Culture of Corruption Impedes Progress

Rampant corruption is believed to be a major factor impeding economic development in Pakistan and many other developing nations.

Is this corruption and lawlessness rooted in the absence of adequate law enforcement, or the lack of independent judges? Or is it a national culture of corruption that ranks such nations among the most corrupt in the world on Transparency International surveys?



A paper titled "Cultures of Corruption: Evidence from Diplomatic Parking Tickets" by Ray Fisman of Columbia University and Edward Miguel of University of California, Berkeley attempts to answer the above question by using parking violations data on international diplomats living in New York City during 1997-2005.

Since all foreign diplomats have immunity from prosecution in the host country, they do not have to pay fines for any parking violations in New York City. The authors argue that the way the diplomats from different nations behave in such a situation is entirely based on the cultural norms of the nations they represent.



The data presented by the authors shows that Pakistani diplomats with 69.4 tickets per diplomat are the tenth worst offenders, behind those from Kuwait (246.2), Egypt (139.6), Chad (124.3), Sudan (119.1), Bulgaria (117.5), Mozambique (110.7), Albania (84.5), Angola (81.7) and Senegal (79.2). The authors also report that diplomats from low corruption countries (e.g., Norway and Sweden with zero parking citations) behave remarkably well even in situations where they can get away with violations, suggesting that they bring the social norms or corruption “culture” of their home country with them to New York City. Others with no parking violations include diplomats from Oman, Turkey and UAE.

In addition to a strong correlation between number of parking tickets and TI's corruption index, Fisman and Miguel also find that officials from countries that have less favorable popular views of the United States commit significantly more parking violations, providing nonlaboratory evidence on the role that sentiment and affinity play in economic decision-making.

With 69.4 tickets for each official ranking them at number 10, Pakistani diplomats in New York are also the worst among fellow South Asian diplomats. Bangladeshi diplomats rank 28 (33 tickets), Sri Lanka ranked 40 (17.2 tickets), Nepal ranked 43 (16.5 tickets) and India ranks 79 (6.1 violations per diplomat).

Going by the highly persuasive data and arguments by Fisman and Miguel, it is hard to see how better law-enforcement and independent judiciary can solve the highly corrosive problem of widespread corruption in Pakistani society, unless it is also accompanied by a national campaign to promote a culture of honesty in the country. Such an effort must begin with open acknowledgment of the seriousness of the corruption crisis and an earnest desire to change, followed by wide-ranging ethics reforms in all spheres of life which are actively role-modeled and led by civil, social, political, business, military and religious leaders of the country.

Related Links:

Haq's Musings

Pakistani Judges' Jihad Against Corruption

Incompetence and Corruption in Pakistan

Zardari Corruption Probe

NRO Amnesty Order Overturned

Transparency International Rankings 2009

Transparency International Corruption Index 2010

Comments

Riaz Haq said…
Here's a BBC report on corruption in India that parallels the experience of many ordinary Pakistanis in their daily lives:

Imagine if you had to pay a bribe to see your newborn baby, get your water supply connected or obtain your driving licence. It's an everyday fact of life in India - but campaigners are now fighting back, using people power and the internet.

"Uncover the market price of corruption," proclaims the banner on the homepage of ipaidabribe.com.

It invites people to share their experiences of bribery, what a bribe was for, where it took place and how much was involved.

Launched in August, the site gives Indians a chance to vent their frustrations anonymously and shine a spotlight on the impact of corruption on everyday life.

"I did the driving test correctly but still the official said I was driving too slow, I realised his intention so gave him 200 Rupees and got the thing done," is a typical example of a posting.

The website was the brainwave of Ramesh and Swati Ramanathan, founders of a not-for-profit organisation in Bangalore called Janaagraha which literally means "people power".

"Bribery is routinely expected in interactions with government officials", Swati Ramanathan told me, "to register your house, to get your driving licence, domestic water connection, even a death certificate."

Having lived in the US and the UK for several years, they were dismayed on their return to see how widespread corruption had become and decided to do something about it.

"We are all also responsible because we end up paying the darn bribes because otherwise you can never get anything done in India.

"We said, 'It's not enough to moralise, we need to find out what exactly is this corruption? What's the size of it?'"
'High reward'

The website has evolved into a consumer comparison site where people can also get information and advice in different languages on how to avoid paying bribes.

One woman told me how she got round paying a bribe to register her mother's house.

"I went with all the paperwork and at first they looked through it and said, 'Oh, I think one of the documents is not up to date.'

"What I had been told at the website is that this is one of the excuses they make to take a bribe, and what we need to do is tell them, 'OK, give it to me in writing with your stamp and seal, and I will make sure I get these documents the next time so that I can get it registered.'"

"The moment I said that, they backed off and said, 'No, no, it's OK, we will pass it through.'"

So far, nearly 10,000 bribe experiences have been reported across 347 cities and 19 government departments.

As the numbers mount, Swati Ramanathan hopes the website will become a powerful tool for shaming government departments into tackling corruption.

"There is so little risk to being corrupt in our country and so high a reward," she explained.

"The moment you change the equation and you make it riskier, the reward becomes less. You make it riskier by making it public."...


http://www.bbc.co.uk/news/world-south-asia-13616123
Riaz Haq said…
Data from Pew research and Transparency International shows that the nations, such as India and Pakistan, where the huge majorities of people claim religion is important in daily lives are also among the most corrupt.

