CORRUPTION IN PAKISTAN

AND

GOVERNMENT’S ANTICORRUPTION LAWS

NAME:MADEEHA SALMAN
CLASS:BBA 4
REG NO: 10282
ACKNOWLEDGEMENT

All the praises are for the almighty, Allah who bestowed me with the ability
and potential to complete this report.

Words are very few to express enormous humble obligations to my affectionate

Parents for their prayers and strong determination to enabling me to achieve
this job.

I also thank Bahria University for giving me the opportunity to study business
law as my subject.

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TABLE OF CONTENT

• Summary…………………………………………………pg 4
• Introduction , recent political history…………………..pg 5
• Corruption in Pakistan…………………………………..pg 6
• Corruption trend in Pakistan over past 10 years………pg7
• Levels of corruption……………………………………...pg8
• Key sectors affected by corruption in Pakistan ………..pg10
• Most corrupt sectors……………………………………...pg11
• Forms of corruption………………………………………pg13
• Corruption prone institution in Pakistan……………….pg14
• According to transparency international
and corruption cases………………………………………pg15
• PPP’s massive corruption…………………………………pg17
• Impact of corruption………………………………………pg19
• Government effort against corruption in Pakistan………pg20
• NAC’s-Objectives, Process and Recommendation………pg21
• Strengthening of anti corruption agencies……………….pg22
• Conclusion………………………………………………….pg23

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Summary
Corruption remains a substantial obstacle for Pakistan where it is still perceived to
be widespread and systemic. Petty corruption in the form of bribery is prevalent in
law enforcement, procurement and the provision of public services. The judiciary is
not seen as independent and considered to be shielding corrupt political practices
from prosecution.
Various efforts over the past years have tried to develop institutional mechanisms
to address these problems. A National Anti-Corruption Strategy, which was
developed in 2002, offers a comprehensive plan for tackling corruption. The
executing agency, the National Accountability Bureau (NAB), is endowed with
comprehensive powers to investigate and prosecute cases. However, a lack of
political will, coupled with the perceived co-option of the judiciary and the
arbitrariness of many anti-corruption proceedings, are major obstacles in the fight
against corruption.
Anti-corruption proceedings have long been suspected of being skewed. They are
mainly directed against members of the political opposition and minor civil servants
while leaving the conduct of military officials outside scrutiny. Moreover, the
National Reconciliation Ordinance of October 2007 has granted blanket immunity
for past corrupt actions, shielding many public officials and members of the
government from prosecution. The dismissal of members of the Supreme Court,
including Chief Justice Chaudhry, has led to violent civil unrest and further shaken
the public’s trust in the judiciary to undertake anti-corruption prosecution.

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Introduction: Recent political history

Political turbulence and insecurity have dominated Pakistan over the last 50 years,marked
by frequent regime changes and unrest. Between 1990 and 1999, four different
democratically-elected governments held power under the same two political
leaders.Each administration was either dismissed or overturned, often as a result of
corruption charges and allegations of power misuse.

Benazir Bhutto of the Pakistan People’s Party (PPP) first came to power in August 1990
but later was dismissed. Her government was replaced by Nawaz Sharif and his Islamic
Democratic Alliance (IJI) party in April 1993. After the resignation of both the president
and the prime minister, and an interim government, elections were held, which resulted in
a second term for Bhutto and the PPP. Her government was again dismissed in November
1996. Sharif returned as prime minister but this time representing the Pakistan Muslim
League party (PML).

This era of democratic government ended in October 1999 following a military coup led
by General Pervez Musharraf. After declaring himself the chief executive, the Supreme
Court validated Musharraf’s claim to the presidency in May 2000. In 2002 a
parliamentary election returned civilian rule, yet the Musharraf presidency was extended
for another five years.

During the military government, former Prime Minister Bhutto was indicted and
convicted on corruption charges at home (in April 1999) and abroad (in Switzerland in
July 2003). Former Prime Minister Sharif was also tried and sentenced for acts of
terrorism in April 2000 although he was eventually pardoned and went into exile.

