Ex-PSM officials face prosecution
Dawn November 26, 2009

ISLAMABAD, Nov 25: The Federal Investigation Agency (FIA) suggested to the Supreme Court on Wednesday that former chairman of the Pakistan Steel Mills (PSM) Moeen Aftab Sheikh and other senior officials should be prosecuted for causing a loss of Rs22 billion last year.

“The field directorate of the FIA, Karachi, has recommended registration of cases against PSM’s former chairman Moeen Aftab Sheikh, former commercial director Sameen Asghar, now attending the Staff College in Lahore, and other officers of the mills, including private persons (contractors/agents etc.),” said a report submitted by the agency’s Legal Director Mohammad Azam Khan.

A three-judge bench headed by Chief Justice Iftikhar Mohammad Chaudhry had taken up a suo motu case relating to the sacking of Mr Sheikh without serving a show-cause notice. The former chairman was removed by the Establishment Division on the advice of the PM’s secretariat on Aug 18 because of heavy losses the industry was incurring.

The suo motu notice was taken on an article by Dr Ayesha Siddiqa published in Dawn on Sept 11. Dr Ayesha had mentioned five concerns as the main beneficiaries of the new sale policy adopted by the mills: Metropolitan, Amreli, Abbas Engineering, Al Abbas Steel and Abbas Steel.

Mr Sheikh remained chairman of the PSM from May 26, 2008, to Aug 18 this year.

The CJ ordered the FIA to complete its probe within two weeks and submit chargesheets against the accused.

The court was informed that Riaz Laljee who allegedly had a major role in the scam and was acting as a frontman of an important personality had escaped abroad, but efforts would be made to bring him back through Interpol.

 

President may re-promulgate CCP Ordinance today
Business Recorder November 26, 2009

ISLAMABAD (November 26 2009): President Asif Ali Zardari is expected to re-promulgate Competition Ordinance 2007 on Thursday, empowering the commission to carry on its programme to nip the evil of creating monopolistic islands by the undertakings indulged in cartelisation, deceptive marketing practices and collusive behaviours.

Sources told Business Recorder here on Wednesday that the 'Competition Ordinance 2009' is lying with Prime Minister Secretariat for onward submission to the President for approval. It is expected that the Ordinance might soon be promulgated for continuation of the functioning of the CCP.

The proposed Competition Ordinance, 2009 has included an amendment in the Ordinance seeking validating and legal backing of all the decisions taken by Competition Commission of Pakistan after February 2008 till November 28.

According to sources, the Ministry of Finance had submitted three summaries to the Prime Minister for re-promulgation of Competition Ordinance 2007, Anti-Money Laundering Ordinance 2007 and Industrial Development Bank of Pakistan (IDBP) (re-organisation and conversion) Ordinance, 2007.

The Competition Ordinance, 2007 was duly approved without any amendment by the National Assembly's standing committee on finance on November 12 and was forwarded to National Assembly Secretariat. The Speaker of National Assembly did not place the Ordinance before the Parliament due to unknown reasons.

 

Scrapping CCP Ordinance may lower Pakistan's ranking in Corruption Index
Business Recorder November 25, 2009

KARACHI (November 25 2009): The scrapping of Competition Ordinance would not only endanger World Bank's future funding but also Friends of Pakistan Funds. It may also further lower Pakistan's ranking in Transparency International's Corruption Perception Index (CPI) 2010, according to Transparency International Pakistan.

In a statement here on Tuesday, TI Pakistan has noted with concern that the Competition Commission of Pakistan (CCP) Ordinance 2007 has neither been approved by the National Assembly as a bill nor it has been re-promulgated.

The recently released TI CPI 2009 is the combined average index of six independent surveys carried out by various donor agencies/rating houses, including the World Bank.

IDA Resource Allocation Index (IRAI) based on corruption, conflicts of interest, diversion of funds as well as anti-corruption efforts and achievements and ADB conducts Country Performance Assessment Ratings (CPAR) for all developing member countries (DMCs) eligible for the ADF. The CPA exercise assesses a DMC's policy and institutional framework for promoting poverty reduction, sustainable growth and effective use of confessional assistance.

Each country's performance is assessed based on the (i) quality of its macroeconomic management, (ii) coherence of its structural policies, (iii) degree to which its policies and institutions promote equity and inclusion, (iv) quality of its governance and public sector management, and (v) performance of the ADF project portfolio in the country.

ADB CPAR comprising corruption, conflicts of interest, diversion of funds as well as anti-corruption efforts and achievements. TI Pakistan Chairman Syed Adil Gilani said that within the preview of the Prime Minister, Committee formed on November 17 under chairmanship of the Finance Minister, comprising secretaries of cabinet, establishment, finance, planning and development, industries and production, interior, health and information technology, which includes Chairman TI Pakistan also, to review the causes of TI CPI 2009, and future programmes.

TI Pakistan stresses upon GoP that the requirement of the existence of CCP is crucial for meeting the commitments made to the donors, the growth of Pakistani economy. Competition brings productive efficiency that helps increase jobs, brings quality in production and reduces prices, and that competitive environment also encourages foreign direct investment.

Syed Adil Gilani also said TI CPI 2010 would depend on the ratings for 2009-10 declared by the WB, ADB, Economist Intelligence Unit, World Economic Forum etc, which would reflect the position of reform carried out by each country according to the donor agencies previous funding.

The good actions recently taken by CCP like Pakistan Steel inquiry, Cement cartel, PIA, Sugar cartel, and inquiry into TCP affairs have resulted in improving the governance perception of GoP in general, but strong opposition from the vested quarters were trying to curtail powers of CCP.

He said the CCP Ordinance was result of the WB initiated Poverty Reduction Support Programmes (PRSPs), signed in 2004 for the year 2005-06, under which the Monopoly Draft Act 1978 was to be replaced with CCP Ordinance by 2007, and in case the CCP Ordinance is not re-promulgated, under pressure from the vested interest, the WB future funding, as well as endanger the Friends of Pakistan Funds, for the reversal of reforms carried out under previous WB funding. The WB IDA IRAI and ADB CPAR scores of Pakistan are deemed to fall lower.-PR

 

Intelligence agencies looking into oil, gas deals
Dawn November 24, 2009

ISLAMABAD, Nov 23: At least two premier intelligence agencies have started investigations into some multi-million dollar oil and gas transactions, including the proposed setting up of 100 ‘autogas’ filling stations and furnace oil import.

According to sources, a team of Inter-Services Intelligence (ISI) and Military Intelligence (MI) has collected record of the proposed transactions and interviewed the managing director of the Pakistan State Oil (PSO) and some senior officials of the petroleum ministry.

PSO managing director Irfan K.

Qureshi told Dawn on Monday that he had shot down the proposed agreement between his company and the Associated Group owned by Iqbal Z. Ahmed for setting up LPG filling stations because it was not in PSO’s interest. “At least five clauses of the agreement prepared by the Associated Group (AG) were detrimental to the interest of the PSO. My legal team proposed certain amendments that were rejected by the AG. Therefore, I have decided to sustain all pressure and not to enter into an agreement that is against the interest of my company and the gov ernment”, he said.

“I will not accept any pressure and will re-tender the LPG project to ensure transparency,” he said.

Mr Qureshi said the autogas project was very important to improve the financial position of the PSO because CNG was a dying business and he wanted to replace it with LPG filling stations to ensure smooth cash flow.

He said he was a professional and ready to face an investigation pertaining to his company’s business since March 4 when he assumed responsibilities of the PSO.

The sources said that two teams of the PSO and the Associated Group held a meeting in Karachi on Monday in an attempt to narrow down differences on the controversial clauses of the proposed agreement.

The issues of filling stations and import of furnace oil were also taken up by the Senate Standing Committee on Petroleum and Natural Resources. Senator Haroon Akhtar presented Monday’s issue of Dawn before the committee and members asked the PSO management questions about the transac tions. Mr Qureshi told the committee that the prime minister’s secretariat had not stopped signing of the autogas agreement. In fact his legal team had objected to certain clauses of the agreement, he said.

He assured the committee that any transaction not in the interest of the PSO would not be signed and every aspect of the deal would be transparent.

About the furnace oil import, Mr Qureshi said his company had been at the receiving end of the circular debt and its receivables from the power sector stood at more than Rs67 billion. He said the Attock Oil had to pay over Rs22 billion to the Oil and Gas Development Company (OGDCL), while it had to receive about Rs18 billion from the PSO. Since the government’s revenue was held up with the OGDCL because of the Attock Refinery’s payables, the government had not been able to clear PSO’s dues, resulting in cash flow problems, he said. If the refineries cleared their dues to oil producers, cash flows of many energy sector companies would improve, he said.

Mr Qureshi said the decision to import furnace oil in large quantities was taken by the product review committee headed by the director general of oil to meet higher power sector requirements.

He said that PSO was importing less furnace oil during November and December for optimal utilisation of its inventories which were earlier built up on the instructions of the government to meet any abrupt demand of the power sector.

 

Taseer rejects criticism of NRO beneficiaries
Dawn November 23, 2009

BAHAWALPUR, Nov 22: Governor Salmaan Taseer has dismissed criticism over National Reconciliation Ordinance (NRO) beneficiaries as much ado about nothing.

Talking to reporters at the local circuit house here on Sunday prior to his departure for Lahore after his two-day visit to Bahawalpur, Mr Taseer said the NRO beneficiaries could not be called corrupt as corruption charges were not proved against any of them in any court of law.

He said hopefully the judiciary would take “good” decisions on the cases reopened after the lapse of the NRO. He said the judiciary could not repeat the history of judicial murder it had done in the trial of Zulfikar Ali Bhutto. He said President Asif Ali Zardari had been behind bars for 11 years but did not compromise with dictators.

He rejected a report of the Transparency International which described corruption going upward in the country. He said the institution had no credibility as its procedures to assess corruption were dubious.

He paid tributes to the armed forces for their successful operation in Malakand and Waziristan. He said for the first time mainstream political parties were united in the war against terrorism.

Mr Taseer, also chancellor of the Islamia University Bahawalpur (IUB), parried a question regarding the selection of a new vice-chancellor. The sitting VC Dr Bilal A Khan, it may be added, is working on an extension.

