Corruption, Causes and Control Ethics and Accountability in the Public Sector By Syed Adil Gilani, Adviser, TI Pakistan Transparency International s definition of corruption is the abuse of entrusted power for private gain. Corruption is a rife ingrained in the minds of citizens. They take it is a norm. They do not consider it wrong to offer bribe to officials or a kickback to get a contract, as experience has shown them that it is the prevalent way to get things done. They know that if they don t bribe officials they would not get the required services or would have to wait for a long period of time. Eradication of corruption, be it petty or grand, is crucial primarily because it is intertwined with the inefficiency of the law enforcement agencies which consequently leads to the decrement of one of the major structures on which the society stands. Furthermore, research shows that the inverse correlation between corruption and growth worsens when the quality of governance deteriorates. What is CPI? Corruption Perceptions Index (CPI) ranks countries/territories based on how corrupt their public sector is perceived to be. It is a composite index, a combination of polls, drawing on corruption-related data collected by a variety of reputable institutions. The CPI reflects the views of observers from around the world, including experts living and working in the countries/ territories evaluated. The CPI focuses on corruption in the public sector, or corruption which involves public officials, civil servants or politicians. The data sources used to compile the index include questions relating to the abuse of public power and focuses on bribery of public officials, kickbacks in public procurement, embezzlement of public funds, and on questions that probe the strength and effectiveness of anticorruption efforts in the public sector. As such, it covers both the administrative and political aspects of corruption. The 2011 CPI draws on following data from 13 institutions. The information used for the 2011 CPI is survey data from these sources gathered between December 2009 and September 2011. Transparency International; Corruption Perception Index Pakistan/India/Bangladesh Score out of 10, and Ranking Year Pakistan Rank/Score Pak Most corrupt Rank India Rank/Score India Most corrupt Rank B desh Rank/Score B Desh Most corrupt Rank No of Countries Ranked 1
2011 141/2.5 42 94/3.1 2010 143/2.3 34 88/3.3 2009 139/2.4 42 84/3.4 2008 134/2.5 47 85/3.6 2007 138/2.4 42 72/3.5 2006 142/2.2 20 70/3.3 2005 144/2.1 16 88/2.9 2004 129/2.1 19 90/2.8 2003 92/2.5 42 83/2.8 2002 77/2.6 26 71/2.7 2001 79/2.3 13 71/2.7 2000 69/2.8 1999 87/2.2 13 72/2.9 1998 71/2.7 15 66/2.9 1997 48/2.53 5 45/2.75 1996 53/1 2 46/2.63 89 91 95 96 108 94 72 58 51 32 21 22 28 20 8 9 120/2.7 134/2.4 139/2.4 147/2.1 162/2 156/2.1 158/1.7 145/1.5 133/1.3 102/1.2 91/0.4 51/2.29 63 43 42 34 18 8 2 3 1 1 1 4 183 178 180 180 179 163 159 147 133 102 91 90 99 85 52 54 Note: A country/territory s score indicates the perceived level of public sector corruption there on a scale of 0-10, where 0 means that a country is perceived as highly corrupt and 10 means that a country is perceived as very clean. A country's rank indicates its position relative to the other countries/territories included in the index. Besides CPI, TI s portfolio of global research also includes: Global Corruption Barometer (GCB): A representative survey of more than 70,000 households in more than 90 countries on people s perceptions and experiences of corruption. The most recent Global Corruption Barometer can be found at: http://www.transparency.org/policy_research/surveys_indices/gcb. Bribe Payers Index (BPI): A ranking of leading exporting countries according to the perceived likelihood of their firms to bribe abroad. It is based on a survey of business executives focusing 2
on the business practices of foreign firms in their country. The most recent Bribe Payers Index can be found at: http://www.transparency.org/policy_research/surveys_indices/bpi.. Global Corruption Report (GCR): A thematic report that explores corruption with regards to a specific sector or governance issue. The report provides research and analysis done by the experts as well as the relevant case studies. The most recent Global Corruption Report can be found at: http://www.transparency.org/publications/gcr.. National Corruption Perception Survey: A survey carried out by TI-Pakistan through an independent agency to ascertain the perception of corruption of ten sectors of the Government. Respondents belong to all geographical areas of Pakistan and to all segments of the society. What Are the Causes of Corruption For few people, corruption seems be the easiest way, or the only