When we will learn to learn

I was reading a tweet which is  about first female PhD Physicist of Pakistan. She was not offerred a job at PINSTECH because she wrote "humanism" in space of religion. I understand it is a sensitive lace to work  but this means being a Muslims is the only criteria of judgement of loyalty and sincerity with the instituition.
I was talking to my wife that Abdul Salam was not promoted since he was a non-Muslim. I am just sick of it. We always cite christians, qadiyanis, jews, hindus work in our  research article since it does not get published in a good journal if we do not include up to date literature in the article. This is straight foreard hypocracy.
We can have any non -Muslim professor as our advisor and we will defend ourself that we are doing fine since no other muslim professor are available hus in extreme circumstances we can have non-muslim advisor. if that is the case, so please my muslim fellow brothers/friends/relative etc etc you should have accepted Dr AbDul Salam since he was the only Nobel Lareatte of Pakistan. You should have cashed it. You should not have ignored it. It was so disappointing when I talk to someone (with beared of course) about Dr Abdul Salam, the first question always is, "was (is) he musllim"? This the first criteria of judging the person is hat whether he is a Muslim or not. I'll be glad if we let the Almighty to do his job for judging everyone.

Basic idea of making blog is to write the anger out of me. I just wrote my inside anger here.
Your views can be totally different. You may disagree with me.

More recently Quetta incident is so sad that I cannot write anything on it apart from this.

یہ اپنے شہیدوں کی لاشیں رکھ کر رونے والے ڈرپوک نہیں ! انہیں دکھ ہے' اپنوں سے اپنا غم نہ بانٹ پانے کا ! انکی آنکھوں میں ایک سوال ہے' کیوں؟

Civil Servcie Reforms - Review

Civil Servcie reforms are important in many ways such as ppublic service delivery, mitigating rent seeking opportunities, eradicating corruption, ease the process of working whether it private sector issue or public sector issue. Below are the causes first taken from the report "Rational for Civil Service Reforms" and then reccommendations which are taken from Crisis Group Asia (2010)

CAUSES

1. Absence of a long term human resource development and management policy has resulted in a neglect in harnessing the potential of Civil Servants, and providing a transparent, predictable, level playing field for all civil servants.
2. Civil servants are risk averse and avoid taking timely decisions.
3. Pressure from the political parties leads to inability to become neutral
4. Exclusion of a large majority of civil servants particularly professionals and technical experts
5. Decision making has become highly over centralized
6. Rapid turnover and political transfers of key Civil Servants
7. Less than adequate compensation packages have encouraged widespread rent-seeking activities by the civil servants, particularly at lower levels where most of the interactions take place between citizens and the government functionaries,
8. Creation of isolated parallel project units and organizations for meeting donors conditionalities has fragmented and weakened the existing capacity of civil service,
9. Reliance on antiquated and outdated rules, procedures and regulations has led to failure in adapting to the changed circumstances and in adopting a problem solving attitude,
10. Turf fighting and self preservation between the Federal and the Provincial Governments and between the Provincial and District Governments
11. Redressal grievance and complaint resolution mechanisms by the citizens against civil servants remain un-satisfactory and time consuming despite existence of the Federal and Provincial Ombudsman’s offices.
12. Absence of internal accountability for the results and outcomes and convoluted and formalistic accountability before the public have taken away the incentives for improving performance and behavior.

RECOMMENDATIONS

To the Government of Pakistan:

1. Enhance civil service performance and revive a spirit of public service by:

a) increasing salaries and pensions, particularly for those at the bottom of the hierarchy, providing better housing, transport and health insurance for all government employees, and subsidised schooling for their children;

b) conducting regular training, including refresher courses, at all levels of the bureaucracy;

c) improving standards of instruction at training institutions to inculcate professional skills as well as norms and practices that reward integrity and professional commitment;

d) providing competitive compensation and benefits to attract qualified and motivated instructors;

e) linking an officer’s performance during training programs with promotions, thus no longer using successful completion as the only yardstick;

f) establishing and strictly abiding by new criteria for secretariat appointments to include professional expertise, diversity of experience, demonstrable leadership in public institutions, and ability to tackle challenging assignments;

g) modifying Annual Confidential Reports (ACRs) to include tangible, performance-oriented criteria instead of subjective evaluations of officers’ characters;

h) instituting a transparent and competitive selection process to encourage representation of all occupational groups, and reserving positions in each basic pay scale for officers from each of those groups; and

i) ensuring that specialists have the same access to training facilities as generalist officers in occupational groups.

2. Eliminate military interference by:

a) ending the practice of hiring serving or retired military officers in the civil service and abolishing the annual 10 per cent quota reserved for military officers;

b) refraining from renewing contracts of retired military officers presently occupying civil service positions;

c) enacting laws barring serving or retired military personnel from heading any institution dealing with civil service training, recruitment or promotions; and

d) immediately ending the practice of having senior appointments subject to evaluation and clearance by the military’s intelligence agencies.

