Corruption in Pakistan: An Overview

Authored by: Marie Chêne
U4 Helpdesk
Date: 08 August 2008

Corruption trends in Pakistan over the past 10 years

Most governance indicators show an unchanging situation in Pakistan, with corruption perceived as widespread, systemic and deeply entrenched at all levels of society and government. Based on research done for this query and consultations with TI Pakistan, corruption is viewed as being equally pervasive within federal, provincial and local governments.

Since first being included in 1995, Pakistan has consistently performed poorly on the Corruption Perception Index (CPI) of Transparency International, and is among the countries with the most perceived corruption each year.

According to the 2007 CPI, Pakistan scored 2,4.(Please see: http://transparency.org/policy_research/surveys_indices/cpi/2007).

The Worldwide Governance Indicators (WGI) of the World Bank have also shown very little progress over time, with weak scores in most areas. Most troubling has been the rapid decline in indicators for political stability, which have deteriorated rapidly since 1998: 1.0 in 2007 compared to 5.8 in 2003 and 11.11 in 1998.

According to the World Bank’s WGI, governance actually seemed to improve slightly under the first military government (1999-2002) following Musharraf’s coup. In 2003, the country even performed slightly better in terms of controlling corruption, rule of law and government effectiveness. However, all the country’s indicators have since collapsed (based on 2007 results) except for those related to regulatory quality and voice and accountability.

Please see: http://info.worldbank.org/governance/wgi2007/sc_chart.asp). Further surveys conducted in recent years confirm the finding that corruption in the country has worsened:

Forms of corruption

Corruption manifests itself in various forms in Pakistan, including widespread financial and political corruption, nepotism, and misuse of power. Both petty and grand corruption are prevalent in the country. Citizens commonly face demands for bribes in their dealings with government institutions to access basic public services. The frequency of petty bribery is alarming and has shown little improvement over time, as evident in the national corruption surveys conducted by TIPakistan in 2002 and 2006.

Survey results for 2002 indicated that a remarkable 100 percent of the respondents who had any type of contact with the police over the previous year were confronted with corruption. In terms of basic services, 44 percent of the respondents were only able to access electricity by paying a bribe, while the rest had to rely on other forms of influence to obtain a connection. When it came to the country’s tax authorities, nearly every respondent (99 percent) had encountered corruption.

According to respondents of the 2006 survey, the three most corrupt government agencies were the police, (64 percent), power sector (11 percent) and judiciary (9 percent). The three main reasons for corruption, as viewed by the respondents, were the lack of accountability, low salaries and discretionary powers. Measures suggested for combating corruption included more adequate salaries and a speedier judicial process.

The public procurement process in Pakistan is an example of where corruption can take place. In principle, the law in Pakistan provides for open and competitive bidding in awarding government contracts. However, information on government expenditures and decisions is not always made public. As signalled by TI-Pakistan’s survey work, public sector services — such as for power and utilities as well as infrastructure and public works — are the most affected by corruption. Public works kickbacks are estimated to constitute approximately 25 percent of the budget. (http://www.business-anticorruption. com/normal.asp?pageid=464).

With Pakistan a major recipient of grants and loans from international donor agencies, corruption in procurement has affected poverty, aid and development projects. A World Bank Country Assistance Evaluation of projects and programmes in Pakistan has confirmed the problem. The World Bank and the Auditor General of Pakistan have repeatedly cited governance problems in recruitment, site selection, absenteeism and corruption for development projects. As a result, some of the World Bank’s projects were(partly) suspended or cancelled, such as the Baluchistan Primary Education Project. In addition, the disbursement of other loans was withheld after irregularities were uncovered.(Please see: http://www.oecd.org/dataoecd/63/31/36494011.pdf).

