Sunday, May 29, 2011

Culture of Corruption in Pakistan

Rampant corruption is believed to be a major factor impeding economic development in Pakistan and many other developing nations.

Is this corruption and lawlessness rooted in the absence of adequate law enforcement, or the lack of independent judges? Or is it a national culture of corruption that ranks such nations among the most corrupt in the world on Transparency International surveys?

A paper titled "Cultures of Corruption: Evidence from Diplomatic Parking Tickets" by Ray Fisman of Columbia University and Edward Miguel of University of California, Berkeley attempts to answer the above question by using parking violations data on international diplomats living in New York City during 1997-2005.

Since all foreign diplomats have immunity from prosecution in the host country, they do not have to pay fines for any parking violations in New York City. The authors argue that the way the diplomats from different nations behave in such a situation is entirely based on the cultural norms of the nations they represent.

The data presented by the authors shows that Pakistani diplomats with 69.4 tickets per diplomat are the tenth worst offenders, behind those from Kuwait (246.2), Egypt (139.6), Chad (124.3), Sudan (119.1), Bulgaria (117.5), Mozambique (110.7), Albania (84.5), Angola (81.7) and Senegal (79.2). The authors also report that diplomats from low corruption countries (e.g., Norway and Sweden with zero parking citations) behave remarkably well even in situations where they can get away with violations, suggesting that they bring the social norms or corruption “culture” of their home country with them to New York City. Others with no parking violations include diplomats from Oman, Turkey and UAE.

In addition to a strong correlation between number of parking tickets and TI's corruption index, Fisman and Miguel also find that officials from countries that have less favorable popular views of the United States commit significantly more parking violations, providing nonlaboratory evidence on the role that sentiment and affinity play in economic decision-making.

With 69.4 tickets for each official ranking them at number 10, Pakistani diplomats in New York are also the worst among fellow South Asian diplomats. Bangladeshi diplomats rank 28 (33 tickets), Sri Lanka ranked 40 (17.2 tickets), Nepal ranked 43 (16.5 tickets) and India ranks 79 (6.1 violations per diplomat).

Going by the highly persuasive data and arguments by Fisman and Miguel, it is hard to see how better law-enforcement and independent judiciary can solve the highly corrosive problem of widespread corruption in Pakistani society, unless it is also accompanied by a national campaign to promote a culture of honesty in the country. Such an effort must begin with open acknowledgment of the seriousness of the corruption crisis and an earnest desire to change, followed by wide-ranging ethics reforms in all spheres of life which are actively role-modeled and led by civil, social, political, business, military and religious leaders of the country.

Related Links:

Haq's Musings

Pakistani Judges' Jihad Against Corruption

Incompetence and Corruption in Pakistan

Zardari Corruption Probe

NRO Amnesty Order Overturned

Transparency International Rankings 2009

Transparency International Corruption Index 2010


irfan said...

I think there is a bias against Pakistan in Western Media. Pakistan is better than India in reality.

Liaquat said...

"My feeling is that it was all a hoax, a drama which has been crafted, and badly scripted I would say. "But they shouldn't make a scapegoat of Pakistan in this way. This is very wrong." - Hamid Gul. He said this on TV. OBL was killed in Afghanistan and brought to Abbotabad to make the very good Military and Pakistan look bad.
I was in Pakistan recently and people are worried that foreign forces like RAW of India and CIA in America are working together to destroy our nuclear weapons by supporting Pakistan Taliban.

This corruption business is all their agenda because there is corruption even in America. Corruption in India is worst just like their poverty as you can see in your video.

Pakistani people still keep working hard inshallah.

Riaz Haq said...

Irfan and Liaquat:

Denial is not the right answer.

Unless Pakistanis acknowledge the existence of serious problems of corruption, incompetence and terrorism in their midst, there can be no progress toward solutions.

The sooner it is done, the better it is for average Pakistanis who are suffering the most from the current multiple crises.

Shams said...

Corruption is also rampant in the US, both within the military and the politicians. It will be good if you shoot them down as well. Best if you tabulate PK v. US along those lines.

iqbal singh said...

@ Irfan :
"I think there is a bias against Pakistan in Western Media. Pakistan is better than India in reality."

If Pakistan focuses on itself or had focused on itself it would not be in this predicament today. If I can paraphrase Golda Meier 'Pakistan loves itself but hates India even more'.

The only genuine cohesive force in Pakistan that keeps it going is the universal dislike and hatred of India.

All other problems including CORRUPTION is secondary!

Anonymous said...

Rai Azlan said...

corruption is one reason that lead us to this situation that we are bing declared as a failed state. people who have authority are buty in collecting more and more wealth with the net of corruption and those who are still clean are either waiting for the opportunity or been dumb enough to utilize it. thats the reality, bitter tough.

Riaz Haq said...

Here's a BBC report on corruption in India that parallels the experience of many ordinary Pakistanis in their daily lives:

Imagine if you had to pay a bribe to see your newborn baby, get your water supply connected or obtain your driving licence. It's an everyday fact of life in India - but campaigners are now fighting back, using people power and the internet.

"Uncover the market price of corruption," proclaims the banner on the homepage of

It invites people to share their experiences of bribery, what a bribe was for, where it took place and how much was involved.

Launched in August, the site gives Indians a chance to vent their frustrations anonymously and shine a spotlight on the impact of corruption on everyday life.

"I did the driving test correctly but still the official said I was driving too slow, I realised his intention so gave him 200 Rupees and got the thing done," is a typical example of a posting.

The website was the brainwave of Ramesh and Swati Ramanathan, founders of a not-for-profit organisation in Bangalore called Janaagraha which literally means "people power".

"Bribery is routinely expected in interactions with government officials", Swati Ramanathan told me, "to register your house, to get your driving licence, domestic water connection, even a death certificate."

Having lived in the US and the UK for several years, they were dismayed on their return to see how widespread corruption had become and decided to do something about it.

"We are all also responsible because we end up paying the darn bribes because otherwise you can never get anything done in India.

"We said, 'It's not enough to moralise, we need to find out what exactly is this corruption? What's the size of it?'"
'High reward'

The website has evolved into a consumer comparison site where people can also get information and advice in different languages on how to avoid paying bribes.

One woman told me how she got round paying a bribe to register her mother's house.

"I went with all the paperwork and at first they looked through it and said, 'Oh, I think one of the documents is not up to date.'

"What I had been told at the website is that this is one of the excuses they make to take a bribe, and what we need to do is tell them, 'OK, give it to me in writing with your stamp and seal, and I will make sure I get these documents the next time so that I can get it registered.'"

"The moment I said that, they backed off and said, 'No, no, it's OK, we will pass it through.'"

So far, nearly 10,000 bribe experiences have been reported across 347 cities and 19 government departments.

As the numbers mount, Swati Ramanathan hopes the website will become a powerful tool for shaming government departments into tackling corruption.

"There is so little risk to being corrupt in our country and so high a reward," she explained.

"The moment you change the equation and you make it riskier, the reward becomes less. You make it riskier by making it public."...

Riaz Haq said...

Can civil society fight corruption? asks Soutik Biswas of BBC:

Are sections of India's civil society subverting democracy to pressure the government to push through tough anti-corruption laws?

The beleaguered Congress-party led government appears to think so. The senior-most minister Pranab Mukherjee has fired an uncharacteristic broadside at activist Anna Hazare's anti-graft agitation for resorting to hunger strikes, making unreasonable demands like video graphing meetings of a joint panel to discuss an ombudsman law and imposing deadlines on the parliament.

