17.

Good Governance
17.1.

Introduction

Good governance has emerged at the forefront of the development agenda in Pakistan.
Citizens, domestic enterprises and foreign investors see governance as the key ingredient for
sustainable development and a sound investment climate. Accordingly, good governance is
recognized as one of the most critical factors for successful achievement of the strategic
thrust, policies, programmes and targets enshrined in the MTDF.
This is the age of living transparently. A visible change has been brought in the
culture of all financial players Finance Ministry and Departments are more open and
transparent, as are all Commercial Banks under vigilant supervision of the State Bank.
Pakistans favourable economic conditions have been achieved as a result of reforms
initiated during the last five years. Reforms have opened up opportunities for foreign
investors. Reforms lie at the core of our economic turnaround. This process needs to be
continued for a longer time. The focus of first generation reforms was to achieve
macroeconomic stability, to rescue the declining and volatile economy. The achieve high
growth and sustain it, the second generation reforms focus on building the institutional and
governance capacity and improving the competitive environment in the country. Civil
services, police, judiciary and devolution will be the key areas of governance that would
occupy our reform effort. In the face of emerging WTO challenges, the focus should be on
reducing the cost of doing business in Pakistan, especially in areas such as government
regulations, tax distortions, efficiency of public utilities and removal of infrastructural
bottlenecks. The challenge now is to sustain reforms in order to accelerate growth and
achieve the Millennium Development Goals.
The concept of governance relates to the quality of the relationship between
government and the citizens whom it exists to serve and protect. Governance may be
defined as the manner in which power is exercised in the management of a countrys
economic and social resources for development. This concept is concerned directly with the
management of development process, involving both the public and private sector. Good
governance relates to a pluralistic and holistic view where responsibility is jointly shared by
players in public sector, the corporate private sector, and civil society by addressing the
issues of accountability, transparency, participation, openness, rule of law and
predictability. It is also a key link between growth and reduction of poverty and inequality.
As growth generates income, good governance trickles this effect down to the masses,
particularly the poor. The State is responsible for creating a conducive political, legal and
economic environment for building individual capabilities and encouraging private
initiative. The market on the other hand, is expected to create opportunities for people. Civil
society facilitates mobilization of public opinion and peoples participation in economic,
social and political activities.
Economic governance, or sound development management, is at the core of
sustainable development. The four key components of governance are accountability,
transparency, predictability, and participation; these are universally applicable regardless of
the economic orientation, strategic priorities, or policy choices of the government. Issues of
public sector efficiency, effectiveness, and accountability are important for long-term
growth. Public sector management requires action to make markets competitive. Similarly

issues of restricting the reach of state intervention and improving the delivery of basic
services are high on the countrys development agenda. A policy, legal and regulatory
environment, which secures property rights and enforces contracts, is supportive of
economic growth and poverty reduction. People being at the heart of development need to
have access to the institutions that promote it. Systemic corruption extracts a heavy price by
reducing investment and increasing capital costs.
During the MTDF, governance activities will be mainstreamed in the development
process. First, the process of decentralization and devolution will be strengthened to
enhance the delivery of critical municipal services. Second, participatory approaches and
governance considerations will be strengthened in the design and implementation of
policies, programmes and projects, with capacity building of agencies involved. Third, the
systemic problems that undermine the efficiency of legal, judicial and law enforcement
institutions will be addressed. Fourth, corporate governance and public-private interface
issues will be addressed to protect identified public interests while minimizing private
transaction costs. Fifth, several areas of public sector management will be addressed,
including (a) streamlining revenue administration; (b) strengthening public financial
administration; (c) streamlining E-Governance; (d) public sector capacity building and civil
service reforms, covering professionalization of civil services and qualitative improvements
through continuous training and skill up-gradation and (e) enhancing the quality and
coverage of data and statistics. Finally, implementation effectiveness of MTDF, covering
both the public and private sectors, will be given priority attention at the thematic, sectoral,
policy coordination and programme level, for key development outcomes with a particular
focus on monitoring and evaluation of targets and outcomes of PSDP.
17.2.

The Context

In the last few years, several governance related initiatives have been taken by the
Government covering a broad range of activities. In 1999, the Government set up the
National Reconstruction Bureau (NRB) for enunciating fundamental nation building reforms
and formulating plans for their implementation.
The focus of NRB was on building
representative local structures; enhancing government responsiveness at the district,
provincial and federal level; judicial reforms; responsive public employment system with
focus on the underprivileged classes and regions of the country; affordable and accessible
primary health care and education; free access of information to all citizens; and transparent
and sustainable economic growth. The devolution plan, which was implemented through
the Local Government Ordinance 2001, has been one of the most important reforms
undertaken by the Government which is expected to have far-reaching impacts.
While progress has been made on governance-related issues, problems persist, some
of which are summarized below.
i)

Poor management of resources, disparities in the pace and level of

development across provinces and across districts.

ii)

Denial of basic needs of food, water and shelter to a substantial proportion of

the population.

iii)

Marginalization, exclusion or even persecution of people on account of social,

religious, ethnic or even gender affiliations.

iv)

Lack of sensitivity, transparency and accountability in many facets of the

State machinery, particularly those that have an interface with the public.

v)

Lack of credibility the gap between the intent and the actions of some
institutions in society.

vi)

Inadequate application of rules, evasion of taxes and failure in getting timely

justice.

vii)

Existence of a significant number of voiceless poor with little opportunities

for participating.

viii)

Deterioration of physical environment in the urban and rural areas

The World Bank has recently released a report on governance indicators for the
period 1996-2004 covering 209 countries. The report, covering six governance indicators
including voice and accountability, political stability, government effectiveness, regulatory
control, rule of law, and control of corruption, shows that Pakistans ratings remain low and
have somewhat deteriorated over the period.
Governance initiatives in major areas during MTDF are outlined below.
17.3.

