On Giving

Faisal Bari

IN the last few months alone, I have come across numerous appeals on Facebook for monetary help. Some have needed money for educational expenses for themselves, for their children and in some cases for friends in dire need. Others have needed funds for accessing healthcare for themselves or their loved ones. Almost all the appeals are serious and some are heartbreaking such as asking for funds required for the treatment of cancer. Some are successful in raising the funds they need, others are not but, ex-ante, it is hard to predict who will be able to raise the funds and who will not.

Comments under such posts speak volumes for the kind of concerns people have. The ‘genuineness’ of the case raises the most concerns: is the need genuine and is the person in question really in the tough spot she/he is portraying her/himself to be in? Some want to know if all other possible avenues for fund raising have been exhausted before they are approached or before they are asked to donate. And then there are concerns about how the funds are going to reach the concerned person. Is there a bank account mentioned? Who does the account belong to? If it is not of the concerned person, how will the donor know if the money has reached the intended recipient?

Not all are able to raise the money they need. Sometimes, people feel that the expressed need is not worthy of being funded. At other times, it takes a long while for people to have their questions answered satisfactorily. They need a trusted source to verify that the need is genuine and they are not being hoaxed, that the funds will reach the right person and in time and so on. But most needs expressed on social media are emergent situations. Medical cases are usually serious cases that require timely if not immediate interventions and college university fees need to be paid on schedule as well.

The Pakistan Centre for Philanthropy (PCP) has done a fair bit of research on philanthropic giving in Pakistan. Some of their broader, well-established conclusions are worth iterating. Pakistanis do give a substantial amount in philanthropy and in the areas of health and education as well. But there are few local institutions that accept philanthropy that are trusted by Pakistanis in general. These few institutions are able to raise substantial amounts. But most other institutions, largely due to lack of information and trust, are not able to do so. So, most Pakistanis prefer to give on the basis of individually acquired information and through personalised channels. People help those whose needs they themselves know are genuine or that can be established as such through a trusted intermediary.

Not having institutions that you can trust can certainly have, other things remaining the same, a dampening effect on the sum total of philanthropic giving. If you do not have people around you who need help, and if you cannot trust institutions that could reach out to people who need help but who are not known to you, you might decide to give less. It makes sense for the PCP to work on ways of ensuring that people have more information about certified institutions so that more avenues for institutional giving are opened up.

But the need for keeping channels of more personalised giving open and making them more efficient still remains. Institutions, by definition, have more rigid and standardised rules, and more bureaucratic and time-consuming ways of responding. While all this is necessary for institutions to function well, it also makes it more difficult for institutions to respond to emergent and more atypical requests. Personalised giving can be quick, idiosyncratic and tolerant of deviance.

But personalised giving requires a certain degree of information revelation and trustworthiness too. When personalised giving was restricted to more immediate circles, the knowledge and trust requirements were not difficult to meet. Social and audio/visual media has allowed us to increase the reach of personalised networks significantly. We can access acquaintances and even relative strangers quite easily now. This allows us much better and bigger possibilities of finding kindred spirits. But how do we extend truthful and trustworthy information revelation mechanisms across the social media as well?

Can an institution fill the gap? Could an institution that is trusted to authenticate information step in to address the information and trust issue highlighted here? Could this institution respond quickly to the needs of those who need help and to those who might be interested in helping? And could this institution do this on a sustainable basis? Or would it be too costly and non-sustainable for an institution to step into this space? Could a computer application be developed to help in this area? I do not have the answer for this. But this missing market does require an answer. Maybe readers can suggest solutions to the problem.

What is obvious is that a solution is needed. Given the weak health, education and welfare systems/institutions in Pakistan and the rampant income, wealth and power inequalities in the country, there will, for the foreseeable future, be many who will need help and we already know there are many who are willing and able to help. But lack of authentic information will continue to delay or muffle the response. This is clearly a welfare-reducing outcome. How can this be addressed?

If people do not want to step up and help out in a particular situation, that is up to them to decide. But where many are able and willing to help, and it can be the difference between life and death for those in need, not having the ability to access credible information to act on seems a really bad reason for not being able to do so. We need to think of ways of addressing this challenge.

From the Dawn, Pakistan, published Friday November 3rd, 2017.


