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The myth of black economy

The myth of black economy

Corrupt practices with all dimensions like money laundering, terror financing, manipulation of funds allocated for development expenditures, hoarding of essential items of consumption, speculative trading in stock exchange securities and properties, tax evasion, smuggling, under and over invoicing continue to grow unabated and adding to undocumented size of the country’s economy. This particular environment accompanied by havoc played by COVID 19 has resulted in fuelling inflation despite sound monetary policy in place, and also has caused sizeable regression with regard to country’s revenues and above all depletion of Human Development Indicators (HDIs), linked to status of social sector development ultimately resulting in immense damage to formal economy.

Due to phenomenal rise in undocumented economy Pakistan has been in limelight for being one of the most corrupt nations of the world. In the recent past World Bank had bracketed Pakistan in a group of corrupt nations like Kenya, Tanzania, Philippines, Guatemala and Liberia. The cause of concern was rampant corruption in these countries resulting in substantial rise in income inequalities and poverty. Besides that lack of good governance and transparency in these countries not only impeded the inflow of foreign investment but also loan giving agencies particularly IMF funding comes with very harsh conditional ties, which in most of the cases adversely impacted the funding receiving economies. In this regard Pakistan is not only asked to meet very hard parameters for its eligibility for required funding from IMF and Asian Development Bank but also getting a discriminatory treatment from these agencies. As such despite meeting all major requirements of Financial Action Task Force (FATF ) particularly curbing money laundering and terror financing continues to be in their grey list since July 2018, which has greatly damaged the economic fibre of the country.

The key factors identified for persistent corruption in this group of countries are:

  1. a) Ineffectiveness of state as the guardian of public interest. It is the universally accepted notion regarding government that its role is to rise above private interest to protect broader public interest. Unfortunately it is general trend in Pakistan that people holding public offices favour particular group or individual linked to their ethnic, political and geographical interest. This promotes corruption in all spheres thus mitigating the line between public and private interest.
  2. b) Illegal gratification is considered an easy way or rather norm of life to get the things done by people holding public offices. Hence service and benefits meant for general public are monopolized by privileged few.
  3. c) discriminatory application of rule of law. Where rule of law and accountability is for general public, whereas privileged class from where illegal gratification is expected is taken as above law and not accountable for any misdeed committed. Thus public offices meant for protecting public interest are openly floundering rule of law and accountability. In Pakistan particularly, law enforcement department that is police is directly responsible for encouraging violation of law by citizens. Role of judiciary, which is a supreme institution to ensure rule of law in the country, cannot be taken as totally transparent and independent of establishment. Hence rule of law is widely compromised.

Another factor highlighted in World Bank’s survey report, which has provided strong hold to corruption in sample study countries is ‘ineffective accountability process’. To combat corruption and floundering of rule of law effective accountability agencies are needed. No doubt Pakistan’s National Accountability Bureau (NAB) is striving to arrest rising trend of corruption by catching hold of even criminal politicians who have ill gotten trillions of rupees not only within the country but also siphoned off abroad, yet their efforts either due to slow process or due to influence exercised by those who abuse power are sometimes found ineffective in nabbing the source of corruption and culprits are exonerated for charges levied against them. Besides politicians who have looted national wealth there are number of bank loan defaulters and those who by abusing power furthered their personal interest still go unpunished.

Lack of commitment with legislators/ parliamentarians and bureaucracy to fight corruption has also been identified as one of the reasons giving fillip to corrupt practices in these countries. According to findings of latest (2020) survey report of World Bank it has been established that corruption emanates from the upper echelons of society, then penetrates down the line in all spheres of economic, social and political set up of the countries.

In case of Pakistan integrity of our parliamentarians, bureaucrats and those holding key positions in public sector entities and also quite a number of owners of private sector entities especially in the field of education cannot be said beyond doubt in all cases. The fact is known to all that in the past few parliamentarians for obtaining eligibility to contest National and Provincial Assemblies elections submitted fake degrees to Election Commission of Pakistan. What can one expect from such leaders who are involved in corrupt practices. Besides that for winning election billion of rupees are distributed among illiterate voters of both rural and urban areas. As such these unethical practices have become a common culture of the country.