Mr Hazare is a well meaning Gandhian, who has a record of fighting corruption in his home state of Maharashtra. But he also has a predilection for making clumsy statements - he endorses capital punishment for the corrupt, for example. But few Indians deny that Mr Hazare has touched a chord, mostly among the country's fretful, politician-loathing middle classes, by pressuring the government to take a tough stand against corruption. Graft has become a way of Indian life, kept alive by the rulers and ruled alike.

Mr Mukherjee's barb is clearly not aimed at Mr Hazare alone. Last fortnight, Baba Ramdev, a thriving yoga guru with political ambitions, also began a hunger strike in Delhi demanding that the illicit money stashed away in foreign banks by rich Indians be brought back home. After futile negotiations with the guru, the government cracked down on his fast in the middle of the night, baton charged sleeping supporters and evicted him from Delhi. The police action earned the opprobrium of many Indians, and further battered the government's fast-eroding credibility.

Now the government appears to be trying to bottle the genie of Mr Hazare and Baba Ramdev's "movements", both of which it legitimised in the first place through recognition and negotiation. It seems to be also unable to handle the vicissitudes of these agitations, with its leaders blowing hot and cold against the government. Such a civil society movement, Pranab Mukherjee said, amounts to a "sinister move of destroying the fine balance between the three organs of government enshrined in our constitution".

"If someone dictates terms from outside to the government, does it not weaken or subvert democracy? It is a big question... We are all civil society, no one is uncivil."

Clearly, Mr Mukherjee's definition of civil society in the haste of a press conference is literal. The World Bank defines civil society to "refer to a wide array of non-governmental and not-for-profit organisations that have a presence in public life, expressing the interests and values of their members or others, based on ethical, cultural, political, scientific, religious or philanthropic considerations".
India has seen deeper, meaningful civil society movements which have been blithely ignored by most of middle class in the past. Only when a protest comes to Delhi in the full glare of 24/7 news television does it get attention. And more so, when it rallies against corruption - which actually hurts the poor more than the rich and the middle class.

By all means, many believe, an enlarged and more representative civil society - ideally a larger, wider group of people from all over the country, not just a bunch of well meaning lawyers and activists from Delhi - should be putting pressure on a stubborn government to act against corruption. Also, as development expert Rajesh Tandon reminds us, civil society is not intrinsically virtuous. And good graft-free governance does not come from reforming the state alone - it demands the reformation of society and its people. There are no short cuts to a more virtuous India.

Riaz Haq said...

Data from Pew research and Transparency International shows that the nations, such as India and Pakistan, where the huge majorities of people claim religion is important in daily lives are also among the most corrupt.

Please

Riaz Haq said...

Here's Prof Anatol Lieven, the author of Pakistan-A Hard Country, explaining P2K in an interview with Harpers magazine:

This represents a shocking surrender on my part to SMS-speak, which comes of associating with students!

What it stands for is “Patronage to Kinship,” which is central to the nature and workings of the Pakistani state and political systems. In my book, I argue that this system—especially in the countryside but to some extent also in the cities—revolves around local elites using their own wealth to gain leadership positions in their kinship groups, using these positions to advance in politics and get elected to the provincial or national assembly (whether under civilian or military rule), and then in turn using their influence on government to extract corruption.

However, by contrast with some systems, like Nigeria’s, the benefits of this corruption cannot simply or even mainly be kept for the immediate beneficiaries. In order to retain support, they have to distribute a reasonable proportion of it to their kinfolk and other supporters—otherwise they won’t go on supporting the leaders for very long. Even within quite tight-knit kinship groups, there is usually a rival relative who will step forward to claim the leadership if the existing leader is seen as mean, greedy, and unresponsive to his followers’ needs. There are two good U.S. quotes which illustrate the morality behind this. The first was said about Mayor Richard M. Daley of Chicago by his supporters: “He dunks, but he splashes.” The second comes from Bruce Springsteen’s song “Highway Patrolman”: “A man turns his back on his family, he ain’t no friend of mine.”

In my book, I describe this system as “Janus-faced.” On the one hand, because of the way in which it maintains kinship links and spreads a certain amount of patronage through society, it helps maintain the existing system’s resilience in the face of the threat of Islamist revolution. On the other hand, it cripples the state’s ability to generate and spend resources effectively on infrastructure, education, and every other form of state service, and it is therefore disastrous for Pakistan’s economic development and social progress.

I argue that the power and prestige of the Pakistani military within the Pakistani system has been due chiefly to its ability to separate itself from the normal workings of the patronage and kinship system, and to operate as a relatively efficient and honest meritocracy. However—and I do wish more of my critics would notice this—I also say repeatedly that the reason the military has been able to do this is that it has in effect functioned as a giant patronage network, extracting a massive share of state resources and spending them on itself, albeit in an orderly way and with some benefits reaching the ordinary soldiers as well as the officers.

Riaz Haq said...

Here are some interesting excerpts from an Outlook India interview with Prof Aswath Damodaran of NYU Stern School of Business:

What risks do the present crisis hold for developing economies like India, grappling for well over a year to curb inflation?

If you are a developing economy you are like a growth company, which is far more dependent on the economy because everything gets magnified. Developing countries are far more exposed to global real economic growth because so much of the value comes from future growth. It is like a mature company is less affected by a recession than a growth company; mature economies are less affected than developing economies by a slowing global economy. Everybody gets hurt, but developing economies in a strange way can get hurt more because everything gets magnified at their level.

So, is India’s current pace of economic growth sustainable?

A scaling effect is going to kick in. It is one thing to grow at 9 per cent a year when you are a smaller economy, but as you get larger people have to get realistic. Policymakers have to realise that planning for 6 per cent real growth for the next 10 years is absurd. As the country scales up, you have got to get more realistic about real growth and have policies in place for what to do as real growth slows down, because it will. It will in India and it will in China. It has got nothing to do with the quality of the policies, it is a fact that as the economy becomes larger maintaining those growth rates is going to be unrealistic.

As we speak, corruption has become a major cause for protests in India....

The way I think about corruption is that it is like paying an unofficial tax. What corruption has done is it has raised the effective tax rate for businesses operating in India from 33.99 per cent to 41, 42, 43 per cent and that lowers investment. It lowers real growth. It has always been a deterrent and it will continue to be so. I think it is important that corruption be dealt with, but you can’t deal with it with an ombudsman, or a group that gets together and says let’s catch corrupt politicians, because it is entrenched in the system. It is built into the system because the salaries of many public servants are set with the implicit assumption that they can supplement that salary by getting paid on the side. It’s almost like waiters in the US get paid a low minimum wage because the assumption is that people will tip them 15 per cent so they can make up that money. It is not going to be easy to take out of the system because you have to revisit the way in which public servants get salaries.

Mayraj said...

Today I had a conversation with someone who told me he was in Karachi for 6 years.
He was born and raised in Canada and went there for a job with Barclays. He does seem to have parents who were from Pakistan, however. He worked there and was involved in other banking industry orgs and also helped an NGO out.
I asked him for his impressions about the local system and the present state of the country. He has just returned home to Canada a few weeks ago.
He told me the system worked well and the mayor was a good mayor. He said he thought he did a very good job.
He also said right now country is in a deep mess. People in power seem to just want to take what money they can out of the system. he said this happening at all levels!

Mayraj said...

I would like you to be cognizant of the fact that now in Pakistan, corruption is at a scale that boggles the mind - at least it should boggle the mind. We are talking no longer millions but BILLIONS. We are talking about Pakistan's external debt shooting up by ten billion dollars in a short span of 3 years with nothing to show for it. I suspect the borrowed dollars have been purchased with corruption billions and transferred abroad. In the next 2 years huge repayments are maturing to the IMF and other lenders. The oil price may shoot up. Our exports reduce and our water supplies may stunt our agriculture. I don't see how we will be able to cope.

