The Effect of Nepotism
Corruption is the main side-effect of nepotism. The moment we negate merit as the only touchstone for selection, the seeds of corruption are well and truly sown. In developed countries democracy ensures selection, appointment and/or advancement on the basis of merit. Unfortunately the worst form of nepotism was practiced by our so-called “democrats” when in power. Democracy is meant to ensure that merit alone is the arbiter of success but our “democracy” was not accountable and when a system is not accountable it is to be expected that patronage will be rampant on a wide-scale. Because of this lack of accountability in Third World countries the situation is perverse, democracies tend to reward favourites, that in turn makes the system tailor-made for corruption. When any authoritarian rule substitutes democracy, the major reason usually given is to stamp out the nepotism and corruption. In the initial euphoria of correcting wrongs, an authoritarian system does fall back on merit. Only when things settle in place the client-patron relationship takes over and things go back to being far worse than in any democracy.
How have the institutions of this country been corrupted? Mainly by installing favourites without merit, in decision-making positions. Those unworthy of selection then proceed to run riot in the institutions at all levels, bending the rules to accommodate their favourites in turn, in time the whole institution becomes rotten to the core. Lacking ability or management capacity, those without merit have as their primary aim and function the lining of their own pockets and/or living high at the expense of the institutions. Obviously this cannot be done without ensuring the appointment of hand-picked cronies in key decision-making slots. A cycle of nepotism is created which deepens the corruption psyche. Even if the person appointed without merit is not corrupt, which happens from time to time, the lack of efficiency, knowledge, experience, managerial capacity, etc encourages others down the line to indulge in corruption, secure in the knowledge that ignorance and incompetence of their superiors will prevent any discovery, a built-in inferiority complex preventing those in power from exercising their authority as it should be used.
Late Zulfikar Ali Bhutto tried to briefly bring merit of sorts into the selection process, creating a “talent pool” based on extensive checking of qualifications and the testing of abilities. This resolve soon faded out in the need for rewarding political favourites, a form of patronage perfected in vicious form by every political government thereafter. Since the PPP had nationalised industry and business, the “talent pool” was sorely needed so that professional excellence would ensure continuity and profitability. In the face of political expediency, this experiment faded out and we returned to a gross form of nepotism. By putting men (and sometimes women) without merit in top slots in government and semi-government corporations, their ultimate destruction as a viable economic entity was ensured. There is a vast difference in the skill and dedication of entrepreneurs running their own business and the expertise and commitment of managers appointed mainly without merit. Almost all the nationalised units collapsed under the burden of corruption and management. To this unmitigated disaster another yoke was added, the over-staffing of units by creating jobs when they did not exist, putting additional pressure on revenue streams.
Disaster became manifold with the nationalisation of the financial institutions. Whereas corruption had previously remained a product of crooked managerial initiative in procurement or sales in nationalised industry, the managerial control of financial institutions by the unscrupulous presented a unique opportunity of pocketing hard cash by the fastest means, the giving over of unsecured loans for dubious purposes to dubious people, eventually even writing off these loans. Whereas “loan default” in any business is to be expected, wilful loan default i.e. those who took loans from financial institutions without any intention of ever paying it back, became a common occurrence. Initially this was the prerogative of political appointees in the banking system, professional bankers soon joined in wilfully into the loot, making the defaults much more sophisticated and difficult to investigate. Suffice to say that our nationalised commercial banks (NCBs) and development finance institutions (DFIs) were the subject of virtual highway robbery, the likes of Younus Habib, Younis Dalia etc becoming bywords in the lexicon of corruption in the banking industry. Most of the NCBs and DFIs were looted but Allied Bank (ABL) went one better as the banking professionals who took over managerial control in the name of “employee ownership” looted this financial institution at will. Each succeeding managerial group in ABL outdid the previous lot, the present President ABL and his “gang of four” including some cronies way past their retirement age, fiddling openly and with relative impunity with employees shares and the loan portfolio. Since ABL had been “privatised” in a controversial employee stock option plan (ESOP), ABL senior management remain untouchable, outside the purview of the Ministry of Finance. That shows up the dilemma of Shaukat Aziz as Finance Minister in stark relief, is he master of his own house or does he find it more expedient to pander to motivated interest, bending with the wind?
Earlier the son of a man who has been adjudged as Pakistan’s biggest tax evader was taken on the Economic Advisory Board (EAB), he was labelled as a budding entrepreneur! Another case in point, the rumour of the imminent appointment of Chairman NDFC. The man supposedly earmarked for the slot is a classmate friend of a couple of eminent personalities in the senior hierarchy of the present military regime. Finding his banking career going nowhere in 1991, he opted into business in the United Arab Emirates (UAE), managing a textile unit as a shareholder partner. This textile factory went into default because of bad management practices and questionable financial decisions. UAE is not as friendly to crooked practices (and bankers) as Pakistan. In an amicable settlement the NDFC hopeful was cautioned not to darken Dubai’s doorstep ever again. For reasons beneath one’s dignity to disclose, this man was rehabilitated as a banker in 1998 after a hiatus of 6 years by Shaukat Tarin, a person he subsequently bad-mouthed at every available opportunity thereafter. It is mind-boggling that an independent decision-maker like Shaukat Aziz, who does not owe his present position to anything but merit, would allow such outright nepotism to take place under his nose, but then he has not shown any resistance in refusing to employ as advisors “honest people of integrity” who, when they were in the Ministry of Finance, kept four cars, one from each bank, for their personal use. One does not believe that the “friends” in uniform of the NDFC hopeful would allow such an aberration to take place if they were aware of the real facts, however whenever recommending a friend it is incumbent on them to lean over backwards to ascertain the real facts before trying to foist such an abnormality on a major DFI.
Other than the direct consequences of appointing someone without merit to such a post, which is tantamount to fostering corruption, the indirect consequences are also many. It demoralizes those with merit but without influence, causing frustration, apathy and loss of efficiency in their service to the institution. In the general public it spreads dissatisfaction because of the variance between word and deed, after all the military regime’s entire success is based on the public believing its sincere intent. If members of the senior hierarchy are perceived by the masses at not practicing what they collectively have been preaching as a regime, the intelligentsia will be skeptical about their intent and fair play, without that solid credibility no system can ever succeed. As such the military regime must be like Caesar’s wife, what to talk of doing wrong, they must not be seen to be doing wrong.
Unless we make every appointment on merit and merit alone in the government and semi-government corporations, particularly in financial institutions, we shall have cause to wonder if things are really different after Oct 12? In the face of business as usual, people will begin to ask, was Oct 12 necessary? As an incurable optimist who believes that the present military regime has sincere intent, one takes the Chief Executive at his word about our pointing out possible mistakes which he would rectify. The functionaries of our military regime must refrain from bending the rules to suit personal preferences, only then will they go a long way in fostering the corruption they set out to eradicate on October 12. Unless one can control one’s urges towards nepotism, we shall never be able to control corruption.
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