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The relationship of corruption and Governance is integrated from a long time back. In case of Pakistan, the root of the relationship runs back si
continent, has affected the level of Governance to the extent of creating extremities of positive and negative. Governance which measures the e
case of Pakistan. Several factors that lead to the level of corruption to reach where it is now are ignored conveniently and the direct effect is on
and are reported to as the “black market activities”. They are referred so as because of their capability to deceive the purposeful boundaries of
The case is not a new one for the world, let alone for Pakistan, and this is a common practice in the country. All these activities are concealed fr
reported as the under-ground economy in macro terms. This is a consequence of a complex tax system, frequent cash transactions in terms of

Pakistan has experienced a relatively below par appreciation when it comes to the structure of the taxing system present, and the flexibility in it
common phenomenon as part of black activities known as “tax evasion”. This concept has given birth to corruption on a wide scale. Tax evasion
recorded in the tax net. Some sectors of the economy in Pakistan have been exempted from taxes right from the independence till date, and he
happen to be the industrialists in some cases, have taken refuge under the same exemption by reporting their income either as under the exem
not only by these means, but also by persistently supporting and influencing the policy making process so that loop holes remain to be exploit

The theoretical side of this aspect has confirmed that the persistent non-compliance towards tax laws have allowed a major portion of the econ
the economy’s activities. The graph relates to the overall black economy as a percentage of GDP and then tax evasion as part of the GDP

Source: Pakistan Institute of Development Economics, Islamabad

(PIDE Research series)

The increasing trend in the black market activities from as early as year 1974 till the start of the 21st century is in line with the theory and also p
account for a major chunk of the economy have decreased on standards year by year. The tax evasion figures also shed light upon the loop ho

Source: Pakistan Institute of Development Economics, Islamabad

(PIDE Research series)

The trend for the tax evasion as part of GDP also depicts an increasing trend which has settled to a somewhat decreasing number, but that is st
depressing signs for the economy, as this constitutes a large number in terms of population which has resided towards corruption by not giving
towards law. A major chunk of the revenue is not used for the purposes assigned for due to the fact that it goes down the drain in the form of
is being evaded in form of taxes in the country. And more than Rs 1000 billion is being utilized under the category of corruption every year.

Incidence of different types of Corruption: Petty, Middling and Grand

To understand the case for Pakistan with regard to Petty and Grand Corruption, it is important to comprehend the exact concept behind the tw
the misuse of financial sums on a small level, which often involves junior representatives in the government and the private sector. But consider
in a comprehensive manner taking the case of Pakistan. Contrary to this grand corruption refers to massive financial discrepancy at the highest
high sum involved in this form of corruption is the most important aspect to look out for along with the level of officials also a part of this. The
are analyzed at a glance. Along with this political corruption, misuse of power and nepotism are also a source of concern for the country.

The majority in Pakistan will be in a state of consensus if the scale of petty corruption is analyzed. Access to basic services in the public sector c
corruption base in the country. This is because the official net does not recognize the sort of transaction that ends up in the provision of the se
cases to the officials of the public sector in order to acquire the relevant service, which otherwise is supposed to be part of the welfare for the p
this petty bribery and petty corruption is being practiced in Pakistan. The sector wise analysis show more alarming figures in terms of corruptio
conducting the relevant research with regard to the public sector of Pakistan. The figures regarding the corruption present in the Police sector w
is the most widely interacted one on the level of population, and the petty corruption present in this sector is also the most. They have grabbed
and the state of the law enforcement authorities in Pakistan. This has certainly affected the Quality of Institution in the country and the resulting

Source: Transparency International Pakistan

Grand Corruption is also a commonly practiced phenomenon in Pakistan. The case of “Pakistan Steel Mills”, the forex scandal, the Punjab Bank s
the higher officials reported to have accepted a large financial sum, in order to strike deals in all three cases. The case was then taken up by the
procurement is another area where transparency has been a source of concern. By the dimensions that are present in the law, open and compe
to the process taking place. According to the information provided by the Transparency International, the kickbacks involved in the public proc
account for 25% of the budget in Pakistan every year.

