Updated: Stamp out corruption the Chinese way?

A government official slaps a spa worker with a fat wad of cash and threatens to bury her under a mountain of banknotes, if she does not submit to his sexual advances. This government official, based in Hubei province China was stabbed to death by the women who later became a national hero, seen by many as standing up to a corrupt government official.

A side effect of the Pakistan-China, deeper than the depths of the ocean, higher than the highest mountain friendship, has been the evolution of a romanticised perception of China, of its leaders and its system of governance. Popularly, it’s assumed that corruption is non-existent in China. Nothing could be further from the truth.

Speaking on the occasion of the 90th founding anniversary of the Communist Party of China, President Hu Jintao identified rampant corruption within the Party as a threat to its continued survival. He declared that fighting corruption will be a "protracted, complicated and arduous battle”.

Economists fear that China is heading for a “hard landing” in 2012. Recent statistics show that electricity production, investment, quarterly growth, retail sales and trade figures have all declined. Given the economic problems of the European Union, uncertainty regarding government spending cuts in the US; it come as no surprise that quarterly GDP growth fell to 8.1%. Now 8.1% growth may sound very good, however it is largely assumed that China needs to grow at at least 8% a year to keep a vast population satisfied and quell any signs of popular dissent.

With corruption having become a national issue and the prospects of a period of declining growth, the last thing the Chinese leadership needed was an internal power struggle. That is exactly what it got!

The purge of the populist Communist Party leader of Chongqing and politburo member Bo Xilai, was also tipped for a senior leadership post later this year, marking the once in a decade change of Chinese leaders. Bo Xilai, a “princeling”, as descendants of senior Communist Party members are known, had been ideologically challenging the current leadership, headed by President Hu Jintao and Premier Wen Jiabao. Xilai’s case has become more complicated as his wife has been arrested as a suspect in the murder of a British businessman, Neil Haywood.

The purge however has not ended with Bo Xilai exit. Others including his three brothers accused of corruption, state officials, and politburo members who actively supported him, such as the former domesticsecurity chief Zhou Yongkang and senior “princeling” generals have also had to leave their posts.

In Pakistan, many believe that the Chinese model should be imported and implemented, ignoring the fact that the very same system has created conditions of stark inequality and rampant corruption. Much like their Pakistani peers, Chinese leaders have been found carrying fake degrees, sanctioned illegal land grabs, involved in siphoning off billions of dollars offshore and perhaps most famously, have managed to sidestep a 2004 ban on newgolf courses, ushering in the construction of 600 of them since the ban came into effect.

Unlike the Chinese leadership that has admitted the shortcomings of its system and is pushing through reforms, we in Pakistan continue to believe in a “Chinese model” which is completely detached from reality. The CPC recognizes the unique challenges it faces given Chinas current international status and her domestic pressures.

So whether its Iran, China or Turkey, longing for importing a system which is perceived to be effective and corruption free but based on a fantasy does no one, especially us any good. 

China isn't corruption free. All those who romanticise an authoritarian regime that will take a hard-line, top down approach to corruption and "stamp" it out and falling prey to cheap rhetoric. It sounds good, it means well, but such talk is cheap and betrays neither an understanding of corruption, nor its incentives and how to mediate them.

It’s high time we in Pakistan did the same and appreciate that the experiences of other countries while informing our policies, are never flexible enough to be implemented wholesale. Especially, when our opinion of a country and her policies are based on a fiction, unrepresentative of reality. 

UPDATE

Talking about good governance, how is this for an attempt at displaying all the good work Chinese officials are upto. A rather poor effort don't you think? Could have got someone better to Photoshop!

Musings on PIA: Part I

I had first intended to write one detailed post on PIA. But with so many considerations and areas to discuss I decided to split it up into different posts. 

Forget the past

As a state owned and managed enterprise, PIA's fortunes have been dwindling for over a decade. Now saddled with massive amounts of debt and ever expanding losses PIA needs to change and change drastically.

