Monday, November 28, 2011

AGAHI: Divisible pools, undivided fools!

Divisible pools, undivided fools!

The News International - Money Matters: Divisible pools, undivided fools!

Money Matters

Divisible pools, undivided fools!

One popular saying of the wise goes that ‘in retrospect everyone is intelligent’, but in the case of the much touted 7th National Finance Commission (NFC) award and the much celebrated18th Amendment in Pakistan’s constitution, the government of Pakistan can hardly say that looking back. Considering the imbroglio which the government finds itself in, the incumbents probably don’t want to look back at these achievements as significant anymore. And there are credible reasons why not.

It was envisaged that the devolution of governance from federal to provincial levels as enshrined under the 18th Amendment and the magnanimity of the NFC award would result in improved regulations and better governance, and not to mention a more robust revenue genweration regime. None of that envisaged is being realised, despite best intentions believe experts. According to experts if anything, both these achievement have actually given rise to serious regulatory and governance issues and made it difficult to initiate fresh revenue generation measures both at the federal and provincial levels.

Some of these disturbing revelations have been made in a confidential report of study funded by the Competitiveness Support Fund — a joint initiative of the Ministry of Financeand USAID — and prepared by a team of leading experts led by Shahid Javed Burki. The committee comprises of Dr Aisha G. Pasha, two former federal secretaries Ahmed Waqar andShahab Khwaja, Dr Hilton Root, Imran Khan and Mehr Shah. Ostensibly the team was scheduled to share the report with all provincial chief ministers and the federal finance minister last week.

“The federal and provincial governments differ over the distribution of some financial assets like Workers’ Welfare Fund (WWF) and Employees’ Old-Age Benefit Institution. The WWF’s financial deposits are estimated at Rs81 billion while the EOBI has assets worth Rs148 billion,” reviles the report. “The distribution of assets owned by autonomous bodies and attached departments of devolved ministries is also proving to be contentious as provinces are demanding the equitable distribution of assets, including that of geographically immovable fixed assets,” further discloses the report.

Interestingly, according to the experts on the team, the parliamentary implementation commission, which was setup to facilitate devolution, could not fully deliver before it ran out of life, as it officially ceased to exist effective June 30 this year. The limited time given to the implementation commission versus the expansive scope of the assignment it had on its hands left a big work in progress in its wake with no takers.

Overall, the budgeted increase in revenue transfers to the provinces due to the NFC Award in relation to the presidential order is Rs222 billion in 2010-11, but total transfers were diluted by about Rs180 billion as a result of lower-than-expected resource generation and 50 per cent increase in salaries of government employees announced by the federal government.

According to the report despite increase in provincial shares, the provincial governments believe that the devolved responsibilities should be funded by the federal government with additional revenue commitments. This impasse between the federal and the provincial levels of governance, the experts believe, revolves around three factors; first the NFC Award preceded the 18th Amendment so it could not have influenced the resource allocation decisions of the NFC because additional functional allocations to provinces had not been decided at that time.

Secondly, it is likely that the provinces will not receive a substantial portion of the additional revenues as was originally assured by the federal government. This is attributed to shortfalls in federal tax collections. Thirdly, the federal government unilaterally announced a 50 per cent increase in salaries and allowances for government employees in federal budget 2010-11, which will deprive the provinces of a substantial proportion of revenue gains. “The issue of financing the additional responsibilities devolved to the provinces therefore remains unresolved and is likely to be taken by the Council of Common Interest (CCI) going forward,” states the report.

CSF report further highlights that despite the fact that NFC Award has expanded the basis for a significant sharing of resources with the provincial governments, the 18th Amendment made only modest changes in the allocation of fiscal powers between the two levels of government. “As such, the high dependence of provincial governments on federal transfers is likely to continue in the foreseeable future.”

Pakistani institutions, specially the key regulators are already ranked really low in terms of performance effectiveness in the world. Experts believe there are grave indications that the regulatory system will come under further stress as a result of devolution, especially in the already fragile area of social service delivery. On the flip side, the process of devolution has been put on hold because the decision to devolve the Higher Education Commission (HEC) has been challenged in the Supreme Court. Moreover, the decision to devolve the Ministry of Health has raised concerns over international obligations such as commitment to the Millennium Development Goals (MDGs). “The impact of devolution on the regulatory system of Pakistan has not been fully appreciated. A likely consequence is that in some areas, particularly social service delivery, there may be setbacks as the provinces begin to reflect on their own regulatory requirements and priorities.”

Some things never change; in case of Pakistani style of governance it will always be the tentative and incomplete planning that will never change, this coupled of course with poor governance of those allegedly concerned-for-public leaders. Enough said?

The writer is a Karachi-based

communication consultant.

Irfan Aamir can be reached at:

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