Corruption - III

This is the final of a three part series of articles detailing corruption with a focus on how to deal with corruption - at the level of government and in the financial market. Corruption in Pakistan is endemic. However while a portion of corruption money stays in the country yet there is sufficient anecdotal evidence to suggest that a major part of it is remitted to other countries of the world including the West and some to offshore tax havens.
The question is: Are there any global initiatives to deal with corruption? And if not, are there any domestic initiatives to deal with corruption?
Recent data suggests that over 21 trillion dollars are hidden in offshore tax havens throughout the world by the super rich - an astronomical amount that, given the ongoing recession in several Western countries coupled with high Eurozone indebtedness, accounts for several countries compelling the Swiss banks to abandon their secrecy laws and release data that would enable these countries tax departments to begin to tax the super rich. France, Germany, the US and other nations have succeeded in forcing the Swiss banks to release information that would enable them to tax their citizens on the threat of expulsion of these banks from their territories.
Pakistan as a case in point neither has any Swiss bank branches nor ever had a government that has proactively sought data from abroad to enable it to tax its nationals who stash their income abroad. Thus Pakistan has neither the leverage nor has shown any inclination to tax its nationals who have stashed their assets abroad. Pakistan also has a law, in common with several other countries, that does not permit double taxation so if a Pakistani national is paying a tax on his/her income/asset abroad he/she is legally disallowed from paying a tax on that asset here.
The global initiative to eliminate corruption is incorporated in the United Nations Convention on Corruption dated 2004 by Office on Drugs and Crime with the focus of the world on drug money laundered through hawala/hundi or banking sector. Would this convention be sufficient to deal with corruption in Pakistan? Article 65 of the Convention proposes that each state party shall take necessary measures, including legislation and administrative measures, in accordance with fundamental principles of its domestic law to ensure implementation of its obligations under this convention. Where two countries or more are involved (as in the case of ephedrine finding its way into Iran) then they would settle disputes through 'negotiation.' However with respect to asset recovery as a component of the Convention the UN notes: "In particular, in the case of embezzlement of public funds, the confiscated property would be returned to the state requesting it; in the case of proceeds of any other offence covered by the Convention, the property would be returned providing the proof of ownership or recognition of the damage caused to a requesting state; in all other cases, priority consideration would be given to the return of confiscated property to the requesting state, to the return of such property to the prior legitimate owners or to compensation of the victims". Thus the proviso is that the government of the day requests asset recovery, calling to mind the ongoing reluctance by the PPP-led government to write the letter to Swiss courts to reopen cases of money laundering against President Asif Ali Zardari.
Additionally, there are anti-bribery laws in the West - US and several European countries - disallowing their citizens from extending a bribe to a foreign national (politician or civilian/military official) to get a contract. In spite of the 37 country OECD anti-bribery law and the US anti-bribery law there have been cases where these laws have been flouted for example the Agosta submarine case involving France and Pakistan. Professor Robert Neild from Trinity College, Cambridge University writes in Public Corruption, The Dark Side of Social Evolution "Rich countries and their agencies...commonly have been and are accomplices in corruption abroad, encouraging it by their actions rather than impeding it..." His three relevant observations were (i) The impact of Cold War corruption (supporting dictatorships, destabilising democracies, funding opposition, etc); (ii) Firms from rich countries bribe rulers and officials from developing countries to gain export contracts; and (iii) "corruption-inducing effects of the purchase, by the rich countries and their international corporations, of concessions in Third World countries to exploit natural deposits of oil, copper, gold, diamonds and the like." Payments, the Professor added, made to rulers often violate local (and Western) rules, keeping corrupt rulers in power, who also embezzle a lot of money.
The foregoing explains why there is a need to enact and implement anti-corruption laws domestically to ensure that corruption is dealt with appropriately. However, as is well-known, laws are enacted by parliament and the question that continues to face this hapless nation is why has parliament not shown any interest in passing laws that effectively deal with corruption? The anti-corruption bill remains stalled in the relevant standing committee of parliament and the two main political parties namely the PPP and the PML (N) routinely hurl accusations against each other of blocking any movement towards an agreement on the bill. Without going into the merits or demerits of each party's accusations it is significant that the bill remains stalled.
Corruption scandals, however, are routinely unearthed by whistle blowers and the media has played a critical role in bringing such cases to the attention of the superior courts. To date the Supreme Court of Pakistan has generated over 100 billion rupees to the exchequer as per the Federal Finance Minister Dr Hafeez Sheikh through its verdicts - money that, without doubt, reduced the budget deficit and thereby had some beneficial impact on the rate of inflation and on the quality of life. Given that the entire federal public sector development programme for the current year is budgeted at 360 billion rupees a 100 billion rupees is a little under 30 percent.
What has been a source of concern for the people of this country is overt pressure exerted on the investigative branch of government to stall any inquiry against an influential person be he a member of the coalition government or be he someone close to the seat of power. Thus in several cases the court, with no investigative capacity or mandate, has been compelled to drop charges simply because the investigation was neither transparent nor fair. Be that as it may the superior judiciary has laid itself open to charges of being PPP centric based on the regularity and speed of hearings of cases which implicate the PPP leadership as opposed to all other cases.
So where must we star t? The International Budget Partnership (IBP) is an organisation that looks at public budgets by governments around the world. Its conclusions are extremely relevant for Pakistan: (i) a large number of countries provide grossly insufficient budget information, (ii) budget engagement by the audit institutions and the legislature is typically weak (Pakistan's last budget was passed in two weeks) and is strongly correlated to the lack of budget information made available to these institutions and the public, and (iii) governments are failing to undertake simple steps to opening up budgets. Greater budget transparency maybe a good place to start as it deals with a subject matter, the economy, that most affects the common man.
(Concluded)