Sunday, 13 May 2012

Govt’s aversion to culture change

By Khaleeq Kiani 
LIKE many other annual rituals in the budget season, a controversy over growth numbers and its methodology has become a routine. Likewise, the terminologies like reforms have been misinterpreted to change names instead of work and institutional culture.
Every year after priorities committee meetings, the federal government usually convenes a session of the National Accounts Committee (NAC) to firm up output estimates of almost all sectors of the economy on the basis of about 8-9 months of performance and estimates of the remaining period of the fiscal year. This is followed up with projection of annualised growth rate of the GDP, its size and so on.
And every year after the NAC meeting, issues crop up over the methodology, base year, growth rate and the output numbers of various individual sectors. It was, however, for the first time that an NAC meeting was repeated within 12 days to revise growth numbers and change the base year to determine the size of the economy.
The government had set a target of 4.2 per cent economic growth rate at the time of budget announcement in June last year.
After heavy rains in Sindh, the growth estimate was revised downwards to 3.6 per cent in September. However, it emerged that crop output had been more than compensated in Punjab for the losses in Sindh, and the growth estimate was once again jacked up to four per cent and widely articulated by finance minister Dr Abdul Hafeez Shaikh at home and abroad.
And right when he was talking about four per cent expected GDP growth rate in Washington with international lending agencies, the NAC on April 26 worked out a growth estimate of 3.2 per cent on the basis of change in the base year which was graduated to 2005-06 from 1999-2000. At that time, it had estimated wheat output at 23 million tons.
A follow up meeting of the NAC was called within 12 days of its previous meeting that changed the base year back to 1999-2000 and economic growth rate was worked out at 3.67 per cent — a bit closer to the finance minister’s off-hand estimate of four per cent. In the process and time, the wheat output estimate also increased to 25 million tons. That is an annual feature given the fact that wheat production data is finalised almost at the end of May every year. By the time, the growth rate may be again raised to four per cent.
So a $300 million reforms programme with lenders’ support has not changed anything on the statistics front. The concerns did not change this year, rather exasperated the suspicions further.
The government had decided a decade ago to transform the Federal Bureau of Statistics into an autonomous institution to collect economic data independently without interference of the ministry of finance or the federal government.
The decision was taken in the background of general complaints that data about economy’s size, its growth rate, inflation, poverty, performance of various sectors, demographics and so on were not reliable enough to enable policymakers, independent economists, educational institutions and international research bodies to foresee, analyze and plan policies, make opinions and recommend new models.
It may be recalled that in one of the final years of Prime Minister Shaukat Aziz, a military secretary to the PM was reported to have made a friendly intervention to get him and his agriculture minister Abdul Sattar Lalika to agree to a consensus wheat output estimate as the PM wanted to show higher growth rate and Mr Lalika feared a news about a bumper crop would crash the wheat prices to the disadvantage of his farmers’ community.
That was followed by the controversy over the incidence of poverty that became such a political issue that no government has announced poverty numbers in six years; related surveys have been stopped for the last many years; the data of household and income survey completed more than two years ago have not been released so far.
Despite preparation of a draft law in 2005, successive finance ministers and governments delayed its promulgation. Finally, the law changed the name of the organisation but did not enable it to achieve autonomy and independence for which the reform was introduced through technical and financial assistance of the World Bank and German development body (GIZ).
Whatever may be the name or abbreviation — FPS or PBS — the question however remains: how can an institution become independent or autonomous which is led by a federal bureaucrat? In spite of his claim of having all the powers to change the base year and present growth estimates, the GDP estimate has been revised under government pressure.
Under a $500 million World Bank programme, the name of Central Board of Revenue was changed to Federal Board of Revenue. The mere change of nomenclature of CBR into FBR without any culture change did not bring any gain. The tax-to-GDP ratio, that stood at 10.3 per cent before the World Bank loan programme, has dropped to 8.2 per cent now.
Similarly, Wapda was divided and its power sector responsibility was transferred to its power wing — renamed as the Pakistan Electric Power Company — after a delay of two years in 1997. Its last rites are yet to be performed after 15 years.
A new entity called the National Transmission and Despatch Company (NTDC) was created to take over the responsibilities of PEPCO, primarily relating to power purchase from all sources and sale to distribution companies for onwards supply to consumers. In the middle of its transformation, another central company — Central Power Purchasing Agency — was created to purchase electricity from all sources, price it and sell to distribution companies.
Thus numerous companies have been created. On paper, the entire chain of Wapda, PEPCO, NTDC, CPPA, and now a transition team, are working and wasting nation’s resources. These are in addition to 14 distribution and three generation companies and a transmission firm in the public sector, and over two dozen private power producers.
The main objective for which the power sector reforms were taken in hand has since not only been forgotten but difficulties compounded. When Wapda restructuring started in 1997-8,its losses varied between Rs5-8 billion a year and have since increased to over Rs400 billion a year, and is still rising. The loadshedding that did not then go beyond two hours has now crossed 12 hours on a country-wide basis.
In a similar exercise, the Agricultural Development Bank of Pakistan has been re-named Zarai Taraqiati Bank. Its losses have gone up and disbursements have been virtually at a standstill for many years.
The reforms at Corporate Law Authority has created the Securities and Exchange Commission of Pakistan that, instead of deepening the market base by attracting investments of the general public, has facilitated repeated market crashes and whitening schemes.
Original Article Here

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