Billions are 'spent' by the government and as much as 40-50% if not more is diverted for pay-offs. There is hardly any development or relief going on anywhere. debt service has gone through the roof, being the biggest item in the budget. Poverty is rising, employment growth is nonexistent. Spending on social services had collapsed as there is no fiscal space.

Corruption is a HUGE component in both out fiscal and current account deficits. It has made a huge increase in both our domestic and international debt. it can corrupted the moral fiber of the country, especially the bureaucracy. Now the younger generation is actually embracing corruption as a perfectly acceptable way of life, looking at the leadership, the tycoons and the senior government officers as role models. They are actually openly defending the corruption of their families and expressing their intention to indulge in the same.

Riaz Haq said...

Transparency International, in its 2011 world corruption report, has shown Islamabad sliding down from last year’s 34th to 42nd in ranking amongst the most corrupt nations in the world, according to The News:

However, this improvement is not due to the fact that the government or the rulers are less corrupt than they were before but because of some good results shown by institutions like the judiciary, Public Accounts Committee (PAC), federal tax ombudsman and the defence departments.

Although last year’s 34th position of Pakistan was out of a total of 178 countries assessed by Transparency International as against 2011’s 42nd rank out of 183 countries, still the country did not deteriorate further as has been the case during the previous three years of the present regime.

To be released here on Thursday, the Transparency International’s 2011 Corruption Perceptions Index evaluated Pakistan getting 2.5 score out of 10, and ranked as 42nd most corrupt country out of 183 countries.

In 2010, TI report Pakistan’s score was 2.3, and it ranked 34th most corrupt country out 178 countries. In 2011, the rank of Pakistan has improved because of increase in the number of countries assessed this year.

Pakistan gained new heights in corruption during the last three years under the present rulers. Pakistan ranked as the 47th most corrupt country in 2008, but in 2009 the country became more corrupt and ranked 42nd in 2009.

In 2010, it was 34th most corrupt nation in the world. However, it is interesting to note that the Transparency International acknowledged that the arrest in the further decline of Pakistan in terms of corruption is not due to the present government’s efforts to curb the menace but owing to commendable role of the judiciary, the Public Accounts Committee, the defence establishment and the federal tax ombudsman.

It underscored that PAC, which has done remarkable work under Leader of the Opposition Chaudhry Nisar Ali Khan, recovered Rs115 billion from 2008 to 2011. The TIP also applauded judiciary’s zero-tolerance for corruption, the Ministry of Defence efforts to apply long-standing Public Procurement Rules 2004 in the armed forces departments; and the working of the federal tax ombudsman as one of the cleanest institutions in the government.

The TIP, however, said that this progress has been overshadowed by the ongoing corruption cases like the NICL, RPPs and 2010 Haj scandal in which the Supreme Court has affected recoveries of billions of rupees.

The TI report says that corruption continues to plague too many countries around the world. According to the Transparency International’s 2011 Corruption Perceptions Index, some governments failing to protect citizens from corruption be it abuse of public resources, bribery or secretive decision-making.

Transparency International warned that protests around the world, often fuelled by corruption and economic instability, clearly show citizens feel their leaders and public institutions are neither transparent nor accountable enough.

The 2011 index scores 183 countries and territories from 0 (highly corrupt) to 10 (very clean) based on perceived levels of public sector corruption. It uses data from 17 surveys that look at factors such as enforcement of anti-corruption laws, access to information and conflicts of interest. Two-thirds of ranked countries score less than five. New Zealand ranks first, followed by Finland and Denmark. Somalia and North Korea (included in the index for the first time) are last. Pakistan with 2.4 score ranked 42nd most corrupt country.

Riaz Haq said...

Here are parts of a report in the News on corruption at all levels in Pakistan:

KARACHI: Speakers at a symposium on Friday said that corruption has thrived in every institution of the country, while institutions established to curb this menace have failed to identify the magnitude of the burgeoning problem, a statement said.

The National Reconciliation Ordinance (NRO) introduced corruption to the top levels of the national politics and government, it said.

These views were expressed in a seminar organised by the National Accountability Bureau (NAB) on “good governance and curbing corruption”.

The event was organised to mark world Anti-corruption Day that fell on December 9 every year.

Dean Faculty of Law, Federal Urdu University, former justice Dr Muhammad Ghous said corruption invariably hampered the good governance, while institutions formed for keeping surveillance on such a practice have not yielded good results.

In his view, honest, sincere and competent officers should be elevated at the helm of affairs of institutions to do away with corruption completely.

He regretted that corruption had become a part of life of every individual in the country. Be it a bank, educational institution, research institution or any other public service organisation, all departments have become morally sick, he added.

Dr Ghous said the most corrupt people are, unfortunately, irremovable from their services mainly due to the political influence. There is no global prescription for eliminating corruption, however, encouraging public participation and strengthening of institutions by giving authority to honest officers could significantly contribute in curbing this problem, he said.

Transparency International Pakistan Adviser Adil Gillani said the UN Convention against anti-corruption was ratified by Pakistan in 2007, while just passing the 37 days of its ratification, the then president General Pervaiz Musharraf introduced NRO, hence, paving the way for corruption at every level of the government.

Good governance could significantly play a vital role in eliminating corruption, he said.

Sindh NAB Director General Major Shabbir Ahmed (Retd) said the cooperation of people is direly needed to do away with the burgeoning menace of corruption.

The department is endeavoring to cope with this problem, he said.

Ahmed said that imposition of strict rules and regulations in every organisation could play a vital role in anti-corruption mission.

Former Inspector General Police Sindh, Niaz A Siddiqui regretted the non-existence of any mechanism to protect rights of citizens.

He questioned why there is no surveillance of police officials in their offices, contrary to thousands of close-circuit cameras installed in the city monitoring citizens.

He saw absence of strict accountability mechanism behind increasing corruption in the country.

Riaz Haq said...

Transparency International Pakistan says military least corrupt, according to The Nation newspaper:

Judiciary has stepped up into the 4th position from 6th in the previous year in terms of corruption, while land administration department has got the first position on the list of country’s most corrupt institutions, according to the National Corruption Perception Survey 2011, released by the Transparency International Pakistan (TIP) on Wednesday.

According to the report the police department has taken the second spot while the Power sector has dropped to the 5th rank from 2nd. Taxation slipped to the 3rd rank from its previous 8th position, while Customs and Tendering and Contracting departments have shown alarming increase in the corruption trend.

It is pertinent to mention here that for the first time military has been included in the survey and it was the least corrupt department after education in the year 2011. Police had topped all the previous years’ surveys but the Land Administration has crossed them and the factor of the ‘Land Mafia’ was one of the big reasons for this increase.

The annual survey report was released at Karachi Press Club in a press conference by TIP Chairman Sohail Muzaffar, along with TIP Advisory Committee chairman Syed Adil Gilani. This year’s survey has been conducted by Gallup Pakistan. Sohail Muzaffar cited the delay in punitive action by the state organs against the corrupt elements in corruption cases like Pakistan Steel, NICL, Punjab Bank, Rental Power Plants, KESC, PIA, Railway and Wapda as the main reason for the rise in corruption levels.

Sohail informed that judiciary is confronted by deliberate defiance in implementing Supreme Court orders and delay in punishing corrupt persons by the judiciary is one of the causes of lower ranking of judiciary. He said that they have released the reports to tell the government and the people that which is the most corrupt department and it should not be taken into personal context or any political intention. “We are trying to help out the government by showing them the corrupt sections in them, now it’s up to the government how it cleans them”.

