Business Corruption

According to the US Department of State 2011, the procurement process in Pakistan is improving but still cases of corruption are reported. For instance, the Transparency International Pakistan National Corruption Perception Survey 2009 reports that the cost of corruption in procurement is about 15%. The competitive bidding process sometimes excludes many potential bidders by last minute publicity or by prequalification criteria that exclude bidders and thereby limit the competition. A major flaw in the public tender bidding process is the absence of an independent complaint handling system. According to Global Integrity 2010, companies found guilty of irregular practices are often not effectively stopped from participating in future bids.

Companies are recommended to use a specialised public procurement due diligence tool in order to mitigate corruption risks related to public procurement in Pakistan. See more on public procurement under 'Public Anti-Corruption Initiatives' in the Initiatives section.

Political Corruption

Corruption is widespread in the public procurement process in Pakistan. According to a July 2010 news article by Sify, the chairman of Transparency International Pakistan claims that more than USD 4 billion is lost due to corruption in procurement alone and can be saved annually, if the Pakistani government implement the Public Procurement Rules 2004 in the federal government, armed forces and all the four provinces, corporations and authorities.

The World Bank, DFID, and the Asian Development Bank are involved in modernising the procurement system in Pakistan, and although transparency is improving, the system still exhibits irregularities. These flaws include inadequate bidding documents, insufficient response time for bidders, prequalification used as a measure to limit competition, price negotiations and a lack of an independent complaint handling system, as reported in the US Department of State 2011.According to the same report, in the past two years, public procurement in Pakistan has been plagued by political influence, corruption, non-transparency and long delays in bureaucratic decision-making.

According to the Transparency International Global Corruption Report 2008, in August 2000, charges were made against several army, naval and air force chiefs on allegations of accepting kickbacks in several defence contracts. Consequently, the naval chief was required to repay USD 7.5 million.

Pakistan Steel Mills (PSM) was privatised in 2006, however, the sale was non-transparent and suspicious because it was sold by General Musharaf at PKR 21.58 billion, despite that it was estimated to be worth PKR 72 billion. Later in 2006, the Supreme Court of Pakistan declared that the privatisation of PSM was void because of major irregularities in the process, as reported by Transparency International Global Corruption Report 2009.

See more on public procurement under 'Public Anti-Corruption Initiatives' in the Initiatives section.

Frequency

World Economic Forum: The Global Competitiveness Report 2011-2012:
- Business executives give the diversion of public funds to companies, individuals, or groups due to corruption a score of 3.0 on a 7-point scale (1 being 'very common' and 7 'never occurs').

- Business executives give the favouritism of government officials when deciding upon policies and contracts a score of 2.6 on a 7-point scale (1 being 'always show favouritism' and 7 'never show favouritism').

Transparency International Pakistan: National Corruption Perception Survey 2010:
- The tendering and contracting sector is ranked as the least corrupt public sector, out of ten assessed public sectors in 2010.

- Of the factors perceived by household respondents surveyed to be responsible for corruption in the tendering and contracting sector, 15.5% replied lack of a lack of accountability, 13.5% replied lack of transparency and 12% replied discretionary power.

- The average bribery per act paid by a household respondent was PKR 39,143.

The World Bank & IFC: Enterprise Surveys 2007:
- 30% of companies expect to give gifts to secure a government contract.