4 Governance and security programme
46. DFID states that governance lies
at the heart of Pakistan's economic and social problems:
Poor planning, budgeting and management
mean health and education services do not meet the needs of the
population. 79% of Pakistanis have 'lost hope' in the current
government's ability to improve their lives. [64]
DFID argues that the Pakistan Government
needs to undertake significant macroeconomic reforms to increase
growth, tackle severe energy shortages, and manage fiscal and
inflationary pressures including increasing the tax to GDP ratio.[65]
DFID's current governance and
security projects
47. DFID's governance programme is made
up of a number of active projects which are listed below.
Table 4
| Project title
| Description
| Budget
|
| AAWAZ Voice and Accountability Programme
| Democratic processes in Pakistan are more open, inclusive and accountable to citizens.
| £37,500,000
|
| Pakistan: Support to Multi-Donor Trust Fund (MDTF) for Northwest Frontier Region
| Support recovery and sustainable development in Border Areas (specifically those aspects identified as addressing root causes of conflict & supporting drivers of Peace)
| £30,000,000
|
| SUB NATIONAL GOVERNANCE - KHYBER PAKHTUNKHWA AND PUNJAB
| Poor people in Punjab and Khyber Pakhtunkhwa provinces report that the government services (especially health and education services) are better meeting their needs
| £15,378,000
|
| Supporting Transparency, Accountability and Electoral Processes in Pakistan (STAEP)
| Democratic processes in Pakistan are more open, inclusive, efficient and accountable to citizens
| £11,500,000
|
| Supporting Electoral Reform in Pakistan
| Stable, inclusive and tolerant democracy in Pakistan
| £5,680,000
|
| Support to Government of Northwest Frontier Province Provincial Reforms Programme
| Government of North West Frontier Province and Federally Administered Tribal Areas-Secretariat demonstrate increased capacity to design and deliver effective and sustainable public services improved.
| £2,496,499
|
| Peace building Support to PCNA (PSP)
| People benefitting from a more stable environment for achieving Millennium Development Goal (MDG) targets in KP and FATA
| £2,400,000
|
| Support to the Government of Balochistan
| To improve GoB's social service delivery through better public sector management.
| £800,000
|
| Pakistan Alternate Dispute Resolution Project Phase II - Punjab
| To enhance access to justice for small and medium enterprises and business concerns through institutionalised mediation
| £296,000
|
| Stabilisation Support to Pakistan
| To provide technical assistance in support of the completion of the crisis analysis phase of the post-crisis needs assessment
| £266,991
|
DFID website: Pakistan programmes
Box1
| DFID Pakistan's 2015 targets for Governance are:
? Provide and install a total of 50 bridge kits to conflict and flood affected areas in Khyber Pakhtunkhwa;
? Help two million more women and men to vote in the next General Election;
? Help increase the number of women in decision-making positions at local and provincial level in Punjab and Khyber Pakhtunkhwa by 13% and at national level by 5%;
? Work with the Government of Khyber Pakhtunkhwa to strengthen its budgeting for another six districts so it is linked to delivery and performance across eight sectors, including education and health;
? Work with the World Bank and other donors to, amongst other things, build schools and roads in Khyber Pakhtunkhwa and Federally Administered Tribal Areas (FATA).
|
Source: DFID, UK aid: Changing lives,
delivering results in Pakistan, Summer 2012
48. This set of targets seemed to bear
little if any relationship to governance projects detailed Table
4. It is unclear to us how DFID's portfolio of governance and
security projects are linked to the targets in its operational
plan for Pakistan, or how the impact of the projects will be measured.
Given that the cost of these projects is large, in excess of £100
million, we believe that DFID should set clearer targets and measure
performance against these targets. .
ANTI-CORRUPTION PROGRAMME
49. On 1 February DFID published specific
plans to tackle the misuse of foreign public funds in each of
its 29 priority countries[66]—one
of which is Pakistan. It said by doing this DFID would:
help the poorest people to develop
their economies, hold their own governments to account and to
grow their way out of poverty[67]
50. Pakistan's main anti-corruption
body is the National Accountability Bureau (NAB), established
in 1999. It has preventive, enforcement and public awareness
functions with a mandate to investigate and prosecute corruption
cases. DFID has informed us that it has worked with NAB in the
past, most notably supporting the drafting of the National Anti-
Corruption Strategy in 2002. DFID said that this work had had
limited impact and referred us to a report that found:
the NAB is widely perceived to target
politicians and civil servants from preceding civilian governments,
discrediting political opponents and junior government officials.
Judges and military officers as well as political allies of the
government have been virtually immune from any investigations
or being held accountable for their actions. [68]
The previous Pakistan administration
were working towards a new anti corruption body, in October 2012,
it introduced a draft National Accountability Commission Bill
2012 to replace the NAB with a new institution. However the Bill
lapsed with the expiry of the National Assembly's term last month.[69]
Box 2
|
DFID's anti corruption programme targets
Over the next three years, DFID said it will support the Pakistani government in tackling corruption through:
? Building political commitment to increase accountability, for example by supporting Pakistan's Public Accounts Committee and supporting the Election Commission.