Answering another question, he said he would look into the matter of re-introduction of MA Seraiki classes in the IUB sub-campuses of Rahim Yar Khan and Bahawalnagar. The governor said he would resolve the problems brought into his notice by PPP workers during his stay here.

KHOSA: Senior Adviser to Punjab Chief Minister Sardar Zulfiqar Khosa said all those on the NRO list should be taken to task. He told reporters at the valima ceremony of brother of Punjab Minister for Special Education Malik Iqbal Channar that there were no militants’ hideouts or camps in south Punjab. In fact, he said, some individuals from south Punjab had fought Soviet Union in Afghanistan along Afghan mujahideen. Now, those mujahideen were being branded as terrorists.

BOYCOTT: Chief Minister Shahbaz Sharif has ordered an inquiry into reporters’ boycott of his press conference at Bahawalpur airport on Saturday and appointed Commissioner Muhammad Mushtaq Ahmed inquiry officer.

Reporters told Mr Ahmed that they had to wait for three hours to enter the VIP lounge and even then the press conference could not be held. The chief minister suspended three Public Relations Department officials over the fiasco. Reporters called the suspension unjustified.

 

Corruption and governance
Dawn November 23, 2009
Letter to the Editor

This is with reference to Transparency International’s latest report wherein Pakistan has been placed at 42nd position on the worst corrupt countries list. Pakistan was last year at 47th position on T.I. list of most corrupt countries.

A review by any sane man of integrity and ethics will reveal that all the countries on the worst top 50 list of most corrupt nations, also have similar ratings on Failed States Index and Human Development Index, which only proves that good governance and development cannot take place as long as corruption is prevalent at the level that it exists in countries like Nigeria, Somalia, Chad, Afghanistan, Sierra Leone, Sudan, Pakistan etc. The list of NRO beneficiaries will reveal that our senior level bureaucracy were the second largest beneficiaries, while the largest benefactors was a particular ethnic group which thrives on politics of violence like the Somalian pirates, followed by politicians like AZ.

Posh valuable real estate societies like DHA are major hubs of corruption, where a notorious real estate mafia Qabza group has now joined the DHA in Islamabad and other ventures. The right to allot real estate belonging to the state by City Governments, Provincial and Federal Government, Evacuee Property and Cantonment Boards must cease forthwith and the same must be sold through open auction to fund welfare, health and education projects.

We have not forgotten the trillion rupee real estate scam in Karachi, where the local government allotted over 400 houses and lodges belonging to the Federal Government and located at prime locations to select private citizens and cronies during the Musharraf junta rule.

The Chak Shahzad scheme is another such misuse by the CDA to benefit the elite or the allotment of over 300 acres in Islamabad. Greed and corruption blinded DHA Lahore to stretch allotment of lands extending to the periphery of our 2nd line of defense near the Indian border. Defense Procurement which consumes a large chunk of our budget, has been exposed to as much as 10 per cent kickbacks like the recent revelation about the Agosta Submarine deal exposed by a French newspaper Liberation.

Pakistan needs to seriously tackle this cancer on a war footing, in the same manner that it is engaged in the war against terrorism. The rise in extremism is linked to corruption, because massive pilferages to the tune of over Rs500billion to Rs700billion has denied investment by the state in welfare, education, health, provision of security and basic needs to the people.

The announcement of a Committee comprising of 6 federal secretaries to review the Transparency International allegations is just like handing over the sheep to the wolves. Apologists, pseudo intellectuals and retired former members of the civil and khaki establishment would have us believe that corruption is not an issue or an impediment for growth and development, because by and large they were all beneficiaries of this menace.

MIAN SHAMSUDDIN Lahore

 

The venality in our midst
Dawn November 22, 2009

By ARDESHIR COWASJEE
SO, the famed prosthodontic smile emerged from its plush Islamabad dugout and took itself off to corruption-ridden Afghanistan last Thursday, where in Kabul it mingled and met with the world’s brightest foreign secretaries, and the Aga Khan.

Our besieged president travelled to that dangerous city presumably at the behest of the US State Department in a tit-for-tat gesture politely acknowledging Afghan President Hamid Karzai’s presence (House Speaker Nancy Pelosi’s ‘unworthy ally’) at his own swearing-in ceremony when the two Afpak head honchos sat side by side.

As Asif Zardari braved Kabul, back in his own homeland his freed-by-his-predecessor media was concentrating on the corruption scenario presented under his government. The fact that Transparency International has downgraded Pakistan in the ranks of the world’s corrupt countries is not as damaging as the perception of corruption that permeates the ranks of his country’s citizens and of those citizens of the world who seek safe investment havens.

Excuses have been made in the press by certain commentators that though corruption impedes growth and economic development, in the initial stages of nation-building and economic take-off eliminating corruption could cause greater stagnation. Our power sector has been cited as one example. A convoluted explanation is that we now suffer from a power deficit because in the 1990s, during the second Benazir Bhutto government, we scrapped too many IPP deals on corruption charges. We would have been better off, it is mooted, with available electricity even if it came with tainted deals.

Amongst others, Japan, South Korea and Taiwan are cited as examples of countries that have had highly corrupt take-offs, followed by clean-ups and structured accountability. China is massively corrupt, but is flourishing economically as is Thailand, and India has taken off to some extent and must now clean up corruption. This defence does not wash in our case. Corruption has eaten into the vitals of this country to the extent that it lies crippled. It is nowhere near take-off point.

Another excuse made by this government’s feeble defenders is that it is unable to tackle the many problems that beset the people as it is under constant attack over corruption charges. This again does not wash. Corruption there has to be, in all countries democratic or otherwise, as that is the nature of man. But corruption must be limited, it must not be allowed to impede growth, governance and negate law and order.

A ‘competent’ government can be forgiven to a certain extent for controlled corruption as long as it delivers and gives to the country what it is supposed to give in return for having been voted in. Our governments apart from not delivering rob to the hilt, plunging us downwards with nary a care as most of their members have no stake in this country.

Some of us might be willing to put up with a certain amount of corruption were we satisfied that the taxes we are paying are being put to our use and benefit and not simply being delivered into a bottomless cavern into which plunge the fingers of the non-tax-paying politicians who have a free run of the country and its assets.

The most hideous example of corruption has been the NRO, bequeathed to us by a blend of past president, Pervez Musharraf, and the USA. This expedient bit of legislation has stripped the country of thousands of millions (or is it billions?) of needed rupees. It ends its life on the auspicious occasion of the national cattle cull, November 28. Can any amounts be recovered, we must ask our government and our courts, or are they lost and gone forever? The list of the beneficiaries is awesome.

Corruption takes many forms — moral corruption is as rampant as is the material corruption we live with, and moral corruption with its hypocrisy and bigotry is as highly insidious, eating not into the national exchequer and the country’s assets but into the national mindset. Corruption, material and moral, also kills.

Material corruption in this city of Karachi, the largest of the land, has been responsible this year alone for the death of 266 so-called political activists of the main political parties that make up the deplorable Sindh government, all of whom it can safely be said were involved in scams mostly concerning the grabbing of land or the division of spoils extorted from the public.

Corruption and venality have almost put paid to the environment of this country, from the stripped hills of the northern areas, down through the NWFP and the hills of Murree, over the plains of the Punjab, swirling into barren Sindh and debased Karachi. Our cities are amongst the most polluted and most environmentally degraded in the world, merely because our governments and administrations are adept at making money by ensuring that measures to prevent pollution and degradation are never undertaken.

On the moral corruption front, we have the blasphemy laws, an open invitation to the amoral to settle scores or to misappropriate properties with the greatest of ease. The Hudood ordinances are an equally open invitation to those who believe that women are expendable — in the cabinet of 80-odd, in itself a form of corruption, we have two sitting ministers who subscribe to this view.

Again and always, back to the Founder-Maker of this country which has staggered along for 62 years under unbelievably inept and corrupt leaderships. Three days prior to its birth, Mr Jinnah called corruption and its attendant bribery ‘one of the biggest curses’ afflicting the subcontinent and firmly told his future legislators that ‘it must be put down with an iron hand.’ The opposite happened. The flabby fist ensured that corruption flourished.

 

Perceptions of corruption
Dawn November 19, 2009

AS compared to last year, Transparency International’s Corruption Perception Index 2009 has seen Pakistan slip five places. These findings will only deepen the already widespread belief that corruption is rampant at all levels of the government and its civilian state institutions. It is little wonder that the citizenry’s confidence in the government is being rapidly eroded. At all levels in all manner of public-sector departments, from land records and tax to customs and motor vehicle ownership or licensing, corrupt practices have become disturbingly common. Sections of the lawenforcement apparatus, such as the police and the lower judiciary, are notorious for taking or demanding bribes. In public-sector health units, where services and basic medicines are supposed to be provided either free of cost or at heavily subsidised rates, citizens find themselves forced to pay through the nose or forego treatment.

Meanwhile, reports are common about financial wrongdoing on part of some of the country’s biggest businessmen, industrialists and politicians. In the recent past, a number of sitting and former repre sentatives of the government have been accused of serious corruption. These have further undermined the public’s level of trust for the state, its institutions and its representatives.

Such loss of faith translates to a lack of support for the government’s policies, at a time when the country is in the midst of an economic and security crisis. But there is also another angle to be considered: Pakistan’s massive military budget does not come under the purview of TI’s corruption monitors. As a result, next to no information is available about any possible irregularities in defence spending, which is now set to increase by some 20 per cent. Citizens contrast this information vacuum with reports of massive corruption in civilian state institutions and representatives. The ‘clean’ look thus acquired by the military — by default really — can be dangerous to a budding democracy that is already on shaky ground. To prevent further loss of public confidence in not just the current government but the democratic system itself, it is imperative that a sustained effort be made to root out corruption at all levels.

 

The path of corruption
Dawn November 24, 2009

By Shahid Javed Burki
Corruption is back in the news. Several newspaper columnists have written about it and it is the favoured subject of TV talk shows these days. Prime Minister Yousuf Raza Gilani has set up a task force to look into the problem.

Headed by Finance Minister Shaukat Tarin, the group has promised to report back to the government in four weeks.

I was queried by the Voice of America on the subject some days ago. The host of that programme played a clip from a statement by Minster Tarin who said that it was well known that large sums of money were being siphoned off by people who had the power to dispense services. It was also known, he went on to say, which government institutions were corrupt. The government was aware of what needed to be done, he seemed to imply. What was required was the political will to take action. He was right on both counts.

