Squeezing the golden USF goose

For those who were bemoaning the PML-N’s indifference towards the telecom sector in their maiden budget, there is more to deplore now.
Recent news reports suggest that the government has decided to transfer the funds collected by the Universal Support Fund (USF) into federal kitty. This move will likely agitate the country’s telecom sector that boasts many established foreign telecom operators.
That this decision came from the Economic Coordination Committee, the country’s highest economic decision-making forum, speaks of the government’s resolve on this matter. It is not immediately clear for what purposes the Finance Minister will utilise the USF money or what mechanism will be adopted to disburse money to the USF-funded projects in the future.
A little background of the USF is in order here. The fund was established by the government in 2006, as a public-private-partnership, to undertake development projects aimed at expanding the telecom footprint in the technologically unserved and under-served areas of Pakistan. The USF Board draws representation from government, various ICT segments and consumer groups.
The organisation became operational in 2007, and as per the USF policy, licensed telecom operators have been contributing 1.5 percent of their adjusted revenues to USF. Part of proceeds from LDI operators’ revenue (termed as Access Promotion Component), also land into the USF account which is maintained at the Ministry of IT.
To find out about the legalities and possible implications of this government move, BR Research turned to the founding CEO of USF, Parvez Iftikhar.
“I cannot say for sure (because this has not happened before), but I think that the federal government can transfer the money from USF account without violating any law or rules laid out in the telecom legislation. But what I do know for sure is that as per Telecom Act, the government is committed to utilize these funds exclusively for Telecom in un-served/under-served areas,” said Iftikhar, who is currently working as an ICT consultant, advising telecoms in Asia and Africa on ICT-related regulatory issues.
Parvez noted that while most telecom operators have been paying their USF charges regularly, project disbursements have stalled in recent years. “I believe that the fund has swelled to somewhere around Rs70 billion. The government will probably justify this move by saying that at present the USF funds are not being utilised – though it may promise to release funds on demand from USF as and when required.”
This episode has brought into focus the “ability” of the USF to deliver on its assigned mandate. That ability, Parvez thinks, was paralyzed by the previous government, intentionally or unintentionally.
“With no permanent Minister of IT (who also happens to be the Chairman of USF Board) and the two former Prime Ministers themselves taking charge, the performance of USF Board (which approves the projects and their disbursements) was severely affected. Even now, USF is operating without permanent CEO for the last many months,” he observed.
Clearly, there is a dire need to fast track project planning and approval processes at the USF and instead of seizing USF’s finances the new government should first appoint a full-time Minister of IT and a permanent CEO at the USF who has the relevant, and long enough, experience.
One hopes that the government will look towards addressing the core issue (i.e. USF performance) and not give in to this ‘fiscal temptation’ that had also gripped the last government about two years ago.