Please read more at http://www.riazhaq.com/2011/06/per-capita-income-corruption-and.html
Mayraj said…
Today I had a conversation with someone who told me he was in Karachi for 6 years.
He was born and raised in Canada and went there for a job with Barclays. He does seem to have parents who were from Pakistan, however. He worked there and was involved in other banking industry orgs and also helped an NGO out.
I asked him for his impressions about the local system and the present state of the country. He has just returned home to Canada a few weeks ago.
He told me the system worked well and the mayor was a good mayor. He said he thought he did a very good job.
He also said right now country is in a deep mess. People in power seem to just want to take what money they can out of the system. he said this happening at all levels!
Riaz Haq said…
Transparency International, in its 2011 world corruption report, has shown Islamabad sliding down from last year’s 34th to 42nd in ranking amongst the most corrupt nations in the world, according to The News:

However, this improvement is not due to the fact that the government or the rulers are less corrupt than they were before but because of some good results shown by institutions like the judiciary, Public Accounts Committee (PAC), federal tax ombudsman and the defence departments.

Although last year’s 34th position of Pakistan was out of a total of 178 countries assessed by Transparency International as against 2011’s 42nd rank out of 183 countries, still the country did not deteriorate further as has been the case during the previous three years of the present regime.

To be released here on Thursday, the Transparency International’s 2011 Corruption Perceptions Index evaluated Pakistan getting 2.5 score out of 10, and ranked as 42nd most corrupt country out of 183 countries.

In 2010, TI report Pakistan’s score was 2.3, and it ranked 34th most corrupt country out 178 countries. In 2011, the rank of Pakistan has improved because of increase in the number of countries assessed this year.

Pakistan gained new heights in corruption during the last three years under the present rulers. Pakistan ranked as the 47th most corrupt country in 2008, but in 2009 the country became more corrupt and ranked 42nd in 2009.

In 2010, it was 34th most corrupt nation in the world. However, it is interesting to note that the Transparency International acknowledged that the arrest in the further decline of Pakistan in terms of corruption is not due to the present government’s efforts to curb the menace but owing to commendable role of the judiciary, the Public Accounts Committee, the defence establishment and the federal tax ombudsman.

It underscored that PAC, which has done remarkable work under Leader of the Opposition Chaudhry Nisar Ali Khan, recovered Rs115 billion from 2008 to 2011. The TIP also applauded judiciary’s zero-tolerance for corruption, the Ministry of Defence efforts to apply long-standing Public Procurement Rules 2004 in the armed forces departments; and the working of the federal tax ombudsman as one of the cleanest institutions in the government.

The TIP, however, said that this progress has been overshadowed by the ongoing corruption cases like the NICL, RPPs and 2010 Haj scandal in which the Supreme Court has affected recoveries of billions of rupees.

The TI report says that corruption continues to plague too many countries around the world. According to the Transparency International’s 2011 Corruption Perceptions Index, some governments failing to protect citizens from corruption be it abuse of public resources, bribery or secretive decision-making.

Transparency International warned that protests around the world, often fuelled by corruption and economic instability, clearly show citizens feel their leaders and public institutions are neither transparent nor accountable enough.

The 2011 index scores 183 countries and territories from 0 (highly corrupt) to 10 (very clean) based on perceived levels of public sector corruption. It uses data from 17 surveys that look at factors such as enforcement of anti-corruption laws, access to information and conflicts of interest. Two-thirds of ranked countries score less than five. New Zealand ranks first, followed by Finland and Denmark. Somalia and North Korea (included in the index for the first time) are last. Pakistan with 2.4 score ranked 42nd most corrupt country.


http://www.thenews.com.pk/TodaysPrintDetail.aspx?ID=10666&Cat=13

http://cpi.transparency.org/cpi2011/results/
Riaz Haq said…
Transparency International Pakistan says military least corrupt, according to The Nation newspaper:

Judiciary has stepped up into the 4th position from 6th in the previous year in terms of corruption, while land administration department has got the first position on the list of country’s most corrupt institutions, according to the National Corruption Perception Survey 2011, released by the Transparency International Pakistan (TIP) on Wednesday.

According to the report the police department has taken the second spot while the Power sector has dropped to the 5th rank from 2nd. Taxation slipped to the 3rd rank from its previous 8th position, while Customs and Tendering and Contracting departments have shown alarming increase in the corruption trend.

It is pertinent to mention here that for the first time military has been included in the survey and it was the least corrupt department after education in the year 2011. Police had topped all the previous years’ surveys but the Land Administration has crossed them and the factor of the ‘Land Mafia’ was one of the big reasons for this increase.

The annual survey report was released at Karachi Press Club in a press conference by TIP Chairman Sohail Muzaffar, along with TIP Advisory Committee chairman Syed Adil Gilani. This year’s survey has been conducted by Gallup Pakistan. Sohail Muzaffar cited the delay in punitive action by the state organs against the corrupt elements in corruption cases like Pakistan Steel, NICL, Punjab Bank, Rental Power Plants, KESC, PIA, Railway and Wapda as the main reason for the rise in corruption levels.