Non-financial aspects In Pakistan

The performance is poor if the trends in corruption are witnessed for Pakistan. The time span from 1990 to 2009 show that frequent charges of
getting dissolved. If the governance indicators are analyzed over this time period, it is also evident that Pakistan has performed poorly in every
negative prospect for Pakistan in those years. The changing of governments frequently has also been identified as one of the trends of the time
that of Nawaz Sharif in 1999 has dented the accountability efforts as well. Another trend that has been witnessed from the sources (TI and CPI)
the accountability procedures present to detect the cause of corruption. Contrary to this, democratic setups showed a much more transparent
statistics are not satisfactory enough for both times to rate Pakistan a strong candidate on grounds of transparency. Nepotism and misuse of a
limitless power rested with the government has given rise to undue favors and appointment of people in public offices with no consideration g

1.4 Data vendors and corruption ratings for Pakistan

The World Bank governance indicators also revealed the shambolic performance of the national institutions of Pakistan, with ever decreasing sc
decrease in 2007 to 1.0 from 11.11 in 1998. This has also confirmed for the fact that dictator governments have affected the control of corruptio
in democratic times, the control was far more than what was present in Musharraf’s era.

General trend for corruption has shown to be an increasing one, for which some remedy has also been offered by the World Bank and the Asia
reduce corruption on a national level and especially in the public sector of Pakistan. Police, Judiciary, Customs and the revenue board have show
post the chief Justice removal incident. Other than that the overall ratings for governance in Pakistan have also decreased, and the control of co
desperate.

Moreover, the condition of the civil bureaucracy has also been way below par, with the junior officials engaging in petty corrupt practices more

1.5 Corruption in Civil Bureaucracy and Quality of Bureaucracy

The bureaucratic circle has always gained strength in this country and right from the word go has tried to keep resources under a constant surv
only a few, who continue to use it for personal gains. This has only brought the corrupt practices into play and the concept of citizen centric go

The bureaucratic administration has kept the Anti-corruption laws with full effectiveness in theory, but the execution has always been there wea
score of 68 out of 100, showing a weak sign. This is because the quality of bureaucracy in Pakistan is way below par and they have also been ke
corruption both financially and in a non-financial manner. Nepotism has been a constant attribute of the civil bureaucratic culture of Pakistan, w
Furthermore, in the financial relation, the bureaucracy has also been the face of all the powerful politicians keen to strike a deal in terms of rece
been analyzed to be more in place when the democratic governments have ruled Pakistan.

1.6 Corruption in Military establishments and Institutional quality

. In August 2000, the kickbacks involved in the famous arms deal naming Admiral Mansoor-Ul-Haq of the Pakistan Navy brought about a wide-
billion which involved submarines, fighter jets and other arms to be purchased from the French authorities. Perhaps, this remained to be the wo
had been removed on the basis of corruption itself.

In Pakistan, the continuity of the process has not been an option often exercised. Five dismissed governments on charges for corruption over th
corruption for the government. Political vendettas have been justified whereas institutional effectiveness has been side-lined. Many have raised
days without trial. This also exempts the military and the judges from this law, which further points out towards lack of equality before the law.
Reconciliation Ordinance by Musharraf for Asif Zardari and company has also given rise to corrupt practices without any checks and balances. A
been manipulated to pardon those who are powerful, and punish the resource less. Hence corrupt practices have flourished, and petty corrupti

1.6 Corruption in law and order institutions and Judiciary

Another concern with regard to corruption over the years has been the performance of the Judiciary. The long and impending cases have allow
number of times. The result is that several corruption based deals have been executed and the process has lost its competence and transparenc
overall civil society, corruption has been exposed on the national level. Whether that pertains to Judiciary or that of Public institutions, the expo

1.7 Nature and types of Corruption in the corporate sector

Tax evasion has also shown to be a consistent problem. That has been possible because of the tax and public finance administration being invo
collected. This has dried up the national revenue source and hence bribery at a small level has translated into a corruption at the most massive
commented on the accountability in Pakistan to be improving with time, but the gaps in between the chain of command are still exploitative. T
national institutions and the lack of evenly implemented reforms throughout the country. The financial reporting in the country is weak, which i
hand of this and above all, the good governance concept remains to be in theory.

