The nature of corruption and anti-corruption strategies in Pakistan

Asad Sayeed, Director, Collective for Social Science Research, Karachi

Pakistan may not be making headlines in the world on corruption these days but contemporary discourse within the country has been focused on the issue in the recent past. In fact there is a discernible pattern over the years where concerns about corruption dominate discourse for some time and then seamlessly other issues take over public imagination. Meanwhile corrupt practices continue in one form or the other, only to raise their head again.

It is useful to note that corruption was mentioned as one of the ailments afflicting territories constituting Pakistan by the founder of the country, Mohammad Ali Jinnah, in his first address to the Constituent Assembly on 11 August 1947. He said:

One of the biggest curses from which India is suffering—I do not say that other countries are free from it, but, I think our condition is much worse—is bribery and corruption. That really is a poison. We must put that down with an iron hand and I hope that you will take adequate measures as soon as it is possible for this Assembly to do so.

That is exactly what the Constituent Assembly did: an anti-corruption law was one of the first items of legislation enacted by the assembly soon after independence, only to be followed by a myriad of laws. However, the perception of Pakistan as a highly corrupt polity and society persists amongst Pakistanis as well as outsiders even after 62 years of the country’s existence.

The obvious question to ask is that in spite of so much concern for so long, why has Pakistan failed to effectively reduce corruption? Is it because of a lack of effective anti-corruption strategies? If that is so, then why can international or regional best practice not be adopted? After all, in some areas—most notably in technologies and strategies related to weaponization and warfare—international best practice has been adopted. Or is corruption not the cause but the symptom of socio-political imbalances—such as the enduring civil-military divide as well as regional-ethnic imbalances—that Pakistan as a nation-state has been unable to resolve over the years?

One can only attempt to answer the above questions once we discern the nature of corruption prevalent in Pakistan as well as the form and substance of anti-corruption strategies adopted to combat the problem. Section 1 of this article lays out the broad contours of corruption in Pakistan through three different analytical vantage points. Section 2 provides a critical assessment for the success and failures of anti-corruption laws and strategies in the country. Section 3 then provides a tentative way forward for more effective and sustainable anti-corruption policy in Pakistan.

Contours of corruption in Pakistan

Corrupt practices and their impact on citizens?welfare can be categorized in numerous ways across time and across countries. For the purposes of this paper, it is important to focus on a succinct definition of corruption. Numerous unethical and illegal practices are termed as corrupt in common parlance. However, there is no perfect overlap between legality and ethics or vice versa. For these very reasons, the UN Convention Against Corruption itself does not provide a succinct definition of the phenomenon.

There are three board analytical areas where the prevalence of corruption needs to be understood in Pakistan. This particular categorization will also help us in assessing the effectiveness or otherwise of anti-corruption mechanisms adopted in the country.

1. Private sector-state collusion

Commonly referred as ‘rent-seeking?in economic literature, through a variety of mechanisms, individuals and groups from the private sector interface with the state to transfer public resources to themselves. The most salient of this form of corruption in Pakistan has been allocation of state land to private interests, as well as land transactions.

The practice started immediately after partition, when millions of refugees came to Pakistani territory from post-partition India. The state adopted a policy of granting land and housing left behind by Hindus who migrated to India to refugees based on claims of property they left behind in India. There is some documentation on the use of influence and money in granting such claims, as well as some politicians using land as a form of patronage to create constituencies by deliberately driving out those Hindus who had otherwise wished to stay in Pakistan. This particular policy resulted in a class of propertied migrants to the exclusion of others.

The practice of land grabbing—both urban and rural—has continued in different ways over the years. Its modern manifestation is in different arms of the state using the Acquisition of Land Act in ways it was not intended so as to sell acquired land cheaply to mafia-like groups of land developers and builders, who subsequently sell it at a premium to prospective home dwellers or for commercial purposes.

Moreover land transactions are a typical way of whitening black money acquired through corruption and criminal activities. Due to taxation loopholes, more than two-thirds of the money paid in land or property taxation is unrecorded. Thus, even if an honest property seller is to claim the market value of her property, she will be handed a large chunk of the money, which is not declared. This particular practice, which is pervasive, results in large amounts of black money circulating and a variety of ingenious methods being adopted to launder that money.

Other forms of private sector-state interface that breed corruption have occurred due to state control over allocation of resources. In the pre-liberalization period, bribery in acquiring industrial and commercial licenses and later in willfully defaulting on loans acquired from state-owned banks and financial institutions frequently hit the headlines in Pakistan. The cost of this type of corruption has been borne by the consumer, in high prices paid for goods and services as a result of inefficiency and monopoly pricing. In the post-liberalization period, a lack of regulation on cartels—particularly in banking services, and the automobile, cement, fertilizer and sugar sectors—has also hit consumers hard.

