A history of corruption

National Accountability Bureau chairman Admiral (retd) Fasih Bukhari’s startling disclosure last week that close to Rs 8 billion are being drained on account of corruption every day in Pakistan stunned everybody. Since the number comes from a high-level official responsible for investigating corruption in the whole country, people are taking it very seriously. This figure translates to a monthly average of Rs 240 billion and a whopping Rs 2.8 trillion annually – almost the size of the current year’s capital outlay. This number is all the more significant because until a few weeks ago, the former navy chief had estimated that the amount lost through corrupt practices was just Rs 5 billion a day. And the revised figure is giving severe heartburn to politicians, former civil and military officials as well as the people of Pakistan who are now demanding Bukhari expose and take action against the corrupt. However, even if Bukhari were so determined, he’d be walking into the Augean stables. ‘Pakistan’ and ‘corruption’ are synonymous in the eyes of the world. Not only has the vice gained acceptance as a way of life, corruption has been institutionalised in Pakistan over the years. Take, for example, the latest ordinance promulgated by President Asif Ali Zardari, which allows investors to invest in the stock market without disclosing their source of funds till 2014. Plain as a pikestaff, the move is aimed at assisting people to whiten their black money and evade accountability, a fact confirmed by concerned officials. However, the Securities and Exchange Commission of Pakistan continues to insist that the move is essential to jumpstarting investment since the stock market is a risky business and won’t attract significant investors under the prevailing circumstances. That said, there are primarily two categories of corruption in Pakistan. One is tax evasion, which funnels monies into the black economy; the second is the siphoning of funds from the formal economy by the informal economy. It’s this latter category that hurts the Pakistan economy most. The practice that generates the largest gains for tax evaders in Pakistan is the  underinvoicing of import goods, particularly machinery. Since the economy is largely underdocumented, the culprits easily get away from under the noses of the authorities responsible for maintaining checks and balances and eradicating sham business practices. But corruption is not a new phenomenon in Pakistan. The consensus is that corruption had started taking root immediately after Pakistan’s creation in 1947, when people – in collusion with the bureaucracy – filed fake claims to get property allotted to them. But none of the seven prime ministers till 1970 – Liaquat Ali Khan, Khwaja Nazimuddin, Muhammad Ali Bogra, Ibrahim Ismail Chundrigar, Chaudhry Muhammad Ali, Hussain Shaheed Suharwardy or Feroz Khan Noon – were ever accused of being directly or indirectly involved in any kind of corruption. Neither did the Ayub Khan or Zulfikar Ali Bhutto governments encounter serious allegations of corruption. However, corruption received a huge fillip during ‘the lost decade’ under military dictator Ziaul Haq, when the US was fighting the former Soviet Union in Afghanistan and bags full of dollars were landing at the infamous Ojhri camp, the ISI covert headquarters in Rawalpindi. After Zia, two governments each of the PML and the PPP were dissolved on charges of corruption, following which Transparency International declared Pakistan the second most corrupt country in the world in 1996. When Pervez Musharraf took over in 1999, he promised ruthless and across-the-board accountability. Headed by Lt. Gen. Amjad Hussain, NAB managed to send shivers down several spines (particularly those of the business community) and succeeded in recovering Rs 300 billion. In the process, however, he sparked off massive capital flight, which forced then prime minister Shaukat Aziz and former SBP governor Dr Ishrat Hussain to beg Musharraf to call off the witchhunt for businessmen. Hussain was thus unceremoniously ousted and none of his successors were willing to take up the cause. Meanwhile, it is said, the Chaudhrys of Gujrat prevailed upon Musharraf and forced him to give up the drive against corruption and go instead for their political opponents. This gave birth to the infamous National Reconciliation Ordinance, the object of which was to pardon the corrupt and the criminals in the name of national reconciliation. But in December 2009, the Supreme Court declared the ordinance illegal. Meanwhile, the present PPP government has won for itself the dubious distinction of being the worst government in last 64 years. The title may not be wholly undeserved: a number of top government officials (including ministers and senior officials) have either been sent to jail or have had criminal investigations launched against them on the directives of the Supreme Court (this list includes our new prime minister Raja Pervez Ashraf, who faces charges in a rental power case in which Rs120 billion were swindled). According to concerned officials, corruption is growing and there is no way to deal with the issue because everyone – from the very top to the bottom – is involved. At that point, it’s just a question of who’s more corrupt. The National Corruption Perception Survey 2011 conducted by Transparency International of Pakistan, for example, shows that people generally believe that land administration officials and the police are the two most corrupt departments while the education department and the military are the two least corrupt. Meanwhile, the Federal Board of Revenue (FBR) is also considered among the biggest players in the corruption game. According to a daring statement made by the previous PPP finance minister Shaukat Tarin, the premier tax collection agency is involved in tax evasion worth Rs500 billion annually. This is why one never hears of tax evaders being jailed in Pakistan; ‘punishment’ comprises nominal fines and penalties, which further encourage evaders to remain within the ever-expanding underground economy. While the World Bank gave $150 million to Pakistan for reforming the FBR and effecting real documentation of the economy, nothing has happened so far. The irony is that the primary cause of non-compliance of tax obligations is the fact that the state never bothered to promote a tax culture and expected the media to educate the people regarding their responsibilities. Since the existing system is in an advanced stage of decay and democracy has not taken root, the routing of corruption will require direct participatory programmes by citizens and pressure groups. Meanwhile, the state must also give up its policy of appeasing plunderers of national wealth and tax evaders. To minimise corruption, the foundations of corruption and the rent-seeking activities of state functionaries need to be done away with. Many believe that our feudal and colonial systems of governance merit radical reconstructive overhaul. The much condemned feudal system, which is said to be one of the major causes of corruption, prevails in more than 70 percent of the country – the rural areas – and it needs to be done away with. India eliminated the feudal system immediately after Partition while former East Pakistan, now Bangladesh, effected the change in 1954. However, this change is unlikely to happen as long as four powerful groups – the military, civil bureaucracy, industrialists and the landed gentry – rule the country since corruption is among the tools they employ to control everything. That said, Pakistan is not the only victim of corruption. Even so-called honest societies in the west, including the US, seem to shine on the surface but are rotting at the core due to corruption. Among recent laws introduced in the European Union is one that states that corruption cannot be challenged in a court of law; hardly anybody is arrested in the US for having committed financial fraud. The black economy is also a global phenomenon which, according to The Economist, accounted for a missing nine trillion dollars worth of output in 1998, an amount close to the size of the US economy. Later, a study by Australian economist Friedrich Schnider attempted to measure the size of the black economy in 76 developed and emerging economies. Among the findings was the fact that underground activity is equivalent to 15 percent of officially reported GDP on average in rich economies and about one-third of GDP in emerging ones. In India, the black economy which was rampant in the 1970s, is back and booming, pushing up stock and property prices, causing inflation and even making the Indian rupee unusually strong against the dollar. The black economy is growing in India and is now estimated to be worth a stunning 500 billion dollars, almost half the size of the official economy. While corruption may be endemic in economies around the world, Pakistan needs to follow up the NAB chairman’s statement by solid measures to address the issue. It must prioritise the issue and should ensure that the accountability process doesn’t turn into a political witch-hunt. An equitable accountability process will make the country economically viable and self-sustaining. Unfortunately, the issue of corruption is inextricably tied to an improvement in overall governance, which hasn’t been addressed by any government so far. n