Political interference, corruption, transparency, security issues and effects of accepting the lowest bids are the major challenges in Pakistan, which need to be addressed immediately, said South Asia Sustainable Development Unit (SASSD) South Asia Region of World Bank's study report.
According to WB report, all hypotheses tested evoked strong agreement. Regarding the stakeholders' perceptions about doing business in Pakistan the majority said that political interference hampers growth of the industry and is restricting the entry of quality local and international contractors and consultants.
The size of contracts does not appeal to foreign contractors and consultants, there is widespread and endemic corruption, lack of transparency in procurement and contract administration, client agencies lack management capacity, security risks restrict growth, law and order situation and political instability make Pakistan a high risk country, low bids by local consultants and contractors and the clients' practice to award contracts based only on price discourages foreign consultants and contractors are cited as some of the other reasons for staying away from bidding in Pakistan.
According to report, these perceptions reflect disillusionment with the country's business environment as a whole. Endemic corruption, is conservatively estimated, will cost the infrastructure related portfolio alone between US $1.6 to 2.5 billion over the MTDF. Calculated using weighted average of the reported cost of corruption as a percentage (approximately 10~15 percent) of the value of work.
Infrastructure component of MTDF is US $16.55 billion. The majority of smaller C2 and C3 contractors reported corruption costs to be greater than 15 percent, report explained.
WB report pointed out that corruption and transparency issues are the major challenges the government has to address in order to develop capacity and improve the country's image. Implementation of FIDIC guidelines and contracts in letter and spirit is considered by stakeholders to be essential for helping solve such problems.
WB report said that the majority of stakeholders including clients, acknowledged the negative impact of low bids by local consultants and contractors on foreign firms seeking work in Pakistan. Acceptance of the lowest bid was stated to be the cause of; insufficient rates, inadequate salaries, insufficient cash flows, delayed payment to subcontractors, delays in project completion dates, low participation rate from international contractors and consultants.
WB report pointed out that there is an almost non-existent practice of blacklisting and eradication of poor performing contractors/consultants from the list, which further compounds the problem. Switching from accepting the lowest bid to the lowest evaluated bid is a challenge to be addressed. Commenting over "Stakeholders Solutions to Key Issues in Business Environment", WB report mentioned, Six key areas of concern were identified as:
-- Administrative and systematic weaknesses-systems do not work as per contract stipulations
-- Corruption and transparency issues
-- Regulatory framework and unclear, inconsistent policies
-- Lack of financing; low rates, high cost and taxes
-- Poor planning, budgeting, funding of projects and delayed release of funds, and
-- Security and risk factors
-- WB study suggested to improve administrative competence and streamline procedures, adopt FIDIC guidelines in letter and spirit, ensure balanced contract documents, provision of training at all levels.
-- Eliminate corruption and ensure transparency in procurement and contract administration;
-- Implement the PEC guidelines and make it more effective; Facilitate credit/financing, make timely payments and rationalise taxes; Prepare correct cost estimates, make realistic budgets, carry out long-term planning and ensure availability of funding for projects; and improve security and risk perceptions.