Costs of misguided accountability

The ongoing heat on corruption and wrongdoings has put efficiency on the backburner. The stakeholder mindset – media, public, and government - is to focus on sensation, not substance. Public economic management has come to a standstill due to fear of undue involvement by accountability officers and agents in decision making. Media and public eyes are on (extra) profits made by efficient private sector. At the same time, they ignore the cost of inefficiencies of projects operating in the public domain. On overall basis, it is becoming a Pareto inefficient model.

This model simply cannot sustain. Fear factor is not letting honest and capable officers to make decisions. The economic cost of inaction is too high. When good and bad are seen with same lens of half cooked accountability, acceptance of corruption is bound to increase. Good officers in the twilight of their careers are more concerned about reputation and unnecessary future accountability. They become incompetent.

Then the accountability drive is not reaching anywhere. Cases are being filed, but not even a few are convicted by courts. Even simple open-and-shut cases are pending – the endless saga of the Hudaibiya Paper Mills being only one such example. When corrupt and honest are being maligned with the same stroke without corrupt being punished, perceived returns for corruption become high, and negative for being honest.

There are talks of privatising State-Owned Enterprises (SOEs) and development projects in public private partnership mode. But the public accountability is based on returns by individuals (or companies) not efficiencies. For example, no one creates havoc about cost escalations due to delay in public projects, but everyone talks about private sector earning higher returns on similar projects which are completed in much quicker time and lower cost.

One manifestation is in the power sector. For example, Neelam Jhelum hydro project was delayed for many years and cost escalated through the roofs. The extra cost is borne by public in terms of paying higher electricity tariff. On the flipside, some of Chinese IPPs under the China Pakistan Economic Corridor (CPEC) were completed well within time without any cost overruns. But many are talking about higher returns earned by Chinese. Same is the case of many other IPPs.

The mistrust between public sector officers and private sector enterprises is growing. Many bureaucrats believe that businesspersons are mere rent seekers and only seek tariff protection, tax reliefs, and subsidies. Private players think that bureaucracy is incompetent and corrupt. Efforts must be made on an urgent basis to bridge this trust deficit.

As a result, private sector is showing reluctance to invest in public projects or demanding higher risk premium. Returns for all parties, both public and private, are worsening as a result. This is leading to Pareto inefficiency. Meanwhile, media and public are being misled. Regulatory failure is being perceived as market failure. Accountability does not care about bleeding of public sector entities, but all eyes are on private players making excess profits. One needs to holistically analyze what is good for the country.

The problem is political victimization of state machinery (bureaucracy) and private sector players. National Accountability Bureau (NAB) and Federal Investigation Agency (FIA) are being used as political tools. Capacity of these institutions is extremely weak. All what matters is media attention. Grade 21-22 officers fear that young lads from NAB may pick them up in a humiliating fashion. Trial is being run on mainstream and social media even though most are freed without conviction later, but with tarnished reputation and careers.

Given this environment, no one is willing to take decisions. Economy at large is paying cost of these inactions. During the last term - at the time of LNG dealings with Qatar - the then minister had to write letters himself as bureaucrats feared corruption charges in the following term. Few cases have been built in this term without any conclusive evidence. That has cemented belief that officers must sit tight and do nothing.

The system is hamstrung. This must change. Intentions of incumbents might be right; but the road to hell is paved with good intentions. Accountability laws and processes are required to be revisited. Economy is finally getting on growth track. To the surprise of many, GDP growth for FY21 is estimated at 3.94 percent and likely to be higher next year. Private sector is cash rich. Government possesses assets. A marriage between the two is both natural and essential. Structural reforms are imperative for sustained growth. But first, reforms need buy-in from stakeholders. The government machinery must enter decision-making without fear. Business risks must be taken. Staged accountability era needs to come with an expiry date.

Copyright Business Recorder, 2021