? Supporting better access to information and transparency, for example helping provincial governments to consult communities about their budgets.
? Improving public financial management, for example by supporting provincial governments on budgeting, reporting and independent auditing.
? Identifying and supporting initiatives outside government that strengthen the voice of citizens in reporting concerns and demanding action on corruption.
? Supporting the international community's work to co-ordinate approaches to corruption.
? Backing global and regional initiatives on corruption.
|
Source: DFID's Anti-Corruption Strategy
for Pakistan, January 2013
51. Commentators have warned that progress
against corruption will be slow as it was "deeply entwined
with patronage, which in turn is at the heart of the political
system."[70] James
Fennell pointed out that the most corrupt institutions in Pakistan
were the ones with an interface with the people, for example
the police, the land tax administrators and the income tax administration.
Corruption is permitted in these entities as Pakistan's political
class need them "to be biddable in order to make sure that
people vote for the right people, for example the so called feudals
in southern Punjab and northern Sindh."[71]
52. It is unclear to us how DFID's newly
announced anti corruption programme sits with the current DFID
governance projects (Table 4) and 2015 targets (Box 1)—whether
it is additional to what already exists with additional funding
or encompasses the projects and targets which already exist.
53. We commend DFID's anti-corruption
aspirations but recommend that in its response to us DFID should:
confirm
that:
the Pakistan Government remains
committed to an anti-corruption strategy and programme led by
the National Accountability Bureau
once appointed, the Bureau's
principal officers cannot be dismissed by the President, Government,
Parliament or the armed forces of Pakistan,
the Bureau has the budget and
power to investigate, charge and prosecute people without seeking
approval from the President, Government, Parliament or armed forces
of Pakistan;
set
out measurable targets to see if its investment in anti-corruption
is having the desired, positive effect;
indicate
at what point monitoring and evaluation will take place to determine
whether DFID and the Government of Pakistan's investment in anti-corruption
is being achieved.
hold
discussions with the Commonwealth Secretary General about what
further steps the Commonwealth can take to help all Commonwealth
Governments to reduce corruption.
54. We are concerned that DFID's
anti-corruption targets do not include bringing public officials
accused of corruption to court and securing convictions and sentences
against those found guilty.
Tax reform
55. More tax has to be collected to
fund social programmes for Pakistan's rapidly growing population.
A report commissioned by DFID on Pakistan governance concluded
that if Pakistan were to guarantee a more inclusive and equitable
political settlement one of the three things it needed to do was
to "Ensure that the tax base is extended and revenues are
raised fairly from all sectors of society".[72]
Dr Ahmad told us:
if the Government does not fix it,
and you continue to have pressure on public services, the increase
in militancy and dissatisfaction with the state of affairs is
only bound to grow. I think this will manifest not only in demonstrations
in Islamabad, which we are seeing now, but also in increasing
regionalism. [73]
56. We were therefore keen to examine
what DFID was doing to support improvements in the current state
of taxation in Pakistan. DFID's submission to our Tax in Developing
Countries inquiry stated that it had contributed to a Tax
Administration Reform Project (TARP) in Pakistan, costing DFID
£13 million over six years. The objectives of the programme
had been to improve organisational efficiency and effectiveness
of revenue administration, promote compliance through strengthened
audit and enforcement capacity, improve trade facilitation through
modern and internationally acceptable customs procedures, and
improve the integrity and fairness of the revenue system.[74]
57. However, Dr Ahmad was scathing about
the programme. He told us that TARP which had been run by the
World Bank had cost $135 million. After a year the programme was
no longer audited, at the end of eight years work had not started
on integrating the tax administration systems (the main purpose
of the programme) and, by the time it was 'shut down' by the World
Bank there was not even a design for a functioning IT system.
He believed the West had turned a blind eye to Pakistan's tax
affairs during this period allowing the programme to fail due
to the need to keep the Pakistan Government on side with the Western
political objectives following 9/11.[75]
58. Currently DFID has no programmes
on taxation. DFID told us that its engagement on taxation focused
on "building consensus" at both Federal and Provincial
level, while being "ready to engage technically when political
leadership was clearly expressed":
The UK stands alongside the US,
IMF, World Bank and Asian Development Bank in encouraging the
Government of Pakistan to lay the groundwork for post-election
economic reform including on taxation and revenue collection.
We questioned the DFID Director General
Humanitarian, Security and Conflict, Mark Bowman in December 2012
about tax in Pakistan as part of our inquiry into the Department's
annual report and accounts and were informed:
There are some very significant
challenges in Pakistan, in terms of building up their tax base.
