International Journal of Business and Behavioral Sciences

Vol. 2, No.6; June 2012

Corruption: Causes and Effects in Pakistans Case (A Review Research)

*Dr. Muhammad Tariq Khan1, Dr. Naseer Ahmed Khan2, Sheraz Ahmed3, & Khalid Mehmood4 1 Assistant Professor, Department of Management Sciences University of Haripur, PAKISTAN 2 Postmaster General, Pakistan Post, Rawalpindi, PAKISTAN, 3Lecturer, Department of Management Sciences University of Haripur, PAKISTAN, 4Lecturer, Department of Management Sciences Hazara University, PAKISTAN *tariq_phd@yahoo.com

Abstract
There is a growing worldwide concern over corruption at the present time. The increasing public interest and concern over corruption have resulted in a large amount of scholarly research on the subject. The concept of economic rent is important in corruption. In Pakistan, the corruption is deep rooted and has many dimensions. There are several causes and remedies for the public policy makers to root out corruption in Pakistan.

Key Words: Corruption, Economic rent, Developmental obstacle. Social evil, Remedies Introduction
Corruption is a universal curse around the world and exists in all the countries as a common phenomenon, both in developing or poorer countries and developed countries. The difference is only of the degrees of corruption. In the last five years, leading politicians in U.K., Belgium, France, Spain and Italy have been convicted of corruption and in fact, the entire European Commission resigned because of it. U-Myint (2000); World Bank (2001); Law Commission of Government of India (2001); Anupam Das et al (2011) have traced that concept of corruption has roots in the ancient world and although its form may have shifted through the centuries, it is still alive and rampant in the modern age especially, in the developing world. U-Myint (2000) asserted that corruption is universal and it exists in all countries. World Bank (2001) has revealed that corruption around the world is believed to be endemic and pervasive and a significant contributor to low economic growth, to stifle investment, to inhibit the provision of public services and to increase inequality. Corruption is identified as the single greatest obstacle to economic and social development. Anupam Das et al (2011),by squeezing from several studies, have theorized that corruption can lead to the destruction of democracy, the violation of human rights, the collapse of markets, lower quality of life, and increased threats to social welfare. The impact of corruption in the developing world is thought to be particularly damaging, as it is believed to hurt the poor disproportionately. World Bank (2004) has estimated that more than US$ 1 trillion is paid in bribes each year and those countries, which tackle corruption, improve governance and the rule of law could increase per capita incomes by a staggering 400 percent. U-Myint (2000) reported that public sector corruption is the most severe obstacle confronting the development process. Countries in the Asia and Pacific region are also very worried about this problem and they are in substantial agreement that corruption is a major constraint that is hindering their economic, political and social development, and hence view it as a problem requiring urgent attention at the highest level. U-Myint (2000) expressed by quoting some researches (i.e. Gray and Kaufmann 1998) that, this greater recognition that corruption can have a serious adverse impact on development has been a cause for concern among developing countries. Javaid (2010), extracting from many studies (Chene, 2008; Vittal and Mahalingam, 2004), opined that the level of corruption in the society ultimately depends on the values and morals of that 79

International Journal of Business and Behavioral Sciences

Vol. 2, No.6; June 2012

society and about Pakistan reported that two types i.e. petty and grand corruptions are prevalent in the country the common man is more interested in the petty and middle level corruption that he encounters in the daily dealings in the government offices.

