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Mandviwalla vs Sheikh

Serious charges are surfacing against the newly appointed Finance Minister Saleem H. Mandviwalla and lately the three-year reign of Dr Hafeez Sheikh marked by unsustainable reliance on domestic borrowing, poorly performing macroeconomic indicators, gross manipulation of critical national data and inability to stand up to his politically powerful cabinet colleagues is now being regarded as the golden era.

So what decisions has Mandviwalla taken since he took over the portfolio of finance on 19 February that has raised the ire of many an economist as well as opposition politician? According to newspaper reports, Mandviwalla, as the chairman of the Economic Co-ordination Committee (ECC) of the Cabinet – the highest economic decision-making body in the country – has taken decisions that would benefit some sub-sectors operated by the private sector as well as approved summaries supported by politically powerful federal ministers. And these decisions, so is the claim, were being resisted by the former Finance Minister not overtly but covertly through issuing directives to establish a committee to review the pros and cons of what were thought to be dicey proposals. In case the committee Dr Sheikh established recommended favouring a particular subsector over another he would then establish a subcommittee to further review the decision. This approach brings to mind the old proverb: a camel is a horse designed by a committee.

One factor needs clarification: the private sector is generally not invited to ECC meetings and its point of view/suggestions are placed before the relevant ministries which are then expected to proceed to review the proposal from all aspects, particularly with reference to the rather ‘amorphous’ concept of national interest, and then draft a summary that has to be approved by the ECC to become effective. Thus summaries placed before the ECC for approval or further review are prepared by the relevant ministry which may be the Commerce Ministry, Production Ministry, Water and Power or Ministry for Petroleum and Natural Resources as the case maybe.

Included in the rather long list of proposals (which is being added to on a daily basis) that were inordinately delayed by Dr Sheikh and approved by Mandviwalla in three weeks are: (i) margins of oil marketing companies and dealers raised by 0.25 rupees per litre and 0.41 rupees per litre respectively, (ii) tariff protection for purified terephthalic acid (PTA) a benefit specific to Lotte, a South Korean company, (iii) Interior Ministry’s safe Islamabad project, (iv) extending an inland freight subsidy of 1.75 rupees per kilogram to 1.2 million tons instead of the previous allowed 0.89 million tons to sugar exporters (with several prominent politicians and influentials engaged in this activity) that would cost the exchequer 2.1 billion rupees, (v) including Hub and Hattar ghee manufacturers in the DTRE scheme (Bilour’s family has an interest in this). Not included in the list are several statutory regulatory orders issued by the Federal Board of Revenue that favour one group operating in the private sector over another that has raised concerns of nepotism as well as market distortions, and (vi) fast-track development of biogases/biomass to energy generation projects which would impact positively on sugar mills.

Saleem Mandviwalla cognisant of rising criticism of his approvals stated in a Press briefing: “it is for the relevant ministries to examine all the issues involved that they present all the facts in their summaries and that other stakeholders get an opportunity to present diversionary views during an ECC meeting.” The stakeholders in this instance are not a reference to the private sector but other ministries. This statement of course implies that the ECC is a post-office which simply endorses decisions already taken by the line ministry. That is not true and the role of the ECC is to listen to all pros and cons and then decide.

Equally pertinently any summary presented by any ministry is to be provided to all the ECC members well before the meeting to enable them to form an informed opinion; and members include the Federal Board of Revenue and the Ministry of Finance officials, both technically subordinate to the Minister of Finance. These officials are expected to provide an impartial and independent opinion on any proposal with respect to the impact of any policy on taxes collected or the resulting expenditure out of the tax payers’ money. Reports indicate that post Dr Sheikh several summaries submitted for approval to the ECC are not being shared by FBR or Ministry of Finance officials before the meeting but on the meeting day itself. FBR and the Ministry of Finance officials have reportedly requested a day or so to evaluate those proposals which were not shared with them before the meeting; however Mandviwalla, all sources indicate, stoutly refused to allow them time and insisted that the proposal be approved.

Completely and what the hapless people of this country may regard as almost criminally ignored by the incumbent Finance Minister, or so claim his detractors, is the mission statement of the Ministry of Finance placed on its website which stipulates “to pursue sound and equitable economic policies that put Pakistan on the path of sustained economic development and macroeconomic stability with a view to continuously and significantly improving the Quality of life of all citizens through prudent and transparent public financial management carried out by dedicated professional.” Seriously challenging the adherence to national interest, amongst others, is the ECC decision to approve an amnesty scheme for all non-customs paid car owners after payment of a nominal duty and taxes.

Thus there is no question that post-19th February ECC decisions would fuel the fiscal deficit and push the country closer to an International Monetary Fund programme though that is not on the cards before March 16 as stated by Mandviwalla when the government would have completed its five-year term. A rise in fiscal deficit increases the rate of inflation which significantly worsens the quality of life – the exact opposite of the Ministry of Finance’s mission statement.

To conclude, Saleem Mandviwalla as the chair of the ECC is being accused of approving all pending projects that were resisted by Hafeez Sheikh and approving the disbursement of large sums for bailout packages for white elephant entities including PIA and PSM with flawed business plans (plans that are unlikely to end the need for further bailout packages). This charge-sheet indicates blatantly disregard for the mission statement of the portfolio that Saleem Mandviwalla heads; however it is extremely doubtful if it would either temper his approvals in the dying days of the current government or indeed make him act responsibly.

To be fair to Mandviwalla one must acknowledge that in the past finance ministers, politicians as well as technocrats, also engaged in activities that were contrary to the ministry’s mission statement. What is the solution that this does not happen in the future? One would hope that the next government takes appropriate measures to bring those finance ministers guilty of violating the mission statement to parliament for discussion and, if it deems it appropriate, to initiate civil action in the courts to ensure that punishment is meted out which would effectively make this critical ministry and the man or woman who heads it accountable to the people and not to the political powers behind the appointment.

Anjum Ibrahim, "Mandviwalla vs Sheikh," Business recorder. 2013-03-11.
Keywords: Political leaders , Political system , Political change , Political issues , Political power , Parliament , Politicians , Technocrats , Macroeconomic , Pakistan , ECB , PTA