Author Archives: Moin Fudda

Rising Corruption in Karachi

karachi_corruption

Corruption in Pakistan is not a new issue, but as of late it has had a detrimental effect on the country’s economic fortunes and its ability to attract foreign investment. A 2014 report by Transparency International Pakistan found over Rs. 8.5 trillion ($94 billion) was wasted due to corruption and bad governance from 2009-2013, during the previous administration led by the Pakistan People’s Party.  Pakistan currently ranks 126 out of 175 nations in Transparency International’s Global Corruption Perception Index, and lags behind neighboring countries in economic development due in part to rampant public sector corruption at both the national and provincial level.  According to Fasih Bokhari, former chairman of the National Accountability Bureau, five to seven billion rupees ($51 million to $72 million) are wasted per day due to corruption and overall inefficiency.

Major General Bilal Akbar, Director General of Pakistan Rangers, Sindh, a border security and law enforcement agency, estimated that over Rs. 230 billion ($2.3 billion) is illegally extorted or otherwise collected in Karachi each year.  General Akbar also stated that political party members, city and district government officials, and law enforcement personnel are complicit in these illegal activities, and that the money extorted is frequently used to fund terrorist and gang-related criminal activities.

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Gender Diversity on Pakistan’s Corporate Boards

When it comes to gender diversity, too many boards still look like this in 2015 (Photo: Wikimedia Commons)

When it comes to gender diversity, too many boards still look like this in 2015 (Photo: Wikimedia Commons)

Corporate boards have historically been comprised mainly of men. However, a number of countries have begun imposing quotas for the number of women on the boards of publicly traded or state-owned companies — an idea that is now being considered as a European Union-wide rule. This is likely to compel businesses elsewhere in the world, including Pakistan, to consider the gender diversity of their own corporate boards.

According to the International Finance Corporation, just 13 percent of 303 companies surveyed in Pakistan in 2010 had more than one woman director — a sample that included publicly listed companies, large family-owned firms, and private, unlisted companies. 

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What’s Stopping Pakistan from Reaping its Demographic Dividend?

pakistan-unemployment

Photo: Dawn

“In the absence of adequate job creation by the public or private sectors, it is more important to enhance financial inclusion, which can help create greater opportunities for self-employment instead of salaried employment.” Tameer Microfinance Bank CEO Nadeem Hussain

Pakistan is one of the top ten most populous countries in the world. Youth make up over 36 percent of the Pakistani labor force, and that proportion is projected to rise to 50 percent by 2050. According to the World Bank there will be 1.7 million Pakistanis entering the country’s labor force every year, yet, worryingly, the Pakistan labor force survey also finds that over 3.7 million people are currently unemployed. The yearly upsurge in the unemployment rate is putting additional weight on the shoulders of the Pakistan government. The government must reassess and make needed reforms in order to change the current trajectory and allow Pakistan to reap the benefits of its demographic dividend.

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Pakistan Seeks Potential Solution to Political Protests

ISB-protest

For the past several weeks, Pakistan has faced a set of dual protests that have sparked a political crisis. One protest, led by former cricket star turned politician Imran Khan, head of the PTI party, draws on Khan’s allegation of widespread rigging in the landmark 2013 elections. Khan’s demands include electoral reforms, a redo of the election, and, controversially, the resignation of Prime Minister Nawaz Sharif of the PML-N party.

The other protest, led by Sufi cleric Muhammad Tahir-ul-Qadri, who heads the PAT party, seeks justice for followers killed and injured in a June incident at his headquarters. Qadri has demanded a full investigation, and also seeks the resignation of Punjab Chief Minister Shahbaz Sharif, the Prime Minister’s brother. After marching to Islamabad and holding daily rallies, the protests eventually turned violent. While the violence subsided, and the army has mediated talks among the government, Khan and Qadri, the situation has not yet abated.

These crises come at a difficult time for Pakistan. The country is dealing with massive floods after heavy monsoon rains. Furthermore, because of the protests, the center of Islamabad has been shut down for more than month, freezing legislative and ministerial activity in the capital. As a result, the government has been unable to make any progress on meeting an extensive set of conditions to keep badly-needed funds flowing under an IMF loan facility. Moreover, the much-awaited visit of Chinese President Xi Jinping has been postponed.

Over the past year, as shown by CIPE’s partner PRIME, an Islamabad-based think tank, the government has made only limited progress toward implementing an ambitious economic reform agenda, thus engendering widespread frustration. Against this backdrop, many observers worried that the military could seize power again, as it has done in the past, or at least seek greater influence. Citing a report from the US Congressional Research Service, there was fear that this could cause the US to withdraw crucially needed support.

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Business Community Unites on Pakistan Budget Proposal

kcci presidents conference

“In a rare show of strength, top representatives of all the country’s chambers of commerce and industry gathered in Karachi and asked the government to revamp the tax collection system if it wants to increase revenue collection in the country.”Express Tribune

For the past five years, CIPE Pakistan has been supporting the All-Pakistan Chamber Presidents’ Conference organized by Rawalpindi Chamber of Commerce & Industry. This conference has provided the business community an opportunity to assemble and a platform to advocate for policy reforms in the country with one voice.

Following in the footsteps this conference, Pakistan’s largest chamber, the Karachi Chamber of Commerce & Industry, organized a Chamber Presidents’ Conference focusing on bringing together leading chambers to submit a joint proposal for the forthcoming federal budget.

Considering the fact that Pakistan has one of the lowest tax to GDP ratios, which results in the government falling short of revenue and burdening those who already pay heavy taxes, participants of this conference remained focused on a single-point agenda “to work with government on increasing tax collection and reducing dependence on IMF loans.”

