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By Hassan Aslam Shad and Dr. Ikram Ul Haq
Prime Minister Imran Khan’s visit to China, which concluded on 6 November, was another historic milestone in the growing geo-strategic China – Pakistan relationship. Elimination of poverty and corruption have been on top of the PM’s priority list ever since he assumed office. The China-Pakistan joint statement records Pakistan’s “evinced interest in learning from the Chinese experience and accomplishments in the field of anti-corruption.”
There are reasons for Pakistan to look China’s way. China’s rise in the 21st Century is a lesson in astute statecraft. Pakistan – China’s closest ally and most crucial strategic pivot in the South Asian balance of power – can certainly learn from China’s experiences.
China’s success in combatting corruption – a specter that haunted it for decades – was through a relentless “no-holes barred” campaign against corruption. In our view, China’s campaign against corruption, due to its sheer magnitude and size, is China’s lawfare against corruption. Lawfare – a portmanteau of terms law and war – is the use of law as a weapon of war to achieve legal, financial and economic objectives. Lawfare, or the strategic weaponizing of law to root out corruption, has been used very successfully in China.
Although efforts to root out corruption had been underway before President Xi Jinping assumed power in 2012, it is under his presidency that lawfare against corruption emerged as a robust state policy to catch what he calls: “tigers and flies” – a metaphor used to refer to the influential higher ups as well as lower rank public servants. It has been reported that the insidious cancer of corruption had reached “epidemic or even endemic levels” in China. China had to make some tough choices: either allow corruption to chew away at its economy and be relegated to the dustbin of history, or eradiate corruption from the political and social ecosystems and reach the pinnacle of global excellence. As we all know, China opted for the latter.
Pakistan today faces some hard choices similar to those China faced decades ago. The country’s economy is in tatters. Corruption has seeped deep within the body politic. Although there are no reliable statistics available on the quantum of corruption, in a 2015 report it was claimed that NAB recovered a sum of Rs. 262 billion in misappropriated funds between 2000 and 2015. The sheer size of the monstrous informal (legal and illegal) economy confirms the seriousness of the challenges faced by Pakistan. A study by the State Bank of Pakistan (SBP) titled “The Size of Informal Economy in Pakistan” estimates the total size of the informal economy of Pakistan to be around 30% of the total economy (which means that some 800-900 billion rupees are generated by the parallel economy). Black money generated through organised criminal activities is about Rs. 1300 billion which does not appear in the study of SBP but is documented in Pakistan: Enigma of Taxation. Another study—Pakistan: Drug-trap to Debt-trap—estimates the total figure of informal economy at US$ 95 billion.
For decades, Pakistan has been unsuccessfully tackling the daunting challenge of countering bribery, financial crimes, tax evasion and plundering of tax payers’ money. Indeed, time has come for Pakistan wage its own lawfare against corruption both through a relook at the current anti-corruption regime and the existing implementation mechanisms.
Pakistan is a signatory to the 2003 United Nations Convention against Corruption (the “Convention”).
According to 2017 Report of Review Group of United Nations Convention against Corruption Office, Pakistan signed the Convention on 9 December 2003 and ratified it on 31 August 2007. At the time of ratification, Pakistan declared that it does not take the Convention as the legal basis for cooperation on extradition with other States parties pursuant to article 44, paragraph 6.
International treaties and conventions are not self-executing in Pakistan but have to be incorporated into the domestic legal framework. Pakistan’s legal frame is not only derived from English common law, based on the 1973 Constitution (with amendments), but also with reference to many provisions of Sharia law.
The sources of law that deal with “corruption” as defined under the Convention include: the National Accountability Ordinance (NAO) (1999); Anti-Money Laundering Act, (AMLA) (2010); Federal Investigation Agency Act (FIA) 1974 (VIII OF 1975); Prevention of Corruption Act (PCA) (1947); Pakistan Penal Code (PPC) (Act XLV of 1860); Code of Criminal Procedure (CrPC) (1898); Extradition Act (EA) (1972); and Law of Evidence (Qanoon-e-Shahadat) Order, 1984, read with Electronic Transaction Ordinance (ETO), 2002, with reference to admissibility of evidence collected through modern devices.
Pakistan’s anticorruption watchdog, the National Accountability Bureau (NAB) was etablished in 1999 under NAO, 1999. The NAO, 1999 empowers the NAB to act against all those involved in corruption and corrupt practices, both the expressions are defined elaborately in the law. Private sector bribery is also criminalized in NAO vide section 9(a) when read together with section 14(c) – the expression “any other person”, according to the Supreme Court of Pakistan applies equally to private persons and the private sector.
Section 4 of NAO and section 2 of PPC establish jurisdiction for offences committed in Pakistan, with section 4(4) of PPC extending this to ships or aircraft registered in Pakistan. Pakistan also has jurisdiction for crimes committed by Pakistani citizens outside of Pakistan (sect. 4 of NAO and sects. 3 and 4(1) of PPC). In relation to money-laundering, Pakistan has jurisdiction when the predicate offences are committed abroad (sects. 2(i) and (q) and 3 AMLA). Pakistan recognizes an additional jurisdictional basis where the accused was working in the service of Pakistan (sect. 4 of NAO and sect. 4 of the Penal Code).
Although NAB, FIA and Provincial Anti-Corruption Establishments and the Financial Monitoring Unit (FMU) are main agencies mandated with the task of countering corruption and have been strengthened over the past few years, political interference as well as the issue of capability and efficiency is still a huge concern.
This is evident from the fact that for decades, Pakistan has been unsuccessfully tackling the daunting challenge of countering bribery, financial crimes, tax evasion and plundering of taxpayers’ money. It is strange that in a country where tax evasion is condoned every now and then (five times from 2013-18) through infamous amnesty schemes, not a single person is convicted/prosecuted for tax evasion.
It baffles the people that when the presence of monstrous black money is so apparent, why its criminal accumulation and generation is not countered, and the offenders remain unpunished. They ask whether it is on account of lack of political will, rampant corruption, ineffectiveness of law enforcement agencies, or defective laws. Terrorists and money launderers not only use hawala and hundi but exploit legal sanction available under section 111(4) of the Income Tax Ordinance which says that if anybody brings money through normal banking channels amount up to Rs 10 million (prior to 1 July 2018 there was no limit), FIA, tax authorities etc. cannot pose any question about the “source.” The banks also take cover under section 5 and section 9 of the Protection of Economic Reform Act, 1992 to withhold information from tax authorities.
The next article on this subject will provide an overview of China’s anti-corruptions laws and certain suggestions for Pakistan to consider in order to effectively weaponize its anti-corruption laws.
Dr. Ikram Ul Haq is an Advocate of the Supreme Court and Adjunct Faculty at Lahore University of Management Sciences (LUMS). Email: ikram@huzaimaikram.com
Hassan Shad is a practicing international lawyer and a graduate of Harvard Law School. Email: veritas@post.harvard.edu