Institutional Developments & Reforms in Pakistan

Institutional Developments & Reforms in Pakistan

1. Institutional Development and Reforms in Pakistan Vaqar Ahmed Sustainable Development Policy Institute (SDPI) September 18, 2024

2. Outline www.sdpi.org | www.sdpi.tv 2

3. How do we define institutions? www.sdpi.org | www.sdpi.tv 3

4. Defining institutions A commonly accepted definition of institutions is that they are the formal and informal rules that organise social, political and economic relations (North, 1990). They are the systems of ‘established and prevalent social rules that structure social interactions’ (Hodgson, 2006). Key features of institutions include the following (Joshi & Carter 2015): They are reproduced through routine actions—they live through enactment They provide relative certainty for everyday social, economic and political interactions They tend to persist over time but can change incrementally and in rare instances, suddenly They are often internalised and unconscious; social actors may not even recognize that they are following institutionalized ways of interacting They shape behaviour and thus affect developmental outcomes Institutions operate in all spheres and can affect access to economic, legal, political, and social rights and opportunities. www.sdpi.org | www.sdpi.tv 4

5. Institutions are not….. Institutions are sometimes confused with organisations . One can think of the differences between them in this way: ‘If institutions can be defined as the “rules of the game”, organisations are how we structure ourselves to play’ (DFID, 2003). Organisations are shaped by institutions , and in turn shape institutional change . Organisations are the material expressions of institutions circumscribed by ‘groups of individuals bound by a common purpose’ (North, 1990; Harper, 2012). www.sdpi.org | www.sdpi.tv 5

6. Informal institutions Institutions can be formal or informal. Formal institutions are the (written) laws, regulations, legal agreements, contracts and constitutions that are enforced by third parties, while informal institutions are the (usually unwritten) norms, procedures, conventions and traditions that are often embedded in culture (Leftwich & Sen, 2010). Informal institutions can complement, compete with, or overlap with formal institutions (Jutting et al., 2007; Leftwich & Sen, 2010). They are implicit and are revealed by investigation of the incentives and norms that drive actors’ behaviours . Whether institutions are relatively strong or weak, or are inclusive or discriminatory, depends upon the context within which they operate (Unsworth, 2010). www.sdpi.org | www.sdpi.tv 6

7. What are public sector institutions? Public sector institutions are the policies, legal frameworks, informal norms and codes of conduct that create the incentives that drive government decision-making, the behaviour of public sector workers, resource allocation – and ultimately the exercise of power within the state bureaucracy. www.sdpi.org | www.sdpi.tv 7

8. www.sdpi.org | www.sdpi.tv 8 Source: DFID (2013)

9. Public sector institutional reform attempts to change institutions and the way they function: the underlying incentives and norms that shape behaviour in organisations , rather than the formal organisational structures, rules and processes. The challenge for institutional reform in the past has been to identify institutions that are critical, and shape reforms to achieve underlying functional change (Pritchett & Weijer , 2010). www.sdpi.org | www.sdpi.tv 9

10. What is required to reform public sector institutions? Reforming public sector institutions requires looking at the structure of the state and its governance systems to identify where decisions are taken and how the various components connect. Three key perspectives to take into account are: Intra-state relations (e.g., decentralization) State-society relations State-market relations www.sdpi.org | www.sdpi.tv 10

11. Challenges to Public sector institutions Lack of political commitment Informal norms may have positive or negative impacts Clientelism – exchange of goods or services for political support Inclusivity – some groups face multiple exclusions www.sdpi.org | www.sdpi.tv 11

12. When are institutional reforms successful? 1. Can government correct priorities? Has government identified its priorities and allocated resources accordingly? Are allocations adhered to? 2. Can government undertake evidence-based policy? How effective are the core policy and decision making structures and processes? Are they based on evidence and data? What is the availability and quality of data? What is the impact of policy changes on the poor? www.sdpi.org | www.sdpi.tv 12