Against this backdrop, the political situation in Pakistan deteriorated. A devastating

earthquake in 2005 in the Pakistan-administered Kashmir region greatly strained the
government. In March 2007, further turbulence arose after the dismissal of Chief Justice
Iftikhar Mohammed Chaudhry for alleged misuse of office. Violence in the northern
province of Waziristan and in the province of Balochistan in the south served another
blow to national unity. After a period of civil unrest, Musharraf was re-elected to the
presidency in October 2007, declaring a state of emergency and suspending the
constitution within a month of taking office. Although parliamentary elections were to
take place in 2007, they were first postponed because of worries of instability and later as
a result of the assassination of Benazir Bhutto in December 2007. When the elections
finally took place in February 2008, President Musharraf was defeated by the PPP and
PML. The parties formed a coalition government in March 2008 with a new prime
minister in power: Yusuf Raza Gilani. The supreme court justices that Musharraf had
dismissed during the country’s state of emergency in 2007 were then restored.

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Corruption in Pakistan

Every Pakistani is familiar with the word “Corruption”. Because they know there work
can only be done in every department if they follow corruption, help corruption. It is
impossible for an ordinary person to done his work by following the proper procedure in
many Public departments. But from last few years after the end of Army regime
the corruptionperception has worsened especially the last year, as stated by the latest
Transparency International Corruption report 2010. Though the 2009 Corruption Survey
Report was an eye-opener, but this year it was shocking Khyber Pakhtoon Khawa
Province (former N.W.F.P) beat all the provinces and has the highest rate of corruption in
Pakistan.

Many people in Pakistan believe that much of the development and a significant portion
of the operations allocations are lost due to bribery and other related illegal and unethical
activities. The extreme poverty and lack of infrastructure and basic services in the rural
areas of Sindh and Balochistan is in part fueled by bribery, influence peddling, extortion,
and abuse of power. The people of Pakistan and the international donors must rise to the
occasion and start pressuring the Pakistan government to curtail corruption and to
improve governance. Failure to do so in a timely manner will continue to frustrate poor
people and make them weary of the current democratic system and drive them to
extremism.

Due to lack of governance and massive corruption, Pakistan has lost credibility and is
facing serious economic threats, poverty, inflation, food and electricity shortages and
increase in unemployment.
There is a need for the government to make serious efforts to apply rules and regulations
across the board to achieve the goal of reducing corruption but this is unlikely with the
present set of corrupt and indifferent rulers.
Pakistan needs good governance and a transparent administration to counter corruption
scams of billions of rupees in Pakistan Steel, TDAP, EOBI, PIA, rental power plants,
KESC, NIC, NHA, OGDC, PSO, PEPCO, CDA, DP Division, DHAs, TCP, NBP, PC
and many other organisations.
The political will of the government to curb corruption is urgently required and it must
also be seen by public and donor countries, like formation of an independent
accountability commission as required by the UN Convention against Corruption. This
commission should report only to parliament or judiciary and not to the ministry of law,
and it should look into corruption of all holders of public offices belonging to civil
services, armed forces, judiciary and elected representatives.

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Corruption trends in Pakistan over the past 10 years

Most governance indicators show an unchanging situation in Pakistan, with corruption

perceived as widespread, systemic and deeply entrenched at all levels of society and
government. Based on research done for this query and consultations with TI Pakistan,
corruption is viewed as being equally pervasive within federal, provincial and local
governments.
Since first being included in 1995, Pakistan has consistently performed poorly on the
Corruption Perception Index (CPI) of Transparency International, and is among the
countries with the most perceived corruption each year. According to the 2007 CPI,
Pakistan scored 2,4. (Please see:
http://transparency.org/policy_research/surveys_indices/cpi/2007).
The Worldwide Governance Indicators (WGI) of the World Bank have also shown very
little progress over time, with weak scores in most areas. Most troubling has been the
rapid decline in indicators for political stability, which have deteriorated rapidly since
1998: 1.0 in 2007 compared to 5.8 in 2003 and 11.11 in 1998. According to the World
Bank’s WGI, governance actually seemed to improve slightly under the first military
government (1999-2002) following Musharraf’s coup. In 2003, the country even
performed slightly better in terms of controlling corruption, rule of law and government
effectiveness. However, all the country’s indicators have since collapsed (based on 2007
results) except for those related to regulatory quality and voice and accountability.
(Please see: http://info.worldbank.org/governance/wgi2007/sc_chart.asp).
Further surveys conducted in recent years confirm the finding that corruption in the
country has worsened: The World Economic Forum's Global Competitiveness Report
(2007-08) identifies corruption as the third greatest problem for companies doing
business in Pakistan, after government bureaucracy and poor infrastructure. (Please see:
http://www.gcr.weforum.org/). Roughly 40 percent of companies in Pakistan feel that
corruption is one of their major concerns. Interestingly, the country is seen as a relatively
better place for running a business than its neighbours. While the Doing Business Survey
of the World Bank, (www.doingbusiness.org) has shown the country slipping two places
to 76 out of 178 countries based on the latest results (June 2008), only the Maldives has a
higher score among countries in the Asia Pacific region. Apart from the private sector,
the general public views corruption to be a stumbling block for the country. TI’s Global
Corruption Barometer 2007 shows Pakistan to be one of the countries most affected by
petty bribery. More than 44 percent of respondents reported that they have paid a bribe to
obtain a service. Half of all those surveyed (52 percent) perceive government efforts to
reform corruption as ineffective and nearly two-thirds (59 percent) think that corruption
is likely to increase within the next three years.
Its National Corruption Perception Survey (NCPS), conducted in 2002 and
2006, assessed perceptions of corruption under the previous governments of Bhutto,
Sharif and Musharraf. The first phase of each government was rated as less corrupt than
the second period that each leader was in power. The next NCPS is being conducted for
2008, with surveys to follow annually over the coming years.

