“Good governance” is regarded as development agenda in Pakistan by each government while the public see governance as the major indicator for sustainable development. In this premise, “good governance” is known as one of the most decisive factor for thriving accomplishment of the strategic thrust, policies and programs. It is as an exercise of authority to manage a country’s affair at all levels to improve the quality of life of the people. It is a continuous process where divergent opinions and desires are satisfied through compromise and tolerance in a spirit of cooperative action for the mutual benefit of the larger whole.  According to World Bank and UNDP, governance has three dimensions; the political regime, the systems and procedures for exercising authority and the capacity of governments.  This paper discusses the underlying causes of weak governance and interaction between state institutions and citizens in Pakistan along with suggesting some policy options as minimum action needed for improvement.
It is widely acknowledged by the academia that the state-machinery of government has contributed to the present state of affairs. Further, the federally-managed resources are obstacles for provinces to obtain the best value for money. Sincere civil servants are frustrated with cost ineffective systems and procedures; the general public is faced with an irresponsive and non accountable political and bureaucratic system while the entrepreneur is witnessed with a set of contradictory policies which further hinder his business. Briefly, both federation and provinces of Pakistan must bring about drastic changes to achieve economic growth and to improve the quality of life of its people.
Conceptual Framework of Good Governance
The term “good governance” is coined by the World Bank and its foundations rest on the principles of freedom, equality, justice and accountability. Philosophical literature and religious texts are full with the definitions and examples of both good and bad governance. The traces of “good governance” can be found in history which reports the downfall of nations due to bad governance and also gives lessons that how nations have risen to great heights because of “good governance”. At the moment, the concept of governance has been evolving from some narrow definition used by the World Bank as “the manner in which power is exercised in the management of a country’s economic and social resources” to the broader definition adopted by the Commission on Global Governance as “the sum of the many ways in which individuals and institutions, public and private, manage their common affairs”. 
Good Governance in the context of Pakistan, go beyond good politics. In Pakistan “good governance” must enable all the stakeholders to enhance economic growth, social development and a mechanism to sustain growth in the future. This can be achieved through civil services reforms, capacity building of institutions, improving and devolution of fiscal administration, increasing the role of the private sector and controlling unproductive public expenditures. All of these fall within four broad areas, namely, legislative framework, institutional capacity, efficiency and management.  Legislative framework is set of boundaries within which institutions, agencies and agents can operate and therefore addresses issues related to devolution, discretion and accountability. Institutional capacity identifies the ability of institutions, agencies and agents to identify policies ensure coherence and coordination and ensure compliance. While the efficiency addresses issues of resource generation, expenditure planning, expenditure controls regulation and overall public administration to ensure the most effective use of resources. The last but not the least is management which addresses issues related to the proper use of systems and procedures and the mechanisms used for the development of the infrastructure and the delivery of services by ensuring that there is an equitable and transparent access to goods and services and protection of public interest from private intrusion.
Legislative issues are important and need to be addressed. Although constitution of Pakistan draws responsibilities between various tiers of government yet there are some areas where no clear-cut allocation of responsibilities is specified. Further, this lack of clarity creates fragments between the functions of various tiers of government and the services which should be delivered by the provincial governments are yet delivered by the centre. This change has not yet been brought in the future programmes. It requires designing of new mechanism for attaining this very objective. One of such mechanism is employing Non Governmental Organisations (NGOs) in making communities aware of their rights and responsibilities. They have been developed to some extent but are largely working as case studies. However, this role needs to be extended. There are also concerns about the legislations that it is passed without adequate drafting skills. Furthermore, some built-in provisions and powers to set aside any mandatory requirement are more often used. These provisions are related with extreme cases of hardship but history is full of the examples where these provisions have been exploited for personal gains. In addition, discretionary quotas provide benefits to the few. These steps result in inefficient public institutions and further pave the way for corruption. In this outline, discretionary quotas followed by discretionary power should be the removed as a first objective.
Although legislation is necessary for an efficient and transparent allocation of responsibilities yet without the corresponding capacity, no change may be forthcoming.  Contrary to it, government institutions are facing huge number of shortcomings. Coherent and coordinated policies are absent in public institutions while the current systems and procedures are outdated.  Although the mechanisms to ensure coordination do exist yet are not implemented. Further there is permanent hindrance in routine management while the existing staff is also inadequately trained.  All of these issues can be eliminated through capacity-building of institutions.
There is an immense need of decentralization of functions which means that financial powers and administrative authority should be given to the lowest tier of government. But decentralization is not a cure-all for resolving Pakistan’s continuing crisis of governance. It has the potential of decreasing the distance between citizens and the state and thus enabling the government to be more responsive to local needs.  Simple transfer of power from centre to region in decentralization will fail to empower the people, and intensify the crisis of governance to new levels. 
An irresponsive civil service needs reforms to make the civil servants answerable for their actions. History of Pakistan has only witnessed a notable reform in 1973. Apparently, it was a measure designed to enhance the professional quality of the cadre but it became a powerful means of political influence. The current inefficient and corrupt needs to be weeded out and staff skills need to be developed to use modern management techniques.  Simple attendance at courses operated by civil service training institutions does not constitute training. Civil servants must be required to show absorption of training skills by results in tests and examination, and this process should be very frequent.
There are number of ways to achieve efficiency. The use of appropriate mechanisms ensures the greatest value for money and this can be one way out. Further, pro-active legislation and use of information can ensure target-based management. The use of information technology through the development and implementation of standardized procedures could also become the cornerstone for change.
