Tackling corruption

From the Newspaper | Shahid Kardar | 11th December, 2012

FEW would disagree with the contention that nepotism, extortion and bribery have become a way of life, and not just with politicians except that in their case it tends to get exhibited more shamelessly.
While corruption exists in one form or another in all societies the major difference in the case of Pakistan (or perhaps South Asia) is the extent of its pervasiveness and its implications for governance and the value system in general and the political culture in particular. No wonder we have slipped further down the rankings of the Corruption Perception Index. Corruption has become systemic. It has become institutionalised at all levels in a way that it has become an integral component of the administrative, social and political culture. Hence, the question who says that our system lacks transparency? when the rate to get something done is well-known what greater transparency can one ask for! Corruption can be the product of collusion, in which both parties cooperate, willing to enter into a transaction for example, transactions involving the award of contracts, deal-fixing, fiscal concessions, rulings in favour of a party either at the expense of someone else or by depriving the agency of revenues from penalties imposed on transgressions. Then there is corruption involving forced extractions in the form of bribes for rendering certain services or granting permissions, even of a routine nature, and taking advantage of the plight in which the supplicant finds himself. At times bribes are paid in the hope of getting requests processed. Much of the corruption of this variety is a product of the tradition under which people have been brought up, to keep in good humour the authority with the mandate to grant permission. At times the purpose may not be to obtain a favour but to simply remain in the good books of the person with the authority to take a decision. Bribes paid either to extract favours or to ensure a level playing field in keeping with the traditions of the department involved are not only difficult to detect but also difficult to address by enlisting sizeable support for reform. However, these days it is evoking strong emotional reactions, partly because of an assertive and active media. Why this recent mounting concern about corruption? The main reason appears to be its growing scale. At one end are the scandals involving political leaders and senior civil and military officials which is leading to a complete loss of faith in government and perhaps also one of the reasons for the rise in popularity of Imran Khan whose personality is perceived to be synonymous with integrity. Although corruption in high places is sensational news and evokes a strong reaction the same people are not moved by the corruption experienced by ordinary citizens on a daily basis. Moreover, such analysis tends to view corruption as an individual act that can be controlled by a clean leadership and by exposing and punishing corrupt individuals. The majority, however, believes that nothing meaningful will ever be done to control it or that those perpetrating such crimes will ever be punished. Whereas corruption in high places attracts attention, we turn the other way if those guilty are from our own community, on the plea that society itself is corrupt and beyond correction. Cynicism and a sense of resignation and despair have resulted in society having taken corruption in its stride, accepting it as part and parcel of a transaction with a public agency. Moreover, the fact that we decry corruption but have no hesitation in electing the corrupt back to power is perhaps because abhorrence of corruption is a middle-class value/virtue which ordinary citizens do not view as a critical issue and thus they do not expect high standards from politicians.

So what should be done? How can we begin to institute systems and procedures that can deter corrupt practices? Current legislation in Pakistan does not require the government to disclose information on decisions taken or actions initiated. Even the political leadership wants to operate behind a cloak of secrecy, like the civil and military bureaucracy, and is least pushed by the denial of this fundamental right. It should be obvious that the immediate, although limited, advantage of hiding the truth has far-reaching long-term implications, as everyone loses. But this does not prevent public representatives from taking a myopic view. This situation is skilfully exploited by the bureaucracy, which is the real long-term beneficiary of a regime operating under the cloak of secrecy and confidentiality. So, to begin with, there should be a requirement to document the justification for the use of discretionary power and make it accessible to all parties to the transaction. By introducing such transparency the exercise of discretionary powers without fear of accountability will be automatically curtailed. Next, people should have access to information on the decisions and actions taken by public authorities. A legal right to information is critical to the effective functioning of democracies. However, the creation of a suitable legal framework is a necessary but not a sufficient condition for controlling corruption. Information must be readily available on procedures and mechanisms for obtaining redress for remedial action within the institutional system, with recourse to the courts only a last resort. Wider distribution of such information will go a long way in empowering citizens to challenge corruption and the abuse of power. Today, the judiciary and the media have played a sterling role in exposing corruption. However, political parties and parliament are largely silent on what they will do to create an enabling environment for controlling corruption. Will they legislate on the subject and support transparency, taking forward some good work done by the Public Accounts Committee? The trickiest question would be how to extend the scope of these mechanisms to include the armed forces, who refuse to be accountable to the rest of society, insisting on persevering with their internalised system of accountability. The writer is a former governor of the State Bank of Pakistan.

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KARACHI: The State Bank on Friday cut its policy interest rate by 50 basis points to 9.5 per cent. The decision brought down the rate to a single digit for the first time in five years.
In its monetary policy for December and January, the central bank expressed concern over a number of issues directly or indirectly impacting the monetary management. It said CPI inflation, which stood at 6.9 per cent last month, declined faster than earlier estimates, along with food, non-food and core inflation. This broad-based deceleration in inflation is now expected to keep the average inflation below the 9.5 per cent target for FY13 (2012-13). Therefore, the SBP has decided to reduce the policy rate to 9.5 per cent, it said. Sharp depreciation of the rupee against international currencies and a large monetary expansion were the two main reasons which influenced the monetary stance and forced the central bank to go for a small interest rate cut instead of a large one. The decision did not go down well with business and industry as they were optimistic about a big cut in keeping with an unexpected decline in main inflation. The State Bank said the overall stress in the external position was also increasing given the declining financial inflows and substantial debt repayments. Led by direct and portfolio investment flows, the total net capital and financial account inflows had been on a declining path for some years now, the SBP said, adding: These inflows have come down from a peak of 7.2 per cent of GDP in FY07 (2006-07) to 0.7 per cent in FY12 (2011-12). The central bank said a low interest rate could potentially affect the credit demand, including that of imports, and return on rupeedenominated assets relating to foreign currency assets. The first consideration is not a source of concern, but the second consideration is important and puts a natural limit on downward adjustments in the interest rate. The central bank attributed the large monetary expansion to a year-on-year growth of 26.4 per cent and fiscal borrowings from the banking system. Given the current high year-on-year growth in broad money of 17.8 per cent, this approach will require more vigilance in near future, it said. Almost all fiscal borrowings from scheduled banks and retirement to the SBP took place during the first quarter of FY13. In the second quarter, the fiscal authority has mostly relied on SBP to meet its financing requirements while just rolling over the maturing scheduled bank debt. As per recent amendments to the SBP Act, the fiscal authority is required to ensure at least zero borrowing from the SBP in a quarter. Given that only two weeks remain before the end of the second quarter of the financial year, it seems unlikely that this requirement will be met, the SBP said. The fiscal authority borrowed Rs586 billion from scheduled banks between July 1 and Nov 30. The fiscal deficit of Rs284 billion, or 1.2 per cent of GDP, during the first quarter (July-September) of 2012-13 was entirely financed by borrowings from domestic sources. Almost 91 per cent of last years fiscal deficit was also financed from domestic sources. A year-on-year growth of 62.5 per cent in interest payments on domestic debt in the first quarter of 2012-13 is not surprising, the SBP said, adding that the consistently low level of credit availed by the private sector, together wit the SBP said, adding that the consistently low level of credit availed by the private sector, together with declining foreign investments, were the main factors responsible for a stagnant economy.