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LEVELS OF CORRUPTION

It is a widely held view that corruption in Pakistan is widespread, systematic, and that it
is entrenched at all levels of government. A World Bank report containing an assessment
of the Pakistan’s Infrastructure Capacity (PICA) dated February 2008 states that 15% of
Pakistan’s Development budget for 2007-08 was lost in the procurement process alone
due to corruption. This does not include subsequent costs of corruption in the
implementation and maintenance stages of projects.

The important business publications such as World Economic Forum’s Global

Competitiveness Report (2007-08) says that corruption is the third greatest problem for
companies for doing business in Pakistan. The report lists the first two problems as
government bureaucracy and poor infrastructure.The Organization for Economic
Cooperation and Development (OECD) [Web Site: http://www.oecd.org says that the
World Bank and the Auditor General of Pakistan have complained about governance
problems in recruitment, site selection, absenteeism and bribery. This has resulted in
cancellation or suspension of some of the World Bank’s projects such as the Balochistan
Primary Education Project. Also, certain other loans were withheld after irregularities
were uncovered.

A survey of South Asian countries at http://www.jdhr.org/publications/media-and-

development/Article%20Forensic%20Accounting-Kashif%20Article.pdf) reports the
following percentages of respondents for having encountered corruption in key sectors in
various South-Asian countries:

Country Education Health Power Land Adm. Tax Police Judiciary

Bangladesh 40% 58% 32% 73% 19% 84% 75%

India 34% 15% 30% 47% 15% 100% 100%

Nepal 25% 18% 12% 17% 25% 48% 12%

Pakistan 92% 96% 96% 100% 99% 100% 96%

General perceptions and actual public surveys about corruption show that Police, Power
Sector,Judiciary, various Taxation departments (Custom duties, Income Tax), and
irrigation departments are considered the most corruption prone departments in Pakistan.

According to a report, appointments in the police force are often based on political
considerations. The instances where conflicts of interest due to personal loyalties and
family connections exist are numerous. Many complain that local landlords or urban
groups with police support exploit poor people through extortion (bogus fines, etc.).
(http://www.globalintegrity.org/reports/2006/PAKISTAN/index.cfm).

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According to a 2006 survey, 96 percent of the people said that they had encountered
corruption inJudiciary. 44 percent of them reported that they paid a bribe to a court
official. In Pakistan, The judiciary is not viewed as independent of the Executive side of
the government but rather part of it. Another report says that the Pakistani judiciary takes
an average of 880 days to settle a business dispute at a cost of 24 percent of the claim
(www.doingbusinesss.org).

Pakistan’s tax and public finance administration is also affected by corruption. The
World Bank’s 2004 Public Expenditure Management report says that there is a
widespread collusion between taxpayers and tax officials leading to lack of tax
compliance by businesses. (http://www.oecd.org/dataoecd/63/31/36494011.pdf).

An article in one of Pakistan’s major English newspaper Daily Times

(http://www.dailytimes.com.pk/default.asp?page=story_9-1-2003_pg3_3 says that the
cost of corruption by political leaders using public office for private gain in banking
sector alone cost 10 to 15%. The same newspaper reports that the overall cost of
corruption by political leaders in Pakistan is between 20% and 25% of the GDP. This is
equitant to an annual average GDP growth rate over 4 years.

