Governing smarter in Pakistan

We take cell phones for granted now in Pakistan. From chowkidars (watchmen) to CEOs, most people in the country now have cellular connections. This connectivity has a knock-on effect because there is now a huge ecosystem of subsidiary services that relies on the ubiquity of cellular services. 

Whether you are ordering food or a cab, many people now reach for their smartphones. Even the media is shifting to mobiles, with more and more entertainment industry magnates trying to figure out how to monetize the small screen. But this was not always so. More importantly, what we take for granted might not have existed but for a few crucial regulatory decisions. 

In December 2000, the Pakistan Telecommunications Authority announced a new policy by the name of “Calling Party Pays” (CPP). Under this policy, charges for connecting to a mobile subscriber were payable exclusively by the calling party, and mobile users no longer had to pay incoming charges. 

By 2003, the number of cellphone users had jumped from 200,000 to 1.7 million. Today, there are almost 140 million cellphone users in Pakistan. There are two questions that arise from this bit of history. What can we learn from this episode? And is there a policy option available to Pakistan today that would be as beneficial as the switch to CPP?

The important lesson to be learned is that there is quite often more money to be made by the state through providing appropriate infrastructure than by trying to do the work itself. If that sounds like an ode to privatization, so be it. The Pakistan of 2017 is a far cry from that of 2000. But there are still far too many bloated and overly subsidized state-owned enterprises around.

A cull of these white elephants would be in everybody’s benefit. Privatization done badly can be hugely problematic, but it is still better to start from the assumption that the state needs to justify its monopolies rather than vice versa. The second question is more complicated to answer. Nonetheless, there are two pivot points that can be used to radically affect Pakistan’s economy.

The first is land law reform, because everything to do with land in Pakistan is massively and needlessly inefficient. Buying, selling and renting land is difficult, as are evicting tenants and repossessing mortgaged land. This regulatory inefficiency has very serious consequences for the economy. 

To take just one example, because repossessing land in Pakistan is difficult, lenders are reluctant to give loans against land. This makes housing more expensive and retards the growth of the construction industry. Pakistan’s construction sector thus accounts for only 2 percent of gross domestic product (GDP); the same sector accounts for 15 percent of GDP in the US. 

The solution to these land problems is for Pakistan to adopt a centrally documented, government-guaranteed land-titling system that operates in the same way as trading on the stock exchange now works. 

But given the foundational nature of property rights, changing the land-titling system is very much the equivalent of rebuilding the foundations of a skyscraper without upsetting the construction above. It can be done, but it certainly will not be easy.

The second pivot point is civil service reform. Pakistan is a country of 210 million people. Our federal government has about 5,500 sanctioned posts of grade 19 or above. Most of those officers make decisions affecting millions on a daily basis, yet they all get paid a pittance in comparison to the powers they wield. 

Pakistan’s governance structure is highly dependent on smart people exercising discretionary power in intelligent ways. Unfortunately, we now have a system that actively discourages smart people from applying, and which even after employment gives them every incentive to make decisions only so as to protect themselves. That system needs to change.

To begin with, bureaucrats need to get paid more. The media is whipping itself into a lather over government servants who are paid salaries equivalent to those in the private sector while heading certain government-owned companies in Punjab. But this only exposes our insanity. Why should government servants not get paid market salaries if they are doing a comparable job and have been selected transparently?

The second half of the equation for civil service reform has to do with manpower management. It is not enough to hire smart people. There has to be a better effort made to gauge civil servants’ performance, to make sure only the best of the best rise to the highest posts. Corporations worldwide invest heavily in human resource and performance evaluation. In Pakistan, we are still wedded to the concept of seniority. 

The country has forever been on the verge of economic security. If it is to finally reach that Promised Land, it will have to make smarter decisions. The change to CPP is a reminder that even relatively simple regulatory reforms, if done intelligently, can have hugely beneficial consequences.
 
— Feisal Hussain Naqvi is an advocate of the Supreme Court of Pakistan. He is a graduate of Princeton University and Yale Law School. He writes regularly for both Pakistani and international publications on issues regarding governance and politics. Twitter: @laalshah