Budget, a necessity or a ritual?

Corruption is rampant in Pakistan to the extent that every individual sitting on his desk wherever he is only thinks of making money for himself and himself alone without any consideration for the nation and the country. A former director of State Bank, while in office extended his patronage and support to open up a bank and also a general insurance company, as they say money makes the mere go he also managed to marry a fourth wife. At the same time he has been publishing and distributing free of cost Islamic religious books only to escape accountability on this land of the pures. Known as an honest man, which he was not, his financial institution was exploited to the extent that it collapsed, but his contacts in State Bank were there to rescue him immediately without caring for his conduct, this is institutionalized corruption where every holding public office is for sale. National Accountability Bureau took notice of his misdeeds, as he has been also linked in the Rs. 1.4 billion fraud of EOBI funds deposited with this bank, and as the news is that he has managed to fly to the cool climate on the West alongwith his newly married wife and evaded the clutches of the law enforcing agencies. Employee’s Old-Age Benefit Institution (EOBI), which is an organisation for the benefit of old men, women and orphan children, is the latest on the list where a fraud of over a billion rupees has been detected. Every year their balance sheet has been issued signed by the auditors and accountants, its board of trustees. On the face of it the auditors and accountants have been hand in glove with the executives. The Director General Finance Mr. Siddique Haroon is reported to have committed suicide, while National accountability teams who have investigated the records have so far found no clue to this swindling of trust money except that Chief Executive of Prudential Bank has been declared absconder by the NAB. This is how Pakistanis have looted Pakistan. How short sighted and selfish our Pakistani brothers are is evident from the list of the victims of NAB.

The enemies of Pakistan are within the frontiers of Pakistan, even the armed forces are powerless in the face of the machination of these corrupt people sitting on Executive desks of administration, while the budget has to be doctored with figures to suit the requirement of time and people are made to pay through their nose and asked to celebrate its launching with fervour.

This annual and celebrated feature of presenting the budget to the nation has lost its value and importance in as much as the prices of essential commodities are being manipulated even when the budget for 2002-2003 is on the anvil, much rhetorical statement is being made and emphasis is being made on the fact that no new taxes are going to be levied and this budget is going to be business and people friendly budget. This has been the gimmicky statement of successive Finance Ministers in the past also, while presenting the budget.

It is not enough as is being rhetorically assured by the power that be, that there is not going to be any new taxes. The nation is not that naéve to swallow this sugar coated pill, a new tax here and a new tax there is not the problem, it is the quantum of money that the consumer has to spend to feed himself and his children. Much emphasis is being laid on the fact that the prices of sugar, atta and daal (pulses) has not gone up, this is not the only thing that the poor man consumes, even the rich people are also benefited by it, they also eat the same chappati, which fills the belly of the hungry nation, now when the budget is on the anvil the price of patrol has been twice raised by about 16 % or so. Do not the poor people also use the public transport? The reason for this enhancement of patrol prices is explained to be the rise in international price of patrol, the nation has to take it with a pinch of salt, the patrol price also includes excise duty and sales tax etc., which surely is not linked with international prices of patrol, the same is the position with all utility bills, which is being paid even by the people living below the poverty line. Is this enhancement in patrol prices not going to enhance the quantum of the budget and thus affect the common man, could not this enhancement be delayed by a couple of month and be effective from 1st of July. Any civilized country will take it as a leak in the budget. We have made mess of the secrecy and the sacredness of the budget and now they are afraid of the budget and call it Maula Budget, and start manipulating ways and means out to avoid impact of budget on their own living, it is true that no country can survive if there nationals do not pay taxes.

The reason for all the ills and curses afflicting Pakistan lies only in one fact and that is corruption and mis-governance. Why it is that the government is not able to meet the target of revenue collections, it is a fact known from top to bottom of the government hierarchy that most of the taxes go to the private coffers of the tax collectors. Late Dr. Mehboobul Haq a former finance minister of Pakistan is reported to have said in eighties that there is a leakage of Rs. 40 Billion in government revenues per year and now that leakage is estimated to be around Rs. 400 Billion or so, that being so, where lies the sanctity of our budget. The framers of budget should not only devote their energy in manipulating the jugglery of figures but also address themselves to the task of eliminating the parallel black economy, create circumstances and situation where people do not have to go to parallel systems. Why it is that the government has to revise time and again the revenue targets, is it the inefficiency of the government or is it the inefficiency of the collectors, the nation would be very much interested to know this abject failure.

CBR is on record to have changed SRO’s to suit the business interest of Prime Minister Nawaz Sharif no action whatsoever has been taken against the beneficiaries or the facilitators in CBR. Such functionaries with record and reputation of being the sycophants and acting as personal employees of person in power must go. Writers and columnists regarding the affairs in financial institutions in Pakistan have pointed it out quite a number of times.