Quality Assurance Process

Faisal Bari

A FRIEND driving a new Honda City that had travelled only 2,000 kilometres had a near miss on the motorway. One of the rear tyres burst while he was driving at 110 km per hour. He was very lucky that there was no traffic at the time and that he was able to keep the car under control as he pulled up to the edge of the road.

When I bought my last car four years ago, I remember the dealer explicitly told me to have the tyres changed and not to rely on the Pakistani company manufacturing them. When my friend told me about his incident, I asked him if he had been similarly advised by his car seller. He said that he had been given this advice but that he had ignored it. When my friend went to get the tyres of his vehicle changed, even the vendor said he should have had them changed as soon as he got the new car.

What is interesting is that clearly the tyre manufacturers are aware of this perception and the issue; a recent advertisement focuses on why people should not have the tyres of a new car changed. They clearly think that their tyres are good enough. But the perception in the market is divided: even if you do an internet search on the company and the quality of their product, you get a very divided opinion: some say the tyres are good, others feel they are not.

These tyres might indeed be good enough. I am not an expert in tyre technology to pronounce one way or the other. And if Pakistani car manufacturers, even when selling cars worth Rs 2.5-2.7 million, are using them, this must be after careful reflection. But it is surprising that even so, the strong perception about the tyres’ quality persists and several dealers still keep advising people they should get the tyres changed right after they buy a new car.

For me, the question here is different. Where is the regulatory structure of the country in all of this discussion? It would seem that we cannot believe the tyre manufacturers as they have an interest in selling their tyres. Neither can we give too much credence to the car manufacturers as it might be a regulatory requirement for them to use local tyres. So, who should we, the citizens of the country, rely on? Where is the local quality assurance mechanism and the local regulator? Do they not hear of stories about exploding tyres? Do they not even see advertisements on television that are talking of perceptions of tyre quality?

This is not the only product or the only time this issue has come up. It was only after a bus full of children had an accident in the Kallar Kahar area that it was revealed that the body-maker of the bus was at fault: the body was too soft and collapsed easily. When a number of children died in a CNG explosion in a van carrying children to school in Faisalabad, we found out that there are substandard tanks being used for CNG storage, and that sometimes installation of CNG kits is also of poor quality.

When a tanker spilled fuel on the road and over 200 people died in the fire that was caused, we came to know that most of the tankers that are being used to transport fuel across Pakistan are not safe and do not meet the quality standards that have been set for them. When buildings catch fire or collapse, we get to know that the construction was faulty or that fire regulations were ignored.

Though the issue of tanker safety is still being discussed this is largely because the incident is still fresh in the memory of people. In all of the other cases, we do not know what happened to the ‘investigations’ after the initial findings. Was anyone punished? More importantly, what was done to ensure better quality bodies for buses, better kits for CNG and better quality installation for these kits? If there were any changes, why have they not been communicated to the people? If history has any lesson, it is that nothing will come of the discussions about tanker safety. There will be some hue and cry, there will be some payments made to the injured and the families of the dead, and then all will be as it was.

So, when dealers tell me to change the tyres of a new car, should I not take that advice seriously even though it might just be an issue of perception? How can I distinguish the truth from falsehood here if it is my family and my life that are at stake? Should I be taking a risk for a few thousand rupees? If I can afford a car of Rs2m or so, why not get new tyres as well?

The issue is not just about cars, buses, tankers or buildings. It has to do with almost every product/service in the country. More effective or less, other countries do have many quality assurance mechanisms in place before products are allowed to reach the customers. And customers can invoke remedial measures when they feel that standards have been breached and/or when standards are not effective enough. We do not have any such assurance.

I do not know if the bottled water or milk I am drinking is safe, if the vegetables or meat I am having are safe or even if the medicines I am taking are at least of minimum acceptable quality. We do not have many options so we have to continue to use all items. But is it not high time for us, as a country, to think of creating more effective quality assurance mechanisms?

From the Dawn, Pakistan, Friday 28th July, 2017.

Beyond Phishing

Faisal Bari

Phishing for Phools: The Economics of Manipulation and Deception: depicts how markets and people will always be open to manipulation and deception
We have known, for a fairly long time, that we can get swayed by short-term considerations and act against our long-term interests. We know we need to eat healthy and exercise to ensure a healthy future but many of us overeat and indulge in foods we should not consume and either do not exercise or not exercise enough. Many of us smoke and/or drink excessively even though we know, and there is no ambiguity about the evidence here, that smoking and excessive drinking are injurious for us.