What has occasioned this revival of interest in the subject is the publication of the 2009 report of Transparency International which once again shows that Pakistan is doing poorly in the area although not as poorly as was the case a decade or so ago. Then the country was ranked as one of the most corrupt places on earth. The dubious honour belongs to even more troubled countries such as Somalia and Afghanistan. Rather than being the second most corrupt country in the world as was the case then, it is now a middling one.

Looking at the subject from the perspective of economics provides some useful insights into the practice. Corruption as a phenomenon can be easily explained in economic terms and economics also guides us towards some of the solutions. Corruption becomes endemic for a number of reasons. It may result when the cost of the services provided far outweigh the compensation given to those who are giving them away. This leads to a temptation on the part of those who have the authority to dispense these services to charge the receiver.

A policeman has the authority and the ability to maintain law and order. Security means a great deal to the people over whom the policeman has some authority. The people may be prepared to pay the officer for providing the services they need.

The same happens on the demand side of the equation. When the benefit of the services being received is much greater than the price being charged for them, those who want them would be prepared to pay additional amounts to receive them. This economic calculus can be changed by altering the cost benefit ratios for both the provider and receiver of services. There are some interesting examples of the reduction in the incidence in corruption when those with authority were given better compensation.

Singapore is often cited as an example of a country that has succeeded in practically eliminating corruption by giving handsome salaries to its senior public servants, including ministers. But we don’t have to go to Singapore to underscore the point that narrowing the difference between legitimate rewards to government employees and the cost to the receiver of the services they provide lowers the incidence of corruption. The Motorway Police in Pakistan has a good reputation. Those who serve in this force are well compensated by the state. They also follow the procedures that are hard to circumvent. The latter point leads me to the second approach for controlling corruption. This is to strengthen the system and the processes used to provide services. Those who provide services and those who receive them should be clear about the procedures that have to be followed. Transparency has to be part of a system of controls. Any wilful departure should be brought to the attention of those who hold public servants accountable.

This brings me to the subject of accountability and corruption. Pakistan has a long history of coming up with accountability systems that were put in place to curtail corruption. Both Gen Ayub Khan and Gen Yahya Khan fired scores of civil servants to pacify the citizenry when corruption became a serious issue. This was an ex post way of dealing with the problem; to take action once the crime was committed. The first Nawaz Sharif administration set up an elaborate system of accountability. This was the ex ante approach, to address the problem before it became one.

The Sharif system was massively tinkered with by his successors and was scrapped by Gen Pervez Musharraf. The military government then went on to institute a system of its own, setting up elaborate investigative procedures as well as accountability courts for trying the cases investigated by the National Accountability Bureau.

Eventually, as is well known, the NAB process itself was corrupted and used for political purposes. The lesson to be drawn from this experience is that continuity of approach is vital. A jerky response to the problem does not create enough confidence on the part of the citizens that the system works to their advantage.

The Shaukat Tarin task force does not have to cover any new ground in pointing the government towards adopting the right set of solutions. Instead, it needs to watch over the implementation of the proposals it would be putting out. The proposals should be directed towards achieving three objectives. The system of compensation has to be drastically revised as should the systems of hiring and firing of people in government service, including the corporate sector controlled by the state.

Sound proposals were made by the commissions headed by Ishrat Husain and Moeen Afzal in this context. These need to be implemented. Along with better compensation should come accountability and that should be embedded in the legal system. No changes should be allowed once the system is in place. This can only happen if there is a broad political consensus behind its creation. Finally, while compensation for providing services should be increased so should the cost of being corrupt. Only then will the calculus change in favour of cleaner governance.

 

NHA, PHA among top 10 most corrupt depts: TI
Business Recorder November 20, 2009

ISLAMABAD: Transparency International (TI) has placed allied departments of the Ministry of Housing and Works amongst the top 10 most corrupt institutions in Pakistan, accusing it of involvement in gross violation of rules in the procurement, allotment and awarding contracts for goods and services.

These departments include National Housing Authority (NHA) and Pakistan Housing Authority (PHA).

The present government has given the task of constructing one million houses for the government employees to NHA. Sources fear that this project may become a victim of embezzlement like new city project launched in 1995.

The PHA has reportedly been involved in gross violation of rules in procuring material.

According to the TI report, the PHA is not following the public procurement rules 2004 for awarding contracts for procurement of works/services/goods or award of contracts for partnership with the private sector.

In addition, the TI claimed that the NHA had been complicit in awarding some contracts without inviting public tenders and open competitive bidding.

The latest violation reported to the TI Pakistan is that the PHA has made a joint venture (JV) with Mayamar for the PHA Mayamar Towers, Karachi.

The TI accused the NHA of violating building byelaws in the Mayamar PHA project and for making undue profits out of booking funds, and depriving citizens of their legal rights.

The sources alleged that the Housing Ministry and its subordinate departments had been reportedly involved in massive corruption in allotment of houses and purchase of land.

They revealed that bribery, cartels between officials and contractors and other corrupt practices had contributed to a massive loss of revenue to the exchequer. The State Office, another department of the Ministry of Housing has reportedly been involved in making money while renting out houses to the government employees.

"It allots one house to many government employees by taking bribes," the sources said, adding that nepotism and bribes are the main tools used to get allotment of houses, flats in government buildings.

"The other source of corruption is irregular expenditure on purchase of vehicles, non-recovery on account of payment from default firms, irregular expenditure on account of foreign trips and unauthorised retention of official vehicles and house rent allowances," said the TI.

When this correspondent contacted the spokesperson of the Housing Ministry for comments, he refused to comment on the TI report.

 

Poor ranking in corruption index no surprise
The News November 20, 2009

LAHORE: Corruption Perception Index of Transparency International is in line with different rankings assigned to Pakistan in economic and social sectors all of which depicts a gloomy picture.

Pakistan has got poor ranking in the Economic Freedom Index of Heritage Foundation, Global Competitiveness Report of World Economic Forum, Gender Gap Report of WEF, Failed State Index of Foreign Policy Magazine and Human Development Index of the United Nations.

Another point worth noting is that as far as the Corruption Perception Index is concerned, Pakistan’s rank among corrupt nations is irrelevant. The most important thing in this regard is its transparency score. Transparency of a country is evaluated on a scale of 0 to 10. Higher the transparency score lesser is the corruption.

Pakistan’s transparency score in 1995 was 2.25 which meant perceived 77.75 per cent corruption. In the same year, the transparency score of China was 2.16 which was lower than Pakistan’s. India’s score was 2.78 points in the same year.

In 1996, during the tenure of second PPP government, Pakistan’s transparency score dropped to one point. That year, the country was declared the second most corrupt country in the world after Nigeria. In other words, perceived corruption was 99 per cent.

In 1998, Pakistan got the highest transparency score of 2.70. That was the lowest corruption level the country has achieved until now. However, even at its best, corruption was still very high at 73 per cent. This level was achieved during the tenure of last PML-N government. However, this progress was reversed the next year during the tenure of the same party as the transparency score dropped to 2.20 in 1999.

During the tenure of General Musharraf, the best transparency score that the country could get was in 2008 which was 2.5. In 2009, the transparency score has dropped to 2.4. The rulers instead of questioning authenticity of the corruption perception index should tackle the problem.

It is indeed interesting that on the one hand the government is disputing the findings of Transparency International while on the other hand its finance minister and deputy auditor general have stated that Pakistan loses Rs400-500 billion in annual revenues because of corruption.

Transparency International has simply seconded this opinion as it also states that corruption eats away Rs500 billion per year in Pakistan.

When Pakistan’s efforts towards eradicating corruption are assessed in comparison to its neighbours, it comes to light that all other countries have made tremendous progress in this regard.

China, which had a transparency score lower than Pakistan in 1995, now has increased its score to 3.6. India has improved its ranking and transparency score from 2.78 in 1995 to 3.4 in 2009. Bangladesh was included in the CPI index at the start of this century with a low score of one and this year it is on a par with Pakistan at 2.4 points.

Sri Lanka, which has been devastated by a decade-long civil war and acts of terrorism, has a transparency score of 3.2 in 2009. Nigeria, which for years remained the most corrupt country in the world, has also higher transparency score of 2.5 points.

 

TIP refutes minister's statement on data collection system
Business Recorder November 20, 2009

KARACHI (November 20 2009): Transparency International Pakistan has noted with concern on the statement given by Federal Minister for Interior Rehman Malik on the CPI 2009 that Transparency International (TI) report, saying the data collection system of the TI is not effective.

According to him, as far as the data collection system of the Transparency International is concerned there are many flaws in the system so the TI's report placing Pakistan on 42nd number on the list of corrupt nations is not acceptable.

Syed Adil Gilani, Chairman, Transparency International Pakistan, said that none of the surveys are commissioned by Transparency International, Berlin or Transparency International Pakistan, and the CPI is based on 13 independent surveys by most credible international financial institutions such as World Bank and Asian Development Bank for their own due diligence.

This information is available since 17th November 2009 on the website of Transparency International Pakistan as well as on Transparency International Berlin. Before making such statement, the facts should have been confirmed by the minister. The CPI includes data compiled and collected between First trimester 2008 and September 2009. The CPI is a composite index, a poll of polls, drawing on corruption-related data from expert and business surveys carried out by a variety of independent institutions.

Surveys from the six institutions used for calculating the score and ranking of CPI 2009 of Pakistan are, Asian Development Bank, Country Performance Assessment Ratings (CPA), 2008, The Bertelsmann Transformation Index (BTI), 2008, EIU, The Economist Intelligence Unit, Country Risk Service and Country Forecast, 2009, Global Insight (formerly the World Markets Research Centre, Risk Ratings), 2008, WEF, World Economic Forum, Global Competitiveness Report, 2007 and 2008 and World Bank, Country Policy and Institutional Assessment (CPIA), 2008.

Each institution has its own methodology; some of the sources provide data compiled by professional risk agencies and expert panels, others provide data from surveys to businessmen and leaders around the world. The following are the steps to determine the mean value of CPI for a country:

1. Standardisation of raw data: Given that each of the sources uses its own scaling system, the data must be standardised before each country's mean value can be determined. Standardisation is carried out via a matching percentiles technique. This uses the ranks of countries reported by each individual source.

