Pakistan Country Profile

Public Procurement and Contracting

Business Corruption

According to the US Commercial Service 2007, 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 2008, companies found guilty of irregular practices are often not effectively stopped from participating in future bids. Most bidders caught for corruption participate again under different names. 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. The Public Procurement Regulations Authorities (PPRA) governs Pakistan's public procurement. The World Bank, DFID, and the Asian Development Bank are involved in modernising the procurement system, 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, lack of an independent complaint handling system, etc.

Public sector corporations, such as power and utilities corporations, infrastructure, as well as public works are the most affected by corruption. According to the Transparency International Global Corruption Report 2008, public works kickbacks are estimated to constitute approximately 25% of the budget. As Pakistan is a major recipient of grants and loans from international donor agencies, corruption in procurement also means that anti-poverty aid and development projects are hampered by corruption. Some projects remain unfinished because the funds were squandered on bribes, kickbacks and commissions.

According to the U4 Anti-Corruption Resource Centre, defence-related procurement and contracts are excluded from the scrutiny of the national anti-corruption agencies, but it is common knowledge that they are also corruption-ridden. The Transparency International Global Corruption Report 2008 mentions the prominent case of a retired admiral who returned USD 7.5 million to the government upon admitting that he had accepted bribes and commissions for several defence contracts.

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

Frequency

World Economic Forum: The Global Competitiveness Report 2009-2010:
- Business executives give the diversion of public funds to companies, individuals, or groups due to corruption a score of 3.1 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 2.8 on a 7-point scale (1 being 'always show favouritism' and 7 'never show favouritism').

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

- The value of a gift expected to secure a government contract is 0.74% of the contract value.