The legislatures both from ruling and opposition parties are continuously busy in leg pulling and power grabbing endeavors and ruling party always being in defensive role is just wasting time instead of looking into important socio- economic issues needing their immediate attention. Even under various Military led governments, Heads of the State despite their earnest endeavors to eradicate corruption, failed to curb corrupt and anti- state activities. Thus underground economy continued to flourish to the extent that it has now outgrown the size of formal economy.

Lack of transparency and good governance have been found main supporting factors for giving strong hold to corrupt practices in the country. Present government in order to combat corrupt culture of the country has given a great boost to jurisdiction of NAB. However little improvement is visible as magnitude of corrupt practices has inflated to the extent that sometime even these agencies hesitate to take action against dishonest persons and sometimes officials of these agencies are victimized for pinpointing corrupt practices.

In fact to arrest corruption lowest tier of government that is local or local government need to be reinstalled at the earliest in all provinces. Since local government functionaries Like Nazims and Naib Nazims and Councillors etc belong to the areas they are looking after and are in direct contact with inmates of that area, neither they themselves can indulge in corrupt practices nor residents of that area dare to get involved in unethical businesses freely. In other words environment conducive to corrupt practices is difficult to be developed under local government system, which is the best strategy for devolution of power. However for success of local government it is to be ensured that honest people are elected to all positions.

It is unfortunate that despite present government’s efforts to reduce damage done to economy by COVID-19 by adopting flexible and appropriate monetary and fiscal policies for boosting GDP growth rate little has been done to boost up performance of social sector particularly in area of education. Since society as a whole is least gender sensitized, rate of literacy among women is even less than 25% in interior Sindh , Balochistan and parts of Khyber Pakhtunkhwa (KP). Due to corrupt practices funds allocated for education both at Federal and Provincial level are being widely misused. Number of ghost schools and teachers in public sector continue to increase. To check this malpractice vigorous monitoring and supervision by agencies other than government functionaries of education departments is needed.

As stated above functionaries of local governments, who also come within the ambit of accountability, they in collaboration with well reputed senior citizens in each local government constituency can form supervisory committees to frequently check activities / performance of management and teaching staff of all educational institutions in their locality.

Above suggested supervisory committees can exercise surveillance on health sector also. Working of Hospitals and dispensaries should be monitored by these watch dog committees. This will ensure proper utilisation of funds and positive growth of social sector. However effectiveness of such monitoring / watch dog committees depends on initiative on the part of general public to bring to the notice (without any hesitation) of these agencies all unethical and corrupt practices common in organisations operating in their locality to enable them to immediate action and nab the evil at the very source.

Unfortunately corruption has penetrated so deeply in all walks of life that common men being helpless have lost all hopes of having transparent and just system of governance at all level. In this regard Donor/ aid giving agencies have been found playing an indirect role in bringing transparency in government affairs of problematic countries.

IMF’s code of good practices on fiscal transparency applicable to all countries. In this regard recipients of funding were required to have emphasis on E-government initiatives. This has prompted business concerns, government agencies and individuals to use the advanced IT technology including electronic services for banking transactions , payment of utility bills, taxes and to keep a track on custom duty settlements etc. However by making it mandatory government can widen tax net and prevent substantial loss of revenue encountered every year.

Until recently in low and middle income developing countries monitoring and supervision by funding agencies like World Bank etc have also been found effective in arresting corruption in social sector development programs. The poverty reduction strategy approach introduced and practiced during last two decades has to some extent prevented misuse of funding meant for poverty alleviation. However it is desirable that efforts should be intensified for putting in place good governance and transparency in all reporting to public as well as funding agencies to come out of the list of corrupt nations.

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