2. A beta-transformation is then performed on the standardised scores.

3. All of the standardised values for a country are then averaged, to determine a country's score.

4. The CPI score and rank are accompanied by the number of sources, high-low range, standard deviation and confidence range for each country.

5. The confidence range is determined by a bootstrap (non-parametric) method which allows inferences to be drawn on the underlying precision of the results. A 90 percent confidence range is then established, where there is 5 percent probability that the value is below and 5 percent probability that the value is above this confidence range.-PR

 

Secretariat in the grip of corruption scandals
Business Recorder November 19, 2009

ISLAMABAD: Pakistan Secretariat, a complex of key Federal Ministries, except Defence and Foreign Affairs, is in the grip of corruption scandals.

Immediately after the release of Transparency International (TI) report, Prime Minister Yousaf Raza Gilani ordered an inquiry, under the chairmanship of Finance Minister Shaukat Tarin, into Pakistan's poor performance in the corruption index.

The most visible corruption has been through blatant violations of public procurement rules. This is facilitated because the element of conflict of interests is disregarded and most of the Federal Secretaries are on the Board of Public Procurement Regulatory Authority (PPRA).

Transparency International Pakistan (TIP) in hundreds of communications throughout the year had pointed out violations of procurement rules. However, most of the time their concerns were not taken seriously by the decision makers.

Several allegations of corruption had been made against the Ministry of Water and Power and its affiliates, namely Water and Power Development Authority (Wapda), Pakistan Electric Power Company (Pepco), Private Power and Infrastructure Board (PPIB), Alternative Energy Development Board (AEDB) and National Engineering Services Pakistan (Nespak). These ranged from appointments based on nepotism and bribes and awarding of contracts to favourites.

Minister for Water and Power Pervez Ashraf has been repeatedly accused of changing tender terms after award, which compromised the entire process, especially with reference to the highly controversial rental power plants. Pepco and PPIB are two organisations, which signed contract with the sponsors of RPPs.

In addition to electronic media, Pakistan Muslim League (Q) parliamentary leader in the National Assembly, Faisal Saleh Hayat, publicly accused Pervez Ashraf. On September 26, 2009, Pervez Ashraf served legal notice to Faisal for making false statements on RPPs, seeking an apology within 14 days, or else face legal proceedings. Almost two months later no case has been filed by the Minister against Hayat.

Wapda is also almost routinely accused of draining public money through following flawed procurement processes.

AEDB is already investigating several cases of corruption, fraud and financial mismanagement, but nothing has been finalised so far despite passage of several months of inquiries.

Commerce Ministry, its attached departments like Trading Corporation of Pakistan (TCP), National Tariff Commission, Trade Development Authority of Pakistan (TDAP), and insurance companies have also been accused by TIP of irregularities that have cost the national exchequer large sums of money.

Numerous cases implicating senior officials of Commerce Ministry have been revealed over the past year and a half on a range of suspect activities including issuance of import permission for arms, procurement, import and export of commodities.

Corruption in Pakistan Steel reached unprecedented levels which led finally to the ouster of the man implicated in the scam. However, it is not clear whether the inquiry report, requested by the Prime Minister on pinning the responsibility of corruption has been completed, or is still going on.

Irregularities in procurement of equipment, for example drilling pipes, drilling bits for exploration activities, from local as well as foreign companies are also evident in Oil and Gas Development Company Limited (OGDC).

Sources allege that OGDC top management indulged in favouritism in the award of contract to renovate OGDC main building in Islamabad. OGDC allocates Rs 10 million per annum for renovation but the contract is given without bidding to the contractor on the approval of Managing Director (MD) of OGDC, which is against rules of awarding contract. According to Auditor General of Pakistan's recent report, OGDC faced a loss of Rs 169.67 million in contract of procurements during financial year 2008-09.

The OGDC administration has also been reported to be involved in allocating natural gas and LPG quotas on ad hoc basis, without approval of competent forum, like ECC, on political basis. After Naveed Qamar assumed the charge of Minister, OGDC MD Zahid Hussain submitted his resignation to Petroleum Ministry due to pressure from Naveed Qamar, sources said.

In Pakistan State Oil (PSO), the change in the Board of Directors is a routine matter, which every new government, even a caretaker government, undertakes. However, due to pressure from Naveed Qamar, the Chairman of the Board, Yasin Malik, resigned. According to sources, a change in the board of directors is on the cards. Sources said that the MDs of other organisations, like PPL, had expressed their inability to work under pressure. All possible changes are part of the plan to make political appointments in organisations like PSO and OGDC. AGP in its recent report revealed that PSO faced a loss of Rs 3.201 million due to short delivery of POL products during last fiscal year 2008-09.

Maula Bux Khatian, a Grade 21 officer of Sindh government, has challenged the appointment of the current Ogra Chairman Tauqir Sadiq in the Sindh High Court. SHC on October 19 put the Federal Government on notice regarding the matter. The petitioner had applied for the post, and has alleged, that Sadiq's law degree is a fake. Sadiq is said to be the brother-in-law of Senator Jahangir Badr and had previously worked as Ogra Registrar and later at the Taxila Heavy Machinery Complex.

 

Rise in corruption in FBR ignored by TIP
Business Recorder November 19, 2009

ISLAMABAD: Transparency International (TI) Pakistan has ignored the rise in corruption in the tax machinery, which is still taking place despite ongoing reforms in the tax administration, sources told this correspondent.

Information collected by this scribe showed that corruption in the Federal Board of Revenue (FBR) is still a major concern, and taxpayers are routinely subjected to harassment despite self-assessment schemes applicable in income tax, sales tax and customs duty.

A number of tax consultants, lawyers and representatives of business and trade opined that corruption declined due to implementation of reforms in the past. However, high level of corruption in tax departments has resurfaced following frequent changes in tax laws over a period of time.

The discretionary powers of the revenue officers have been gradually enhanced through amendments in tax laws.

The cases of corruption are mostly evident in issuance of refunds and selection of cases for audit. Through legal changes, the tax system appears to be reverting to the old assessment-based system, instead of self-assessment.

Sources alleged that even double pay package to tax officers has not been sufficient to motivate the tax machinery to desist from corruption in the field formations. The FBR is trying to end interaction between taxpayers and tax officials through electronic return filing system, but physical involvement of tax officials still exists in this process. In most of the tax fraud cases, the detecting agency has found some connivance of the tax officials.

The Auditor General of Pakistan has unearthed financial and procedural irregularities to the tune of Rs 46.537 billion during 2008-09, reflecting serious loopholes in the tax system. Most of the irregularities related to the audit objections raised during test audit of cases of refunds, clearance of goods, input tax credits, non-payment of taxes and wrong applicability of law.

Recently, Minister of Finance Shaukat Tarin stated on a private television channel that FBR can generate around Rs 400-500 billion by ending corruption in the tax department, and plugging the loopholes

 

Non-compliance of rules: SECP included in 10 TIP targets
Business Recorder November 19, 2009

ISLAMABAD: Transparency International (TI) Pakistan has identified the Securities and Exchange Commission of Pakistan (SECP) as one of the 10 institutions in Pakistan that are not complying with defined rules and procedures.

The TI report highlighted that Pakistan also requires immediate action, through a surgical operation, on reviewing and cancelling the appointments and promotions not made on merit, and extension of services or reappointment after retirement, removing from key public offices those who are facing corruption charges, and implementing effective non-discriminatory accountability mechanism for those civil/defence departments not complying with the procedures including transparent implementation of rules by regulatory authorities like Securities and Exchange Commission of Pakistan (SECP), TI added. Analysts were of the view that a question was raised by the TI whether the public procurement rules are applicable on the SECP or not.

Autonomous organisations, like SECP, have developed their own procurement rules. Being an independent organisation, commission-approved procedures have been laid down for procurement purposes, they added.

On April 29, 2009, it was reported that the Commission had approved huge amount of bonuses for its senior officials despite reduction in its earnings. The SECP earns its revenue under Companies Ordinance, 1984, Insurance Ordinance, 2000, Securities and Exchange Ordinance, 1969, Non-Banking Finance Companies Rules, 2003, Modarba Companies Rules, 1980 and other income earned from investments, mark-up on staff loans and gain/loss on disposal of fixed assets. The Commission gave three main reasons for the decrease in the revenue, as follows: (i) substantial decrease in incorporation of companies against last year; (ii) registration of companies with small capital base; and (iii) no increase in existing capital of the companies incorporated, the report added.

When contacted, sources said that the SECP policy board has the legal authority to give annual bonuses and rewards. Such bonuses were given to all employees including chairman, commissioners, etc.

As far as procedure for appointment is concerned, the SECP has adopted two different processes for hiring of individual officers. One process is related to selection of junior executives. The SECP advertises in two leading national newspapers and the scrutiny of applications is undertaken by the National Testing Services (NTC). Later, the SECP issues call letters to short listed candidates, and written tests are taken by NTS. After announcements of results by the NTS, the SECP issues call letters to short listed candidates. Panel interviews are done by designated selection committees, and final interviews by SECP Chairman.

For appointment of senior officials, the SECP issues advertisement in two leading national newspapers and scrutiny of applications is undertaken by Human Resource (HR) and concerned department. The process involves issuance of call letters to short listed candidates, panel interviews by designated selection committees, and final interviews by the chairman.

The transparency of both processes is only guaranteed by those who are empowered to select the candidates and that continues to be subject to nepotism, be it political or bureaucratic.

 

Global corruption index Pak ranks 42nd: TI
Pakistan Observer November 18, 2009

Karachi—According to the latest Transparency International (TI) corruption report, Pakistan has become more corrupt as compared to 2008.

The TI announced its report today in which Pakistan had moved up quite a few positions in the list of the most corrupt countries and ranked at number 42 in the list.

Releasing the annual report, the TI chief in Pakistan, Adeel Gilani, had said that anti-corruption efforts in the country had taken a 180 degree turn after Gen Pervez Musharraf issued the National Reconciliation Ordinance on October 5, 2007, 56 days after the ratification of the UN Convention against Corruption.

Somalia, Afghanistan seen most corrupt among 180 nations whereas New Zealand, Denmark have best scores in watchdog ranking

Releasing its annual Corruption Perceptions Index (CPI) on Tuesday, the watchdog said Afghanistan had sunk for the second straight year in its ranking of 180 nations based on perceived levels of corruption in the public sector.