way-to get what they want. As corruption snowballs due to lack of Rule of Law, corruption has become more acceptable in Pakistan until it has finally become a way of life here. Those with pitifully low wages feel that they have no option but to demand bribes if they want to make a decent living. And when those who extort bribes or pay them to gain an unfair advantage go unpunished, few are prepared to swim against the tide. Two of the most powerful factors that keep the fire of corruption growing are Selfishness and Greed. Because of selfishness, corrupt people turn a blind eye to the suffering that their corruption inflicts on the others, and they justify bribery simply because they benefit from it. The more material benefits they amass, the greedier those who follow corruption become. TI Pakistan believes that absence of Rule of Law is the main cause of widespread growth of corruption in Pakistan. Measures to Reduce Corruption. Below are some of the recommendations of TI Pakistan to curb corruption: All Government Departments to develop their websites and place all procedures and fees on it. All Government Departments to have a complaint mechanism with a prescribed period to address complaints. Judiciary to adjudicate all cases within one year since the initial filing of the case. Civil Society and Community Based Organizations to be mobilized to assist victims of corruption to file and process their cases. Media to be motivated to publish corruption done by various institutions. 3
Report Card Study on Corruption in the different sectors/institutions be initiated, published and disseminated and the Government lobbied to take appropriate remedial measures. Donor agencies to have third party monitoring to ensure that funds loaned and grants are used for the purpose for which they have been provided. Standard Procurement Rules should be followed in all parts of the country. Procurement Regulatory Authorities should be promulgated in provinces where one does not exist. Procurement Regulatory Authorities be given power to penalize defaulters. Role of TI Pakistan. Being a national chapter of the world s only anti-corruption network, TI Pakistan had the privilege of the commencement of its functions in February 2001. The entity embarked upon the journey to strive towards the same notion, yet the challenges faced brought the struggle to a whole new level, for it was not only the law enforcement agencies, but all the other organizations who were fully involved in corrupt practices. However, particular focus was emphasized towards corrupt activities in the public sector because its employees have the discretionary power that enables them to observe and respond to potentially corrupt conduct and, at the same time, extract bribes. Hence, if the officials are cognizant of their responsibilities and are accountable to their conduct, fraud in other entities would then be controlled by the law enforcement agencies themselves. The credible board of trustees of the organization comprises of ten trustees. The Trustees include retired High Court Judges, Chartered Accountants, Senior Advocate of the Supreme Court, Social Activist, representatives of the Private Sector and a Social Scientist. Four of the trustees are females. Similarly, the board selects an advisory committee that helps the board revitalize the primary objectives of the organization which further enhances the decision making ability of the board and ensures that such a strategy is devised which is in line with the principles of the mission statement. Transparency International Pakistan is striving towards the achievement of the same goals as that of the other TI National Chapters all over the world, yet its credibility was established after certain prominent cases were taken up Suo Moto by the Supreme Court of Pakistan like that of National Insurance Company Limited (NICL), Rental Power Plant, Pakistan Steel, PIA, CDA, Cartel of Contractors proved by CCP, and many more. It collaborates with different partners in different ways. With the civil society and community based organizations, TI-P assists in awareness raising skills, corruption monitoring techniques and advocacy. This is done through TI-P s own staff, who has received trainings at various regional and global workshops. TI-P also strives to mobilize the support of individuals and institutions through the involvement of the youth, particularly students by imparting training to them on various topics. Transparency International Pakistan, besides building partnership and collaboration, also builds up the capacity 4
