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Pakistan needs good governance

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Pakistan faces a number of development challenges as it moves into the 21st century

Dec 13 - 19, 1999

According to a latest study of the World Bank Privatization programme of Pakistan's government may not took off until the main irritants were removed and the confidence of the investors restored. According to the study "dispute between the government and privately owned Independent Power Producers (IPPs), the deteriorating economic environment, and the difficult regional and domestic political developments are likely to impair the government ability to proceed with the privatization programme as originally envisaged."

Privatization could also be further delayed by the decision of the freezing of the Foreign Currency Accounts (FCAs) and other exchange controls, as well as the deteriorating global economic environment.

It said that Pakistan has moved ahead with significant reforms, including increasing the authority and ability of the State Bank of Pakistan and the banking courts to impose financial discipline; pursuing loan defaulters; revising financial disclosure requirements and removing credit ceilings that hinder the development of a market-based banking system. A key ingredient in the development of the financial sector is the privatization of banks and other financial institutions. Recovering overdue loans is essential to strengthen Pakistan's banking system.

These governance problems have severely reduced the effectiveness of public expenditures and the -tax collection machinery, held back and distorted the development of the private sector, weakened macro-economic management, harmed the environment, and exacerbated the other structural problems Pakistan faces.

The study further stated that Pakistan faces a number of development challenges as it moves into the 21st century and strives to join the ranks of the middle-income developing countries. The recent turmoil in East Asia clearly demonstrates that good governance along with stabilization and structural reforms are essential to achieve sustained rapid growth. In particular, structural reforms such as fostering competition, strengthening the legal and institutional frameworks, and improving the efficiency of the civil service are essential pre-requisites.

The bank is assisting the effort to improve governance with actions under individual projects and through sector programme agreements such as under the SAP. Bank-financed projects promote transparent procurement processes, including third-party monitoring and merit-based personnel practices. Under several ongoing operations, for example in provincial education and health projects, the bank is financing the development of management information systems to build a basis for rational political choice on expenditure decisions, such as the locations for schools and clinics.

In the meanwhile it is being indicated in relevant circles that the policy of privatization may be drastically changed in the new economic Road Map" being prepared under the guidance of the Economic Advisory Board and personal supervision of the Finance Minister, Mr. Shaukat Aziz. the new policy package may be launched during the 3rd week of the current month after its approval by the National Security Council.

According to the revised policy privatization of public sector units may be persued through the stock exchanges in phases instead of selling of 26 strategic shares to a single buyer with transfer of management. The Finance Minister who had lengthy meetings with the members of all the three stock exchanges in the country has been recommended this new approach towards privatization to reactivate the programme which is almost stalled for the last about 18 months. All the three stock exchanges — Karachi, Lahore and Islamabad — have unanimously recommended the new approach of off loading shares of public sector commercial enterprises in installments through the stock exchanges as "this will help fetch better price besides broadening the investor base of capital markets".