Falcon26
SENIOR MEMBER
- Joined
- Dec 24, 2015
- Messages
- 2,753
- Reaction score
- 3
- Country
- Location
Taimur Saleem Khan Jhagra is a rising star who gets Pakistan’s deeply flawed and unsustainable structural problems. He’s a former partner at McKinsey, one of the foremost Managment consultancy firms in the world. Taimur is the brains behinds KP’s universal health insurance policy and has improved the province’s tax collection capacity in a very serious and significant manner. In this interview with the Business Recorder, he discusses some of the challenges that ail Pakistan economy and what it will take to resolve them. I highly recommend this interview to anyone interested in understanding Pakistan’s current economic and policy problems.
@JamD This interview also touches on waste, and other issues we discussed on another thread yesterday.
An Interview with Taimur Saleem Khan Jhagra, Minister for Health and Finance, Khyber Pakhtunkhwa
Q- What is your view on the take that our policymakers made some mistakes while designing the 18th Amendment. What changes are needed in the 18th Amendment in order to make this model sustainable?
TSJ : I think on the 18th amendment, you'll find a lot of views. You'll even find views within the party and perhaps you'll find issues based on where you are sitting and how you're looking at it. I believe that you can make any model work. You can make a unitary state work and you can also make a devolved state work. Once you choose a model, you need to ensure that the mechanisms required to make it work out there.
I'm personally a big fan of the 18th amendment. I think there are, minor or less minor things that can be improved and I think on that people can have different views. I certainly think, for example, during this pandemic, it was important and it is important that there be a legal mechanism for the country to respond in an integrated manner to an emergency.
But I also think that the devolution in the 18th amendment has brought huge benefits aid by bringing autonomy of action. It means that the country doesn't need to move at the pace of the slowest common denominator. And I think, that is hugely important and misunderstood. For example, today, the 1st of November, is the day that 7 million people in the SWAT Valley and in the Malakand division, get access to universal health insurance.
Within the next 90 days. Right. Anyone who is a citizen of Khyber Pakhtunkhwa regardless of where they live in the country are going to get universal health insurance. I think the benefits of that and the implications of that in the healthcare sector are huge. However, imagine if we had to take this decision for the entire country, and you had to get four provinces, two other federating units and the Federal Government agreed on this. We would not have been able to move at the pace at which we did. So, I think that this, and there are countless other examples like this are the sort of benefit that the 18th amendment brings. You ask a very important question about the fiscal challenges that it presents.
Typically, people talk about the transfer of funding from the Federal Government to the provinces. Remember that at the time when this was done, the intent was that, the revenue collection capabilities of the state would be improved considerably. Unfortunately, that is something that has never happened.
I believe that if we really need to solve the fiscal problems and the fiscal challenges that we face, I think you have to think out of the box in terms of how you create more fiscal space working together and that has very little necessarily to do with the 18th amendment.
Let me tell you a few areas, first the cost of government and one area where we're working together is to do with coordination is pension reform. The pension liabilities across the four provinces and the Federal Government exceed a trillion rupees a year. Almost 20% of government spending.
I can tell you that in KPK, the pension budget this year is 86 billion. Just 15 years ago it was less than a billion and about 1% of the budget. Today it is also about 20% of spending but we don't have a solution. Pakistan is one of the only countries in the world with an unfunded pension program, which actually puts the future pensions of all those hard-working civil servants of senior and junior grades at risk.
That is something that you have to solve. This is the sort of problem that is easier to solve through coordination and collectively and can release in the medium term, up to a trillion rupees of, of spending potential annually, as well as secure the pensions of all the civil servants for the future if we go to a funded program
If you look at other areas such as the size and scale of government, the sustainability of government and the value of money of resources. If you look at the structure of government, it is built through layers and layers of hierarchy from a secretary to a special secretary, to additional secretaries, to joint secretary, to deputy secretaries, to section officers, every person, and every layer has multiple support positions such as stenographers, senior clerks, junior clerks, like what we call class four employees. So far one productive position drivers. Every government car today has to have a driver employed and what that means is that the state has become the giver of direct employment and what this does is that if I obviously invested a rupee in economic value generation, it will give back dividends and benefits that are going to create direct and indirect jobs. However, If I'm going to spend the same Rupee on hiring another person in government, no matter how many people I hire in government the government is only going to represent, say 10% of the job market at most. 90% or more will always be employed in the private sector, but by not investing in the private sector we are never going to be able to unleash the job creation capability of the economy.
Then we're going to have to look at the size of government and the future sides of government, because we obviously have to protect the livelihoods of those employed by government today. And we ought to, and we will. But can we afford a model where government still hires thousands of stenographers a year. I didn't even know when I came to government what a stenographer is. It's someone who takes notes in shorthand so that they can type it up on a typewriter. But typewriters have been an extinct object for now for about 20 years, if not 30 but we still don't change the structure of government.
Procurement is the third area. We estimate that just in Khyber Pakhtunkhwa alone, savings from streamline procurement could be between 20 and 40 billion rupees a year which is about 20 to 40% of our development spending. I estimate that across the country, those savings annually could be around 500 billion Rupees a year.
If we adopt modern practices on how to centralize procurement, how to do framework contracts, how to streamline processes so that, there is lesser leakage. All of this is about operational transformation of the government. That will release the fiscal space to ease the burdens that we need as opposed to constitutional changes.
There is also a role for increased revenue generation where both the Federal Government and provincial governments can and ought to do more. We increased sales tax on service collection in the last year by 65%, despite the COVID pandemic and I believe that there is obviously still huge untapped potential that we can get into year on year, phase by phase.