Devolved Development

International experience demonstrates that decentralization offers great scope for

enhancing efficiency of public sector delivery services. Decentralisation is promoted for the
reasons of increased administrative efficiency, equity, service provision, participation and
democratisation, national cohesion, local empowerment and poverty reduction, among
others. Local governments are more likely to engage in participatory procedures that can
identify local priorities and provide feedback on actual implementation progress and
difficulties.
The overarching policy for the devolution reforms is to introduce a democratic,
accountable and rights-based framework for local governance in Pakistan.
The
government's devolution plan calls for empowered, accountable, elected local governments,
with the requisite political, administrative and financial authority to deliver services
effectively. The local government system has been established in a three level system of
district (Zila), tehsil and union councils. Local governments at each level comprise their
elected Nazim and Naib Nazim, their elected councils (district, tehsil/town and union
councils) and their administrative structures (district government, tehsil/town municipal
administration and union administration).
The functions of the local governments are as follows:
i)

The most critical functions i.e. district coordination, education, literacy,

health, community development, information technology, law, works and
services, land revenue, agriculture (extension), environment, finance and
planning, and rural development have been decentralized to the district level.

ii)

The Tehsil Municipal Administrations (TMAs) are responsible for municipal

services such as intra-city or intra or inter-town or tehsil network of water
supply, sanitation, conservancy, removal and disposal of solid and liquid

waste, sewer/storm water, drainage, roads, bridges and related physical

infrastructure, land use control, master planning, classification of
commercial/residential areas, markets, housing, urban or rural infrastructure
and its maintenance, environment, and law enforcement.
iii)

The union council is the lowest tier in the local government set up with
mainly monitoring functions and undertaking small development schemes.

iv)

Village and neighbourhood councils have a proactive role to promote citizen

involvement, identifying priorities and problems, and finding solutions.

Strategy
The strategy for the devolution process has been shaped by the past experience
including issues relating to centralised and top-down decision-making, haphazard planning,
weak accountability and financial management, and lack of transparency and citizens
participation. The principles of across the board accountability and public participation
underpin the reforms process with the focus on improving the public sector service delivery
mechanisms. Community participation is at the centre of the strategy, with broad-based,
decentralised, and homogenous local organisations at the village and neighbourhood level.
The participation of the non-elected citizens in the development process is ensured through
the Citizen Community Boards (CCBs).
The main features of the strategy are as follows:
i)

All local governments are to function within provincial framework.

ii)

Provincial governments are to ensure service delivery through policy,

regulation, guidance, incentives, oversight and monitoring of outcomes.

iii)

Development authorities i.e. Public Health Engineering Departments, Local

Government and Rural Development Departments, and Water and Sanitation
Agencies are to be devolved to local governments.

iv)

No local government function is to be performed by provincial government

or any other agency/body. There shall be no vertical programmes or parallel
structures for execution of local government functions.

v)

Local governments are fully empowered to take any administrative and

financial decisions relating to their functions.

vi)

Local councils should notify their own byelaws relating to delegation of

financial and administrative powers

vii)

The NGOs and civil society should assist in developing the capacity of local
governments and facilitate the local governments in improving service
delivery.

viii)

The CCBs mechanism should be used for channeling development activities.

Current Status of Devolution and Local Governments

Under Article 140-A of the Constitution each Province by law has to establish a local
government system and devolve political, administrative and financial responsibility and
authority to the representatives of the local government. The main local government
legislation is the Local Government Ordinance enacted by each province in 2001. The
present province-wise position of local areas under the Local Government Ordinances 2001
is given in the Table 1 below.

Local area
Province

Table 1
Local Areas by Province, 2005
District
City
Tehsil
Town in a City
District
District

Union

Punjab

33

116

3453

Sindh

15

84

18

1094

NWFP

23

42

957

Balochistan

26

72

518

Total

97

314

30

6022

The devolution reforms process encompasses a regime of reforms that are focused on
political reforms but also includes political reforms, judicial reforms, civil services reforms,
police reforms and accountability and transparency.
New systems of planning,
implementation, resource allocation and peoples participation in decision-making have
been introduced. The significant change is that elected leaders are now incharge and
accountable for service provision at local levels and the local councils and citizen groups
monitor performance.
The LGO 2001 devolved political power and decentralized administrative and
financial authority to accountable local governments for good governance, effective delivery
of services and transparent decision-making through institutionalized participation of the
people at the grassroots level. The local governments operating within the provincial
framework are functioning throughout the country. The planning and developmental
functions have been decentralized to lower tiers of the local government. The provincial
governments are in the process of redefining their mandate. Their new roles mainly focus
on provincial legislation, sectoral policies, macro planning, inter-district coordination and
oversight related functions in relation to the local governments. Local governments in
Islamabad Capital Territory (ICT) and cantonment areas are in the process of being
established. In all more than 58 rules have been notified by all the provinces and additional
rules and byelaws are being developed.
The share of women in national decision-making has improved significantly. The 33
percent quota under the devolution plan for women at the union, tehsil and district levels
provides a platform for mainstreaming women in the development process. Minority,
peasants and workers seats on each local council ensure inclusion of the vulnerable and poor
groups.

