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Allah cursed the briber (rashi) and bribe-taker (murtashi). Narrated Abdullah ibn Amr ibn al-As [The Office of the Judge (Kitab Al-Aqdiyah) [24:3573], Sunnan Abudawud

Corruption
In philosophical, theological, or moral discussions, corruption often refers to spiritual or moral impurity or deviation from an ideal. Frequently, this takes the form of contrasting a pure spiritual form with a corrupted manifestation in the physical world. The presence of corruption inflicts substantial economic costs on an economy. Corruption is a double edged sword; it reduces both the volume and efficiency of investment and thus economic growth. Corruption hurts the economy by raising transaction costs. Even if these payoffs are considered part of the cost of doing business, there is an economic loss as these payments are neither available for expansion and improvement in the quality of public services, nor for private sector investment. Political corruption is the use of legislated powers by government officials for illegitimate private gain. Misuse of government power for other purposes, such as repression of political opponents and general police brutality, is not considered political corruption. (price, 2009)

Corruption in Pakistan
It seems like the Pakistani society and corruption go hand-in-hand; the entire society as a whole is not corrupt but as it is said that the law of averages gives a blanket over both the extremes. Corruption seems to be one of the fundamental problems of this country; reigning back to 1950s. Till date not much has been done; though every time a new

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Current Business Affairs government comes over or takes over has talked about tackling with this issue but perhaps corruption is either too widespread in the system or whichever government comes in power falls in love with corruption. Many experts believe that the current lawlessness, shrinkage of economy and increasing poverty is credited to the corruption in the country. Corruption is like a termite that eats the entire structure of the government which eventually leads to a failure. In Pakistan over a period of year especially during the 1990s many governments became the victim of high corruption in the system. Different governments have made little effort for handling the corruption like Pakistan Penal Code of 1960 (PPC), the Prevention of Corruption Act of 1947 (PCA) and the National Accountability Ordinance (NAO) of 1999; it is important to note here that NAO initially was drafted to outline the objectives, duties and power of NAB National Accountability Bureau but after forming of the new government in 2002 NAO was regulated and the Judiciary and personnel of the armed forces were excluded from NAB. (Zahid, 2009)

Key sectors affected by corruption in Pakistan


Expert sources indicate that the following sectors are among those most affected by corruption (the particular order varies from source to source):(U4 Helpdesk Query, 2009)

Police and law enforcement Judiciary and legal profession Power sector Tax and customs Health and education Land administration In addition, Public Procurement seems to be a major concern across most sectors

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Most corrupt departments of Pakistan


Following is the list of a few most corrupt departments of Pakistan, according to Transparency International; (Zahid, 2009) 1. National Highway Authority (NHA) 2. Pakistan Housing Authority (PHA) 3. Security and Exchange Commission of Pakistan (SECP) 4. Ministry of Water and Power 5. WAPDA 6. Pepco 7. National Engineering Services Pakistan (NESPAK) 8. Private Power and Infrastructure Board (PPIB) 9. Alternative Energy Development Board (AEDB) 10. Pakistan Steel 11. Trading Corporation of Pakistan

Single institution/sector perceived to be most affected by corruption, overall results

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Figure 1

Corruption and business activities in Pakistan


1. Survey of world bank
A survey conducted by the World Bank among 200 business firms in Pakistan revealed that a significant amount of time and money was wasted in numerous unpredictable interactions with petty and higher-level bureaucrats seeking bribes. Entrepreneurs reported spending about 12 percent of their time dealing with tax and regulatory requirements. Also, corruption depresses economic growth by lowering public investment. Only a part of the amount appearing in budget documents as expenditure on public projects may actually get spent on these projects; the rest is siphoned off by government functionaries and contractors Lack of transparency, weak public accountability, weak judiciary and complex legal structures are causes of corruption and considered as the most important challenge faced by the business community in Pakistan.

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Current Business Affairs The World Bank finds corruption a serious and growing obstacle to the investment climate in Pakistan besides expressing dissatisfaction over the issue of governance in the country. The World Bank said that corruption is largely associated with business-government interface and reveals that the menace is more widespread here as compared to other countries though the bribe rates here are lower. Referring to a survey conducted for the formulation of the draft report, the Bank says that results show that perceptions about corruption in Pakistan are based on actual experiences with paying bribes by the investing firms. It reveals that the firms making investment in Pakistan have to pay bribes even to get water, telephone and electricity connections which is a huge impact of Corruption on business activities in Pakistan. (price, 2009) On the issue of government: Consistent interpretation and application of rules and regulations is an important reflection of good governance. Discretion or lack of predictability and consistency in the interpretation of rules and regulations (by government officials) is indeed a severe problem in Pakistan. Only 46 per cent of firms in Pakistan believe that the officials interpret rules consistently, compare with 60 per cent in comparator countries which in turns effect on the businesses and its growth. On the issue of corruption: Corruption, a serious and growing obstacle to the investment climate, is largely associated with business-government interface. Corruption is considered a severe constraint by more than half of all the firms (57 per cent) in Pakistan, significantly higher than the 40 per cent figure from 2002 and much higher than those of the comparator countries, with the exception of Brazil and Bangladesh. It is common for firms in Pakistan to pay informal payments to government officials to get