Habib Bank Ltd., was paid Rs. 9 billion by State Bank of Pakistan to bail out of the morass in which it had landed itself after induction of political cronies in bank management. This money has presumably gone down the drain and has been questioned in these columns. The audit and accounting firm appointed to scrutinize the financial health of the bank only rescheduled the bad debts and imaginary profits were shown in the balance sheet. United Bank Ltd., has been paid Rs. 21 billion by State Bank of Pakistan and major chunk of this money is not reflected any where in the annual audit reports by the bank auditors.

The accounting and auditing firms, professionals as they are, owe a sacred duty not only to the nation, the country but also to the profession to which they belong and to the ethics which they have been taught, any deviation from the professional ethics call for their disqualification, but it is sad that in our country there is no respect or regard for professional ethics in any walk of life. The independent auditors and accountants are simply treated as employees of their client who pay them fat fees for their un-professional reports. In the light of the above observations their reports must be examined again, if necessary by foreign consultants, accountants and fees thereof should be paid by the bank themselves.

There is yet another case of NDFC, where the then politically appointed chairman also asked the auditors to mug up his report according to the wishes of the chairman. This accounting firm when showed their reluctance to this demand was sacked during the course of audit by the chairman acting beyond his authority. The Audit firms are appointed in the Annual General Body meeting and can only be changed by them and not by the chairman acting under his politically inspired authority. Politics and personal considerations should have no place in financial management. The major problem that have plagued the banking / financial sector in Pakistan is the infected loan portfolios and the nepotism / favoritism exercised in the appointment of senior personnel / CEO’s in these institutions.

While NDFC was setup in 1973 for financing investment in public sector enterprises, this institution came on the list of World Bank and World Bank and Asian Development Bank offered to finance private sector investment but not through PICIC and IDBP, they used NDFC as its conduit, a small insignificant but a solvent organization. NDFC though had lines of credit from international financial institutions but was restricted to lending to the public sector only and there was no provision in its charter, which could allow it to lend to anyone with government approval. As NDFC had no culture or experience for long term lending, which added to the collapse NDFC. One living example of poor management and regulatory control in banking sector is the project lending by commercial banks is that of Hyatt Regency Hotel built on Railway land incomplete for more then twenty years or so.

Our present rulers in line with the dictates of IMF, World Bank and Asian Development Bank are also very keen on micro-credit and small and medium enterprise (SME’s). Micro-credit is essentially driven by a missionary spirit. Even commercially it works up to a limit; although it might bring some results in the beginning in contributing to poverty alleviation, it is never likely to make a significant contribution to growth as it has to walk on a very tight rope between conservation and indiscriminate lending due to political and personal expediency which will be very popular but soon acquire a defaulting portfolio. While playing for power politics, the slogan of SME’s remains to be an excellent Public Relation gambit.

Then there is an apex trade body of trade and industry in Pakistan éthe FPCCI. The audit reports for the last ten years are highly questionable, but who can question? When the custodians themselves want a tailor made reports, which only shows every thing is hanky dory, the office bearers only mark time for two years and in playing group politics instead of strengthening its advisory role and positive interaction on the economic policies, which is its prime responsibility, to regulate and control the growth and development of trade and industry on sound and viable footings in the country. One glaring instance of absence of financial and administrative accountability in the apex trade body is that of ETPI project launched five years back with the assistance of the Government of The Netherlands, who participated to the amount of rupees 70 million with equal matching amount from the FPCCI. The entire money has been siphoned off in salaries to its managers with no visible results on the ground. World TV news has shown a film on the disastrous effect of the toxic waste emanating from the industry and freely flowing into the rivers in China. The disastrous effect of this mishandling of the toxic industrial affluent has led to the spread of cancer among the Chinese residing in the area apart from damage to the agricultural land. The Sindh Minister for Environment, Forest & Wildlife is also on record to have said in a workshop recently that the mishandling of the toxic industrial waste is leading to salinity in agricultural lands and is a threat to the human population using the produce from these lands. While some other environment projects with financial assistance from the Government of the Netherlands have also met with the same fate at Korangi Trade Association, the Sarhad Chambers and many others. Textile Quota audit reconciliation leading to frauds are yet another area of plunder through Trade Associations. Only rhetoric’s, seminars and photo sessions are not going to change the fate of the nation and industry. What is needed is not only framing of policies but also to see to it that the policies are implemented in letter and spirit. This is the primary responsibility of any government or its organs and apex trade bodies. Coming from as it does, from an insider is a gospel truth and can be proved to the hilt beyond any shadow of doubt if investigations are made by a professional who is independent of the control of the apex body and expediencies.