Concepts and Definition of Corruption

Law Commission of the Government of India (2001) is of the opinion that there is no universal definition of corrupt behavior, corrupt practices and corruption and it varies from country to country. The World Bank and other multilateral institutions refer to it as: the abuse of public office for private gain. It involves the seeking or extracting of promise or receipt of a gift or any other advantage by a public servant in consideration of the performance or omission of an act, in violation of the duties required of the office. An Anonymous (n.d.) writer has defined corruption as the abuse of public position for personal gain or for the benefit of an individual or group to whom one owes allegiance. U-Myint (2000) has defined corruption as the use of public office for private gain, or in other words, use of official position, rank or status by an office bearer for his own personal benefit. Taghavi et al (2011), while explaining administrative corruption, concluded that in all definitions, corruption is a transfer of interests between the public and private sectors in which the pubic interests are directed towards private interests. According to Langseth (1999); Law Commission of Government of India (2001) and Gadit (2011), the most functional definition adopted by various international organizations such as the World Bank, Transparency International (TI), and Asian Development Bank (ADB) is the misuse of public office for private profit or political gain because, by and large, it covers all types of corruption/corrupt practices and abuses of public office. As such, it involves the improper and unlawful behavior of public-service officials, both politicians and civil servants, whose positions create opportunities for the diversion of money and assets from government to them and their accomplices. According to Anonymous (n.d.), the corruption occurs when a public official accepts, solicits, or extorts a payment, or when private agents offer a payment to circumvent the law for competitive or personal interest. Corruption is a two-way process, involving members of both the public and private sector, or a giver and a taker who are engaged in illegal, illegitimate and unethical action. U-Myint (2000) has put forward the concept of Economic Rent. The concept of economic rent (or monopoly profit) occupies a central place in the literature on the subject of corruption. Economic rent arises when a person has something unique or special in his her possession, which can be a luxury condominium in a posh neighborhood, a plot of land in the central business district of the city, a natural resource like an oil well, or even some pleasing personal traits such as beauty and charm. A person who owns such a special asset can charge a more than normal price for its use and earn economic rent or monopoly profit. U-Myint (2000) and Law Commission of Government of India (2001) drawing upon the concepts, quoted a corruption equation (set by Klitgaard, 1998) as: Corruption = (Monopoly) + (Discretion) Accountability or in abbreviated form as: C=R+DA In the above equation, C stands for corruption, R for economic rent or monopoly, D for discretionary powers, and A for accountability. The equation states that the more opportunities for economic rent (R) exist in a country, the larger will be the corruption. Similarly, the greater the discretionary powers (D) granted to administrators, the greater, will be, the corruption. However, the more administrators are held accountable (A) for their actions, the less will be the corruption, and hence a minus sign in front of A. So, the opportunity for corruption is a function of a public officials control 80

International Journal of Business and Behavioral Sciences

Vol. 2, No.6; June 2012

(M), the discretion that official has (D), and the accountability that this official faces for his or her decisions. About Pakistan, Javaid, (2010) comprehensively expressed that corruption defined as misuse of entrusted power for private benefit is unfortunately endemic in Pakistan. No structure, no tier and no office of public sector, is immune from it. Its spread is enormous. It has reached every organ of state beyond executive it has put its claws on judiciary and legislature even. It would be no exaggeration to say that the whole body of the state of Pakistan is suffering from this malaise and wailing under its dead weight. Its incidence is so enormous that Pakistan is ranked 139th in the community of nations on the scale of corruption free governance. This ranking is not at all enviable or acceptable. Histort of Corruption in Pakistan Maqbool (2000) wrote that traditionally, the South Asian countries have been pluralist societies; however, the legacy of colonial rule was a fragmentation of loyalties through corruption and bribery. That is why corruption and nepotism continue to exist. Loyalties to a particular group; family; caste or ethnic, religious, or linguistic community invites corruption in the form of nepotism. The culture of nepotism was further promoted in the colonial system of administration by the awarding of land, titles, and jobs to groups supporting colonial objectives. Since independence, the nationalization of bank and industries in the 1970s, the use of foreign aid, and the infusion of drug money into the economy, corruption has become even more systemic. Moreover, the informal structure of the economy has created abundant opportunities for corruption malpractice for the private sector, the tax authorities, and government officials. Corruption grew as links were forged between legislators and businesses, and a new class of business owner politicians emerged. Similarly, Qadir (2003) expressed about genesis of corruption in Pakistan that the culture of corruption was promoted in the colonial system of administration by the award of lands, titles and jobs to a specific group supporting colonial objectives as part of political bribery. In Pakistan whitecollar crime had its roots in the 1950s, starting from settlement of refugee claims, industrial sanctions, allotment of agricultural lands, although the mechanics of money making giving rise to rampant corruption. Till the Second World War, corruption was prevalent in considerable measure amongst Revenue, Police, Excise and Public Works Department officials, particularly of the lower grades while the higher ranks were comparatively free from this evil. By the time of Independence in 1947 increase of corruption by public officials became much noticeable. Reasons of Corruption in Pakistan Shah and Schacter (2004) and Langseth (1999) expressed that corruption is country-specific and varies from country to country and its causes also vary from one country to the next, but it is possible to identify some its key drivers based on in-depth country studies Among the main contributing factors are policies, programs and activities that are poorly conceived and managed, failing of accountability and transparency and. public servants, lacking a service mentality. While fixing factors affecting corruption an Anonymous (n.d.) writer endorsed it by adding that in general, it can be said that corruption flourishes where the institutions of government are weak, where a governments policy and regulatory regime provide scope for, where oversight institutions (parliament, judiciary, civil society) are marginalized or they are corrupted themselves. It must be stressed that the causes of corruption are highly contextual, rooted in a country's political development, legal development, social history, bureaucratic traditions, economic conditions and policies.

