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...

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...

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 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 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'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.

Riaz Haq said...

Post-Panama case Pakistan
Dr Ikramul Haq, Huzaima Bukhari August 27, 2017 Leave a comment

The institutional structure of economy is designed to generate rents for the elite at the expense of the middle classes and the poor. So what is at stake?

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 Panama Papers: how the world’s rich and famous hide their money offshore [The Guardians, April 3, 2016]
Through the report titled, Panama Papers: Politicians, Criminal & Rogue Industry That Hide Their Cash, some of the crooks of the world — drug dealers, mafias, corrupt politicians and tax evaders — have been exposed. Pakistanis who are part of this undesirable club are unveiled through a year-long investigation project by journalist Umar Cheema in his write-up, Pak politicians, businessmen own companies abroad [The News, April 4, 2016].
Post-Panama case Pakistan is emerging as a dangerous place where the government is openly protecting and patronising the convicted and accused. There is no will to end state-sponsorship of organised crimes. Notorious laws — sections 5 and 9 of the Protection of Economic Reforms Act, 1992 and section 111(4) of the Income Tax Ordinance, 2001 — are still protecting dirty money, financing of terrorism and encouraging tax evasion. In the presence of such laws, the judiciary has punished the three-time elected prime minister — an unprecedented move that can be a starting point to end mafia-like rule in Pakistan as happened in Colombia after years of power of dirty money muzzling institutions or eliminating those who were not purchasable.


How can we eliminate corruption and tax evasion in Pakistan in the presence of permanent money-laundering and tax amnesty scheme in the form of section 111(4) of the Income Tax Ordinance, 2001 that facilitates the whitening of dirty money and tax evaded funds. It ensures that for money brought into Pakistan through normal banking channels no question would be asked by tax officials or FIA. Through this section, criminals and tax evaders get their undeclared money whitened by paying just an extra 3 to 4 per cent to any money exchange dealer to get remittances fixed in their names.
It is thus clear, brilliantly explained by Dr. Akmal Hussain in Restructuring for economic democracy, that “the institutional structure of Pakistan’s economy is designed to generate rents for the elite at the expense of the middle classes and the poor.” It is this structural characteristic of the economy and not just bribery that prevents sustained high economic growth and equity in Pakistan. Unless we change this structure of economy, the morbid story of corruption and tax evasion will continue. In the presence of these maladies, no decision of Supreme Court can help Pakistan progress and become an egalitarian state.

Riaz Haq said...

Nearly 90 per cent of countries have made no significant progress since 2017


The CPI ranks 180 countries and territories by their perceived levels of public sector corruption on a scale of zero (highly corrupt) to 100 (very clean).

The Asia Pacific average holds at 45 for the fourth consecutive year, and over 70 per cent of countries rank below 50.

New Zealand (87), Singapore (83), Hong Kong (76) and Australia (75) lead the region.
Afghanistan (24), Cambodia (24), Myanmar (23) and North Korea (17) are the lowest in the region.
Singapore (83) and Mongolia (33) are at historic lows this year.
While many countries have stagnated, countries in Asia Pacific made up nearly half of the world’s significant improvers on the CPI since 2017.

The significant improvers are: South Korea (63), Vietnam (42) and the Maldives (40).
Three countries declined over this time: Malaysia (47), Mongolia (33) and Pakistan (27).
For each country’s individual score and changes over time, as well as analysis for each region, see the region’s 2022 CPI page.


Across Asia Pacific, governments have claimed they would tackle corruption, but few have taken concrete action. Pervasive corruption and crackdowns on civic space leave the situation dire.

Malaysia (47) has been declining for years as it struggles with grand corruption in the wake of the monumental 1MDB and other scandals implicating multiple prime ministers and high-level officials. The current prime minister has promised to clean up but still appointed a deputy prime minister with serious corruption allegations as part of efforts to stabilise his unity government.
In India (40), considered the largest democracy in the world, the government continues to consolidate power and limit the public’s ability to demand accountability. They detain more and more human rights defenders and journalists under the Unlawful Activities Prevention Act (UAPA).
Massive protests erupted in Sri Lanka (36) as the government’s financial mismanagement resulted in an economic meltdown in the country. Noting the link between pervasive corruption among the country’s leadership and the crisis, Sri Lankans demanded anti-corruption reforms and refused to leave the streets despite brutal police crackdowns.
After years of decline, Australia (75) is showing positive signs this year. Most notably, the government elected last year fulfilled its promise to pass historic legislation for a new National Anti-Corruption Commission. Yet there is still more work that needs to be done, including more comprehensive whistleblower protection laws, and caps and real time disclosure on political donations. Greater transparency and longer cooling off periods to reduce the 'revolving doors' of lobbying must also be prioritised.
In parts of the Pacific, governments have interfered in elections, denying the public the opportunity to have their voices heard. Even with its history of electoral strife, Papua New Guinea’s (30) August election was called its worst ever amid numerous irregularities, stollen ballot boxes and even bouts of violence. In the Solomon Islands (42), frustration with reported collusion between politicians and foreign companies boiled over into violent civil unrest late last year. Now, the government has delayed elections scheduled for until 2024 raising further concerns over the abuse of executive power.
Transparency International calls on governments to prioritise anti-corruption commitments, reinforcing checks and balances, upholding rights to information and limiting private influence to finally rid the world of corruption – and the instability it brings.