A statement by Asian Human Rights Commission (AHRC) issued on December 8, 2009

says that “. . . long periods of martial law have provided opportunities for the generals to
loot the country, by siphoning public funds for their own personal gain. The media,
judiciary, military and civil bureaucracy, became part of the loot of the generals’
corruption.”

A report accessible at http://pakobserver.net/200912/28/Articles02.asp provides the

following explicit and implicit examples of corruption in Pakistan:

”Perks are a type of corruption which country’s ruling politicians, bureaucracy and
military elite is enjoying in the form of free fuel, electricity, accommodation, luxury cars,
army of servants. There is no legal and/or moral justification for such perks.”

“It is opined that 30 percent of total corruption is in government departments and banks.
In 1997 Nawaz Sharif government appointed 30 judges to settle 48,000 registered bank
loans cases of 217 billion rupees. The reports of 193 billion rupee loan right off from
1999 to 2009.

The 2005 Karachi Stock Exchange Scam that cost 25,000 families allegedly some 800
billion rupees while Islamabad, State Bank of Pakistan and Securities and Exchange
Commission looked the other way.

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KEY SECTORS AFFECTED BY CORRUPTION IN PAKISTAN

1. Police and law enforcement

2. Judiciary and legal profession

3. Power sector

4. Tax and customs

5. Health and education

6. Land administration

7. In addition, Public Procurement seems to be a major concern across most sectors

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1. The report titled the National Corruption Perception Survey 2010 showed a high
rise incorruption from 195 billion rupees in the year 2009 to 223 billion rupees in
the year 2010.
2. Bureaucracy and Police had maintained their ranking as the two of the most corrupt
departments in public sector in 2010.
3. Land administration departments were placed third in corrupt practices.

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4. Corruption in the judiciary, local government and education sectors has also
increased as compared to the last year.

5. Syed Adil Gilani chairman of TIP said that about 70 % of people believed that the
previous military regime of General Pervez Musharraf was less corrupt then
the present Pakistan People’s Party (PPP) led coalition government.
6. In terms of bribery, land administration was the most corrupt sector, where average
bribe paid in each incident was 46, 414 rupees.
7. KPK is highlighted to be the most corrupt of all the provinces.

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Forms of corruption

Corruption manifests itself in various forms in Pakistan, including widespread financial

and political corruption, nepotism, and misuse of power. Both petty and grand corruption
are prevalent in the country. Citizens commonly face demands for bribes in their
dealings with government institutions to access basic public services. The frequency of
petty bribery is alarming and has shown little improvement over time, as evident in the
national corruption surveys conducted by TIPakistan in 2002 and 2006.
Survey results for 2002 indicated that a remarkable 100 percent of the respondents who
had any type of contact with the police over the previous year were confronted with
corruption. In terms of basic services, 44 percent of the respondents were only able to
access electricity by paying a bribe, while the rest had to rely on other forms of influence
to obtain a connection. When it came to the country’s tax authorities, nearly every
respondent (99 percent) had encountered corruption.
According to respondents of the 2006 survey, the three most corrupt government
agencies were the police, (64 percent), power sector (11 percent) and judiciary (9
percent). The three main reasons for corruption, as viewed by the respondents, were the
lack of accountability, low salaries and discretionary powers. Measures suggested for
combating corruption included more adequate salaries and a speedier judicial process.
The public procurement process in Pakistan is an example of where corruption can take
place. In principle, the law in Pakistan provides for open and competitive bidding in
awarding government contracts. However, information on government expenditures and
decisions is not always made public. As signalled by TI-Pakistan’s survey work, public
sector services — such as for power and utilities as well as infrastructure and public
works are the most affected by corruption. Public works kickbacks are estimated to
constitute approximately 25 percent of the budget.
With Pakistan a major recipient of grants and loans from international donor agencies,
corruption in procurement has affected poverty, aid and development projects. A World
Bank Country Assistance Evaluation of projects and programmes in Pakistan has
confirmed the problem. The World Bank and the Auditor General of Pakistan have
repeatedly cited governance problems in recruitment, site selection, absenteeism and
corruption for development projects. As a result, some of the World Bank’s projects were
(partly) suspended or cancelled, such as the Baluchistan Primary Education Project. In
addition, the disbursement of other loans was withheld after irregularities were
uncovered.
In response, the World Bank and the Asia Development Bank are assisting Pakistan in
establishing e-governance in order to promote transparency and reduce corruption in
procurement processes and other areas of governance.