81

International Journal of Business and Behavioral Sciences

Vol. 2, No.6; June 2012

Taghavi et al (2011) are of the view that corruption or any misuse of governmental power for personal benefits is a phenomenon prevailing in administrative and political systems of different countries. This results from different factors. Some of the most important factors of it includes: overinterference of government in economy, inappropriate administrative system, excessive bureaucracy and complexity, governmental and private monopolies, expansion of rent, non-transparent regulations, weak management, unequal distribution of incomes, interference of high-ranking politicians and governmental authorities, lack of accountability of government and different issues like this which provides a ground bed for the expansion of corruption at micro level (administrative corruption) and macro (political corruption) level. Maqbool (2000) has expressed that one indication of the extent of corruption in Asia is that whenever a political regime has crumbled in Pakistan and some other countries in South Asia, a major and often decisive cause has been the prevalence of official misconduct among politicians and administrators and the concomitant spread of corruption among business people. According to Qadir (2003) in Pakistan some of the main reasons for post independence corruption are: a) Land Awards: Settlement of millions of homeless through allotment of lands resorting to corruption. Fake claims were approved for the allot-tees. b) Bloated Public Sector: Nationalization Program in the 1970s being a poor economic option brought a new form of nepotism of corruption. Bureaucracy inducted into the public corporate sector for collusive mode of corruption both at individual and organizational level. c) Private Sector Cooperatives: In the decade of 70s, 80s and even up to 90s a large sum of the public was misappropriated by private sector Cooperatives, Housing & Finance Corporations. As a result public money to the tune of Rs.13 - 14 billions went into the accounts of these Corporations. d) Drug Money: Pakistan saw the entry of drug money in the early 80s inducing corruption and strengthening the underground economy. e) Foreign Aid and Investment: f) The utilization of foreign funds was not properly perceived. The public sector utilization of foreign funding was not done prudently thus scaring away investments as well as tying up the country in heavy foreign debts. g) Informal structure of National Economy: An informal and undocumented economy coupled with lax procedures provided considerable opportunities to the business community for un-fair practices. h) Institutional Erosion: The institutions of legislative, executive and judiciary failed to establish a system of check and balances. Institutional failure is one of the main causes of corruption in Pakistan. Forms of Corruption in Pakistan Anonymous (n.d.) wrote that corruption takes a variety of forms: bribery, nepotism, patronage, theft of state assets, evasion of taxes, diversion of revenue and electoral fraud. The theft of state assets by officials in charged of the stewardship, and manipulation or violation of electoral laws regarding campaign finance and voting is also considered as corruption. About Pakistan, Javaid (2010) wrote with reference to Transparency International Pakistan that corruption manifests itself in various forms in Pakistan, including widespread financial and political corruption, nepotism, and misuse of power. Corruption clouds almost all tiers of government; it is all pervasive and deeply entrenched. Over the period acceptability of corruption has rather increased in the society and there is little evidence that people feel guilty about their own role in corruption. The scale of corruption is highest in development projects and procurement (including defense and public sector corporations) and the bank loan write offs. The mega corruption is mainly in development projects, bank loans and 82

International Journal of Business and Behavioral Sciences

Vol. 2, No.6; June 2012

procurements. According to one estimate the loss made to the national exchequer is of over Rupees 200 billion per annum, this loss is caused collectively by all the government departments but the most prominent amongst them as per the Perception Survey carried out by Transparency International Pakistan are: 1- Power Sector, 2- Tax and Customs, 3- Police and Law Enforcement, 4Judiciary and Legal Profession, 5- Health and Education and 6- Land Administration Besides this, Qadir (2003), explaining Nature, Causes and Extent of Corruption has also mentioned the following major issues which have been the main cause of corruption in Pakistani society: 1. Public Utilities In terms of the amount of corrupt money changing hands, taxation department, state-owned banks and DFIs, power sector utilities like WAPDA, Sui-Gas etc., and other public works departments account for the large scale institutional corruption. 2. The Tax Regime Characterized Pakistans Taxation system by widespread tax evasion, lack of documentation, existence of large untaxed sectors and weak administrative capacity to collect taxes resulting in as much as 50% of the total urban income going unreported. As per recent estimates, annual tax evasion stands at Rs.218 billion. 3. Public Sector Banking Public Sector Banks, which have dominated the financial sector since the nationalization of the Banks in the 1970s, have experienced serious deterioration in their loan portfolios mainly because of political interference in their lending and loan recovery decisions. About 90% of the defaulted loans and bad debt concentrated among a small number of influential people (top hundred defaulters). Recently, the system protected such defaulters. In many cases, loan amnesties were granted. Loan recovery efforts by officials of public sector banks were undermined by fear of politically motivated retribution. 4. Public Sector Expenditures Due to a non-transparent process and weak accountability system, the public sector expenditures are officially misused, thereby, kickbacks and pilferage of revenue is in connivance with the public officials. 5. Underground Economy The burgeoning under ground economy and smuggling in large part are symptoms of wide spread corruption in Pakistans economy. This underground economy has expanded at an annual rate of 20% over the last 23 years as compared to the average annual growth of 17% under normal GDP. Two researchers have pointed out corruption in health sector and it is a matter of deep concern because health is very sensitive sector where people are already in severe trouble. Gadit (2011) wrote that hospital medical superintendents are known for financial mismanagement, favoring bids that could provide personal benefits, hiring people without merit and not paying heed to corrupt practices of the office staff. The medico-legal certificates are issued upon payment of bribes; medical staff and their relatives use medications. Favors accepted by doctors from pharmaceutical industry, even in the form of cars, wedding receptions, foreign trips, land and other luxurious items. Private medical colleges selling seats, government posting and transfers by either payments or using the influential connections, not attending patients in time, ignoring emergency calls, consumption of drugs or alcohol while on duty and much more. Under the context, in 2001, 2.8 billion prescriptions were filled in the United States for an average 9.9 prescriptions per person. It is said that the philanthropy that was once present in modern medicine has been replaced by love of money, which gave rise to an elaborate system of bribery, conflict of interest and deception. According to another researcher, Haque (2010), corruption in government hospitals is very common particularly in third world countries. Corruption starts from the top places. Corrupt elements in the Governments of powerful countries, World Health Organization (WHO), Local Governments, Ministry of Health, Multinational Companies, Non Governmental Organizations, Secret Organizations and 83