Fiscal decentralisation entails providing local governments with locally generated

revenues, in addition to a reliable and predictable transfer of funds from the higher levels.
An innovation introduced under the LGO is the establishment of an independent Provincial
Finance Commission (PFC) in all four provinces. This has been done in order to undo the
past practice of budgetary allocations on the basis of vested interests, in particular,
development allocations. The primary responsibility of the PFC is to ensure equitable
distribution of resources between the provincial government and the local governments.
Since financial year 2002-2003, formula based allocation is in place. The share of each local
government is clearly indicated in the award. The interim awards are in the process of being
replaced by three-year awards.
The devolution plan institutionalises community participation by setting up an
institutional base of CCBs at the grassroots level for participatory development and bottomup planning. The CCBs through voluntary and self-help initiatives take up improvement of
service delivery and development and management of new public facilities. More than
10,500 CCBs have been registered in the provinces and projects have been initiated. Under
the law, at least 25 percent of the development budget is to be expended through CCBs. The
unspent CCB funds are credited in the following years budget. The maximum share of the
Local Government is 80 percent and the CCBs are required to contribute at least 20 percent.
In addition, as envisaged in LGO 2001, the Devolution Trust for Community Empowerment
(DTCE) has been established as a non-profit, non-governmental organization working to
promote community empowerment through citizen participation at the grassroots level by
facilitating the organization of CCBs and implementation of CCB development projects.
DTCE has made networking arrangements with the Rural Support Programme Network
(RSPN) and National Council for Human Development (NCHD) to enhance its effectiveness.
The LGO provides a number of checks and balances for ensuring that the
expenditure is incurred judiciously and in accordance with the law, rules and regulations.
The financial system introduced in the local governments is based on principles prescribed
by the Auditor General of Pakistan. The accounts committees address complaints and
improve the functioning of the accounting offices in consultation with the people.
Several other LG-related institutions and committees have also been set up at various
tiers to facilitate smooth functioning of the LG system. These include:
i)

Local Government Commission (LGC) at provincial level for dispute

resolution and monitoring compliance of the LGO.

ii)

Zila Mushavairat Committee as a representative forum to help articulate the

vision for integrated development of the district

iii)

Zila Mohtasib office to investigate complaints and allegations relating to maladministration.

Police Reforms
The Police Order 2002 was a major step towards making police more efficient and
accountable to the people. It is aimed at institutionalising a system of checks and balances
through the creation of public safety commissions at the district, province and national
levels. The financial and administrative autonomy of the police has been protected to ensure
professionalism. The reorganisation of the police on functional lines with investigations
being separated from the watch and ward function would insulate the police from political

interference. With the abolition of the executive magistracy, the police are now answerable
to the Zila Nazim and the system of safety commissions at the federal, provincial and district
levels.
District Public Safety and Police Complaints Commissions and Police Complaint
Authorities have been set up and the Head of District Police are accountable to these new
institutions. Union Public Safety Committees will be supported to provide feedback on
police performance and law and order at the union level.
Provincial and Local Dimensions
The devolution reforms were aimed at devolving power and responsibilities from the
federal to the provincial, district and down to the Union Council level. The federal to
provincial devolution was expected to strengthen provincial autonomy and in turn the local
governments. Work on this is expected to be completed in the near future. The local
government system has created a new relationship between the provincial and district tiers.
The government is slowly developing a strategy to guide the shift from the existing
provincially-focused service delivery system to an effective system run by local
governments with standards for quality. The provincial governments recognize the need for
a major restructuring of provincial departments.
Human Resources
The full implementation of the local government system requires civil service
reforms. It is necessary to adapt the public administration at all tiers (and the officials from
multiple services) to the new reality of devolution and to make it more focused, performance
oriented, transparent, accountable, demand driven and responsive to citizen demands.
Merit based recruitment and promotion criteria; performance based compensation;
incentives to improve innovation and to increase the demand for professional skills are
integral components of reforms. Efforts are underway to create District service at the local
level.
The successful implementation of devolution is dependent to a large extent on the
capacity of local government institutions and the quality of officials working in the local
governments. Budgeting, planning, monitoring, financial management, accounting and
auditing are some of the key areas where capacity building efforts have focused and need
further attention. Capacity building is viewed as an on-going process rather than a one-time
initiative. The capacity of the training institutions to deliver training to local governments
will be geared up to meet new challenges. Assistance will be sought from the Federal and
Provincial governments, development partners, NGOs, and other institutions for building
capacity of local government officials.
Impact of Devolution
There are indications that the devolution reforms have helped improve some social
indicators in Pakistan. The survey findings from the Household Consumption Expenditure
Survey (HCES) 2004, relating to the LG functions are encouraging and show an
improvement in the living conditions of population since 2000-2001. This includes an
increase in the sources of drinking water, households using flush system and use of
underground sanitation. Similarly, other social sector indices, such as education, have
registered an increase in the last three years. Another recent survey (CIET survey) also

shows that there is improvement in access to services, citizens satisfaction levels have
improved, and revenue generation by local governments has shown significant increases.
Issues and Future Plans
Devolution is a long term process and requires concerted efforts and resources.
Further action is planned during MTDF on the following critical areas for realization of full
benefits of devolution.
i)

The new institutions such as PFC, LGC, Zila Mohtasib, Zila Mushavariat
committee, and monitoring committees, need to be made fully functional,
among others, by providing the required resources.

ii)

The PFC awards need to be firmed up within a multiyear framework, with

share of each local government level clearly reflected in the award.

iii)

The Provincial departments dealing with public health engineering and local
government and rural departments as well as development authorities need
to be fully decentralized to the TMA level.

iv)

The provincial departments need to be restructured to effectively perform

their new roles of policy making, regulating and guiding LGs.

v)

The provincial programmes need to comply with the LGO so that the LG
functions are performed exclusively by the concerned local government,
including aligning the vertical programmes and parallel structures with the
new LG structures.

vi)

While capacity building of the LG officials is one of the most important areas,
there is need to ensure that the work of the local government is not taken
over by the agency providing the support.

