In seminars and group discussions, and in books and newspaper articles on the national economy, economists and thoughtful people have been warning against the unrelenting capture of state power, particularly economic power, by a few elite groups and how it has impeded poverty alleviation and national cohesion and promoted discontent.
Some years ago eminent economist Dr Ishrat Hussain in his book Pakistan: The Economy of an Elitist State warned against it. His warnings were echoed recently by another eminent economist, Hafiz Pasha, who has devoted a full chapter on the subject in his latest book.
Who are these elitist groups? The World Bank has identified landlords, industrialists, bureaucracy and the military establishment as the elitist groups. To this list economists like Hafiz Pasha have also added commercial banks, urban real estate developers and parliamentarians. Unless the power of the self-serving elite is neutralised, there will be little hope of real economic reforms, they all contend.
‘Elite capture’ basically involves shaping of policies by a few relatively small classes that enables them to appropriate public money for their own good, or should one say, greed. It takes place when powerful wielders of political power, including civil-military bureaucratic complex, big land owners and businessmen, manipulate policy formulation and make rules of the game themselves to advance their group’s vested interests. Resulting in inequitable distribution of national wealth, it leads to alienating citizen from the state.
Capture of state power and using it for personal aggrandisement is corruption, no doubt. But no one says so openly because of the fear of the entrenched elite groups. Laws have been likened to a net; the big break though it, the little creep under it and only the middle sized are entangled in it. So when any individual manipulates laws and regulations to his benefit, he is more likely to be caught and punished but not so with the elitist groups even when they shape policies to force their own priorities.
Interesting revelations were made at the Islamabad Literature Festival recently by Hafiz Pasha on elite capture of commanding heights of economy. Today, the country’s largest industrial complex was the Fauji Foundation with assets reportedly worth over $4 billion and making annual profit of hundreds of millions of dollars while enjoying significant tax exemptions. The largest urban real estate enterprise were the Defence Housing Authorities (DHAs) growing in size and numbers every year, the latest one built in Quetta. Similarly, the largest construction empire is the military-run Frontier Works Organization (FWO) with contracts worth Rs200 billion. About the tax exemptions enjoyed by the elite Hafiz Pasha says “army chief and core commanders enjoy special tax treatment along with the president.”
Hafiz Pasha has also listed other elite groups plundering national wealth. These include multinational companies, senior bureaucrats, members of parliament, urban real estate developers and the feudal class. He concludes by saying, “the list goes on and on of privileges enjoyed by the elite due to state capture. A conservative estimate of the additional income or increase in wealth that accrues annually to these groups is almost Rs2 trillion. This implies that the tax and other revenue foregone is over Rs500 billion. The people have to wait for the time, which may never come, when this type of mostly legalised plunder of the state will come to an end.”
Is there a way to contain, if not end, the elite capture? When asked at the seminar if given an opportunity, how would he proceed to correct it, Pasha candidly remarked that his health and fag end of life did not permit him to venture into it. Deeply entrenched privileges by a deeply entrenched elite needs a sincere and profound political process, he said.
However the picture may not be as bleak as it may seem and a way forward can be found.
A practical way forward to weaken the hold of elite capture is to tear apart the shroud of secrecy around government decision-making process on the one hand, and to make an accountability mechanism that subjected every strata of state and society accountable to the same accountability laws and mechanisms. Excluding some sections from the accountability net, like the military and the judiciary, is not the best way to ensure that state power is not employed to advance vested interests of some at the expense of the over 200 million people of the country.
The RTI (Right to Information) legislation last year has opened the doors for every citizen to ask questions which could previously be asked only in the parliament. Asking questions repeatedly will enhance transparency as the critical first step towards accountability of those capturing state power and using it only to the advantage of few.
After all, it was because of questions asked in the parliament that it transpired that the military was involved in more than 50 businesses ranging from cement, fertilizer and sugar production to banking, aviation, real estate development to bakery, transportation to toll collection and now even meat production. It also transpired how contract for toll collections had been awarded to FWO without bids. The RTI has made it possible for citizens to ask questions about tax exemptions, rules and regulations that favour Milbus over private businesses and utilization of the profits and the like.
Promoting transparency by utilising the available tools will hopefully take forward meaningfully the conversation on elite capture of state power.