The CPI scores countries on a scale of zero to 10, with zero indicating high levels of corruption and 10, low levels. The ranking is based on data from country experts and business leaders at 10 independent institutions, including the World Bank, Economist Intelligence Unit and World Economic Forum.

For the third year running, the conflict-ridden east African nation of Somalia came in last, this time with a score of 1.1.

Afghanistan had the second-worst ranking at 1.3, down from 1.5 in 2008 and 1.8 in 2007. Myanmar followed with a score of 1.4, while Iraq and Sudan were both on 1.5.

New Zealand was the top-ranked country with a score of 9.4, followed by Denmark at 9.3, and Singapore and Sweden, both on 9.2.

Countries which saw their ranking drop included Iran, which fell to 1.8 from 2.3 following a presidential election in June that the opposition said was rigged.

Political turmoil also contributed to a fall in Ukraine’s score to 2.2 from 2.5. Greece saw its score slide to 3.8 from 4.7, reflecting insufficient anti-corruption enforcement, lengthy delays in the judicial process and a string of corporate scandals that TI said pointed to “systemic weaknesses”.

Nations that improved included the United States, which rose to 7.5 from 7.3. TI cited Washington’s swift response to the financial crisis, including reforms demanding greater transparency and accountability.

Poland rose to 5.0 from 4.6 after establishing an anti-corruption office. Russia edged up to 2.2 from 2.1, a rise attributed to anti-corruption legislation introduced by President Dmitry Medvedev. But TI noted that the excessive role of the Russian government in the economy remained a problem.— Agencies

 

Pakistan slips five places in TI index
The Nation November 18, 2009

An international watchdog says war-ravaged Somalia remains the world's most corrupt country, followed by Afghanistan, Myanmar, Sudan and Iraq. The annual report of Transparency International shows that Singapore, Denmark and New Zealand are the most principled countries around the globe. It attributed this strong performance to the "political stability, long-established conflict of interest regulations and solid, functioning public institutions" in these nations. The ranking released Tuesday measures perceived levels of public sector corruption in 180 countries and draws on surveys of businesses and experts. Pakistan has been placed 42nd in the list.

 

Corruption in Pakistan increases: Transparency International
Daily Times 18, 2009

LAHORE: Pakistan has climbed five places to number 42 in an annual list of the world’s most corrupt countries, Transparency International said in a report on Tuesday.

In its annual Corruption Perceptions Index, the TI said Pakistan’s 2009 Corruption Perceptions Index Score is 2.4, and of the 180 countries and in its ranking as the most corrupt country, it has slipped five ranks, from 47 in 2008 to the 42nd most corrupt country in 2009.

The Corruption Perceptions Index looks at perceptions of public sector corruption in 180 countries and territories, - and is a composite index that draws on 13 expert opinion surveys.

It scores countries on a scale from zero to ten, with zero indicating high levels of perceived corruption and ten indicating low levels of perceived corruption.

Majority of the 180 countries included in the 2009 index score below five on a scale from 0 (perceived to be highly corrupt) to 10 (perceived to have low levels of corruption).

The CPI measures the perceived levels of public sector corruption in a given country and is a composite index, drawing on 13 different expert and business surveys. The 2009 edition scores 180 countries, the same number as the 2008 CPI.

TI Pakistan Chairman Syed Adil Gilani said TI Pakistan was of the view that terrorism was the direct result of poverty, which had resulted due to corruption, especially the illegal direct, or indirect, rule of armed forces in Pakistan since 1951 to 2007. The endorsements provided to military regimes by a corrupt judiciary were also to be blamed.

Adil said positive impact of the few good governance steps taken by the government would be visible by the next year

He mentioned the reinstatement of sacked judges by the Prime Minister through an executive order on March 16, declaration by the Supreme Court chief justice of zero tolerance for corruption and the withdrawal of the National Reconciliation Ordinance from the National Assembly as positive steps.

He said TI Pakistan also congratulated the Pakistan Army, which had proved to the world that Pakistan’s military were among the best in the world.

“The elimination of terrorists in Swat in two months is what the US and NATO forces have failed to achieve in 8 years in Iraq and Afghanistan, which has made Pakistan a proud nation,” TI Pakistan said.

But Adil said the government was governing the country without governance and had lost credibility all over the world, due to which the country was facing serious economic threats, poverty, inflation, food and electricity shortages and increase in unemployment, which were the direct results of the massive corruption in the public sector.

He said the government must make serious efforts to apply rules and regulation across the board in order to reduce corruption.

The TI Pakistan chairman said Pakistan needed immediate enforcement of good governance and a transparent administration to counter the acute problems, the billion of rupees corruption scams reported in the Pakistan Steel, TDAP, EOBI, PIA, rental power plants, KESC, NIC, NHA, OGDC, PSO, PEPCO, CDA, DP Division, DHAs, the NBP and many other organisations.

The Berlin-based organisation said Afghanistan and Iraq, countries that receive billions of dollars a year in international support, were also among the world’s most corrupt nations.

 

Pakistan slips five places in TI index
Dawn November 18, 2009

ISLAMABAD, Nov 17: In its Corruption Perception Index for 2009, the Transparency International has placed Pakistan at the 42nd place, slipping five places from 2008 when it was at 47.

Most of the 180 countries included in the 2009 index scored below 5 on a scale from 0 (perceived to be highly corrupt) to 10 (perceived to have low levels of corruption).

The Chairman of the Pakistan Chapter of Transparency International, Syed Adil Gillani, said that because of lack of governance and massive corruption the country had lost credibility and was facing serious economic threats, poverty, inflation, food and electricity shortages and increase in unemployment.

He said the government must make serious efforts to apply rules and regulations across the board to achieve the goal of reducing corruption.

Mr Gillani said Pakistan needed good governance and a transparent administration to counter corruption scams of billions of rupees in Pakistan Steel, TDAP, EOBI, PIA, rental power plants, KESC, NIC, NHA, OGDC, PSO, PEPCO, CDA, DP Division, DHAs, TCP, NBP, PC and many other organisations.

Mr Gilani said that the political will of the government to curb corruption was urgently required and it must also be seen by public and donor countries, like formation of an independent accountability commission as required by the UN Convention against Corruption under the HOPO Act, 2009.

This commission should report only to parliament or judiciary and not to the ministry of law, and it should look into corruption of all holders of public offices belonging to civil services, armed forces, judiciary and elected representatives.

There were some bright spots in the report — Bangladesh, Belarus, Guatemala, Lithuania, Poland and Syria were among the countries that have improved the most.

The highest scorers in the 2009 CPI are New Zealand at 9.4, Denmark at 9.3, Singapore and Sweden tied at 9.2 and Switzerland at 9.0.

 

Pakistan slips into more corrupt category: TI
The News November 18, 2009

KARACHI: Corruption in Pakistan increased in one year of the PPP government and Transparency International ranked Pakistan 42nd among the world’s most corrupt countries against 47th last year.

Pakistan’s 2009 Corruption Perception Index (CPI) score was 2.4, ranking it at 42, TI Pakistan chief Adeel Gilani said while releasing the report here on Tuesday. Against this, Bangladesh has marginally improved its position also ranked 42nd against 38th last year. India has been at 84th position.

According to the Transparency International ranking, the higher the position of a country on the list the better is its integrity account and lesser corruption. Countries scored highest in the 2009 CPI are: New Zealand at 9.4, Denmark (9.3), Singapore and Sweden tied at 9.2 and Switzerland at 9.0, reflecting political stability and long established conflict of interest regulations.

According to Gilani, anti-corruption efforts in Pakistan had taken a 180-degree turn since the then-president Pervez Musharraf issued the National Reconciliation Ordinance (NRO) in October 2007. The NRO, which granted immunity to politicians, military officers and bureaucrats charged with corruption, enabled the return home from exile of former prime minister Benazir Bhutto.

The Transparency International chairman accused Pakistan’s Army as the most corrupt institution in Pakistan but added Chief of the Army Staff Gen Ashfaq Parvez Kayani had, nevertheless, taken up serious violation of public procurement rules by the Defence Housing Authority (DHA) and other violators of rules.

According to the TI report, Pakistan was the second most corrupt nation out of 188 nations in 1996 but now it was listed as the 42nd most corrupt nation. He said the Pakistan People’s Party (PPP) had submitted as many as 49 references against Gen (retd) Pervez Musharraf but it was strange that it was not pursuing these cases.

“Corruption in Pakistan is rampant because of lack of democracy,” he said. He, however, rejected that President Asif Zardari should enjoy indemnity. He said China, Saudi Arabia and the United Arab Emirates (UAE) were not investing in Pakistan because of corruption. The builders’ mafia in Pakistan was involved in corruption worth trillions of rupees and it was the job of the civil society to expose it, he added.
To yet another question, he said the rise and fall of corruption in Pakistan was not specific to a certain person who was holding the reins of power but it was the system that was bad. He said the armed forces had badly impacted the civilian system and generals should not be given lucrative jobs after their retirement.

“We demand that the armed forces and the judiciary should be brought under the fold of the new accountability law,” he said. Gilani said TI was of the view terrorism was the direct result of poverty accruing mainly from the unconstitutional direct and indirect armed forces regimes in Pakistan between 1951 and 2007 and fully “endorsed by the corrupt judiciary”.

He said the government was governing Pakistan “without governance” and “Pakistan has lost credibility all over the world”. Pakistan was facing serious economic threats, poverty, inflation, food and power shortages and rising tide of unemployment due to the “massive, ongoing corruption”. He said scams of different public sector organisations should be exposed.

Gilani said a political will to fight corruption was “urgently required” and must also be seen by public and donor countries. He stressed the need for the formation of an independent accountability commission as required by the United Nations Convention Against Corruption and it should report only to parliament or judiciary and not to the law ministry to avoid a conflict of interest and unbiased accountability.

Talking about land scams in the country, especially Karachi’s Gutter Baghicha, Gilani said unauthorised allotments by Nazims and fraudulent change in land records by revenue officers reported during last one year in the media should be investigated by a judicial tribunal and land records should be computerised within one year.

The National Corruption Perception Survey 2009 (NCPS 2009) indicates that the overall corruption in 2002 has increased from Rs45 billion to Rs195 billion in 2009. Police and power maintained their ranking as the top two most corrupt sectors, the TI report said.

