WB links $6 bn aid with improved governance -Pakistan Press Foundation (PPF)

Paksitan Press Foundtion

WB links $6 bn aid with improved governance

By Mehtab Haider

ISLAMABAD: The World Bank has linked $6 billion lending for Pakistan under the Country Partnership Strategy (CPS) with improved governance, saying that the Worldwide Governance Indicators suggest that Pakistan is at or below the 25th percentile on key dimensions of governance, and significantly below the South Asia averages with the exception of regulatory quality.

The WB’s CPS (2010-13) 118-page long report (exclusively available with The News) states that ultimately governance challenges lie at the heart of most of Pakistan’s economic development priorities.

Quoting a survey, the CPS states that the result of a range of survey confirms Pakistan’s governance challenges. “A recent Investment Climate Survey indicates that governance constraints are critical to the overall business environment. Despite improvements in the business-governance interface, firms’ perception of corruption and crime has worsened; between 2002 and 2007, the percentage of firms citing corruption as a major constraint to doing business rose from 40 to 57 per cent. Overall, almost half of all Pakistani firms reported at least one incident of bribery,” the CPS document further states.

To ensure well functioning institutions of accountability and oversight, the CPS states that there is limited oversight and weak accountability of public institutions. There are also weaknesses in the legislative scrutiny of annual budget law and of audited accounts and audit reports as well as institutional independence eroded by political pressures. Strategy has been developed for improving effectiveness of institutions of accountability such as Ombudsman, Public Accounts Committee and Auditor General.

An action plan for implementation of Freedom of Information Ordinance has been developed and under implementation, the CPS states. Pakistan is also committed under the WB’s CPS that it would make efforts for increased transparency and accountability in use of public funds. “The completion of audit within six months of end financial year will be ensured and delivery of audit reports to the legislatures will be made within one month of the audit completion,” the CPS said.

For increased power generation and enhanced supply, the losses of electricity sector will be reduced from 22 per cent to 17 per cent and for unaccounted gas from 10 per cent to 6 per cent. The loadshedding for power sector will be reduced from 25 per cent of peak demand to 15 per cent and gas loadshedding will be eliminated.

Islamabad is also committed with the Bank for zero budget support for tariff subsidies, clearly indicating that the power sector will have to put its house in order otherwise the electricity tariff will have to be increased. The WB will also provide assistance for cross-border energy supply initiated under Central Asia-South Asia (CASA) for importing 1,000 MW electricity to Afghanistan and Pakistan.

The World Bank Group’s support to Pakistan will be organised around four pillars: (i) improving economic governance; (ii) improving human development and social protection; (iii) improving infrastructure to support growth; and improving security and reducing the risk of conflict.

The achievement of Pakistan’s development objectives depends on improved governance of the public sector – greater transparency and accountability, strengthened legal and regulatory frameworks, especially for private sector activity, improved responsiveness, and a better interface with citizens.

Pakistan is committed under the CPS to scale down its fiscal deficit to 3.5 per cent of GDP by 2012-13 from expected 6.2 per cent of GDP for fiscal year 2009-10, implement strategy to restructure cash bleeding public sector enterprises and then privatise, mobilisation of revenues by increasing tax to GDP ratio to 12.7% by 2012-13 and introduction of broad-based Value Added Tax (VAT).

Conflict and insecurity, the CPS states, represents major obstacles to economic development and poverty reduction and therefore dealing with the causes and consequences of conflict represents a critical challenge for Pakistan.

The security situation in Pakistan is precarious, having deteriorated over the past four years, and imposes a large cost to society. The government and donors recognise that the crisis has deep historical roots as well as links to the ongoing conflict in Afghanistan.

The Federally Administered Tribal Areas – a focus of ongoing military operations — has long been administered under a colonial-era legal and governance framework based on tribal structures that leaves it outside of the regular constitutional framework.

The WB states that the ascendancy of militancy in Swat, for example, was directly linked to perceived degradation in the responsiveness of the justice system.

The region also hosts among the largest demographic segments of young men between the ages of 15 and 29 years while offering little in the way of employment and livelihood opportunities. Young men are particularly vulnerable to the economic incentives provided by militant groups.

“The widely reported monthly stipend for a ground-level recruit is between Rs 15,000 and Rs 20,000 (US$188 to US$251), far more than Rs 6210 ($77) a month for a rare, well-paying unskilled job,” it states.

Unemployment among young men aged 15 to 24 stands at 10.5 per cent in KP (numbers are dramatically higher in tribal areas than in settled districts). In contrast, unemployment in Sindh province for the same segment is at 4.1 per cent, and for the country as a whole the figure rests at 7.1 per cent. The adverse impacts of these disparities, in terms of their contribution to the nurturing of grievances and to militancy and insecurity, are increasingly felt beyond the northwest frontier region.

Political and governance deficits may be the single most important driver of crisis in FATA and KP today, perpetuating a historical experience of disenfranchisement, alienation, corruption, poverty and underdevelopment, and facilitating the conditions of lawlessness, insecurity and extremism that have fuelled the downward spiral of crisis.
Source: The News