On the inclusion of military in the survey, the TIP chairman said, “We have not included it in the survey, Gallup itself has added military and they have not put railways in the survey”. He said the military should not be placed before the education in the rank because according to him military is less corrupt than the education.

He added that Gallup agreed late to conduct the survey, “No one was ready to conduct the survey, the Institute of Business Administration (IBA) which conducted the previous year’s survey refused to conduct it this year. We had short time and Gallup agreed in the last”, said Muzaffar.

Riaz Haq said...

Here's an Express Tribune report on TI findings in Pakistan:

The latest perception report from Transparency International Pakistan (TIP) shows a limited number of respondents see centres of corruption in Pakistan in the following descending order, of being perceived as the most corrupt to the least: 1) land administration; 2) police; 3) income tax; 4) judiciary; 5) tendering & contracting; 6) customs, plus state corporations and the last is the army. Once again TIP has expressed its shock at the mounting lack of honesty in public affairs and has listed some of the reasons why the graph of evil is creeping upwards every year.

It is not surprising that land administration is the first among the perceived culprits. It is vastly the domain of the provinces where the politician has yet to begin to take responsibility for sorting-out maintenance and collection. Land record is still in primitive shape and the low bureaucracy that handles the sector is not upgraded and made competitive. Most of the trouble takes place away from the big cities because the writ of the state languishes in smaller districts and abdicates to three power centres: the feudal landlord (often a politician), the police and the judiciary. It will take a long time to sort-out this mess and it will not happen at the same speed in all the provinces. The police has endemic ills that most states in the Third World have failed to tackle. The recruitment of policemen has been pegged to good education only recently, but the provinces — whose domain this is — have been remiss in making the kind of allocations needed to upgrade the institution’s performance. The ratio of policemen to population is abysmal, training standards — though imitative of the army — are nowhere near being practically useful and low status has kept the average policeman tied to slavish behaviour towards the seniors and a brutish one towards the common man.

But the police may not be intrinsically as bad as the circumstances of its functioning make it. State policies favouring non-state actors involved in terrorism on the side have hamstrung the police. Unwillingness to prosecute has instilled in the department a habit of not trying too hard to convict, say, terrorists from a shady jihadi organisation simply because it is being clandestinely supported by the state. Because of this ambience of state-backed criminality, many policemen themselves indulge in crime and get away with it. Many senior policemen live beyond their means and own properties they could not have bought with honest money. As for the tax administration, if one were to look at the statistics, things may be getting better — and that is why it is no longer number one in corruption. Pakistan’s revenue collection is one of the lowest in the world (with the tax-collection machinery believed to be riddled with corruption and inefficiency) and that impacts directly the capacity of the state to spend on development. The reigning theory is to erect a system in which the income tax officer comes into least contact with the taxpayer.

Riaz Haq said...

Here are some excerpts from an interesting Friday Times Op Ed on Pakistan's undocumented (informal & illegal) economy:

The economy is in the doldrums, but that is not news any more. What is more interesting, and more difficult to investigate, is what is happening in the world beyond the survey operator and tax collector's ambit. Papers published by the Social Policy Development Center (SPDC) in Karachi and the State Bank place the informal economy in a range of 20 to 30 percent of GDP. But most of this undocumented economy does not include strictly illegal, or shall we say criminal, practice.
that militant groups are running their own businesses (during the TNSM's movement in Swat, emerald mines were reputed to be in the hands of Maulana Fazlullah's men); that militants and terrorists are even coming up with new ways to generate funds (kidnapping for ransom being a case in point).
According to data from the UN, Afghanistan produced about 90% of the global output of opium in 2007. This fell to just over 62% by 2010 (with Myanmar accounting for most of the rest). Three quarters of the poppy production was in the provinces of Helmand and Kandahar, which border Pakistan. Domestic consumption of opium in Afghanistan is next to nil. Also, the country does not legally import the chemicals needed to process opium into heroin, although these are imported in Pakistan for legitimate uses. Almost 7,000 metric tons of opium, both raw and processed, in the form of morphine and heroin, leaves Afghanistan and finds its way to the lucrative markets of Western Europe.
Given that the global trade in opiates is estimated to have a value of some $70 billion, even a small proportion of the proceeds can make life comfortable for a lot of people in Pakistan.
With close to 80 suicide attacks in 2010, about 400 rocket attacks, and about 350 bomb blasts in addition to target killings, use of improvised explosive devices etc, its not hard to deduce that there is a significant trade in arms and ammunition in Pakistan. The ISAF container scam case led to some interesting findings. There were the obvious conclusions - including that the abuse of the Afghan Transit Trade facility is massive. More tellingly, the Supreme Court's suo moto case found that 7,922 ISAF containers simply went missing. In addition to the packed meals, the alcohol and the camp supplies stamped with ISAF logos that appear in border markets, the possibility of pilferage of more dangerous items cannot be ruled out.

The smuggling masked by the Afghan Transit Trade is another story altogether, and according to some stakeholders extends to the illegal trade in timber, antiquities and gemstones stemming from that unfortunate nation. Being a neighbor to a land-locked, war-ravaged country with no semblance of law and order was never going to be easy. But Pakistan's governance failures have made a bad situation worse.

There's much more to Pakistan's economy than meets the eye, and many of the more interesting activities are practically impossible to investigate unless someone is prepared to take considerable personal risks. The few pieces of the jigsaw puzzle that are available from public data and information paint a tantalizing picture. If the downslide of the formal economy continues, things could get even more interesting.

Riaz Haq said...

Here's an Op Ed by Prof Anatol Lieven published in the Guardian:

If Pakistan's chief justice, Iftikhar Chaudhry, manages to press his charges of corruption against the president, Asif Ali Zardari, he will bring down the existing Pakistani government. If he extends his anti-corruption campaign to the political elites as a whole, he will bring down the entire existing political system – and replace it, his critics say, with a dictatorship made up of an unelected (and equally corrupt) judiciary.
The truth is that Pakistani politics revolves in large part around politicians' extraction of resources from the state by means of corruption, and their distribution to those politicians' followers through patronage. Radically changing this would mean gutting the existing Pakistani political system like a fish. Nor is it at all certain how popular the process would really be with most Pakistanis.

For while the greater part of this process of extraction and redistribution is illegal according to Pakistani law, how much of it is immoral in Pakistani culture is a much more complicated question. Every Pakistani politician accuses his rivals of corruption but, equally, the perception that he himself is "generous" and "honourable" to his own supporters is likely to be central to his own local prestige. If a public monument is ever erected to the Ideal Pakistani Politician, the motto "He dunks but he splashes", originally coined by Mayor Richard Daley of Chicago, should be inscribed on its pedestal.

And this is not just a matter of cynical politics. It also obeys a fundamental moral imperative of local culture to be loyal to one's followers and, above all, one's kinfolk. The politician who is really despised is the kleptocrat who both steals immoderately and does not share the proceeds. As a result, a good deal of the proceeds of corruption does get distributed through parts of society, thereby helping to maintain what until recently has been the surprising underlying stability of the Pakistani political system.

The military is widely seen as relatively immune to corruption, and when it comes to its own internal workings, this is largely true – though it usually ceases to be true when generals go into politics. However, it is vitally important to note that this is in large part because for many decades the military as a whole has acted as a kind of giant patronage network, extracting a huge share of Pakistan's state resources via the defence budget and other concessions, and spending them on itself. Because – to its credit – it has distributed the resulting benefits in an orderly if hierarchical way among its generals, officers, non-commissioned officers and even to a degree privates, it has managed to keep a lid on corruption within the military itself. However, a belief is growing among ordinary soldiers, not just that the generals' perks are immoderate but that in some cases their families are using their connections to make huge corrupt fortunes outside the military.