Behavioural psychologists have also shown that there are significant biases and limitations in the way we process information in our decision-making. The order in which information is provided, salience of certain facts, how we process probabilistic events and how much information can we process at any point in time are all factors in how we decide.

Literature from advertising and marketing provides ample evidence that our wants and desires can be and are shaped by many factors. Consumer sovereignty is all fine and dandy as a concept, and there is hardly a time when, in more developed societies at least, we force a consumer to buy something he/she does not want to, but consumer tastes are very open to manipulation by advertisers and marketing people. They can create wants where none exist and shape existing wants in directions that consumers might not have thought of themselves.

Information is a crucial variable in the success of markets functioning efficiently. But, information is usually asymmetric and markets are, especially in many developing countries, not always complete. Using information revelation strategically, to one’s advantage, is also quite common where asymmetries exist.

If you are trying to buy a second hand car, the seller is likely to know more about the car and its faults than you. She might not reveal faults and over-emphasise good qualities. But, since she is an interested party, you cannot trust anything she says. This effects how the market for second hand cars can be organised: you need third parties to credibly reveal car quality.

Akerlof and Shiller do not go beyond what we have known in these areas, and for quite some time, in any way. Nor do they set out to do so. The contribution of their book, Phishing for Phools: The Economics of Manipulation and Deception, is that rather than seeing the above issues as special cases that in some ways make markets deviate from ideal forms once in a while, Akerlof and Shiller argue that the mentioned issues are an integral part of markets and how market economies are organised. This is the way we are and the way markets are.

Given the above, markets and people will always be open to manipulation and deception. We can set up regulatory regimes and we can make these regimes as dynamic and responsive as possible but the opportunities for phishing, given dynamic markets, will always be there. A new drug, a new financial instrument, a new idea or even old ideas and fads in new situations will create new and unforeseen openings for phishing. We can be vigilant and forestall more obvious forms of phishing and learn from the past but we will not be able to foresee all possibilities that the future will bring. In the same way as all contracts have to be contingent as we cannot foresee all future possibilities, regulation is contingent too: the regulator can also only forestall what she can anticipate. She can respond to new situations as quickly as possible, but that does allow phishing to be lucrative.

Food and Drug Administration (FDA) in the US has stringent requirements before they allow drugs to be available to people. Still there have been many cases where ineffective drugs or drugs with strong but hidden side-effects have been passed. Pharmaceuticals have found ways of working with and around all FDA regulations. FDA keeps regulations dynamic, but it is far easier for companies to find ways of phishing than for FDA to close or foreclose these opportunities.

Things are much worse in Pakistan. In many areas we do not even have functional regulators. What do private schools teach? Does anyone keep an eye on them? What percentage of medicines available in Pakistan is fake and/or spurious? Who can tell us that?

In others areas, where regulators are present, they have significant capacity issues. In some cases regulators have been captured by specific interests. Do NEPRA/OGRA safeguard consumers’ interests? Whose interests does PEMRA look out for? Did PTA, SECP and Competition Commission do their job when they approved the merger of Warid and Mobilink?

We are much more open to phishing activity than citizens of developed countries. As we continue to privatise, deregulate and liberalise without creating an efficient and effective regulatory structure, we become more open to such activity. In some countries even if the regulatory structures are weak, the judicial system offers effective checks and balances. But this is not the case in Pakistan: litigation is too costly and slow to respond in most cases.

Akerlof and Shiller, both winners of the Nobel Prize in economics, make the case for showing how phishing activity is an integral part of the market system very well. This book should be read and its insights internalised by all who are trying to understand the dynamics of markets, especially those who are living in the developing countries.

But beyond talking a little about individual vigilance and regulatory institutions/structures, Akerlof and Shiller do not talk of remedies. If phishing is an integral part of markets, the only option is that we should be prepared to live with it and just try to minimise its impact through individual awareness and what we can do through regulatory institutions? Given how long and deep Akerlof and Shiller have thought about these issues, it would have been wonderful if they had given us their thoughts on response aspect as well. Maybe that is for the future.

