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Regulation or Business

Shall Govt be engaged in business? Is the question I been thinking about lately. I have reached to a conclusion that YES – yes Govt shall do business and as such that business profits can supplement its expenditures and in proportion reduce the tax collection from the lower income people currently in tax net. The more govt grow its business the more it can raise the bar of taxable income. I believe that Govt’s primary job is, and shall be, regulation/administration and not the business. Then how shall govt do the business?  – Singapore Model. Pakistan Govt shall follow the Singapore Model. PTI’s Asad Umar, in PTI’s Economic Policy – GE 2013, has highlighted a similar intention under “Institution Reform Emergency” for Govt businesses if PTI forms the Federal Govt.  In his TV talk he referred to Singapore’s Temasek & Malaysia’s Khazanah as an example.

Temasek Holdings is a Singapore Govt’s Holding & investment company managing companies & businesses of the govt with current net portfolio value of S$ 242 billion. Before Temasek Holdings, govt used to manage the govt owned companies just like our companies today. Temasek holding is a company registered just like any other private holding company in Singapore and pays taxes like any other company and is governed under the same rules as other companies in Singapore. This arrangement provides a level playing field to all be it government affiliated company or else. Temasek is protected to the extent of appointment of its 14 board members,  its CEO and its past reserves under the constitution of Singapore. The executive authority of the country, and the sole shareholder of the company, Ministry of finance, has absolutely zero involvement in Temasek’s investment, divestment or other business decisions.  Just like any other company, Temasek’s sole shareholder, ministry of finance, has right to appoint or remove a board member but with concurrence of the President of Singapore. Board also needs concurrence of the President to appoint or remove the CEO.  A very strong constraint is placed by constitution on right of the govt to company’s money even though govt is the sole shareholder.  The day new cabinet swear-in , all reserves of Temasek on that day become “Past Reserves” and new govt or current govt cannot draw any amount from the past reserves of the company thus protecting the national assets even if there is a change in govt.

In Pakistan, our state-owned companies and enterprises are managed by the state to a variety of degree from one company to the other. I have Listed 108 companies – and there are even more – and they all have officers from Civil Services of Pakistan at various roles – From Board Member to the Managing Director of the company. Where it attracts the conflict of interest, it also overlaps the state role simultaneously as regulator and the business operator. Separation of the commercial interests of the state from its regulatory responsibilities is not something new to Pakistan or either to the Govt itself. Government Holdings (private) ltd company was established in 2000 under Ministry of  Petroleum and Natural Resources with intent to separate “regulatory & commercial interests”.

Our Govt shall also establish, as sole shareholder, independent holding company (ies) so as to manage the affairs of Govt’s commercial interests separately from its regulatory responsibilities. Considering our political culture, the best way possible is to create such holding company through an act of parliament, say a State Owned Enterprise Holding & Management Company (Establishment) Act, and place it under all regulatory requirements in force for the time being. Appointment of the board members can follow the procedure as adopted in KP Ehtesaab commission. A joint search & scrutiny committee of the parliament can be mandated to find and appoint the board members for the holding company and the board subsequently can appoint CEO of the company. The company so created shall be given complete freedom to any investment, divestment and any other business decision completely independent from any state institution/office and subject to the regulatory requirements in place.  Taking the “Past reserve protection”  philosophy as in Singapore’s constitution, such a protection be placed on assets of the company so created and on its subsidiaries to prevent any direct or indirect encroachment from the current govt in office.  In this act shall also empower the company so created to have power to appoint board members to its subsidiaries and any such power essential to ensure efficient and transparent corporate governance in all subsidiary companies. The same act shall clearly define and place the limits to the relationship of Govt as sole shareholder and the holding company as some second layer of security exclusively being the Public money at risk.

Another act of parliament, say State Owned Enterprise Holding & Management Company (Taking over enterprises/companies) Act can be introduced to transfer existing companies under various ministries/divisions under the management control of the newly established holding company. This act may facilitate the transfer of commercial entities along with their assets & liabilities in stage wise manner so as to have reasonable time for holding company to prepare for the new administration. Although current Companies Act have provisions on relationship of holding company & its subsidiary, however here being a public companies the act can be more elaborative and rigorous to set out the limits to which holding company can exercise its powers in terms of assets and liabilities of the subsidiary company.