International Journal of Business and Behavioral Sciences

Vol. 2, No.6; June 2012

powerful Media; all play their role in misdirecting the health budget of government hospitals toward rich and powerful and away from the poor and weak. They snatch away the big chunk of whatever little health budget is destined for the poor patients. Corrupt society leads to the appointments and assignments of corrupt, incompetent and impotent people who destroy the systems through their actions and inactions. Corruption in the government hospitals ravages and desolates the Pathology Department affecting its all activities! In order to have sound and blissful healthy systems there is dire need to fight materialism and greed by all sane and honest people of the society through instillation of high moral and ethical values at all levels and in all spheres of the society. Issues of Corruption in Pakistan According to Qadir (2003), Pakistan has following corruption issues: 1. Post independence settlement of refugees and allocation of properties, termed Evacuee Property, Corruption thus seeped into Pakistan society surreptitiously spreading its tentacles everywhere. 2. The interventionist economic polices and discretionary powers (liquid petroleum gas quotas & textile quotas. Wide discretionary powers tempted public officials into criminal acts. 3. Inadequate compensation to civil servants and Demonstration Effect induced by the corporate salaries and remittance from Gulf countries is another contributory factor to corruption. 4. Excessive aid flows over the years and the reluctance of international funding agencies to tackle corruption, even the social sector projects have been victim of grafts, also social sectors program are directed at less visible outputs. A large number of projects in the social Sectors have been mere exercises in paper pushing. 5. In the 1980s Pakistan received a major portion of its aid in the form of grants and these funds served to line many a pocket. 6. Rent-seeking in land acquisition and undertaking imprudent economic projects like Green Tractor Scheme, Yellow Cab Scheme, Karachi Mass Transit Project, IPPs, Ghazi Barotha Hydropower Project and Motorway Project have been a major source of corruption. Exorbitant valuation led to huge increases in project outlays. 7. Crime-wise analysis revealed, financial scams have severely damaged public trust foremost among these was the Cooperatives scandal, which has shaken the confidence of the small depositors. In a country with low saving rates such incidents have long-term economic implications. 8. Loan default resulted in trust breaching crimes. Trust nationalization policies of the 1970s gave direct political controls and financial prudence gave way to political pressure and bribes. Political clout and ability to bribe became the criteria for loan issuance. 9. Weak regulatory system. The state Bank of Pakistan was unable to prevent disasters. Financial institutions were completely at the mercy of ruling clique of businessman, who did not waste the opportunity to exploit the situation to their advantage. Arrival of the businessman politician undermined the tax authorities. 10. Corruption is invariably a collusive form of activity premised on a nexus of the elites e.g. politicians, bureaucrats, businessmen (including foreign companies) and technocrats. Colluding Bureaucrats assisted in the politicization of the civil services thus ushering in the subsequent loss of professionalism. 11. Delivery failures of civil institutions to greater extent are attributed, to planned political inductions at lower levels through payment to legislators. The result was reduced efficiency and increased corruption. Some of the daring functionaries accumulated assets worth millions.