Zubair Motiwala, Co-President of the Pakistan-Afghanistan Chamber of Commerce & Industry said, “Our successive governments have followed a policy of divide and rule. But now that we are united here on one platform, no government can ignore us anymore.”

The conference was attended by the presidents of more than 18 chambers including those from Faisalabad, Lahore, Multan, Islamabad, Rawalpindi, Khyber Pakhtunkhwa, Gilgit Baltistan, Lasbela, Sukkur, and other cities and regions.

This was the first time that leading chambers have agreed to develop a unified budget proposal at least two months ahead of budget preparation. The proposal will be finalized at the next meeting, which will be hosted by Faisalabad Chamber of Commerce & Industry in April of this year.

The business community showed its determination to keep advocating for policy reforms to encourage economic revival in the country. Speaking at the occasion, Dr. Shimail Daud, President of the Rawalpindi Chamber of Commerce and Industry, said;

“The unnecessary power of the bureaucracy should be curtailed for the good of the country’s economy. The business community from all four provinces of the country is working together for the most implementable and serious budget proposals and this time it will definitely bring results.”

Moin Fudda is Country Director for CIPE Pakistan.

Political Parties Ask Business Community to Present Economic Manifesto for Pakistan

President Conference 1

The Chambers President’s Conference provides an excellent opportunity for business community leaders to focus on a single key agenda point – how to advocate for business-friendly policy reforms – This is the only such event in Pakistan that brings business community leaders together under one roof for intense and constructive discussions.” – Manzar Khurshid Shaikh, President, Rawalpindi Chamber of Commerce & Industry

For the fifth year in a row, on February 25-26, 2013, leaders of Pakistan’s business community assembled at Bhurban near Islamabad to participate at the Fifth All Pakistan Chamber Presidents Conference. Thirty-three chamber presidents representing large and small chambers from across Pakistan deliberated on how the next government should act on improving conditions for doing business in Pakistan. The Rawalpindi Chamber of Commerce and Industry spearheads this event in collaboration with CIPE Pakistan.

This year’s conference was unique as, for the first time in this history of Pakistan, representatives from five key political parties faced direct questions from business leaders. Pakistan Peoples’ Party, Pakistan Muslim League (N), Pakistan Muslim League (Q), Muttehda Qaumi Movement (MQM) and Pakistan Tehreek-e-Insaf (PTI) attended the meeting. There was an agreement from politicians that the next government must improve the conditions for doing business in the country, which will not only stop capital flight, but also provide employment opportunities.

Interestingly, they arrived on a consensus on the business community’s demand for an effective business-focused manifesto. It was agreed that after the elections, key political players will again sit down with business community leaders to get feedback on specific reform agenda.

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Pakistan Inches Towards Reforming Public Sector Enterprises

Participants at the roundtable on corporate governance of public sector enterprises in Islamabad. (Photo: CIPE Staff)

“The government was determined to enhance the efficiency of public sector enterprises (PSEs) by restructuring their boards and appointing professional heads of these organizations, mostly from the private sector, in order to make the entities profitable institutions.”

– Dr. Abdul Hafeez Shaikh, Finance Minister of Pakistan

Pakistan’s loss-making public sector enterprises (PSEs), also known as state-owned enterprises, are a major cause of economic concern. This year, ccording to official estimates from the Ministry of Finance, eight major PSEs received more than  US $3.5 billion in support from the federal government, which is higher than the federal component of Pakistan’s development budget. According to the Ministry of Finance, “Inefficient public sector enterprises are draining fiscal resources and choking the economy.”

A major reason that these companies lose so much money is a low level of transparency and poor governance; but historically, any discussion of the governance of Pakistan’s PSEs was taboo. Successive governments used these companies to provide jobs to their supporters. Moreover, non-transparent financial transactions continued to drain resources while reducing PSEs’ operational efficiencies.

Understanding the political sensitivity of the issue, CIPE’s Pakistan team has taken a subtle approach to the reform of PSEs, with patient efforts aimed at generating a debate on the importance of a introducing a code of corporate governance for PSEs. These efforts began to yield results when, on CIPE’s advice, the Ministry of Finance constituted a taskforce in October 2011, comprising a wide range of stakeholders, including relevant ministries with ownership of PSEs, private sector representatives, the Securities and Exchange Commission of Pakistan (SECP), the Pakistan Institute of Corporate Governance, and others. The taskforce became the driving force behind a productive debate. As a result of several meetings and a consultative process, on March 22, the SECP released new draft regulations for PSEs.

Recognizing Pakistan’s unique regulatory framework, under which ministries are the owners of relevant PSEs, existing codes of corporate governance were not sufficiently relevant to these firms to ensure local buy-in. Instead, CIPE advised the taskforce to develop a homegrown solution that would still be based on international best practices. After careful consideration and study of international models, a technical committee appointed by the taskforce prepared the draft regulations to correspond to the complex reality of public sector enterprises in Pakistan.

“The draft regulations have been designed in view of the distinct governance challenges faced by the PSEs. Recommendations made in the draft regulations include measures to optimize efficiency, enhance the transparency of operations, and provide a mechanism for accountability of management.”

Securities and Exchange Commission of Pakistan

The draft regulations are now available on the SECP’s website for review and comment.

In order to generate further public debate, and to build awareness about corporate governance of state-owned enterpises, CIPE also assisted the taskforce in organizing Pakistan’s first major roundtable on governance of PSEs, on April 10 in Islamabad.  This event received an overwhelming response, with over 125 participants from various PSEs attending. Moreover, a subject which, as mentioned, was previously considered taboo in Pakistan, received extensive media coverage.