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Current Business Affairs things done. In 2006, three out of every four firms strongly agreed or tended to agree with the preceding statement. Results: Results show that perception about corruption in Pakistan is based on actual experiences with paying bribes. In other words, the probability that a firm reported corruption as a serious obstacle rises by 29-percentage point (against 57 per cent in the full sample) if the firm experienced at least one incident of bribe. As with perceptions of corruption, bribe incidence in Pakistan has increased 20 per cent over time-from 40 per cent in 2002 to 48 percent in 2007.

Amounts paid: The amount of bribe paid in Pakistan is difficult to estimate but available evidence suggests it is not too high by international standards, although it varies by region. Firms were asked the amount of bribe that firms in their industries pay to government officials to get things done. The bribe rate (as a percentage of annual sales) in Pakistan equals 0.7 on average, compared with 1 per cent in comparative countries. Firms in Islamabad (including Rawalpindi) reported the highest bribe rate of 2.7 per cent, followed by firms in Karachi (1.4 per cent), and Lahore where the figure was less than 0.1 per cent. The findings suggest that relative to other countries, bribery in Pakistan is more widespread (affects a larger proportion of firm), but the bribe rate is lower although not by a significant amount. Comparison: Compared to other countries, Pakistan has a high overall incidence of bribe due to tax and labor inspections-despite having a smaller percentage of firms that are inspected. 6 Bahria University Islamabad

Current Business Affairs Compared to other countries, the conditional incidence of a bribe is the highest in Pakistan. This means that for each inspection, the likelihood that a firm in Pakistan will be requested or was requested to pay the bribe higher than it is in any of the comparator countries. In contrast, firms in Egypt have almost twice as many inspections but much less incidence of bribes. These findings are consistent with the conclusions that curtailing corruption in Pakistan requires not only a reduction in the interaction between government functionaries and the private firms, but also greater check and balances on government officials as well which leads a chance to corruption and affects business activities in terms of huge amount of losses . Gifts and payments: Corruption also exists in another factor that is restricting access to water supply to firms. 62 per cent of all the firms surveyed (that have applied for new connections) were reportedly asked to make informal payments or gifts in order to obtain water connections. Firms in Pakistan face the severest corruption on this front relative to its international comparators. Every firm in the chemical sector that had applied for a (water) connection was asked for such payments. On the issue of power connection, A stunning 84 per cent of firms that applied for connections had to make informal payments in order to obtain electricity services-a startling increase from the 25 per cent firms that reported making such payments in 2002. (abbasi, 2009)

2. Public Procurement and Contracting


Business Corruption: According to the US Commercial Service 2007, the procurement process in Pakistan is improving but still cases of corruption are reported. For instance, Transparency International Pakistan's National Corruption Perception Survey 2009 reports that the cost of corruption in procurement is about 15%. The competitive bidding process sometimes excludes many potential bidders by last minute publicity or by 7 Bahria University Islamabad

Current Business Affairs prequalification criteria that exclude bidders and thereby limit the competition. A major flaw in the public tender bidding process is the absence of an independent complaint handling system. According to Global Integrity 2008, companies found guilty of irregular practices are often not effectively stopped from participating in future bids. Most bidders caught for corruption participate again under different names. Companies are recommended to use a specialized public procurement due diligence tool in order to mitigate corruption risks related to public procurement in Pakistan.

Political Corruption: Corruption is widespread in the public procurement process in Pakistan. The Public Procurement Regulations Authorities (PPRA) governs Pakistan's public procurement. The World Bank, DFID, and the Asian Development Bank are involved in modernizing the procurement system, and although transparency is improving, the system still exhibits irregularities. These flaws include inadequate bidding documents, insufficient response time for bidders, prequalification used as a measure to limit competition, price negotiations, lack of an independent complaint handling system, etc. Public sector corporations, such as power and utilities corporations, infrastructure, as well as public works are the most affected by corruption. According to Transparency International 2008, public works kickbacks are estimated to constitute approximately 25% of the budget. As Pakistan is a major recipient of grants and loans from international donor agencies, corruption in procurement also means that anti-poverty aid and development projects are hampered by corruption. Some projects remain unfinished because the funds were squandered on bribes, kickbacks and commissions. Defense-related procurement and contracts are excluded from the scrutiny of the national anti-corruption agencies, but it is common knowledge that they are also corruptionridden. A prominent case was that of a retired admiral who returned USD 7.5 million to the government upon admitting that he had accepted bribes and commissions for several defense contracts. (Public Procurement and Contracting, 2009) 8 Bahria University Islamabad