84

International Journal of Business and Behavioral Sciences

Vol. 2, No.6; June 2012

12. Complete breakdown of structures, including the internal accountability structure of government departments and Anti-Corruption Organizations, thereby resulting in delivery failures and institutional collapse. 13. Financially motivated, the sociological factors responsible for it cannot be ignored. Favors were given on the basis of ethnic, familial, religious and other social considerations are responsible. A large number of public office holders have failed to stand up to resultant pressures. Consequences of Corruption Lintjer (2000) concluded that the costs of corruption are high, and in a globalized world will become insurmountable. Langseth (1999) revealed that corruption distorts resource allocation and government performance. The causes of its development are many and vary from one country to the next. According to Marsida (2011) and OECD-ADB (2000), the international financial crisis of the late 1990s demonstrated that corruption has devastating effects on both political stability and economic prosperity and growth. Mendes also referred IMF studies and other research work, which revealed that countries rife with corruption have less of their GDP going into areas critical to development, such as education, and have lower growth rates. Some experts argue that corruption acts as a tax on foreign direct investment. Shang-Jin Wei, an economist at Harvard University, has suggested that an increase in the corruption level from that of Singapore to that of Mexico is equivalent to raising the tax rate by over 20 percentage points. Qadir (2003) reported that corruption in Pakistan is so pervading in that it has destroyed the very fabric of our society and during the last 10 years all elected Governments have fallen due to massive political corruption. Qadir Mansoors report is very correct because in August 1990 president Ghulam Ishaq Khan dismissed parliament and cabinet (government) of prime minister Benizir Bhuttos (exercising his power vested to him in article 58/2-b of constitution of Islamic Republic of Pakistan) on the charges of corruption and in November 1996 again president Farooq Laghari dismissed Benizir Bhutto government on the same charges and in January 1997 supreme court of Pakistan acknowledged the charges correct and dismissed the Benzir Bhuttos appeal of restoration of her government. Qadir (2003) rightly concluded that the role of money in politics in Pakistan has brought in a new class of wealthy businessmen turned politicians who have constantly strived for saving their business interest over the national economic advantage. According to report of Transparency International Pakistan (2010) Syed Adil Gilani, Chairman TI Pakistan said that Corruption is the root cause of poverty, illiteracy, terrorism, shortage of electricity, food etc and lack of governance in Pakistan, and that the credibility of Pakistan is almost at the lowest level, which can be seen from almost no funding in last two years from the Friends of Pakistan trust fund being managed by the World Bank. Transparency International Pakistan (2010) Facts and Amount of Corruption in Pakistan According to Qadir (2003), a new class of wealthy businessmen turned politicians who constantly strive for saving their business interest over the national economic advantage, therefore Javaid (2010) expressed that according to one estimate the loss made to the national exchequer due to corruption is over rupees 200 billion per annum. Transparency International Pakistan (2010) indicated on the basis of The National Corruption Perception Survey 2010 that the overall Corruption in 2010 has increased from Rs 195 Billion in 2009 to Rs 223 Billion and 70% Pakistanis say that present government is more corrupt than previous government. Most people considered the past Federal government to be cleaner. This is quite similar if we look at the response towards provincial governments, except Punjab. However, if we look at the results from provinces from a standalone 85

International Journal of Business and Behavioral Sciences

Vol. 2, No.6; June 2012

point of view, Punjab is the only province where present provincial government is rated to be cleaner than previous provincial government and Khyber Pakhtunkhawa is rated as the most corrupt province. Police and Power maintained their ranking as the top two most corrupt sectors, and land administration is ranked as the 3rd most corrupt sector. Corruption in Judiciary, Education and Local Government has also increased compared to 2009, whereas FBRs two departments, Customs and Taxation are ranked as the least corrupt sectors. Qadir (2003) reported that in the decade of 70s, 80s and even up to 90s a large sum of the public was misappropriated by private sector Cooperatives, Housing & Finance Corporations. As a result public money to the tune of Rs.13 - 14 billions went into the accounts of these Corporations. Qadir (2003) further reported that weak administrative capacity to collect taxes resulting in as much as 50% of the total urban income going unreported. As per recent estimates, annual tax evasion stands at Rs.218 billion. Syed Adil Gilani, Chairman TI Pakistan expressed that the most corrupt sector is tendering which eats away at least 40% of Pakistan development budget, and this is confirmed from the recent results of Transparent tendering for transportation of sugar in Trading Corporation of Pakistan where TCP has saved at least Rs 49.3 million by implementing Public Procurement Rules 2004, which is 40% lower than cost of same work awarded last year. Violators of PPRA are BOI (Board of Investment), WAPDA, (Water and Power Development Authority) CDA (Capital Development Authority), NHA (National Highway Authority), CCP, SECP (Security and Exchange Commission of Pakistan), SBP (State Bank of Pakistan), Customs, EOBI (Employees old Age Benefit), ECP (Export Corporation of Pakistan), EPZA (Export Processing Zone Authority), FIA (Federal Investigation Agency), MOI, FPSC (Federal Public Service Commission of Pakistan), FOS, GPA, Islamabad HC, JPCL, MoH, MoInv, MoPA, MoIT, MoPriv, MoZakat, NIH (National Institute of Health), NSCS, PCB (Pakistan Cricket Board), PEPA, PHF, NLC (National Logistic Cell), NIC, PID, Privatization Commission, and Utility Stores Corporation (Transparency International Pakistan, 2010). Maqbool (2000), referring World Bank (World Bank 1998) expressed that the public perception is that the law enforcement agencies and government organizations are the most corrupt elements of society. In monetary terms, the level of corruption is highest in departments dealing with tax collection, followed by the public sector, which accounts for 24 percent of gross domestic product. Together these entities handle transactions worth US$19 billion per year, of which as much as 20 percent may be siphoned off as kickbacks and commissions to those handling these transactions. Samad (2008) referred some studies and reported that Pakistan has figured prominently on the list of corrupt countries. In 1998, the World Bank estimated corruption in Pakistan close to 10% of GDP (Khan et al., 2004). The country is being fast abandoned by its manpower because of being victims of corruption and left with no opportunities of advancement. Pakistans ranking on Transparency Internationals Corruption Perception Index (CPI) has consistently been among the lowest. Samad (2008), squeezing from Transparency International has given following year-wise ranking table of Pakistan in corruption in comparison of other countries of the world. Pakistans Rank 39 53 48 71 Pakistans Score (out of 10) 2.25 1.0 2.53 2.7