Sohail informed that judiciary is confronted by deliberate defiance in implementing Supreme Court orders and delay in punishing corrupt persons by the judiciary is one of the causes of lower ranking of judiciary. He said that they have released the reports to tell the government and the people that which is the most corrupt department and it should not be taken into personal context or any political intention. “We are trying to help out the government by showing them the corrupt sections in them, now it’s up to the government how it cleans them”.

On the inclusion of military in the survey, the TIP chairman said, “We have not included it in the survey, Gallup itself has added military and they have not put railways in the survey”. He said the military should not be placed before the education in the rank because according to him military is less corrupt than the education.

He added that Gallup agreed late to conduct the survey, “No one was ready to conduct the survey, the Institute of Business Administration (IBA) which conducted the previous year’s survey refused to conduct it this year. We had short time and Gallup agreed in the last”, said Muzaffar.


http://www.nation.com.pk/pakistan-news-newspaper-daily-english-online/national/29-Dec-2011/military-least-corrupt-institution-tip
Riaz Haq said…
Here's an Express Tribune report on TI findings in Pakistan:

The latest perception report from Transparency International Pakistan (TIP) shows a limited number of respondents see centres of corruption in Pakistan in the following descending order, of being perceived as the most corrupt to the least: 1) land administration; 2) police; 3) income tax; 4) judiciary; 5) tendering & contracting; 6) customs, plus state corporations and the last is the army. Once again TIP has expressed its shock at the mounting lack of honesty in public affairs and has listed some of the reasons why the graph of evil is creeping upwards every year.

It is not surprising that land administration is the first among the perceived culprits. It is vastly the domain of the provinces where the politician has yet to begin to take responsibility for sorting-out maintenance and collection. Land record is still in primitive shape and the low bureaucracy that handles the sector is not upgraded and made competitive. Most of the trouble takes place away from the big cities because the writ of the state languishes in smaller districts and abdicates to three power centres: the feudal landlord (often a politician), the police and the judiciary. It will take a long time to sort-out this mess and it will not happen at the same speed in all the provinces. The police has endemic ills that most states in the Third World have failed to tackle. The recruitment of policemen has been pegged to good education only recently, but the provinces — whose domain this is — have been remiss in making the kind of allocations needed to upgrade the institution’s performance. The ratio of policemen to population is abysmal, training standards — though imitative of the army — are nowhere near being practically useful and low status has kept the average policeman tied to slavish behaviour towards the seniors and a brutish one towards the common man.

But the police may not be intrinsically as bad as the circumstances of its functioning make it. State policies favouring non-state actors involved in terrorism on the side have hamstrung the police. Unwillingness to prosecute has instilled in the department a habit of not trying too hard to convict, say, terrorists from a shady jihadi organisation simply because it is being clandestinely supported by the state. Because of this ambience of state-backed criminality, many policemen themselves indulge in crime and get away with it. Many senior policemen live beyond their means and own properties they could not have bought with honest money. As for the tax administration, if one were to look at the statistics, things may be getting better — and that is why it is no longer number one in corruption. Pakistan’s revenue collection is one of the lowest in the world (with the tax-collection machinery believed to be riddled with corruption and inefficiency) and that impacts directly the capacity of the state to spend on development. The reigning theory is to erect a system in which the income tax officer comes into least contact with the taxpayer.


http://tribune.com.pk/story/314181/pakistans-perceived-corruption/
Riaz Haq said…
Here are some excerpts from an interesting Friday Times Op Ed on Pakistan's undocumented (informal & illegal) economy:

The economy is in the doldrums, but that is not news any more. What is more interesting, and more difficult to investigate, is what is happening in the world beyond the survey operator and tax collector's ambit. Papers published by the Social Policy Development Center (SPDC) in Karachi and the State Bank place the informal economy in a range of 20 to 30 percent of GDP. But most of this undocumented economy does not include strictly illegal, or shall we say criminal, practice.
-------
that militant groups are running their own businesses (during the TNSM's movement in Swat, emerald mines were reputed to be in the hands of Maulana Fazlullah's men); that militants and terrorists are even coming up with new ways to generate funds (kidnapping for ransom being a case in point).
-------------
According to data from the UN, Afghanistan produced about 90% of the global output of opium in 2007. This fell to just over 62% by 2010 (with Myanmar accounting for most of the rest). Three quarters of the poppy production was in the provinces of Helmand and Kandahar, which border Pakistan. Domestic consumption of opium in Afghanistan is next to nil. Also, the country does not legally import the chemicals needed to process opium into heroin, although these are imported in Pakistan for legitimate uses. Almost 7,000 metric tons of opium, both raw and processed, in the form of morphine and heroin, leaves Afghanistan and finds its way to the lucrative markets of Western Europe.
-------------
Given that the global trade in opiates is estimated to have a value of some $70 billion, even a small proportion of the proceeds can make life comfortable for a lot of people in Pakistan.
--------
With close to 80 suicide attacks in 2010, about 400 rocket attacks, and about 350 bomb blasts in addition to target killings, use of improvised explosive devices etc, its not hard to deduce that there is a significant trade in arms and ammunition in Pakistan. The ISAF container scam case led to some interesting findings. There were the obvious conclusions - including that the abuse of the Afghan Transit Trade facility is massive. More tellingly, the Supreme Court's suo moto case found that 7,922 ISAF containers simply went missing. In addition to the packed meals, the alcohol and the camp supplies stamped with ISAF logos that appear in border markets, the possibility of pilferage of more dangerous items cannot be ruled out.