vii)

Enforcement of budget, accounts and CCB rules at all levels of local

governments.

viii)

Development of a proper information system to monitor releases and

expenditure of local governments.

ix)

Appointment of internal auditors in local governments for effective internal

controls.

x)

Increasing the registration of CCBs and improving the utilisation rate of CCB
funds reserved in the local government budgets through major social
mobilization and capacity building efforts.

xi)

Financial and administrative empowerment of officials of local governments

to be in line with new responsibilities.

xii)

Civil service reforms to enhance performance and service delivery and

creation of District Service and allowing the local governments to fill the
critical vacancies for improved service delivery.

xiii)

The police needs to be made service oriented and accountable to the public
through independent safety commissions. The full implementation of the
Police Order 2002 is necessary for improving the law and order thus
consolidating the structures and processes of local government.

Participation, Civil Society, and Social Capital

The involvement and participation of the people at all stages of planning,
implementation and monitoring is a pre-requisite for good governance. Very often plans are
misplaced because they are not reflective of the actual requirements of the people and are
not culturally and socially sensitive to the ethos of the people for whom they are meant.
People must feel a sense of ownership of such plans and must participate. The trend of
expecting the government to do everything for them must come to an end. Programmes and
schemes where people participate have been known to be much more successful. This could
be done through the CCBs constituted under the devolution plan, self-help groups, womens
groups, user groups, associations, trade unions and rural support organizations.
The role of civil society in the development of the nation cannot be overstated.
Thousands of civil society organizations, including voluntary organizations, non-profit
making companies, rural support organizations, corporate bodies, cooperatives and trusts
are actively involved in economic and social development. They need to be recognized as
partners in development. The strengths of the voluntary sector, namely their advocacy
skills, organizational skills and being closer to the people should be used to the advantage of
all concerned. It is proposed as follows:
i)

Involve voluntary organizations in planning and implementation and as

interface with the public.

ii)

Develop core competencies and professionalism in the voluntary sector.

iii)

Broaden the base and scope of voluntarism by encouraging its growth in

districts and regions where the same has been weak.

iv)

Create an enabling environment for greater involvement of the voluntary

sector, especially in backward areas where the State machinery is weak.

v)

Build appropriate data bases, carry out documentation, research and

dissemination of innovative development models evolved by voluntary
organizations.

vi)

Initiate a shift towards increasing the financial contribution of civil society to

the development process.

It has been demonstrated that the empowerment of the marginalized and the
excluded establishes pressure groups in society to check the deterioration in governance
standards. This requires not only legislative initiatives through acts of positive
discrimination but it also requires directing explicitly the public developmental efforts at
addressing the economic insecurities of the targeted segments of the population, including
the dissemination of information and free access to all. What is required most of all is the
capacity building of the individuals through human development strategies, involving the
access to education, basic health care facilities and opportunities of livelihood. The media
and the voluntary sector also have a very important role to play in exposing and bringing
up-front issues of bad governance and graft.
During the MTDF period, it is planned to mainsteam participation in all
development activities. This will include projects, programmes and sector strategies;
policies, guidelines and procedures; training; information sharing; capacity building to
strengthen participatory approaches; and networking with local institutions and
development partners.

17.4.

Access to Justice

Access to justice is an important part of the governance reform agenda of the

Government. The programme is designed to support the five related governance objectives:
(i) providing a legal basis for judicial, policy and administrative reforms; (ii) improving
efficiency, timeliness and effectiveness in Judicial and Police Service; (iii) supporting greater
equity and accessibility in justice services for the vulnerable poor; (iv) improving
predictability and consistency between fiscal and human resource allocation and the
mandates of reformed judicial and police institutions at federal, province and local
government levels; and (v) ensuring greater transparency and accountability
in
performance of the judiciary, policy and administrative justice institutions.
The judicial reforms launched by the Government with assistance from the Asian
Development Bank mainly focus on development and capacity building of key institutions
that provide both judicial and non-judicial legal services; security and ensuring equal
protection of law to the citizens, in particular the poor; strengthen legitimacy of state
institutions; provide support to institutional and organizational changes necessary for
implementing reforms; and creating conditions conducive to pro-poor growth especially by
fostering confidence of investors and private sector. It encompasses the following five main
areas:
i)

Improving governance structures, systems and capacities to articulate

policy/laws including setting up organizations mandated under new laws;
institutional strengthening; defining procedures, including administrative
grievance procedures; enhancing human resources; and installation of
facilities and equipment.

ii)

Public knowledge and legal empowerment through public awareness

campaign and awareness raising about the opportunities available with civil
society organizations under Access to Justice Development Fund.

iii)

Enhancing performance and accountability including establishing the

baseline and institutional arrangements for monitoring changes in efficiency
and effectiveness of performance of courts and police agencies; and clarifying
and ensuring arrangements for accountability.

iv)

Policy impact and innovation including defining arrangements to ensure that

the lessons of implementation of reforms are incorporated into revisions and
refinements in policy and laws for justice reforms; and defining procedures
for allocation of resources to innovative approaches (including for legal
education and public-private partnerships).

v)

Supporting further legal and policy reform including drafting of new

contempt and defamation laws; development of a legal and policy
framework for a revised comprehensive administrative grievance procedure;
and
legal policy reform work in other areas identified during
implementation.

Work on these reform areas is continuing and will be completed during the MTDF.

17.5.