of the public sector in various fields. One of the major avenues of corruption is through public procurement. It is preferable to prevent corruption than to prosecute later as the history of Pakistan suggests that there has been a very few cases of corruption that lead to the prosecution of the accused. Due to the intervention of TI-P, many violations have been rectified; the Courts, PAC, NAB and PPRA have taken actions resulting in the savings of billions of rupees to the exchequer. CASE STUDIES. NICL Corruption Case. After there were a certain irregularities observed in the tender for Land in Lahore, Karachi and Islamabad published on the 13 th of December 2009, TIP sent a letter to Chairman NICL indicating that they violated PPRA rule 11, according to which the bidding documents were to be submitted within 15 days, whereas the time allotted by the organization was 8 days. Furthermore, there was a violation in rule 23. As per PPRA rule 23, bid documents required were to be issued at the exact time of the advertisement of the tender, yet the company did not do so. The copies of the letter were sent for information and also to take notice to the Prime Minister, Chairman PAC, AGP, Chairman NAB, MD PPRA and Registrar Supreme Court of Pakistan. When PPRA sought an explanation against the said violations, NICL reported back indicating that the purchase was an immediate requirement and to clarify any confusions, the time period has been extended and the required documents are attached. However, some very serious allegations were noted against the NICL after four pieces of land were purchased after being evaluated at a higher price in comparison to the market value. For the 803 kanal plot in Lahore, the property was purchased at an amount that was seven times higher than the market value and hence brought about a loss of around 1.45 billion rupees to the national exchequer. Furthermore, for the office space in Dubai in Liberty Tower, 10 acre plot purchased in Korangi Deh Phihai and another piece of land purchased in Lahore resulted in the loss of AED 40 million, 70 million rupees and 1.2 billion rupees respectively. From what was observed, several award of contracts for the paintings and furniture were provided to M/s Casa Bella. However, Casa Bella was not the license holder of Pakistan Engineering Council. Similarly, the consultants hired for the evaluation of the land were not only reported to be relatives of the Chairman NICL, but did not hold the license from Pakistan Engineering Council as well. It was soon after such allegations were reported in TIP letters to Chairman NICL, and Mr. Asif Ahmed who was a brother of one of the bidders Mr. Danish of M/s Dream Resort Limited had requested a Suo Moto action against this tender, the Supreme Court intervened and directed the National Accounting Bureau (NAB) on 26 April 2010 to submit a report against the request made by the TIP. From the inquiry report provided to the court, NAB confirmed that the allegations held against NICL were true and that they struck a deal with a private company called M/s Privileges. Within a couple of months, NICL submitted a report to the Supreme Court after which Chief Justice sent it to TIP for its comment on it. TIP sent a detailed report to the Supreme 5
Court in return which reiterated that the NAB inquiry report proves the corruption of Rs 1.426bilion, and according to rule no. 7 of the Integrity Pact, it is binding upon the violators M/s Privileges farms to make a payment of ten times the amount of corruption as a fine that would bring about the total penalty to be 14.26 billion rupees and should be recovered and deposited with the Government of Pakistan. TIP went on further to stress that exemplary punishments be given to the violators so as to ensure that malpractices of this nature are avoided in the future. Supreme Court ordered to concert the TIP letter and convert the HR Case to Suo Moto Case 18 of 2010. In addition to that, Supreme Court ordered Secretary Commerce to file a criminal complaint with the FIA and went on further to direct the matter relating to the trial of the accused to FIA and NAB. Furthermore, Rs 40.5 million were traced to accounts of Mr. Amin Faim, Minister of Commerce, and the SC has ordered legal action against the siting minister. Latest Status of NICL Case. It was reported in press on 2 nd of July 2012 that the Commerce Ministry is learnt to have started a probe against its own Minister Makhdoom Amin Fahim to find out his alleged involvement in appointment of Ayaz Khan Niazi as Chairman of the National Insurance Company Limited (NICL). The move would pave the way for registration of case against him without any prejudice. The appointment, according to the well informed sources of Business Recorder, was made in violation of rules. On June 22 this year, the Supreme Court had directed the