As for Zardari, it seems highly doubtful that he can hang on much longer. The chief justice is pursuing him with bulldog determination and the letter of the law is on his side. The military has been infuriated by what it believes are his attempts to ally with Washington against it. It does not want another military government, but it does want a civilian regime that is much more responsive to its wishes. And the opposition want him out before, not after, senate elections that might just enable him to cling to the presidency even if as expected his Pakistan People's party is defeated in general elections due by early 2013. Whether getting rid of Zardari will fundamentally change Pakistani politics, however, is a very different matter.

Riaz Haq said...

Here's a Global Post story on NATO using smugglers to supply its troops in Afghanistan through Pakistan:

With few other options available to it since Pakistan closed its border crossings almost two months ago, NATO has at times resorted to paying local smugglers to get much-needed supplies to its troops fighting in Afghanistan, Pakistani officials say.

The Pakistani and Afghan smugglers, who must pay bribes to militants to travel safely through some areas, navigate treacherous routes over the 1,800-mile mountainous divide that separates the two countries to bring containers of oil, food and other essential items — all at a price — to soldiers on the other side.

“Borders mean nothing to us. We have been crossing in and out for centuries,” Sahib Khan, a smuggler who said NATO had hired him, told GlobalPost.

The hiring of illegal smugglers came after a failed attempt by NATO to pay private companies, which truck goods across the border under the Pakistan-Afghanistan Free Trade Agreement (PATA). These private companies, Pakistani officials said, were secretly swapping out their normal cargo for NATO supplies until Pakistani security forces caught wind of the scam.

A senior officer for the Frontier Corps, an elite military unit that is responsible for security along the border, told GlobalPost that a total ban on the movement of containers under PATA, which was signed in 2010 to promote bilateral trade, eventually foiled the strategy.

“We had concrete evidence that some of the containers being imported by private companies, under PATA, were being used to smuggle supplies for NATO troops under cover of commercial imports,” the official said.
Smuggling between Pakistan and Afghanistan has long been a profitable and vibrant business. Various trade agreements have been signed between the two neighbors in a bid to contain the practice, but high import and export taxes coupled with little government oversight, thwarted those attempts.

Mostly items like flour, edible oil, lentils, dried vegetables, contraband cigarettes, and animals for meat are smuggled into Afghanistan, while spare auto parts, electronics and unregistered vehicles are smuggled the other direction.

Smuggling is so widespread that it has become the backbone of the economy in towns and villages along the border, where locally it is treated simply as normal trade. The mountainous terrain provides an edge over security to smugglers who regularly trickle across the border without any trouble.

Sahib said that most of the food and oil supplies he has carried across the border for NATO originate from the southern port city of Karachi, and are moved through Peshawar and Quetta, and finally through Pakistan’s tribal areas, which are largely under the authority of various militant groups.

For those militants, the smugglers have been an important source of income. Smugglers are required to pay “rahdari,” or “passage,” an unofficial tax that allows them safe passage.

“Once we are onto the route, it’s the responsibility of those who receive rahdari to ensure we are able to safely enter into Afghanistan,” Sahib said.

Any smuggling that is done on behalf of NATO can in no way make up for the closed borders, however. Smugglers say they carry between 20 and 25 small containers a day while, when the border crossings were open, NATO shipped an average of 250 large containers a day — making the reopening of the borders essential to the war effort.

Riaz Haq said...

Here are some excerpts of BBC's Soutik Biswas's review of Pulitzer-winning New Yorker reporter Katherine Boo's "Beautiful Forevers":

"We try so many things," a girl in Annawadi, a slum in Mumbai tells Katherine Boo, "but the world doesn't move in our favour".

Annawadi is a "sumpy plug of slum" in the biggest city - "a place of festering grievance and ambient envy" - of a country which holds a third of the world's poor. It is where the Pulitzer prize winning New Yorker journalist Boo's first book Behind the Beautiful Forevers is located.

Annawadi is where more than 3,000 people have squatted on land belonging to the local airport and live "packed into, or on top of" 335 huts. It is a place "magnificently positioned for a trafficker in rich's people's garbage", where the New India collides with the Old.

Nobody in Annawadi is considered poor by India's official benchmarks. The residents are among the 100 million Indians freed from poverty since 1991, when India embarked on liberalising its economy.
She used more than 3,000 public records, many obtained using India's right to information law, to validate her narrative, written in assured reported speech. The account of the hours leading to the self-immolation of Fatima Sheikh derives from repeated interviews of 168 people as well as police, hospital, morgue and court records. Mindful of the risk of over interpretation, the books wears its enormous research lightly.
The local councillor runs fake schools, doctors at free government hospitals and policemen extort the poor with faint promise of life and justice, and self-help groups operate as loan sharks for the poorest. The young in Annawadi drop dead like flies - run over by traffic, knifed by rival gangs, laid low by disease; while the elders - not much older - die anyway. Girls prefer a certain brand of rat poison to end their lives.
Boo has an interesting take on corruption, rife in societies like India's. Corruption is seen as blocking India's global ambitions. But, she writes, for the "poor of a country where corruption thieved a great deal of opportunity, corruption was one of the genuine opportunities that remained".

On the other hand, Boo believes, corruption stymies our moral universe more than economic possibility. Suffering, she writes, "can sabotage innate capacities for moral action". In a capricious world of corrupt governments and ruthless markets the idea of a mutually supportive community is a myth: it is "blisteringly hard", she writes, to be good in such conditions. "If the house is crooked and crumbling", Boo writes, "and the land on which it sits uneven, is it possible to make anything lie straight?

Riaz Haq said...

Here's a News report of losses at sta6e-owned Pakistan Steel Mills:

The Federal Cabinet that met here on Wednesday with Prime Minister Yousaf Raza Gilani in the chair turned down the loss making Pakistan Steel Mills’ (PSM) request for Rs9 billion to bail it out of financial crisis.

PSM, a few days ago, had moved a summary to the federal cabinet through the Ministry of Production to seek a Rs9 billion bailout package from the government as it was in severe financial crisis; and the Mills was running below 20 percent of its capacity. The cabinet deferred the Mills request until the next meeting of the cabinet.

It is worth mentioning that PSM remained a profit-making entity for seven years, from 2000 to 2007, but as the PPP-led coalition government came into office, the entity started accumulating billions of rupees losses and continues to nosedive. The Mills is spending about Rs1.2 billion a month under different heads, whether it is making profit or raking up losses. The giant holds a constant burden of 21,000 employees despite suffering from low productivity.

The Ministry of Production is also now distancing itself from this politically sensitive entity and believes that the Mills is more in control of the Cabinet Committee on Restructuring of State-Owned Enterprises, headed by the Finance Minister Dr Hafeez Sheikh, well-placed sources told The News.

Interestingly, last year in November, the federal minister for production Chaudhry Anwar Ali Cheema also gave a blatant statement by calling the Mills “nothing but a burden on the economy of the country” and had advised the government that it is better to get rid of it rather than feeding it with billions of rupees every year.

Official sources, while giving a blue print of the Mills performance, said that during 2007-08, PSM production attainment stood at 82 percent of its capacity utilisation and after that, it took a declining course to 64 percent in 2008-09, 40 percent in 2009-10 and 35 percent in 2010-11.

This year too, due to shortage of raw material including iron ore and coal, the Mills is running on less than 20 percent of its capacity.

As far as the sale of PSM products is concerned, it was recorded at Rs42.938 billion in 2007-08 and has been on the decline since then, with Rs34.340 billion in 2008-09, Rs23.832 billion in 2009-10 and Rs27.379 billion in 2010-11.