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CORRUPTION PRONE INSTITUTION IN PAKISTAN

The wide consensus across surveys points to the police as being one of the most corrupt
institutions in Pakistan. According to the organisation Global Integrity,appointments in
the police force are often based on political considerations. Police officers frequently
have conflicts of interest due to personal loyalties and family connections. It is also well
known that in Pakistan, influential landlords decide the appointment of law enforcement
officers in their area, with police officers acting on their behalf. Unlawful police methods
do not solely affect poor people. Businesses also complain that they suffer from extortion
by the police, for instance in the form of bogus traffic fines.

The other sector in Pakistan which is seen as notoriously inefficient and corrupt is the
judiciary. According to TI Pakistan’s 2006 survey, 96 percent of the people who came in
contact with the judiciary encountered corruption and 44 percent of them reported having
to pay a bribe to a court official. The judiciary is also viewed as lacking independence
from the executive and contributing to a general culture of impunity. Again, according to
Global Integrity, the procedure for selecting judges at the national level is not transparent
and selection procedures are often made in exchange for political favours. Despite these
problems, judges are exempt from oversight and investigations by Pakistan's national
anticorruption agency, the National Accountability Bureau. The business community
generally lacks confidence in the capacity of the judiciary to enforce rules and laws, and
the settlement of disputes often involves paying bribes.

The country’s tax and public finance administration has also been affected by corruption.
The World Bank’s 2004 Public Expenditure Management report on the country showed
widespread collusion between taxpayers and tax officials, a situation that has led to tax
evasion and lack of tax compliance.In addition, a financial accountability assessment
undertaken by the World Bank in 2003 showed that, although good progress had been
achieved in public sector accountability, major gaps and weaknesses remain in the
accountability chain. These have arisen mainly from low institutional and staff capacity
and uneven implementation of reform measures. The report emphasised the urgent need
to strengthen financial reporting, to institute adequate controls at all levels of government
— especially at the provincial level and to maintain effective tracking of social spending.
A more recent report on public sector accounting in Pakistan further shows its public
sector accounting and auditing does not comply with international standards. More
attention needs to be paid to summary tables of outstanding public sector accounting and
to good reporting and disclosure processes following audits.

The high prevalence of corruption in the sectors covered in the national survey suggest
that the problem likely cuts across federal, provincial and local administrations since
service delivery is divided between different political levels. Moreover, the country is
administratively structured in such a way that there are 100 times more junior-level
civilservants than senior officers, creating a ready group to engage in the petty abuses
currently plaguing Pakistan.

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ACCORDING TO TRANSPARENCY INTERNATIONAL AND CORRUPTION
CASES 2010

War-torn states are still seen as being the most corrupt in the world, according to a new
report from Transparency International.
According to the report, corruption has increased in Pakistan as the country dropped
to 34th from 42nd in the ranking of global corruption index.
This year’s index, which measures the perception of corruption in the public sector,
showed that 132 of the 180 nations reviewed scored below five on a 0-to-10 scale, with
10 indicating the least corrupt, Transparency said.The index has become a benchmark
gauge of perceptions of a country’s corruption, anassessment of risks for investors. It’s an
aggregate indicator that combines data from as many as 13 surveys and assessments from
10 independent institutions, including country experts and business leaders.

On the eve of a new global report on corruption, the Transparency International Pakistan
has claimed that the TIP alone has identified corruption cases worth Rs 300 billion in
different federal government departments during one year.

The News Chairman TIP Adil Gilani lamented that the government did not show any
interest in probing these cases of corruption. He, however, said that it was only the
Supreme Court of Pakistan, the Public Accounts Committee of the National Assembly
and the PPRA, which took notice of some of these corruption cases. He explained that
generally the identified corruption cases involved violation of the
Public Procurement Regulatory Authority (PPRA) Rules of 2004. The Transparency
International is releasing its report on Tuesday at 2 pm amid indications that Pakistan is
all set to hit further lows amongst the world’s most corrupt nations. The 2009 report
showed Pakistan climbing five numbers from the previous 47 to become the 42nd most
corrupt country in the world. Gilani expressed his disappointment that there was no
effective accountability apparatus presently operational in Pakistan due to which
corruption was on the rise. He explained that the TIP referred a number of corruption
cases to the NAB but it did not proceed even in one single case.

