Reversing baby steps?

Prime minister Imran Khan’s latest incentives to investors in Pakistan’s construction sector are neither appropriately timed nor advisable. At a time when a de-facto lockdown is enforced across Pakistan with little clarity over the future, its not clear exactly how soon the economy will kick back in action and resume work in full gear.

Its therefore far from clear if the mainstream rank and file currently left without jobs will return to work anytime soon, notwithstanding the policy impetus to construction related work across Pakistan.

A new amnesty by Prime Minister Khan under the so-called ‘no questions asked’ policy allows construction related investors to withhold the source of their investments. Tragically, this effectively reverses the few gains made by Pakistan towards documenting its economy, and creates an avenue for the internationally recognized dreadful reality of money laundering.

Pakistan has been targeted with international criticism for years over its ‘no questions asked’ policy adopted in the early 1990s, ostensibly to build up its foreign currency reserves. Successive Pakistani governments allowed individuals to buy foreign currency from the open market and stash away their deposits in on-shore foreign currency bank accounts, without revealing the source of their funds.

The mounting global pressure on transparency in Pakistan’s financial sector finally forced the country to be grey listed by the Paris-based Financial Action Task Force or FATF – the global watchdog. For the past year, Pakistani officials have faced an uphill battle in trying to satisfy the FATF though without a favorable outcome. Though the best case scenario on this front has often been touted in officials circles as an eventual stepping back from the grey list, the worst case outcome – pushed to the black list nevertheless remains on the table.

Its possible that the prime minister and his advisers considered it a good time to dodge the issue as the world remains singularly focused on battling the Corona virus pandemic. But there are at least two downside risks associated with this choice.

On the one hand, the amnesty has coincided with the outcome of the investigations into the sugar and wheat related scams that forced Pakistanis to bear the brunt of a significant escalation of the prices of these essential commodities. Those found at fault include well-known political figures across the board including those close to the prime minister. Does the prime minister remain armed with enough moral authority to take those found culpable to task as he equips the barons in Pakistan’s construction sector to launder their wealth? To that pertinent question, the answer must be in the non-affirmative.

On the other hand, the de facto legitimacy given to money laundering in Pakistan over the past three decades has pauperized the state and repeatedly forced back attempts to document the economy. Its hardly surprising that Pakistan has mostly missed its annual targets for tax collection over the years, as existing loopholes have restricted tax authorities from targeting the biggest offenders.

With a loophole extended by Prime Minister Imran Khan to the construction sector, it is hardly justifiable for his government to withhold similar treatment to other sectors of the economy. As Pakistan suffers the devastating consequences of its present lockdown and with the government having taken a reverse gear on money laundering related progress, similar treatment across the board for the entire economy is amply justified.

But in the ultimate analysis, the risks from a return to the ‘no questions asked’ policy far outweigh the gains made with great difficulty over the years. Even if the global community in the short term ignores the ill advised amnesty for investors in construction, Pakistan stands to gain little in the long term.

As Prime Minister Khan leads the country through more than just an ordinary full-blown crisis, learning lessons from Pakistan’s past is essential to lead the country to a qualitatively better future. Being labeled yet again as a country with a government sanctioned fresh loophole to facilitate money laundering, is hardly going to win reputational points for Pakistan globally.

Meanwhile, Prime Minister Imran Khan’s biggest misstep from his failure to build a national political consensus during this moment of crisis, on its own deserves a full remedial effort. More missteps is hardly the road to take.

The writer is an Islamabad-basedjournalist who writes on political andeconomic affairs.

Email: farhanbokhari@gmail.com