Secretary Commerce and the Federal Investigation Agency (FIA) to proceed against Makhdoom Amin Fahim in accordance with the law regarding the appointment of Ayaz Khan Niazi as Chairman NICL and transaction of Rs 40.5 million in his account. It is not the era of kingdoms. Does the government considers appointing thieves its right? the judges remarked when the court was informed by FIA that Makhdoom Amin Fahim had not paid Rs 40 million so far. The CJ said it was a massive corruption scam and money was being recovered through the struggle of the court, but people still criticize the courts. The Commerce Secretary was ordered to submit a report that entailed the details of persons responsible for the scam. The SC expressed annoyance when the court inquired the commerce secretary as to why no legal action had been taken against Amin Fahim. Expressing its annoyance, the court said if legal action could be carried out against the Prime Minister for not complying with the court orders, then it could be carried out against any minister. Pakistan Steel Mills. Massive corruption in the Pakistan Steel was brought to the notice of the Supreme Court by TI Pakistan, which took Suo Moto action and started proceedings. Senior officials of the Pakistan Steel were indicted and arrested. Rental Power Plants TI Pakistan pointed out the illegal manner in which contracts were dished out to their favorites against all rules at huge costs. TI-P requested the Supreme Court to take Suo Moto action. The Supreme Court opened a case and eventually declared that all the contracts were illegal and were consequently nullified. They also directed the companies to refund all advances saving the treasury billions of rupees. 6
Pakistan Railways The authorities in Pakistan Railways were illegally signing a contract for supply of 200 Railway Engines without inviting tenders. TI-P lodged a complaint with the Regulatory Authorities and sent a copy to the Supreme Court. The Supreme Court took Suo Moto action and restrained the Pakistan Railways from awarding the contract without going through the competitive bidding process. Anti Fraud Hotline. TI Pakistan, under an agreement with USAID, developed, maintain and operate a toll free hotline for lodging complaints against fraud wastage and abuse in USAID funded projects. This is one way to monitor and deter corruption. When the citizens realize that there is a mechanism for reporting corruption on which action would be taken, they begin to lodge complaints against irregularities that they witness. A number of cases were investigated by the Office of Inspector General/USAID and corruption nipped in the bud. Some of these are: The News August 03, 2012 ISLAMABAD: The Benazir Income Support Programme (BISP), the flagship PPP show touted as the main scheme to help the poor, has hit a major roadblock as the prime sponsor, USAID, has withheld $75 million since July 2010 because it could not carry out satisfactory monitoring and evaluation of its first grant of $85 million. The withheld amount is part of the $286 million USAID has withheld in the last three years for various projects in Pakistan. This startling revelation comes in a USAID report, which also reveals that substantial funds for two other projects were also blocked and a project in Sindh was debarred and blacklisted for any future aid. Corruption, fraud and poor monitoring in many USAID-sponsored projects for Pakistan have resulted in holding back of funds. According to the quarterly progress and oversight report of the Office of Inspector General of the US (OIG) concerning the USAID projects of civilian assistance programme in Pakistan as of June 30, 2012, out of the obligated $3.162 billion in civilian assistance for fiscal years 2010, 2011 and 2012, only $2.876 billion had been spent since fiscal year 2010. The latest report, which covers the period from April 1 to June 30, 2012, noted that the OIG s May 2012 audit of USAID support to the Benazir Income Support Programme found that USAID s first installment of $85 million transferred to the Pakistan government for the programme was disbursed to approximately 480,000 beneficiaries, who were given regular cash payments as a way of stabilizing the economy. In July 2010, USAID provided a second installment of $75 million to the Government of Pakistan for use in the programme but as of March 2012 has not authorized the government to transfer this money to the programme because mission officials were unable to verify that the programme had implemented an effective monitoring and evaluation plan, the report added. The report also disclosed that the USAID had ended $20 million Pakistan Children s Television 7
