USF offers a lesson on institution-building

There is no paucity of people in Pakistan, both knowledgeable and uninformed, who associate democratic regimes with managerial bankruptcy and institutional ruination. If historical evidence wasn a reason enough, the current regimes dismal performance has cemented such judgments. While various public sector institutions bled (or "weakened" in the Presidents opinion) in recent years, there are very few functioning public sector organisations left. One such organisation which weathered political whirlwinds and managed to stay on course all these years is the "Universal Service Fund". More interesting is the fact that USF was in infancy when the political transition took place in 2008. USF was established back in 2006 as per the Ministry of IT and Telecoms USF policy of 2005, and commenced its operations in 2007. In line with World Bank recommendations, it was modelled on public-private-partnership. The funds board of directors draws representations from government, IT and Telecom sectors and consumer groups. The government acts as a trustee and monitors the fund performance. The funds overarching goal was to bridge the digital divide in Pakistan through development of ICT infrastructure in those un-served and under-served areas which were commercially unviable for telecom operators. To make the voice telephony and data services available and affordable in such areas was central to the funds objectives. Telecom operators contribute 1.5 percent of their adjusted revenues to the fund, while part of proceeds from "Access Promotion Component" (APC) also land into USF account (maintained at MoIT). Following the PPRA rules, USF-funded projects are advertised to licensed operators and are bid against. USF subsidises projects in areas such as rural telephony, broadband and optical fiber cable networks. For over four and a half years now, USF has contracted projects worth Rs.17.1 billion, in an open and transparent way. Notwithstanding the slowdown in subsidy disbursals in 2010 and much of 2011, USF is regarded by the sector as a success story as it has achieved some major milestones (see the illustration). The fact is that the USF experience offers some valuable insights into the process of institutional-building and public-private-partnership in a country like Pakistan. Despite governments involvement and multimillion dollar contracts, not once has the fund or any of its officials been charged with malpractice. The governance structure of the fund has largely kept political pressures at bay. The organisations former CEO, Parvez Iftikhar, happened to be its very first employee. He literally started this organisation from scratch, set up the office premises, and built a team of professionals to run the fund. Parvez vacated his post just last month, leaving behind a vibrant and functioning institution which has a lot to cherish and even more to look forward to. USF takes its funding from licensed telecom players, identifies projects within the sector, invites the same players for bidding, and then subsidises major portion of the project cost. Though the government controls the fund, it cannot impose its decision arbitrarily. The Planning Commission should seriously look at this model for under-developed sectors, rather than being all over the place and achieving very little. For smooth functioning of the fund, its operational and financial autonomy must be protected. In addition, both the telecom operators and relevant authorities must step up. Currently, many mobile operators appear reluctant to participate in USF projects due to security issues and higher operating expenditures in remote areas. The proposed subsidy on operating expenditures must offer some incentive to change that. Moreover, USF board meetings must be convened regularly so that activity picks up. Towards that end, government is the one in need to get its act together. Here is hoping that with a new CEO in charge, USF may continue pursuing its mandate!

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A SNAPSHOT OF USF PROGRAMMES
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                    Rural      Broadband        Optical
                  Telecom          Fiber          Cable
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Operations
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                  (Mauzas)       (Towns)       (Tehsils
                                               & towns)
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Contracted          6,118           264             102
Completed           3,539           256              58
Audited             3,429           122              37
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Achievements
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                     PCOs/    Broadband   Optical Fiber
              Telecenters   connections      Cable (Km)
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Contracted         844/60       434,750           6,523
Completed          552/47       348,345           4,063
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Subsidy (Rs bn)
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Contracted           4.21          6.35            6.48
Disbursed            2.73          2.38            2.90
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Source: USF
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