The true test of the SIFC

Mosharraf Zaidi

05 December 2023

Published in: The News

The logic for a public-sector vehicle that does what the Special Investment Facilitation Council (SIFC) is supposed to do is solid. Pakistan’s governance system doesn’t work for anyone, even the country’s elites.

What is the harm in establishing mechanisms that solve problems? There are very few serious people in the country that would not celebrate a robust and effective SIFC.

On the face of it, therefore there is not only no harm in trying, there is only an upside if it works out. Will it work out? What are the key considerations that should inform the SIFC as it learns how difficult the task of normalizing Pakistan’s economy really is? Who are the most vital stakeholders in the SIFC reform journey? Some little historical perspective may help shed light on these important questions.

The October 8, 2005 earthquake left over 73,000 dead and rendered over 3.5 million Pakistanis homeless. The scale of the death and destruction was unlike anything Pakistan had experienced. In the hours and days immediately after the earthquake, the entire governance system was seized with one overwhelming question above all: how will Pakistan recover from the calamity?

Two days after the earthquake, a body called the Federal Relief Commission (FRC) was set up to coordinate and manage immediate search and rescue and relief operations. Sixteen days after the earthquake, a body called the Earthquake Reconstruction and Rehabilitation Agency (ERRA) was established to create a mechanism and channel for the large-scale and long-term reconstruction that the country would now need.

At the time, there was no National Disaster Management Authority (NDMA) and therefore the FRC made a lot of sense. The logic for establishing ERRA was a little less compelling. The primary explanation for why ERRA was required was that the existing approvals process for big public spending projects – especially infrastructure for roads, highways and electricity transmission and distribution – took too long and required too many loopholes for the system to jump itself through. By allocating all such big spending effort to the ‘authority’ of ERRA, the government systems in Pakistan would be able to act decisively and quickly to serve earthquake-affected Pakistanis without the burden of the long-winded district and departmental DWPs, the provincial DWPs, the central DWP, and of course the ultimate ECNEC.

Back then, I argued for the government to revisit the existing mechanisms rather than establishing a parallel government in the shape of ERRA to do what the government should be able to do anyway. In subsequent arguments with senior officials and colleagues who insisted that the earthquake merited the establishment of a parallel government, I usually had three key questions I would ask.

The first was: “what will Pakistan do if a different calamity was to strike a few years later – would there be a new ‘ERRA’ for every kind of calamity?” The second was: “what impact will a functional and well-funded parallel government like ERRA have on the less functional and already decrepit rest of government? How will it affect motivation and accountability when we signal that it’s okay for the rest of government to move slowly and without performance metrics on the boulevard of broken Pakistani government dreams whilst ERRA gets on the highway of governance heaven?” The third was: “without sunset clauses, would the system have the wherewithal to shut down an organizational infrastructure that brings jobs and money, given the track record of job creation and sustenance as a driver of public sector incentives?”

ERRA turned 18 years old this year – an adult by every measure. Some aspects of the earthquake response are seen as among global best practices. Pakistani civil servants and military officers are respected around the world based on the richness of the earthquake experience. Indeed, the FRC was transformed into the National Disaster Management Authority (NDMA) and though it took some time for the NDMA to become central to how Pakistan deals with disasters, it is a reasonably functional coherer of the Pakistani response to disasters and calamities. It helped deal with the internal displacement after the 2009 military operations in Swat, it helped deal with the floods of 2010, and it has maintained a reasonable handle on disaster responsiveness since – most notably during the 2022 superfloods.

Equally, it is important to remember that ERRA wasn’t established to deal with disasters. It was established to ensure reconstruction and rehabilitation. A lot of the large-scale infrastructure (highways, roads and electricity supply and distribution) got done quickly – within months of the calamity. But a lot did not. One interesting metric? Of the 5,722 government schools damaged or destroyed during the earthquake, rapid financing and approvals via ERRA helped in reconstructing 3,542 schools. Another 936 schools are still under reconstruction. Reconstruction on a total of 1,243 schools has yet to begin. Let that sink in. Eighteen years after the earthquake, reconstruction has yet to begin on 1,243 schools of the schools destroyed or damaged by the earthquake.

More importantly, the country has experienced a major and transformative decentralization via the 18th Amendment and the overall demand for services has skyrocketed. Education and learning outcomes in the earthquake-affected areas have not recovered – and some may argue that the establishment of ERRA helped catalyse the fossilization of federal and provincial functions that ERRA handled – roads, highways, electricity, schools and housing. In short, the energy from the emergency that the earthquake created was bottled up and served inside ERRA – and it left the rest of government as it was. So whatever change could have taken place in those departments did not. And then, in February 2020, the Covid-19 crisis erupted.

The country required another ERRA, another parallel government to make things happen quickly and coherently. This time it was named NCOC – the National Command and Operation Center – and its job was not ‘reconstruction’ per se, but rather the cohering and coordination of the entire government based on real-time data on how the Covid-19 pandemic was affecting Pakistanis and Pakistan. Like much of the FRC and ERRA, the NCOC did an amazing job as a short-term injection of ‘emergency’ energy into a largely dysfunctional morass of governance. All the problems that required a parallel government named ERRA in 2005 were the same problems that required a parallel government named NCOC in 2020. Thankfully, unlike ERRA, the NCOC was sunsetted and closed – but many wonder how and where the lessons of the NCOC’s incredible use of data and rapid turnaround of decisions are housed.

Many thoughtful experts – including those that endure the machinations of governance from within the system – will see the SIFC as a knee-jerk outcome of the big-ticket Pakistani institutional deficits: military-civil disequilibrium, capacity and capability, and coherence. But this train has left the station and getting it to safely deliver the goods at every future destination is now perhaps the more important aspect of how it is understood and how its behaviour can be shaped.

The most important lesson for governments everywhere in this era of polycrisis is the lesson of convergence. All big-picture problems and solutions are now anchored outside the boundaries of traditional verticals – and wrapped up across old and new disciplines. Let’s take climate change as a test case. Climate has a finance dimension that makes the Finance Division and the Debt Management Office a central stakeholder in the Climate Division’s work, but neither of those functions can be fulfilled without a robust provincial planning function input. More crucially, new investments and the drive for exports growth means that the BOI and the Commerce Division are intimately connected to both adaptation and to ‘clean’ and ‘green’ both in terms of the kinds of industries Pakistan promotes at home and the kinds of investors it works to bring home.

Agriculture, food security, life sciences, and technology are all part of the many solutions to climate change. So too is engagement with the rest of the world. The Foreign Affairs Division needs a climate function that is great at the UN and COP negotiations game, but also at the climate finance, renewable energy and storytelling games. That is a lot of cross-functionality. No serious person believes the current system and structures of government can address this challenge – yet we keep trying.

Is the solution a climate version of ERRA, NCOC or SIFC? Probably not. What the country needs – for climate, for education, for public health, for national security, for women’s economic empowerment, for investment, and for exports – is a dramatic transformation of the traditional verticals in government. It needs a wholly different approach to how talent is recruited and retained in the public sector, and it needs entirely new kinds of incentives to shape the behavior within the public sector. Can the SIFC serve as a vehicle for serious reforms that serves these urgent Pakistani systemic needs? That is the SIFC’s true test.