This book is a must read for not only students of social sciences, it should be read by bureaucrats, politicians and public policy enthusiasts. More importantly, it should be read by citizens: they need to know how they are open to phishing based on cognitive and psychological factors as well as due to information issues. And these issues are integral to how markets work. This awareness will help us design and develop better coping mechanisms individually, collectively and institutionally.

Phishing for Phools: The Economics of Manipulation and Deception
Authors: George A. Akerlof and Robert J. Shiller
Publisher: Princeton University Press, September 2015
Price: Hardcover $25
Pages: 288

From The News on Sunday, Political Economy pages, Pakistan, published Sunday 21st August, 2016

Some Critical Questions: Banking Puzzles Galore


Provision of efficient banking and financial services can contribute significantly towards achieving development and growth objectives. But has the banking/financial sector done that in Pakistan? Is it contributing, what it could, to Pakistan’s development and growth effort? It is not a bad question to ask at a time when there is talk of revival of growth and a number of industries have started to experience some expansion.

Growth has been slow over the last few years. And the growth we have had has mostly been driven by growth in the services sector and not manufacturing. In particular, growth in large-scale manufacturing has been quite slow. Some experts suggest that other than expansion in the services sector it is the informal economy that has been growing.

A number of questions continue to puzzle. Why is financial inclusion so low in Pakistan? Why are the majority of people in Pakistan unbanked? Why have commercial banks not gone to rural areas in a bigger way and why do they not have more clients in the areas in which they work? Formal-sector financial inclusion in less than 15pc. As many clients seem to be part of the formal sector as there are in the informal financial sector. Even where clients are in the formal financial sector, meaning they have bank accounts, they only have access to saving instruments (bank accounts). Most of them do not have the opportunity to borrow from banks. If these clients have to borrow, they have to request friends and/or relatives, rely on instruments like committees (community based saving and credit instruments) and/ or rely on the very expensive commercial informal market.

Informal finance seems to provide flexibility, even though it costs more, that formal sector has been unable to mimic. Penetration of microfinance banks, though it has expanded over the last decade, at around 1-1.5 million clients total, remains very low.

After nationalisation in the early 1970s, banks were forced to open a large number of branches in rural and far-flung areas. Many of these branches continued to function into the 1990s. When privatisation of the larger banks occurred in the 1990s, they carried fairly large networks with them into the private sector. And though they might have done some rationalisation on the margins, by and large, they have continued with the large branch network they inherited. But there have not been major expansions either.

GDP growth rates have fluctuated a lot over the last decade. We had a couple of strong growth years over 2004-6 period, but since then growth has been slow. It is only now that we seem to be moving towards some revival for growth. When growth rates are high, it is easier to find places where lending can generate good returns for banks. But when growth rates are low, it is harder to find reasonable risk-decent return sectors. Banks tend to lend less in bad times.

One of the fastest growing sectors, in the country over the last couple of decade has been the private, for-profit schooling sector. Today it is estimated that about 35-40pc of enrolled children attend private schools in the country. The proportion of children attending private schools in the larger cities is more than 60-70pc.

Some estimates of the number of private schools across the country put them well above 125,000. But the entire expansion in private schooling has happened through retained earnings, borrowings from friends/family and/or borrowing from the informal sector. Formal financial sector, commercial banks, investment banks and even microfinance banks have had nothing to do with the expansion of the sector.

There is plenty of evidence that the expansion of the sector would have been faster if formal finance had been available to the larger and more successful education-entrepreneurs (edu-preneurs, as they are called) in the sector, but formal banks have chosen not to lend to the sector.

Motorcycles and mobile phones have seen major expansions too. Some 1.7 million motorcycles are sold a year now and there are more than 100 million mobile connections that have been sold in Pakistan. Localisation of motorcycle production as well as its sale has been almost completely funded by informal finance. Similarly, formal finance has not had any role at the retail or distributive stages of the expansion in the mobile market.

It is hard to come up with an example of a sector that has seen expansion because of the formal financial sector. Banks have not taken any risks whatsoever with new sectors in the last couple of decades. Banking has been, to say the least about it, pretty boring and uninteresting.

