You have been founder-chairman of two important institutions governing economic activity. Looking back, are you satisfied with what you were able to achieve?
Khalid Mirza: “The fact of the matter is that in both instances I simply carried out the responsibilities entrusted to me to the best of my ability. There was nothing extraordinary in what I was able to bring to the table — no special expertise or herculean effort! I just did my job as required by law. A lot could have gone wrong and I am very clear whatever was accomplished was simply by the grace of Almighty Allah I am more than satisfied with the results. In each case, the achievements exceeded my expectations. During the three years I headed SECP, a major capital markets reform programme was implemented and also the capacity of the institution was raised to near global standards. And results of a similar nature were achieved during the period I led Pakistan’s anti-trust agencies i.e. the last year of the Monopoly Central Authority and then the first three years of the Competition Commission of Pakistan into which the MCA was converted, a process in which I had both an advisory and an executory role. Through progressive interpretation and robust implementation of the Monopolies Ordinance, the moribund MCA was imparted effectiveness and bite in its last year. When the CCP was established under the new competition law which was based on the principles embodied in the Treaty of Rome, it managed to achieve a high level of operating effectiveness within three years, and most significantly, it was able to holistically enforce and implement all aspects of the law in its entirety.
Both in the case of the SECP and the CCP, I was up against powerful and influential vested interests. I believe that the underlying feelings of antipathy still persist. I can go on and on – the simple answer to your question is: yes, I am satisfied with the accomplishments in each case. Before I forget, I have to whole heartedly acknowledge the yeoman efforts of a core group of professionals that stood by my side, through thick and thin, both in the case of the SECP and CCP.”
What kind of pressures did you face in these jobs and how did you deal with these pressures?
KM: “If you hold public office, pressures come with it. They are a natural corollary that one has to deal with. Pressures come from all sides: from friends, relatives, colleagues, subordinates, public figures, ministers, officials i.e. from a 360 degree circle. And they vary greatly from seemingly simple and innocuous requests to demanding actions violative of law and policy to threats if the demands were not complied with. This is the most difficult aspect of holding public office. After some time, one learns how to sidestep or just listen without giving a response, or politely say ‘no’ without causing offence — particularly to an elder. Also, after a while, the message goes out loud and clear that you do not oblige and the pressures decline precipitously.
This reminds me of an incident you might find interesting. As Chairman SECP, I was considering the appointment of an inquiry officer to look into the affairs of a company regarding which there was considerable prime facie evidence that it was siphoning off about $30 million every year in transfer pricing. I received a telephone call from a very high official — vested with enormous state powers and patronage — asking me to desist from holding the inquiry and also accusing me of being anti-foreign investors and further, that I was actually discouraging foreign investment. I might mention that the major shareholder of the company was a foreign investor who was, in fact, actually the beneficiary in the transfer pricing scam. I had to tell the official quite bluntly that during most of my career, particularly my period in the IFC, I had vigorously encouraged foreign direct investment into emerging markets and that while I was all in favour of foreign investors. I loathed foreign looters and would not hesitate to take action against them.
I also remember that during an interview on an English language TV channel a year or so before I retired as Chairman CCP, i.e. after we had proceeded against banks, the cement sector, the sugar sector, the LPG sector etc, I was asked a similar question regarding the pressures I must be facing. I recall I had responded by saying: yes, I do get pressures from all quarters but it is a part of my job to deal with such pressures. However, I want you to know that I am over 60-years old. I have had a full life and I have seen it all. God has blessed me with whatever I could ask. I am now no longer looking to this world for anything and my eyes are instead focused on my akhirat i.e. the hereafter or the after life. Therefore, for anyone to believe or say that I could be pressured or influenced to act improperly is just a little bit of an exaggeration.”
Can you tell us something about the challenges you faced at the CCP?
KM: “At the CCP, the challenge was even bigger than at the SECP. I was up against powerful, politically well-connected vested interests that had been adversely affected by strong enforcement action taken by CCP. The aim of these vested interests was to either dilute the law or weaken the commission. By the Grace of Allah Almighty, they did not succeed in achieving their goals. I appear to have been directly targetted. Unlike the vile and vicious propaganda aimed at me while I was in SECP, during my CCP tenure the aim was to remove me from the scene. It is interesting that during my tenure at CCP I had a “run-in” with all three organs of the Government. I was threatened by a privilege motion in the Senate; the Executive branch of Government sacked me but the next day, the PM was forced to reinstate me after a media uproar; and then one of the High Courts proceeded against me for Contempt of Court, a case which is still pending. Shockingly, the contempt case was initiated on totally false grounds, by a very dear, childhood friend of mine, who happens to be a leading public figure and whose economic interests were unfortunately affected by the CCP’s enforcement actions. I could never have thought that he would do this but it just goes to show how much people were riled by me for simply doing my job.”
