Daily Times

In Pakistan, government entities operate under two primary governance models: Company Mode and Authority Mode. While each offers distinct advantages, they also present specific challenges, particularly when it comes to mismanagement and corruption. This article provides a detailed examination of both models, supported by high-profile cases such as the LDA City scam in Authority Mode and the struggles of Pakistan Steel Mills (PSM) and Pakistan International Airlines (PIA) in Company Mode.

1. Authority Mode: LDA City Scam and Additional Governance Issues

Authorities like the Lahore Development Authority (LDA) function under strict statutory frameworks designed to ensure public accountability. However, even with significant oversight, authorities are not immune to large-scale corruption and mismanagement.

LDA City Scam (2018): The LDA City project, intended to provide affordable housing, turned into a massive scandal when LDA officials sold more plots than actually existed, resulting in financial losses for thousands of investors. Investigations revealed that LDA officials had manipulated records and engaged in fraudulent plot sales. This severely impacted public trust in LDA and exposed significant weaknesses in its internal governance.

Additional LDA Scandals: LDA has faced several other issues of corruption, including an Rs 875 million scam involving senior LDA officers who manipulated land allotments in Johar Town. These officers continued to hold powerful positions despite being involved in corruption, further highlighting systemic issues in LDA’s governance. Additionally, another Rs 300 million plot scam surfaced, involving fraudulent allotments by LDA officers in Johar Town. These ongoing scandals underscore the vulnerability of Authority Mode to internal corruption when governance mechanisms are not adequately enforced.

While Authority Mode is meant to ensure structured and accountable governance, these cases show that even with layers of oversight, authorities can be compromised by internal actors, leading to substantial financial losses and inefficiencies.

2. Company Mode: Pakistan Steel Mills and PIA

In Company Mode, public sector companies have more financial and operational autonomy, allowing them to operate like private businesses. However, this autonomy often leads to governance challenges, as seen with Pakistan’s major public enterprises.

Pakistan Steel Mills (PSM): Once a flagship of Pakistan’s industrial sector, PSM has been non-operational for over a decade. The company has accumulated over PKR 200 billion in losses due to mismanagement, outdated technology, and political interference. Despite multiple attempts at privatization and revival, PSM remains a burden on the national economy, with inefficient operations and poor resource management.

Pakistan International Airlines (PIA): PIA has been another major public enterprise struggling with operational inefficiencies. With accumulated losses exceeding PKR 450 billion, PIA’s issues stem from overstaffing, political appointments, and inefficient management. The airline’s inability to modernize and adapt has left it uncompetitive, and despite multiple government bailouts, PIA continues to face severe financial and operational difficulties.

These examples highlight how Company Mode offers operational flexibility and financial independence, but without robust governance structures, it can lead to long-term inefficiencies and substantial financial losses.

3. Pros and Cons of Authority Mode and Company Mode

Authority Mode:

Pros:

Public Accountability: Authorities are regularly audited and subject to government oversight, ensuring transparency.

Structured Governance: The clear regulatory frameworks under Authority Mode provide consistency in decision-making.

Cons:

Bureaucratic Delays: Multiple layers of approval often slow down decision-making, reducing responsiveness to urgent needs.

Internal Corruption: Despite external oversight, internal corruption can occur, as seen in the LDA City and other LDA scams.

Company Mode:

Pros:

Operational Flexibility: Companies can respond quickly to market changes and operational needs without the constraints of bureaucratic red tape.

Financial Independence: Public sector companies have the potential to generate revenue independently through commercial activities.

Cons:

Lack of Oversight: Without strong regulatory frameworks, companies may experience financial mismanagement, as seen in PIA and Pakistan Steel Mills.

Political Interference: Even though companies are supposed to be autonomous, political appointments and interference can significantly undermine their efficiency.

Both Authority Mode and Company Mode present opportunities and risks. While Authority Mode is designed to provide public accountability through structured oversight, it is prone to bureaucratic delays and internal corruption, as demonstrated by multiple scandals involving LDA.

On the other hand, Company Mode offers financial independence and operational flexibility, but it faces challenges related to poor governance and political interference, as seen in the ongoing struggles of Pakistan Steel Mills and PIA.

A balanced approach that combines the strengths of both governance models – operational efficiency from Company Mode and transparency from Authority Mode – could help improve the performance of public sector organizations in Pakistan. Strengthening internal controls and ensuring accountability at every level will be critical to preventing future scandals and improving governance in the public sector.

The writer is a chartered accountant and certified business analyst, serving as a CEO for Model Bazaars.