The question of cost-effectiveness

The News

Since its inception the NAB has spent a total of Rs 25.36 billion and managed to recover only Rs 99 billion directly, having a net benefit of nearly Rs 74 billion in 18 years from its prosecutorial activities

On the 4th of January Prime Minister Imran Khan appeared proud. Ten years of dark ages have ended, he tweeted, boasting the historic National Accountability Bureau (NAB) recoveries of Rs 389 billion in 2019 and 2020. These facts give the Pakistan Tehreek-i-Insaf (PTI) confidence that it has achieved its most major promise: effective political and institutional accountability.

At the same time, the NAB has suffered a legal defeat in the English High Court. The Pakistan High Commission in the UK has been ordered to pay Rs 4.5 billion to the foreign asset recovery firm Broadsheet LLC. The payment relates to the hiring of Broadsheet by the NAB to trace assets of 200 Pakistanis as far back as 2003, two years after the NAB’s inception. The imposition of such a large penalty raises questions about the cost-effectiveness of the NAB as an institution and political accountability in Pakistan as a concept.

According to NAB’s annual report, in the year 2019 the anti-corruption watchdog spent a total of Rs 1.9 billion. Total recoveries during this period were Rs.3.8 billion, with a high number of 1,938 successful disposals of cases and a 68 percent success ratio. How was Rs 389 billion recovered in 2019 and 2020, when only 3.8 billion was recovered in 2019? The answer is slightly complicated. On the 25th of October 2019 the NAB chairman claimed recovery of over Rs 702 billion through cancellation of land allocations in Sindh. The NAB terms these kinds of recoveries as “indirect recoveries”. The logic is simple, if the NAB did not cancel the allotment of such lands, it would have resulted in a loss of Rs 702 billion to the state and thus NAB “indirectly” saved this money by cancelling the said allotments or projects. There are two things essentially wrong with such calculations. First, they generate no revenue for the state or for the affected. Nothing is received by the NAB but the ability to make a claim that such money has been saved. Second, it asks us to delve in the world of “what ifs”. In the scenario of cancelled allotments or auctions of land, until the land is re-auctioned in a corruption-free manner, any evaluation of an indirect recovery is only a moot point. This may perhaps be the reason why the Rs 702 billion claimed to be saved in Sindh was noticeably missing in the prime minister’s recent tweet.

The saga of indirect recoveries has been around throughout the NAB’s history, but it was only resurrected in 2015 after a decade of zero indirect recoveries (as reported by the NAB) and the incumbent government seems to have taken it to an entirely different level. Indirect recoveries amounted to only Rs 5 billion in 2015, Rs 1.7 billion in 2016, Rs 21 billion in 2018 and a staggering Rs 121 billion in 2019. Moreover, as per the NAB’s website, the total recoveries made by the NAB since its inception (in 2001) are Rs 472 billion, out of which, Rs 160 billion has been indirect recoveries, and Rs 110 billion has actually been recovered by the State Bank of Pakistan in collaboration with the NAB, Rs 59 billion is restructuring of loans (which may previously have been written off) and Rs 44 billion is court fines. Since its inception the NAB has spent a total of Rs 25.36 billion and managed to recover only Rs 99 billion directly, having a net benefit of nearly Rs 74 billion in 18 years from its prosecutorial activities. There is, however, a caveat: out of the Rs 99 billion recovered by the NAB, Rs 69.2 billion has been voluntary returns and plea bargains. Which means that NAB has recovered less than Rs 5 billion through successful court convictions, 4.5 billion of which it now has to pay Broadsheet.

Beyond debating prosecutorial success and financial recoveries, there is however a larger point to accountability, a moral argument that society should promote a culture of transparency and meritocracy rather than corruption and inefficiency. The value of such a culture of accountability for any state is immeasurable. However, the perception of corruption in Pakistan has been measured. In 2017 Pakistan ranked 117 out of 198 countries on Transparency International’s corruption perception index (CPI), in 2019 Pakistan ranked 120 out of 198 countries on the same index. Many authors have deemed the CPI unreliable; the perceptions of participants may be biased and since corruption is usually hidden, it may not be easily quantifiable.

It might not be easy to say that the NAB has failed, but it is definitely hard to say that it has achieved resounding success, even after its purported independence in recent years. The data on the NAB’s website is supportive of its marginal success, yet it is ironically opaque. While the NAB’s annual report mentions the total budget allocated to it, there is no data on where this money was actually spent. As the Broadsheet saga shows, there is little we know about pending claims, discrete expenditures and hidden liabilities.

NAB’s apparent failure isn’t peculiar for developing countries, most of which face similar problems in their accountability regime. It is, however, a failure that can be remedied if appropriate steps are taken. The foremost measure would be to approach prosecution from a wholesome, rather than a zero-sum mindset. The data shows that the NAB has had resounding success in recovering money through plea bargains, as opposed to court convictions. The NAB must hence redirect its focus towards “restitution” and abandon its policy of “retributive criminal justice”. More importantly, it should holistically analyze for each of its action the realistic costs and benefits of an investigation. In such an analysis, the costs should include both the direct costs of prosecution, the opportunity costs of resources spent on the prosecution and the indirect cost of interfering in economic activity.

It has been suggested by scholars that corruption allows the red tape queue to be rearranged in a way that brings about an efficient allocation of time. In this regard, the NAB must make sure that its investigations cause the least amount of economic disruption possible.

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