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Impact of corruption on developing activities: Corruption also retards the pace of development activities. It also impedes national prosperity and hinders governments efforts aimed at providing basic social services and alleviating poverty. Among many other factors, corruption emanates primarily from poor governance. The magnitude of corruption in some leading public sector enterprises in Pakistan compels the government to pay huge subsidies amounting to hundreds of billions of rupees out of public exchequer. For example, to pay for the inefficiency and mismanagement of WAPDA and KESC, government has to keep huge provision in its national budget, every year. KESC which has the privilege of serving one of the most densely populated markets in the world of about 15 million domestic, industrial and commercial consumers, in a radius of 40 miles, perhaps, is the most corrupt and the most inefficient organization in Pakistan. With such large number of metropolitan consumers KESC should have become a profit-earning organization. The corruption curves of WAPDA and Pakistan Railways may not be much below. It is now widely believed that corruption and inefficiency in the implementation of development projects, both at federal, provincial, and local government levels are eating the biggest share of PSDP and provincial development budgets. Pakistans water sector is fraught with large and small scale corruption. According to a 2003 and 2006 survey by Transparency International (TI), Pakistans Water and Power Development Agency is perceived to be the second most corrupt institution in the country. Close to half of the more than 31,000 complaints received by Pakistans anti-corruption ombudsman in 2002 were related to this one institution. Pakistan is on the list of the most water stressed countries in the world, and forecasts indicate that available resources are depleting rapidly, possibly leading to a state of water scarcity in the next two decades. Much of the water infrastructures are in poor condition and Pakistan has to invest almost to Rs60 billion per year in new large dams and related infrastructure over the next 5-10 years. In the energy sector, Pakistan will face acute power shortages of approximately

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Current Business Affairs 6,000 megawatts by the year 2010 (equivalent to about three Tarbela dams) and 30,700 MW by the year 2020. (Business and Finance Review, 2009)

Examples of Corruption by the Departments


Corruption examples have been categorized under various heads as follows: Policy Manipulation: The most frequent example quoted by many pertained to the overnight changes in import duty structures via issuance of Statutory Notifications SROs during previous regimes. These SROs were linked with imports of BMW cars, steel items, etc. According to respondents, many SROs were designed to favor a single industry at the cost of others, at times even a single firm. A few illustrative examples follow. One must, however, note that while CBR is widely perceived as the source of these manipulations, it is primarily the rulers and their interest groups who conceptualize these manipulations and use CBR as implementing authority. Many upright officers of the tax administration had to pay a price when they took a principled stand against such manipulations. Another method that previous governments have used to bypass upright officers is to put their own handpicked officers in key positions in the tax administration to get their work done. The business is import of scrap metal. The applicable duty is rupees 5000 per ton. Suddenly an SRO is issued from CBR and the duty is reduced to rupees 500 per ton. Certain business interests in the industry had arranged reduction in duty through payments and/or by using contacts with highly placed officials. In one budget, assembled computers became duty free while some duty was still imposed if one imported their parts. There was an obvious mistake made. It is alleged that local assemblers paid Rs 16 lakh to CBR to get this anomaly rectified.

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Current Business Affairs For sugar exports to India a special SRO was issued for rebate. The rebate was unlawful and too high (Rs 4500 per ton given when Rs 500 per ton would have sufficed). Collusion: Most income tax and customs levies are said to be determined with prior consultation between the two parties concerned. In customs, collusion takes place in misdeclaration of items imported, their quantities and values. In income tax, the assessment is manipulated to favor people who pay bribes and extort money from those who do not. Similarly in sales tax, factories and retailers are let off with lower levies on payments of money. Many employees are reported to have a monthly payment plan with different organizations. A large-scale operation is located upcountry. The business was very profitable. At the same time the businessman was evading income tax. The business was audited one year and massive tax evasion was found. The penalty and the recovery of past taxes were estimated at rupees 40 million. It was claimed that the Income Tax Officials were paid rupees 6 million and the case was hushed up with the businessman getting away free. Importers and customs officials are undeclared partners in many import transactions, e.g., auto parts. If 25,000 auto parts are imported only 10,000 are declared, thereby resulting in massive evasion of duty and loss to the exchequer. Examiners, appraising officers, ACs are all involved in this chain of corruption. Extortion: Many respondents were most unhappy with the level of extortion in the tax administration. It makes sense, as in the case of collusion and policy manipulation the tax collector and the taxpayer both share in the benefits. However, extortion supposedly makes it difficult for an honest taxpayer to live with dignity. It forces one to indulge in a dishonest practice with the sword of future blackmail always dangling. Most of this