The problem of corruption is across the board with the Federal and the provinces in the same context. This is hampering the growth pattern of
country, and a gap between the rich and the poor.

Literature Review

2.1 An overview of competing definitions of corruption and corruptio

countries
The usual case for defining corruption has not been a complex phenomenon and consensus is present over its various definitional forms. Accor
Corruption” written by Jeremy Pope (2000), Corruption is defined as “the misuse of entrusted power for benefit”. This can be related in terms of
the aspects in a broader sense. Another definition that comes from an authentic source to define this menace of the society is from the Commo
promoting good Governance” written by the Commonwealth Secretariat (2000) describes corruption as abuse of public office for private gain. T
word corruption, as it states that the offices which are liable for the benefit of the people in general are also a part of this dilemma if misused. T
personal interests or by political affiliations for political ventures are both covered within the parameters of this definition.

Another author who defines corruption goes along same lines to explain this concept so that all definitions that have been previously outlined
“Corruption and Political development”, explained corruption as the behavior which deviates from normal duties of a public role because of a p
discrepancies. Hence what is notable in this definition is the fact that misappropriation is accounted for a massive scale. The definition looks ge
corruption in its widest context. The common ingredient of the above given definitions is the fact that all mention about the discrepancies, mis
is evident that there is no radical differentiation in the above stated definitions of corruption and all refer to the same understanding level. Ano
public corruption as “illegal profiteering by a public agent from a position of a representative of government at any level”. This has given rise to
which is practiced at a massive scale.

Pakistan is a case nothing new when it comes to the competing definitions of corruption. Kamran Shafi (2008) and Hassan Askari Rizvi (2008) ha
manner, writing in particular about the different forms of corruption that are present in Pakistan. With special attention to Petty corruption, it h
with this type have only sought an increase with connection to time. The 1990’s era witnessed a far greater accountability measures with regard
position worsened.

The types of corruption when it comes to the developing and the developed countries are in the sharing zone. All guns have been blazing towa
or being practiced, but the fact of matter indicates that the same is the case in the developed countries but in a different manner. The World Ba
starting off with “Bribery”, which is defined as an offer in financial terms or any request for a favor in order to influence a public official. The sec
favoritism on part of the public representatives to move out of line to assist and favor their relatives and known ones. This is an extremely comm
political and social setup. The lack of proper accountability system affects the judgment criterion here and hence this sort of corruption is comm
the non-financial aspect of corruption, and again allows for more seepage in a system with many loopholes in its implementation.

Another form of corruption is “Fraud”, which is explained as the deceit that allows for the government to be cheated upon and misguided. This
according to the described context. This is a financial discrepancy, which allows for personal gains to set in so as to destroy the public entity, or
signifies the importance of “Embezzlement”, a form of corrupt practice that encompasses the stealth of public money and government owned f
persistent presence in the developing countries due to lack in the law and order existence in the region. This does not rule out the concept’s ex
The report moves a step further in determining the forms of corruption and discussed the difference between “Administrative Corruption” and
alters the implementation of any policy or policies in getting a favor which stands unqualified in the first place and the latter one pointing out t
regulations such as rescinding all licenses. Moreover, Petty Corruption and Grand Corruption are also mentioned as distinct branches of corrup
refers to the financial discrepancy at a junior level and it involves smaller sums, whereas the opposite case is true when mentioning Grand Corru
possibility is only in place when the chain of corruption leads up to high offices in the government and with high officials involved directly. This
determine whether grand or petty corruption exists. If the political class is clean and free from any type of corruption, then grand corruption is
phenomenon and vice versa.

2.2 Brief overview of theories of corruption and corruption initiatives

A number of theories that have surrounded corruption and its concerns are popular enough and explain the reality of this concept in a relative
indigenous behavior with at least one other variable other than corruption. Furthermore, the possibility of the theories to be implemented in th
understanding and the implementation process. This is because the ground realities of both the regions is entirely different when studying corr
respective manner. Hunginton, Leff mentioned about a theory concerning corruption explaining that better governments which are often on th
stiff in nature in the first place and corruption condenses red tape and rallies allocative efficiency. This theory again might not be able to survive
but the theory was put forward as a result of research in different other countries. Laffont-Tirole came up with an almost same theory but ough
The author of this theory also argued that the governments that are involved in imposing rules and regulations which are firm in the first place
efficiency is not a result of the reduced red tape in the country.

