Corporate governance reform

GOING by the early hype surrounding the forthcoming Companies Bill 2016, it would appear that the proposed legislation is gearing up to fill a major gap in Pakistan’s code of corporate governance. We are told by the SECP chairman that the bill will empower the government to demand information on the beneficial owners of foreign companies that are registered in Pakistan. The current law, passed in 1984, does not allow the SECP to ask any questions about the investors involved in the offshore parent of any locally registered company. The absence of these powers was cited by the SECP as a major hindrance to carrying out any investigations of private parties in the wake of the Panama Papers disclosure. If it is true that the SECP is now moving to plug this hole, then it could be a meaningful step towards an updated corporate governance regime that takes into account contemporary realities.

Over the years, as Pakistan’s economy liberalised and opened up to greater participation by private capital, both foreign and domestic, a range of legislation was put in place to provide protections to owners of private capital. These included laws like the Protection of Economic Reforms Act (PERA) of 1992, cited today as the greatest hindrance to investigating money trails associated with offshore companies, as well as a failure with regard to updating the Companies Ordinance of 1984. Our money-laundering legislation was toothless, as well as the disclosure regime mandated upon non-listed private companies. Net result has been the gradual opening up of a vast space of unaccounted for, and unaccountable, money trails along which billions of dollars can travel with little to no scrutiny.

All our laws relating to the governance and regulation of companies with offshore ownership are now in dire need of being updated. Listed companies operate under a strong disclosure regime, but private companies with offshore ownership can enjoy the best of both worlds: the opacity of their disclosure requirements as well as the protections afforded to their foreign transactions. One thing the Panama Papers controversy ought to have taught us — unfortunately, the politics unleashed by the disclosures overshadowed this — is the importance of updating our legislation to ensure that clauses meant for protecting investors are not being abused to shield wrongdoing such as money laundering. The new bill apparently is trying to do some of this by mandating disclosure requirements regarding directors of offshore companies with registered offices in Pakistan, as well as holding the company and its directors accountable for any money laundering either might undertake. If this turns out to be true, as promised by the SECP chairman, it would be a step to emulate in other legislation as well, starting with PERA.

NDTV blackout

IT does not augur well when the state plays a role in sanctioning the media for supposed transgressions. In the first-ever instance of an Indian television channel being subjected to a blackout by the government of India, NDTV has been ordered off the air for a day on Nov 9 as a penalty for its coverage of the Pathankot airbase attack earlier this year. An inter-ministerial committee concluded that the channel had disclosed “strategically sensitive” details about the airbase while broadcasting news of the incident that took place on Jan 2. The committee’s official report alleged that the information could potentially have been used to cause “massive harm” to the lives of civilians and defence personnel as well as military equipment at the site. The Editors’ Guild of India has issued a strongly worded condemnation of the action against the channel as being a violation of media freedom and demanded the decision be rescinded.

While we are not in a position to judge the veracity of the allegations against NDTV in this instance — and there are indeed certain protocols attached to covering terrorist attacks in a responsible way — it is unacceptable for the state itself to take punitive action in such matters. The media in both established and aspiring democracies has always been chary of government regulations pertaining to its conduct because of the obvious possibility of partisan intervention by the state. Last year, NDTV ran a blank screen for an hour in protest against the Indian government ban on airing a documentary about a notorious gang rape in Delhi, thus pushing back against government attempts at content control. In most instances, therefore, the media follows a system of self-regulation, with varying degrees of success. However, it cannot afford to be complacent about its freedom or resort to self-censorship that undermines its very raison d’être — that of being a mechanism of public accountability. Last month, during the nationalistic frenzy that suffused the Indian media over purported cross-border ‘surgical strikes’, NDTV — seen as more temperate than other Indian channels — engaged in the extraordinary feat of muzzling itself when it chose to not air an interview with P. Chidambaram, the former home minister who questioned those claims of military adventurism. As NDTV is now finding out, governments with an authoritarian streak will use any opportunity they can to encroach on the media’s independence and circumscribe its watchdog role in ways both subtle and otherwise.

Returning militants

AMONG the decisions taken by Sindh’s apex committee during its meeting on Thursday in Karachi was the move to compile a list of people “who have been to Afghanistan, Iran and Syria” recently, with emphasis on madressah students. Presumably, the committee has taken this initiative out of concern that extremist fighters from the Middle East’s battlegrounds — as well as other regional conflicts — may be planning to return to this country. This is a wise move and should be replicated across the nation. Media reports indicate that thousands of foreign fighters, hailing from across the globe, have headed to Iraq and Syria since 2011 to fight for the militant Islamic State group and other jihadi outfits. Many of these militants have returned to their home countries. And as reported in this paper in August, over 650 Pakistanis are believed to be fighting in Syria, Iraq, Yemen, Afghanistan and the Central Asian states. In fact, the National Crisis Management Cell has sounded the alarm about local militants fighting abroad, while independent analysts have raised similar concerns. Along with locals, it is estimated that some foreign fighters may also try and seek refuge in Pakistan.

With IS on the back foot with the Iraqi advance on Mosul and with the terrorist group also being pounded in Syria, there is indeed a very real chance that Pakistani fighters — along with some of their foreign comrades — may be looking to return to these shores. As it is, the presence of many sectarian and jihadi non-state actors in this country is a troubling reality. The prospect, therefore, of battle-hardened and even more radicalised fighters returning to Pakistan is not a pleasant one. The state must actively monitor any inflow of foreign-returned fighters. Despite a number of mass-casualty attacks in Pakistan over the years, this country has been spared the type of brutal violence that has ripped Syria and Iraq apart. To prevent the situation from deteriorating, it is essential that foreign-returned militants do no open a new front in Pakistan.

Published in Dawn November 5th, 2016