In response, the World Bank and the Asia Development Bank are assisting Pakistan in establishing e-governance in order to promote transparency and reduce corruption in procurement processes and other areas of governance. The Board of Investment (BOI), for example, is now publishing tender invitations on their website. (Please see, for example: http://info.worldbank.org/etools/BSPAN/PresentationView.asp?PID=1978&EID=911 and http://www.pakboi.gov.pk/

Corruption prone institutions

The wide consensus across surveys points to the police as being one of the most corrupt institutions in Pakistan. According to the organisation Global Integrity (http://www.globalintegrity.org/reports/2006/PAKISTAN/index.cfm), appointments in the police force are often based on political considerations. Police officers frequently have conflicts of interest due to personal loyalties and family connections. It is also well known that in Pakistan, influential landlords decide the appointment of law enforcement officers in their area, with police officers acting on their behalf. Unlawful police methods do not solely affect poor people. Businesses also complain that they suffer from extortion by the police, for instance in the form of bogus traffic fines.

The other sector in Pakistan which is seen as notoriously inefficient and corrupt is the judiciary. According to TI Pakistan’s 2006 survey, 96 percent of the people who came in contact with the judiciary encountered corruption and 44 percent of them reported having to pay a bribe to a court official. The judiciary is also viewed as lacking independence from the executive and contributing to a general culture of impunity. Again, according to Global Integrity, the procedure for selecting judges at the national level is not transparent and selection procedures are often made in exchange for political favors.

Despite these problems, judges are exempt from oversight and investigations by Pakistan's national anticorruption agency, the National Accountability Bureau. The business community generally lacks confidence in the capacity of the judiciary to enforce rules and laws, and the settlement of disputes often involves paying bribes. (http://www.business-anticorruption. com/normal.asp?pageid=464). For example, the judiciary takes an average of 880 days to settle a business dispute at a cost of 24 percent of the claim (www.doingbusinesss.org).

The country’s tax and public finance administration has also been affected by corruption. The World Bank’s 2004 Public Expenditure Management report on the country showed widespread collusion between taxpayers and tax officials, a situation that has led to tax evasion and lack of tax compliance (See: http://www.oecd.org/dataoecd/63/31/36494011.pdf). In addition, a financial accountability assessment undertaken by the World Bank in 2003 showed that, although good progress had been achieved in public sector accountability, major gaps and weaknesses remain in the accountability chain. These have arisen mainly from low institutional and staff capacity and uneven implementation of reform measures.
The report emphasised the urgent need to strengthen financial reporting, to institute adequate controls at all levels of government — especially at the provincial level1 —and to maintain effective tracking of social spending. (Please see:http://siteresources.worldbank.org/PAKISTANEXTN/Resources/Pakistan-Development-Forum- 2004/PakCFAA2004.pdf).

A more recent report on public sector accounting in Pakistan further shows its public sector accounting and auditing does not comply with international standards. More attention needs to be paid to summary tables of outstanding public sector accounting and to good reporting and disclosure processes following audits. (Please see: http://siteresources.worldbank.org/SOUTHASIAEXT/Resources/Publications/448813-
1195243379044/sar_report-pakistan-summary.pdf)

The high prevalence of corruption in the sectors covered in the national survey suggest that the problem likely cuts across federal, provincial and local administrations since service delivery is divided between different political levels. Moreover, the country is administratively structured in such a way that there are 100 times more junior-level civil servants than senior officers, creating a ready group to engage in the petty abuses currently plaguing Pakistan.

Part 3:Further Reading and Resources on Pakistan

INDICES

Bertelsmann Transformation Index 2008

The BTI is a global ranking of transition processes, in which the state of democracy and market economic systems as well as the quality of political management are analyzed in 125 transitional and developing countries. Pakistan is included in the analysis and the rankings. The country reports can be found at: http://www.bertelsmann-transformationindex. de/28.0.html?&L=1
For ranking please see: http://www.bertelsmann-transformation-index.de/27.0.html?&L=1.

The Global Integrity Index (2007)
TI Corruption Perceptions Index 2007
For the latest CPI survey data please see:
http://transparency.org/policy_research/surveys_indices/cpi/2007.