Under our present system the auditors are hand in gloves with the executives of the organisation they are ethically and professionally suppose to protect but they on the contrary become partners to the loot and plunder by the time serving office bearers and the managing committees, who only come to mark time for their personal interest. Hundreds of complaints are lodged against the un-ethical practices of Chartered Accountants in Pakistan, but all these complaints presumably go to the dustbin of the Institute of Chartered Accountants because there has not been any single visible sign of any action being taken against violators of professional ethics by the Institute or the government of Pakistan. This is one of the main reasons of financial disarray in the country. The scandal of Mehran Bank has yet to see the day of light. The Prudential Bank and Indus Bank are on the list of corruption and so was Capital Bank whose sponsor managed to escape to England through Afghanistan. Mr. Khalid Saeed, a Chartered Accountant by profession must be busy in swindling in England now.

Banker’s Equity Ltd., ( BEL) which was set up in 1979 as a private limited company with 40 % shares holding of the State Bank of Pakistan and 60 % by its five nationalized commercial banks, while BEL was suppose to provide equity participation in projects, it was also forced to develop more or less into a lending institution in a fashion similar to other DFI’s by the corrupt banking Mafia. It was subsequently privatized and has more or less gone out of business. The Chief Executive of the privatized BEL is facing trial and punishment on one count or the other for the last three years perhaps for not toeing the lines of banking Mafia. What has the State Bank of Pakistan and its Governor, Deputy Governors and Directors been doing when the banks under their control were making money, one wonders why only one person Rauf Qadri has been singled out for punishment, are the others, his accomplices saint? A unique example of saints and scoundrels working in Pakistani Banks, while adage is Saints and Scoundrels meet in jail.

Board of Directors and the Trustees are yet another source of corruption in the public and private sector organisations which are practically ruled and advised by the professional accountants, auditors and legal advisors, it is time now that there must be some tangible amendments to evolve transparent accountability in company laws to curb the powers enjoyed by the members of the Board of Directors, who not only misspend the public money but also evade taxes and questionably transgress the authority vested in them for their own benefit and not in the interest of the organisation.

While preparing the budget, functionaries involved should ensure the following rules of conduct:

1. That there should be absolute and impeccable secrecy of the budget.

2. That the government should not raise the price of commodities in order to raise the quantum of the budget.

3. Adopt measures to enhance the GDP growth, our present growth rate, which is about 3.5 % is the lowest in last two decades.

4. Eliminate budget deficit on war footings and make it transparent for the nation.

5. Reveal the names of bank defaulters and the quantum of loans and the recovery that has been made for the confidence building of the nation in budgets.

There has been too much talk about interest free banking or in other words Islamic banking, so far no practical step has been taken towards that end and we are still in square one inspite of the instructions from the competent court of law. It is time now that the entire economic and financial policy of the government should be revamped. The General has promised to the nation that there will be no outstanding IMF loan after 2004. He is known to live up to his words and promises and would be able to live up to it? Time for cosmetic changes and sugar coated pills are over, the nation still remembers with pride the first budget of the government of Pakistan, presented by the first Finance Minister Mr. Ghulam Mohammed, that was a surplus budget.

It is a fact that under the captaincy of Mr. Shokat Aziz, common man in Pakistan has not been offered any relief, there is no denying the fact that prices of essential commodities have become unbearable with and without a budget, while common man is suffering sycophants and cohorts of bankers Mafia are the biggest beneficiaries in every walk of life whether be it the corridors of power or the area of finance and commerce management or manipulation, they are in total control of these forums. One health Tax was abolished and interest rates on domestic investments reduced from 18% to 10% (net), which is bound to bring negative effects in national saving schemes hurting the retired persons and widows who live on returns of these investments.

While the quantum of non-performing loans has increased to Rs. 384 Billion, the amount of bad loans on 12th October 1999 was Rs.185 Billion, this is alarming scenario as people would like to know who are the new defaulters, specially when the economic and industrial activity is on standstill, with a huge recovery claimed by NAB through accountability process. Transparency and good governance demand that nation be informed of the true health of economic situation along side announcement of budget to involve them in nation building at this critical juncture of our history, when we are facing the enemies in and outside the geographical and ideological frontiers. Let us provide the common man for a change this time with a living package in order to provide two square meals to his dependent and be able to provide education to his children as well. The nation will come forward to restore the sanctity of budget and vigilance over the revenue leakage to march towards a welfare economy.

Mr. Ali Ashraf Khan is a Pakistani Businessman and Ex-Politician who bid good bye to politics in order to concentrate on more useful service benefit of the political intrigues prevalent in the National Political life of Pakistan. He frequently writes for English and Urdu newspapers in Pakistan.