The smuggling masked by the Afghan Transit Trade is another story altogether, and according to some stakeholders extends to the illegal trade in timber, antiquities and gemstones stemming from that unfortunate nation. Being a neighbor to a land-locked, war-ravaged country with no semblance of law and order was never going to be easy. But Pakistan's governance failures have made a bad situation worse.

There's much more to Pakistan's economy than meets the eye, and many of the more interesting activities are practically impossible to investigate unless someone is prepared to take considerable personal risks. The few pieces of the jigsaw puzzle that are available from public data and information paint a tantalizing picture. If the downslide of the formal economy continues, things could get even more interesting.


http://www.thefridaytimes.com/beta2/tft/article.php?issue=20120113&page=7
Riaz Haq said…
Here's a Global Post story on NATO using smugglers to supply its troops in Afghanistan through Pakistan:

With few other options available to it since Pakistan closed its border crossings almost two months ago, NATO has at times resorted to paying local smugglers to get much-needed supplies to its troops fighting in Afghanistan, Pakistani officials say.

The Pakistani and Afghan smugglers, who must pay bribes to militants to travel safely through some areas, navigate treacherous routes over the 1,800-mile mountainous divide that separates the two countries to bring containers of oil, food and other essential items — all at a price — to soldiers on the other side.

“Borders mean nothing to us. We have been crossing in and out for centuries,” Sahib Khan, a smuggler who said NATO had hired him, told GlobalPost.

The hiring of illegal smugglers came after a failed attempt by NATO to pay private companies, which truck goods across the border under the Pakistan-Afghanistan Free Trade Agreement (PATA). These private companies, Pakistani officials said, were secretly swapping out their normal cargo for NATO supplies until Pakistani security forces caught wind of the scam.

A senior officer for the Frontier Corps, an elite military unit that is responsible for security along the border, told GlobalPost that a total ban on the movement of containers under PATA, which was signed in 2010 to promote bilateral trade, eventually foiled the strategy.

“We had concrete evidence that some of the containers being imported by private companies, under PATA, were being used to smuggle supplies for NATO troops under cover of commercial imports,” the official said.
----------
Smuggling between Pakistan and Afghanistan has long been a profitable and vibrant business. Various trade agreements have been signed between the two neighbors in a bid to contain the practice, but high import and export taxes coupled with little government oversight, thwarted those attempts.

Mostly items like flour, edible oil, lentils, dried vegetables, contraband cigarettes, and animals for meat are smuggled into Afghanistan, while spare auto parts, electronics and unregistered vehicles are smuggled the other direction.

Smuggling is so widespread that it has become the backbone of the economy in towns and villages along the border, where locally it is treated simply as normal trade. The mountainous terrain provides an edge over security to smugglers who regularly trickle across the border without any trouble.

Sahib said that most of the food and oil supplies he has carried across the border for NATO originate from the southern port city of Karachi, and are moved through Peshawar and Quetta, and finally through Pakistan’s tribal areas, which are largely under the authority of various militant groups.

For those militants, the smugglers have been an important source of income. Smugglers are required to pay “rahdari,” or “passage,” an unofficial tax that allows them safe passage.

“Once we are onto the route, it’s the responsibility of those who receive rahdari to ensure we are able to safely enter into Afghanistan,” Sahib said.

Any smuggling that is done on behalf of NATO can in no way make up for the closed borders, however. Smugglers say they carry between 20 and 25 small containers a day while, when the border crossings were open, NATO shipped an average of 250 large containers a day — making the reopening of the borders essential to the war effort.


http://www.globalpost.com/dispatch/news/regions/asia-pacific/pakistan/120123/pakistan-border-nato-us-troops-afghanistan
Riaz Haq said…
PIA, Pakistan's national airline, is a victim of corruption and incompetence from political patronage. Here's a Reuters' report on it:

PIA (PIAa.KA), like Pakistan, always seems to be on the brink of disaster. But now that seems closer than ever for the national flag carrier, once a source of pride for the country.

The airline is haemorrhaging hundreds of millions of dollars a year while being pummelled by competition from sleek Gulf giants like Emirates EMIRA.UL, Etihad and Qatar Airways.

A quarter of its 40 aircraft are grounded because the airline can't find enough money to buy spare parts. Flights are regularly cancelled and engineers say they are having to cannibalise some planes to keep others flying.

"The situation has worsened to the extent of rendering this airline almost financially unviable," said the State Bank of Pakistan in a report on the state of the economy.

In many ways the airline mirrors the way Pakistan -- a strategic U.S. ally often described as a failing state -- is run.

The same inefficiency, nepotism and corruption that critics say have prevented the government from tackling a Taliban insurgency, crippling power cuts, ethnic violence and widespread poverty also threaten to bring down the airline.

PIA lost 19.29 billion rupees in the first nine months of 2011, almost double the losses in the same period in 2010.

The airline, like the Pakistani economy, has relied on bailouts to stay in the air, and is negotiating with the state for another rescue package.