There has been remarkable improvement in the judiciary. As compared to 2006 when it was ranked third most corrupt sector, in 2009 judiciary is ranked 7th. The survey model prepared by TI in 2002 was used and a 24-page questionnaire was repeated to carry out surveys from 5,200 respondents from all four provinces. The physical survey commenced in February 2009 and completed in April 2009.

Major findings of the Pakistan National Corruption Perception Survey 2009 show:

1. Police, Power, Health and Land are the most corrupt departments, and Judiciary, Customs & Taxation have improved their ranking since 2006.

2. In response to the query on comparing civilian and military government, respondents said civilian government were more corrupt.

3. The Present District Government System has been rated as more corrupt by 66.48 per cent respondents, than the previous District Government System.

4. Majority of (60 per cent) respondents feel that government/armed forces should not be involved in commercial activities.

5. Majority of respondents wants National Accountability Bureau or any equivalent Anti-Corruption Agency should be an independent body under the control of the Supreme Judicial Council.

6. The three main reasons of corruption in view of our respondents were being, ìlack of Accountability, ìLack of transparencyî & ìDiscretionary Powerî.

7. The three measures suggested for combating corruption are ìAccountability of public office holdersî, ìJudicial process to be streamlinedî & ìAppointing on meritî.

8. To the question ìIn your opinion has the media played a positive role in combating corruption, 77 per cent said yes”.

9. Respondents ranking of four most viewed TV channel are Geo, ARY, Express and Aaj.

10. Assuming that there are 21.5 million households (8 persons per house) in the country, average bribery expenditure being Rs9,428 per household, almost Rs195 billion is being cost of petty corruption at the lowest level. In NCPS 2006, it was Rs45 Billion.

11. Motorway police system has been said by more than 82 per cent respondents to have reduced corruption, and 84 per cent have recommended to be implemented in all cities of Pakistan.

 

PM concerned over TI report
The News November 18, 2009

ISLAMABAD: Prime Minister Yousuf Raza Gilani on Tuesday expressed concern over the slide in Pakistan’s ranking in the Corruption Perception Index, 2009 issued by the Transparency International (TI).

He ordered the formation of a committee, led by Finance Minister Shaukat Tarin, with secretaries of cabinet, establishment, finance, planning and development, industries and production, interior, health and information technology as its members, to review all the governance issues raised in the media and those in the TI report in consultation with Syed Adil Gilani, the TI head in Pakistan.

The committee will submit its report in four weeks. The prime minister further directed that a comprehensive review of the Procurement Regulatory Authority and the rules framed therein might also be undertaken by the committee and suitable recommendations be submitted to him.

The prime minister expressed the resolve of his government to take Pakistan on the path of good governance and improve its standing as a country possessing a just and transparent governance system.

 

Pakistan ranked 42nd 'most corrupt country'
Business Recorder November 18, 2009

KARACHI (November 18 2009): Pakistan has been ranked as 42nd most corrupt country, among 180 countries ranked by the 'Transparency International Corruptions Perceptions Index (CPI) 2009' released here on Tuesday. Pakistan is followed by Bangladesh and India. New Zealand has been ranked as the cleanest country, and Somalia ranked 180th as the most corrupt country.

The CPI 2009 has been described as survey of the surveys that measures the degree to which corruption is perceived to exist among public officials and politicians in 180 countries around the world. It focuses on perceptions, and not hard data (latter difficult to obtain and validity questionable, eg by comparing number of prosecutions or court cases). CPI 2009 draws on 13 different polls and surveys, from 10 independent institutions, carried out among experienced observers such as business people and country analysts, including local experts.

"The Government is governing Pakistan without governance, and Pakistan has lost credibility all over the world, due to which the country is facing serious economic threats, poverty, inflation, food and electricity shortages and increase in unemployment, which are direct results of the massive on-going corruption," said Adil Gilani, Chairman of Transparency International (TIP), while releasing the CPI at a press conference here.

In Doha United Nations Convention against Corruption (UNCAC) conference, held on November 9-13, 2009, the United Nations had put a price tag on corruption--estimating that up to $1.6 trillion in public assets move across borders each year through networks such as money laundering or into secret holdings.

The 2009 Corruption Perception Index looks at perceptions of public sector corruption in 180 countries and territories and is a composite index that draws on 13 expert opinion surveys. It scores countries on a scale from zero to ten, with zero indicating high levels of perceived corruption and ten indicating low levels of perceived corruption.

The vast majority of countries included in the 2009 index score below five on a scale from 0 (perceived to be highly corrupt) to 10 (perceived to have low levels of corruption). The CPI measures the perceived levels of public sector corruption in a given country and is a composite index, drawing on 13 different expert and business surveys.

The 2009 edition scores 180 countries, the same number as the 2008 CPI. According to the chairperson of Transparency International, Labelle: "Stemming corruption requires strong oversight by parliaments, a well performing judiciary, independent and properly resourced audit and anti corruption agencies, vigorous law enforcement, transparency in public budget, revenue and aid flows, as well as space for independent media and a vibrant civil society."

"The international community," she said, "must find efficient ways to help war-torn countries to develop and sustain their own institutions." Highest scores in the 2009 CPI are New Zealand at 9.4, Denmark at 9.3, Singapore and Sweden tied at 9.2, and Switzerland at 9.0. These scores reflect political stability, long-established conflict of interest regulations and solid functioning public institutions.

Pakistan's 2009 CPI score is 2.4 and, out of 180 countries, its ranking as most corrupt country has slipped five ranks--from 47th in 2008 to 42nd most corrupt country in 2009. It also reveals the effects of corruption in the subcontinent, which is more alarming in Pakistan, as Bangladesh which was the most corrupt country in 2001, 2002 and 2003, has improved in ranking from 38th most corrupt country in 2008 to 42nd most corrupt country in 2009.

Gilani said that Transparency International is of the view that terrorism is the direct result of poverty, resulted only and only due to corruption (defined as "misuse of authority for private gains"), and mainly illegal direct/indirect armed forces rules in Pakistan since 1951 to 2007, fully endorsed by corrupt judiciary. The positive impacts will be visible next year of the few steps of good governance taken during last one year of the restoration of judiciary by the Prime Minister by an executive order on March 16, 2009 (after lawyers' movement supported by opposition parties, civil society and above all media), declaration of judiciary by the Chief Justice to be zero tolerance for corruption and withdrawal of draft NRO bill from national assembly (on strong protest of opposition of parties and civil society, he said.

He said Transparency International congratulates Pakistan Army, which has proved to the world that Pakistan armed forces are the best. The elimination of terrorists in Swat in two months by Pakistan Army is what USA and Nato forces failed to achieve in eight years in Iraq and Afghanistan, which has made Pakistan a proud nation.

Army chief has also taken up seriously violation of Public Procurement Rules by Defence Housing Authority (DHA) and army purchases, and advised to follow the rules, which is a healthy sign and warning for those who are violators of rules. Gilani said that the government must make serious efforts to apply rules and regulations across the board, to achieve the goal of reducing corruption.

In the last 10 years, the economic growth of Bangladesh, and deterioration in Pakistan economy can also be judged from the currency parity rates of Pakistan, Bangladesh vs Dollar in 1999:2009, taka/Pak rupee was 49.65: 51.84 and in 2009 it is taka/Pak rupee 70.39: 83.46.

He said that Pakistan needs immediate enforcement of good governance and transparent administration to counter the acute problems of billions of rupees corruption scams reported in Pakistan Steel, Trade Development Authority of Pakistan (TDAP), Employees' Old Age Benefit Institute (EOBI), Pakistan International Airlines (PIA), rental power plants, Karachi Electric Supply Company (KESC), National Insurance Corporation (NIC), National Housing Authority (NHA), Oil and Gas Development Corporation (OGDC), Pakistan State Oil (PSO), Pakistan Electric Power Company (Pepco), Capital Development Authority (CDA), DP Division, Defence Housing Authorities (DHs), Trading Corporation of Pakistan (TCP), National Bank of Pakistan (NBP), PC, and many other organisations.

 

Another TI shocker coming today
The News November 17, 2009

ISLAMABAD: According to the latest Transparency International (TI) corruption report, Pakistan has become more corrupt as compared to 2008, diplomatic sources said on Monday.

The TI is likely to announce its report today (Tuesday) and a diplomatic source from a key European country confided that the TI’s Corruption Perception Index (CPI) for 2009 does not bring good news for Pakistan.

Declining to share the details of the report which the diplomat claimed to possess, he said Pakistan had moved up quite a few positions in the list of the most corrupt countries.

“You should not be surprised to see Pakistan doing even worse than one of your neighbouring countries that was on top of the list of the most corrupt nations in mid 90s,” the diplomat said.

Only in September, the Transparency International had issued a stinging indictment on the eve of a high-profile New York meeting of the Friends of Democratic Pakistan where President Zardari was to meet US President Barack Obama. Then the TI had stated: “How can one expect from any donor to come forward to assist Pakistan in its current financial crisis, when there exists no law against corruption.”

Releasing the annual report, the TI chief in Pakistan, Adeel Gilani, had said that anti-corruption efforts in the country had taken a 180 degree turn after Gen Pervez Musharraf issued the National Reconciliation Ordinance on October 5, 2007, 56 days after the ratification of the UN Convention against Corruption.

The timing of the TI report’s release will bring embarrassment for President Zardari, whose government’s credibility is already being questioned internationally because the president’s own image and that of many of his key players are plagued by serious corruption charges.

When the print media carried the last TI report, PPP Secretary Information Fauzia Wahab had charged the Transparency International of conspiring against the elected government. She had also said that carrying such a report by the media was like working against the interests of Pakistan.

 

Breach' of agreement: ECC may suggest actions against KESC
Business Recorder November 15, 2009

SLAMABAD (November 15 2009): The Economic Co-ordination Committee (ECC) of the Cabinet, which is scheduled to meet on November 17 under the chairmanship of Finance Minister Shaukat Tarin, is expected to suggest actions against Karachi Electric Supply Company (KESC) for "breach of agreement" with the government at the time of its privatisation, well-informed sources in Water and Power Ministry told Business Recorder on Saturday.

According to the sources, Pakistan Electric Power Company (Pepco) and National Electric Power Regulatory Authority (Nepra) have pointed out several violations on the part of KESC, including non-payment of outstanding dues. The Nepra has already imposed a penalty of Rs 0.6 million for poor performance and failure to dispatch adequate power from its own plants and the IPPs, which resulted in severe shortage of power and massive loadshedding in Karachi.