I suggest that our provincial govts can also shift to the concept of service provision or management companies to corporatize and to improve the service delivery by creating and playing in a competitive environment. Separating corporate interests of the govts can significantly reduce the chance of abuse of merit and corrupt practice thus improving overall transparent working environment and generating efficient revenue streams for the govts. I believe such an arrangement can also reasonably attract the private and foreign investments in state-owned but privately held companies and contribute to the growth of the company and economy.

Public Monies & Disclosure

Govts being custodian of the public monies are entrusted and expected to spend the monies in an efficient and transparent manner ensuring level playing field for all the market players who intend to engage in business with Govt entities. Govt shall proactively disclose the information about its engagement in matters involving spending of public money. Public procurement rules aim to ensure that govt engages contractors in a level playing manner. Right to information laws have been enacted to grant access to such information even if the public officers are reluctant to proactive public disclosures.

Recently there was a report that KP Govt purchased medicine at prices more than 50% lower than that of the Punjab Govt. The conclusion was drawn by Punjab Pharmacists Association after a comparison of purchase prices of Punjab & KP. I tried to find the approved rates of the medicines purchased (or selected to purchase) in bulk by Punjab & KP Govts from respective health department websites to have a more closer look in the difference. I could find only technical evaluation of the selected medicine by the Punjab govt whereas KP Health Department has uploaded the final price list for each product & the provider.

Based on the information available on KP website, any person can select a particular medicine type, note the price paid by govt and can check the selling price at his nearest pharmacy shop to compare if Govt is paying more for the same medicine or less. Providing easy access to the correct information in matters involving public money  and having ability to independently verify the market value attracts more accountability and scrutiny to the govt spending. I strongly suggest readers to have a self-test and check the prices against the given rates of govt in market. Active engagement of citizens to audit & verify govt data will keep the govt to continue and focus the provision of correct info. In similar manner Punjab’s School data is made public and that portal developed by PITB invites public to contest their data. Such an exercise increases the credibility of the govt data and public trust in state institutions.

Another program by KP Health Department involving massive amounts of public money was initiated as “Sehat Insaf Card” under “Sehat sahulat program” with aim to provide free health service to low income households. This program is now covering all districts of KP and nearly 51% of the KP population will be able to have free treatment in any registered hospital through KP. Some districts have received cards while distribution is in progress in other districts and is expected to complete by end march.

Govt has released massive amount of information on http://www.sehatsahulat.com.pk/ about this program. Given the nature and quantity of information, there is great opportunity for public health and data scientists to carry out their research. Data is available for each registered household with the union council address and is searchable by district. I suggest this search ability be further brought down to the level of Tehsil and Union council for a quick search verification of a beneficiary. Card Nos and Contact numbers with village names are also provided for each beneficiary of the scheme. While there might be an abuse of such data yet there is an opportunity to verify if card have been distributed to real and well deserved people or just to dead people and on political preferences. In Pakistan we often have observed dead people come for votes and people get salaries form govt while working abroad. So here is an opportunity for people to verify if govt is providing correct data or fabricated data.

There are summary reports available for total visits and admissions for each district by gender type and case related like surgical, delivery, C-Section etc. This website provides reports for each health facility under this program where you can find the number of patients for any given period of time by four different age groups, gender, disease type, length of stay in hospital, bed occupancy in the facility, types of procedure performed on them, cost of a procedure and total income of a health facility under this program.

The insurance provider, on same website, provides reports for each district giving the coverage of patients by gender type, age group, admissions by treatment and facility type (Govt vs Pvt) and finally the treatment costs claimed by public facilities and private facilities.  Such a comparative report, publically available, will be an important tool in public to put a pressure on public health facilities to improve their quality and service against private facilities within same districts. It is important that how health department will be using these reports as a matter of accountability for its district health staff esp when there will be a clear comparison of govt & pvt facilities available.

As these 2 projects involve a big chunk of public money, it is appreciated that the department has made all these information public proactively and has attracted more scrutiny. Likewise, govt can earn more public trust if its other departments also proactively disclose more and more info and ensure that correct and update info are released to public.