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'Deregulation' is one of those esoteric buzz words picked up by the
government planners from international development agencies and echoed
by private sector consultants during the tail end of the nineties
and still carries a hallow of great promise for economic progress.
There are other words too, like market economy, accountability, sustainability,
empowerment, privatisation and most regal of them all, poverty alleviation
and social sector development. We are going to talk about deregulation
this week. This is an odd one, in the sense that it is a misnomer
from the start.
I have been privy to at least three high powered committees working
in parallel (and triplicating effort) assigned to advice the government
how to go about deregulating the statutory environment such that private
sector can operate more freely. At the very outset of each of those
committees - each one under a different ministry and funded by a different
donor - I made an effort to bring about a cognisance about two facts:
one that someone else was also undertaking a similar exercise with
great overlap in areas under scrutiny and second that it was not regulations
we were looking at; it was unnecessary and discretionary controls.
As such we should rename the committee to reflect the real purpose
of the exercise. 'Deregulation' implies that there are too many nitpicking
specifications and procedures that private sector has to adhere to;
whereas in reality there are virtually no specifications or standards
to regulate. We are talking about redundant rules that permit exploitive
and extortionist officialdom to inflict previsions of hell on business
entrepreneurs.
The first observation (about duplication) would be brushed aside since
we had already accepted funding from some benevolent donor agency
which was compelled by its own bureaucracy to dispense allocated funds
for some useful purpose. Going back with a good conscience to tell
them, "Thank you but so and so is already doing it" would
be sacrilege in terms of 'Aid Management'. So might as well go ahead
with it. As for the second point about distinction between controls
and regulation, I was laughed off for indulging in amusing semantics.
I have always held pride in my sense of humour but attribution of
'inadvertent humour' is something I have reserved for those whom I
have no love lost for. Being on the receiving end of such back-handed
compliments is a professional hazard every private sector person has
to risk when hobnobbing with the establishment.
Returning to the crux of the matter, regulation is one of the weakest
links in Pakistan's governance systems. We could begin with the constitution
but that would be overkill for the specific subject at hand. Let us
make a distinction between procedural controls and regulations. Procedures
for conducting activities - commercial, industrial or social - have
to follow certain documentary protocols laid down by governing authorities
in every society. From acquiring licences to setting up industries,
imports and exports of goods, visas, sale and purchase of property
and assets and all such activities (myriads of them) are governed
by procedural rules. The government itself functions under Rules of
Business 1973. The private companies, in the corporate sector at least,
lay down operational procedures called Standard Operating Procedures
(SOPs). All such matters belong to the highly developed science of
organisational management that starts with organisational structures
and ends with laying down details SOPs. For public sector organisations
we call it 'good governance.'
Regulatory framework is a different animal altogether. It relates
to statutory specifications and standards laid down for commodities,
goods and services. It is mandatory for all enterprises, public or
private, to comply with such specifications. The purpose of such regulatory
structures is to provide security to the people from exposure to hazards
of health, mechanical and electronic dangers, financial exploitation
and to promote efficient use of natural resources - safety of public
is the keyword. Areas where regulations are imposed can be divided
into food items, clothing and apparel, housing, transport, industrial
products for domestic or industrial use, consumer goods and services,
which are the largest sector of the economy and cover a very wide
range of activities.
Regulatory framework includes two basic components: the quality standards
as laid out in statutory books and the implementing agencies that
ensure compliance of these standards by everyone. Violators are supposed
to be apprehended and penalised accordingly. Pakistan is one of the
poorest countries in the world on both these counts. In a World Bank
sponsored study 'Governance Matters', 1998, which ranked countries
in six groups from bottom to the highest, Pakistan was rated second
from the bottom on count of 'regulatory framework' but in the bottom
group on count of 'government effectiveness' and 'rule of law.'
The Pakistan Standards and Quality Control Authority (PSQCA), the
apex body for formulation, adoption and enforcement of standards and
the Pakistan National Accreditation Council (PNAC) have been setup
but are in nascent stages of maturity. Their impact on establishment
and accreditation of quality standards is negligible. The political
will required to accelerate quality issues in the country seems to
be totally dormant at the moment. The focus is on quantitative growth;
not realizing that qualitative aspects go hand in hand, especially
in export markets.
Consumer safety is a very low priority for the government. People
are being fed poison in the name of food through adulterated milk,
unsafe vegetable oils, toxic residues on fruits and vegetables and
fungus infested cereals with impunity. Building and road safety standards
are non-existent. Even in the posh areas, contractors construct buildings
that leak, peel off plasters and develop structural cracks with no
recourse available to consumers. Public transport vehicles are death
traps. Roads journeys are no less than Indiana Jones experience. Industrial
and consumer goods being produced locally are more risky than playing
roulette in Las Vegas, especially gas and electronic appliances. Even
the common electric switches and sockets being produced locally warrant
life insurance policies for safe use.
The Prudential Regulations of the State Bank - and even there it took
fifty years to bifurcate Corporate, SME and Consumer segments - are
a unique redeeming feature whereby financial sector is fairly modern
and efficient. SECP rules suffer from rigidity although recent efforts
to promote 'Corporate Governance Guidelines' are beginning to move
things qualitatively. Entrepreneurs have a choice between adopting
an ill-fitting corporate structure - since there are no graduations
of rules according to size of business - or go without any legal standing
as a sole proprietor. Worst of all, it is easier to die than to wind
up a company in Pakistan.
Labour laws and Factory Laws are archaic and extremely cumbersome.
The implementing agencies are ill-trained and extortionist. So while
so much effort and expense (above and below the table) goes into protecting
labour rights and industrial environment, the ground realities are
pathetic and tales of Victorian Industrial squalor pale before them.
Under these conditions, talking of 'deregulation' seems almost ironic.
Pakistan needs more regulation, sane regulations, and efficient agencies
for ensuring compliance - like the police on the motorway doing an
excellent job. Privatisation without regulation is disastrous! The
fiasco with privatisation of wheat purchase and storage is one glaring
example of it. To sum it all up, Pakistan is under-regulated and over-policed
in procedural matters. It needs drastic reforms in governance management
and regulatory frameworks. Call it what you may but please not 'deregulation':
it sends the wrong signals to everyone.
Iqbal Mustafa
1221 words
11 December 2004
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