Last week, at a conference on innovative finance, Planning Minister Asad Umar commented on a question on risks associated with public private partnership (PPP) projects that when bad decisions are equated with criminal intent, the appetite of bureaucracy and private sector to venture into PPPs diminishes. Asad's words were: "We have to live with it". An immediate question comes to mind: if we have to live with it, where is the mantra of change? But the broader issue is how we have reached this point, and more importantly how to mend our ways.
The general perception is that the bureaucracy is not ready to sign on anything where there is some risk of future accountability; and the private sector is asking for higher risk premium, if at all it is ready to invest. The cost is to be incurred by public at large. Due to policy inaction, the provisioning of requisite public goods and services is either inadequate or costlier. Look at the PPPs in the power sector where, due to circular debt and other issues, even local companies are not investing without dollar-based, guaranteed returns. And in some instances (even in recent history), the costs are inflated in projects where cost is a pass-on item.
Some observers connect the policy inaction by public officers, or higher risk-premium charged by the private sector, to undue interference of the National Accountability Bureau (NAB), as many civil servants in grades 19 to 22, whom this writer informally talked to, are saying off-the-record that they are not at all willing to take any risk. And whenever you do innovation, you tend to take risk, but there is no reward for bureaucrats. Neither is promotion system or remuneration linked to performance. And seeing how NAB and others are probing, no rational agent will take such risks.
The problem is not confined to the public sector officials; even the private sector representatives are reluctant to engage with government on pro-bono basis or at token financial incentive. The other day a dear friend was candidly asking about joining the board of directors of one government-owned entity. He is keen to bring change by deploying his expertise, but at the same time he fears that at some point in time in future, NAB or any other organization may ask him about potential wrongdoing by the management of that very organization.
People are susceptible when an age-old case is resurrected and a then a board member of a PSE is detained, questioned on why he did not attend a board meeting where supposedly some mala fide decision took place. Senior government officers or seasoned private sector experts are on a number of boards and virtually no one attends all the meetings, and if someone does, how can he or she ensure that the management is not engaged in wrongful deeds?
In law, when there is a wrongdoing and there are intentions to do so, then it becomes a crime. But when people are questioned on wrongdoing where their own intentions are not to commit crime, the problems arise. When there are officers in the custody of NAB for over a year, while by law they cannot be detained for 90 days and further 30 days for decision (total of 120 days) without proof, the others simply become risk averse.
These issues have jammed the progress on PPPs, which is the need of the hour. Both federal and Punjab governments have budgeted decent amounts on development under PPP by engaging private sector in providing public goods or services. But the federal planning minster does not seem to be optimistic about any progress on that front. The Punjab government has formed a PPP authority, but without success to take home to date.
There is some success for the PPP model in Sindh, where the private sector is more receptive and the provincial government has a doer running PPP cell. But there, the risk premium has increased after NAB becoming active. And not everyone in Sindh is so keen anymore. Lately, a multilateral agency went to a clean, big private group of Karachi to sell its credit guarantee, and the seth was receptive. But as soon as the official spelled out "PPP," the seth simply refused to talk any further on that very project, saying that he is not at all interested to do anything with the government.
The federal government has to rethink the way NAB or other accountability organizations operate; else the public service delivery failure will only increase. The private sector must be given the necessary confidence to lean in and assist the government in developing the country.