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Current Business Affairs extortion is possible because of the immense discretionary powers that the tax officials have over taxpayers, coupled with very little accountability. A husband and wife doctors team (close relatives of a senior tax administration official) was asked to submit income and expenditure statements. They got everything done by a reputed auditor, as they wanted their case to be clean. Their supporting documents were lost (deliberately) twice to send them a message to collude with the tax collectors. Finally, their assessment was made at ten times the actual and notice sent (even the close relative could not help them in this blatant harassment). One businessman was in the business of exporting reproduction of old jewellery. When the local tax collector got upset with the businessman on something the businessman was charged with exporting antiques. Even when the businessman showed him thirty similar copies the official was not satisfied. The official arranged for the archaeology department to issue a certificate that the items were antiques and even got an FIR ready to send the businessman to jail. Fortunately, because of some other pressures on the archaeology department the department refused to give the certificate and the businessman was saved from another cycle of harassment and indignity. Nothing has happened to the collector. Multiplicity of checks is there to extort money from the business. They do not trust their own employees and we have to pay the price. There is a sales tax audit, a vigilance audit, an anti-corruption audit, a regional teams audit, and finally a central audit. All of them come to our factories and waste our time. Their only interest is in money. Speed money: Speed money seems to be the most common form of corruption in the whole of tax administration. The system is well understood by all parties and is not even considered as corruption by some. Average monthly take home, without damaging government revenues (read due to speed money), of a Karachi port-based customs examiner is Rs 50,000. An appraiser takes home between Rs 100,000 to Rs 150,000 while a principal appraiser makes between Rs 200,000 to Rs 250,000. Any money that they make because

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Current Business Affairs of collusion with the importer is on top of this. Speed money rates in Peshawar for customs rebate are from 3% to 5%. In Lahore the rates overall are about 2% as the turnover is much higher, while Karachi people pay only about 1.5%. (Federal board of revenue, Corruption, 2007)

Removal of corruption from Pakistan


The Pillars of the Countrys Integrity System
The Transparency International mission approached its task along the lines of its Source Book 2000 Confronting Corruption: The Elements of a National Integrity System, which is accessible through the TI

An Elected Legislature
In early 2002, Pakistan had no elected national legislature, national elections were scheduled to take place in October 2002. Under the commendable bold Devolution Program of the GOP, elections for local councils took place in the first 8 months of 2001, and district, tehsil and union Nazims (mayors) were indirectly elected, with councilors acting as an electoral college. While many questions remain about the role of the Nazims, and about the funds they will have available, TIs National Chapter in Pakistan was working actively with the City Nazim of Karachi and the Nazims of several towns in Karachi toward the introduction of more transparency into the administrative activities, suggesting that at the grass roots level a political process with involvement of the citizens is possible. Two possibly very interesting instruments for citizen administration interaction were the newly-to-be-established Citizen Community Boards and the public Safety Commissions. Their role and functions should be carefully monitored.

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An Independent and Impartial Judicial System


An independent, impartial and well-informed judiciary holds a central place in the realization of just, honest, open and accountable government. A judiciary must be independent of the executive if it is to perform its constitutional role of reviewing actions taken by the government and public officials to determine whether or not they comply with the standards laid down in the Constitution and with the laws enacted by the legislature. And the selection and appointment of judges at all levels, but particularly at the High Court and Supreme Court levels, must be, and must be seen to be, totally professional, rule- and merit-based, and transparent. At present, the judicial system in Pakistan is not held in high esteem. Some call it the cause of all evil. Many regret that members of the judiciary are expressly exempted from the work of the National Accountability Bureau (NAB). It also seems that more attention should be given to the selection of judges from the Bar and the training of court staff. However, in December 2001 GOP announced an Access to Justice Policy aimed at strengthening good governance, the rule of law and ensuring access to justice. Its implementation will have to be carefully monitored. There is an abundance of laws, ordinances and regulations that are in part outdated or contradicting each other, thus giving corrupt officials good opportunities for exercising discretionary powers without any risk.

Independent and Free Media


Alongside an independent judiciary, the existence of free and independent media is one of the twin powers essential for good governance, and neither should be accountable to government or politicians. The Government should scrupulously refrain from any temptation to manipulate the media, either through direct influence over companies or individual journalists, or by using economic powers such as the placement of advertising.