"Just like PIA has the potential to do well, Pakistan's economy does too. But both haven't because of mismanagement. In the end that is the story -- mismanagement," Salman Shah, a former Pakistani finance minister, told Reuters.

PIA officials were not available for comment on the challenges facing the airline despite repeated requests.

HUGE WORKFORCE WEIGHS DOWN AIRLINE

Over the years, critics say, governments have manipulated state corporations like PIA for political and financial gain, giving jobs to so many supporters that the size of the workforce has become unsustainable in the face of mounting losses.

"We don't have people in the right places in typical Pakistani fashion. It's about who you know not what you can do," said a PIA pilot, who like other employees asked not to be identified for fear of being fired.

Today, PIA has a staggering employee to aircraft ratio of more than 450, more than twice as much as some competitors. In the first nine months of 2011, employee expenses drained 16 percent of turnover.

"Politically motivated inductions have been the major cause of the significant increase in human resource burden in this organisation," said the central bank.

"It cannot be corrected without taking drastic steps for rightsizing and increasing operational efficiency."

That is unlikely in a country where political expediency and interests often undermine efforts to make everything from governments to corporations successful.

Frustrations with those realities are palpable at PIA.


http://www.reuters.com/article/2012/02/14/uk-pakistan-airline-idUSLNE81D02820120214
Riaz Haq said…
Here's an excerpt from Time magazine on anti-corruption initiative in Pakistan:

(LAHORE, Pakistan) — Corruption is so pervasive in Pakistan that even Osama bin Laden had to pay a bribe to build his hideout in the northwest where he was killed by U.S. commandos.

Ordinary Pakistanis complain they have to grease officials’ palms to get even the most basic things done: File a police report when they have a traffic accident. Obtain copies of court documents. Get permission to see their relatives in the hospital.

Now, an enterprising group of Pakistani officials is cracking down on this culture of graft with an innovative program that harnesses technology to identify corruption hot spots in the country’s most populous province, Punjab.

The initiative, which leverages the ubiquitous presence of cell phones, relies on the simple concept of asking citizens about their experience.

---
The program — run by the Punjab Information Technology Board — uses telephone calls and text messages to get feedback from citizens conducting transactions with a dozen different government departments, including those dealing with property, health and emergency response.

Many of the reported cases of corruption involved low-level property officials known as patwaris, who are notorious for demanding bribes. One man in the city of Multan sent a text message saying he had to pay a patwari about $170 to get his new property registered. Another man in Sheikhpura district reported paying about $15 to a patwari and his assistant and said “they should be removed from their jobs.”

Bin Laden’s courier, who built the al-Qaida chief’s compound in the town of Abbottabad, had to pay roughly a $500 bribe to a patwari to purchase the required land, according to Pakistani intelligence officials, who spoke on condition of anonymity because they were not authorized to talk to the media.
--------
The low level of corruption reported could be partly driven by citizens’ reluctance to tell government officials the truth, said Michael Callen, an assistant professor of political science at the University of California, Los Angeles, who is conducting research on the program. That could improve as the program becomes more widely known, the anonymity of individuals is protected and more punitive action is taken against corrupt officials, he said.

The initiative’s scale and proactive solicitation of feedback differentiate it from other anti-corruption efforts around the globe, such as the “I Paid a Bribe” website run by an Indian non-profit group. The website and other similar schemes rely on citizens to take the initiative to complain. That can produce fictional accusations made to blackmail honest officials, said Umar Saif, head of the Punjab technology board.

The Punjab government already has used data from the program to pressure officials to clean up their operations.
---------
While the initiative does not attempt to tackle the millions of dollars thought to be involved in high-level government corruption, it faces significant challenges since much of Pakistan’s political system is based on patronage. Politicians hand out jobs to their supporters in exchange for votes. It’s not the salary or benefits, but the chance to solicit bribes that makes the jobs highly coveted.


http://world.time.com/2013/02/04/pakistan-tries-new-way-of-tackling-corruption/
Riaz Haq said…
Here's a NY Times story about Indian Swiss accounts which may also be relevant to Pakistan:

NEW DELHI — Generations of Indians have grown up imagining a bank with high ceilings and chandeliers in Switzerland, where shadowy Indians go to leave a lot of illicit cash in the care of practical white men. In popular lore, the “Swiss bank account” is an essential part of Indian villainy, even though illicit money is a common household possession.

So, last week, when a news agency quoted a Swiss official as saying that Switzerland was willing to share with the Indian authorities information about Indians of dubious nature who hold bank accounts in that country, the Indian government appeared to give the news considerable importance. Considering the infamy of the Swiss bank account in the Indian imagination, data released last week by Switzerland’s central bank, the Swiss National Bank, contained a surprise.

Indians, not all of them shady, held about $2.3 billion in Swiss banks last year. That’s 40 percent more than in 2012, but just a third of what they had parked in 2006. Indian accounts represented just 0.15 percent of the total holdings by foreigners in Swiss banks in 2013.

When Indians talk about their country’s illicit money, which is chiefly tax-evaded funds and income by illegal means, there is, of course, righteous contempt. But there is also a swagger over the sheer size of this shadow economy, because, after all, it is Indian. So a mere $2.3 billion was not what most Indians would have expected their rich and corrupt to have stashed in their Swiss nests.