While private sector participation can overcome a number of shortcomings in the development of infrastructure but this would result in excessive rents accruing only to the few agents.  The legislative framework establishes the boundaries within which the public-private partnership can take place. However, these laws will need to be translated into a workable and transparent regulatory framework. Most of the existing institutions are manned largely by staff without the knowledge and understanding needed to adapt to a rapidly changing operating environment.
The international environment is in favor of the industrialized nations hence Pakistan needs to adopt a strategy which has been shown to be successful by the newly emerging industrial states, that is, the induction of the private sector from inception to implementation. In other words, Pakistan must include the private sector in all facets of dealing with the international community starting with preparation of position papers and underlying research, to actually negotiating access and, the subsequent supervision and management of the accord. Moreover, the general complaint with respect to Pakistan’s exports has been the absence of quality control. The private sector must ensure that this becomes a necessary condition for export. Towards this end, trade associations should be encouraged to establish and operate training centers and central quality control facilities, set standards which are mandatory, and establish a system of penalizing violators.
Management can be divided into three broad categories; economic management, fiscal administration and expenditure management.  Economic management means efficient allocation of resources to ensure wide spread and equitable economic and social development of a nation. It is the basic responsibility of any government and this can only be achieved through good governance. Unfortunately, this has been a dream for not only the policy makers of Pakistan, but also of its people.
Fiscal administration is another need of hour in Pakistan. Breakdown in economic governance results from the failure of governments to institute a progressive taxation structure. Today taxes are imposed on and collected from the poor. Large segments of civil society, particularly the rich remain inadequately taxed. Also there is exemption of tax on agricultural incomes and capital gains and the taxation structure creates inefficiency in the economies.
Fiscal policy of Pakistan shows excess of tax holidays, exemptions and grants without an independent audit of assessment by outside agencies. A fundamental problem, however, is that the tax base remains narrow and a large proportion of direct taxes are collected as deductions at the source. Much of these shortcomings of tax administration can be reformed through broad systemic changes undertaken at all levels. The effectiveness of the change will depend on political support. The establishment of independent and autonomous Revenue Authorities with a market based pay structure with built-in rewards and penalties should be considered as the most viable vehicle for reform.
Expenditure management is another important issue as planning and budgeting systems are deficient in Pakistan. This reduces transparency and accountability in the process of allocation and expenditure. Consultation in matters of taxation with vested interest groups has always existed but there is little external input in making the budget. Expenditure requests are not scrutinized by legislators and budgets are framed without a consistent macroeconomic framework. Medium to long-term expenditure plans are not prepared, neither are such frameworks established which results is no link between the composition of expenditures and the financing of the deficit to major economic parameters, such as growth and prices. Therefore, it erodes efficient allocation and effective management of the macro economy.
End Result – Corruption
Mis-governance leads and breeds corruption in a number of ways, through bribery and extortion, nepotism, and fraud and embezzlement. It reduces the efficiency on which an economy depends, and by increasing the cost of investment, lowers the potential return. It also reduces the government’s resources and hence its capacity for investment.
Corruption in Pakistan is not a unique phenomenon. It occurs up stream and has wings which encourage flight of capital. Corruption has had adverse effects on human development and as Pakistan faces a scarcity of resources, it is unable to set up and enforce an effective legal framework to eradicate the corruption. According to Robert Klitgaard, who first devised the equation of corruption in 1988, corruption is a function of monopoly power, discretion, lack of accountability and low government salaries. 
Corruption = f (Monopoly power, discretion, accountability, low government salaries)
The combination of monopoly power and discretion alone is a disastrous combination. When linked to the absence of accountability and low legal earnings they become more than just lethal. One obvious mechanism to eliminate corruption would be to review legislation which helps breed corruption, such as through creating monopoly power, permitting discretion without checks and balances, places authority without responsibility. Parallel to this should be an effort to reform the judicial system generally. Another mechanism would be to introduce legislation which is effectively implemented through an impartial and independent authority. Corresponding changes in the laws of evidence and trial should allow for flexibility in procedures and rigour of evidence.
The legislation alone is insufficient for eradication of corruption. At the same time the strength and independence of the judiciary must be secured. In summary, the action needed to eliminate corruption should include accountability from the top, setting up of national anti-corruption commissions and exclusive corruption courts, ending of unnecessary discretionary laws and ensuring transparency.
To ensure sustainable and equitable development the government must realize its role in economic development. This can only be achieved best through a realization that such a positive role requires not an expansion in the scale of government activity, but an increase in its effectiveness and a major reallocation of its resources. Poor governance is now recognizable. There is a failure to establish a framework of law and government behavior conduces to development, with a tendency to divert public resources for private gain. No arbitrariness in the application of rules and laws with excessively narrowly based decision making mechanisms only exacerbate the problem.
Further the development in Pakistan can be achieved through political stability, stable macroeconomic environment, the outward-looking trade strategies, the quality of primary education, effective land reforms, credit reforms, a merit based efficient and competent bureaucracy, well-functioning institutions and development of core areas of comparative advantage. In sum, governance is a continuum; it does not automatically improve over time. Citizens need to demand good governance. Their ability to do so is only enhanced by awareness, education, and employment opportunities. The Government of Pakistan needs to be responsive to those demands. For change to be effective it must be embedded in the societies concerned and cannot be imposed from the outside.