Supreme Audit and other Oversight Bodies

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Until less than a year ago, the Auditor General of Pakistan was also Accountant General. The recent separation of functions was a significant step toward building a strong, independent supreme audit watchdog office. The Auditor General has recently published (and put on its Website) the first Annual Report and a Corporate Audit Plan, and intends in future Annual Reports to include a section on Unfinished Business, listing items where recommendations of the AG have not yet been acted upon by the Executive. This development is laudable. For the future it is important that the Auditor General be empowered to audit in addition to government accounts also the accounts of all public corporations (though not those which have been set up as commercial corporations, even if the government holds the majority of the shares). The Auditor Generals Office should be accountable to the Parliament only. The Auditor General of Pakistan appears to have some degree of independence, but its funding is determined by the Ministry of Finance, whose accounts it audits (even though the AGs Office is now apparently free to use its budget funds as it sees fit, without any control by the Finance Ministry). It is highly desirable that the AGs Office be given a fully independent status as soon as a Parliament has come back into existence. Equally important as a strong Auditor Generals Office is the existence of other strong, independent oversight bodies, such as the Public Accounts Committee and the Ombudsman. In the absence of a legislature, the present ad hoc Public Accounts Committee has limited powers. The TI mission heard that the ad hoc PAC has cut the knot of an extra-long backlog and is presently reviewing the audits of 2001, having put aside the older files. While it is clear that audit action, if it is to be effective, must occur in a timely manner, it is important that older cases of violations, including probably corruption, are not simply abandoned. All the oversight bodies should be supplied with adequate human and financial resources. Every Rupee invested in oversight will bring high returns.

Independent Anti-Corruption Agency


Fully independent anti-corruption agencies like the Independent Commission Against Corruption (ICAC) in Hong Kong have proven their worth, and it is to be hoped that at 15 Bahria University Islamabad

Current Business Affairs the end of the present consultancy GOP would decide to establish such an independent body, with judicial powers and the involvement of Civil Society, and with a clear mandate for prevention work.

Effective, well-trained Law Enforcement


The National Accountability Bureau (NAB) has been empowered to deal with corruption crimes at the top political and official levels. NAB has been particularly successful in recovering for the country significant amounts of money. It has established a strong organization and is considered by many an efficient and effective organization. The TI mission heard, however, fairly widespread concern that both the military and the judiciary are excluded from the mandate of NAB. Clearly, an unconstrained mandate would have strengthened the legitimacy of NAB. The mission took also note of the fact that some draconian aspects of the NAB powers (detention rights) have been reviewed. An oversight of the NAB itself should be assured. The police is considered by many in Pakistan to be particularly corrupt. The TI mission welcomes the fact that GOP has acknowledged the need to address this issue and is embarking on a police reform, including the establishment of Public Safety Commissions, Criminal Justice Coordination Committees and an independent complaints handling authority. The separation of investigation and prosecution functions should enhance the due process of law and is welcome. Also, the police must be insulated from politics. The experience with the newly-established motorway police appears to demonstrate that sufficient pay, a well-structured job, effective monitoring and the creation of pride in the job can work wonders. This lesson should be remembered. All the arguments in the following section apply to the police as well.

A Strong Public Service to Serve the Public


A well-trained, adequately-paid professional public service with pride in its job is a major factor in containing corruption in any country. Pakistan has started a civil service reform, 16 Bahria University Islamabad

Current Business Affairs focused on the federal level, addressing i.e. rewarding merit in recruitment and promotions, the pay and pension systems, and right-sizing and restructuring. The Federal Public Services Commission apparently has been given enhanced powers and some degree of autonomy. One can only hope that early attention will also be given by the Provinces to the provincial civil service system. The TI mission believes that pay levels need to be given particular attention. If everybody believes that even after recent (fairly significant) pay adjustments the official income of civil servants, especially at the lower levels, is inadequate to cover basic family living requirements, then acceptance of this fact is a tacit invitation to supplement the official income through corruption, and thats the way it is apparently interpreted inside the civil service as well as by the clients in Pakistan and abroad (the dangerous corruption of need argument). Enquiries as to the size of the gap between the actual and a living wage are answered by some with the need for a four- to fivefold increase. Obviously this would confront the GOP with a major problem. But some additional move, perhaps for selected, especially endangered and exposed civil servants, would appear to be necessary if the easy excuse for rampant corruption is to be removed and a drive for a professional, clean public service is to have a chance. The TI mission is painfully aware of the economic strictures, and yet would urge that this issue be given early attention. Perhaps equally important is the reduction to a necessary minimum of discretionary powers of civil servants. Many government services can be structured so as to require minimum discretion in their execution. Discretion invites corruption. The GOPs drive to deregulate the economy through the near-abolition of price controls, the closing of the Supplies Office, changes in the Factories Act and the effort to establish and then tackle irritants in the investment requirements deserves strong support. The exercise of discretion is a powerful catalyst for corruption throughout any administration. Among many other measures, the new electronic technologies offer unlimited opportunities for transparency and clarity without civil servant discretion and even for interaction between client and official without personal contact, minimizing the occasions for the transfer of bribes. Other important features of a non-corrupt, professional civil service are the adoption, and acceptance by each civil servant, of a good Code of Conduct with clear rules i.a. on the

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Current Business Affairs acceptance of gifts and entertainment, conflict of interest and nepotism, systematic monitoring and enforcement of the rules, and a serious disclosure of assets program for senior officials (under which the disclosure forms are actually checked, verified, made publicly accessible, and action is taken, if suspicion of wrongdoing emerges). There needs to be accessible and well functioning complaints mechanism, by which clients/citizens can question the delivery of service to them, citizens or citizens organizations can report on wrongdoing they have noticed and civil servants can complain about wrongdoing by their colleagues, without fear of mobbing or other adverse consequences. Lastly, Pakistan should have a good whistleblower protection program, giving assurance to people that reporting violations will not get themselves into trouble. Any set of rules and conduct of course requires effective sanctions to be taken seriously, and in this context the TI mission welcomes the promulgation of the Removal from Service (Special Powers) Ordinance, 2000 with its broad powers to hold persons in government or corporation service accountable.

