Zardari vs the Sharifs

The general public is increasingly being inconvenienced, which to many is a mild word compared to the actual state of affairs, as a direct offshoot of poor performance of nearly all key federal ministries. And analysts have begun to point out the fact that the level of incompetence as displayed by the 'experienced' PML-N team, third time in power, far outpaces the incompetence exhibited during the inexperienced Zardari-led government.
There is also a widespread consensus that nepotism is very much alive and well though perhaps the choices of the incumbent government are a tad better than those during 2008-13 with many focused on the appointment of Tauqir Sadiq as head of OGDC with an FA degree as epitomising the flawed recruitment policy of the Zardari/Gilani era. However, to be fair to the Sharif administration there are few who would go a step further and state that corruption has outpaced the Zardari years though, because of the tacit Zardari-Nawaz Sharif 'deal', the country's investigative arm is not proactively pursuing cases against the former president. This raises a question: is corruption or incompetence the greater evil?
Zardari-led government was and continues to be accused of a blend of corruption and incompetence yet the quality of life index was perceived to be better during 2008-13 relative to post 2013 though Dar's inelegant data manipulation reveals improved performance of key macroeconomic indicators. To put it facetiously one could claim that commission sourced corruption ensures that the project in question can proceed without any further administrative hurdles. With lower corruption - no one, not even Nawaz Sharif can claim that he has eliminated corruption entirely - where the money is not distributed according to each as per his/her position added to gross inefficiency may actually do more damage to a greater number.
Corruption is defined as accepting bribes, extortion, cronyism, nepotism, graft and embezzlement; in Pakistan effective govt requires complicity of politicians, bureaucrats (which explains why retired loyalists from civil and military services are brought back into government), as well as the private sector. The politicians may engage in actual awarding of contracts and receive a percentage of the commission, but so would the bureaucrats who are required to generate the necessary paperwork to ensure that later forensic analysis would not be able to attribute blame. Unfortunately for those involved Pakistani officialdom has not been that savvy in generating airtight paper work in corruption related activities and reliance has been placed instead on deals between party leaders not to rake up cases against each other when in power. The private sector, the last player in the chain, gets a lucrative contract that generates a profit millions of rupees in excess of what he paid upfront as commission. Corruption therefore increases the cost of doing business, with those firms/companies with connections (political as well as bureaucratic) having the ability to change procurement and tax laws in their favour - a practice that breeds inefficiency in domestic firms and makes them uncompetitive internationally.
Multi-billion rupee corruption scams surfaced during the Zardari-years and to name just a few included rental power projects (RPPs), NICL scam, Hajj scandal, ephedrine scandal, PSM and EOBI. Violations of public procurement rules in award of contracts to RPPs was limited due to Supreme Court intervention, the NICL and EOBI scams were mainly a transference of wealth from the company to private individuals (with company officials getting their cut) with no major impact on the general public. The ephedrine case alerted Western law enforcing agencies to government complicity in violating laws pertaining to ephedrine sales. The hajj scandal badly impacted on the well being of the hajjis of that year but the duration of their suffering was limited to a few weeks. In addition the Zardari government continued the practice of issuing statutory regulatory orders in favour of influential groups, and routinely violating public procurement rules for example in the Islamabad Safe City project. And last but not least extortion or bhatta khori is rampant not only in the public sector but also in the private sector particularly in Karachi - a practice that has become rampant in Punjab as well, a charged confirmed by Governor Punjab Chaudhry Muhammad Sarwar in his press conference the day after he resigned.
Incompetence, however, has a public as well as a company, specific cost. And if one adds flawed policies and wilful neglect of what should be priorities to the equation then the cost to the general public can be insurmountable. Current examples of incompetence, be it wilful or not, are numerous. Going by the principle of last in first out the recent petroleum crisis boggles the mind, the first-ever in the exalted history of this hapless country reflecting appallingly poor performance of a government grappling from one crisis to the next of its own making. The result of this crisis: disruption of daily life impacting on crores of people as well as loss of productive activities that conservative estimates place at 20 billion rupees per day. Loss of revenue due to the stalled productive activity would be a price that may be paid by the public in months to come as new withholding taxes are imposed to make up the loss. The numbers affected as well as the loss of productivity (given that the crisis continued for over a week) far outpaces the corruption impact of the PPP-led coalition government in over five years. The electricity crisis due to paucity of furnace oil imports is continuing to this day, which may not be disrupting the transport sector but is certainly disrupting industrial activities.
The Nandipur power plant inaugurated by Prime Minister Nawaz Sharif also deserves a mention, since it was cited as an example of PML-N government's quick wittedness in contrast to the foot dragging by the former government. The project, at a considerably higher cost than originally envisaged, remains non-operational due to incompetence associated with not taking the technical people on board.
A few examples of ongoing flawed policies at a tremendous public cost are in order. First the focus on retiring domestic debt procured at 12 percent with foreign debt currently available at around 5 percent without taking account of: (a) the steady rupee depreciation that conservative estimates indicate would be at around 5 percent per annum, which would make the cost of foreign borrowing higher than domestic borrowing within three years maximum; (b) increasing short-term domestic borrowing from commercial banks at high rates in the face of declining net domestic assets to meet International Monetary Fund (IMF) conditions thereby crowding out private sector borrowing as well as raising the stock of domestic debt and compromising its own stated policy, (c) borrowing in the capital market at rates well above the foreign market rates with respect to Euro bonds (at 8.5 and 7.5 percent for five and ten-year bonds of one billion dollars each and 6.5 percent for sukuk of one billion dollars). That this borrowing is expected to be sustained is indicated in the budget for the current year with another eurozone issuance of 49,000 million rupees. In addition given that Dar budgets are even more unrealistic than in the past borrowing would be ratcheted up, if available, at whatever cost.
Second there is no focus at all on improving the performance of the Federal Board of Revenue, however, to make good his claims that he is improving the tax to GDP ratio Dar has engaged in (i) raising withholding taxes even further with a higher incidence on the poor relative to the rich, which are not collected by the FBR but it takes credit for it; (ii) gas infrastructure development cess (GIDC) and surcharge are being placed under other tax revenue as opposed to non-tax revenue raising fears that the government would use the funds collected not for development of the gas sector but for budgetary support, and (iii) hands off policy continues in terms of either bringing the rich landlords overly represented in the assemblies into the tax net (by opposing the relevant constitutional amendment) or buckling under pressure from influentials through policy announcements (auto policy/drug policy etc) and through issuance of statutory regulatory orders. Dar agreed to audit tax payers and FBR has sent off notices as per an IMF condition but one would have to wait and see if any action is taken before expressing support for this measure. Third the expenditure priorities remain hostage to borrowing of the PML-N government with ever rising outlay on debt servicing. In its first budget the PML-N government set aside 36 percent of total current expenditure for mark-up payment while the actual allocation was 37 percent due mainly to higher-than-budgeted borrowing. This year Dar has set aside 38 percent, which could easily be 39 percent by the end of the year. Higher allocations for current expenditure account for slashing federal development expenditure by 115 billion rupees last year - a trend that is likely to continue this year given the expected (budgeted) lower external support this year which, together with lower private sector borrowing, would translate into lower than budgeted growth rates. To be facetious Dar would have to give even more untenable targets to the Pakistan Bureau of Statistics this year to convince the Prime Minister that all is well.
To conclude the cost of corruption coupled with incompetence appears to be considerably less than the cost of incompetence and flawed policies. Zardari sahib clearly has trumped Nawaz Sharif.
(The views expressed in this article are not necessarily by those of the newspaper)