It is possible that Indian money has fled to safer havens over the years, or has returned to India disguised as respectable investments.

Nobody knows just how big India’s illicit economy is, but in recent years Indians have come to accept that it is very big. From the range of numbers that claim to measure the shadow economy, Indians tend to believe in the highest.

A popular notion is that $1.4 trillion of illicit Indian money has flown out of the country over the decades and is held in various parts of the world. The apparent source of this figure is an analysis in 2009 by the academic R. Vaidyanathan. He had extrapolated it from a report released by Global Financial Integrity, a think tank in Washington; $1.4 trillion swiftly became a widely accepted estimate of Indian illicit money held abroad.

---

Mr. Kar’s report hit India at a time when the middle class was convinced that it was disgusted by corruption. The $500 billion figure was picked up by politicians, reformers and officials, who quoted each other to support their claim.

A study published in 2006 by Friedrich Schneider on the world’s shadow economies dealt briefly with the “tax morality” of Germans. According to the study, two-thirds of the Germans surveyed regarded tax evasion as a “trivial offence,” while only one-third judged stealing a newspaper this way. Indian tax morality is similar, but it makes a distinction between expatriate illicit money, which is viewed as a serious crime perpetrated by the very corrupt, and money held within India, which is perceived as a practical measure.

Black money, as illicit money is called in India, is a significant part of Indian life. Most Indians of means, including many who protested on the streets against political corruption, deal in illicit money when they buy or sell real estate, or when they need foreign exchange to import goods. Huge amounts of cash travel across India during election seasons to bribe voters. Rich ladies prowl Delhi’s malls with bricks of cash in their bags, or with attendants who carry the bricks for them. And, there is a network of quaint people much in demand for their ability to magically transmute rupees collected anywhere in India into dollars that can be made to appear almost anywhere else in the world.


http://www.nytimes.com/2014/06/26/world/asia/indias-underground-economy.html?_r=0
Riaz Haq said…
#Pakistan’s #Sharif brothers, #Zardari figure on NAB’s list of 150 ‘high-profile’ #corruption cases. https://shar.es/1qUoYH via @sharethis

Pakistan’s National Accountability Bureau (NAB) has reportedly submitted a list of 150 mega corruption cases, involving high-profile figures such as, Prime Minister Nawaz Sharif, his brother and Punjab Chief Minister Shahbaz Sharif, former premiers, ministers and top bureaucrats, before the country’s Supreme Court.
The report said that an inquiry was being carried out against the incumbent prime minister and his brother in a case pertaining to the construction of a road from Raiwind to Sharif family House worth Pakistani rupees 126 million, reported the Dawn.
Former Prime Minister Raja Pervaiz Ashraf is also being scrutinised for the rental power plants (RPP) case.
Also, a case has been launched against former President Asif Ali Zardari for possessing assets beyond resources.
It also mentioned 50 cases of monitory irregularities, misuse of powers and land scams.
Among the monitory irregularities, inquiries were being conducted in 22 cases, with probes launched into 13 cases and references in 15 cases.
In land scams, on the other hand, 29 cases were under inquiry, 13 cases were being investigated and references had been filed in eight cases.
The report also showed that inquiries were underway in 20 cases of abuse of power, while a probe had been launched into 15 cases and references filed in 15 cases.

The case, which was filed by Manzoor Ahmed Ghauri earlier this year against NAB chairman and other officials, is being heard by a three-member bench headed by Justice Jawwad S. Khawaja.
The report was submitted after the court expressed disappointment over what they claimed was an extreme form of ‘maladministration’ in the anti-corruption body.
Riaz Haq said…
The Panama Papers reveal hidden wealth of 12 world leaders including #Pakistan #PM #NawazSharif in offshore account http://gu.com/p/4tvm5/stw

The hidden wealth of some of the world’s most prominent leaders, politicians and celebrities has been revealed by an unprecedented leak of millions of documents that show the myriad ways in which the rich can exploit secretive offshore tax regimes.

The Guardian, working with global partners, will set out details from the first tranche of what are being called “the Panama Papers”. Journalists from more than 80 countries have been reviewing 11.5m files leaked from the database of Mossack Fonseca, the world’s fourth biggest offshore law firm.

The records were obtained from an anonymous source by the German newspaper Süddeutsche Zeitung and shared by the International Consortium of Investigative Journalists with the Guardian and the BBC.

Though there is nothing unlawful about using offshore companies, the files raise fundamental questions about the ethics of such tax havens – and the revelations are likely to provoke urgent calls for reforms of a system that critics say is arcane and open to abuse.