One institution traditionally beset by most of the problems referred to above appears to be the Central Board of Revenue. The CBR is considered particularly corrupt by many observers, and the TI was pleased to learn that a reform program for CBR is already underway, with significant donor support. Pakistan suffers from a particularly small tax base (1.2 million taxpayers in a population of 140 million people is excessively low), and due to inefficient (and often corrupt) practices, the tax collection result is totally inadequate. Here a broad use of electronic means to catch potential tax payers in other activities, but also in order to reduce the personal interaction between tax inspector and tax payer could go a long way toward increasing the tax intake. A Code of Conduct, reduction of discretion of tax inspectors, effective complaints mechanisms, strict monitoring and effective sanctions for violators should be part of any reform program. The CBR might be one candidate for starting with higher salaries, coupled with strict monitoring and sanctions.

Procurement
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Pakistans fight against corruption could benefit greatly from an almost total overhaul of the countrys procurement systems, institutions and rules. Through public procurement a very major share of the countrys public resources is being spent and much of it presently wasted. The World Banks Country Procurement Assessment Report of June 2000 paints a grim picture of the situation and presents many suggestions for improvement. The TI mission believes implementation of those recommendations would go some way toward cleaning up the procurement scene and improve transparency, predictability, accountability and quality of procurement. The semi-official, double role of the Pakistan Engineering Council is particularly difficult to accept, and we agree strongly that the PEC should be limited to its private sector responsibilities so as to remove the obvious conflict of interest that exists under the present arrangement. The TI mission would actually go beyond the recommendations of the World Bank report and stress in particular (i) the need for full transparency of the bid evaluation process, (ii) the need to apply particularly strict and transparent procedures to the selection of consultants, and (iii) the desirability of using the TI-developed concept of the Integrity Pact to a few selected major investment projects. The Integrity Pact concept has recently been applied to the selection of consultants for the Karachi Water and Sewerage Board K2 Project and has brought highly satisfactory results for KWSB, in terms of significantly lower consultant cost than had been predicted on the basis of past experience. Incidentally, the Integrity Pact concept is equally applicable to privatizations and the issuance of licenses, concessions etc. Considering that the Governments program foresees the privatization of several very large public corporations (such as PTLC and KESC) and of all the banks, we recommend that the GOP consider using the Integrity Pact concept for at least one of those cases, to test its effectiveness and at the same time to send a clear signal that Government will make every effort to avoid the pitfalls of privatization as they can be observed in so many other countries. Most external donors prescribe their own procurement rules which as a minimum increase the complexity and probably confusion of general procurement activities. One would hope that the donor community could be persuaded to agree and apply the highest common denominator or standard and thus help bring about uniform procurement rules. By the same token, donors are not

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Current Business Affairs necessarily only part of the solution, but often also part of the problem. Padding a project with items dear to the respective minister or secretary (cars etc), topping-up the salaries of senior officials involved in executing a donor-supported project, or offering to government civil servants consultancies (often external), which supposedly are carried out during official vacations but in fact are done instead of official duties, are unfortunately well-established practices in many developing countries. GOP is urged to monitor relations between donors and individual government departments carefully and to make sure that no such practices, which after all are a form of corruption, are tolerated. In several discussions, the TI mission heard that delayed releases of budget funds often contribute to procurement problems: Down- or progress-payments fall due throughout the year and funds should be available when due. If principals cannot pay when payment is due, the bidders will either pad their bids to make up for the delay in advance, or they will bribe the officials of the principal to see that they get paid over everybody else. A review of the release system may be desirable. A final recommendation in the procurement area: Bribery of Pakistani officials by external companies (whether done from abroad or through subsidiaries in Pakistan) is now a criminal act in all 35 countries which have ratified the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. If GOP becomes aware of such bribery, or attempted bribery, in order to obtain or retain a contract with the Government of Pakistan, GOP should present the facts to the Embassy of the home country of the bribing company, with copy directly to the OECD Working Group on Corruption in Paris. Under the legality principle, the Embassy has to pass this information to its own prosecutorial authorities. Implementation of the OECD Convention requires deterrence by effective prosecution, and the judicial machinery in the home countries cannot act unless they obtain the relevant information. It would also be advisable that GOP inform the business community in Pakistan that it will fight corruption also by pursuing bribers, be they Pakistani or foreign.