The writer is a former senator
Some years ago eminent economist Dr Ishrat Hussain in his book Pakistan: The Economy of an Elitist State warned against it. His warnings were echoed recently by another eminent economist, Hafiz Pasha, who has devoted a full chapter on the subject in his latest book.
Who are these elitist groups? The World Bank has identified landlords, industrialists, bureaucracy and the military establishment as the elitist groups. To this list economists like Hafiz Pasha have also added commercial banks, urban real estate developers and parliamentarians. Unless the power of the self-serving elite is neutralised, there will be little hope of real economic reforms, they all contend.
‘Elite capture’ basically involves shaping of policies by a few relatively small classes that enables them to appropriate public money for their own good
‘Elite capture’ basically involves shaping of policies by a few relatively small classes that enables them to appropriate public money for their own good, or should one say, greed. It takes place when powerful wielders of political power, including civil-military bureaucratic complex, big land owners and businessmen, manipulate policy formulation and make rules of the game themselves to advance their group’s vested interests. Resulting in inequitable distribution of national wealth, it leads to alienating citizen from the state.
Capture of state power and using it for personal aggrandisement is corruption, no doubt. But no one says so openly because of the fear of the entrenched elite groups. Laws have been likened to a net; the big break though it, the little creep under it and only the middle sized are entangled in it. So when any individual manipulates laws and regulations to his benefit, he is more likely to be caught and punished but not so with the elitist groups even when they shape policies to force their own priorities.
Interesting revelations were made at the Islamabad Literature Festival recently by Hafiz Pasha on elite capture of commanding heights of economy. Today, the country’s largest industrial complex was the Fauji Foundation with assets reportedly worth over $4 billion and making annual profit of hundreds of millions of dollars while enjoying significant tax exemptions. The largest urban real estate enterprise were the Defence Housing Authorities (DHAs) growing in size and numbers every year, the latest one built in Quetta. Similarly, the largest construction empire is the military-run Frontier Works Organization (FWO) with contracts worth Rs200 billion. About the tax exemptions enjoyed by the elite Hafiz Pasha says “army chief and core commanders enjoy special tax treatment along with the president.”
Hafiz Pasha has also listed other elite groups plundering national wealth. These include multinational companies, senior bureaucrats, members of parliament, urban real estate developers and the feudal class. He concludes by saying, “the list goes on and on of privileges enjoyed by the elite due to state capture. A conservative estimate of the additional income or increase in wealth that accrues annually to these groups is almost Rs2 trillion. This implies that the tax and other revenue foregone is over Rs500 billion. The people have to wait for the time, which may never come, when this type of mostly legalised plunder of the state will come to an end.”
Is there a way to contain, if not end, the elite capture? When asked at the seminar if given an opportunity, how would he proceed to correct it, Pasha candidly remarked that his health and fag end of life did not permit him to venture into it. Deeply entrenched privileges by a deeply entrenched elite needs a sincere and profound political process, he said.
However the picture may not be as bleak as it may seem and a way forward can be found.
A practical way forward to weaken the hold of elite capture is to tear apart the shroud of secrecy around government decision-making process on the one hand, and to make an accountability mechanism that subjected every strata of state and society accountable to the same accountability laws and mechanisms. Excluding some sections from the accountability net, like the military and the judiciary, is not the best way to ensure that state power is not employed to advance vested interests of some at the expense of the over 200 million people of the country.
The RTI (Right to Information) legislation last year has opened the doors for every citizen to ask questions which could previously be asked only in the parliament. Asking questions repeatedly will enhance transparency as the critical first step towards accountability of those capturing state power and using it only to the advantage of few.
After all, it was because of questions asked in the parliament that it transpired that the military was involved in more than 50 businesses ranging from cement, fertilizer and sugar production to banking, aviation, real estate development to bakery, transportation to toll collection and now even meat production. It also transpired how contract for toll collections had been awarded to FWO without bids. The RTI has made it possible for citizens to ask questions about tax exemptions, rules and regulations that favour Milbus over private businesses and utilization of the profits and the like.
Promoting transparency by utilising the available tools will hopefully take forward meaningfully the conversation on elite capture of state power.
The writer is a former senator