However, reform in itself is very difficult. And we, as citizens and consumers of PIA dont help to make things any better. Too much national pride is invested in PIA. Open any article or editorial on PIA, and it starts off by listing down its achievements from 30 or so years ago.

The past was the past. The world was different then. Jet fuel was definitely much much cheaper. PIA faced much less competition abroad and a monopoly over domestic flights. Comparing PIA today with what it was is an unfair comparison and sets unrealistic expectations on whoever attempts to bring about change.

Feels good, but the past is the past

Pakistanis need to detach some national pride in relation to PIA and accept that its financial performance is more important than how it makes us feel about ourselves and Pakistan.

Once we have accepted that PIA's fairytale entry into the aviation market is behind us, we can perhaps move forward by setting realistic expectations of the airline.

Unrealistic expectations

Talking about realistic expectations, many of us have fallen into the trap of comparing PIA with Middle Eastern Airlines. Emirates, Qatar Airways, Etihad etc, are profitable (to an extent) and provide excellent service (depending on what your idea of excellent is). However, this comparison is unfair as all these airlines have tacit state backing, lower operating costs due to state backed infrastructure development, such as airports and support facilities, and relatively lower labour costs, especially amongst lower skilled airport, janitorial and support staff based on migrant labour. Given the dearth of rights, these labourers have no union to represent themselves in the Gulf. Not to mention their success at sucking away alot of PIA's experienced staff.

Further afield the airline market looks quite grim. Traditional European carriers are struggling and several budget airlines have shut-down. Cathay Pacific, Qantas, JAL, Singapore airlines, US airlines have all experienced persistent losses over the past decade for one reason or the other. Mainly, the impact of higher oil prices, coupled with increased competition and rising airport charges has shrunk profit margins across the globe. Airlines are making money (those that still do) on volume and attracting business and premium travellers. It is here where PIA struggles.

Challenging regional dominance? 

Emirates has been profiled as an airline which will dominate the skies. It is expected to become the long haul equivalent of mass, budget airlines, an Easy Jet or Ryan air for the world. With an excellent airport in Dubai that subsidises its headquarters and acts as a global hub, purchase of high volume Airbus A380s have all helped to get bums on seats and increase marginal revenue per passenger, even whilst facing increasing competition from Qatar Airways and Etihad.

PIA then is poorly equipped to contest the dominance of Gulf Airlines. A major source of revenue is the Indian market and the massive economies of scales flights in and out of India enjoy. Problems with Indian airlines such as Kingfisher have helped nudge customers towards Gulf airlines, while opening up opportunities for other airlines. Lufthansa for example is bullish on its prospects in India. Its brand new Boeing 747-800 will be deployed on routes serving the Indian market.

Pakistan of course is excluded from the Indian market. Which is a shame, as PIA could have become the low cost alternative, bringing customers from Europe, transiting in Karachi for say onward flights to Mumbai. But that is still a pipe dream.

To sell and move on?

Privatization is consistently offered as a solution.

Then again, as a "strategic asset" its unlikely to be sold off completely. They are too many rent seekers attached to the organization to allow the gravy train to be privatised. There is the option of a partnership or a management buy out but that is unlikely to happen. In the region this has been tried before.

SriLankan airlines management was handed over the Emirates. The relationship remained rocky and came to a dead end when Emirates refused to disembark ticket paying passengers to accommodate government dignitaries. Emirates exited the partnership and Sri Lankan airlines is back in state hands.

Given the state of the global airline market PIA is unlikely to attract buyers. Pakistan itself is not an attractive market in terms of relocating overseas senior managers. Some say that PIA has many assets but the aeroplanes are old, depreciation has taken hold, so who is going to pay a "fair" price for it? Does the PIA brand have any value that could attract a potential buyer? Debatable. Who would want to buy into an organization with strong labour unions whose demands are unlikely to be met by the state and so will pass on to any potential private buyer. Who would buy into that?