Amongst the mega corruption cases, he said the Rental Power Projects of the
government, presently under the scrutiny of the Supreme Court of Pakistan, was on the
top. He claimed that under the Rental Power Projects, the government awarded 14
contracts in violation of the PPRA rules as also stated in the ADB report, causing a loss
of over US$ 2 billion. He said that the TIP had also written to the apex court on this case
of massive corruption and irregularity.

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He said that the TIP also wrote to different authorities about corruption in Pakistan Steel,
whose sale policy and procurement had caused reported loss of Rs 22 billion. This
corruption case, though ignored by the government, had taken been up by the Supreme
Court of Pakistan.

Gilani also talked of the alleged violation of Pubic Procurement Rules 2004 by Pakistan
Railways in the tender for procurement of 150 locomotives, only US made, which might
have caused a loss of at least Rs 40 billion to the national exchequer. The project, he said,
is presently on hold.

Regarding the OGDCL, which made headlines in the recent past when Prime Minister
Gilani appointed his jail mate and a convict who was not even a graduate as its managing
director, Gilani said that the TI had also reported to the government authorities about the
purchase of compressors for $30 million for Qadirpur Gas Field without inviting public
tenders from M/s Valerus, which is a violation of the Public Procurement Rules 2004. He
said the TIP also reported another violation of the Public Procurement Rules 2004 in
tender for supply of rental drilling rigs costing the Government of Pakistan Rs 3 billion
per year. He added that the Trading Corporation of Pakistan awarded contracts at
exorbitant rates to cartels of Stevedores and Transporters in 2009, wheat and fertiliser,
causing loss of over Rs2 billion.

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PPP’s Massive corruption in public sector: PAC

Public Accounts Committee in its latest report has pointed out grave irregularities and
incompetencies of government sector, especially in Federal Board of Revenue.
The irregularities include non-transparent procurement, inaccurate records of state land
and buildings, unfair payment practices and wrong information in the accounting system,
circumvention of internal controls, weak access controls in computer systems,
deficiencies in land sales procedures and accounting controls, and lapses in governance
structure and financial operations.
The committee considered the government’s financial statements and the report of the
Auditor-General of Pakistan, and noted that the Auditor’s report contained 20 audit
observations on government ministries and 19 audit observations on statutory boards.
It revealed the government’s devastating failure in checking the financial irregularities
and losses incurred in the public sector organisations and taking initiatives for optimum
utilisation of scarce resources. The AGP, which is a watchdog institution, in its audit
report2007-08 laid out monetary and bureaucratic irregularities in the Federal Board of
Revenue to the tune of Rs 101.054 billion in both the direct and indirect taxes at
Rs54.517 billion and Rs46.537 billion, respectively. A chosen sample of only 3.030 cases
indicates unacceptable monitoring of withholding tax, revenue losses in
assessment/collection of taxes, short levy and non-levy of taxes and penalties, non-
recovery of arrears etc.
The policy makers still pay no mind to the untaught expenditures of the government
functionaries. It is time that the expenses in the offices of high-ups and of the enterprises
in public sector should be substantially curtailed, simplicity adopted, expenditures on
foreign visits made need-based, use of official vehicles rationalized and
remuneration/perks reduced.
The federal cabinet comprising almost a century of ministers/advisors is a classical
example of wasteful expenditures. And yet they enjoy free lunches out of taxpayers’
money and are exempted from taxation.
Besides, the losses suffered in the public sector enterprises such as Pakistan Steel Mills,
Pakistan International Airlines, Pakistan Railway and others also needs to be looked into.
Surprisingly that huge loss of Rs22 billion suffered by the Pakistan Steel did not bother
the government and the Supreme Court had to take suo motto notice of this huge loss.
While making efforts to raise tax revenues, the government in addition to imposition of
VAT is also trying to secure foreign aid to reduce fiscal and balance of payments gaps it
has secured $11.3 billion credit from the IMF with tough conditions attached to its
standby credit. It has also sought financial assistance from the Friends of Pakistan who
pledged $5.513 billion in April 2009 but very little has been disbursed so far.
The question arises considering the statements of leakage of more then 500 billion rupees
every year will it be fair expectation the government would coup the financial crunch.
FBR officials earlier this year had exonerated one of their colleagues found involved in
an inadmissible tax refund of Rs140 million to a private pay-phone company, keeping in
the dark both the PM’s Secretariat and the committee.
Non/Short realisation of sales tax, additional tax and penalty denied Rs. 1352.989 million
while the inadmissible input tax adjustments\credit, in violation of section 73 of sales tax
act 1990 cost the exchequer Rs 424.206 million.