This is an area that we would like to explore further—how
we can continue to work with the Pakistani authorities. They
have a very persistent problem in terms of the very low ratio
of tax to GDP. Through the technical support that we can provide
but also the dialogue we have with them over their general economic
policy, through the IMF and other organisations, this will be
a key priority for us in the coming years.[76]
59. It seemed to be agreed amongst our
witnesses that the IMF had a critical and important role to play
in persuading the Pakistan Government to reform taxation. Although
discussion continue between the Pakistan authorities and the IMF,
to date the IMF have not received a loan request from the outgoing
administration. There is speculation that Pakistan's caretaker
administration might approach the IMF but it is not clear if negotiations
could be concluded unless agreed by the newly appointed government
following the May elections. New IMF financing would be dependent
on the Pakistan authorities taking prior policy actions for macroeconomic
stabilisation. Discussing Pakistan on 21 November 2012, the IMF
Executive Board said:
"Directors called for comprehensive
revenue and expenditure reforms. Fiscal consolidation should focus
on changes in tax policy and improvements in compliance. Some
Directors urged reconsideration of the tax amnesty schedule currently
being contemplated. Recognizing the political difficulties in
implementing a full VAT, Directors advised the authorities to
consider credible alternative revenue measures including a modified
GST and strengthening the income tax."[77]
Dr David Steven said he hoped the IMF
would be tougher in what it did.[78]
Dr Ahmad agreed:
You cannot have an IMF programme
that says, "Never mind about the tax reform." How is
the IMF Board going to turn around and say the same thing to Greece,
if Greece is going to ask for the Pakistan treatment? You cannot
have another IMF programme. That is where the United Kingdom,
and the Germans[...] have a voice in the IMF. No programme without
tax reform. [79]
We asked the Secretary of State how
levels of taxation could be increased in Pakistan. She also believed
the IMF had an important role and that there was potential for
a new Government after the election to face up to the problem
She hoped that in the first 100 days after the election there
would be a serious approach to confront taxation. She said that
Pakistan needed to
look at some of the reforms that
have also been proposed by the IMF, potentially. They also need
themselves—I sense, on a cross party basis—to start
to get some agreement on what needs to be reformed, whoever wins
[the election], so that you try to take the politics out of what
are structural economic challenges that will face whatever government
takes over after the next election.[80]
60. We recommend that DFID work with
other donors to encourage Pakistan to make progress on tax policy
and revenue collection and seek to ensure this is a high priority
for all donors. We further recommend that the UK Government use
its influence in the IMF to ensure this institution presses for
reforms to Pakistan's tax system. The UK Government also should
be ready to support the new Pakistan government in implementing
a nationwide, strategic communication plan to explain the need
and benefits of the desired tax policy changes so as to help the
authorities to build political momentum for reform within Pakistan.
The 'Golden Thread'
61. The Secretary of State said
the concept of the Golden Thread, as discussed earlier in this
report, has translated into DFID's programme in Pakistan by investing
in the transparency and accountability agenda, for example the
budgeting and local community engagement project in Khyber Pakhtunkhwa.[81]
62. However, given the importance the
Prime Minister, David Cameron, attaches to the 'Golden Thread'
and the poor quality of governance in Pakistan, we were surprised
that DFID's governance programme only had one small provincial
project directly related to improving and building the Golden
Thread which, from what the Secretary of State told us, we surmise
is the Sub national Governance project in Khyber Pakhtunkhwa.
63. Pakistan is a country where the
Golden Thread is lacking—there is corruption, a frequent
absence of the rule of law and low tax collection. We were surprised
that addressing these important failings does not seem to be the
main focus of DFID's governance work. We recommend DFID review
and re-design the DFID Governance programme to support key Pakistani
reformers to design and deliver a credible reform programme,
involving increases in revenue collection, applying the rule
of law and reducing corruption.
64 Ev 56 Back
65
Ev 56 Back
66
DFID Press Notice: Corruption: UK crime agencies to fight problem
overseas 1 February 2013 Back
67
DFID Press Notice: Corruption: UK crime agencies to fight problem
overseas 1 February 2013 Back
68
2008 U4 paper Overview of Corruption in Pakistan Back
69
Ev 63 Back
70
Q11 Back
71
Q40 Back
72
Coffey International Development in association with the IDL Group,
Pakistan Country Governance Analysis 2011, April 2011 Back
73
Q89 Back
74
House of Commons International Development Committee Fourth Report
of Session 2012-13 Tax in Developing Countries: Increasing Resources
for Development, HC 130,Ev 108 Back
75
Q 93 Back
76
House of Commons International Development Committee Ninth Report
of Session 2012-13 Department for International Development's
Annual Report and Accounts 2011-12, Ev 4, Q 14 Back
77
International Monetary Fund website, Public Information Notice
(PIN) No. 12/135, http://www.imf.org/external/np/sec/pn/2012/pn12135.htm Back
78
Q102 Back
79
Q95 Back
80
Q125 Back
81
Q123 Back
|