Do you take particular pride in any of your achievements?
KM: “There was a lot done while I was at SECP and I feel enormously grateful to Almighty Allah for making me the instrument to achieve such a wide ranging set of corporate and capital markets reforms. I do not know of any jurisdiction that was able to achieve such a holistic and remarkably sequenced reform programme in such a short period and against such heavy odds. Unless I consult my papers, details of how it was accomplished are a haze in my memory and I cannot pinpoint any specific matter in respect of which I could take particular pride. The overall feeling and sense I have regarding that period is that of a circus lion tamer whipping the ground to persuade each lion to climb on to his designated stool.
Now, as regards the CCP, the memory is clearer and the details sharper – while CCP’s overall performance during my tenure is globally acknowledged as certainly well above par, I am particularly proud with respect to two aspects. Firstly, its enforcement record and the ground-breaking “speaking orders” issued covering all areas of anti-competition culpability, including very importantly those related to deceptive marketing practices by its Office of Fair Trading; and secondly, the concerted media and advocacy programmes implemented that not only informed the business community but also put on the defensive the forces acting against the CCP.
Oddly enough, there is one very specific matter that stands out in my mind which I feel I must mention. Perhaps, the most significant annual international anti-trust event is the OECD Global Competition Forum and last year, I was asked to chair one of the Forum’s three main day-long sessions, the topic of which was ‘Collusion and Corruption in Public Procurement’. This was a rare honour for someone from the developing world. In fact, the World Bank inquired of the OECD as to why the OECD had asked me to preside over this session. The answer was that it was recognition not only of what had been achieved under my watch but also because I was a “persona institutae” i.e. “an institution by himself”. While I feel proud that I was thus honoured, I notice that this is not even mentioned in the CCP’s latest annual report pertaining to my last year as its Chairman which was prepared and published after I retired.”
In your opinion, what is the significance of independent and competent regulatory institutions in economic management?
KM: “There are really four elements that constitute the key to a robust economy and also, the prevention of financial instability. These elements – which are by no means easy to secure in the fragile environment of emerging markets – are: firstly, maintenance of macro-economic stability through sound economic policies; secondly, building efficacious financial institutions; thirdly, ensuring compliance with recognised governance norms; and fourthly, putting in place capable, fully empowered and independent regulators.
Insofar as regulation and law enforcement is concerned, the environment in most emerging markets, including Pakistan, is an almost impossible format. I am talking about the lack of political will to support regulation, as needed, and competition enforcement; the constant threat to the independence of regulatory and law enforcement agencies; the lack of resources made available to implement regulatory and anti-trust programmes properly; the dysfunctionality of the judicial system weakening the enforcement capacity of regulations and law enforcers, the propensity of other government agencies to act contrary to the spirit of regulatory and anti-competition laws, and the fact that the needed technical skills are in short supply.
You will appreciate that this is indeed a formidable environment! However, whether the economy is developed or not, the lack of competent regulation in sectors in which it is needed can adversely affect economic activity in those sectors and be debilitating for the economy. Any sector which because of its peculiar structure or for legacy reasons suffers from an imbalance of market forces would need ongoing, adjustable measures to correct this imbalance, avert the precipitation of systemic risk and protect the legitimate interests of all economic players, including, most importantly, the more vulnerable elements involved.
On the other hand, it is equally obvious that badly conceived or poorly implemented regulation is worse than no regulation. Regulation can only be useful if the regulator is duly empowered, professionally competent, operationally independent, and not only has integrity but manifestly seen to have integrity. It is extremely important that regulation retains the purity of formulation and enforcement, and is not tainted by any political agenda. The regulator is at once a monitor, a policeman, a magistrate, and a father-figure and patron of the market. In developing countries, facilitating the market’s development through appropriate regulatory positioning is an additional significant function of the regulator.
Unfortunately, as matters stand right now, most of our regulatory institutions, if not all, do not come anywhere near the standard I have just elaborated.”
What are the reasons for this less than satisfactory state of affairs?
