IMPACT OF CORRUPTION ON

BUSINESS ACTIVITIES IN PAKISAN

Presenters:
•Ali Farooqui
•Ali Raza
•Irfan Ullah
•Mohsin Kamal
 CORRUPTION

• Corruption often refers to spiritual or moral impurity or deviation from an

ideal

• Corruption is a double edged sword; it reduces both the volume and

efficiency of investment and thus economic growth.

• In Politics, the misuse of government power for other purposes, such as

repression of political opponents and general police brutality, is not
considered political corruption.
CORRUPTION IN PAKISTAN
• Pakistani society and corruption go hand-in-hand

• Corruption seems to be one of the fundamental problems

of this country

• Till date not much has been done to eliminate corruption

• Corruption is credited in the country due to :

– Current lawlessness
– Shrinkage of economy
– Increasing poverty

• Different governments have made little effort for handling

the corruption:
– Pakistan Penal Code of 1960 (PPC)
– the Prevention of Corruption Act of 1947 (PCA)
– the National Accountability Ordinance (NAO)
 Key Sectors Affected By
Corruption In Pakistan

• Expert sources indicate that the following sectors are among those most
affected by corruption:

– Police and law enforcement

– Judiciary and legal profession
– Power sector
– Tax and customs
– Health and education
– Land administration
– In addition, Public Procurement seems to be a major concern across most
sectors
 Most Corrupt Departments Of
Pakistan
• Following is the list of a few most corrupt departments of Pakistan,
according to Transparency International :

– National Highway Authority (NHA)

– Pakistan Housing Authority (PHA)
– Security and Exchange Commission of Pakistan (SECP)
– Ministry of Water and Power
– WAPDA
– Pepco
– National Engineering Services Pakistan (NESPAK)
– Private Power and Infrastructure Board (PPIB)
– Alternative Energy Development Board (AEDB)
– Pakistan Steel
– Trading Corporation of Pakistan
CORRUPTION AND BUSINESS
ACTIVITIES IN PAKISTAN
Survey of world bank
•Significant amount of time and money is wasted in
numerous unpredictable interactions with Higher-level
Bureaucrats seeking bribe

•12 percent of an entrepreneur’s time is spent in dealing

with tax and regulatory requirements

•Corruption depresses economic growth by lowering public

investment

•Only a part of budget documented for a project is spent on

it in real
 Survey Of World Bank
• Causes of corruption In Pakistan according to WB’s Survey are:

– Lack of transparency
– Weak public accountability
– Weak judiciary
– Complex legal structures

• The World Bank finds corruption a serious and growing obstacle to the
investment climate in Pakistan

• World Bank representative said that:

– corruption is largely associated with business-government interface

– It is more widespread here as compared to other countries though the bribe rates
here are lower
 Survey Of World Bank
• Firms making investment in Pakistan have to pay bribes even to get
water, telephone and electricity connections which has a huge impact of
Corruption on business activities in Pakistan

• On the issue of government:

– Lack of predictability and consistency in the interpretation of rules and

regulations leads to bad governance

– 46 % of firms in Pakistan believe that the officials interpret rules consistently

– In comparator countries the same believe is among 60% of the firms, which in
turn effect on the businesses and its growth
 Survey Of World Bank
• On the issue of corruption:
– Corruption is considered a severe constraint by 57% of the firms in Pakistan
– The numbers were 40% in 2002
– Its common for firms to pay informal payments to government officials to get
things done

• Bribe incidence in Pakistan has increased rapidly over time and its
expected to increase in future more quickly

• The amounts of bribes paid in Pakistan is very less than comparator

countries
– Firms in Islamabad (including Rawalpindi) reported the highest bribe rate of 2.7
percent
 Survey Of World Bank

• 62% of the firms surveyed disclosed that they were asked for informal
payments or gifts to obtain new water connection

• 84% of the firms had to make informal payments in-order to obtain

electricity services
CORRUPTION AND BUSINESS
ACTIVITIES IN PAKISTAN
Public Procurement and
Contracting
•The procurement process in Pakistan is improving but still
cases of corruption are reported

•Corruption in bidding processes, even the companies that

are found in illegal practices are often not effectively
stopped from bidding in future

•Pakistan is a major recipient of grants and loans from

international donor agencies

•Corruption in procurement also means that anti-poverty aid

and development projects are hampered by corruption
 Public Procurement and
Contracting
• Defense-related procurement and contracts are excluded from the
scrutiny of the national anti-corruption agencies

– It is prominent that they are also corruption-ridden

– Prominent case was that of a retired admiral who returned USD 7.5 million to the
government upon admitting that he had accepted bribes

• Corruption has a huge impact on the development activities of:

– WAPDA
– Pakistan Railways
– Pakistan’s Water and Power Development Agency
EXAMPLES OF CORRUPTION
BY THE DEPARTMENTS
• Policy Manipulation

– The overnight changes in import duty structures via issuance

of Statutory Notifications (SROs)

– These SROs were linked with imports of BMW cars, steel

items, etc.

• Collusion

– Most income tax and customs levies are said to be determined

with prior consultation between the two parties concerned

– In customs, collusion takes place in misdeclaration of items

imported, their quantities and values

– In income tax, the assessment is manipulated to favor people

who pay bribes and extort money from those who do not
 EXAMPLES Continued…
• Extortion
– The level of extortion in the tax administration is very high

– Example of “Businessman exporting reproduction of old jewelry

• Speed money
– Speed money seems to be the most common form of corruption in the whole of
tax administration.

– Speed money rates in Peshawar for customs rebate are from 3% to 5%.

– In Lahore the rates overall are about 2%.

– while Karachi people pay only about 1.5%.

REMOVAL OF CORRUPTION
FROM PAKISTAN
• An Elected Legislature

• An Independent and Impartial Judicial System

• Independent and Free Media

• Supreme Audit and other Oversight Bodies

• Independent Anti-Corruption Agency

• Effective, well-trained Law Enforcement

• A Strong Public Service to Serve the Public

REMOVAL OF CORRUPTION
FROM PAKISTAN
• Procurement

• The Role of the Private Business Sector

• Freedom of Information

• Role of Education

• Role of Civil Society

BRIEF METHODOLOGY AND
RESULTS
• Instrument Used

• Main aim to conduct this survey

• 50 questionnaires were distributed

• Random sampling technique was used

• Organizations targeted were

– Government sector
– Private sector

• The results were neither shocking nor surprisingly

positive
 BRIEF METHODOLOGY AND
RESULTS…..
• The main reason of corruption

• Investors pulling back

• Our survey findings showed that government organizations are the most
corrupt ones

• Reaction of respondents regarding their involvement in corrupt activities

• The type of corruption that is mostly practiced in Pakistan

 BRIEF METHODOLOGY AND
RESULTS…..
• We got some shocking results about whistle blowing

• Unclear rules and regulations for those who raise their voice against this
menace

• Lack of effective anti-corruption bodies

• Corruption is considered as a norm

• It has played a major role in the tragic economic and social degradation
of Pakistan
 BRIEF METHODOLOGY AND
RESULTS…..
• The Impact of corruption

• Reduction in foreign investments

WE SHOULD WAKE UP AND PUT A FULL

STOP TO CORRUPTION !!!!