Year 1995 1996 1997 1998

Number of Countries 41 54 52 85

86

International Journal of Business and Behavioral Sciences 1999 2000 2001 2002 2003 2004 2005 2006 99 NA 91 NA 133 145 158 163 88 NA 79 NA 92 129 144 142

Vol. 2, No.6; June 2012 2.2 NA 2.3 2.6 2.5 2.1 2.1 2.2

Similarly, Javaid (2010) has also built a comparing table extracted from many studies showing position of Pakistan in corruption. Pak Most Corrupt Rank 42 47 42 20 16 19 42 26 13 NA 13 15 5 2 No. of Countries Ranked 180 180 179 163 159 147 133 102 91 90 99 85 52 54

Year 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996

Pakistans Rank/ Score 139/2.4 134/2.5 138/2.4 142/2.2 144/2.1 129/2.1 92/2.5 77/2.6 79/2.3 NA 87/2.2 71/2.7 48/5.3 53/1

Prevention of Corruption in Pakistan According to Mahmood (n.d), for an anti-corruption drive to be successful anywhere, there must exist an anti-corruption strategy to govern it, structure it, drive it and above all provide the direction and shape that it must take to succeed. Unfortunately in Pakistan, as in many other countries, anticorruption strategy has historically been deemed synonymous with anti-corruption enforcement. Pakistan inherited the Prevention of Corruption Act (PCA) at Independence in 1947. The World War II had led to an immense increase in procurement-related corruption and the first ever anticorruption agency was created under the PCA called the Special Police Establishment. Corruption was now a cognizable offence. The surge that started never really subsided. Neither did awareness about the issue. Following the PCA 1947, laws like the Public Representatives (Disqualification) Act 1949 and the Elected Bodies (Disqualification) Ordinance 1959 were promulgated. However, they were perceived as tools of political victimization and failed to bring about a meaningful impact in containing corruption. Anti-corruption agencies have also been created ever since independence. The West Pakistan Anti Corruption Establishment 1961 created the provincial Anti Corruption Establishments (ACEs). The Federal Investigation Agency (FIA) replaced the Pakistan Special police 87

