Delivering infrastructure in a democracy

One of the most important injuries that the state has sustained in the last decade is the entrenchment of the idea that private businesses can fulfil the responsibilities of the state better than governments can. This is a powerful argument at the academic level because of decades of research and empirical evidence that demonstrate inefficiencies in government. It is a powerful argument at the political level because it enables the marriage of private business interests, and the purported public interests of government. It is a powerful argument in developing countries like Pakistan, because governments are resource- constrained--they have neither the money, nor the personnel to be effective.

Despite all these arguments there is no evidence that conclusively demonstrates that developing countries can benefit, or have benefitted, from this "outsourcing" of the state. Fads like "public-private partnerships" (ppp's) make for sexy acronyms that are thrown around like free sweets after a military coup, but they are hardly understood, and almost always open to massive abuse.

Why is the discussion important about who should be undertaking the nitty-gritty work of the state? One reason is that the state is in recession, not just in developing countries, but globally. Everywhere one looks, fundamental functions that the state has developed and been vested with over a process of hundreds of years are rapidly being "transferred" to the private sector.

In Iraq private businesses like Blackwater enjoy all the privileges of having a kind of monopoly over violence, without incurring any of the liabilities of the government. In Bangladesh, private, not-for-profit organisations like BRAC have not only become lenders and employers of the first resort, they have spawned globalised, multinational and, in some cases, for-profit corporations. In India, the world's most dynamic and fastest-growing middle class is choosing privately owned mini-cities to live in, leaving behind the crumbling infrastructure of Indian cities that the majority of Indians still call home.

From private security services to clean water in nicely packaged bottles, the evidence is overwhelming--the state is in retreat. In each instance, the state has not only conceded that it is incapable of serving the needs of the people, it has gone further: it is now actively enabling and empowering private business interests over and above the interests of voters, taxpayers and citizens. A subsidy here, a concessional rate for land there--all in the name of the benefits of private investors bringing in much needed money and expertise into the provision of infrastructure and services for the people.

In Pakistan, the latest example of the state's acceptance of its inability to fulfil its functions is manifest in the formation and behaviour of the Infrastructure Project Development Facility (IPDF). The newly minted head of the IPDF recently suggested that the government transfer over twenty public-sector development projects (PSDPs) to the IPDF, worth a cool Rs165 billion. In doing so, the IPDF claims it will save the government that large sum of money, and ensure that infrastructure actually gets built.

The theory is simple. Government processes are cumbersome, inefficient and ineffective. Enter the private sector--which is of course, all-easy, all-efficient, and all-effective. Intelligent Pakistanis, including the head of the largest political party in Pakistan, and his well-meaning colleagues who have been promoting the ppp's through vehicles like the IPDF, should be asking a few questions here.

First, what's in it for the investors? Surely, no one puts up Rs165 billion just because Pakistan needs it. When the state undertakes delivery of services or construction of infrastructure, it is doing its job, and giving back to the taxpayers it takes from. By bringing in Rs165 billion from private firms, what will the IPDF be giving to those firms? It doesn't have any assets or authority of its own. Is it reasonable to expect it would be giving away assets that belong to the Pakistani people?

Second, who would oversee the transactions between IPDF, and these private firms? We've already seen what happens when secrecy is the operative element of a transaction, with the sale of assets by the Privatisation Commission. The Supreme Court has to step in, and then, of course, all hell breaks loose. What legal or constitutional authority would determine how kosher the IPDF was in its dealings with these firms?

Finally, who'll be looking out for the little guy? For almost forty years the Pakistan People's Party has been the party of the little guy. In its quest to provide the little guy with highways, roads and electricity, the ruling party and coalition must remember: the only asset the little guy has is the state. Protecting the state from the instincts of a private firm, whose only mantra is profit, is job number one. Environmental issues, relocation and resettlement issues and oversight of expenditure in the name of government are all state functions designed to protect the average citizen. As the IPDF signs up investors, who will watch over these issues?

In the old days, when civil servants' rectitude was the stuff of legend, the response of government in the face of such a challenge would be predictable. The IPDF, after all, is an extra-constitutional, non-traditional, government-funded agency. On paper, it has no links to Parliament, to the Auditor General, to the taxpayer or to the citizen. More worryingly, despite some very bright people being involved, the so-called private-public partnership model it is espousing has no record of success anywhere. The invisibility of the lions of the bureaucracy and the silence of the tigers of civil society in this scenario is surprising.

At the generic level, the idea that the private sector is a model of efficiency is somewhat strewn with contradictions. After all, taxpayers subsidise businesses and firms in Pakistan quite heavily. In fact, the bigger the sector, the larger the subsidy, from textiles, to agriculture, to banking and finance.

Moreover, initiatives like the IPDF are not new. As early as the mid-1990s the government began to "outsource" poverty-reduction to highly successful social entrepreneurs who were very good at poverty-reduction, and were committed to the cause. Today, those entrepreneurs have either passed on, or are on the verge of retirement. In their wake lie expansive behemoths that use government subsidies, without any accountability to Parliament, through the Auditor General, or otherwise. They specifically wrote this into their charters to prevent the state from taking a look inside. If the IPDF is the latest in this long line of inventiveness, citizens have a right to demand that some clear accountability functions be built into the IPDF design.

Pakistan is an increasingly fascinating case study. When companies that should never have been in the public sector get privatised, entire cities are paralysed by protests (remember telecoms and steel?). Yet, when government functions and sovereignty are switched off, the keys handed to private enterprise without any transparency or accountability to parliament, nobody bats an eyelid.

By indulging the IPDF, the Pakistani state is openly accepting that it is fundamentally incapable of doing the most basic of things--building roads, highways, sewers and power plants. It is saying that it does not have the money, the people or the expertise to build these things.

Not so long ago, however, this same state built a nuclear bomb. How does a state that achieved this find itself out of ideas to build roads? Pakistan is building a fighter jet in partnership with China. How does a state that is creating new weapons run out of money to generate electricity?

The IPDF, of course, is moving full speed ahead. The new IPDF chief is reportedly upset with the ministry of finance and the Privatisation Commission for holding back the march of progress. Perhaps those lions of the bureaucracy are alive and kicking, after all. Maybe the tigers of civil society are next. For the sake of the credibility of the state, and for the sake of the integrity of the public sector, one should hope that they are. Pakistan needs infrastructure, and it needs private investors. For recognising this, the political powers that are driving IPDF should be commended. Their challenge is to now deliver these needs in a manner befitting a democracy owned by the people, rather than a holding company owned by private firms.



The writer is an independent political economist. Email: mosharraf@ gmail.com