Shame! Shame!

Adil Najam

Two news items from this week give me cause to worry about economic governance Pakistan.

They suggest that the independence of economic governance–which some consider to be the most important contribution of the current government–might either be illusory, or is diminishing.

Both stories are about the removal–reportedly for political reasons–of two key economic decision-makers. The first story is about the country’s Chief Economist, Pervaiz Tahir, and the second gives details about the earlier easing out of Dr. Tariq Hasan, the Chairman of the Securities and Exchange Commission of Pakistan (SECP).

On Pervaiz Tahir’s removal, according to a report in The News (18 June, 2006; full story here):

The country’s chief economist has reportedly been removed from his post after he differed with the government on poverty reduction and GDP growth rate figures. However, the government has outrightly denied any such development. Secretary Planning Division Akram Malik, however, when approached said: ‘This is absolutely untrue.’ He said the poverty figures of 10 per cent reduction during the period 2001-05 had been calculated by the UNDP, World Bank and Asian Development Bank experts following the internationally recognised methodology. He said although Pervaiz Tahir was the country’s chief economist, he was not an expert on calculating the poverty figures.

When contacted Pervaiz Tahir said he would not comment on the reasons for his removal. However, when asked if he had not agreed on the official figures on poverty reduction and GDP growth rate, he said: “I will only say that my views on these matters are known to all in the Planning Commission.” Sources in the Planning Commission said a committee headed by the secretary P&D and comprising the chief economist and representatives of donors as members worked on the poverty reduction figures. However, the chief economist did not attend the committee meetings and had reportedly conveyed to the deputy chairman that the poverty reduction figures being finalized were simply ‘impossible’.

Commenting on this issue, an editorial in The Daily Times (19 June, 2006) titled ‘The Poverty of Thought’ rightly pointed out (full story here):

General Pervez Musharraf and his civilian sidekicks want to ‘re-brand’ Pakistan. Nothing wrong with that improving the image should not lead to hiding facts or fudging them…. Now we learn that the government’s chief economist has been shunted aside and given another brief because he differed with the image-builders on poverty reduction and growth figures… Presumably, Mr Tahir was using a methodology not to the liking of the government, or maybe the chief economist did not know his mathematics and statistics… Such is the government’s obsession with presenting “Shining Pakistan” and such is its abhorrence of any comment or critique on this issue that it is prepared to do everything to hide its warts and all…. When the national interest is subordinated to the government’s interest, how can Pakistan shine?

Two days later, the lead story in the same newspaper is about the forcing out of Dr. Tariq Hassan and it smells strikingly like the first. According to The Daily Times (21 June, 2006; full story here):

According to documents seen by Daily Times, [Dr. Tariq] Hassan [former Chairman of the Securities and Exchange Commission of Pakistan] wrote to Prime Minister Shaukat Aziz on August 4 offering his resignation because ‘interventions’ from the two officials were making it difficult for him to reform the stock exchanges and maintain direct contact with the main players of the Karachi Stock Exchange (KSE). The prime minister did not accept his resignation at the time and pledged him his full support, but just five months later on January 9, 2006, himself asked Hassan to resign because he (Hassan) had not been able to maintain a good relationship with market players. However, this time Hassan refused to resign and also turned down an offer to become the PM’s legal adviser.

In his letter of August 4, Hassan said: “Recent market interventions by senior government officials have resulted in delay of certain reform initiatives. This is likely to not only impede the overall reform process but may also have a negative impact on the reform programme itself. Therefore, I seek your permission to resign… What I am now being asked to do additionally by your advisor is not only excessive but would also be detrimental to capital market reforms,” he wrote. He wrote his second letter to Aziz on January 9 after a meeting with the prime minister’s principal secretary Javed Sadiq Malik in which he was offered the slot of legal advisor and asked to resign as SECP chief. Hassan refused, saying this was a crucial time because stock market players were again pressing the SECP not to carry out its reforms. “I request you to either reconsider your suggestion or at least give me an opportunity of presenting my case,” he wrote.

Of course, there are likely to be other details to both stories that we are unaware of. However, the intrusive pressure being applied to arrive at the preordained and politically motivated decisions does not bode well.

An open and transparent economy cannot be built by using non-open and non-transparent tactics. Prime Minister Shaukat Aziz, in particular, should recognize that his legacy will be measured not by the short-term fixes he might trigger today, but by the long-term health of economic governance institutions that he leaves for tomorrow.