2. Corruption and extortion by state actors

State personnel across different institutions of the state engage in various forms of corrupt practices. These range from straightforward bribery and extortion of individuals and businesses to various forms of domestic and international kickbacks on procurement of materials and services. For the sake of clarity we will distinguish state-led corruption by civil bureaucrats, the armed forces and politicians.

Much of the bribery and extortion carried out by the state is executed through the civil bureaucracy. Ranging from petty bribes to the policeman or building authority clerk to major kickbacks on procurement, civil bureaucrats are the ‘deal executors? They are in the loop for the simple reason that they carry out the documentation and are most familiar with rules and regulations, as well as the loopholes and lacunae that exist. However, apart from the petty bribes and extortion, for the most part the civil bureaucrat is not the sole claimant of big-ticket corruption. Over the years, the civil bureaucracy in Pakistan has lost its clout and political power to the executive and legislature, whether military or civilian.

The central protagonists in state-led corruption are the military and politicians. Arguably, civilian politicians are more accountable than the military for three reasons. First, the logic of electoral democracy itself holds politicians accountable for their misdeeds and lack of delivery to the electorate. Although this proposition may be contested in the case of Pakistan, where politicians with tainted reputations are re-elected time and again, the fact that electoral democracy has not had a fair run—in the sense that an incumbent government has not yet gone back to the electorate after completion of its term and been subjected to a largely fair election process—means that this contention has not been put to a robust test. Second, audit and accountability laws apply to politicians, which makes them relatively more susceptible to legal provisions than their uniformed counterparts. Third, their conduct is more in the public eye because of their greater interface with the public as well as the media.

The military, on the other hand, is powerful enough to evade public accountability. The military’s budget in Pakistan is neither presented in detail to parliament nor have public representatives so far been able to debate it. Moreover, civilian audit authorities do not audit the military budget, and to top it all, serving military personnel have been exempted from investigation by civilian anti-corruption watchdogs by law. Also, because of the very nature of the civilian-military imbalance in Pakistan, demanding accountability in military scandals is a much more hazardous proposition for an otherwise free media than it is from civilian politicians.

3. Institutionalized corruption

There are a number of areas in Pakistan where corruption is institutionalized. As mentioned earlier, enough tax and legal lacunae exist through which black money can be laundered. The most salient in this regard is the ‘no questions asked?private remittance in foreign exchange. According to law, an individual can get as much foreign exchange into the country tax-free as they wish without being questioned over the source of funds. This is the most-used conduit for laundering money obtained through land transactions, tax evasion, and criminal activity. In addition, the state periodically provides a window through which to ‘whiten?black money at a nominal rate of taxation by announcing a ‘whitener?scheme where black money can be declared at a minimal rate of taxation that is lower than for those who earn legitimate taxable income (last time, December 2008, the rate was two per cent). That the state provides this facility every few years creates an incentive to accumulate black money rather than pose any threat of penalization.

The other form of institutionalized corruption is land grants given to military personnel. Officers of the armed forces are entitled to residential, commercial and agricultural land at highly subsidized prices. In the case of residential land, numerous societies developed by the armed forces dot Pakistan’s urban landscape where infrastructure is developed (largely at state expense) and land is allotted to military personnel at subsidized rates, who in turn can sell it at the market rate and extract a hefty premium. Similarly, developed agricultural land is provided at subsidized rates and in some cases army personnel are deputed to tend the land at state expense. (See Military Inc: Inside Pakistan’s Military Economy by Ayesha Siddiqua, Oxford University Press, 2007, for details on land allotment to military personnel as well as the process through which it takes place.)

Another feature of institutionalized corruption in Pakistan is located in the country’s security and foreign policy. For the last three decades, the Pakistani state has been involved in a number of major covert operations as part of its foreign and security policy. Perhaps the most elaborate has been the country’s nuclear program. The confession of Dr. A.Q. Khan—one of the main protagonists in Pakistan’s nuclear program—in 2004 that he supplied contraband material to other countries in return for cash may be the tip of the iceberg so far as money laundering and clandestine activity for this purpose is concerned. In the formative phase of the program, material and equipment were purchased illegally from the international market. This process would have involved a large number of state and non-state actors laundering state money.

The other major element has been covert warfare conducted in Afghanistan and Kashmir. A large chunk of state resources was diverted to conduct the entire war effort through non-state actors (including training, provision of arms and ammunition as well as logistic support). Much of this money would have made its way back to Pakistan through re-laundering and into land, real estate and other ‘legal’ activities as well as criminal ones.

