We have painfully witnessed an erosion of public trust in different state institutions either due to the collusion of various stakeholders or the lack of capacity of our institutions to deliver the services effectively and efficiently. The common man and the business community have to face hardships and at times resort to corrupt practices in the shape of bribes and exerting undue political influence to have access to public goods and services. Big commercial and business groups try to protect their interests through the representation of their cronies in forums of decision-making and implementation. Economies and markets the world over operate under imperfect conditions which necessitate the protection of consumers in particular and the public in general against inefficiencies of government institutions and exploitation at hands of monopolies of industrial and commercial conglomerates. The government plays a vital role in establishing an effective and independent regulatory regime, which has the primary responsibility to ensure the protection of public interest that can promote confidence in state institutions.
The common man in Pakistan has suffered a lot on account of malpractices and inefficiencies of both our public and private sectors due to the failure of our regulators. At times, we have witnessed that our regulators failed to protect the interest of people while conniving with other stakeholders. Non-realisation of objectives of an efficient regulatory regime in Pakistan historically led to delays in the implementation of government decisions, distortions in prices, insufficient market competition, poor quality of goods and services and weak management of businesses which had a direct bearing on the economic development. A regulatory regime represents an authority, which has the responsibility to operate at either sectoral, national, or international levels and has the authority to influence, direct, limit, or prohibit any activity undertaken by any stakeholder operating in different sectors. Therefore, a regulator “is a person or organisation appointed by a government to regulate an area of activity” relating to different sectors. The government in Pakistan has long used economic and administrative regulations to better align public and private interests to address market failure and equity considerations. Any effective regulatory regime requires “regulatory rules and allows regulators to operate with a high degree of autonomy within rules”. The regulatory organisation must have a proper system of accountability, transparency, and consistency and must have in view the risks associated with the process of regulation, which includes “uncertainties of rules, information asymmetries, and implementation lapses”. Unfortunately, our economic and developmental activities are done under a state of regulatory capture where through manipulation of regulations the interests of wealthy and influential groups are protected.
In the context of public interest, the regulations are developed and implemented to pursue the objectives and goals, which protect the public at large. A regulatory failure is a situation where regulations that “intend to overcome market failures or to protect the public at large fail to achieve those same goals”. Another dimension of regulatory failure is a situation where “monetary or other cost of regulation does not outweigh its benefits”. If the regulatory process fails to remain efficient then the same is considered detrimental to growth and productivity, therefore, regulators need to avoid the following inconsistent policies and should ensure transparency in the regulatory process which would result in enhancing public trust in national institutions. The fundamental issue in the context of the regulatory regime is how to ward off the influence of interest groups that have been established and entrenched in regulatory bodies. The various governments in Pakistan have established regulatory bodies with expectations to protect the public interest but with time, we witnessed that these institutions weakened with narrow perspectives following the “routine bureaucratic policies and procedures” and protecting the interests of the companies and commercial groups they are supposed to regulate.
Pakistan has established an elaborate framework of the regulatory regime through regulations and the creation of hundreds of authorities relating to different sectors with the purpose to regulate the economy to protect the public interest and well-being of people. There are regulators for specific sectors and industries such as the State Bank of Pakistan and the Stock Exchange Commission of Pakistan (SECP) entrusted with responsibilities to regulate the financial and corporate sectors. The Pakistan Telecommunication Authority, Oil and Gas Development Corporation (OGDC), National Electric Power Regulatory Authority (NEPRA), Oil and Gas Regulatory Authority (OGRA), and Pakistan Electronic Media Regulatory Authority (PEMRA) are responsible to regulate oil and gas, power, telecommunication, and media sectors. Apart from specific regulatory authorities, the government in certain cases plays the role of a regulator through ministries and departments. Regulation in Pakistan is carried out through different instruments such as quotas, government approvals, issuance of SROs, licenses, NOCs, subsidies, inspections, and monitoring. These instruments enable the private sector and government agencies to run their businesses and operations responsibly and stably. However, such regulations at times create barriers and distortions for business promotion and create obstacles to achieving the objective of economic and social well-being and on the contrary promote monopolies, vested interest and market imperfections, which harm the interest of consumers and the public.
We have seen that in the recent past State Bank of Pakistan failed to take any action to regulate malpractices in the foreign exchange market and SECP could not stop inside trading of shares, which proved detrimental to the public interest. Even OGRA failed as a regulator to protect the public interest when the oil marketing companies created an artificial shortage of oil in the market and refused to reduce petrol prices. Similarly, during the sugar crisis in the country, we noticed that the ministry of industry and sugar cane commissioners were unable to regulate this sector efficiently which resulted not only in a price hike of the product but also wasting public funds on providing subsidies to the sugar producers. NEPRA has consistently failed to bring any improvement in the power sector as line losses and inefficiencies in revenue collection by the DISCOs have continued to hit the public interest resulting in the souring of circular debt to a historic level. Even our urban development authorities and cooperative housing departments have also failed the nation in protecting the interest of the common man through their ineffective implementation of regulations, which resulted in benefiting the big land mafia and depriving the people of access to decent affordable housing facilities. Even our price controlling mechanism (Committees) at provisional and district levels have failed to arrest the trend of undue price hikes in the market resultantly making the lives of the public miserable. It is abundantly clear that our regulatory regime whether sector-specific or the government (as regulator) has not performed in the best interest of the people which has eroded the confidence of the public in our system and compelled them to resort to corrupt practices to have access to their legitimate goods and services.
Weak accountability arrangements in regulatory authorities and departments have substantially contributed to the failure of the regulatory regime in Pakistan. The effectiveness of regulators largely depends on an accountability system and such an arrangement has to exist both internally as well as externally. The primary objective in designing regulations is to reduce the potential for regulatory capture in which some firms or industries benefit from regulations at expense of wider public interest and to address such concern the promulgators of regulations should ensure “fairness and appropriateness” of rules. The other dimension of internal accountability is “answerability in regulatory provisions” which means accountability of both regulators and regulated entities. The internal accountability instruments like enforcement checklists, reviews of enforcement, and ratings of inspectors, etc if properly applied could strengthen the regulatory regime. External audit by the Department of Auditor General of Pakistan is a key tool for ensuring the accountability of regulators through feedback to the parliament for legislative oversight of public sector entities. However, the public sector regulators like NEPRA, OGRA, PTA, etc recently have shown their unwillingness to share data about their decisions as regulators while insisting on sharing accounting information only. This refusal on part of these regulators is contrary to the principles of transparency and accountability. The regulators hold the view that while scrutinising the data relating to their regulatory functions the AGP would assume the role of “super-regulator” which is completely a misplaced argument. There is a clear difference between a regulatory function and an audit as they are two distinct disciplines having their independent mandates and objectives.
Over the years, Pakistan has reformed its regulatory regime but to make it more transparent, responsive and accountable further reforms in this area would ensure the protection of public interest. All governments of past and present have agendas of privatisation and deregulation with the expectation that these initiatives would lead to the efficient allocation of national resources and attaining higher productivity. However, to avoid monopolies and concentration of resources and ensure effective service delivery the state regulators would have to play a proactive role to protect the public interest through a robust regulatory regime. The regulatory authorities will have to protect the common man from the exploitation of vested groups and monopolists through checks and balances. The government will have to refrain from interfering in the functions of regulators by making them independent. The top priority of the regulators should be to protect the consumers from the exploits of monopolists. The competent staff having the requisite experience and skills of the latest regulatory measures must manage the regulatory authorities and they must be given autonomy so that their decisions gain credibility. It is high time that we should improve the functioning of the regulatory regime to protect the public interest and strengthen people’s trust in their institutions.