Two decades down the road, there has been a complete failure of the promised framework, resulting in cartelisation and a free hand to the market abuses.

The transition to a judicious dispensation of balance among the interests of the government, the private sector and the public has been much delayed, denying the benefits of deregulation and liberalisation to the common man.

Scores of regulatory bodies came into being that multiplied the administrative costs but economic decisions continued to be made on political considerations and at the whims of a few powerful lobbies.

In the absence of performance audits, the satisfaction level of the general public in the regulatory organisations has declined because most of the objectives for which they were set up have not been achieved and to some extent, the current price spiral and economic woes could be attributed to weak regulatory system of checks and balances.

There is now a growing perception that the government has shed its responsibility to safeguard public interests while. markets lack self-discipline. The outcome has been cartels of more than two dozen banks, about a dozen oil companies, a group of brokerage houses, a few automobile manufacturers and about 85 sugar mills.

In theory, a regulatory authority is a quasi-judicial forum that regulates human activity by codifying and enforcing rules and regulations, supervision or oversight, for the benefit of the public at large. It is generally viewed as an executive arm of the government which has the statutory authority to perform its regulatory functions, enforce standards and safety, oversee use of public goods and regulate activities.

The regulatory framework or the process should have three basic elements to ensure that regulatory power is rule-based, regulators have effective means to act against unauthorised business and commercial activities and provides means to wider interest groups to have their view considered and their issues addressed in a fair and judicious manner.

To ensure a regulatory framework to function smoothly, mechanisms are put in place to ensure transparency of information and decision making through a process of consultation and participation. The government and its departments are required to explain their actions and promote non-arbitrary decisions.

In Pakistan, however, the situation has almost been a total reverse. From banking to capital market and from power sector to oil and gas, the regulatory authorities have been virtually missing all along and if at all they have done something, their role has been limited to protecting the special interests at the cost of general public.

One can count on finger tips a few exceptions when the government might have implemented the recommendations of the National Electric Power Regulatory Authority about the power sector whether it was related to consumer tariff or power purchase rates for thermal, wind and hydro projects.

And whenever, the Nepra tried to show some muscle, its members were either sent home unceremoniously or their positions were kept vacant to get results as desired by the successive governments.

The result today is a complete chaos in the power sector; there is on average five-hour load shedding every day in addition to unannounced shut downs and breakdowns, power companies seldom utilise maximum generation capacity because of lack of funds for fuel purchases, distribution companies facing defaults and force majeure notices and an overall creation of over Rs250 billion worth of inter-corporate circular debt that has the potential of challenging the country’s sovereign credit rating and standing. More than 10 years after its inception, the Nepra’s strength in terms of employment has gone beyond 200 people and yet the tariff setting is practically done by a few bureaucrats of Water and Power Ministry and Wapda.

Banks have been earning windfall profits by taking advantage of the weak regulatory framework and enjoy highest interest rate spreads when compared with rest of the world. While the consumer financing in a way enhanced the country’s economic growth rate but cartel-like situation in this sector has severely jeopardised the competitiveness in the economy.

Despite huge non-performing loan portfolios, the banks’ annual profitability remained in the region of 80 per cent throughout the last eight years as their cumulative profits increased from Rs7 billion in 2000 to over Rs120 billion in 2006. Over the last ten years or so, the State Bank of Pakistan almost remained a silent spectator as the banks enjoyed a banking spread of as high as 10 per cent at one point of time at the cost of depositors’ savings and brokers used excess liquidity to multiply their earnings in the stock market.

Due to the weak oversight role of the Securities and Exchange Commission of Pakistan, small investors lost more than $13 billion in the market failure of March 2005 and a lot of hue and cry was of no help as investigations remained limited to putting the issue under the carpet. Even after that, no need was felt at the policy making level to strengthen regulatory control. A group of brokers can take the market to any height or depth in a matter of days to earn windfalls and the SECP generally remains irrelevant to play any role.

The government shares in Saudi-Pak Commercial Bank were sold for about Rs10 billion without any regulatory check and without approval by any government agency and both the central bank and the SECP remained silent. Shareholding of locals in a private telecom company and a private bank were recently sold abroad but proceeds have remained outside Pakistan despite legal requirement to bring these funds and pay taxes.

The primary objective of Oil and Gas Regulatory Authority was to safeguard interests of the general public in determination of petroleum products and natural gas. Established in 2000, its role has been limited to announcement of gas prices for end consumers for more than five years and that too on the basis of wellhead and prescribed prices approved by the government. The oil industry was deregulated in 2001 much before the regulator was given some role in the oil sector in 2007. Before 2007, a group of oil companies and refineries used to set prices of petroleum products despite a clear conflict of interest.

Even today, 85 per cent of oil business remains outside the regulator’s ambit since the prices of high speed diesel and furnace oil, accounting for about 15 million tons out of about 18.5 million tons of total oil consumption, are fixed by the oil companies themselves.

The fixation of petroleum products that used to be done by a couple of bureaucrats in the petroleum ministry under the regulated regime, is now being down by Ogra but still more than 85 per cent of oil business is outside its jurisdiction. And in the process, more than Rs300 billion worth of unjustified revenue has gone in the hands of some in private sector as record prices of almost all commodities crippled the common man and the national economy.

While the interference from the political leadership has been a major factor towards non-functioning of the regulatory framework in almost all economic fields, it is time the regulatory organisations are subjected to an independent performance audit to ascertain if objectives of their creation have been achieved. How long should the tax-payers finance non-productive entities which fail to come up to their expectations?