Confronting the Status Quo: Pakistan’s Uphill Battle With Bureaucracy

As Pakistan’s new government grapples with the risk of default, it is eyeing reforms to turn the country’s loss-making state-owned enterprises (SOEs) into profitable ventures. However, the bureaucracy appears to be a key hurdle in this push for change.

The government’s effort to support the the transition is facing resistance from the bureaucrats who manage these institutions.

The stagnant culture within Pakistan’s bureaucratic institutions has led to resistance to change, with bureaucrats fiercely defending their operational jurisdictions, complicating procedures, and prioritizing short-term, ad-hoc solutions over long-term, sustainable change. For instance, the government’s efforts to implement a paperless work environment in the bureaucracy have been thwarted, as many bureaucrats see it as a threat to their positions of authority.

The bureaucrats arguably have a vested interest in maintaining the status quo. They control billions of dollars’ worth of assets in real estate, and other ventures, and view the government’s reform efforts as a threat to their lucrative revenue streams.

This is evident in the case of the Federal Board of Revenue (FBR), where the bureaucracy has refused to cooperate with the government on data sharing and efficiency-enhancing proposals. Sources claim that contracts awarded to international consulting firms by the government for the FBR reform process have been met with disdain.

Prime Minister Shehbaz Sharif recently threatened to outsource the entire tax collection system if the tax collecting goal was not achieved by the FBR. “Give me some plan,” he told the FBR at a ceremony honoring the agency’s officers.

“If you force me, I will probably go to the point where I have to outsource it,” Sharif warned.

The situation is similar with Pakistan International Airlines (PIA), Pakistan Steel Mills, and Pakistan Railways, which are a massive burden on the country's economy.

It is important to note that Pakistan has been trying to privatize PIA for more than a decade, but it has not yet reached a stage where PIA is ready for investors’ interest and bidding efforts. For years, the bureaucracy leading PIA and their networks of unions have ensured that they retain even operations like running the flight kitchen and handling cargo and luggage. They see the airline as an agency for employment purposes rather than a business aimed at profits.

It’s unclear when the government will be able to convince investors that Pakistan Steel Mills and Pakistan Railways are worth investing in, as little more than the announcement of privatization intentions – which haven’t yet encountered pushback from bureaucrats – has been done.

In addition, Pakistan’s electricity industry is the country’s biggest source of debt, with all electricity distributors and producers under state ownership and managed by bureaucrats. Seeing no opportunities for promotion, the institution’s bureaucrats have for decades utilized it as a means of obtaining financial gain through accepting bribes and permitting power theft and other forms of corruption.

Due to the dire situation, the interior ministry arrested electricity distribution company (DISCO) officers in April. To curb corruption, the federal government has decided to appoint officers from the Federal Investigation Agency (FIA) and other intelligence organizations to positions within the DISCOs.

The Pakistani state has a long-standing practice of taking on the task of managing all firms directly for the sake of maximizing control – while at the same time ignoring the corruption of its bureaucrats. The state’s recent push to streamline service provision via privatization is evidence that it has been performing a dismal job of providing public services itself.

A logical first step would have been to try to reform the bureaucracy, something that hasn’t been tried despite announcements to do so by every government in the past 20 years. Governments, which may view an inefficient and wasteful administrative system as a tool to further their own agendas, haven’t genuinely engaged in such efforts.

At this point, the government is forced to close the door on the corruption of administrative services and bureaucrats.

Pakistan is faced with a dilemma: While it cannot afford to let its debt spiral out of control, it also lacks a workable plan to generate the private sector’s interest in its extensive network of enterprises.

Pakistan is undoubtedly facing a crisis. As the government pushes forward with its reform agenda, it faces an uphill battle against a deeply entrenched bureaucracy that is unwilling to relinquish its power and privileges. Overcoming this resistance will be crucial for Pakistan to turn its SOEs into viable, profitable enterprises and steer the country away from the risk of default.

In the end, only time will tell whether Pakistan overcomes this enormous obstacle or collapses under the weight of corrupt bureaucracy.