Shielfer-Veshny emphasize over the argument that governments that make the rules slack are more or less covetous and canny in attributes wh
discretion; hence allowing no red tape to flourish and the no corruption to persist. This in consequence causes the allocative efficiency to be un
glance remains to be a utopic idea when the essence of the theory is revised. Conclusion based on this idea cannot be substantiated as proof o
Another theory that depicts some sort of practicality in it explains that canny governments allow loopholes in the rules to let the bureaucrats p
red tape and then frame it to their liking which also protects them at the same time. Hence the conclusion rests upon the fact that corruption a

Anti-corruption initiatives have been taken in order to reduce the incidence of corruption in any country under consideration. The world has so
the corrupt measures being practiced in the country and resulting red tape culture being promoted. The case is similar for Pakistan as well in te
Anti-Corruption strategy (NACS) has been in place from 2002, originated by the National Accountability Bureau in the country. The report talks
Pakistan. The paper mentions about the “enforcement” approach being adopted which has allowed some hyper actions to reduce corruption in
terms of vision and install a strategic frame-work involving higher level power authorities and understanding in a comprehensive manner to acc
fight the effects of corruption so that Quality of Institutions is made effective, resulting in good governance. But for this an implementable plan
this purpose a consultative and consensus based approach is used to fulfill the strategy in terms of methodology. Mushtaq.H.Khan (2000) ment
countries and how that is interconnected with the issue of Governance. He points towards a “greed plus discretion” theory of corruption and ho
so that the result orientation depicts a different analogy altogether.
2.3 Corruption Optimality and Corruption Deterrence
Corruption Optimality and Deterrence has been dealt with in defining how different conflicts and hurdles from other bits and pieces of the soci
discrepancy does not take place without any checks and balances. Samarth Vaidya (2005) mentions about the concept of corruption deterrence
has allowed for more corruption deterrence to set in and hence play its relevant role. The author then draws out an interesting comparison bet
deterrence in the modern world of today and with special regard to the developing countries. One model depicts the media’s role in exposing
percentage of truth regarding corruption is supposed to be reported. The other setting is that of a monopolized one where there is incentive to
a false manner as well. The result that the author comes out with indicates that corruption deterrence is more in the one where competition exi
reached, beyond which the corruption is unacceptable. But that does not mean that this is true for all situations and will hold equally well in all
deterrence in an effective manner is only possible once the institution of media steps into the equation. Another important aspect to note is th
coherence when it comes to the corruption exposure and corruption deterrence.

Besley and Pratt (2002) explain the fact the two institutions mentioned above are in serious conflict at most of the times when the issue of corru
developmental phase of their national age are likely to suffer the bruises when it comes to corruption deterrence. But it is important to note he
subjugate towards any cooperation with the government. In that case corruption optimality is witnessed and it continues to exist in the environ
cooperate, it is difficult to establish credibility in front of the government propaganda. The government machinery is then in a much convincing
practices and even if the reporting is wrong. Moreover, this no competition state allows the false accusation premise to fall quickly as opposed
causes the corruption deterrence aspect to get weak as the time progresses.

Francis.T.Lui (1986) has also mentioned about corruption deterrence and its model in great detail. He has introduced the idea of over-lapping g
when the corruption involves an uncheck high financial summary, then auditing official or officials becomes a daunting task but this assumptio
an economy. This also assists in explaining the rationale behind government’s implementation of severe corruption deterrence policy for tempo
overall in the economy.

2.4 Indicators and instruments for assessing Corruption by data vendo

Efforts at a massive scale have been in action in order to assess the corruption stats and trends overall by different techniques and through diff
made and with special research strategy invested by Reinikka and Svennson (2006). World Bank has also invested much effort in terms of formu
Indicators (WDI) have been published in which a separate ranking on Transparency and corruption is given rated from 1 to 5.

The UNDP and Global Integrity (2008) is another attempt by the UNDP and the Global Integrity organization in the world to compile all the diff
scale of corruption country wise. They are further divided in rankings to give the administrative process, the overall risk assessment and other d
relevant sector. Most measurement meth

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