KM: “I am afraid that the Government cannot be absolved and must be held responsible for the outright apathy it has developed towards institutions of economic governance. When I say Government, I am not referring particularly to the present regime. I use the term generally to refer to government as an institution covering several previous regimes as well.
It is interesting to note that almost as a matter of policy, regulatory agency heads are appointed “till further orders” even though this is patently illegal. I suppose the idea is to introduce an element of uncertainty and to ensure that the appointee does not act contrary to the government’s political agenda. Also, in the case of at least one agency, the governing law makes provision for a Commission member to continue getting reappointed indefinitely till the age of retirement. This is a dagger piercing the heart of regulatory independence and deserves to be condemned. The sooner such stipulations are repealed and replaced by single-term appointments for a lengthy period of say, 5-7 years, it is not possible to expect regulators to act independently. Further, in the case of another important regulatory agency – and I hope this is not true – the appointments recently made are such as to render the agency captured by a market participant having unsavoury linkages.
I believe the government has not realised that the quality of regulation and regulatory institutions is an important factor to achieve economic well-being. Increasingly, I see regulatory and enforcement measures that are either inept or soft with hardly any impact or signalling effect for the economy. I am sure the regulated have picked up the palpable sense of intellectual dishonesty that underpins some of these weak measures which is both shocking and harmful for the economy.
What qualities would you like to see in the head of a regulatory agency?
KM: “I think I have already touched upon some aspects of the question, at least indirectly. Very briefly, apart from unimpeachable integrity, technical competence, knowledge of the market sector in question and demonstrated managerial capacity, he must be a real leader who not only is fully capable of standing up to powerful forces confronting the agency but can also inspire his team to do precisely that. Also, it is very important that he must not be tainted in the slightest by any real or perceived conflict of interest.
As regards the staff of such institutions, I often say that they must have the qualities of an Alsatian or German Shepherd dog i.e. they must be bold, incorruptible and discerning – these are the qualities against which German Shepherds are judged in dog shows!
It is extremely important for the effectiveness of a regulatory or law enforcement agency to hire competent and qualified staff, train them, and retain them by ensuring high morale. The question is: how can high morale be achieved? Based on my experience in establishing two regulatory institutions, I believe that feelings of pride in the institution engendered by the institution’s bold actions that have far reaching consequences plus a benign, intellectually stimulating work environment plus strong and purposeful leadership with clear vision contributes to high morale and the institution becomes an ‘employer of choice’ that can attract and retain quality staff.”
What are you doing at present? Any future plans?
KM: “At present, I am on the adjunct faculty of LUMS teaching courses in Corporate Governance and Business-Government Relations. I also consult a little. As you know, my core expertise covers all aspects of project finance and investments in the private sector — so far most of my consultancy assignments relate to this broad area albeit I am often consulted with respect to regulatory matters.
Soon after my retirement, the Government did offer me two positions which were really quasi-sinecures, and without the necessary empowerment. It was clear that these were not viable and I could not possibly have been able to deliver anything worthwhile. You know that I have worked for over 44 years, and by the Grace of Allah Almighty, I was able to achieve a reasonable degree of success in almost every job or assignment that I undertook. I certainly did not want to crown this long and successful track record with a failure. Accordingly, these positions were politely declined by me.
I might mention that recently I was asked by a consortium of business groups in Karachi to a head an institution of higher learning they wanted to establish. It seemed like a laudable project to me and I was quite willing to take up the challenge. However, it soon became obvious in my initial interaction with the rather clever businessman chairing the consortium that the proposition would not be feasible for me unless I had the necessary operational autonomy, and to achieve this, I requested insertion of appropriate provisions in the contract. I believe the consortium chair began to see the institution slipping away from his grasp and the proposal did not proceed any further.
It appears that other than advisory work for corporates and NGOs, non-executive board seats, consultancies, etc., and also, of course, teaching, I may have to a large extent outlived my utility. Although, I have considerable energy and can contribute a lot, the age at which I am and the high level positions I have had the privilege to hold means that I am now beyond the ken of most organisations in Pakistan in the matter of jobs that can be offered to me, except perhaps, in some cases, at the very top. I have become, as it were, priced out of the market!
And insofar as the public sector is concerned, I am gratified by the deference and respect often shown to me. However, as to whether or not I am needed for any assignment depends upon whether or not I am considered to be in sync with the prevailing syndrome.
In view of all this, I have decided to shift my base to London and to seek greener pastures abroad.”
