Daily Times

Taking, rather even not taking, decisions have consequences. It is not for its eloquence alone that the phrase “Justice delayed is justice denied” has withstood the test of judge ‘time’. Not taking a decision when warranted, is in itself a bad decision, and the most critical example for procrastinating in Pakistan’s context is Kalabagh Dam. While good or bad is relative, bad decisions invariably have a habit of coming back and biting you in the nether region.

By that logic, if you never take a decision, then 100 percent of the consequences are bad. However, if you take a decision every time, by the law of averages, if there is one, 50 percent of the decisions should be right with positive consequences. Unfortunately, in the case of public sector, these might be the very decisions which end up being investigated by NAB; for invariably the right path will trample the interests of some moneyed interest. In time, therefore, nobody takes a right decision or any decision with obvious, inevitable consequence. On top of all that, the jury is perhaps still out on whether an honest and well, let’s just say “comparatively not very competent,” public servant is better than a dishonest and competent public servant. While the latter will have you believe that at least the project gets done, that remains a fallacy.

To digress a bit, the term ‘public servant’ ab initio was a tasteless joke, but with time has acquired gargantuan sadistic tendencies. Anytime I have had to call airport inquiry, or electricity complaint or any such related government department; somehow it never feels like there is a servant on the other side, in fact, the other way around. Accordingly, I henceforth propose the term “Public Supervisors” as a substitute, since it goes so well with the term “Political Masters.”

Getting back to bad decisions, some of us have always wondered, taking a cue from the above-borrowed terminology, whether or not an “honest and competent public servant” has ever been sighted in history by mere mortals and whether or not the species, if it ever existed, is now extinct? On the other hand, the substitution of “incompetent” with “comparatively not very competent” was motivated by the need to be politically correct, and a reluctant common sense which just would not accept that public servants, after all, that is invested in them in terms of training and otherwise, can be incompetent.

This last insight, if you think about it, raises an intriguing question: if incompetent public servants do indeed exist, why aren’t there any incompetent private servants, and why aren’t they the subjects of cynical quotes? The probable reason is that the backlash of incompetence in the private sector is termination; which is unheard of in the public sector. There cannot, therefore, even in the short term, be an incompetent private servant. And this leads to another anomaly which begs an answer: not so competent public servants exist since there is no backlash, but necessarily their streak of bad decisions are limited to their workspace only. This is an absolute truth since even a madman, they say, is not stupid.

A recent reading relating to bankers and the decisions they make, “The Bankers New Clothes”, reaffirmed the causation behind bad decisions. No personal stake and lack of any kickbacks make people risk averse and stupid, or dishonest. The book in question was written in the aftermath of the twin financial crises a few years ago and had some interesting views on banks and their regulators. Undoubtedly, 2008 was not the last time that banks created havoc which resulted in the destruction of wealth and employment; they will do so again and again. And the primary reasons for this apparent devil may care attitude is that they play with other people’s money and when they lose, the Government and the Central Banks step in to protect and fund their follies.

Frankly, the author’s observation that Basel III (an internationally agreed framework for determining how much equity capital banks should maintain) is complicated and seems to miss the mark by a wide margin makes sense. By the time you finish risk weighting assets in accordance with Basil III, you have lost sight of the primary objective of determining capital adequacy, which remarkably can also be in tiers; and perhaps it should be tears! Banks maintain equity at less than 10 percent, and at the same time, their borrowers are required to have equity ranging from 30 percent and above; talk about hypocrisy. The solution, according to the author, was more equity, increasing the ratio between own money and other people’s money; equity equivalent to 20-30 percent of total assets. Something, State Bank of Pakistan might look into as well perhaps.

Nonetheless, in the case of the bankers, while it is other people’s money, the other person is at least identifiable, and by chance, if they end up losing the owner’s capital, there is fallout. When the government spends, it is public money, and who is the public, 180 million or more people in the case of Pakistan. And when everybody owns something, in essence, nobody does.

Worse than that, bad decisions never get identified. Beyond whispers here and there, politicians and bureaucrats are careful not to categorise any past decision as bad. But in all honesty, not denying that we have come a long way, if we had only taken the right decisions every time, we should have been in a much better shape economically and otherwise. The fact that none of the successive governments failed to start work on Kalabagh dam, irrespective of whatever reasons, is a bad decision.

And what is the advantage of determining whether a decision was good or bad by hindsight? Well most obviously, there are lessons to be learnt. As an example, there have been many tax amnesty schemes in the past, before offering another. Would it not be appropriate to analyse the net benefit or costs of previous schemes so as not to repeat the follies of the past. Also, identification of bad decisions will also identify those who took them, and perhaps in such cases, the perpetrators might even be denied a second chance to put public asset at risk; and let us not restrict ourselves to the economy only.

I would like to conclude today with a question. Shouldn’t the key decisions taken by past governments be subjected to hindsight analyses by independent experts, to establish brilliance or expose a policy? And should simply losing an election and the right to govern sufficient, or bad decisions form part of the equation? Unless bad decisions are identified and have repercussions, those in power have an incentive only to take bad decisions. The Economist reported that the Thailand Government has recently ordered a former Prime Minister to pay a fine of US$ 1 billion for negligence related to a subsidy scheme for rice farmers. Perhaps it is time to penalise bad decisions in Pakistan too!

The writer is a chartered accountant based in Islamabad and can be reached at syed.bakhtiyarkazmi@gmail.com