The last time PSM had fetched Rs2.38 billion in profit was in 2007-08, while after that it continuously racked up losses. In 2008-09, its losses were 26.53 billion in 2009-10 it was Rs11.52 billion and in 2010-11 it was Rs11.49 billion.

According to PSM data, during the first quarter (July-September 2011-12) it accumulated losses of about Rs4.3 billion.

Riaz Haq said...

Here are excerpts of a David Brooks' NY Times column on why political participation is important for idealistic youth:

Often they are bursting with enthusiasm for some social entrepreneurship project: making a cheap water-purification system, starting a company that will empower Rwandan women by selling their crafts in boutiques around the world.

These people are refreshingly uncynical. Their hip service ethos is setting the moral tone for the age. Idealistic and uplifting, their worldview is spread by enlightened advertising campaigns, from Bennetton years ago to everything Apple has ever done.

It’s hard not to feel inspired by all these idealists, but their service religion does have some shortcomings. In the first place, many of these social entrepreneurs think they can evade politics. They have little faith in the political process and believe that real change happens on the ground beneath it.

That’s a delusion. You can cram all the nongovernmental organizations you want into a country, but if there is no rule of law and if the ruling class is predatory then your achievements won’t add up to much.

Furthermore, important issues always spark disagreement. Unless there is a healthy political process to resolve disputes, the ensuing hatred and conflict will destroy everything the altruists are trying to build.

There’s little social progress without political progress. Unfortunately, many of today’s young activists are really good at thinking locally and globally, but not as good at thinking nationally and regionally.

Second, the prevailing service religion underestimates the problem of disorder. Many of the activists talk as if the world can be healed if we could only insert more care, compassion and resources into it.

History is not kind to this assumption. Most poverty and suffering — whether in a country, a family or a person — flows from disorganization. A stable social order is an artificial accomplishment, the result of an accumulation of habits, hectoring, moral stricture and physical coercion. Once order is dissolved, it takes hard measures to restore it.

Yet one rarely hears social entrepreneurs talk about professional policing, honest courts or strict standards of behavior; it’s more uplifting to talk about microloans and sustainable agriculture.

In short, there’s only so much good you can do unless you are willing to confront corruption, venality and disorder head-on. So if I could, presumptuously, recommend a reading list to help these activists fill in the gaps in the prevailing service ethos, I’d start with the novels of Dashiell Hammett or Raymond Chandler, or at least the movies based on them.

The noir heroes like Sam Spade in “The Maltese Falcon” served as models for a generation of Americans, and they put the focus squarely on venality, corruption and disorder and how you should behave in the face of it.

A noir hero is a moral realist. He assumes that everybody is dappled with virtue and vice, especially himself. He makes no social-class distinction and only provisional moral distinctions between the private eyes like himself and the criminals he pursues. The assumption in a Hammett book is that the good guy has a spotty past, does spotty things and that the private eye and the criminal are two sides to the same personality.

He (or she — the women in these stories follow the same code) adopts a layered personality. He hardens himself on the outside in order to protect whatever is left of the finer self within.

Riaz Haq said...

Here are some excerpts from Raymond Baker's book "Capitalism's Achilles Heel" regarding Pakistan's venal politicians:

"While Benazir Bhutto hated the generals for executing her father, Nawaz Sharif early on figured out that they held the real power in Pakistan. His father had established a foundry in 1939 and, together with six brothers, had struggled for years only to see their business nationalized by Ali Bhutto’s regime in 1972. This sealed decades of enmity between the Bhuttos and the Sharifs. Following the military coup and General Zia’s assumption of power, the business—Ittefaq—was returned to family hands in 1980. Nawaz Sharif became a director and cultivated relations with senior military officers. This led to his appointment as finance minister of Punjab and then election as chief minister of this most populous province in 1985. During the 1980s and early 1990s, given Sharif ’s political control of Punjab and eventual prime ministership of the country, Ittefaq Industries grew from its original single foundry into 30 businesses producing steel, sugar, paper, and textiles, with combined revenues of $400 million, making it one of the biggest private conglomerates in the nation. As in many other countries, when you control the political realm, you can get anything you want in the economic realm."
Like Bhutto, offshore companies have been linked to Sharif, three in the British Virgin Islands by the names of Nescoll, Nielson, and Shamrock and another in the Channel Islands known as Chandron Jersey Pvt. Ltd. Some of these entities allegedly were used to facilitate purchase of four rather grand flats on Park Lane in London, at various times occupied by Sharif family members. Reportedly, payment transfers were made to Banque Paribas en Suisse, which then instructed Sharif ’s offshore companies Nescoll and Nielson to purchase the four luxury suites.
Upon taking office in 1988, Bhutto reportedly appointed 26,000 party hacks to state jobs, including positions in state-owned banks. An orgy of lending without proper collateral followed. Allegedly, Bhutto and Zardari “gave instructions for billions of rupees of unsecured government loans to be given to 50 large projects. The loans were sanctioned in the names of ‘front men’ but went to the ‘Bhutto-Zardari combine.’ ” Zardari suggested that such loans are “normal in the Third World to encourage industrialisation.” He used 421 million rupees (about £10 million) to acquire a major interest in three new sugar mills, all done through nominees acting on his behalf. In another deal he allegedly received a 40 million rupee kickback on a contract involving the Pakistan Steel Mill, handled by two of his cronies. Along the way Zardari acquired a succession of nicknames: Mr. 5 Percent, Mr. 10 Percent, Mr. 20 Percent, Mr. 30 Percent, and finally, in Bhutto’s second term when he was appointed “minister of investments,” Mr. 100 Percent.

Riaz Haq said...

Here's an excerpt from Time magazine on anti-corruption initiative in Pakistan:

(LAHORE, Pakistan) — Corruption is so pervasive in Pakistan that even Osama bin Laden had to pay a bribe to build his hideout in the northwest where he was killed by U.S. commandos.

Ordinary Pakistanis complain they have to grease officials’ palms to get even the most basic things done: File a police report when they have a traffic accident. Obtain copies of court documents. Get permission to see their relatives in the hospital.

Now, an enterprising group of Pakistani officials is cracking down on this culture of graft with an innovative program that harnesses technology to identify corruption hot spots in the country’s most populous province, Punjab.

The initiative, which leverages the ubiquitous presence of cell phones, relies on the simple concept of asking citizens about their experience.

The program — run by the Punjab Information Technology Board — uses telephone calls and text messages to get feedback from citizens conducting transactions with a dozen different government departments, including those dealing with property, health and emergency response.

Many of the reported cases of corruption involved low-level property officials known as patwaris, who are notorious for demanding bribes. One man in the city of Multan sent a text message saying he had to pay a patwari about $170 to get his new property registered. Another man in Sheikhpura district reported paying about $15 to a patwari and his assistant and said “they should be removed from their jobs.”

Bin Laden’s courier, who built the al-Qaida chief’s compound in the town of Abbottabad, had to pay roughly a $500 bribe to a patwari to purchase the required land, according to Pakistani intelligence officials, who spoke on condition of anonymity because they were not authorized to talk to the media.
The low level of corruption reported could be partly driven by citizens’ reluctance to tell government officials the truth, said Michael Callen, an assistant professor of political science at the University of California, Los Angeles, who is conducting research on the program. That could improve as the program becomes more widely known, the anonymity of individuals is protected and more punitive action is taken against corrupt officials, he said.

The initiative’s scale and proactive solicitation of feedback differentiate it from other anti-corruption efforts around the globe, such as the “I Paid a Bribe” website run by an Indian non-profit group. The website and other similar schemes rely on citizens to take the initiative to complain. That can produce fictional accusations made to blackmail honest officials, said Umar Saif, head of the Punjab technology board.

