The gravy trains of Pakistan

Pakistan is world’s sixth largest country in terms of population. It also is perhaps the youngest in terms of demographics with almost 100 million persons under the age of 25. In terms of its economy, it is the 44th largest economy measured in nominal dollars and 26th based on purchasing power parity basis. Based on per capita income, Pakistan ranks at 150 in the world. It is evident that Pakistani people are mired in poverty and rank at the bottom of the Human Development Index (147 out of 188 countries.)

It is also clear that economic growth is of critical importance for Pakistan both for poverty alleviation and national security. Early this year, Sri Mulyani Indrawati, VP for South Asia at the World Bank, in a speech at the HEC in Islamabad said that, “for the past two decades, Pakistan’s growth rate has been half of India’s and China’s. If current trends continue by 2050, India’s economy will be 40 times larger than Pakistan’s”. This is clearly a recipe for disaster.

The underlying factor behind this situation is the collapse of the governance institutions of Pakistan. Over the past few years, India has consistently scored much better on the global competitive index than Pakistan. This year the institutional ranking of Pakistan is 119 versus 60 for India. The institutions we are talking about are those national institutions that manage the economy of Pakistan. These include our government’s strategists, planners, regulators, implementers and monitors. It is important to connect these rankings with what the IMF’s 12th review regarding the reform agenda excerpts from which reproduced below:

“…the economic reform agenda needs to continue after the program ends. In this context, it will be important to further strengthen public finances and external buffers, broaden the tax net, improve public financial management, strengthen the monetary policy framework, address losses in PSEs, complete the energy sector reforms, and accelerate competitiveness-enhancing improvements of the business climate, including the trade regime.”

The Global Competitiveness Index ranking and the IMF recommendations are an indication of the demise of our governance. Most of these institutions relate to the Public Financial Management System of Pakistan. The key manifestations of Pakistan’s economic strategy are reflected in the annual budget of Pakistan. The entire paraphernalia of institutions is built around the budget for ensuring its relevance, credibility and integrity. Through the budgetary system Pakistan’s various tiers of government plan and spend around 22 percent of GDP in a year. This year this would amount to almost $65billion. The government is clearly the single biggest spender in this country but its machinery has become highly malleable and leaky. Having a free run of spending such large sums without adequate accountability or responsibility is creating havoc with our economy. The strategies and spending that should have been focused on generating prosperity and growth of the people have instead become the gravy trains for the ill-gotten wealth of the rich and powerful.

The constitution of the country designed the structure of the governance system of Pakistan. There are several layers of lines of defence around the budget. The inner core of the defence is supposed to be the existence of an outstanding cabinet comprising of talented thinkers and managers. Around this core the second line of defence is supposed to be an outstanding bureaucracy fully trained and equipped to ensure the credibility, integrity and relevance of the budget. Around this layer is a representative parliament of the poor masses of this country fully aware of the priorities and methodology for raising and spending a very scarce resource of the country. Around this layer is a fence called the Auditor General of Pakistan. The Auditor General of Pakistan is supposed to be independent from the government and reports directly to the Parliament of Pakistan. But in reality the bread and butter of the institution is with the ruling party. The last incumbent was under a NAB investigation himself. Next to the Auditor General are the institutions of NAB, FIA, Police, etc. Their task is to apprehend the violators of the public trust and bring them to the court of laws to have them punished for their misdeeds. The final layer of defence is the judiciary of the country who have to strike the fear of law into the hearts of those entrusted with the wealth of the nation.

These layers of defence or fences to protect and promote the collective wealth of the nation have been systematically eroded to promote personal wealth and greed. The evidence is everywhere. The offshore companies of the rulers, The hounding of honest bureaucrats and promotion of the worst. Destruction of meritocracy. The emergence of unsavoury wealth. Emergence of china cutting, monopolistic profits, unreasonable upfront tariffs, unprecedented power thefts, doling out of largesse have become the hallmarks of our governance system. Cutting deals and borrowing money that is unsustainable have become rampant. Immediate satisfaction at the expense of leveraging the future generations has become the norm.

Fixing the governance is no rocket science. The methodology, technology and expertise is all available to have a globally competitive public financial management and governance system. All the built-in checks and balances have to be energised. The focus of governance has to change from self service to national service. This needs national leadership with unblemished vision, selfless devotion and doggedness to push through tough and painful reforms.

It means every branch of government to play its designated role. It means blocking the leakages from the system comprising Commissions, favouritism, flawed bidding process, ghost services, blocking politically motivated projects that are a major drain on the economy and eliminating non-targeted subsidies.

Some examples of Politicised spending projects like sasti roti scheme, Daanish schools, metro bus projects, Bahawalpur solar project, Nandipur power project took scarce resources away from wealth building and sustainable projects. It is interesting to note that in the global competitiveness index category of efficiency of governments the Pakistan ranking is unashamedly high.

— Wasteful government Pakistan 103 India 49

— Regulatory burden Pakistan 103 India 59

— Transparency in policymaking 118 India 57

These rankings indicate that the gravy trains of Pakistan will continue to run and continue to drain us into the foreseeable future as neither our government nor our opposition is interested to fix a system that promotes personal wealth and not national wealth. Unless the people and civil society of Pakistan build up the pressure on the government of Pakistan to make meaningful governance reforms and unless they are backed up by the judiciary, who are the guardians of the constitution, no reforms will happen.