Restructuring government

WE continue to operate old systems of governance, with the government performing functions beyond what should be its staple role. The trend has been for structures to grow, despite many tasks having become redundant. And this, despite the challenges of rapidly changing technological and global environments and the increased presence and capability of the private sector to perform various roles more efficiently.
Although enough lessons learned have suggested that empowered and truly representative local governments deliver basic social services, we persist with bloated federal and provincial governments.
Even after the 18th Amendment, under which several functions were transferred to the provinces, we still maintain a large federal government with 43 divisions, an additional 400 attached departments of 650,000 personnel, and autonomous organisations with 520,000 also occupying prime, poorly utilised commercial spaces. Excluding the cost of losses of, or subsidies to, the autonomous organisations and the opportunity cost of office and residential buildings, over Rs750 billion is spent annually on functions actually reassigned to the provinces, on intra-provincial schemes and on agencies and activities whose cost should be shared by the provinces.
Drive down Blue Area in Islamabad and one can see government-funded organisations with exotic names, but with few in government knowing what functions were mandated to them, let alone those they actually perform. Any reduction in divisions (and associated departments) is opposed by politicians and bureaucrats; the former seek ministerial positions and the latter secretaries’ positions.
The case of the provincial governments is even more disconcerting. Not only are they doling out all kinds of allowances to those on their payrolls, they have also become employment bureaus, engaging armies of unskilled peons, chowkidars, drivers and clerical and supervisory staff, while lacking personnel with adequate domain knowledge. We find, for example, that Punjab, which had 22 departments in 2000, now has 48! One outcome is that the pension liability of the centre and provinces, excluding such liabilities of other state-sponsored entities such as public universities, has crossed Rs30 trillion.
This structure has contributed to the state’s huge footprint on the economy. According to a PIDE study, it is almost 67 per cent of the economy, with 122 regulatory agencies constraining economic activity and raising the cost of doing business by operating excessive, obsolete regulatory frameworks with little clarity on why an activity needs control.
Hence, the time has come to restructure government for improved service delivery; this requires the government’s role to be redefined, which would determine its size and skill mix. The best way to explain this is in terms of what the government should neither do nor pay for (for example, Utility Stores, banks, and airlines), should do and pay for (for example, defence, foreign policy, taxation and monetary policy, justice, law and order, natural monopolies, and physical and social infrastructure that the market and private sector cannot provide), and should pay for but not necessarily do it itself (for example, many social and economic services).
Aligning structures and skillsets with such an objective would depend on the type of basic social and economic services that can be delivered efficiently and effectively, directly or through outsourcing by the appropriate government tier. This would need a combination of reorganised structures, delegation of administrative and financial powers and re-engineering of business processes and work-flow through simplification and automation, with each tier of government and relevant ministry independently designing the performance of its functions through its own employees, having its own pay structure and harnessing a growing range of more efficient, cost-effective local outsourcing options.
Rejigging the government’s role and recasting the Constitution for a new federal framework (proposed earlier) to address institutional fragmentation and worsening trust deficit will require Islamabad’s size to be cropped by two-thirds. Its role should be restricted to establishing a strategic direction, policymaking and standard setting in collaboration with the provinces through an effective Council of Common Interests. This thinning — mainly Grades 1-16-because of their sheer numbers and share of salary outlay — should be complemented by a) the surrender of all vacant posts, and b) finalisation of attached departments, agencies and autonomous organisations to be liquidated/ wound up (because of redundancy). Only a handful of autonomous organisations can be privatised — also because some would become monopolies without unbundling or retooling of the delivery mode of goods and services.
For the two proposals above, we should consider retiring those who have completed 25 years of service (protecting pension entitlements), while banning fresh recruitments. If it becomes politically difficult to retire them, they should be placed in a ‘surplus pool’, thereby saving on rent, utilities, maintenance of cars, etc. A similar exercise needs to be conducted for the provincial governments.
Reducing the number of agencies and personnel, complemented by digitalising and modernising governance systems and their capacity will help in the diminution of the various layers of processing approvals for policy actions, and conducting activities and transactions. This would improve resource and functional allocations and administrative efficiency, leading to lower management costs.
The defence establishment needs to shed its non-core and commercial activities — NLC, FWO and projects of the Fauji Foundation and Welfare Trust. There is also a need to pare down conventional forces and review other non-combat expenditure, such as the continuous upgrading of a wide range of posts to accommodate the growing numbers of officer cadre.
Today, there are 1.4 million military-related pensioners, with 32,000 retiring each year, absorbing close to three-fourths of annual federal pension allocations. Soldiers and even medical personnel such as lab assistants, radiologists, etc, are retired at the age of 40. With general improvement in health and nutritional status, the years of service for soldiers can be increased by four to five years and those of non-combat categories by much longer, within an appropriately designed contributory pension scheme.
The writer is a former governor of the State Bank of Pakistan.
Published in Dawn, October 11th, 2024