17
Non-recovery of adjudicated government revenue worth Rs. 234.893 million was also
observed in addition to sales tax irregularities of more then Rs. 24 million. Non
enforcement of indemnity bonds\bank guarantees has cost Rs. 87.283 million.
Tax Fraud by issuance of fake\flying invoices stands at Rs. 1213.79 million, report
revealed. In addition it also surfaced a fradualant drawl of tax refund of Rs. 20 billion.
The Report says that a short realization of custom dues due to misclassification of
imported goods was 6.838 millions due to negligence of Collectorate of customs Lahore,
Rawalpindi, Peshawer, Multan and Karachi.
It also highlighted the grant of inadmissible excess rewards worth more the Rs. 150
million on behalf or recovery of government dues.

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Impact of Corruption
To a varying degree, Corruption exists in the almost all countries. However, the degree to
which corruption adversely impacts common people’s lives and increases poverty is
directly proportional to the level of corruption and how wide spread it is in the society. A
country’s or province’s development depends on how much of that country’s resources
are lost to corruption. In developed countries where corruption is limited to a small
number of projects and where common people do not encounter corruption on a daily
basis, the adverse impacts tend to be marginal and do not jeopardize the welfare of its
people. In contrast, a poor country like Pakistan, where each paisa must be spent to uplift
people from poverty, corruption has a significant impact. The following are some
examples of the damage that is caused by corruption:

Defective or dangerous Infrastructure – poor roads, badly constructed college buildings,

schools, railway tracks, hospital facilities, water projects, bridges or housing units.

Inadequate Infrastructure – incomplete roads, fewer classrooms in schools, dams that

cannot stop floods or buildings that do not meet original requirements.

Poor education standards as Schools remain unoccupied due to absence by teachers or

fewer teachers to effectively educate students. Technical and Engineering schools that
lack laboratory facilities or library books.

Hospitals that have inadequate number of beds, no medicine for patients, and no vehicles
to transport patients to hospitals.

Eventually, the budget planners and donor countries loose confidence in the ability of an
organization to deliver improved infrastructure and become reluctant to provide further
funding. As people of rural areas are poor and cannot pay for any services, they will not
have access to educational or health institutions. Alternatively donor agencies force
privatization of infrastructure building and delivery of services giving contracts to
companies that specialize in urban areas. Such private companies often do not trust or
have confidence in the local labor and tend to bring labor from other provinces or focus
only on projects in urban areas resulting in the continued suffering of people living in
rural communities.

19
Government’s Efforts against Corruption in Pakistan

Pakistan has long made official commitments to fighting corruption, going back to the
early days of independence. Government anti-corruption initiatives intensified after 2002,
starting with the design and implementation of the National Anti-corruption Strategy
(NACS) by the National Accountability Bureau (NAB). However, the results have been
limited. According to the analysis presented in the NACS, this has been because of two
major reasons: i.) political will that has not been sustained over the years and ii.) policy
recommendations that have not been supported by a concrete plan of action.

According to TI Pakistan, current anti-corruption efforts are not promising and there has
been significant backsliding as of late. The main problem has been the decision by
President General Musharraf in 2007 to grant immunity to corrupt elements and bar legal
action against ministers and parliamentarians (unless prior clearance has been given).
These actions have been sanctioned under the National Reconciliation Ordinance (NRO),
which amended in October 2007 the National Accountability Ordinance of 1999 that had
guided the country’s corruption-related work. Many immune or pardoned beneficiaries of
the NRO were appointed to important ministries and included ministers or public
officials.

The National Anti-Corruption Bureau (NAB)

Pakistan's main anti-corruption body is the NAB, which has preventive, enforcement and
public awareness functions. Its mandate is to investigate and prosecute corruption cases
and it publishes annual reports on its progress.
Although it is formally independent, the NAB has always been strongly influenced by the
military. Traditionally its chairman has been appointed by the President from among
senior military officials. The current chairman of the NAB, Mr Nawid Ahsan is not a
ranking member of the military. The NAB is widely perceived to target politicians and
civil servants from preceding civilian governments, discrediting political opponents and
junior government officials. Judges and military officers as well as political allies of the
government have been virtually immune from any investigations or being held
accountable for their actions.

