The continued heat on corruption and wrongdoing has put efficiency on the back burner. The mindset of stakeholders – media, public and government – is to focus on the feel, not the substance. The management of the public economy is at a standstill due to the fear of undue involvement of officials and agents of responsibility in decision-making. The media and the public look to the (additional) benefits of an efficient private sector. At the same time, they ignore the cost of inefficiencies in projects operating in the public domain. Overall, it becomes an inefficient Pareto model.
This model simply cannot be sustained. The fear factor does not allow honest and competent officers to make decisions. The economic cost of inaction is too high. When good and evil are viewed with the same objective of half-baked accountability, the acceptance of corruption is bound to increase. Good officers at the twilight of their careers are more concerned with reputation and unnecessary future liability. They become incompetent.
Then the accountability campaign is reaching nowhere. Cases are filed, but not even a few are condemned by the courts. Even simple open and closed businesses are going on – the endless saga of the Hudaibiya paper factories is just one example. When corrupt and honest are maligned at the same time without punishing the corrupt, the perceived returns from corruption become high and negative for honesty.
We are talking about the privatization of public enterprises (SOE) and development projects in public-private partnership mode. But public accountability is based on the returns of individuals (or companies) and not on efficiency gains. For example, no one wreaks havoc on escalating costs due to the delay in public projects, but everyone is talking about the private sector getting higher returns on similar projects that are completed much faster and for less. cost.
One demonstration is in the energy sector. For example, the Neelam Jhelum hydroelectric project has been delayed for many years and costs have risen through the rooftops. The additional cost is borne by the public in terms of paying a higher electricity tariff. On the other hand, some of the Chinese PPIs under the China-Pakistan Economic Corridor (CPEC) were completed well on schedule without cost overruns. But many are talking about the higher returns earned by the Chinese. The same goes for many other PPIs.
Mistrust between public sector agents and private sector companies is growing. Many bureaucrats believe that businessmen are just annuity seekers and only seek tariff protection, tax breaks and subsidies. Private actors think the bureaucracy is incompetent and corrupt. Urgent efforts must be made to close this trust gap.
As a result, the private sector is reluctant to invest in public projects or demands a higher risk premium. The returns of all parties, both public and private, deteriorate as a result. This leads to Pareto inefficiency. Meanwhile, the media and the public are being misled. Regulatory failure is seen as market failure. Accountability does not care about the bleeding of public sector entities, but all eyes are on the private actors who are making excessive profits. We have to take a holistic view of what is good for the country.
The problem is the political victimization of the state apparatus (bureaucracy) and private sector actors. The National Accountability Office (NAB) and the Federal Investigation Agency (FIA) are used as policy tools. The capacity of these institutions is extremely weak. All that matters is media attention. The officers in grades 21-22 fear that young boys from the NAB will come and get them in a humiliating way. The trial is ongoing on mainstream and social media, though most are later released without conviction, but with tarnished reputations and careers.
In this environment, no one is willing to make decisions. The economy as a whole pays the cost of these inactions. In the last term – at the time of the LNG negotiations with Qatar – the then minister had to write letters himself because bureaucrats feared corruption charges in the next term. Few cases have been built into this term without any conclusive evidence. This reinforced the belief that officers should sit still and do nothing.
The system is crippled. This must change. The intentions of the incumbents may be right; but the road to hell is paved with good intentions. Accountability laws and processes need to be reviewed. The economy is finally getting on the path to growth. To the surprise of many, GDP growth for fiscal 21 is estimated at 3.94% and is expected to be higher next year. The private sector is rich in liquidity. The government has assets. A marriage between the two is both natural and essential. Structural reforms are imperative for sustained growth. But first, reforms must be approved by stakeholders. The machinery of government must enter into decision-making without fear. Business risks must be taken. The era of phased accountability must come with an expiration date.
Copyright recorder, 2021