International Journal of Business and Behavioral Sciences

Vol. 2, No.6; June 2012

Establishment (PSPE) in 1975. The Ehtesab Bureau was instituted in 1997 augmenting the Ehtesab Commission of 1996. The Bureau was entrusted with investigation of corruption while the Commission had to prosecute it. The above initiatives, though well-meaning, did not bring about a meaningful improvement in the situation where corruption kept consistently raising its ugly head and the agencies were growingly perceived to be its victims themselves. The perception of their being tools in the hands of political masters for victimization also never subsided. These institutions therefore, fast-lost credibility and public trust so imperative for an anti corruption drive to succeed. Maqbool (2000) was of the opinion that Pakistans current regime (the then General Pervez Musharrafs regime 1999-2008) has rightly concluded that to achieve stability, corruption must be eliminated from all segments of society. The government has identified this task as a priority objective and is fully committed to its pursuit, along with that of strict accountability. Qadir (2003) in his report on corruption control and corruption cases in Pakistan stated many shortcomings of existing system. He stated that many governments in the past have attempted accountability drive in some form or other but these could not materialize into potent effort to check the spread of corruption in the society because of some reasons as given below: 1. Misuse of the Agencies by Successive Governments, for arms twisting of their political opponents. 2. Poor investigations and lack of professional expertise, to detect and investigate crimes towards vested interest. 3. Misuse of mandate by the Investigating Agencies, to please their political masters under social or financial coverage. 4. Implementation of Fair and Just Accountability, lacked in successive Governments. Resultantly, the public demand for accountability has gained momentum in the last decade. Weakness in the accountability system, in-effective laws and the Anti Corruption Agencies own lack of professional expertise to detect and investigate the white-collar crimes. 5. The Incompatible Legal Judicial System, which is widely perceived to be an obstacle to economic efficiency. Legal institutions in Pakistan are under-staffed, lack of trained administration, defective management system and technology. 6. Appointment of Heads of Investigating Agencies and other officers on political consideration and not on merits. 7. In-adequacies & Institutional Weakness of the Anti Corruption Agencies. The Anti Corruption Agencies do not have the necessary capacity for undertaking the national task. All these shortcomings are because of deficiency of the will of both the rulers and public in elimination of corruption. Actually government officials and politicians are corrupt in need of wealth so they commit exploitative corruption, whereas public commits collusive corruption. This point has well explained by following researchers: OECD-ADB (2000) suggested that fighting corruption requires both leadership and partnership. It requires many leaders in national and local governments, in the judiciary and security forces, in the tax administration, in corporations, and among citizens in every community. It also requires partnership. When we look at todays most successful societies we find densely integrated networks of public and private activity. Such partnerships draw on the shared interests of citizens, businesses, elected officials, and civil servants. They all aim at breaking up the monopolies, the unchecked discretion, and the lack of accountability that lie at the heart of corruption. Seiichi Kondo (2000) concluded that governments could not fight corruption alone. The private sector and civil society are critical players in the fight against corruption and since the 1997 financial 88

International Journal of Business and Behavioral Sciences

Vol. 2, No.6; June 2012

crisis, civil society activity in Asia and the Pacific is clearly on the upswing. While this is encouraging, much more needs to be done. It is well explained by the example of Korea by Byoung-Woo. Byoung-Woo (2000) reported that in Korea, corruption has been one of the primary obstacles to economic development. In response to Koreans desire for a corruption-free society, in August 1999 the government set up a number of comprehensive anti-corruption programs. These programs are based on three basic principles: the emphasis should be on prevention rather than on punishment, the approach should be comprehensive and systematic, and the feasibility and effectiveness of programs should be given priority. Under these principles, the government has adopted the following three strategies to maximize the programs effectiveness: 1- Establishing an anti-corruption infrastructure that will enable Korea to fight corruption systematically and consistently 2- Promoting administrative reforms in corruption-prone areas such as law enforcement, the construction industry, tax administration, housing, environmental management, and the food and entertainment industry 3- Building local and international partnerships among governments, enterprises, and civil society

Conclusion
In the light of above literature, we can conclude that corruption is universal curse around the world and exists in all countries as a common phenomenon, both in developing or poorer countries and developed or rich countries. The difference is only of the degrees of corruption. In the last five years, leading politicians in U.K., Belgium, France, Spain and Italy have been convicted of corruption and in fact, the entire European Commission resigned because of it. According to U-Myint (2000); World Bank (2001); Law Commission of Government of India (2001), corruption is significant contributor to reduction in the efficiency on which an economy depends, to low economic growth by lowering the potential return, to stifle investment by increasing the cost of investment and reducing the governments resources, to inhibit the provision of public services and to increase inequality. Common to other South Asian countries, corruption in Pakistan is unique because it occurs up stream, it has wings which encourage flight of capital rather than wheel which encourage reinvestment and it often rewards rather than punishes as the legal processes to fight corruption are weak in themselves and the lower judiciary is amenable to letting off the accused if the price is right (quoted by U Myint, 2000 from many studies). In Pakistan, corruption manifests itself in various forms including widespread financial and political corruption, nepotism, and misuse of power. The scale of corruption is highest in development projects and procurement (including defense and public sector corporations) and the bank loan write offs. The mega corruption is mainly in development projects, bank loans and procurements, which rocks the foundation of the economy. Loss made to the national exchequer by corruption is of over Rupees 200 billion per annum; all the government departments collectively this cause loss. As extracted by Javaid 2010 from report of Transparency International Pakistan, the most prominent amongst them as per the Perception Survey carried out by Transparency International Pakistan are: 1- Power Sector, 2- Tax and Customs, 3- Police and Law Enforcement, 4- Judiciary and Legal Profession, 5- Health and Education and 6Land Administration. As per U Myint (2000), in Pakistan, corruption is because of poor governance. All the efforts made by state (governments) to eliminate corruption were failed. The state may need to establish credibility by punishing highly visible corrupt officials but in the past the goal of such prosecutions was to attract notice and public support and not to solve the underlying problem.