Giving the background, the sources said that the ECC had noted the presentation, made by the Nepra on steps taken by the latter to regulate the first ever privatised power utility, and constituted a committee, comprising Ministers for Law, Finance, Deputy Chairman of Planning Commission, Water and Power Secretary and the Nepra Chairman. The committee held its meeting on September 11, 2008 and October 16, 2008, and noted that the KESC was in breach of agreements on account of the following:

-- Failure to install additional 1000 MW generation within three years from the date of privatisation as per the implementation agreement (IA). Termination of O&M agreement with Siemens in violation of share purchase agreement (SPA).

-- Operated the KESC system without a qualified O&M partner in violation of the consortium agreement, a condition precedent for qualification criterion to bid for and own the KESC as per the SPA.

-- Delayed utilisation and implementation of Rs 10.1 billion for financial improvement plan (FIP).

The KESC has accordingly been advised as under:

-- The KESC should run its all available plants, especially of Bin Qasim, at the maximum output to meet its system demand and also enhance the availability and dependable capacities of all its power plants.

-- Transmission and distribution networks should be upgraded and augmented to avoid frequent breakdowns.

-- Import from Wapda system should be minimised as much as possible so that loadshedding duration in the rest of the country is reduced.

-- The KESC should add generation to meet future load growth of system and make flat-out procurement of power from the IPPs. The sources said the Nepra also issued a show-cause notice under Section 28 and 29 of the Nepra Act, 1997 to the KESC on July 21 due to non-fulfillment of its obligations to the consumers, NTDC and IPPs.

The Nepra has already heard the views of all the stakeholders and now the decision is awaited. In subsequent development, the Cabinet Committee on Energy Crisis (CCEC) has also taken cognisance of the issue in its meeting held on July 29 and August 5, and given targets to the KESC to improve the situation.

The sources said the Muttahida Qaumi Movement (MQM), which was also part of the government both in the Centre and province, was of the view that as the utility had failed to provide any relief to the consumers of Karachi, hence the government should take it back from the incumbent operators. However, the government was reluctant to cancel/nullify the privatisation as it would send negative message to the investors, said the sources.

 

Feasibility of IP gas pipeline project: contract awarded to German firm
Business Recorder November 14, 2009

ISLAMABAD (November 14 2009): Pakistan has awarded a contract to ILF Consulting Engineers of Germany for consultancy on Iran-Pakistan (IP) gas pipeline project to undertake project feasibility. The ILF will work in joint venture with Pakistan engineering consultancy agency, National Engineering Services Pakistan Limited (Nespak), Business Recorder learnt reliably here on Friday.

Only a pre-feasibility study has been undertaken on the IP gas pipeline project and a bankable feasibility study and Front End Engineering Design (FEED) are required to approach the investors and financiers for tendering and procurement of materials, equipment and appointment of construction contractors.

The ILF will undertake feasibility study, Environmental Impact Assessment, FEED and supervision of detailed route survey. The overall cost of services, through the international tendering, received by ILF-Nespak joint venture for both stages, amount to 48.9 million dollars - 15.5 million dollars for stage-1 and 33 million dollars for Stage-2 - against the second lowest bidder, Worley Parson's 138.7 million dollars.

ILF had taken part in the bidding process after pre-qualifying two-and-a-half years ago and was declared the lowest evaluated bidder. "But the award of consultancy contract was delayed due to late signing of the gas sales purchase agreement (GSPA) with Iran. The contract was signed in June 2009," said the sources.

According to sources, following the directions of the Steering Committee on IP on August 22, a meeting of all the stakeholders, including ISGS, SSGC and SNGPL, was held with the ILF-Nespak to discuss the options of allocating consultancy work among various participants, which remained inconclusive.

"Another meeting was held on October 28 in the Petroleum Ministry to sort out the issue, and after detailed deliberations, the decision was taken to award the contract to ILF-Nespak joint venture," the sources said. The German-based ILF consultants have expertise in tunnelling, underground construction, pipeline engineering, feasibility studies, social and environmental impact and detail design.

The government will initially arrange around 15 million-dollar financing through National Bank of Pakistan (NBP), for consultancy services to the ILF-Nespak on the IP gas pipeline project. The Finance Ministry has assured to make arrangement of financing in this regard. Pakistan has already agreed to import 750-mmcfd gas and would seek additional 250-mmcfd gas from Iran on the request of Balochistan government to meet Gwader Port's requirements.

"If the Economic Co-ordination Committee (ECC) gave the nod for additional gas import from Iran, then the size of the pipeline would be increased and Pakistan will have to take up the issue of the size with Iran," the sources said. "If the volume of gas imports is increased, the size of the pipeline may have to be increased to 48 inches, said the sources.

The cost of construction of 42-inch pipeline - from Iran to Nawabshah - was estimated at 1.2 billion dollars. However, with increase in the size, the cost would rise. At present, 48 percent thermal power generation is based on furnace oil, out of which about 62 percent is imported. One bcfd gas will generate an estimated 5,000-mw electricity. Recent studies have shown that the imported gas would be the most economical fuel compared with other imported fuels.

 

0.5m tons raw sugar import: TCP again trying to favour Dubai-based firm
Business Recorder November 12, 2009

KARACHI: Trading Corporation of Pakistan (Pvt) Ltd (TCP) is at it once again. For all intents and purposes, it appears that the 2009-10 sugar policy, approved by the Cabinet for import of 0.5 million tons raw sugar and another 0.5 million tons white sugar has come as a windfall for the Corporation and its abettors.

Apprehending that it may be tasked to import the required sugar, TCP machinery has been geared up to prepare tender documents so as to favour its favourite supplier at exorbitant prices, notwithstanding the colossal loss the country may suffer in case the deal goes through.

According to well informed sources, major world supplier of sugar is Brazil and all importing countries who import raw sugar, including the biggest buyer India, import raw sugar in bulk with cargo size 40,000-50,000 tons to take freight advantage of big vessels. On the contrary, TCP, in order to favour its favourite is recommending to Finance Secretary to import raw sugar in bags with the reasoning that shipment in bulk would deteriorate the quality of raw sugar.

This is an absolutely flimsy reason as no country in the world including India imports sugar in bags. It is unheard of in trade because of unreasonably high prices because bagging cost in foreign countries is skyhigh, compared to cost in Pakistan. Why pay for expensive bags when Pakistan produces bags locally at much cheaper prices? Why pay higher bagging cost when the same cost is much cheaper in Pakistan? sources questioned.

It is a proven fact that there is no deterioration in quality if shipment is in bulk, but if there is, then why are all the importing countries including India and Indonesia importing raw sugar in bulk.

Another recommendation, which TCP has in mind to forward to the Ministry of Finance, sources said, is to ship out 0.5 million tons in containers. This is another unheard of move. No country in the world including India and Indonesia, when buying big quantities of raw sugar, import in containers when they can easily take advantage of low freight rates for big bulk vessels of 40,000-50,000 tons. The reasons given in this case by TCP are that the cargo size in bulk shipment is 12,500 tons; as such 40 ships will arrive in Karachi, which would be difficult to handle in the crushing season. All the TCP has to do is to look into the past few years when the sugar mills imported raw sugar and all ships that arrived in Karachi were of 40,000 ton size, and in bulk. Why should TCP so blatantly try to mislead the authorities? sources asked.

The tailor-made conditions the TCP is endeavouring to formulate suit only one party, based in Dubai, which has raw sugar lying in its refinery and can easily bag it and ship it in containers to Karachi. It is impossible to get hold of 20,000 containers to ship out raw sugar from Brazil in a short period so that sugar can arrive during the crushing season. Just to favour one party in Dubai, the country would have to pay a nail-biting price. In whose pocket this money would go? This is the big question that saner elements in the government should be asking, sources said.

TCP has suggested to Finance Secretary that following options may be considered before it is asked to issue tenders for the import of 0.5 million tons raw sugar. One of the options below drafted by the TCP makes a crafty and deceitful reading:

The world sugar prices are showing bullish trend. In this situation it is apprehended that the news of importing 0.5 million tons raw sugar will create a panic in the international sugar market resulting in the price to shoot up. To overcome this situation TCP has to float at least 10 tenders in staggered and manageable size of 50,000 tons with the responsive time of at least 15 days as against Public Procurement Regulatory Authority's (PPRA's) required responsive time of 30 working days for international tender.

Other options: Allocation of quantities to sugar mills may be made by Ministry of Industries & Production under intimation to TCP. All nominated sugar mills will be required to lift the quantities as per their allocation directly from the port and all cost of transportation and container handling charges will be borne by them.

About 20,000 containers of 25 tons each will arrive at Karachi port. To avoid demurrage at container yards, mills will have to lift the containers swiftly within the stipulated time. In case sugar arrived in break bulk (in bags) about 40 vessels will arrive, each of 12,000 tons sugar. In that case, priority berthing will be required to avoid demurrage on port.

Meanwhile Adil Gilani, Chairman of Transparency International Pakistan (TIP), had sent a letter to TCP Chairman Saeed Ahmed Khan on Oct 10 drawing his attention to the violation of Public Procurement Rules-2004 in TCP procurements of raw sugar from worldwide sources.

TIP had received a complaint that TCP is again manipulating import of 500,000 tons raw sugar from a specific supplier in UAE. Complaint that a proposal of TCP has been going the round in the Ministry of Finance about pros and cons of importing raw sugar in containers instead of importing it in bulk.

Gilani said: TCP in the last 12 months has imported white sugar, all from UAE from a specific supplier, and managed to alter the terms, conditions and specifications to suit this particular exporter. One way or other, this exporter has been able to get the specifications changed.

This time also, TCP is recommending to get approval for the import of raw sugar in containers, and exemption from PPRA to reduce the time of tender from 30 days to 15 days, and stagger the tender in small batches of 12,500 tons, total 40 batches, and in 2/12 months.

Such terms and conditions, which have been reported earlier also by TIP as one manufacturer-specific are not allowed in the PP Rules No 10 & 32.

TIP has asked TCP to inform whether the complaint is true; and if it is, on what grounds TCP is violating PPRA rules and asking for exemption from these rules. TIP stood for transparent implementation of the Rule of Law, Gilani said.

