Elite capture

November 18,2018

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In 2006, Nawaz Sharif and Benazir Bhutto signed the Charter of Democracy that laid the foundation for the Pakistani elite to capture the state of Pakistan (and the resources in it). State capture is “systemic political corruption in which private interests significantly influence a state’s decision-making processes to their own advantage”.

‘Elite capture’, a parallel phenomenon, is a form of “corruption whereby public resources are biased for the benefit of a few individuals in detriment to the welfare of the larger population”.

Money laundering is the “process of creating the appearance that large amounts of money obtained from criminal activity originated from a legitimate sources”. Mega money-laundering is a collective endeavour. For mega money laundering, the mega money-launderers need to capture the state.

Mega money-launderers need to capture the Securities and Exchange Commission of Pakistan (SECP) so that fictitious companies can be registered and are allowed to operate. Mega money-launderers need to capture licensed banking entities so that fictitious accounts can be opened and are allowed to be operated. Mega money-launderers need to capture licensed banking entities so that suspicious transaction reports (STRs) can be suppressed. Mega money-launderers need to capture the State Bank of Pakistan (SBP) so that SBP’s Financial Monitoring Unit (FMU) takes no action on STRs.

Question: Where do the funds for mega money-laundering come from? Answer: There are five sources: At the federal level, the Rs800 billion Public Sector Development Programme (PSDP). At the provincial level, four annual development programmes (ADPs) of over Rs1 trillion. Mega money-launderers at the federal level need to capture the PSDP and mega money-launderers at the provincial level need to capture ADPs and then laugh all the way to the bank.

Over the past five decades, Pakistan’s ‘elite democracy’ has had 11 elections. Pakistan’s elections are an intra-elite competition. Our democracy is ‘exclusive’ and our economic institutions are ‘reverse Robin Hood’ –rob from the poor and give to the rich.

Why do nations fail? Daron Acemoglu and James Robinson published a 546-page book titled ‘Why Nations Fail: The Origins of Power, Prosperity and Poverty’. The authors recommend focusing on three leadership qualities: greed, selfishness and knowledge of history.

Pakistan’s future depends on our leaders. Why do nations fail? Are our leaders greedy? Are our leaders selfish? How well do our leaders know history?

Of the 30 million Pakistani families, a thousand Pakistani families have managed to capture most of the state’s resources. Elite capture has had two consequences: One, Pakistani citizens have lost trust in the institutions of the State. Two, rampant poverty is the direct result of the elite capture of state resources.

We are not poor, but have been conscripted into poverty because of elite capture. We are not beggars, but have been conscripted into beggary because of elite capture. We now produce the most expensive electricity in the world because of elite capture. We have built the most expensive rapid transit systems because of elite capture.

According to Transparency International, elite “capture is one the most pervasive forms of corruption”. Addressing elite capture requires “anti-corruption strategies…enhancing state capacity and public-sector management, strengthening the accountability of political leaders...freedom of information legislation…e-government mechanisms…conflict of interest rules…asset declaration requirements.”

The writer is the government’s spokesperson on economy and energy issues.

Email: farrukh15hotmail.com. Twitter: saleemfarrukh


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