Project. It said that in late 2011, the USAID OIG initiated an investigation into the Pakistan Children s Television Project implemented by the Rafi Peer Theatre Workshop after receiving numerous complaints regarding the project through the Anti-Fraud Hotline. To date, the OIG investigation has revealed significant violations of the USAID procurement policies and standards. In May 2012, OIG referred its initial findings to the USAID mission in Pakistan, and later that month, the USAID agreed with the Rafi Peer Theatre Workshop to end the $20 million cooperative agreement. The OIG investigation is going on. The report said that the USAID also proposed Sindh Rural Support Organisation for debarment. It says that in February 2012, the USAID OIG referred the Sindh Rural Support Organisation to the USAID for debarment based on a yearlong investigation into alleged mismanagement, theft and corruption associated with its participation in several USAID-funded projects. To date, the investigation has resulted in the termination of 23 of the organization s personnel. Two individuals were terminated in April 2012 after the OIG investigation revealed that they had harassed a group of villagers who had filed complaints with the Anti-Fraud Hotline and ultimately had the villagers sign falsified documentation indicating that they had received payment under a USAID project when they had not. The investigation revealed that the organization s CEO sent the employees to the village and that the falsified documents were submitted as an official response to the ongoing OIG investigation. USAID proposed the Sindh Rural Support Organization for debarment in early May 2012. Based on the findings of a related forensic audit conducted by WFP in conjunction with USAID OIG, WFP permanently suspended the organization from participation in future projects in late March 2012. In another case, an OIG investigation related to the $50 million Small Grants and Ambassador s Fund Programme, implemented by the National Rural Support Programme (NRSP), revealed that an NRSP employee conspired with a programme grantee to falsify project-related financial documentation. The investigation revealed that the grantee, the Peshawar-based Khushal Welfare Organisation (KWO), fabricated documentation indicating that workers had been paid as part of $86,000 agricultural rehabilitation grant when, in fact, they had not. The falsified documentation was submitted to substantiate claims that KWO met its cost-sharing requirements under the grant. During the OIG investigation, an NRSP employee admitted to knowingly certify the falsified documentation. The NRSP terminated the employee involved in the misconduct in March 2012. The USAID OIG referred the NRSP employee and KWO to USAID for possible suspension or debarment. Advocacy and Legal Advice Centre(ALAC) TI Pakistan is operating another toll free hotline to provide free legal advice to victims of corruption. Besides providing legal advice, TI Pakistan also intervenes on their behalf with the concerned agencies against whom the complaints have been lodged. Hundreds of individuals have benefitted and their complaints resolved because of TI-P s intervention. 8
Conclusion By exposing these cases, Transparency International Pakistan has been successful in breaking the myth that corruption is a white collar crime and is impossible to prove. Also, TIP finds itself consistent to the negative views about corruption and the fact that it reduces income, decreases foreign investment and increases inequality to a considerable extent. Corruption also causes illiteracy, unemployment, increase in crime rates, and is the root cause of terrorist activities in Pakistan. Due to the absence of the protection of the whistleblowers in Pakistan, it becomes increasingly challenging for an anti corruption NGO like that of Transparency International Pakistan to motivate individuals to participate and expose the corrupt and their accomplices. Therefore, it is through TIP s strategy that the organization tries to achieve the objectives by combating the fear of retribution that the whistleblowers have for reporting crime or corruption. It also intends to alter the mindset that no efficacious action will result from reporting the incident and that those cases with serious enough allegations would be considered only. Furthermore, it is common practice that the incident is not reported if it had little impact upon the observer. Therefore, to create sufficient awareness amongst the citizens and to make them realize the significance of their observation, TIP tries to influence the attitude of the masses by making them well aware of the fact that their contribution to fight corruption will make a difference to the current situation. 9