 

Property bought in Dubai: TIP reminds NICL to explain position
Business Recorder November 11, 2009

KARACHI: Transparency International Pakistan (TIP) has again reminded the National Insurance Company Limited (NICL) to explain its position regarding the procurement of property in Dubai and award of Heating, Ventilation & Air-conditioning (HVAC) contract, bypassing Public Procurement Rules.

In a letter sent on Oct 10 (Tuesday) to Muhammad Ayyaz Niazi, Chairman and CEO, NICL, Syed Adil Gilani, Chairman, TIP has drawn his attention to TIP letters sent to him on October 8, 23 and 24 on the subject. It has been pointed out to the TIP that the selected contractor, Roma Computers is not licensed by Pakistan Engineering Council (PEC) but still it is being considered for the HVAC works at an exorbitant cost of Rs 380 million, against engineers' estimated cost of Rs 260 million.

TIP has pointed out that it is against the law of the land to award works to any contractor not licensed by Pakistan Engineering Council, under PEC Act 1976, bylaw No. 3 Engineering Work - SRO 568(I)/87, which states: "No engineering work shall be constructed except by a constructor or operated except by an operator licensed as such by the Council".

Adil Gilani said that this complaint has to be examined under Rule 2(g), Corrupt & fraudulent Practice, and if the inquiry report confirmed that the complaints were true, then according to the "Integrity Pact", besides action to be taken under the NAB Ordinance, the violators will also have to pay 10 times the amount of corruption, and in this case, as reported by complainant the difference is Rs. 120 million, the total penalty may be Rs 1.20 billion.

On the procurement of property in Dubai, Gilani said it has been reported that the ongoing price of the property in the UAE market is approximately AED (Dubai Dirham) 1100 per sft, but NICL has paid AED 3350 per sft, i.e. more than 200 percent of the market value.

The complaint is that more than Rs. one billion has been paid by NICL for the UAE property. TIP has requested NICL to confirm whether the procurement has been made, and if so, provide the detailed process, tender, contract agreement and integrity pact of the property procured by NICL in (if any) UAE. If the complaint is determined to be true, under the Integrity Pact, the seller has to pay 10 times the amount lost in corruption, which may come to Rs. six billion, Adil Gilani said.

 

Punjab govt adopts procurement rules?
Dawn November 8, 2009

ISLAMABAD, Nov 8: Punjab government has adopted the public procurement rules following the PPRA Act passed by the provincial assembly.

To this effect, the Punjab Services and General Administration Department has formally issued a notification for the enforcement of the act.

Under the Punjab Public Procurement Regulatory Authority Act, all public procurements will now be processed under Public Procurement Rules 2004, which includes signing of “integrity pact” by all bidders, contractors, consultants and suppliers.

It is a no bribery pact as bidders pledge not to bribe and agree to pay 10 times the loss to government if corruption is detected during tendering or in contract implementation process.

The Pakistan Chapter of Transparency International (TIP) has congratulated the Punjab government and the provincial law makers on the passage of the law and decided to hold a one-day capacity building seminar in Lahore later this month on the Public Procurement Rules 2004.

Transparency International Pakistan (TIP) chairman Syed Adil Gilani has given a detailed presentation to Punjab Chief Minister Shahbaz Sharif on the procurement regulations.

Mr Gilani while announcing the holding of the seminar said in a statement that it was the public procurement that generates corruption as, he said, has been reported in the TIP-National Corruption Perception Survey 2009.

It was reported in the survey that corruption in Pakistan had increased by 400 per cent in the last three years

 

Pak Steel inquiry: Ministry of Industries misinforms Senate body
Business Recorder November 7, 2009

ISLAMABAD: The Ministry of Industries and Production has blatantly misinformed the Senate standing committee on industries, headed by Ishaq Dar, regarding an inquiry report on Pakistan Steel Mills (PSM), as revealed by official documents and sources exclusively to Business Recorder here on Tuesday.

The Ministry of Industries had constituted a three-member committee to conduct an inquiry into the recent massive financial losses incurred by PSM and to examine its audited accounts for the last three years. The committee was headed by the Chief Executive Officer (CEO) of Pakistan Industrial Development Corporation (PIDC), Karachi, and comprised Joint Secretary (CS Wing), Industries Ministry and General Manager (Steel), and Engineering Development Board (EDB).

According to the notification, a copy of which is available with Business Recorder, the committee was to make a presentation to the standing committee of the Senate on industries and production on August 28, 2009 in the committee room of Parliament House.

However, on that day (August 28), the Industries Ministry indicated that the inquiry report was incomplete, and committed to submitting it in a subsequent meeting, which is yet to be scheduled. Official documents show that the Industries Ministry blatantly misinformed the Senate standing committee as to the inquiry committee’s report’s availability. Documents available with Business Recorder show that the committee’s report was completed on August 26, 2009.

The committee’s inquiry report states that PSM earned profits from 2000-01 till 2007-08. The company incurred a gross loss of Rs 19.5 billion (59 percent of its net sales) during 2008-09. This loss was further aggravated by a mammoth rise of about 200 percent in general and administrative expenses in comparison to the previous year. Thus pre-tax loss suffered by the company during the year 2008-09 was Rs 22.1 billion as compared to a profit of Rs 3.6 billion during the preceding year.

The main reasons for the colossal loss of PSM for the year ended June 30, 2009 were as follows:

(a) Non-action by the management to safeguard company’s financial position in view of abnormal decrease in the international price of raw material and freight charges. In 2005-06 the former chairman had successfully negotiated a 25 percent reduction in the price of coal that led to the dilution of the negative effects of similar international price trends even after signing agreements with international suppliers thus averting a loss;

(b) Pakistan Steel did not adjust its price proportionate to the increase in international prices. For instance, in July 2008, the landed cost of imported billet was Rs 104,873 per ton whereas the price of PSM billet was Rs 60,537 per ton. The price of imported billet were drastically reduced in July 2008 from Rs 99,555 per ton to Rs 47,000 per ton in October 2008, whereas PSM, instead of reducing its price, raised it from Rs 60,537 per ton in July 2008 to Rs 63,036 per ton in October 2008, which resulted in piling up of inventories.

© Record of the PSM Board of Directors meeting on 26th November, 2008, indicate that the Board had directed the management to constitute a high powered committee to negotiate with foreign raw material suppliers and freight companies to adjust their prices by offering a discount equivalent to the differential amount of current prices. These directives were not acted upon in letter and spirit. The stand taken by management was that PPRA rules do not allow such actions. It is interesting that on a reference by PSM at a later stage, the company’s lawyers Aga Faquir Muhammad & Co rendered their opinion vide their letter dated 4th April, 2009 that PSM can negotiate with international suppliers and freight companies and PPRA rules need not deter the Company from this action.

(d) It also transpired from the record that the ‘Baltic (Freight) Index’ was dropped by almost 80 percent during the year 2008-09, but management failed to avail any reduction in freight charges.

(e) If the rates of raw material and freight had been re-negotiated by PSM, then as per calculations made by PSM Finance Department billions of rupees would have been saved. It transpired that a note in this connection was submitted by GM (F&A) of Pakistan Steel on 6th January, 2009 for the Chairman’s approval but apparently the matter has lingered on.

(f) Previously, on more than one occasion, the company had allowed huge upward revision of 50 percent to 70 percent in international freight charges when international market rate increased. The reluctance to renegotiate prices of raw material and freight charges on the pretext of PPRA rules was a criminal act. It is interesting to mention here that under PPRA rules, there is no specific penalty for violation of any section of the rule.

The inquiry committee in its findings recommended that as per Articles of Association of Pakistan Steel, the Chairman, being Chief Executive, is accountable for all actions, ie administrative/ operational/ policy matters etc. Since the Chairman of Pakistan Steel enjoys complete operational autonomy, he can be mainly held responsible for colossal losses suffered by the PSM.

 

IP gas pipeline feasibility study: Pakistan may award contract to German firm
Business Recorder November 1, 2009

ISLAMABAD (November 01 2009): Pakistan may award a contract to Germany-based ILF Consulting Engineers to conduct a bankable feasibility study and engineering design of Iran-Pakistan (IP) gas pipeline. ILF will work in joint venture with Pakistan engineering consultancy agency National Engineering Services Pakistan Limited (Nespak).

A pre-feasibility study has been undertaken on the IP gas pipeline project and a bankable feasibility study and Front End Engineering Design (FEED) is required to approach investors and financiers and for tendering and procurement of materials, equipment and appointment of construction contractors.

Sources told Business Recorder that a delegation of ILF consultants is in Pakistan at present to finalise the terms and conditions of the contract. Germany-based ILF consultant provides consultancy with regard to tunnelling, underground construction, pipeline engineering, feasibility studies, social and environmental impact and detailed design.

Petroleum Ministry has estimated $22 million to work on Stage One (preparatory phase), which includes bankable feasibility study, social and environmental impact assessment (SEIA), supervision of detail route survey (GRS) and FEED. Sources said that bankable feasibility study would require $10 million to $12 million. The government will initially arrange around $12 million financing through National Bank of Pakistan (NBP) to conduct a bankable feasibility study of IP gas pipeline project.

Finance Ministry has assured arrangement of financing in this regard. Pakistan has already agreed to import 750 mmcfd gas and would seek additional 250 mmcfd gas from Iran on the request of Balochistan government to meet the requirement of Gwador Port. "If ECC gave the nod for additional gas import from Iran, then the size of the pipeline would be increased and Pakistan will have to take up the issue of the size with Iran", sources said.

After increasing the volume of gas import, the size of the pipeline may have to be increased to 48 inches, sources said. The cost of construction of 42-inch pipeline--from Iran to Nawabshah--was estimated at $1.2 billion. However, with increase in the size the cost would rise.

At present, 48 percent thermal power generation is based on furnace oil, out of which about 62 percent is imported. One bcfd gas will generate an estimated 5,000 mw electricity that would result in massive relief in load shedding to Pakistan's electricity consumers.

Recent studies have shown imported gas would be most economical as compared with other imported fuels. According to analysis, thermal power cost would be 3.51 cents/kwh from Iranian gas if the crude oil price stood at $40 per barrel, whereas the furnace based power generation would cost 4.24 cents/kwh, LNG 3.51 cents/kwh, coal 4.3 cents/kwh and solar 11 cents/kwh.