This is the first of a three-part series of articles detailing how corruption is measured. Part II would focus on the global banking meltdown due to corruption/violation of laws by some of the world's biggest banks and some comparisons to the defunct Mehran and BCCI will be drawn. And the third and final part relates to measures that are required to deal with corruption.
The extent of corruption in any multinational or a relatively closed country or in a micro unit including provinces/states or a company/bank/firm directly compromises the quality of life of all those who may come into contact with the defrauding entity.
The more the reach of the corrupt entity, the greater the number of people impacted. Thus a multinational bank engaged in corruption in one country, as the global village is learning to its cost, may well lead to a collapse of the financial system world-wide, impacting not only on its clients (households) but also its corporate customers, leading to a recession. A government that is corrupt would necessarily impact the people of the country and a corrupt entity say Pakistan Steel Mills would impact on its staff, but in the event of a bailout package by the cabinet, its impact would be on the entire economy as the budget deficit would rise.
How does one measure corruption? Sitting in Pakistan after four years of the PPP-led government the general perception is that we have never had it so corrupt. The perception is based on two factors. First, the number of financial scams mainly institutional that have hit the Pakistani airwaves and the print media in the past four years is truly legendary. In its own defence, the PPP argues that judicial activism and an extremely proactive media have led to the outing of more corruption cases than ever before - factors that were simply not applicable in the past. Secondly, and equally importantly, a number of statements by those serving in the present government have raised the public's consciousness of the range and extent of corruption today. Shaukat Tarin, former Finance Minister, went on record to state that there is an average annual corruption of around 500 billion rupees in the Federal Board of Revenue. The current Finance Minister Dr Hafeez Sheikh, not as bold as his predecessor, publicly thanked the Supreme Court for taking decisions on corruption-related cases that led to the reimbursement of 100 billion rupees to the exchequer. And finally the PPP-appointed National Accountability Bureau Director General Fasih Bokhari recently admitted that there was an estimated 6 to 8 billion rupee corruption per day in Pakistan. This figure exceeds the one released by Transparency International (TI), against which Interior Minister Rehman Malik launched a campaign of harassment, or so it is alleged.
While corruption in individual instances may be quantifiable yet total corruption in any one country can, at best, be an estimate. It was first quantified by the TI in 1995 under the head Corruption Perceptions Index (CPI) and was defined as how corrupt the public sector was perceived to be; additionally it was, as per the website "a composite index, a combination of polls, drawing on corruption-related data, collected by a variety of reputable institutions" and a reflection "of views of observers from around the world, including experts living and working in the countries/territories evaluated". The PPP has challenged the veracity of the CPI as nothing but perceptions that are flawed, given that those surveyed are resident in cities, where the PPP no longer has political support. However, TI acknowledges CPIs shortcomings: "Corruption generally comprises illegal activities, which mainly come to light only through scandals, investigations or prosecutions. It is thus difficult to assess the absolute levels of corruption in countries or territories on the basis of hard empirical data."
A 2002 study found a very significant correlation between CPI and two other proxies for corruption, namely black market activity and overabundance of regulation as well as with real gross domestic product (GDP) per capita. Thus the higher the rate of corruption, the higher the activity in the black market (in Pakistan drug related is the focus rather than political/civilian/military corruption) and the lower the GDP growth, as well as allocations for development.
The CPI for Pakistan has hovered between 2.1 to 2.6 (10 score defined as absolutely clean while zero is absolutely unclean). Musharraf's years had the following CPI (in brackets): 2003 (2.6), 2004 (2.5), 2005 and 2006 (2.1), 2007 (2.2). The PPP years rated as follows: 2008 (2.4), 2009 (2.5), 2010 (2.3) and 2011 (2.5). TI cautions that "the CPI is not designed to allow for country scores to be compared over time. This is because the index draws on a country's rank in the original data sources rather than its score. A rank will always deliver only relative information - and therefore a ranking is a one of assessment. A country's rank in a given data source can change (a) if perceptions of corruption in other countries included in that source change or (b) if countries are added or removed from that data source." There are thus reservations about the CPI score that the TI acknowledges but for lack of any other better alternative, it remains the best estimate of corruption.
Pakistan's ranking has remained at 134 and other countries in that same ranking are Cameroon, Eritrea, Guyana, Lebanon, Maldives, Nicaragua, Niger, and Sierra Leone. India's CPI improved from 2.7 in 2001 to 3.3 in 2006 to 3.4 in 2008 to 3.1 in 2011. Bangladesh jumped from 1.2 in 2003 to 2.7 in 2011.
The United Nations is the only global initiative that provides a mechanism to deal with corruption. In December 2000 the UN General Assembly recognised that an "effective international legal instrument against corruption, independent of the United Nations Convention against Transnational Organised Crime was desirable and decided to establish an ad hoc committee for the negotiation of such an instrument in Vienna at the headquarters of the United Nations Office on Drugs and Crime. The text of the Convention against Corruption was negotiated and entered into force on December 14, 2005". However the focus is not on state corruption but narcotics and money laundering by terror groups. Therefore, corruption by Pakistan officialdom has not been a matter of concern or interest for the UN.
The by-now famous last interview given by President Asif Ali Zardari to a private channel is often cited wherein the interviewer sought the President's comment on the steady erosion of the profitability of major state institutions to which the response was "in your opinion" thereby delegating it to the realm of perception. Later, the President acknowledged that there had been some deterioration in the financial health of the entities. However, he was quick to lay the blame for one instance on his former Finance Minister Shaukat Tarin for refusing to heed his call to purchase planes for PIA by insisting that a business plan needs to be formulated first. The response convinced no one, perhaps not even the party loyalists.
But, as is claimed repeatedly by many a politician time and again, politicians are not the only ones guilty of corruption. The civilian and military personnel, the judiciary, the police are all engaged in corruption, which explains the NAB Chairman's 8 billion rupee a day figure.
(To be continued)