The Role of the Private Business Sector

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Current Business Affairs The private business sector should be reminded of its very special responsibility in the countrys renewal efforts. Active bribery and corruption are criminal acts, in Pakistan as elsewhere. Behavior suggesting that the Government can be held to ransom should not be tolerated. The law offers sanctions, and those sanctions should be applied systematically, so as to achieve a maximum deterrent effect.

Freedom of Information
Central to the efforts of the Government should be, in our view, a bold Freedom of Information (FOI) law which gives citizens the right of full, easy and largely free access to most information of government. A few sensitive areas like defense-related matters and personal data can be protected and excluded, but the bulk of all information should be accessible. The FOI movement started in Sweden in 1766, and today all industrial countries with very few exceptions have broad FOI legislation. Pakistans Official Secrets Act stems from a time when administrators had mostly control functions; in todays world of service to the public, the old approach should be abandoned and replaced by a modern law. FOI - and the transparency of government created by it - acts as a major hurdle to corruption, as global experience clearly indicates. TIs Corruption Perception Index shows a clear correlation between strong FOI legislation and very low corruption levels in a country. Pakistan has had a Freedom of Information Ordinance, 1997 and a draft Ordinance to Provide for Transparency and Freedom of Information, August 2000. Both previous texts are rather restrictive. Both the Human Rights Commission of Pakistan and the Consumer Rights Commission of Pakistan have prepared broader model FOI laws, and the TI mission would urge the GOP to be guided by the carefully developed two model laws. In addition to promulgating a strong FOI law, the GOP should adopt an equally bold pro-active information policy under which most government activities are made public at an early stage, so that the citizens can contribute to the development of policies and exercise their legitimate control function. Draft ordinances and laws should be shared with the public at the early formative stage 21 Bahria University Islamabad

Current Business Affairs (negative examples appear to be the NEPRA and PEMRA acts), even before the elections to a national legislature, and major investment projects should be discussed with all the stakeholders at an early stage, perhaps through public hearings, when changes are still possible. Attached is a paper entitled Transparency and Corruption Prevention on Building Large Dams which TI presented to the World Commission on Dams in December 1999. Although this paper addresses primarily transparency and corruptionprevention issues to be considered in the context of planning and implementing large dam projects, the issues apply ceteris paribus to any large investment project such as motorways, power generation or water transfer facilities.

Role of Education
In order to change the general acceptance of corrupt practices over time, a concerted long-term effort is required to educate the people starting with schoolchildren, the formal education system and general media efforts.

Role of Civil Society


Pakistan today has a large number of Civil Society organizations which are anxious to play their role of contributing to public activities, and at the same time to monitor public institutions and hold their officials to account. The TI mission felt that even among the most professional nongovernmental organizations, there is much frustration about the suspicion with which they are looked upon by the Government. TI being an active part of Civil Society, taking in any country a non-confrontational approach and instead seeking to build coalitions between government, the international donor community, the business community and civil society, hopes that the GOP will seriously consider inviting the Civil Society of Pakistan to take on a larger role than heretofore to the benefit both of the Government and all the people in the country. The activities of TIs National Chapter in Pakistan may illustrate the opportunities for such approach. TI Pakistan has begun several rather promising activities in Karachi, ranging from introducing TIs Integrity

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Current Business Affairs Pact concept to the Karachi Water and Sewerage Boards procurement for a major investment project, to working with the Nazims of Karachi and of one of the new town councils in Karachi towards bringing significantly increased transparency to all the towns activities, and to working with several dozen primary schools toward putting the corruption topic on the agenda through school plays, contests etc. The wide range of activities of TI-Pakistan are described in TI-Pakistans Annual Report for 2001, attached as Annex 2,Finally, TI (including TI-Pakistan) would be pleased to be given an opportunity, at any stage of the process, to review and comment on the recommendations of the consultants (KPMG) employed by GOP to develop a national anti-corruption strategy. (Dr. Kamal Hossain, 2002)

Brief Methodology and results


The data was collected through questionnaire (annex 1), the questionnaire aimed to measures that how much the employees of different organizations in Pakistan are aware of the corruption in their organization, how much it is affecting the businesses and what should be done to gun down corruption in Pakistan. We have distributed 50 questionnaires among different organizations which includes both government and private organizations and these questionnaires were filled by mixed level of employees, we were aiming to find mixed opinions thats why we decided to distribute it among different level of employees. The results were neither shocking nor surprisingly good because as it is stated by World Bank that Pakistan is among the top corrupt countries in the world, so our findings are similar to those of World Banks Report in 2009. We have found that the main reason which is flaming corruption is low compensation benefits and in some cases the culture of the organization, but mostly the prior. Most of the respondents said that corruption is practiced often in the business culture of Pakistan and thats why many International investors are afraid of investing in Pakistan and currently operating investors are pulling back their investments back, which is a very bad sign for the future of Pakistans 23 Bahria University Islamabad

