The National Accountability Bureau’s (NAB) fifth annual report for the year 2004 was released in March, 2005. The Chairman NAB in his foreword to the report, while giving satisfactory remarks, has described the Bureau’s task highly complex and difficult. The report, inter alia, takes into account Bureau’s conceptual framework, achievements, limitations, challenges and the restructuring plans.
The report reveals that in the reporting year, a large number of bribery, kickback and corruption cases have been subjected to intrusive inquiry, investigation and prosecution in the Accountability Courts. As a result, 43 accused persons have been convicted by the courts during the reporting year, while 231 accused persons admitted their guilt and have agreed to pay Rs. 930.752 million on account of Plea Bargain. Out of which Rs. 456.372 million has already been recovered and deposited in the national exchequer.
The report stresses on the need to review the business and organizational laws, ethics, culture and governance issues so that the corruption opportunities are effectively checked and discouraged.
The FIA’s Anti-corruption and economic crime functions have been formally integrated into NAB with a view to eliminate duplication of efforts, inconsistencies and streamlining laws of respective agencies. The Bureau plans to make efforts to pursue the transferred court cases, investigations and inquiries expeditiously and efficiently. Another significant change in the Bureau is the delegation of authority by the Chairman NAB to Directors General Regional Bureaus for the conduct of inquiry, investigation and prosecution of the accused personnel up to BS-16 in respective regions without prior clearance from NAB head quarters. These measures are expected to speedup the accountability process in the country, although at very low administrative level.
The plans also include training programmes for its officers to pursue the goals and objectives set forth for the organisation. Services of the experts of national and international anti-corruption organisations will be acquired in this regard.
The Bureau received 11490 complaints during the year 2004. Out of these 10084(88%) complaints were processed (completed, discarded, considered not fit for action, referred to concerned departments) and 1406(12%) are still pending for action. Likewise during the year 28% of the inquiries were finalized and 72% are lying pending.
The Bureau gets its annual budget from the Federal Government. The annual budgetary allocations and the comparison with the recoveries during the last four years are as under:
|
Year |
Expenditure |
Recoveries deposited with Government (Rs. in million) |
Expenditure as percentage of recovery |
|
2000-01 |
222.087 |
851.409 |
26% |
|
2001-02 |
252.032 |
933.589 |
27% |
|
2002-03 |
330.134 |
731.453 |
45% |
|
2003-04 |
456.660 |
636.437 |
72% |
|
Total |
1,264.913 |
3,152.888 |
40% |
NAB’s National Anti-Corruption Strategy (NACS) mainly commenced in the year 2004. The areas where progress has been made during the year are (i) awareness and educational campaign by employing media tools, training of civil servants, (ii) surveys and interaction with opinion makers, (iii) conferences and seminars, (iv) preventive initiatives which include (a) asset declaration system for the public servants, (b) remuneration of the public servants, and (c) evaluation of United Nations Convention against Corruption for ratification and (v) restructuring and strengthening of NAB. The major events of the NACS were two international conferences organized in April 2004 and November 2004, these were attended by heads of various national as well as foreign institutions.
The Bureau, in the report also sets the vision for its future activities. It recognises that corruption poses a serious challenge to the economy and social values. As a result the country cannot achieve the desired objectives of economic growth and success of legislative, judicial and executive systems and up-gradation of the civil society unless this menace is completely uprooted. It acknowledges that prevalence of corruption would imply perpetual rise in poverty and limited opportunity for the impoverished and disadvantaged class to come out of social exclusions and exogenous shocks. The Bureau, according to the report is cognizant of its national duty, and would continue to strive for better impact and results of its anti-corruption drive.
The Bureau plans to eradicate corruption in two phases. In the first phase it hopes and plans to strike a fatal blow to corruption at the strategic level by improving the credibility of decision making process. In the second phase it plans to strike the corruption networks at the grass root level.
A careful appraisal and assessment of the NAB’s annual report and its activities reveal that despite huge budget and organisational setup, it has only been able to establish itself as a frightening and scaring organisation. Its role and contribution to eradicate corruption and in the recovery of looted public money and evaded taxes and duties is debatable and would require a detailed analysis. Although opposition has also criticized NAB in the parliament and described its role as dubious for targeting only anti-government politicians, but this appears only to the extent of criticism as the opposition members have not come forward with any positive and concrete suggestions to improve its working.