13. When are institutional reforms successful? 3. Can government get incentives right? What is the current formal/informal incentive structure? Who benefits? What are the incentives for state structures to deliver services; for the bureaucracy to attract and motivate staff; for the development of national skilled human resources? What incentives, if any, are there to modify behaviours of key players in support of the desired outcomes? What incentives are there to review and improve performance? 4. Can government ensure respect for rules and law? Are formal rules and laws respected? Are there informal rules leading to corruption, patronage, victimisation , exclusion? Can rights be enforced through law? Are rules and law subject to political interference? Are there informal systems of dispute resolution? www.sdpi.org | www.sdpi.tv 13

14. 5. Is cultural change supportive? National attitudes to risk, hierarchy, incentive systems, participation, donor interventions, etc. Willingness to engage in consultation. Responsiveness to information, Issues of community and individual identity. 6. Are relevant drivers for change available? What are the key drivers for change? Social, technological, economic or political? Are there sponsors or champions for reform? Extent of their power and influence. Level of commitment to reform. What benefits or incentives do they have to push a reform process? Level of political stability. What are the implications of the current electoral cycle? www.sdpi.org | www.sdpi.tv 14 When are institutional reforms successful?

15. 7. Are voices and partnerships inclusive? What mechanisms and structures are in place to promote the concerns of poor people? Awareness raising, capacity building, joint manage of e.g. forestry or water resources, participatory budgeting? How effective are they? What voice do people have to hold delivery organisations to account? Report cards? Public audits? www.sdpi.org | www.sdpi.tv 15 When are institutional reforms successful?

16. Stability & change in institutions Institutionalization – an institution attains a stable state Deinstitutionalization – the legitimacy of an established practice erodes or discontinues Reinstitutionalization – an exit from one institutionalization, and entry into another institutional form www.sdpi.org | www.sdpi.tv 16

17. Outcome: Public and private investments generate greater and more equal economic, social, and environmental returns. Overview of Institutional Development Reforms  

18. Readings www.sdpi.org | www.sdpi.tv 18

19. Historical background-I Discovering roots of institutional development in Pakistan’s constitutional framework. Institutional development suffered early setback as the newly-created Indian Republic refused timely transfer of much of the assets of United India that were to be handed over to Pakistan under the partition agreement ( Sherani 2017). The three wars reinforced a sense of uncertainty and a state of perpetual hostility with a much-larger neighbor. Early demise of the country’s founder, resulted in political power coming to be concentrated with a narrow elite. www.sdpi.org | www.sdpi.tv 19

20. Historical background-II Elitist groups (including landed gentry) utilized their political influence to consolidate their political hold as well as to pursue own economic interests. Constitutional framework was late, and Pakistan continued to be ruled under the India Act 1935 till 1956. This also put other institutional developments such as land reforms on a back burner. With the military takeover just two years latter, the first constitutional framework was again being rewritten as early as 1958. There is a lot of patchwork after 1958 expect for two noteworthy developments (1973 constitution and 18 th constitutional amendment). www.sdpi.org | www.sdpi.tv 20

21. Highlights from 2000 s President Musharraf suspended the constitution initially, and later introduced changes via the Legal Framework Order (LFO) Several new institutional frameworks for managing service delivery and accountability are introduced Most notably these include the National Reconstruction Bureau and National Accountability Bureau By 2007 a wide amnesty for politicians is given under National Reconciliation Ordinance which allowed a lot many veteran politicians to return to politics Around the same time mainstream opposition parties band together for a Charter of Democracy – where among other things institutions such as PAC, NAB, ECP will be run in agreement with each other. www.sdpi.org | www.sdpi.tv 21

22. highlights 2010-18 Transition towards democracy Mobilizing devolution While a lot of progress has been made in terms of transition towards democracy, improvements in civil-military relations, and market reforms however four governance challenges preventing transformation (World Bank 2019): Gaps in public administration Incomplete devolution Dominance of state in the market Revenue systems under stress www.sdpi.org | www.sdpi.tv 22

23. Division of powers in executive branch The Eighteenth amendment introduced changes to about 36 percent of the 1973 Constitution of Pakistan: 102 out of 280 Articles of the Constitution were amended, inserted, added, substituted or deleted. In addition, 47 items on the Concurrent Legislative List were removed and moved to the provincial legislative domain. As a result, some 17 federal ministries were abolished. However, some of these ministries were reestablished on account of federal government being accountable for international obligations e.g., climate change. www.sdpi.org | www.sdpi.tv 23