The Punjab government already has used data from the program to pressure officials to clean up their operations.
While the initiative does not attempt to tackle the millions of dollars thought to be involved in high-level government corruption, it faces significant challenges since much of Pakistan’s political system is based on patronage. Politicians hand out jobs to their supporters in exchange for votes. It’s not the salary or benefits, but the chance to solicit bribes that makes the jobs highly coveted.

Riaz Haq said...

Here's a story of misuse of counter-terror funds by Pakistan's Ex-Home Minister Rehman Malik:

Pakistani officials used a secret counter-terrorism fund to buy wedding gifts, luxury carpets and gold jewellery for relatives of ministers and visiting dignitaries, leaked documents reveal.

The revelations cast a spotlight on high-level corruption in Pakistan as the impoverished but nuclear-armed country battles a surge in Taliban violence.

They concern the National Crisis Management Cell (NCMC) of Pakistan's interior ministry, formed in 2000 to co-ordinate between the country's intelligence agencies and federal and provincial governments on national security matters.

The NCMC received about 425 million rupees (HK$53.4 million) from Pakistani government coffers between 2009 and last year, according to files obtained by Umar Cheema, a journalist for Pakistani daily The News.

During that time the interior ministry was headed by Rehman Malik, a supporter of former president Asif Ali Zardari's Pakistan People's Party (PPP).

Many of the documents deal with payments to intelligence sources, routine maintenance of vehicles and overtime for employees. But they also include receipts for gifts for US and British embassy officials, as well as flowers and sweets for journalists.

One receipt for 70,000 rupees is itemised as: "Pair of wristwatches for marriage of nephew of minister for interior".

The documents show that on a trip to Rome for an Interpol conference in November 2012, Malik took a necklace, wooden tables and a TouchMate tablet computer as gifts.

The counter-terror fund was also used to buy three rugs as wedding gifts for the son of former prime minister Raja Pervez Ashraf early last year.

A set of 21-carat gold jewellery worth US$3,000 was bought for one unnamed individual, while another was the recipient of a US$1,500 set.

Among the more bizarre items paid for from the fund was the US$800 cost of four sacrificial goats, plus butchery costs for the festival of Eid-ul-Adha.

Pakistan's present government, led by Prime Minister Nawaz Sharif, has ordered an audit of the interior ministry accounts from 2010 to last year. Ministry spokesman Danyal Gilani confirmed the audit was continuing.

Riaz Haq said...

Here's a NY Times story about Indian Swiss accounts which may also be relevant to Pakistan:

NEW DELHI — Generations of Indians have grown up imagining a bank with high ceilings and chandeliers in Switzerland, where shadowy Indians go to leave a lot of illicit cash in the care of practical white men. In popular lore, the “Swiss bank account” is an essential part of Indian villainy, even though illicit money is a common household possession.

So, last week, when a news agency quoted a Swiss official as saying that Switzerland was willing to share with the Indian authorities information about Indians of dubious nature who hold bank accounts in that country, the Indian government appeared to give the news considerable importance. Considering the infamy of the Swiss bank account in the Indian imagination, data released last week by Switzerland’s central bank, the Swiss National Bank, contained a surprise.

Indians, not all of them shady, held about $2.3 billion in Swiss banks last year. That’s 40 percent more than in 2012, but just a third of what they had parked in 2006. Indian accounts represented just 0.15 percent of the total holdings by foreigners in Swiss banks in 2013.

When Indians talk about their country’s illicit money, which is chiefly tax-evaded funds and income by illegal means, there is, of course, righteous contempt. But there is also a swagger over the sheer size of this shadow economy, because, after all, it is Indian. So a mere $2.3 billion was not what most Indians would have expected their rich and corrupt to have stashed in their Swiss nests.

It is possible that Indian money has fled to safer havens over the years, or has returned to India disguised as respectable investments.

Nobody knows just how big India’s illicit economy is, but in recent years Indians have come to accept that it is very big. From the range of numbers that claim to measure the shadow economy, Indians tend to believe in the highest.

A popular notion is that $1.4 trillion of illicit Indian money has flown out of the country over the decades and is held in various parts of the world. The apparent source of this figure is an analysis in 2009 by the academic R. Vaidyanathan. He had extrapolated it from a report released by Global Financial Integrity, a think tank in Washington; $1.4 trillion swiftly became a widely accepted estimate of Indian illicit money held abroad.


Mr. Kar’s report hit India at a time when the middle class was convinced that it was disgusted by corruption. The $500 billion figure was picked up by politicians, reformers and officials, who quoted each other to support their claim.

A study published in 2006 by Friedrich Schneider on the world’s shadow economies dealt briefly with the “tax morality” of Germans. According to the study, two-thirds of the Germans surveyed regarded tax evasion as a “trivial offence,” while only one-third judged stealing a newspaper this way. Indian tax morality is similar, but it makes a distinction between expatriate illicit money, which is viewed as a serious crime perpetrated by the very corrupt, and money held within India, which is perceived as a practical measure.

Black money, as illicit money is called in India, is a significant part of Indian life. Most Indians of means, including many who protested on the streets against political corruption, deal in illicit money when they buy or sell real estate, or when they need foreign exchange to import goods. Huge amounts of cash travel across India during election seasons to bribe voters. Rich ladies prowl Delhi’s malls with bricks of cash in their bags, or with attendants who carry the bricks for them. And, there is a network of quaint people much in demand for their ability to magically transmute rupees collected anywhere in India into dollars that can be made to appear almost anywhere else in the world.

Riaz Haq said...

#Pakistan’s #Sharif brothers, #Zardari figure on NAB’s list of 150 ‘high-profile’ #corruption cases. via @sharethis

Pakistan’s National Accountability Bureau (NAB) has reportedly submitted a list of 150 mega corruption cases, involving high-profile figures such as, Prime Minister Nawaz Sharif, his brother and Punjab Chief Minister Shahbaz Sharif, former premiers, ministers and top bureaucrats, before the country’s Supreme Court.
The report said that an inquiry was being carried out against the incumbent prime minister and his brother in a case pertaining to the construction of a road from Raiwind to Sharif family House worth Pakistani rupees 126 million, reported the Dawn.
Former Prime Minister Raja Pervaiz Ashraf is also being scrutinised for the rental power plants (RPP) case.
Also, a case has been launched against former President Asif Ali Zardari for possessing assets beyond resources.
It also mentioned 50 cases of monitory irregularities, misuse of powers and land scams.
Among the monitory irregularities, inquiries were being conducted in 22 cases, with probes launched into 13 cases and references in 15 cases.
In land scams, on the other hand, 29 cases were under inquiry, 13 cases were being investigated and references had been filed in eight cases.
The report also showed that inquiries were underway in 20 cases of abuse of power, while a probe had been launched into 15 cases and references filed in 15 cases.

The case, which was filed by Manzoor Ahmed Ghauri earlier this year against NAB chairman and other officials, is being heard by a three-member bench headed by Justice Jawwad S. Khawaja.
The report was submitted after the court expressed disappointment over what they claimed was an extreme form of ‘maladministration’ in the anti-corruption body.

Riaz Haq said...

The Panama Papers reveal hidden wealth of 12 world leaders including #Pakistan #PM #NawazSharif in offshore account

The hidden wealth of some of the world’s most prominent leaders, politicians and celebrities has been revealed by an unprecedented leak of millions of documents that show the myriad ways in which the rich can exploit secretive offshore tax regimes.