The National Anti-Corruption Strategy in Practice

The NACS does not refer to specific programmes but is structured around the pillars of
the National Integrity System (NIS), as developed by Transparency International.
According to a U4 report, the NACS is especially useful for its analysis and diagnosis of
the Pakistani corruption situation and the detailed programme of reforms it recommends.
However, the process has been initiated by a military institution in a military-led country.
As a result, the NACS primarily targets politicians, civil servants and business people,
while ignoring military and security personnel. Although the military regime itself has
been perceived as relatively clean, the NACS process has been compromised by the
perception that NACS could be motivated by political motivations, such as to ensure
President Musharraf ‘s election in 2002.

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NACS — Objectives, Process, and Recommendations

Having traced historically the anti-corruption efforts and the need for a holistic approach
to fight corruption, we will now delve into the formulation of the National Anti
Corruption Strategy (NACS) of Pakistan. We will begin by describing the objectives of
the NACS, the process followed for its formulation and the different phases it passed
through till completion and formal approval by the Government for implementation.

The purposes of the NACS were to:

• Undertake a review and assessment of the causes, nature, extent and impact of
corruption in Pakistan;
• Develop an integrated framework for tackling it with focus on prevention along
with enforcement; and
• Create an implementation action plan for containment of corruption.

The constitution of the NACS Project Team itself was an exercise in participation in that
it consisted of government officers from a range of Ministries and Departments.
Constituting a team of indigenous officers was important since the consultation process
envisaged had not only to have representation from different public sector organizations
but had to have the cultural and lingual mix necessary to undertake it throughout a
country with diverse languages, cultures and traditions. This mix came in handy at places
like Peshawar, Kohat, Quetta, and other remote areas. This is, however, not to undermine
the contribution made by the international consultants that the project had the benefit of
engaging.

The NACS is structured around the pillars of the National Integrity System, a concept
borrowed from the Transparency International and adapted to local needs. This concept
entails that a country’s national integrity system comprises of pillars or sectors, which if
operating with high standards of transparency, accountability and effectiveness, support
each other and will in turn help maintain high standards of national integrity and low
levels of corruption. Each pillar will act as a watchdog on at least one other and will
support each other in keeping the desired level of integrity. These pillars are:
o Legislature and the political system;
o Executive;
o Public accountability bodies: Auditor General; Public Accounts Committee; and
the Ombudsman;
o Anti corruption agencies;
o Legal system and judiciary;
o Media;
o Civil society; and
o Private sector

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Strengthening of Anti Corruption Agencies (ACAs)

One of the recommendations of the NACS was to strengthen ACAs in general and
the NAB in particular being the anti-corruption arm of the federal government.
This recommendation called for improvements through organizational
restructuring and enhanced functional capacity of the NAB. A Small Scale
Technical Assistance (SSTA) was provided jointly by ADB and DFID for
restructuring/strengthening of the NAB. The Consultant’s Report on Policy,
Organization and Structure Review of the NAB made a set of recommendations,
the most important of which are:
o Revision of Policy and Operating principles
o Formulation of table of Delegation of Powers
o Defining job descriptions
o Preparation of Manual of Operations and Standard Operating Procedures
for all NAB functions
o Conduct of training Needs Assessment and development of Training
Modules
o Instituting Management Information, Operational Information and
Intelligence Collation Systems
o Developing indigenous Technical Support and Surveillance Capability
o Instituting Physical, Electronic and Information Security Systems
o Enhancement of Human Resource/budget for the NAB
Most of the above recommendations have been implemented and have greatly improved
the investigative, prosecutorial and management capabilities of the NAB

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Conclusion
The future of Pakistan and alleviation of poverty in rural areas of Pakistan is highly
dependent on successful and completion of all development projects. This success is
threatened by the evil of corruption that must be stopped on urgently before it is too late.
The religious extremism, deteriorating economic conditions, and worsening living
conditions are unnerving the people of rural Sindh and Balochistan, who until now have
refused to fall in the trap of extremism. It is imperative that all stakeholders including
political parties, government officials, civil society organizations, private companies,
donor agencies and common people recognize the carnage that current levels of
corruption can do to the heartlands of Pakistan. They must form a grand coalition to stop
the menace before it is too late.

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