The Panama Papers reveal:

Twelve national leaders are among 143 politicians, their families and close associates from around the world known to have been using offshore tax havens.
A $2bn trail leads all the way to Vladimir Putin. The Russian president’s best friend – a cellist called Sergei Roldugin - is at the centre of a scheme in which money from Russian state banks is hidden offshore. Some of it ends up in a ski resort where in 2013 Putin’s daughter Katerina got married.
Among national leaders with offshore wealth are Nawaz Sharif, Pakistan’s prime minister; Ayad Allawi, ex-interim prime minister and former vice-president of Iraq; Petro Poroshenko, president of Ukraine; Alaa Mubarak, son of Egypt’s former president; and the prime minister of Iceland, Sigmundur Davíð Gunnlaugsson.
Six members of the House of Lords, three former Conservative MPs and dozens of donors to UK political parties have had offshore assets.
The families of at least eight current and former members of China’s supreme ruling body, the politburo, have been found to have hidden wealth offshore.
Twenty-three individuals who have had sanctions imposed on them for supporting the regimes in North Korea, Zimbabwe, Russia, Iran and Syria have been clients of Mossack Fonseca. Their companies were harboured by the Seychelles, the British Virgin Islands, Panama and other jurisdictions.
A key member of Fifa’s powerful ethics committee, which is supposed to be spearheading reform at world football’s scandal-hit governing body, acted as a lawyer for individuals and companies recently charged with bribery and corruption.
One leaked memorandum from a partner of Mossack Fonseca said: “Ninety-five per cent of our work coincidentally consists in selling vehicles to avoid taxes.”

http://www.theguardian.com/news/video/2016/apr/03/the-panama-papers-how-to-hide-a-billion-dollars-video-explainer
Riaz Haq said…
Names figuring in the (Panama) leak included the king of Saudi Arabia and Pakistan Prime Minister Nawaz Sharif. Ayad Allawi, ex-interim prime minister and former vice-president of Iraq was also listed, the Guardian said.
The (Panama Papers) data contains secret offshore companies linked to the families and associates of Egypt's former President Hosni Mubarak, Libya's former leader Muammar Gaddafi and Syria's President Bashar al-Assad as well.

The documents reveal many Israeli connections and disclose people with Israeli citizenship as well as Israeli banks and entities have used the offshore law firm to register companies in tax havens around the world, Haaretz reported.

Several Israeli banks appear in the files, Haaretz said. Bank Hapoalim managed some of its trusteeship activities for trust funds through the law firm. This activity, carried out by means of the subsidiary Poalim Trust Services, closed down in 2011. The documents also contains many correspondences concerning Bank Leumi activity in Jersey in the Channel Islands.

Blacklisted interests

At least 33 people and companies in the documents had been blacklisted by the US for wrongdoing, such as some Iranian interests and those of Lebanon's Hezbollah, the ICIJ said.

One of the companies exposed in the leaked documents provided fuel for aircraft used by the Syrian government to bomb and kill thousands of its citizens, Haaretz said.

"These findings show how deeply ingrained harmful practices and criminality are in the offshore world," said Gabriel Zucman, an economist at the US-based University of California, Berkeley, and author of the book The Hidden Wealth of Nations: The Scourge of Tax Havens.

Zucman, who participated in the ICIJ investigation, said that the publication of the leaked documents should encourage governments to impose “concrete sanctions” on countries where such firms are registered and on institutions that provide confidentiality for companies using tax havens, Haaretz said.

The leaked data from 1975 to the end of last year provides what the ICIJ described as a "never-before-seen view inside the offshore world."

The investigation yielded the millions of documents from about 214,000 offshore entities, the ICIJ said. The source of the documents, Mossack Fonseca, is a Panama-based law firm with offices in more than 35 countries. It is the world’s fourth-biggest offshore law firm, the Guardian said.

Though most of the alleged dealings are said by the ICIJ to be legal, they are likely to have serious political impact on many of those identified.

Among the main claims of the ICIJ investigations:

Close associates of Putin, who is not himself named in the documents, "secretly shuffled as much as $2bn through banks and shadow companies," the ICIJ said.
The files identified offshore companies linked to the family of Chinese President Xi Jinping, who has led a tough anti-corruption campaign in his country, the ICIJ said.
In Iceland, the files allegedly show Prime Minister Sigmundur David Gunnlaugsson and his wife secretly owned an offshore firm holding millions of dollars in Icelandic bank bonds during the country's financial crisis.
The leaked documents were reviewed by a team of more than 370 reporters from over 70 countries, according to the ICIJ.

The BBC cited Mossack Fonseca as saying it had operated "beyond reproach" for 40 years and had never been charged with any criminal wrongdoing.

Haaretz, however, reported that authorities in the British Virgin Islands fined Mossack Fonseca $37,500 for violating laws against money laundering - it had registered a company in the name of former Egyptian President Hosni Mubarak’s son, but did not report its relationship to the two even after both father and son were charged with corruption in their country.


It was not immediately clear who was the original source of the leaked documents.
- See more at: http://www.middleeasteye.net/news/huge-tax-leak-exposes-leaders-saudi-pakistan-1560802862#sthash.VEvK4rvT.dpuf
Riaz Haq said…
Post-Panama case Pakistan
Dr Ikramul Haq, Huzaima Bukhari August 27, 2017 Leave a comment

The institutional structure of economy is designed to generate rents for the elite at the expense of the middle classes and the poor. So what is at stake?