24. However, a lot of overlap in regulatory space The regulatory framework in the country consists of several independent or semi-autonomous regulatory agencies at federal & provincial level In almost every sector vast amounts of powers are available with regulatory bodies including: Economic regulators: For example, CCP, SECP, SBP, PPRA etc. Utilities regulators: For example, PTA, OGRA, NEPRA, FAB, CAA etc. Commodities regulators: For example, MNFSR etc. www.sdpi.org | www.sdpi.tv 24

25. Institutional Thought Process 2018 onwards 40 Task forces to implement manifesto/100-days plan Most critical include: NAB laws Civil services reforms Energy Social sectors: Health, education, creation of 10 million jobs, construction of five million houses Review of China Pakistan Economic Corridor (CPEC) www.sdpi.org | www.sdpi.tv 25

26. Outcome: Public and private investments generate greater and more equal economic, social, and environmental returns. Significance / Implications for Improved Public Service Delivery & Economic Development

27. World governance indicators Government effectiveness Voice & accountability Political stability and absence of violence and terrorism Rule of law Regulatory quality Control of corruption www.sdpi.org | www.sdpi.tv 27

28. World governance indicators Pakistan: track record 2013 vs. 2022 Government effectiveness (no change) Voice & accountability (minor decline) Political stability and absence of violence and terrorism (sharp decline) Rule of law (improved) Regulatory quality (improved) Control of corruption (improved) www.sdpi.org | www.sdpi.tv 28

29. Implications have been studied National Tax Commission Report (2015) Task Force on Civil Service Reforms (2018) Rule of Law Roadmap Steering Committee (2020) Pay & Pensions Commission Report (2021) Institutional Reforms in Federal Govt. (2021) Readings above mentioned www.sdpi.org | www.sdpi.tv 29

30. For example, Economic Implications of Incomplete devolution www.sdpi.org | www.sdpi.tv 30

31. Institutional reform and post 18th Amendment context www.sdpi.org | www.sdpi.tv 31

32. Post-18 th Amendment Policy & Planning Role of Federal Government National Finance Award Planning Commission: Five Year Plan Strategic Trade Policy Framework National Climate Change Framework National SMEs Framework Tax harmonization across federation Implementation of National Water Policy Energy: Circular Debt Plan Provinces have gone ahead and framed legal frameworks in several of the above mentioned domains www.sdpi.org | www.sdpi.tv 32

33. IN some areas Weak policy making capabilities trigger security threats Cyber Security Data Protection Consumer Protection in e-commerce Digital payment systems ….weaknesses in digital integration with rest of the world (provinces question federal!) www.sdpi.org | www.sdpi.tv 33

34. Recent (post-election) Efforts www.sdpi.org | www.sdpi.tv 34

35. Overall approach www.sdpi.org | www.sdpi.tv 35

36. R eorganization of federal government Reduce Federal Government entities Evaluate SPS/MP Scales Policy Public Financial Management Law (PFM) State-owned Enterprise (SOE) Procedures E-governance 36

37. Civil service reforms Induction and Recruitment Training standards Performance Contracts Promotion Policy and Rules Efficiency and Discipline Rules Directory Retirement Rules Rotation Policy Technical Advisors (TAs) Compensation and Benefits Career Progression, Postings and Placements in the Federal Secretariat Amendments in Rules of Business 37

38. Business Process Re-engineering Reforms in ADP/PSDP allocation and releases Pakistan Single Window Regulatory Framework / Guillotine / Ease of Doing Business E-payments E-complaint system 38

39. Evaluations Post 18 th Amendment Institutional evolution post 18 th Amendment is still work-in-progress Develop a clear vision for decentralization Build Consensus around technical implementation arrangements Empower local governments in accordance with assigned responsibilities Restructure and streamline government agencies to address overlaps and redundancies www.sdpi.org | www.sdpi.tv 39