Corporate Governance

Corporate governance is the concept where private and public institutions, including
laws, regulations, and accepted business practices govern the relationship between
corporate managers and entrepreneurs on one hand and those who invest resources in
corporations, on the other. Good corporate governance contributes to enhanced investment
for growth and employment generation, competitiveness for global market, environmental
and social responsibility, and to increasing efficiency of public sector agencies.
Since its inception in 1999, the focus of the regulatory measures taken by the
Securities and Exchange Commission of Pakistan (SECP) has been on fostering investor
confidence. The SECP has been particularly keen to encourage good corporate governance to
ensure transparency and accountability in the corporate sector and safeguard the interests of
all stakeholders, especially the minority shareholders. In 2002, the first Code of Corporate
Governance for Pakistan was issued by the SECP. It was subsequently incorporated in the
listing regulations of the three Stock Exchanges and is now applicable to all public listed
companies.
While the Code provides a framework to address the complexities of the corporate
sector it primarily aims to establish a system whereby a company is directed and controlled
by its directors in compliance with the best practices so as to safeguard the interests of
diversified stakeholders. The Code emphasizes openness and transparency in corporate
affairs and the decision-making process and requires directors to discharge their fiduciary
responsibilities in the larger interest of all stakeholders in a transparent, informed, diligent,
and timely manner. The Code requires commitment on the part of all concerned to take
forward the process of improving standards of corporate compliance, disclosure and
accountability. Concerted and sustained efforts are planned by SECP for effectively
implementing various good governance practices in the corporate sector.
Regulatory issues are relevant in every sector, with need for sound balance between
the public and private interests. During MTDF, the regulatory frameworks would be
developed to protect public interests while minimizing private transaction costs. In the
formulation and application of the rules and regulations, accountability, transparency and
predictability will be fostered. This is especially necessary for issues of corporate
governance of public enterprises, which must reflect the general principles of good private
management as well as the interests of the State as the owner, in furtherance of some public
aim.
17.6.

Public Sector Management

Enhancing public sector management efficiency will be a key focus of MTDF.

Reforms in governance administration, public financial sector, capacity building and civil
services, E-Governance, and data and statistics are outlined below.
Revenue Administration
In the past, Pakistan had pursued policies of protection and resource mobilization
through higher tax and tariff rates. However, due to the success of worldwide tax reforms,
the direction of tax policy and administration in the country also changed from narrow to a
liberal approach. Taxes are now being used as an effective tool to boost production, create
demand, promote investment, and encourage imports of capital and manufactured goods.

Pakistans tax effort is much below when compared with its regional neighbours. The
Central Board of Revenue (CBR) has accordingly initiated a reform agenda to enhance its
revenue effort and service standards. Salient features of this initiative include the following:
i)

Achieve financial and administrative autonomy.

ii)

Restructure the CBR along functional lines and develop a well trained and
motivated workforce to develop and manage a modern, efficient revenue
administration.

iii)

Increase voluntary compliance with the tax law through application of a

concerted taxpayer education and facilitation programme and the reengineering of business processes.

iv)

Design and deliver fair, responsible and effective enforcement mechanisms in

a way that directly responds to changes in the environment.

v)

Develop effective working relationships with taxpayers and other

government departments that contribute to increased compliance and
improved service.

vi)

Increase the revenue net and collection and eliminate revenue leakage.

vii)

Enhance staff productivity, efficiency and satisfaction through extensive

training programmes and enhanced salary structure.

The tax administration reforms focus on management and institutional development,

improving revenue operations, strengthening revenue services, tax compliance culture,
adopting responsive IT system, infrastructure up-gradation and development, and
programme management. The tax administration reform strategy is concentrated on policy
reforms, administrative reforms and organizational reforms. The policy reforms cover
simplification of laws, introduction of universal self-assessment, elimination of exemptions,
reducing dependence on withholding taxes, and effective dispute resolution mechanism.
The administrative reforms aim at transforming income tax organization on functional lines,
re-engineering of manual processes of all taxes with the aim to reduce face to face contact
between taxpayers and tax collectors, increasing effectiveness of CBR, and improving skills
and integrity of the workforce. The organizational reforms include re-organization of CBR
headquarter on functional lines, reduction in number of tiers, reduction in workforce from
existing level of over 31,000 to a range of 18000-20000, with enhanced financial packages.
Simultaneously, the Government has constituted a Cabinet Committee for Federal Revenue
(CCFR) to provide functional autonomy to CBR.
CBR has already re-structured its headquarter operations. Professional members
from private sector for human resource management, information management system,
audit, taxpayers education and facilitation, and fiscal research and statistics have been
appointed. Sales tax audit and enforcement activities are being strengthened. CBR is
strengthening its field offices and facilitation centers with new business and customer
services procedures and automated tax administration system.
During the MTDF, the reform agenda will be completed. The measures to promote
investment and generate economic activity include rationalizing tariff structure on primary,
semi-manufactured and finished products, discourage tax evasion and bring equity in the