What PIA does have is property holdings and more importantly sovereign landing rights as a flag carrier. The later is where PIA's strengths lie and who else but the state to leverage it?

Karachi as a "hub"

Now a year or so ago the Turkish dream filled the papers as a possible way to "save" PIA. Turkish Airlines, with which PIA already has a code sharing agreement, would have taken over some of PIA routes while PIA would have taken over some Eastbound Turkish Airline routes.

Pakistani passengers would then transfer at Istanbul and Eastbound passengers at Karachi. Now setting aside all the claims and counter claims regarding back handed deals etc, lets look into whether Karachi has the potential to be a major hub, attracting Eastbound travellers to opt for PIA-Turkish Airlines over someone else?

One of the big advantages that hubs like Dubai have is that the have transformed transiting through the airport as an experience in itself. There is something for everyone and most importantly, people are willing to spend money while they wait to change flights. People fly Emirates because their prices are competitive, they have a wide network, a reputation for good service and the attraction of slotting in a stopover or transit through Dubai. Doha in its new airport set to open later this year is trying to do the same and Qatar Airways has started to encourage stopovers in Doha, ditto for Etihad and Abu Dhabi.

Karachi does not offer any of this. The only way the Turkish Airlines-PIA alliance could have worked to increase passenger numbers would have been to cut prices and by becoming a lost cost option. However, Kuwait Airways has been trying to do just that, yet it remains loss making.

The confidence with which the MD of PIA at the time spoke glowingly about how new traffic was going to be generated by gaining Eastbound passengers was extremely optimistic. If you are on holiday, would you really want to transit through Karachi if given the choice?

And lets not forget about the all important First and Business class travellers. Now its here where airlines make their money. Are they proper lounges available which would compete with facilities offered at other airports in the region? Is PIA part of an airline alliance which is all important for business travellers? Now one potential benefit that was not really elaborated on when the Turkish Airlines-PIA partnership was announced, was whether this would perhaps help PIA gain entry into Star Alliance, which Turkish Airlines is part off. Perhaps this partnership would have helped to improve standards of customer service at Karachi Airport. However, attracting business travellers at a hub which struggles to keep the internet going is far too optimistic.

Alcohol, a variety of dinning options, recreational areas, lounges etc, all add to the experience of flying through an airport. Why people in PIA assumed that customers would consider transferring via Jinnah Terminal Karachi is beyond me.


(The following piece in the Economist about the fate of Eastern European airlines is quite analogous to the situation PIA faces: http://www.economist.com/blogs/gulliver/2012/02/eastern-europe)

Refund policy: The end of university looting (IHC rules in favour of university students)

The following blog was originally posted on Tribune Blogs.

There was some speculation regarding who this judgement applies to. According to the lawyer involved in this case, Bilal Mirza, this applies to both public and private institutions. Essentially no educational organization can demand non-refundable deposits, at least that's how I have interpreted the order.

Read the detailed verdict here: 

Detailed Judgement: ISB HC ruling on University Fees

Largely unreported, Pakistani students earned a well-deserved victory in the Islamabad High Court last week. The High Court ruled the current policy adopted by several public and private universities to demand non-refundable deposits at the time of offering admission ‘illegal’.

This is a problem that many students are familiar with. When the admission season starts, they apply to a range of institutions and even start hearing back from a lot of them. However, they are still in waiting for their first choice to respond.

In the meantime, unsure whether they will get into their most preferred university or not, they start making deposits at other institutions; only to later gain admission where they originally wanted and losing out on the sums deposited at all the other universities.

Recently, a student named Muhammad Usman Syed filed a petition at the Islamabad High Court, holding Comsats Institute of Information Technology and the High Education Commission (HEC) as respondents. His legal representatives, Bilal Mirza and Omer Farooq of Farooq Khan & Mirza argued that the policy of holding deposits and deeming them non-refundable is against international practises, where many institutions employed a pro-rata rate of refund.

The court was found in favour of the plaintiff and the HEC has been directed to implement a fee-refund policy in universities.