http://tns.thenews.com.pk/post-panama-case-pakistan/

The hidden wealth of some of the world’s most prominent leaders, politicians and celebrities has been revealed by an unprecedented leak of millions of documents that show the myriad ways in which the rich can exploit secretive offshore tax regimes — The Panama Papers: how the world’s rich and famous hide their money offshore [The Guardians, April 3, 2016]
Through the report titled, Panama Papers: Politicians, Criminal & Rogue Industry That Hide Their Cash, some of the crooks of the world — drug dealers, mafias, corrupt politicians and tax evaders — have been exposed. Pakistanis who are part of this undesirable club are unveiled through a year-long investigation project by journalist Umar Cheema in his write-up, Pak politicians, businessmen own companies abroad [The News, April 4, 2016].
Post-Panama case Pakistan is emerging as a dangerous place where the government is openly protecting and patronising the convicted and accused. There is no will to end state-sponsorship of organised crimes. Notorious laws — sections 5 and 9 of the Protection of Economic Reforms Act, 1992 and section 111(4) of the Income Tax Ordinance, 2001 — are still protecting dirty money, financing of terrorism and encouraging tax evasion. In the presence of such laws, the judiciary has punished the three-time elected prime minister — an unprecedented move that can be a starting point to end mafia-like rule in Pakistan as happened in Colombia after years of power of dirty money muzzling institutions or eliminating those who were not purchasable.

------------------

How can we eliminate corruption and tax evasion in Pakistan in the presence of permanent money-laundering and tax amnesty scheme in the form of section 111(4) of the Income Tax Ordinance, 2001 that facilitates the whitening of dirty money and tax evaded funds. It ensures that for money brought into Pakistan through normal banking channels no question would be asked by tax officials or FIA. Through this section, criminals and tax evaders get their undeclared money whitened by paying just an extra 3 to 4 per cent to any money exchange dealer to get remittances fixed in their names.
It is thus clear, brilliantly explained by Dr. Akmal Hussain in Restructuring for economic democracy, that “the institutional structure of Pakistan’s economy is designed to generate rents for the elite at the expense of the middle classes and the poor.” It is this structural characteristic of the economy and not just bribery that prevents sustained high economic growth and equity in Pakistan. Unless we change this structure of economy, the morbid story of corruption and tax evasion will continue. In the presence of these maladies, no decision of Supreme Court can help Pakistan progress and become an egalitarian state.
Riaz Haq said…
Uzair Baloch spills the beans about #PPP top leaders' corruption & backing of #crime, violence in #Karachi #Pakistan

https://tribune.com.pk/story/1526890/uzair-baloch-spills-beans/

In his confessional statement, dated April 29, 2016, Uzair testified that he joined a gang led by Abdul Rehman alias Rehman Dakait in 2003 and was incarcerated in the Central Jail, Karachi where he was appointed incharge of the prisoners belonging to the Pakistan Peoples Party (PPP) on the recommendation of then jail superintendent Nusrat Mangan and PPP leader Faisal Raza Abedi.

In the statement available with The Express Tribune, Uzair disclosed that he assumed full-fledged command of the gang after Dakait was killed in an encounter in 2008 and formed an ‘armed terrorist’ group under the name of the Peoples Aman Committee (PAC) and became its chairperson.

He confessed to have collected Rs20 million extortion from different persons and departments every month, adding that the fisheries department would pay Rs2 million.

He also disclosed that PPP MNA Faryal Talpur, sister of party co-chairperson Asif Ali Zardari, was given Rs10 million extortion every month. According to the alleged gangster, Dr Saeed Baloch and Nisar Morai were posted to the fisheries department on his recommendation.

“I maintained a friendly relationship with the [then] Karachi Capital City Police Officer Waseem Ahmed, SSP Farooq Awan and his brother Shahadat Awan [a lawyer and currently posted as prosecutor general of Sindh],” Uzair disclosed, adding he had done several favours for them, including helping Farooq and Shahadat encroach land in Malir. He also got Farooq to collect Rs150,000 to Rs200,000 in extortion every month.

The incarcerated gangster disclosed that on the insistence of Senator Yousuf Baloch he met the then chief minister Qaim Ali Shah and Talpur and asked them to get the head money and cases against him withdrawn, which was eventually done by Talpur and Zardari.


In his statement, Uzair disclosed that after the Karachi operation was intensified he was called through Qadir Patel and Senator Yousuf by Talpur to her Defence residence, where Sharjeel Inam Memon and Morai were also present. According to him, Talpur discussed various issues the including Lyari gang war, and offered to hide his personal arms and explosives and have Sharjeel and Morai handle his financial affairs and Yousuf and Patel handle affairs in Lyari if he wanted to flee the country.

He testified to have done various illegal works for the party, including helping Patel encroach land and providing 500 jobs to criminals on Yousuf’s insistence. He also admitted to have helped Owais Muzaffar Tapi, Zardari’s foster brother, illegally occupy 14 sugar mills that were later purchased at lower prices.

Uzair also claimed to have sent 20 of his men to harass residents around Bilawal House on Zardari’s instructions and force them to sell 30 to 40 bungalows to Zardari at lower prices. The gangster said he came to know about a plan to kill him while in police custody, so he pleaded to have his custody transferred to the Rangers.

The former Lyari kingpin had also requested complete protection, apprehending that he and his family members could be killed after these revelations, as he expected revenge from Zardari and other politicians he named in his statement.

Popular posts from this blog

China Sees Opportunity Where Others See Risk

Economic Comparison Between Bangladesh & Pakistan

Smartphones For Digital & Financial Inclusion in Pakistan