A week after IMF and Pakistan came to an understanding on the terms under which the IMF will extend its $5.3bn Extended Finance Facility (EFF) an IMF spokesman told the media that IMF awaits implementation of the pre-conditions for IMF’s Executive Board to approve the facility. Things may not be moving ahead at the IMF’s desired pace but the fact is that the FBR is pulling its strings together to begin delivering on its promise of plugging the leaks in the taxation system. In some sectors, a beginning has been made in detecting tax evasion.
On the security front too, a beginning was made when the Prime Minister visited the ISI headquarters and Ministry of Interior to induce a more co-ordinated effort in containing terrorism and cornering the terrorist outfits, which earlier wasn’t being taken as seriously.
How much does this change have to do with IMF’s pressure or the Prime Minister’s visit to China is unclear, but the fact is that a firm beginning seems to have been made; how well it delivers will depend on the front liners in the Ministry of Interior and the ISI.
The Punjab Chief Minister too expressed his government’s commitment to identify and punish the power and gas thieves, and a Taskforce on Eradication of Electricity and Gas theft (supported by the police) has been formed, which will review its progress every week.
But in sharp contrast thereto, the KP Chief Minister said that if his province doesn’t get power supply as per its quota, he will join the protests against loadshedding. As for the Chief Ministers of Sindh and Balochistan, they are yet to speak on the issue though both need to act.
This explains why the IMF had insisted that the terms being agreed by Pakistan should be approved by the Council of Common Interests (CCI) so that provincial governments commit to implementing the agreed reforms and accept their responsibility in that context. Majority of the tax evaders live in the provinces, not the federal capital. But do we see the provinces assisting the federation in identifying tax evaders and providing assistance in catching them? In many cases, tax evaders escaped because of this weak co-ordination in this area.
Similarly, majority of the power and gas thieves live in the provinces, not the federal capital. Yet, provincial governments rarely assist in catching them because many of them happen to be provincial politicians, and are often considered beyond the reach of the law. After devolution of authority to the provinces and rise in their shares in the Divisible Pool of the federal revenue, it is incumbent upon the provinces to help fulfil the commitments the federal government makes with loan-extending IFIs and foreign donors.
Provinces acquired the right to collect taxes earlier collected by the federation, but did not assign requisite priority to building the ability to monitor related economic activities, and add professionally trained and sufficient manpower to their revenue boards for collecting those taxes. It is worth asking the KP Chief Minister whether or not it is a fact that a major contributor to the power sector’s circular debt is the refusal of power consumers in FATA to pay their bills, and if this non-payment is justified, how justifiable is the basis there for.
The attitude of the KP Chief Minister is not the sort of profile that can build confidence among foreign lenders and donors to extend the enormous help that Pakistan needs right now to put the country’s economy back on track for recovery from the depression it is in. Sadly, Pakistan’s politicians (with claims to popularity, not the ability to convince the masses to accept their fair share in the ongoing economic crisis) are demanding fulfilment of ‘rights’ without caring about where the resources will come from for serving those rights.
This attitude brings politicians at par with short-sighted trade union leaders that have a huge share in turning the public sector enterprises (PSEs) into the mess they now are. The only difference is that trade unions killed the PSEs while politicians killed the economy.
One of the terms agreed with the IMF is revamping the PSEs (per a priority list) to prepare them for privatisation – an exercise calling for re-organising them (unburdening them of debt, incompetent managers, operational inefficiencies, and excess workforce). In the last five years, the bailouts offered by the federation to these huge PSEs were spent largely on paying staff salaries, not on revamping the PSEs. This is proved by the fact that efficiency of PR, PIA and PSM has only gone down instead of improving.
Almost a third of PIA’s fleet remains grounded because of lack of spare parts and PR is operating far fewer train services compared to its network capacity, PSM’s output is down to just ten percent of its production capacity. But workforces in all these PSEs remain intact.
But if the attitude of the provincial governments (except in the Punjab) remains as popularity-oriented as it is, will the revamping of the PSEs be possible, especially laying-off their excessive workforces and changing their management? It seems unlikely, though badly needed.
Revamping Pakistan Railways (PR), Pakistan International Airlines (PIA), and Pakistan Steel Mills (PSM) – all overburdened with workforces and bleeding the federation – would be a daunting task for the federation unless it has the support of the provincial governments. It is time the provincial governments took their obligations seriously, especially in enforcing the state policies that are based on commitments to the nation and to external entities. Unless this principle is adhered to in all actions, Pakistan’s image (hence its credibility) will not improve.
To begin with, they must impose market disciplines to check corrupt practices – hoarding, supplying fakes (especially medicines), adulteration, short measuring, and power and gas theft – to establish their writ. This can be done by well-trained and protected inspection teams. In this context, it is time all the Chambers of Commerce and Industry were forced to devise self-regulatory codes (in consultation with the government) that must be observed by every member of a chamber. Sadly, this was not done by any government since 1947.
This effort can’t succeed unless provincial governments also start providing what the markets need – security, and essential civic services. Don’t forget that law can’t be enforced and taxes collected in an imperial style; the state is expected to deliver in exchange for taxes. The disappointing part however is that these aren’t yet the provincial governments’ priorities. The focus remains on demanding more from the federation, with zero concern for their own obligations as if money grows on trees in the federal capital.
A. B. Shahid, "Introspection, what’s that?," Business recorder. 2013-07-16.Keywords: Economics , Economic system , Economic policy , Economic issues , Economic crisis , Political issues , Political leaders , Social issues , Energy crisis , National issues , Loan , IMF , ISI