taxation structure. While some of these measures will have adverse revenue implications in
the short-run, the long-term impact of such measures will be positive, as demand-side effect
will take over the initial negative impact. On the other hand, measures that aim at widening
of tax base and enhancing the coverage are expected to have favourable revenue
implications. Overall the policy changes related to sales and custom taxes are expected to
have significant positive revenue implications.
Public Financial Sector
The financial reporting and accounting system in Pakistan had several shortcomings.
It did not provide timely, accurate, comprehensive and reliable information for decision
making and policy formulation purposes. It lacked fiscal and financial accountability due to
lack of meaningful accounts and due to non-compliance with international best practices.
There was also no segregation between audit and accounts departments.
A reform programme is being implemented to separate audit and account functions,
provide effective accounting and reporting system in line with the international best
practices, strengthen financial management practices and increase the impact of
development programmes, provide basis for enhancing public sector accountability through
financial monitoring and control, and produce timely and reliable information for decision
making and policy formulation. The focus of these reforms relates to four areas of concern:
financial and budgeting system; auditing; human resource management and change
management; and training. Substantial progress has been made and the programme is
planned to be continued during MTDF under a second phase.
Capacity Building
Poor public management stems in part from low levels of human resource
development and weak institutions. A major effort is envisaged during MTDF in the area of
public capacity building to produce a competent, accessible and motivated civil service
which is transparent, accountable and responsive to the changing socio-economic needs of
the people, particularly the poor. To achieve this objective, a five-year programme has been
launched during 2004-05. The programme includes short-term, medium-term, and long-term
training programmes (Executive Development Programme; Professional Development
Programme; and establishment of National School of Public Policy, respectively) for the civil
servants. The objective is to produce a civil service which is sensitized to the needs of
people, responsive to the demands of changing socio-economic environment, well trained
for innovative decision making and policy formulation, geared towards development of
strategic and tactical vision in specialized fields, and prepared to face the future challenges.
The government plans to establish a National Executive Service for economic
ministries and divisions, social sector ministries and organizations, provincial and district
governments, and regulatory ministries and organizations. The issues being addressed
include compensation, linking compensation with responsibility and performance, review in
pay scales, and reforms in the area of performance evaluation.
e-governance
Electronic governance (e-governance) is fast emerging as an important tool for
achieving good governance especially with regard to improving efficiency, transparency
and making interface with government user friendly. So far the emphasis has been on
providing connectivity, networking, technology up-gradation, selective delivery systems for

information and services and a package of software solutions. It is proposed to focus on the
re-engineering of procedures and rules which are infact the core of any effective programme
of E-governance. There is need for a focused vision about the objective of introducing Egovernance. The range and standards of delivery to be achieved within well defined time
frames will need to be clearly laid down. During MTDF, due attention would be given to the
sustainability, interactivity and standardization of E-governance activities. Within the ambit
of E-governance, it will be necessary to develop government to government, government to
citizens and government to business functionalities. One of the major initiatives envisaged
in the IT sector is to take IT to the masses.
Data and Statistics
It is recognized that the availability, quality, and accessibility of data in Pakistan
needs to be improved to meet needs for planning and monitoring, particularly, in the
context of the countrys rapidly growing economy. Better data is needed to provide the basis
to develop well-informed policies, which facilitate broad-based equitable growth and
poverty reduction. The analysis has indicated the following areas need to be improved:
i)

Strengthening the Statistics Division, which is responsible for collecting,

disseminating, and coordinating data in the country.

ii)

Addressing key gaps, including the quality and coverage of management

information systems, gender monitoring and analysis, and district and subdistrict data.

iii)

Improving the timeliness of dissemination and presentation of statistical data.

iv)

Improving and institutionalizing the monitoring system on key indicators.

v)

Harmonization and integration between the different sources of data on key

indicators.

The following important deficiencies are proposed to be addressed during the

MTDF:
i)

The scope and quality of the provincial and district data administration
systems, particularly for education, health and water, and health
management system are planned to be improved with timely national level
dissemination. Following devolution, the main responsibility for data
collection and quality for water and sanitation falls under the district and the
province and there is no administrative system that reports on the overall
number, quality, and location of sanitation and water utilities. Strengthening
these systems would require significant commitment and resources.

ii)

There is no vital registration system in Pakistan and the only comprehensive

mortality data correctly available are from surveys. It is planned to improve
disease surveillance, which could include a new sample-based vital
registration system.

iii)

Currently there is a lack of data for gender analysis. This will be corrected so
that a full assessment of gender disparities could be carried out.

iv)

There is a lack of district based social statistics on outputs and outcomes.

Most social sector surveys are only representative at the federal and province
level despite the main responsibilities for decision-making now being with
the district. A broader statistical system will be developed to meet the new
demands of devolution.

v)

The other gaps such as labour/employment data; data for a more in-depth
analysis of the nature of poverty across the country and over time; data on
the informal economy; and environmental data would also be addressed.

The following measures are planned to improve timeliness and dissemination.

i)

A user-friendly, reliable, comprehensive and regularly updated central

database would be developed for the core MTDF, MDG and PRSP indicators
that is widely recognized and used.

ii)

A review of statistical practices would be conducted in consultation with

users, covering presentation of statistics, availability of source and
methodology information, and release procedures.

The timeliness is reliant on the general capacity, resources, and technology of

monitoring and evaluation systems. A significant improvement would come from increasing
the use of new information and communication technologies to speed up data collection and
processing, and allocating more resources for processing, editing, and disseminating data.
Significant progress has been made towards establishing a comprehensive system to
assess overall progress on PRSP indicators at the federal level. The monitoring and
evaluation system would be reviewed to make it more comprehensive, including key focus
areas of MTDF.
There are problems of limited coordination between the various statistical activities
and duplication of resources and effort. It is proposed to strengthen the Statistics Division
with the capacity and authority to coordinate the full range of statistical activities. During
the MTDF, a strategic framework would be developed for national statistics development to
help identify priority areas for improvement, coordinate statistical activities and monitor
progress. This would include a master plan for data collection activities, which could also
help ensure the comparability of statistics across source and over time through setting out
agreed definitions and methods of computation of key indicators and agreed periodicity for
data collection. The data availability, capacity constraints, and use of information at the
province and district level would also be addressed comprehensively.
17.15. Corruption
There is conclusive evidence that systematic corruption exacts a heavy price from
development activities by reducing investment, increasing capital costs, and increasing the
time business executives need to spend negotiating with government officials. The
Government has set up the National Accountability Bureau (NAB) which has been very
active in the fight against corruption. Several initiatives during MTDF will also assist in
making progress against corruption. This includes (i) the public sector management agenda,
consisting of actions to make markets competitive and supporting improvements in public
administration; (ii) the development of proper institutional and legal frameworks; (iii)
strengthening audit functions to improve resource allocation while making embezzlement