40. Customizing Institutional arrangements: The case of sifc www.sdpi.org | www.sdpi.tv 40 Aspect Description Why Established? To address the need for attracting and facilitating large-scale investments in key sectors of Pakistan's economy (incl. agriculture, mining, IT, and energy). Need Arose Due To: Complex bureaucratic processes hindering investment. Lack of a single point of contact for investors. Difficulty in obtaining necessary approvals. Unlocking Pakistan's economic potential through increased investment. Structure: Three-tiered structure: Apex Committee (headed by the Prime Minister) Executive Committee Implementation Committee Terms of Reference (ToR): Formulate and recommend investment facilitation policies. Facilitate project approvals and clearances. Coordinate with all government departments involved in the investment process. Monitor progress of investments in key sectors. Attract investments from specific countries (e.g., GCC countries). Secure the assistance of the military for security and facilitation, similar to models in other countries. Achievements The SIFC is a relatively new initiative.

41. Sub-national customization (case of KP Urban policy) www.sdpi.org | www.sdpi.tv 41 Aspect Description Why Formulated? To address challenges faced by Khyber Pakhtunkhwa's urban centers and guide their development towards becoming engines of social, economic, and cultural growth. Challenges to be Addressed: Rapid urbanization without proper planning. Lack of infrastructure and basic services in many urban areas. Environmental degradation and pollution. Limited economic opportunities and social mobility. Objectives: Promote inclusive and sustainable development in cities. Improve infrastructure and service delivery. Enhance economic opportunities and job creation. Foster social mobility and a better quality of life for all citizens. Encourage vibrant communities and cultural preservation. Develop smart cities with a focus on social, environmental, and economic considerations. Main Targets & Expected Achievements: Improved urban planning and governance. Increased access to quality infrastructure (water, sanitation, transportation). Enhanced environmental sustainability through waste management, green spaces, and climate change adaptation. Improved social mobility and inclusion for women, children, and differently-abled residents. Development of vibrant and livable urban centers. Attracting investment and promoting economic growth. Institutional Arrangements: Urban Policy & Planning Unit (UPPU) within the Planning & Development Department (PDD) is responsible for overseeing policy implementation. Collaboration with various government departments (Local Government, Environment, Housing, etc.). Involvement of private sector, civil society organizations, and academia. Regular monitoring and evaluation of the policy's effectiveness.

42. Sub-national customization (case of KP land use and building control authority) www.sdpi.org | www.sdpi.tv 42 Aspect Description Why Established? Address issues arising from unplanned and haphazard development in Khyber Pakhtunkhwa. Enhance transparency and efficiency in land use management and building control processes. Promote sustainable development and ensure responsible utilization of land resources. Current Status: Established through the Khyber Pakhtunkhwa Land-Use and Building Control Act, 2021. Authority is still under development, awaiting official notification for its recruitment. Expected Objectives: Develop and enforce land-use plans for urban and rural areas. Regulate construction activities to ensure compliance with building codes and safety standards. Facilitate the issuance of building permits and clearances in a timely manner. Prevent unauthorized construction and land use violations. Promote efficient land management practices for sustainable development. Main Targets & Achievements (Once Operational): Increased compliance with land-use plans and building codes. Improved transparency and reduced corruption in land development processes. Enhanced public participation in planning decisions. More efficient and streamlined procedures for building permits and clearances. Reduced environmental degradation from improper land use practices. Institutional Arrangements (Expected): Governing body: Provincial Land Use and Building Control Council (PLUBCC) chaired by the Chief Minister. Implementation body: KP-LUBCA with a Director General. District-level Land Use and Building Control Committees for local implementation. Difficulties in Operationalization: Delay in official notification for KP-LUBCA formation. Resource constraints, including staffing and technical expertise. Potential resistance from existing stakeholders with vested interests in the current system. Developing a comprehensive and transparent land record management system.

43. Conclusion Understanding of institutional reforms continues to evolve at national and sub-national level World Development Indicators rank at average in global comparison Deeper federal-provincial coordination needed for institutional harmony in critical areas (including affairs of CCI, NEC etc.) Institutional reforms should remain work-in-progress and led by a mix of insiders and outsiders. www.sdpi.org | www.sdpi.tv 43

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