Corruption – a global concern


-Editorial

WEB DESK: The British Prime Minister, David Cameron, hosted a seminar on corruption in London and his office published a policy paper on 12th May 2016 containing a foreword from the Prime Minister as well as essays from notables, such as the International Monetary Fund (IMF) chief Christine Lagarde as well as heads of government of Nigeria, New Zealand, Afghanistan and Singapore.

Sadly, Pakistan was not represented in this conference though the number of foreign official tours of our incumbent cabinet members have surpassed all past records. Corruption is defined as the “abuse of public office for private gain”.

Its economic direct costs estimated by the IMF chief is around 1.5 to 2 trillion dollars, about 2 percent of global Gross Domestic Product each year; however she argued that this estimate may be an understatement as “the indirect costs may be even more substantial and debilitating, leading to low growth and greater income inequality. Corruption also has a broader corrosive impact on society. It undermines trust in government and erodes the ethical standards of private citizens.”

This definition effectively distinguishes those holding public office from those operating in the private sector with the responsibility for corruption devolving on the former while the latter may contribute to the indirect cost of corruption. How corruption hampers growth is explained by the Fund through its impact on (i) weakening the government’s capacity to raise revenue and perform its core functions and through harming the culture of compliance, corruption increases tax evasion; (ii) by inflating costs in the public procurement process, corruption undermines the quantity and quality of public spending; (iii) because of lower public revenues, countries tend to rely more on central bank financing or in our case on borrowing from abroad, which creates an inflation bias in the country; and (iv) corruption can even raise the cost of accessing financial markets as lenders factor in corruption.

In Pakistan, as a case in point, there is no culture of compliance with respect to payment of due taxes. Costs in public procurement process continue to be grossly overstated, lower public revenues have led to a massive rise in borrowings and, borrowing itself in this country is a function of one’s influence accounting for one of the highest write offs of loans.

To resolve the issue of business participating in bribes, Lagarde cited Indonesia’s example where the Minister of Finance partnered with business to create ‘new rules of the game’ focused on streamlining customs approval process in exchange for a commitment from business not to offer bribes. This should be considered by the Minister of Finance as a component of next year’s budget. What is the way forward?

The Fund suggests four mitigating measures. First, transparency is a prerequisite; again in our case transparency is singularly lacking in decision-making. The LNG deal signed more than three months ago is still not placed on the website as constantly promised by the relevant minister and the actual terms of the 46 billion dollar China-Pakistan Economic Corridor remain shrouded in mystery. Secondly, to enhance the rule of law a credible threat of prosecution must exist.

In Pakistan, despite accusations of serious corruption made during the run up to the 2013 elections there have been no visible moves during the last three years to hold anyone accountable for past corruption with the state presenting an extremely weak case with respect to convicting politicians. The anti-money laundering bill, supported by the Fund under its ongoing programme, was rendered toothless by the Senate Standing Committee on Finance through taking out income taxes from its purview. Thirdly, excessive regulation creates rents which are allocated at the discretion of the public officials and must be eliminated.

In Pakistan, the third-time Sharif administration is continuing to talk of a one stop shop with respect to the start of the project, an objective still to be met. And finally, a clear legal framework is required which Pakistan has, however, the Fund points out that the best frameworks come to nothing unless they are implemented, and the implementation in our case remains weak. There is merit to the argument that a lot of the developing world’s corruption money stashed abroad is the outcome of policies by the West.

David Cameron during the seminar as well as in the foreword to the book he published containing the essays of many of the speakers in the seminar states that “we know that some high value properties – particularly in London – are being bought by people overseas through anonymous shell companies, some of them with plundered or laundered cash. So we are consulting on ways to make property ownership by foreign companies much more transparent – and considering whether to insist that any non-UK company wishing to bid on a contract with the UK government should publicly state who really owns it.”

However, one would also hope that past purchases should also be scrutinised. The need of the hour as stated by David Cameron is to ensure that corruption should be exposed so there is no way to hide and ‘we need to drive out the rogue lawyers, estate agents and, accountants who facilitate or tolerate corruption in commerce and finance’ but at the heart of all this is international cooperation on transparency.

Source: Business Recorder

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