more easily detected; (iv) procurement reforms, while reducing costs will make fraud more
difficult to perpetrate; (v) civil service reforms, while improving procedures for recruitment
and promotion will build capacity and help reduce patronage and nepotism; and (vi)
streamlining regulations will improve public management while reducing opportunities for
corruption.
17.16. Effective Implementation
If knowledge is the defining characteristic of the MTDF 2005-10, implementation is
its litmus test. A distinguishing feature of MTDF 2005-10 is the emphasis on effective
implementation of PSDP.
The strategy includes capacity building and institutional
development of agencies involved including development of performance indicators;
establishment of planning and monitoring cells in ministries/departments; strengthening of
impact analysis and monitoring and evaluation activities in planning and development
agencies, with linkages to the District Monitoring Development Committees under the
Devolution Plan; periodic monitoring exercises, with reports to ECNEC/NEC, and training
of project directors and other staff in project management, monitoring and evaluation. A
major focus will also be building capacity for undertaking Public-Private Partnerships
(PPPs), monitoring the pace at which PPPs are actually realized, lessons learned and
disseminating the implementation experience to catalyze actual realization of PPPs to
enhance infrastructure development. Performance, outcomes and result-orientation will be
the guiding criteria not only for projects and programmes, but also for policies, action plans
and rules and regulations governing development as a whole.
In the past, the emphasis has only been on monitoring of activities related to PSDP.
During the MTDF 2005-10, the development effectiveness of the framework as a whole will
also be a focus of attention, covering both the public and private sectors. Progress on the
strategic thrust of the framework will be monitored including policy coordination and
effectiveness of key strategies and programmes. At the project, programme and sector level,
greater attention will be devoted to evaluation studies with a focus on impacts and
outcomes, and on lessons learned for incorporation in subsequent phases.
The Government is undertaking civil service reforms to enhance the capacity of the
public sector, among others, for proactive public policy, strategic vision in specialized fields
and effective decision making. This will require restructuring, capacity building and
professional development, with compensation linked to responsibility and performance.
During the MTDF 2005-10, there will also be need to supplement these efforts by engaging
experts on a contractual basis in specialized fields and key result areas with market-based
compensation packages.
The MTDF 2005-10 is intended to provide flexibility for mid-course corrections
during implementation. Recognizing that close monitoring of the overall performance of
MTDF 2005-10 in terms of planned outcomes will be essential, the monitoring system in the
planning agencies, line ministries and departments and other sectoral agencies will be
supplemented by constituting high level standing committees in each of the thematic areas,
with membership drawn from both the public and private sectors. These committees will
have a strategic role in reviewing MTDF 2005-10 implementation relating to overall policies,
strategies and programmes, and key result areas, assessing recent developments, both
macroeconomic and sectoral, and making recommendations for action.

17.17. PSDP Implementation

Past experience has shown that many development projects and programmes,
having laudable objectives, have failed to deliver the results because of the inadequacies in
design and implementation. Time and cost over-runs have been substantial and widespread
in public sector infrastructure and investment projects. In some areas benefits intended to be
delivered to the people through development programmes have not fully reached the
beneficiaries due to weakness in administrative planning and delivery mechanism.
Accordingly, the MTDF has a priority focus on improving project planning and
implementation and ensuring that the intended benefits are actually delivered to the people.
In the past, sustainability of the assets created has received much less attention in the
planning process. This is the primary reason for the deteriorating conditions of assets and
low capacity utilization. On the other hand, there has been a trend towards acquiring
capital assets in increasing quantities, without regard to sustainability aspects. As a result,
cost and time over-runs are inevitable as limited available funds are thinly spread across a
large number of projects. Other issues include lack of accountability of the implementing
agencies, inadequate use of participatory approaches in the design and implementation of
programmes, lack of transparency in the operation of schemes, and inadequacy of
monitoring mechanisms. This indicates the need for institutional reforms, capacity building,
and involvement of the people and grassroot level non-government agencies in the
formulation and implementation of development projects and programmes.
The implementation of projects improves considerably if the projects are welldesigned, screened comprehensively during the appraisal and approved process, and focus
on monitoring and evaluation activities are undertaken. It is planned to focus on the
following areas during the MTDF period:
i)

Improving the quality of projects "at entry" through proper feasibility studies
for all projects, incorporation of lessons learned from evaluation of earlier
projects, capacity building, and interagency coordination.

ii)

Ensuring adequate and timely release of funds.

iii)

Reviewing procedures for submission, examination and approval of projects.

iv)

Enhancing capacity for contract management, including transparency in

contract documents, greater professionalism and adequate delegation of
authority.

v)

Simplification of procedures for acquisition of land.

vi)

Preparing a ready reference of financial control and regulation.

vii)

Project facilitation at preparation and design stage by the Planning Division,

including on-line services.

