ECC subornation continues

You snooze, you lose. The Economic Coordination Council (ECC) has remained notorious under successive central governments for their arbitrary decisions. Now a number of recent ECC decisions in the Peshawar incident aftermath smack of less-than-noble intent. The nation may be busy mourning, but economic czars, it seems, have upped their dubious game lately.
A news report in this newspaper on December 30 described in detail how the ECC awarded the EPC and pipeline projects of Gwadar-Nawabshah LNG terminal without competitive bidding. The government-to-government (G2G) project will be initiated by Pakistani governments main natural-gas importing firm, Inter State Gas System, and completed by China Petroleum Pipeline Bureau, a Chinese government arm.
The award has been made without competitive bidding, which involves press tender and at least a two-stage bid screening. Apparently, the G2G nature of this consulting engineering project - in which the project funding will reportedly be coming through a Chinese government soft loan - allows an exemption from relevant PPRA rules. The ECC approval was "in principle" and a cabinet nod is reportedly awaited.
Whats the problem then? Well, the exemption may be legal, but its clearance from PPRA wasn sought, according to a source that has been a keen ECC observer but doesn want to be identified.
"This ECC decision is the complete violation of the standard pre-qualification procedures. This engineering consulting contract is very complex, but the ECC or the finance ministry does not have the capacity to fathom the intricacies involved. PPRA, the relevant regulatory body here, has the legal and technical capability to analyze this contract, but it was bypassed in this case. It is imperative that contracts like this be studied properly in public interest before making decisions," said the source.
A week before that, on December 24, the ECC took two decisions that raised many eyebrows. The forum approved Rs10 per kg subsidy on sugar exports, apparently to ease the liquidity positions of sugar millers. It also raised the export ceiling by 30 percent to 650,000 tons which will be in force till mid-May this year. It would cost the exchequer (federal and provincial) Rs6.5 billion if the export limit is reached.
In the same sitting, ECC also lifted the 25 percent regulatory duty on potato exports that was imposed a few months earlier. The press release read, "The chair (finance minister) was informed that farmers had planted the crop on ten percent larger area this year and abundant yield was on the cards, surely creating a surplus." After taking the decision, the chair formed a secretary-level committee "to closely monitor the market situation and keep the ECC updated regularly."
Rather than nudging the private sector to build more storage warehouses or asking the millers to mind their own liquidity, is exporting surplus produce the finance ministers recipe? ECCs reasoning, which seems more compatible with cronyism than with astute economic management, is concerning.
Without proper crop estimates at hand, potato exports have been incentivized. Without local-market price-sensitivity analysis, export of about 13 percent of annual sugar production has been allowed. In the process, distorted signals have been sent to farming community. Consumers, on average, will be worse off due to these decisions.
Has ECC become a conduit for private-sector wealth creation? Ali Salman, who heads the Islamabad-based free-market think-tank PRIME, strongly agrees. "Government is not an agency to create wealth; it should only enforce rules and let the markets function on their own. Otherwise, taxpayers would end up sustaining either deadbeat organizations like PIA and Railways or private-sector rents," he said.
Commenting on the G2G LNG contract awarded to the Chinese, Ali Salman feels that these kinds of decisions are not occasional transactions; they
e rather systematic in which politicians and bureaucracy, not the markets, are making decisions.
"ECCs decisions are made on summaries prepared by ministries and thats a process in which a lot of lobbying efforts are involved. Yes, some good decisions have also come out of the ECC. But the fact that there is a lot of discretion involved, makes this mechanism depend on whether a decision-maker is honest or not," he pointed out.
There is more that finance minister and his ECC pulled recently. On December 19, ECC approved $65 million bailout of NBPs Bangladesh operations without demanding any checks or balances or fixing responsibility. Reportedly, the banks internal control in Bangladesh is a mess that resulted in multibillion losses in credit portfolio.
Earlier, the December 18 appointment of the new SECP chairman also fits into the post-Peshawar "swift decision-making" theme. The gentleman is said to be a friend and former colleague of Dars. That in itself isn cause enough to criticize the fresh appointment. But the sudden appointment on a long-pending top corporate regulatory position, and that, too, of a controversial figure, flags this issue.
This column is not selling narratives here. But the above-mentioned decisions suggest a "sleight of hand" suddenly active after a national tragedy. Mind you, post-December 16 period to date is also the time when the PTI protest juggernaut abruptly cooled off. An argument can be made that these transactions may have created ruckus if it weren for the environment after December 16. Economic policy advocates and political activists must take notice if theres merit in the above story.