89

International Journal of Business and Behavioral Sciences

Vol. 2, No.6; June 2012

References
Anonymous (n.d.) Corruption: Case in Cambodia, Report on corruption in Cambodia Anupam Das and Meaghan Marie Beatty Parry (2011) Greasing or Sanding? GMM Estimation of the Corruption-Investment Relationship, International Journal of Economic Research, Vol. 2 No. 2, pp.95-108, April, 2011, online@www.ijeronline.com Haque ,Anwar Ul (2010) Corruption in the Government Hospitals International Journal of Pathology; 2010; Vol. 8No. 2, pp. 73-81 a Review Article Byoung-Woo Ahn (2000) Combating Corruption in the New Millennium, in, Progress in the Fight Against the Corruption in Asia and the Pacific Papers Presented at the Joint ADB-OECD Conference on Combating Corruption in the Asia-Pacific Region Seoul, Korea, 1113 December 2000 Gadit, Amin A. Muhammad (2011) Corruption in medical practice: How far have we gone?, Opinion and Debate, Vol. 61, No. 1, January 2011 Javaid, Umbreen (2010) Corruption and its Deep Impact on Good Governance in Pakistan Pakistan Economic and Social Revie, Volume 48, No. 1, pp. 123 -134 (Summer 2010) Langseth, Petter (1999) Prevention: An Effective Tool to Reduce Corruption Report of Global Program against Corruption, Center for International Crime Prevention, Office of Drug Control and Crime Prevention, United Nations Office at Vienna. Law Commission of Government of India (2001) One Hundred And Seventy Ninth Report of Law Commission of India, on the Public Interest Disclosure and Protection of Informers December 2001 D. O. No6 (3) (72) /2001-LC (LS), December 14, 2001 Lintjer, John (2000) The Fight against Corruption: How a Regional Development Bank can Help, in, Progress in the Fight Against the Corruption in Asia and the Pacific Papers Presented at the Joint ADB-OECD Conference on Combating Corruption in the Asia-Pacific Region Seoul, Korea, 11-13 December 2000 Mahmood, Amjad (n.d) Pakistans National Anti Corruption Strategy: Background, Status, Opportunities and Challenges, Anti Corruption Resource Center, www.U4.no Maqbool, Khalid (2000) Combating Corruption in Pakistan, chapter 3, in, Progress in the Fight Against the Corruption in Asia and the Pacific Papers Presented at the Joint ADBOECD Conference on Combating Corruption in the Asia-Pacific Region Seoul, Korea, 11-13 December 2000 Marsida Ashiku, (2011) Political Transition, Corruption in new Democracies- Special Case Albania, International Journal of Economic Research, Vol. 2, No 3, pp. 111-124, May June 2011, online@www.ijeronline.com Mendes, Errol Business against Corruption Corroding the global economy and sustainable development: The United Nations Global Compact at risk Case stories and examples Implementation of the 10th United Nations Global Compact Principle against corruption OECD-ADB (2000) Organization for Economic Co-operation and Development - Asian Development Bank) Progress in the Fight against the Corruption in Asia and the Pacific Papers Presented at the Joint ADB-OECD Conference on Combating Corruption in the AsiaPacific Region Seoul, Korea, 11-13 December 2000 Qadir Mansoor (2003) Report on present situation, problems and solutions in the legal

90

International Journal of Business and Behavioral Sciences

Vol. 2, No.6; June 2012

system related to corruption control and corruption cases in Pakistan, International Review of Penal Law, Vol. 74, 2003/1, pp. 515-525 Samad, S. (2008) Combating Corruption: The case of the National Accountability Bureau, Pakistan, JOAAG, Vol. 3, No. 1 Seiichi Kondo (2000) The Anti-Corruption Initiative, in, Progress in the Fight Against the Corruption in Asia and the Pacific Papers Presented at the Joint ADB-OECD Conference on Combating Corruption in the Asia-Pacific Region Seoul, Korea, 11-13 December 2000 Taghavi, M. H. Nikoomaram, S. Tootian (2011) Comparing Impact of Administrative Corruption on Economic Growth in Developing Countries, International Journal of Management and Business Research, Vol. No. 2, pp. 93-98, Spring 2011 IAU Transparency International Pakistan (2010) National Corruption Perception Survey 2010 Press Release, Transparency International Pakistan, 5 C, 2nd Floor, Khy-e-Ittehad, Phase VII, DHA, Karachi U-Myint (2000) Corruption: Causes, Consequences and Cures, Asia-Pacific Development Journal Vol. 7, No. 2, December 2000, pp. 33-58 World Bank (2001) http://www.worldbank.org/publicsector/anticorrupt/index.ctm World Bank (2004) http://www.worldbank.org/WBSITE/EXTERNAL/NEWS

91