Current Business Affairs business. According to the respondents, the organizations that are badly affected and are involved in this bad practice of corruption are Government organizations. 93 % percent of the respondents stated it an open ended question that Government Organization is the one that should be taken care of and should be fixed to cure the badly infected business culture of Pakistan. Many respondents denied that they are not involved in any corrupt activity but they pointed finger towards their colleagues and superiors that there are several who are practicing corruption and affecting our businesses throughout the country. Our findings showed that the type of corruption that is mostly practiced is bribery and nepotism, 43 percent and 37 percent respectively, as the respondents replied. It was very shocking that there was not a single respondent who have ever blown a whistle against the act of corruption because everyone was afraid that there is no clear rules and regulation for the protection and security of those employees who reports the act of corruption. Our findings showed that the anti-corruption bodies are not doing enough to eliminate this bad and cursed act from our society, its growing rapidly. They consider it as a norm and culture of Pakistans business; it is the common perception that in Pakistan one will not be able to perform his/her duties without involving in corrupt activities, either directly or indirectly. Corruption is a major problem in the country. People from all walks of life are extremely worried about it, as it has played a major role in the tragic economic and social degradation of the country. Corruption has affected the businesses in past, it is affecting them now and it will do the same in future if no appropriate steps would be taken. International investment in Pakistan is getting lower and lower year after year. This is the time we should get up and join our hands together and say no to corruption because its eating the flesh of our country from the inside.

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REFERENCES
Federal board of revenue, Corruption. (2007). Retrieved 05 15, 2010, from www.fbr.gov.pk: http://www.fbr.gov.pk/reforms/taxadmin/chap5.pdf Business and Finance Review. (2009, 3 16). Retrieved 05 19, 2010, from www.jang.com.pk: http://jang.com.pk/thenews/mar2009-weekly/busrev-16-032009/index.html Public Procurement and Contracting. (2009). Retrieved 05 13, 2010, from Business Anti-corruption portal: http://www.business-anti-corruption.com/countryprofiles/south-asia/pakistan/corruption-levels/public-procurement-and-contracting U4 Helpdesk Query. (2009). Retrieved 05 13, 2010, from www.U4.no.

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Current Business Affairs abbasi, A. (2009, 7 10). Corruption retarding investment in Pakistan:WB. Retrieved 05 19, 2010, from www.thenews.com.pk: http://www.thenews.com.pk/top_story_detail.asp?Id=23190 Dr. Kamal Hossain. (2002, 05). Transparency International. Retrieved 05 19, 2010, from www.unpan1.un.org: http://unpan1.un.org/intradoc/groups/documents/UNPAN019877.pdf price, J. (2009). Encyclopedia of the nations. Retrieved 05 19, 2010, from nationsencyclopedia.com: http://Nationsencyclopedia.com/economies/asia-andthe-pasific/Pakistan-OVERVIEW-OF-ECONOMY.html Zahid, U. (2009, 11 23). Corruption and Pakistan. Retrieved 05 13, 2010, from www.pro-pakistan.com: http://www.pro-pakistan.com/2009/11/23/corruptionand-pakistan

ANNEXTURE
QUESTIONNAIRE
Q1: what is the definition of corruption?

Q2: What is the main reason of corruption in business organizations?

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a) Less compensation benefits b) Organizational culture c) Individual themselves Q3: How frequently do you think corruption is practiced and is part of the business culture in Pakistan? a) Never b) Seldom c) sometimes

d) Often

e) always

Q4: As a professional what do you think which business sectors or Institutions are mostly affected by corruption?

Q5: Are there any Groups/Individuals that are practicing corruption in your organization? a) Yes b) No

Q6: What was your reaction, when for the first time you came to know that your colleagues or superiors are involved in corrupt activities? a) Hawww I was shocked c) Ahhhhhh I loved it b) Naaaww it felt good d) Hmmm its part of life

Q7: Which form of corruption is mostly practiced in your organization?

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Current Business Affairs a) Bribery d) Nepotism b) Extortion e) Patronage c) Embezzlement

Q8: Have you ever reacted against corruption by raising the issue at a higher level? a) Yes b) Never faced (skip to question 10)

Q9: If yes then how, If no then why not?

Q10: Does your organizational rules and regulations provide protection to employees who, in good faith, report acts of corruption? a) No b) Probably Not c) Probably

d) Certainly

e) I Dont Know

Q11: Do you think Anti-corruption bodies are doing enough in preventing, detecting, punishing, and eradicating corrupt acts? Dis-satisfactory 1 2 3 4 5 Satisfactory

Q12: If you were a head of anti-corruption department, what steps would you take to eliminate corruption?

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