Impact of Corruption on Business Activities in Pakisan

IMPACT OF CORRUPTION ON BUSINESS ACTIVITIES IN PAKISAN

Presenters:•Ali Farooqui

•Ali Raza•Irfan Ullah

•Mohsin Kamal

CORRUPTION

• Corruption often refers to spiritual or moral impurity or deviation from an ideal

• Corruption is a double edged sword; it reduces both the volume and efficiency of investment and thus economic growth.

• In Politics, the misuse of government power for other purposes, such as repression of political opponents and general police brutality, is not considered political corruption.

CORRUPTION IN PAKISTAN• Pakistani society and corruption go hand-in-hand

• Corruption seems to be one of the fundamental problems of this country

• Till date not much has been done to eliminate corruption

• Corruption is credited in the country due to :– Current lawlessness– Shrinkage of economy – Increasing poverty

• Different governments have made little effort for handling the corruption:

– Pakistan Penal Code of 1960 (PPC)– the Prevention of Corruption Act of 1947 (PCA)– the National Accountability Ordinance (NAO)

Key Sectors Affected By Corruption In Pakistan

• Expert sources indicate that the following sectors are among those most affected by corruption:

– Police and law enforcement– Judiciary and legal profession– Power sector– Tax and customs– Health and education– Land administration– In addition, Public Procurement seems to be a major concern across most

sectors

Most Corrupt Departments Of Pakistan

• Following is the list of a few most corrupt departments of Pakistan, according to Transparency International :

– National Highway Authority (NHA)– Pakistan Housing Authority (PHA)– Security and Exchange Commission of Pakistan (SECP)– Ministry of Water and Power– WAPDA– Pepco– National Engineering Services Pakistan (NESPAK)– Private Power and Infrastructure Board (PPIB)– Alternative Energy Development Board (AEDB)– Pakistan Steel– Trading Corporation of Pakistan

CORRUPTION AND BUSINESS ACTIVITIES IN PAKISTAN

Survey of world bank

•Significant amount of time and money is wasted in numerous unpredictable interactions with Higher-level Bureaucrats seeking bribe

•12 percent of an entrepreneur’s time is spent in dealing with tax and regulatory requirements

•Corruption depresses economic growth by lowering public investment

•Only a part of budget documented for a project is spent on it in real

Survey Of World Bank• Causes of corruption In Pakistan according to WB’s Survey are:

– Lack of transparency– Weak public accountability– Weak judiciary – Complex legal structures

• The World Bank finds corruption a serious and growing obstacle to the investment climate in Pakistan

• World Bank representative said that:

– corruption is largely associated with business-government interface

– It is more widespread here as compared to other countries though the bribe rates here are lower

Survey Of World Bank

• Firms making investment in Pakistan have to pay bribes even to get water, telephone and electricity connections which has a huge impact of Corruption on business activities in Pakistan

• On the issue of government:

– Lack of predictability and consistency in the interpretation of rules and regulations leads to bad governance

– 46 % of firms in Pakistan believe that the officials interpret rules consistently

– In comparator countries the same believe is among 60% of the firms, which in turn effect on the businesses and its growth

Survey Of World Bank

• On the issue of corruption:– Corruption is considered a severe constraint by 57% of the firms in Pakistan– The numbers were 40% in 2002– Its common for firms to pay informal payments to government officials to get

things done

• Bribe incidence in Pakistan has increased rapidly over time and its expected to increase in future more quickly

• The amounts of bribes paid in Pakistan is very less than comparator countries

– Firms in Islamabad (including Rawalpindi) reported the highest bribe rate of 2.7 percent

Survey Of World Bank

• 62% of the firms surveyed disclosed that they were asked for informal payments or gifts to obtain new water connection

• 84% of the firms had to make informal payments in-order to obtain electricity services

CORRUPTION AND BUSINESS ACTIVITIES IN PAKISTAN

Public Procurement and Contracting

•The procurement process in Pakistan is improving but still cases of corruption are reported

•Corruption in bidding processes, even the companies that are found in illegal practices are often not effectively stopped from bidding in future

•Pakistan is a major recipient of grants and loans from international donor agencies

•Corruption in procurement also means that anti-poverty aid and development projects are hampered by corruption

Public Procurement and Contracting

• Defense-related procurement and contracts are excluded from the scrutiny of the national anti-corruption agencies

– It is prominent that they are also corruption-ridden

– Prominent case was that of a retired admiral who returned USD 7.5 million to the government upon admitting that he had accepted bribes

• Corruption has a huge impact on the development activities of:

– WAPDA– Pakistan Railways– Pakistan’s Water and Power Development Agency

EXAMPLES OF CORRUPTION BY THE DEPARTMENTS• Policy Manipulation

– The overnight changes in import duty structures via issuance of Statutory Notifications (SROs)

– These SROs were linked with imports of BMW cars, steel items, etc.

• Collusion

– Most income tax and customs levies are said to be determined with prior consultation between the two parties concerned

– In customs, collusion takes place in misdeclaration of items imported, their quantities and values

– In income tax, the assessment is manipulated to favor people who pay bribes and extort money from those who do not

EXAMPLES Continued…

• Extortion– The level of extortion in the tax administration is very high

– Example of “Businessman exporting reproduction of old jewelry

• Speed money– Speed money seems to be the most common form of corruption in the whole of

tax administration.

– Speed money rates in Peshawar for customs rebate are from 3% to 5%.

– In Lahore the rates overall are about 2%.

– while Karachi people pay only about 1.5%.

REMOVAL OF CORRUPTION FROM PAKISTAN

• An Elected Legislature

• An Independent and Impartial Judicial System

• Independent and Free Media

• Supreme Audit and other Oversight Bodies

• Independent Anti-Corruption Agency

• Effective, well-trained Law Enforcement

• A Strong Public Service to Serve the Public

REMOVAL OF CORRUPTION FROM PAKISTAN

• Procurement

• The Role of the Private Business Sector

• Freedom of Information

• Role of Education

• Role of Civil Society

BRIEF METHODOLOGY AND RESULTS

• Instrument Used

• Main aim to conduct this survey

• 50 questionnaires were distributed

• Random sampling technique was used

• Organizations targeted were– Government sector – Private sector

• The results were neither shocking nor surprisingly positive

BRIEF METHODOLOGY AND RESULTS…..

• The main reason of corruption

• Investors pulling back

• Our survey findings showed that government organizations are the most corrupt ones

• Reaction of respondents regarding their involvement in corrupt activities

• The type of corruption that is mostly practiced in Pakistan

BRIEF METHODOLOGY AND RESULTS…..

• We got some shocking results about whistle blowing

• Unclear rules and regulations for those who raise their voice against this menace

• Lack of effective anti-corruption bodies

• Corruption is considered as a norm

• It has played a major role in the tragic economic and social degradation of Pakistan

BRIEF METHODOLOGY AND RESULTS…..

• The Impact of corruption

• Reduction in foreign investments

WE SHOULD WAKE UP AND PUT A FULL STOP TO CORRUPTION !!!!