3. Enhance the functioning of federal and provincial secretariats by:

a) reducing excessive centralisation of functions and devolving administrative and financial authority to lower tiers, with effective oversight;

b) revising and simplifying existing rules and procedures to ensure that civil servants are informed of their rights and responsibilities;

c) ending the systemic bias in favour of generalists by allowing the same opportunities for postings, promotions and career advancement to specialists; and

d) reversing the quota for District Management Group (federal) appointees to provincial posts at the level of Basic Pay Scale (BPS) 21 so that 75 per cent of these posts are reserved for provincial civil servants, and the remainder for federal appointees.

4. Institute effective accountability over the civil bureaucracy by:

a) implementing the recommendations of the Charter of Democracy, signed between the PPP and PML-N, to set up an independent accountability commission, answerable to the National Assembly’s Public Accounts Committee (PAC); this committee would investigate – in tandem with the Federal Investigation Agency (FIA) – alleged malpractice and financial and other corruption by government officials and take disciplinary actions against those found guilty;

b) empowering federal and provincial ombudsmen to redress public grievances against bureaucratic malpractice; and

c) holding federal and provincial secretaries accountable to parliament and provincial assemblies by mandating national and provincial parliamentary committees to hold regular hearings requiring these civil servants to account for efficient use of resources as well as the organisation, management and staffing of their respective departments.

5. Promote fairness and eliminate opportunities for political manipulation at all levels of the civil administration by:

a) expanding the role of the Federal Public Service Commission (FPSC) from a recruiting agency to one that professionally oversees all aspects of the bureaucracy’s functioning;

b) mandating parliamentary committees to vet and approve senior civil service appointments, proposed by the FPSC, to ensure that they are made on merit rather than personal or political affiliation, followed by a vote in parliament;

c) withdrawing the discretionary power of the prime minister to promote officers to the highest grade in the bureaucracy and transferring it to the FPSC;

d) guaranteeing security of tenure and providing civil servants legal protection against postings, transfers and promotions that do not conform to due process;

e) empowering the Federal Services Tribunal to monitor postings and transfers, and review civil servants’ complaints about arbitrary transfers; and

f) replicating these measures in the provinces.

6. Settle the status of the report by the National Commission on Government Reforms (NCGR) by:

a) constituting a bipartisan parliamentary committee on civil service reform, with half the members nominated by the government and half by the opposition, co-chaired by the prime minister and the leader of the opposition, to assess the report, placing recommendations before the national and provincial assemblies for detailed debate and review;

b) once approved, present a final bill on the floor of the National Assembly for a vote; and

c) encourage the provincial assemblies to follow suit on reform of the provincial services.

7. Improve land administration and local governance by:

a) computerising land records;

b) making certificates of possession and other land ownership-related documents available at information kiosks in tehsils (towns) for a small fixed fee;

c) establishing call centres in districts to report requests for bribes, illegal commissions and other abuses, including by the patwari (village revenue officer); and

d) devolving authority to tehsil officials to issue certificates of domicile and related documents, rather than through district headquarters.

8. Modernise civil service systems and processes and enhance inter-agency coordination through e-gov­ern­ance technology by:

a) making compliance with standards set by the E-Government Directorate (EGD) mandatory for major federal government projects;

b) instituting compulsory training in basic information technology processes for all government employees in BPS-5 and above; and

c) giving the EGD greater financial and organisational autonomy by converting it from a cell to an attached department of the ministry of information technology.

9. Improve police functioning by having the parliament review the Police Order (2002); setting up a parliamentary subcommittee to deal exclusively with policing; and empowering accountability and managerial bodies such as the public safety commissions and the National Police Management Board.

10. Mainstream FATA’s bureaucracy by abolishing the FATA secretariat and the office of the political agent, and transferring their authority to the NWFP secretariat, relevant provincial line ministries and district departments.

To the U.S. and the International Community:

11. Condition FATA aid under the U.S. Enduring Assistance and Cooperation Act 2009 on reform of the region’s corrupt and dysfunctional bureaucracy, including the abolition of the FATA secretariat and the office of the political agent, with their powers transferred to the NWFP secretariat, relevant provincial line ministries and district departments.

12. Include technocrats, as well as cadre civil servants, in all public sector capacity building projects, in addition to training schemes at leading international universities and institutes.

13. Build the capacity of civil service training institutions by providing instructors and teaching materials on best international practices of public policy, fiscal policy, financial management, infrastructure development, human resource management, energy and agriculture.

14. Provide technical support for the expansion of E-government technologies, particularly in areas such as land revenue administration, taxation and policing, and leverage aid to press line ministries, departments and agencies to incorporate E-governance processes within their domains. 

