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November 28, 2020

The reform challenge

Business

November 28, 2020

LAHORE: The term reform has been abused so much that people shudder whenever a government vows to introduce reforms for economic betterment.

Economic reforms are needed in a system where vested interests dominate over transparent policies. No government has ever been able to successfully implement reforms if it has within its ranks those very vested interests that it intends to wipe out of the system. It is unfortunate our democratic system has always been dominated by the vested interests.

No political party could expect to come into power without the “electable” that represents vested interests. They are loyal to their interests and therefore to any party that comes into power.

It is true that reforms bring short-term pressure on the common man as vested interests create economic chaos in order to reverse the reform process.

But the reforms start delivering within a year if the government implements them in letter and spirit and without giving even temporary waiver to any quarter.

With vested interests present within the government, it is not possible to implement reforms seamlessly. Any hint of softness from the government on pressure from its own members creates the uncertainty that is exploited to the maximum by the vested interests.

The result is that the spirit of the reform is lost. The hardship that the reform was to bring for a short period becomes permanent. This has happened with every reform introduced by the democratic regimes in the past two decades.

The first and foremost condition for introducing reform is that the government introducing it should be completely transparent. It should abide by all rules and regulations that exist in the system.

It should stop completely the use of numerous discretionary powers that have been vested in the system to favour someone by ignoring merit.

Discretionary powers are available not only with the members of the federal government, but with bureaucracy as well.

Heads of federal and provincial governments for instance have the power to increase the age limit for a particular post and even soften the condition of minimum qualification. This power was blatantly abused in Punjab during the first democratic setup after the 1999 military takeover.

Many appointments were made on the basis of favouritism instead of merit. Similarly, bureaucrats enjoy powers that have become avenues of corruption.

The import rules for instance are supposedly very strict about under-invoicing. When an importer indulges in under-invoicing, they should be apprehended by the evaluation department of customs. Since the under-invoicing is done with the connivance of the officials, this option is seldom used.

The other option is that someone from the public challenges the invoice value and offers to lift the consignment by paying the duty on at least 20 percent higher than invoice value.

The challenger is asked to deposit the government levies (duty, sales tax) and the invoice value of the goods (because the payment was made by the importer). But there is a catch in this regard.

The importer is informed by the custom officials about the offer and is asked to agree to the enhanced value to get the consignment released. The importers almost always agree to match the offer of challenger (as they

know that they have under-invoiced and paid the actual payment to the supplier in cash illegally).

If they do not accept the challenge, they would get only the invoiced value after clearance by the challenger (although this warrants confiscation of goods).

This is only one example; there are various others that have become lucrative avenues for rent seekers. Before instituting reforms, these discretions both at government and bureaucratic levels have to go. This will be the largest reform ever introduced in Pakistan.

Appointments then would be only on merit and through a transparent process to ensure that the most competent human resource is inducted in the system.

This is particularly essential in case of appointments of regulators.

Even the prime minister should not have the option to return the names of three shortlisted candidates to the selectors for reconsideration. This will bring discipline in government affairs.

The government should announce a clear policy duly approved by the cabinet. The bureaucracy should be tasked with implementing it if the policy does not violate rules and regulations.

Reforms would always remain a non-starter if full transparency is not restored at government and bureaucratic levels. We first have to purge the system of corrupt and incompetent individuals both in bureaucracy and in the government and then introduce reforms. There might not be need for many reforms if the flaws in the present governance model are addressed.