Multiple challenges

Pakistan is the fifth most populous country in the world which as on August 23, 2022 is 230,052,620 as per worldometers. It shares borders with two important regional powers, China and India. Apart from these two, Afghanistan and Iran, both strategically important states, being conduits to Central Asia are neighbours too. Despite having access to a sea of humanity and large markets, our policymakers have failed to capitalise on this enormous opportunity for accelerated and sustainable economic growth/inclusive development.

The main drawback lies in our foreign policy that could not achieve desired results. Access to the markets of all the above-mentioned four countries could have changed Pakistan’s fate. However, due to our faulty/myopic/inward foreign policy, we have many contentious matters with India. Iran too has reservations about our policies and some unresolved issues with Afghanistan as well.

China, as our all-weather friend initiated landmark project China Pakistan Economic Corridor (CPEC), is unhappy with our dealings leading to widening trust deficit between the two nations. Our incumbent Prime Minister, who is known as ‘Shehbaz Speed’ in China, after assuming power in April 2022, has not yet made an official visit to China to meet President Xi Jinping and Prime Minister Li Keqiang to address Chinese concerns and restore trust.

Other than our immediate neighbors, we have troublesome relationship with Middle Eastern countries and the United States. The European Union maintains bilateral relations with many countries on mutually-beneficial terms. However, Pakistan has never been a favourite jurisdiction for them. Our successive governments, military and civilian alike, have never realised how much loss Pakistan suffered due to our persistent irrational foreign policy.

Our exporters are facing numerous problems/difficulties/issues in introducing their products to the international markets due to different barriers and restrictions. However, there is extreme apathy on the part of our rulers to address their concerns. This state of affairs is costing us heavily. As a result, with each passing day, the country is facing challenges related to its economic viability and obligations on external financial front.

Apart from failures on external front, the outdated and inefficient internal governance system is the root cause of many ills faced by the country. The continuous institutional interferences in the affairs of executive have brought us to a position where we are struggling to avert the risk of default. Our unsuccessful efforts to maintain foreign reserves at acceptable levels are not only undermining our national security but also creating survival issues for the citizens.

It has been four months now, and the present government is still struggling to restore the Extended Fund Facility (EFF) programme of the International Monetary Fund (IMF). Despite perpetual violation of the terms agreed with the IMF by the previous coalition government of Pakistan Tehreek-e-Insaf, we are still hopeful for the release of a tranche of US$ 1.17 billion. Earlier, the present government on IMF’s dictates imposed heavy taxes through the Finance Act 2022 and promised the imposition of Petroleum Levy of Rs 50 per liter.

Now the IMF is asking for establishing ‘electronic assets declaration system’ in respect of assets possessed by high-level public officials including top government servants and their spouses. It has asked Pakistan to strengthen its anti-corruption system. The domestic and global perception about us on this account is negative. The global community thinks that a major share of our resources could not reach the public due to massive corruption.

The recent global corruption perception index placed us at number 140. Our law enforcement agencies, especially the National Accountability (NAB) have played a pivotal role in building this perception—filing of politically-motivated cases by NAB and then delaying court proceedings. Now the higher courts are also being labeled for selective justice.

Consequently, the World Justice Project Report for 2021 placed us at number 130 out of 139 countries. In these circumstances when the global watchdog for financial crimes, FATF, demands streamlining of our systems, our intellectuals call it discrimination by the international community resulting in the issues remaining unaddressed and our losing global support.

It is a fact that Pakistan has been facing strategic deficiencies in its Anti-Money Laundering and Countering Financing of Terrorism (AML-CFT) regime. Despite repeated warnings by FATF, we hardly bothered to implement the global standards to counter financial crimes. Ultimately, in June 2018, we were placed on the list of jurisdictions under increased monitoring.

This action not only brought us embarrassment at the global level but also exposed businesses and individuals to extra scrutiny while making financial transactions with Pakistan. It also increased the cost of financial intuitions due to spending extra amounts on performing customer due diligence. Now despite a lapse of over four years, FATF’s concerns are still there, due to which the country is suffering huge losses on account of reduced foreign direct investment.

The implementation of IMF’s conditions for disclosing public officials’ assets and strengthening of anti-corruption system is in line with IMF Managing Director Christine Lagarde’s speech in FATF Plenary Valencia on June 22, 2017 in which she committed to working with FATF and supporting countries in building systems against money laundering and financing of terrorism through the AML/CFT standards. Both the organisations know that these global challenges cannot be resolved by countries working alone. Lagarde stressed that this partnership was more important than ever, and highlighted three priorities to build on the progress made so far:

• Fighting corruption and tax evasion;

• Combating the financing of terrorism; and

• Maintaining correspondent banking relationships.

It is pertinent to mention that AML-CFT is a regular part of the IMF and the Executive Board of the global financial institution has granted its approval following the review of AML-CFT assessment programme in March 2004. Keeping in view the commitment by IMF’s Managing Director, if we look at Pakistan, it is facing all these challenges.

We have failed to bring Pakistani people into the tax net as per our potential. The World Bank in its report published in 2015 ranked us 172 out of 186 countries in terms of tax compliance, whereas Transparency International placed us at number 140 out of 180 countries. Similarly, when it comes to ranking the measures for countering financing of terrorism, we are placed on the list of jurisdictions under increased monitoring since 2018.

It is right time for us to do an impact analysis of our actions in the light of numerous red flags raised by the international community with respect to handling by us of the most crucial issues. We can neither achieve financial integrity, unless we collaborate with the international community, nor can we materialize our dream of a prosperous Pakistan in isolation. We have to address our problems proactively to gain their confidence so that we can maximise opportunities to put the country back on the road to prosperity.

(Huzaima Bukhari & Dr Ikramul Haq, lawyers and partners of Huzaima, Ikram & Ijaz, are Adjunct Faculty at Lahore University of Management Sciences (LUMS), members Advisory Board and Visiting Senior Fellows of Pakistan Institute of Development Economics (PIDE). Abdul Rauf Shakoori is a corporate lawyer based in the USA and an expert in ‘White Collar Crimes and Sanctions Compliance’)

Copyright Business Recorder, 2022