Why does the banking industry have big and small banks coexisting? If big banks are more efficient, low in risk and high in profit, which they are and have been, and given banking is not a competitive market and has been and is oligopolistic in all societies, why have they not been able to drive the smaller banks out of the market?

There has been some consolidation in the banking industry over the last decade and some is still continuing. But banking-sector profits have been large enough to have allowed even smaller banks to survive, despite higher costs of funds for them, due to niche strategies and by making slightly more risky investments.

But, even smaller banks have not been experimental enough and none of them have tried strategies for banking the poor and/ or going into sectors that have historically been served by informal finance. The cost of funds for the larger banks is quite low. There has been plenty of free float. They make quite a bit of money lending to smaller banks for short-term needs as well. Between lending to government at high rates, not giving much to clients in interest and having a very low cost of funds, it is not surprising that the larger banks continue to show significant profits without taking any risk or developing new sectors and/or markets.

Banks have been making too much money in the last few years by just lending to the government. Treasury bonds, going from a few months’ duration to that of a decade, have given yields up to 13-14pc. If the banks can get this sort of return in risk-free paper, why would they want to go for risky investments, and why would they want to develop new clients and/or new markets?

This is exactly what has been happening. Banks are heavily invested in government papers. They do not need to lend to service providers, small and medium enterprises (SMEs), agriculture or any other sector where there is risk or the credit markets have not developed fully. They can leave all that to either the smaller banks or the government.

Pakistan relies a lot on agriculture and we have done reasonably well in agricultural production historically. But, if it was not for State Bank of Pakistan (SBP) stipulations and/or encouragement for banks to lend to agriculture, banks would not be lending to farmers at all. No commercial bank has ever developed any interesting product for the agriculture sector. The market for agriculture loans is as primitive as it was decades ago.

Pakistan has a shortage of millions of houses (dwellings). Yet our housing loan and mortgage markets are almost non-existent. If it was not for the House Building Finance Corporation (HBFC), even the nascent market in housing would not have developed.

More than 95pc of registered enterprises in Pakistan are micro, small and/or medium enterprises. Report after report has established that SMEs have been and continue to be credit-constrained and non-availability of credit is one of the major constraints that has hampered and is hampering optimal growth paths of enterprises. Yet, the banking sector has never prioritised the development of credit products that could work for SMEs.

There is no point in talking about loans to professionals and/or service providers. The notions of collateral remain archaic in our banking industry. New products, in the area of collateralisation, have not been seen for ages.

Even though the government stepped in with Khushali Bank and Pakistan Poverty Alleviation Fund (PPAF) to develop and deepen the microfinance market, the total number of clients of microfinance, including all private providers, stands barely above a million or so clients.

If banks continue to make effective returns through buying risk-free government papers and have low cost of funds as they do, they will continue to be risk-averse and will not invest in developing sectors for lending that could contribute a lot to overall development and growth of the country: SMEs, housing sector, service sector, microfinance and even consumer finance.

Historically, new sectors and/or clients have only been developed, like banking sector expansion post-nationalisation, when the regulator either forced the banks to enter a sector or underwrote the risk for lending to a sector. Maybe the same strategy should be used by the government and the SBP again.

Should the government form some funds for underwriting part of the risk for developing mortgage products, products for SMEs, venture capital and so on? And, should the government try to create ‘incentives’ for banks to experiment more in these areas/markets and in ‘forcing’ them to expand services to rural areas? We could, potentially, develop links between mobile companies, banks and microfinance providers to keep risk of lending to the poor manageable but at the same time offer services to the poor, like income smoothing, that the poor really need.

The banking sector could contribute a lot more to the development effort. But its contributions so far have been limited. It could extend banking services to a majority of citizens of the country. This can have significant saving enhancement as well as income smoothing possibilities for people. The banking sector could help in developing a much better housing market in the country. And, by serving the services sector as well as SMEs, the banks could contribute a lot of the overall growth and development effort. But, so far, it has not.

Having access to cheap funds and the possibility of making more than reasonable returns through risk-free government paper, the banks have avoided taking risks and/or developing new products and markets. The government, through underwriting some part of the risk and through design of incentives and appropriate regulation, should encourage banks to enter some of the areas mentioned above. This can have significant impact on the overall growth rate of the country and on the pace of development.