But if we work collectively, understanding that there is a need both to cut completely unnecessary costs, and increase the overall size of the revenue pie available to the country, I believe to a large point that the discussion on the fiscal transfer distribution within the 18th amendment will become a moot point because if we keep on fighting over who gets the greatest share of the pie, and if every federating unit and the Federal Government keeps on claiming that what we don't have is enough and it is true that what we don't have is enough then surely the issue is the size of the pie, not the distribution
@JamD This interview also touches on waste, and other issues we discussed on another thread yesterday.
An Interview with Taimur Saleem Khan Jhagra, Minister for Health and Finance, Khyber Pakhtunkhwa
Q- What is your view on the take that our policymakers made some mistakes while designing the 18th Amendment. What changes are needed in the 18th Amendment in order to make this model sustainable?
TSJ : I think on the 18th amendment, you'll find a lot of views. You'll even find views within the party and perhaps you'll find issues based on where you are sitting and how you're looking at it. I believe that you can make any model work. You can make a unitary state work and you can also make a devolved state work. Once you choose a model, you need to ensure that the mechanisms required to make it work out there.
I'm personally a big fan of the 18th amendment. I think there are, minor or less minor things that can be improved and I think on that people can have different views. I certainly think, for example, during this pandemic, it was important and it is important that there be a legal mechanism for the country to respond in an integrated manner to an emergency.
But I also think that the devolution in the 18th amendment has brought huge benefits aid by bringing autonomy of action. It means that the country doesn't need to move at the pace of the slowest common denominator. And I think, that is hugely important and misunderstood. For example, today, the 1st of November, is the day that 7 million people in the SWAT Valley and in the Malakand division, get access to universal health insurance.
Within the next 90 days. Right. Anyone who is a citizen of Khyber Pakhtunkhwa regardless of where they live in the country are going to get universal health insurance. I think the benefits of that and the implications of that in the healthcare sector are huge. However, imagine if we had to take this decision for the entire country, and you had to get four provinces, two other federating units and the Federal Government agreed on this. We would not have been able to move at the pace at which we did. So, I think that this, and there are countless other examples like this are the sort of benefit that the 18th amendment brings. You ask a very important question about the fiscal challenges that it presents.
Typically, people talk about the transfer of funding from the Federal Government to the provinces. Remember that at the time when this was done, the intent was that, the revenue collection capabilities of the state would be improved considerably. Unfortunately, that is something that has never happened.
I believe that if we really need to solve the fiscal problems and the fiscal challenges that we face, I think you have to think out of the box in terms of how you create more fiscal space working together and that has very little necessarily to do with the 18th amendment.
Let me tell you a few areas, first the cost of government and one area where we're working together is to do with coordination is pension reform. The pension liabilities across the four provinces and the Federal Government exceed a trillion rupees a year. Almost 20% of government spending.
I can tell you that in KPK, the pension budget this year is 86 billion. Just 15 years ago it was less than a billion and about 1% of the budget. Today it is also about 20% of spending but we don't have a solution. Pakistan is one of the only countries in the world with an unfunded pension program, which actually puts the future pensions of all those hard-working civil servants of senior and junior grades at risk.
That is something that you have to solve. This is the sort of problem that is easier to solve through coordination and collectively and can release in the medium term, up to a trillion rupees of, of spending potential annually, as well as secure the pensions of all the civil servants for the future if we go to a funded program
If you look at other areas such as the size and scale of government, the sustainability of government and the value of money of resources. If you look at the structure of government, it is built through layers and layers of hierarchy from a secretary to a special secretary, to additional secretaries, to joint secretary, to deputy secretaries, to section officers, every person, and every layer has multiple support positions such as stenographers, senior clerks, junior clerks, like what we call class four employees. So far one productive position drivers. Every government car today has to have a driver employed and what that means is that the state has become the giver of direct employment and what this does is that if I obviously invested a rupee in economic value generation, it will give back dividends and benefits that are going to create direct and indirect jobs. However, If I'm going to spend the same Rupee on hiring another person in government, no matter how many people I hire in government the government is only going to represent, say 10% of the job market at most. 90% or more will always be employed in the private sector, but by not investing in the private sector we are never going to be able to unleash the job creation capability of the economy.
Then we're going to have to look at the size of government and the future sides of government, because we obviously have to protect the livelihoods of those employed by government today. And we ought to, and we will. But can we afford a model where government still hires thousands of stenographers a year. I didn't even know when I came to government what a stenographer is. It's someone who takes notes in shorthand so that they can type it up on a typewriter. But typewriters have been an extinct object for now for about 20 years, if not 30 but we still don't change the structure of government.
Procurement is the third area. We estimate that just in Khyber Pakhtunkhwa alone, savings from streamline procurement could be between 20 and 40 billion rupees a year which is about 20 to 40% of our development spending. I estimate that across the country, those savings annually could be around 500 billion Rupees a year.
If we adopt modern practices on how to centralize procurement, how to do framework contracts, how to streamline processes so that, there is lesser leakage. All of this is about operational transformation of the government. That will release the fiscal space to ease the burdens that we need as opposed to constitutional changes.
There is also a role for increased revenue generation where both the Federal Government and provincial governments can and ought to do more. We increased sales tax on service collection in the last year by 65%, despite the COVID pandemic and I believe that there is obviously still huge untapped potential that we can get into year on year, phase by phase.
But if we work collectively, understanding that there is a need both to cut completely unnecessary costs, and increase the overall size of the revenue pie available to the country, I believe to a large point that the discussion on the fiscal transfer distribution within the 18th amendment will become a moot point because if we keep on fighting over who gets the greatest share of the pie, and if every federating unit and the Federal Government keeps on claiming that what we don't have is enough and it is true that what we don't have is enough then surely the issue is the size of the pie, not the distribution