The findings of the case have a major impact on students across the country, especially at this time of the year. Over the summer holidays, a large number of students will submit admission applications in local universities. While the HEC may still take some time to implement the new policy, aspiring students in local institutions should be aware of their rights during the admission process.

Now that the precedent has been set, perhaps it’s also time for private schools to look into their admission practices and the hefty deposits that they charge?

I had the chance to briefly chat with Bilal Mirza, Advocate High Court, on the details of this case. Here is the transcribed interview:

1) Could you give a brief background of what policies the universities had adopted and why the plaintiff considered them to be unfair? 

There has been a prevalent practice adopted by many universities to announce their results well in advance of top tier universities in any given field. It requires the applicant students to deposit a hefty amount, which the prospectus ambiguously refers to as security deposit and the amount is stated as ‘non-refundable’, to be paid before a deadline deliberately set just prior to announcement of admission results by top tier universities.

Therefore, a student who wishes to secure his academic future and applies to several universities, is coerced into paying this amount in order to have a back-up option in the event he/she does not qualify for the top tier university. Many students, who do eventually get admission in top tier universities, are not returned this amount on a arbitrary ground that the applicant paid this amount with full knowledge of the fact that it is non-refundable and therefore now ‘estopped’ from claiming it.

The petition was filed to challenge:

• The practice of announcing results early with a deliberately short deadline
• The non-refundable policy of universities where students are forced to forfeit a sum paid to the universities without any legitimate reason – as the universities have provided no services as consideration.

Federation of Pakistan, through the Ministry of Education and the HEC were made parties to the proceedings. This was done so that appropriate directions may be issued for formulation and implementation of rules and regulations on this matter which was previously not being regulated by the HEC.

2) When was the case filed? What was the respondent’s response to the courts proceedings?

The case was filed in early 2011 at the Islamabad High Court not long after it was re-constituted. The respondent university’s main submission was that every university is empowered to formulate, approve and promulgate its own policies. It said that the present no-refund policy has been posited in pursuance of the same. Furthermore, as the amount is stated as non-refundable in the prospectus, therefore doctrine of estoppel was attracted and applicant students are not at the liberty to claim a refund.

3) What does the verdict mean? What can universities do and not do?

The judgement passed by the Honourable Islamabad High Court has declared that there is no estoppel against law. Even if an applicant was aware of the terms of the prospectus, it is not possible for one to contract out of fundamental rights enshrined in the Constitution of Pakistan.

The no-refund policy of the universities has been declared to be against principles of natural justice. As it is exploitative, therefore it is in contravention of the tenets of the Constitution of Pakistan.

The Honourable judge also stated that is against the dictates of Islam and moral values to make claim to an amount against which no service, labour or product is given.

Furthermore, it has been emphasised that the educational institutes are expected to demonstrate parental conduct and approach towards students instead that of businessmen.

Educational institutes cannot be allowed to operate purely on commercial considerations rather main object should be to impart education with purpose of building nations.

It was also observed that the brunt of such policies is borne by the lower and middle classes, which is blatant discrimination as the right to education is not reserved only to the rich, influential and mighty ones. Also, entire families suffer due to these policies and brilliant students are deprived of education due to lack of resources to pay non-refundable security deposits.

 4) Is there any scope for this verdict to be applied retrospectively? If I was in a similar situation a year or two ago, can I claim money back?

Directions have been issued to the Ministry of Education and HEC to conform their policies with the observations made. The HEC has already adopted the dictum of the judgement by announcing that it will issue detailed regulations in compliance of the judgement and will eliminate the no-refund policies. Only expenses actually incurred by universities in processing applications etc. may be retained and the remaining amounts are to be refunded to the applicants. The judgement, unfortunately, does not have retrospective application but will benefit all students who henceforth apply for admissions in Pakistan.

5) Can this verdict be applied to other institutions such as private schools and colleges?

Yes, it applies to all public and private sector institutes.