Daily Times

The contrast between the invidious talk shows on the idiot box at night and the mundane morning shows coupled with drab breaking news in the wee hours of the morning strengthens the lack of confidence in the hype created by the media over recent developments, and reinforces the view that, at the end of the day, the big fish will escape the net. On the other hand, the argument that irrefutable evidence is the sine qua non of any process to ultimately take the corrupt to task cannot be denied; all the more so, considering valiant attempts from various political camps to filibuster this ongoing campaign against corruption. Only time will pass the final judgment.
In the meanwhile however, common Pakistanis have once again dared, encouraged by the recent developments, to start believing that there is some light at the end of the tunnel. The view that those able to wield political power can get away with murder, or limitless corruption, is perhaps getting shaded and even appears fallible. In chit chats across various segments of society, a pressing concern now is the eventual retirement of the erstwhile head of the pillar of government leading this noble charge against corruption. Politicians across the divide are perhaps rightly envious of the popularity currently being enjoyed by their historical nemesis and their fear that their precious democracy is under siege might not be misguided.
The situation does bring to mind a popular quote from the movie, The Dark Knight Rises: “There’s a storm coming, Mr. Wayne. You and your friends better batten down the hatches, because when it hits, you’re all gonna wonder how you ever thought you could live so large and leave so little for the rest of us.”
True to colour, however, the agents of democracy keep insisting that the debate on governance, reform, corruption and the rest of the plethora is the domain of political players. Perhaps practicing before preaching might even be prescient, and in this case, set a thief to catch a thief is probably not a brilliant strategy. The corrupt will endlessly test the dictum that everybody has a price and the priceless are few and far between.
Undeniably, if education should be the top priority of the government, eliminating corruption is perhaps fractionally second, much before any other kind of development. While the social impact of corruption is best debated between those having the requisite bailiwick, let’s focus on the hazardous wallops to the economy.
The obvious fallback, looting the taxpayer’s money and filling up Swiss coffers aside, the associated ramifications are arguably worse. Ignoring for the moment the debate on whether Foreign Direct Investment is beneficial or not, which foreign investor in his right mind will be willing to invest in a country ranked 126th in the corruption perception index? In any case even domestic investors, quintessential for growth, are unwilling to invest in Pakistan, and this reluctance, it can be argued, is quite rational. Project development in Pakistan, depending on size and complexity, can take a number of years, and entails numerous hassles including fruitless but costly encounters with related regulators and government authorities. Once the project is running, in addition to the regulators, the project now has to deal with fantastic income assessments by the tax collectors, all apparently designed to ensure project liquidation. And assuming an honest, extremely lucky and persistent investor does survive all that, it could take more than a decade for his investment to be paid back, if at all. Compared with that, the right connection can very likely ensure a scheme to double the money in less than a year.
So what is the obvious choice, invest in a project or float a con? Corruption discourages investment. It is simpler to get rich by controlling national resources on favourable terms than by producing goods or services that creates employment and increases national productivity.
Corruption is the worst kind of monopoly rent and aggravates income inequalities radically. Black money is money out of the system and has to find safe havens, Swiss accounts through carrier models being an option ubiquitously known in Pakistan. Speculative beneficially held investment in real estate is perhaps not that well known. The ever rising price of property, while the economy is reeling, is an enigma and should not be considered as a positive sign. When money moves to land and stocks, the values increase but the quantity does not; the country is not wealthier. In addition, and more importantly, sky rocketing property prices make it impossible for the common man to achieve his dream of a makan (house), and the proportionate increase in rents is a double whammy on his disposable income.
On a comparable plane, if economic growth is less than 5 percent, exports are stagnating for around four years, factory production is suffering due to load shedding, savings and investments are on a downward trajectory, how and why is the domestic stock market one of the top performers in the world?
Curiously, the banks will also only lend to the wealthy, those owning land and stock, and even a democratic government taxes the wealthy carefully. Those who are forced to work for a living pay a larger portion of their income in taxes, direct or indirect, than those who enjoy the fruits of undocumented wealth. Lower taxes on speculation will encourage more and more to speculate, which is hardly conducive for growth. Circular corruption is a bigger, and more vicious, issue than the famous circular debt in the power sector.
Finally, income appropriated by the rich does not result in increasing aggregate demand since most of it is reinvested in non-productive assets rather than being spent; contrarily the same income in the hands of the middle class will most likely result in consumption, increasing aggregate demand.
To summarise, corruption negatively impacts economic growth across the board and continuingly. Pakistan should support all and every effort to curtail corruption if the objective is real economic growth and addressing income inequality.

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