17.18. Monitoring and Evaluation

An effective monitoring and evaluation (M&E) system is essential to managing for
development outcomes. Such a system helps realign resources in line with the priorities;
helps development of specific programmes and activities in line with the overall

government objectives; helps government make explicit choices and trade-offs between
objectives and policy options, by assessing the effectiveness and costs of the various choices;
builds capacity to report on outcomes; and enables managers to take decisions based on
performance to improve the impact of the programmes.
There are several issues related to enhancing effective monitoring and evaluation of
development projects and programmes in the country. First, the capacity at the federal and
provincial level for effective M&E is weak. At the federal level, the Projects Wing of the
Planning and Development Division is responsible for M&E of the PSDP. At the provincial
level, this responsibility lies with the Planning and Development Departments (P&DDs).
They are constrained by limited staff and expertise, funds for field monitoring activities,
inadequate information technology and the lack of a broader enabling environment for
effective M&E. Second, line ministries and departments responsible for project monitoring
have limited capacity. Their monitoring is focused on physical progress, outputs, funds
releases and disbursements. At the federal level, structural impediments include the
absence of monitoring structures, and uncertainty of roles and responsibilities pertaining to
M&E. Following devolution, there is also need to provide more clarity on the roles and
responsibilities of provinces and districts on M&E activities. Third, the project documents
do not have adequate information on specific and measurable indicators to facilitate M&E.
The focus is on inputs and outputs rather then outcomes. Problems with funds flow and
lack of trained M&E manpower in project implementing units hinder effective M&E at the
project level. Finally, information flows are weak, which do not link data with policy
makers, planners and other stakeholders.
During MTDF, the M&E activities are planned to be strengthened around the
following four priority areas.
i)

Planning Commission to put in place a comprehensive programme to

strengthen portfolio M&E ensuring that all large ongoing PSDP projects
contain specific and measurable indicators; contain outcome baseline data;
use and report M&E information and data on a regular basis; and have
adequate resources allocated in projects for M&E.

ii)

Empowering line ministries at the federal level and line departments at the
provincial level for individual project monitoring.

iii)

Overcome weaknesses in project and programme design and implementation

by strengthening PC-I to PC-V documents, making these more outcomes
focused.

iv)

Strengthen capacity of Planning Commission (Projects Wing), Provincial

P&DDs, and M&E Cells of line ministries on M&E including expanding use
of monitoring software, training staff involved in M&E at the federal,
provincial and local level; and standardizing project documents.

The following specific measures are envisaged

i)

The Projects Wing of the Planning Division will be the focal point of all the
monitoring and evaluation activities of the PSDP.

ii)

Outcome of monitoring exercise will be presented on quarterly basis to

ECNEC and biannually to NEC for seeking guidance and policy decisions. It

will be ensured that all the decisions and directives of NEC/ECNEC are
implemented promptly.
iii)

Each executing ministry will establish a Planning and Monitoring cell as per
ECNEC decision to ensure effective monitoring of development projects.

iv)

The monitoring and evaluation sections of provincial P&D agencies will be

strengthened to ensure effective implementation of their development
projects/programmes.

v)

Linkage with District Monitoring Development Committee under the Local

Government Ordinance will be ensured.

vi)

Training of Project Directors will be coordinated with Pakistan Planning and

Management Institute (PPMI).

vii)

Sustainability and accountability issues will be addressed to improve

development effectiveness.

The Projects Wing in consultation with PPMI has already initiated a training
programme for project directors. This programme will be expanded during the MTDF. The
capacity of the Projects Wing is being improved including setting up of a database library,
hiring of short-term consultants, training and use of IT and monitoring software. PPMI is
also being upgraded, including hiring expertise based on market remuneration and twining
arrangements with international institutions.
At the Federal level Planning & Development Division and the Planning
Commission are responsible for formulation of overall economic policies, project planning,
and appraisal and approval of public sector development programme. Broadly speaking, the
project management covers planning, preparation, appraisal, implementation and
monitoring & evaluation. All these phases of the project are interlinked and include interdependent activities. Accordingly, a separate Projects Division headed by a professional
could be constituted under the Planning Commission by upgrading the existing Projects
Wing to deal with project appraisal, monitoring, evaluation and facilitation (the phases of
project cycle management which concentrate on the implementation of projects).
Good governance is perhaps the single most important factor in ensuring that the
objectives of the MTDF are achieved. Steps will be taken to address issues relating to
enhancing effectiveness of devolution, and improving peoples participation and
involvement of civil society, especially voluntary organization, enhancing development
activities. Empowerment of the marginal and excluded would be pursued with a view to
equip them to act as pressure groups to check the deterioration in governance and
exploitation of the public. Corporate governance issues will be addressed, including
improving the public-private interface, with development of the legal and regulatory
frameworks. Public sector management will be made more efficient through a variety of
measures. Civil service reforms aimed at improving transparency, accountability, efficiency,
fair play and honesty; procedural reforms for public-government inter-face to rid the system
of unnecessary rules, procedural regulations and controls; reforms of the revenue system
and judicial reforms to hasten the process of delivery of justice will be taken up in all
earnestness. E-governance and IT will be given a big push to increase transparency, fair
play and make systems faster and user friendly. Development effectiveness will be
enhanced and outcomes monitored closely. This will be complemented by systematic and

professional programme/project formulation; project based reform-linked plan support;

synergy and coordination between different government departments and agencies; and
more effective monitoring and evaluation will be encouraged and supported. With a
comprehensive reform agenda, the governance indicators are expected to improve during
the MTDF. In order to accomplish the reform agenda, an allocation of Rs. 66.2 billion has
been made in the MTDF for activities related to Governance, Research and Statistics sector.
An amount of Rs. 11.6 billion has been proposed during the financial year 2005-06. The
major programmes / projects to be launched during the MTDF in the sector include Access
to Justice Programme (Technical Assistance, Federal and Provincial), Tax Administration
Reforms, Project for Improvement of Financial Reporting & Auditing (PIFRA),
Conversion of B Area to A Area in 25 Revenue Districts of Balochistan, Raising of
Balochistan Constabulary, Technical Assistance for National School of Public Policy and
Public Sector Capacity Building Project. It is expected that the successful implementation of
these initiatives would result in improving governance and growth related indicators
amongst the comity of nations.