The Guardian, working with global partners, will set out details from the first tranche of what are being called “the Panama Papers”. Journalists from more than 80 countries have been reviewing 11.5m files leaked from the database of Mossack Fonseca, the world’s fourth biggest offshore law firm.

The records were obtained from an anonymous source by the German newspaper Süddeutsche Zeitung and shared by the International Consortium of Investigative Journalists with the Guardian and the BBC.

Though there is nothing unlawful about using offshore companies, the files raise fundamental questions about the ethics of such tax havens – and the revelations are likely to provoke urgent calls for reforms of a system that critics say is arcane and open to abuse.

The Panama Papers reveal:

Twelve national leaders are among 143 politicians, their families and close associates from around the world known to have been using offshore tax havens.
A $2bn trail leads all the way to Vladimir Putin. The Russian president’s best friend – a cellist called Sergei Roldugin - is at the centre of a scheme in which money from Russian state banks is hidden offshore. Some of it ends up in a ski resort where in 2013 Putin’s daughter Katerina got married.
Among national leaders with offshore wealth are Nawaz Sharif, Pakistan’s prime minister; Ayad Allawi, ex-interim prime minister and former vice-president of Iraq; Petro Poroshenko, president of Ukraine; Alaa Mubarak, son of Egypt’s former president; and the prime minister of Iceland, Sigmundur Davíð Gunnlaugsson.
Six members of the House of Lords, three former Conservative MPs and dozens of donors to UK political parties have had offshore assets.
The families of at least eight current and former members of China’s supreme ruling body, the politburo, have been found to have hidden wealth offshore.
Twenty-three individuals who have had sanctions imposed on them for supporting the regimes in North Korea, Zimbabwe, Russia, Iran and Syria have been clients of Mossack Fonseca. Their companies were harboured by the Seychelles, the British Virgin Islands, Panama and other jurisdictions.
A key member of Fifa’s powerful ethics committee, which is supposed to be spearheading reform at world football’s scandal-hit governing body, acted as a lawyer for individuals and companies recently charged with bribery and corruption.
One leaked memorandum from a partner of Mossack Fonseca said: “Ninety-five per cent of our work coincidentally consists in selling vehicles to avoid taxes.”

Riaz Haq said...

The (Panama Papers) data contains secret offshore companies linked to the families and associates of Egypt's former President Hosni Mubarak, Libya's former leader Muammar Gaddafi and Syria's President Bashar al-Assad as well.

The documents reveal many Israeli connections and disclose people with Israeli citizenship as well as Israeli banks and entities have used the offshore law firm to register companies in tax havens around the world, Haaretz reported.

Several Israeli banks appear in the files, Haaretz said. Bank Hapoalim managed some of its trusteeship activities for trust funds through the law firm. This activity, carried out by means of the subsidiary Poalim Trust Services, closed down in 2011. The documents also contains many correspondences concerning Bank Leumi activity in Jersey in the Channel Islands.

Blacklisted interests

At least 33 people and companies in the documents had been blacklisted by the US for wrongdoing, such as some Iranian interests and those of Lebanon's Hezbollah, the ICIJ said.

One of the companies exposed in the leaked documents provided fuel for aircraft used by the Syrian government to bomb and kill thousands of its citizens, Haaretz said.

"These findings show how deeply ingrained harmful practices and criminality are in the offshore world," said Gabriel Zucman, an economist at the US-based University of California, Berkeley, and author of the book The Hidden Wealth of Nations: The Scourge of Tax Havens.

Zucman, who participated in the ICIJ investigation, said that the publication of the leaked documents should encourage governments to impose “concrete sanctions” on countries where such firms are registered and on institutions that provide confidentiality for companies using tax havens, Haaretz said.

The leaked data from 1975 to the end of last year provides what the ICIJ described as a "never-before-seen view inside the offshore world."

The investigation yielded the millions of documents from about 214,000 offshore entities, the ICIJ said. The source of the documents, Mossack Fonseca, is a Panama-based law firm with offices in more than 35 countries. It is the world’s fourth-biggest offshore law firm, the Guardian said.

Though most of the alleged dealings are said by the ICIJ to be legal, they are likely to have serious political impact on many of those identified.

Among the main claims of the ICIJ investigations:

Close associates of Putin, who is not himself named in the documents, "secretly shuffled as much as $2bn through banks and shadow companies," the ICIJ said.
The files identified offshore companies linked to the family of Chinese President Xi Jinping, who has led a tough anti-corruption campaign in his country, the ICIJ said.
In Iceland, the files allegedly show Prime Minister Sigmundur David Gunnlaugsson and his wife secretly owned an offshore firm holding millions of dollars in Icelandic bank bonds during the country's financial crisis.
The leaked documents were reviewed by a team of more than 370 reporters from over 70 countries, according to the ICIJ.

The BBC cited Mossack Fonseca as saying it had operated "beyond reproach" for 40 years and had never been charged with any criminal wrongdoing.

Haaretz, however, reported that authorities in the British Virgin Islands fined Mossack Fonseca $37,500 for violating laws against money laundering - it had registered a company in the name of former Egyptian President Hosni Mubarak’s son, but did not report its relationship to the two even after both father and son were charged with corruption in their country.

It was not immediately clear who was the original source of the leaked documents.
- See more at:

Riaz Haq said...

#Pakistan PM #NawazSharif's children raised £7m against #UK flats owned offshore. #PanamaPapersLeak

The children of Pakistan’s prime minister, Nawaz Sharif, raised a £7m loan from Deutsche Bank against four flats in Park Lane in London owned by offshore companies.

Acquired while Sharif was in opposition, the properties were owned by British Virgin Islands shelf companies on the books of the offshore agent Mossack Fonseca, the Panama Papers show.

The Sharif family’s investment in upmarket London property was disclosed in 1998 by Rehman Malik, a political opponent and the head of Pakistan’s Federal Investigation Agency, who had fled to London after allegedly being arrested and tortured.

Malik compiled a report that he claimed showed the Mayfair homes had been bought using “ill-gotten wealth earned through corrupt practices”. He claimed they had not been declared on tax returns, in breach of Pakistani law.

In April 2000, after Sharif had been toppled from his second term as prime minister and put in prison by Pakistan’s then military leader, Pervez Musharraf, the country’s chief corruption prosecutor repeated the allegations, saying: “We believe the money used to buy these apartments was stolen from the people of Pakistan.”

Sharif and members of his family have always denied any wrongdoing, and none have ever been convicted of any offence. Supporters say the charges against them are politically motivated. It is not illegal to own property through an offshore company.

Yesterday the family responded to the furore in Pakistan with a statement saying the Panama Papers “have made no allegations of wrongdoing against the Sharif family”, and that “all of the corporations owned by the Sharif family are legal and financially sound”.

In October 2008, Nawaz Sharif’s son Hussain and daughter, Mariam, turned to the Swiss arm of Deutsche Bank to borrow large sums, using the flats as collateral.

Three BVI companies were used to raise the loan, which entitled Nawaz Sharif’s adult children to borrow £3.5m in cash and a further £3.5m in money to be invested in “liquid assets” by Deutsche Bank.

Deutsche Bank said: “We fully recognise the importance of this issue. We have enhanced our procedures for bringing clients on board and verifying with whom we are doing business, and our policies, procedures and systems are designed to ensure that we comply with all applicable rules and regulations.”

Deutsche began auditing its private banking clients in 2013, seeking confirmation that they complied with all relevant tax rules. Checks on its Swiss and Luxembourg clients are now understood to be complete.

The flats in question are at Avenfield House overlooking Park Lane, where Sharif was once photographed at a press conference with his political rival Benazir Bhutto. They are held by two BVI entities on the books of Mossack Fonseca, Nielsen Enterprises and Nescoll Limited.