Moving Cautiously

Black Economy: Double GDP, Double Revenue

Who is harmed by rent seeking?

Stronger government and stable and consistent policies help an economy to grow. This could be one of the reasons apart from the Green Revolution, Afghan aid and post 9/11 war on terror aid that we registered higher growth in the martial law eras than in democracy. The first 12 years of democracy, from 1987-99, were marked with lower growth since the governments were not strong enough, apart from 1997-99 PML-N’s heavy mandate government. However, in the end we all witnessed that nothing is more powerful than the army in Pakistan.

Irrespective of the form of government in Pakistan, the elites (smaller part of the economy) have a comprehensive hold on the economy through their (personal) links with the bureaucrats and politicians. Hence, these links are used to make extra benefits using their positions. If these benefits can be translated into monetary units then it’s called ‘economic rent’.

Economic rents are used, according to firms, to create more wealth and to distribute among the workers to provide benefits to them. Thus, the society gets benefits from economic rents through wealth creation, known as beneficial rent-seeking. However, this might not be the case in real. Firms make extra rent/profit and do not distribute (fully) among the workers or society, known as detrimental rent-seeking. Firms/ entrepreneurs involved in such activities are known as rent seekers.

Lobbyists around the world hired by firms/entrepreneurs, work closely with bureaucrats and politicians, to protect the firms’ benefits that hire them. They do not care about society even though they always argue that they are doing it for the betterment of society. Sometimes, the lobbyist is a member of a big association in which all the firms are registered, such as APTMA’s representative will be a member from ATPMA, etc. The sad part is that if these lobbies are very strong and the government is weak, then they can easily exploit the government to make policies in their favour. We have seen that in such a situation, the government becomes part of rent-seeking.

The government’s role in developing countries like Pakistan is inevitable when private sectors do not invest due to lack of entrepreneurship or lack of profitability and confidence in the economy. The government’s role is vital in case of market failures. However, it may end up with worse outcomes since it will affect its own benefits as well, which will lead to rent-seeking by the government. Thus, the concept of rent-seeking is not limited to private firms/entrepreneurs and the government could be a rent seeker as well.

Licensing schemes, in general, lead to corruption by authorities as bureaucrats or the officers on duty use their discretionary power to award license to clients. This may lead to rent-seeking in two ways: the government creates its own monopoly as it’s the sole authority that provides licenses to clients. Therefore, government officials appointed to do this particular job may be involved in taking bribes from clients and if clients give a bribe then the total transaction cost of producing or importing increases. Thus, consumers are charged higher prices, more than the cost of production, which leads to their exploitation. In the 1960’s and 1970’s, several licensing schemes were introduced for investors, importers and exporters in Pakistan.

Industrialists always demand protection for their industries so that they can enjoy inefficient production by producing at a higher cost than the world. They ask for subsidies to cover the implicit cost of their product due to higher taxes and thus higher input prices are used in the production processes. They ask for bans and other kinds of restrictions on the final products as they do not want foreign goods to replace their product in the domestic market. With the same token, tariff cascading, lower on raw material and higher on final goods, restrict imports of consumer goods into the domestic market. Consequently, people are deprived of consuming better quality products. Finally, tax holiday, which was given to industries in the 1990’s helped producers to seek more profits. But the extra profit was not passed on to the consumers, which implies rent-seeking by industrialists. All these policies are demanded by the lobbies of different associations/industries from the government that have detrimental effects on the society. Wealth generated from these activities goes into a few hands instead of creating wealth within society.

Pakistan’s entire population is around 185 million. The household size is around 6.8, which makes 27.2 million households in Pakistan. If the government announced Rs1 per kg subsidy on wheat flour due to increase in the prices of wheat and demanded by the flour mills and let’s suppose that if 10 kg wheat flour is consumed on average each month in every household, then the government needs to give Rs272 million subsidy to the wheat flour mills. On the other hand, if Rs10 is given to each household, it will be evenly distributed among the 27.2 million families instead of Rs272 million distributed among a few wheat flour mill owners. Thus, whenever producers ask for subsidies, they get benefits in millions at the cost of few rupee savings of each household. These policies could be very sound politically but in the end, the society is not benefitted from them and a major chunk of money goes into the hands of rent seekers.

Among rent seekers, the automobile sector takes the top spot. They have been protected by high tariff rates for more than two decades now. They are still insisting that policymakers provide them more protection. Are they close to being competitive in the world market or is their sole objective rent-seeking? Since infant industry argument does not tell to protect the industry forever, we need to decide now whether it’s favourable to protect the auto sector or to start investing in some other industry, which will be beneficial for the country and society in the long run. Local assemblers were asked to follow a deletion programme and they were to achieve specific targets of deletion each year. However, the deletion process is quite slow and each year they ask for more protection. They have been facing little competition due to used car imports. Although the imported used cars are five years old, which have on an average close to 80,000 mileage, people sill prefer buying old cars than new locally manufactured cars. Local car assemblers are going to the National Tariff Commission on Nov 22, 2012 to discuss the tariff rate on old and new cars. It’s expected that they will ask for increasing used cars’ tariff rates and not allow the import of five-year-old used cars, instead allow the import of three-year-old cars.