The most important implication of institutionalized corruption is that powerful actors—whether state or non-state—cannot be investigated and prosecuted under anti-corruption laws if the entrepreneurial class (in the case of big business) and state personnel (in the case of covert policy operations) have the imperative to protect important state and economic interests against these laws.

Anti-corruption mechanisms and laws in Pakistan

Apart from regular laws against crime and fraud enshrined in the Criminal Procedure Code (CrPC), as mentioned in the introduction specific anti-corruption laws in Pakistan date back to the country’s inception. Five pieces of anti-corruption legislation have been enacted to date. Another piece is on the anvil and is expected to replace the extant National Accountability Bureau (NAB) legislation. Much of the legislation, as seen from the titles of laws, has concentrated on elected representatives and politicians, although the 1947 Act and NAB law both have big business in their ambit also.

Anti-corruption legislation in Pakistan

In addition, there are a number of specialist agencies and bureaus that are dedicated specifically to investigate white-collar crime. The list below is again in addition to routine investigation carried out by the police and other civil and military intelligence agencies. Presently there are three specialized anti-corruption agencies.

Anti-corruption agencies in Pakistan

The general perception in Pakistan is that in spite of the myriad laws and agencies investigating corruption, white-collar crime has increased rather than decreased. Moreover, serious analysts also do not consider anti-corruption mechanisms in Pakistan to have been successful. The most common lament is that the above-cited laws and agencies are discriminatory and particularly that they are focused on politicians in the main and civil bureaucrats on the periphery. As such, politicians have often questioned the legitimacy of anti-corruption mechanisms as a form of victimization in a country where the civil-military tensions have dominated politics. Their recriminations gain credence from the fact that these laws consistently exclude the military, the judiciary and lately, the Islamic clergy from their ambit. While big business has been intermittently targeted, it too has by and large escaped the net for the simple fact that if captains of industry and commerce are hounded by the state then private sector investment will suffer.

Other complaints have centred on capacity and intent issues: lack of adequate training, duplication of effort across bureaus, lack of audit controls, interference from the executive, etc. As such the National Anti-Corruption Strategy that was unveiled in 2002 has remained ineffective.

While interference from the executive is a political issue, there is no reason for the lack of capacity to prevail over a long period of time when ostensibly there is so much focus on corruption (as reflected by the number of laws and agencies).

Economic liberalization as part of anti-corruption strategies

Another anti-corruption mechanism that was popular in the recent past was to reduce the role of the state in resource allocation, as it was deemed to create rents and lead to corrupt practices.

Pakistan has vigorously pursued privatization and deregulation of the economy. This has at best produced mixed results. Some of the sectors privatized have indeed become more efficient and benefited from being out of direct government control, while others—particularly public monopolies—have only turned into private monopolies with no benefits to the consumer. Moreover, the process of privatization itself has been called into question as being less than transparent, and collusive.

Deregulation of the economy has in many cases gone to the other extreme, where regulation that protects public interest has also been dismantled, with results including cartels and market manipulation.

The way forward

That corruption in Pakistan is pervasive and endemic is without doubt. We have attempted to show in section 1 that it is also multi-faceted in character. In section 2, we have seen that in spite of the number of laws enacted and bureaus created to check corruption, they are not perceived as effective and are not broad-based.

While there are issues remaining for the improving of capacity and for better strategizing on anti-corruption mechanisms, corruption is inextricably linked to socio-political imbalances in Pakistan. If the country is to embark on an effective and sustainable anti-corruption drive, some level of agreement among different power wielders is necessary to ensure that accountability will be across the board. Only then will there be broader societal legitimacy for anti-corruption practices. Once such an agreement is reached, a future anti-corruption program requires us to:

1. Bury the past and start anew. Bringing up corruption cases from the past will open a Pandora’s box, from which demands for accountability of all manner of powerful sections of the elite will emerge. Not only will this be divisive but it will also consume valuable time. Moreover, those in powerful positions (including formulators of the state’s security policy) will resist such a move. If catharsis is needed, then a process of truth and reconciliation, like that in South Africa, should be initiated.

2. Create a constitutional body to oversee all aspects of corruption, with no group or entity outside its ambit. The creation of such an entity would also mean that the duplication in mandates of several agencies could be rationalized.

3. Enhance the capacity and oversight functions of the auditor’s office to ensure that corruption in service delivery—which is the most important for the citizen—is minimized.

4. Carry out civil bureaucratic reform to strike a balance between security of tenure and credible penalization for wrongdoing.

In this process it is very important to keep in mind that excessive moralizing on corruption does not generate substantive dividends. As with much else, it is advisable to create institutions that will over time reduce the incidence of corruption in society.

Footnote: The author is grateful to Moaiz Siddiqui for his diligent research assistance.