The details of convicted and plea bargain cases suggest that the organisation is generally exhausting its energies and efforts on petty cases ranging between few thousands to a few hundred thousand rupees only. As such the potential of the organisation is not being utilized in mega white collar crime cases resulting in billions of Rupees of over profiteering, evasion of taxes and duties with consequential colossal revenue loss to the exchequer. These crimes are resulting in artificial hyperinflation, widening of gap between the rich and the poor and creating imbalances in the economic system. Identification and sharply focusing on such mega cases will not only earn good name for the organisation, increase its goodwill but fetch revenue for the government. The Bureau can recover enough money, even in a single such case, what it is currently recovering in at least hundred cases.
The main categories of white collar economic crimes, apparently not even within the knowledge or priorities of NAB, include cases pertaining to (i) over tariff protection (resulting in over profiteering, unfair competition and tax evasion), (ii) economic rents from tax exemptions (SROs and notifications issued in the recent past), (iii) concealment of income (evasion of income tax), and mal customs administration (under invoicing, clandestine imports, evasion of customs duty and sales tax and mis-declaration at import stage)
Over tariff protection which is granted by increase in customs duty on the import of goods and reduction of import duty on inputs results in (i) increase in landed cost of imported equivalents thus enabling over profiteering at local production stage (ii) income tax evasion (as high cost of production is shown in financial statements, excessive cost to the consumers, and attract anti-dumping duties at export stage in the international markets e.g. bed Lenin, poplin, match sticks, PET resin). Loss of revenue on account of customs duty and sales taxes as imports are discouraged at imports stage, due to high tariffs.
Over the last couple of years the government has considerably reduced the customs duty on imported raw materials and most of the raw materials now attract duty rates as low as 5%. Besides, most of the raw materials are being imported from China at highly competitive prices and mostly at under-invoiced prices. Yet no reduction in the domestic prices has been witnessed nor has the benefit of the reduction in the import duties been passed on to the consumers, on the contrary the prices are increasing day by day and the manufacturers are grabbing the entire benefits of reduction in cost of production and concealing the same from the government. The NAB seems to have no account, control and check on these issues.
Transaction Price System for customs valuation under the WTO regime has also resulted in substantial revenue loss to the government and erosion of protection to the domestic industry. The WTO’s valuation system, which is more in the favour of importers, facilitates under invoicing and corruption in a country like Pakistan.
These mega white collar crimes have multiple grave and serious adverse effects on the economy on account of (i) concentration of wealth in few hands, (ii) irreparable loss to the consumers, (iii) holding back economic development, (iv) artificial hyperinflation, which is the killer of all values, for which the government is unnecessarily being blamed, and (v) loss of valuable revenue.
White collar crimes cannot be eradicated through complaints as these are only raised when disputes arise amongst partners, personal grudge or for reward and other motives. The NAB apparently does not have any mechanism for automatic detection of such cases. There is a dire need to understand the modus operandi of such heinous economic crimes for which research based economic analysis and studies to control and eradicate white collar economic crimes are needed. Besides NAB needs the services of insiders who can lead NAB to these crimes for detection and corrective measures. All those involved directly or indirectly in such activities including those who facilitate the process should be taken to task.
The Bureau should take bold steps to control these heinous white collar economic crimes. This would increase the credibility of the government and the Bureau and in turn reduce the tendency of making black money and drive the economy towards a documented system.
As regards the Bureau’s weakness described under the SWOT (strengths, weaknesses, opportunities and threats) analysis of the report, the same can be overcome if the objectives and measures to achieve them are sharply focused and prioritized. However, if the existing NAB fails, despite of substantial budget, huge organisational setup and unlimited powers, to come up to the expectations of the nation, then no organisation will even in the future be able to eradicate white collar crime from the country. The challenges and the tasks of the NAB are much bigger and vital than it has perceived for it self.
The author is Director (WTO) in the International Islamic University