Competition and distortions are two important terms here. Any kind of distortion may lead to rent-seeking by the principle (government) or the agent (lobbyist), which will not benefit the society. Similarly, anything that leads to go away from competition helps rent seekers to seek more surplus from consumers, thus increasing their own wealth by decreasing the society’s wealth.

rent-seeking can also be quite costly to economic growth. Since rent-seeking results in more returns for firms/entrepreneurs, it attracts more rent-seeking activity. rent-seeking activity takes away from competitive equilibrium, thus leading to lower output level. Therefore, it results in lower economic activity and lower growth rate. Moreover, it hurts innovation through lower expenditures on R&D. Since innovation or technological advancement is the core to economic growth, rent-seeking adversely impacts economic growth. As it’s mostly done by the elites or top 0.1 percent (according to income) people, it creates severe income inequality as wealth is not distributed among society. Some people argue that rent-seeking is analogous to theft because in theft thieves take your money with them and in rent-seeking again, certain people take a chunk of money with them and the rest do not receive anything.

Despite several problems in the economy, we need a ‘big push’ from specific investors to invest more in the country so that the economy is back on the growth track. However, this policy of development economics will lead us towards rent-seeking. Hence, there’s a need for long-term policy measures -- call it ‘slow and steady push’ -- which has regulations for anti rent-seeking and everyone has a level-playing field to contribute to the economy. In order to get rid of rent-seeking, we need to abolish the Statutory Regulatory Orders’ system, prepare a tariff rationalisation structure in such a way that we’ll drop the normal maximum tariff to zero in the next few years, give a specific timeframe to all the industries that are being protected for the last many years to become competitive, introduce no new quotas and bans on any product and finally, limit the government’s role in investing in those activities where the private investor can invest. Moreover, the government should focus on providing law and order, justice, property rights, basic infrastructure and ensure that competition prevails in the market.

http://e.thenews.com.pk/newsmag/mag/detail_article.asp?magId=10&id=4050

Some new Lessons learnt based on Empirical Findings at the 28th PSDE

In the first paper causal link among growth, private investment and public investment is checked. One of the most interesting result came out of the study is that public investment crowds out private investment which is contrary to the previous studies which shows crowding in hypothesis, i.e., public investment crowds in private investment. After this paper government should stay away from investing in all those sector where there is a chance for private sector to invest. 

In two another papers on external debt and growth, both the studies came out with negative long run association between growth and external debt. They found the existence of debt overhand due to which external debt hinders growth. 

An interesting find in one of the papers (Ali and Mustafa (2012)) is that labour is negatively associated with the GDP in the long run, which to me is a absurd results. I think it is due to the problem of endogeneity since labour is taken as exogenous variable but it is an endogenous variables and should be treated endogenously. Another paper (Qayyum and Haider(2012)) treated it endogenously since they estimated the model with system GMM and came up with positive coefficient of labour. 

In the same session last paper did a critique on the FRDL-2005. the paper concluded "FRDL was implemented to improve overall fiscal discipline int eh country so as to put the country on the desire path of economic growth. The FRDL was not frame on the basis of overall economic situation of the country rather it was framed on the basis of constitutional provision. The jurisdiction of FRDL is only the federal government and provincial governments are not in the jurisdiction". Qasim and Khalid (2012).

References

1. Public-Private Investment and Economic Growth in Pakistan: An Empirical Analysis

Maryam Bint-e-Ajaz and Nazima Ellahi

Kashmir Institute of Economics, University of AJ&K, Muzaffarabad and Foundation University, Islamabad

2. External Debt Accumulation and its Impact on Economic Growth in Pakistan

Rifaqat Ali and Usman Mustafa

Department of Education, Attock and Pakistan Institute of Development Economics (PIDE), Islamabad

3. Foreign Aid, External Debt and Economic Growth Nexus in Low Income Countries: Empirical Evidence from Pakistan

Unbreen Qayyum and Adnan Haider

Pakistan Institute of Development Economics (PIDE), Islamabad and State Bank of Pakistan, Karachi

4. Fiscal Responsibility: A Critical Analysis of FRDL (2005) Pakistan

Muhammad Ali Qasim and Mahmood Khalid

Pakistan Institute of Development Economics (PIDE), Islamabad.

PRECISE ESTIMATES OF THE INFORMAL ECONOMY

http://www.pide.org.pk/psde/25/pdf/AGM28/M%20Ali%20Kemal%20and%20Ahmed%20Waqar%20Qasim.pdf