From the Dawn Special Report on Banking, Published Friday May 13th, 2016


Excessive Greed


BALLOTING for allocating plots is not new. It has been done by development authorities and private colonies. But making money off people who are eventually not going to get plots, ie unsuccessful applicants, is the issue at stake here and one that concerns the Defence Housing Authority, Lahore, that recently advertised they will be selling some residential and commercial plots in developed sectors, I to VI, of DHA, Lahore to the public.

Most entities balloting for plots are not in a position to get so many applications, charge such high processing fees and keep so much money in their account for long. If DHA were to auction plots they would probably make more per plot. But they would not have as much in processing fee or through interest earned by keeping applicants’ money for some months.

DHA, Lahore will have a ballot for the plots on March 17. The DHA scheme asks for Rs100,000 to be deposited for a two-kanal residential or an eight-marla commercial plot, Rs50,000 for a one-kanal residential or a two- to four-marla commercial plot and Rs30,000 for a 10-marla residential plot. It announced that 25pc to 30pc of this amount, depending on the plot, is non-refundable processing fee. The rest is to be returned to unsuccessful applicants in due course.

However, DHA forms make it clear that the depositor has to give the undertaking that “The amount has been deposited at my will, it may remain with the Authority till the time of refund of the amount, free of interest/charges etc.” Details of the scheme are available on the DHA, Lahore website.

The authority is not giving these plots at a discount. The prices listed on the website reflect, more or less, market prices: two-kanal plots range from Rs24 million to Rs57.5m, one-kanal from Rs6m to Rs23m, 10-marla plots from Rs7m to Rs13m, while eight-marla commercial plots go up to Rs135m; even two-marla commercial plots are around Rs4m.

Why is it choosing to ballot the plots? Why aren’t they auctioning the plots or using the real estate agent network in DHA to sell them? Ballots allow for random selection. Isn’t it a concern for fairness that it is using balloting instead of alternative market mechanisms to sell these plots? Have the government and courts not frowned upon raffle and ballot schemes by companies? Courts have also not liked it when companies have tried to hold on to public money for too long without providing the goods and services they are supposed to: for instance, car manufacturers were told not to take the full amount at the time of booking from customers.

It is evident that DHA feels this is the best way to maximise revenues. They get Rs10,000 to Rs25,000 as non-refundable processing fee from each applicant. They get to keep Rs30,000 to Rs100,000, per application until such time they refund the remainder to the unsuccessful applicants. And they do not have to bear the cost of having auctions or paying commission to agents.

There are unconfirmed reports that DHA has already received around 100,000 applications. If true and we assume the average applicant paid Rs50,000 as deposit, then it gets to keep a whopping Rs5 billion for as long as refunds are not made. Even if they keep the deposits for three months, just the interest on the deposit is going to be substantial.

In addition, if the average non-refundable portion is taken to be 25pc, DHA stands to make Rs1.25bn just in the name of processing fee. The income from the plots is of course separate from this. DHA stands to gain substantially from the scheme. And, we can say, this is indeed a clever scheme to make money.

But is it really fair to people? Plots in DHA are sold at a premium. That is granted. This is a good opportunity for people to buy plots in the developed sectors of DHA. Property rights are much more secure in DHA than in other private societies and/or government schemes. The incidence of fraud is lower and the living part, in DHA, is considered to be of better quality. And it is quite true that DHA offers better infrastructure and services to residents.

If it were to auction these plots, there would be no objection to the scheme. Whosoever can pay for the plot could buy it. Given the prices that have been quoted for the plots even for the balloting, it is clear the scheme is not for giving the poor or even the middle classes a chance to own a piece of DHA land. So, why go for the ballot?

This is where the greed part comes in. DHA knows, given the premium their plots get, that many will apply for being part of the ballot. It seems that they are banking on making money from the non-refundable processing fee and from interest generated by keeping the deposits for a few months. This part is unfair.

Why is the processing fee in the range of Rs10,000 to Rs20,000? What sort of processing requires this much money? Is there any other place where we see processing fees that are this high? Isn’t there a need for DHA to justify charging this level of processing fee?

Then there is the issue of keeping deposits for a few months. Why is DHA Lahore asking for a deposit that is larger than the processing fee? Given that the total amount of deposits is going to be very large, the interest generated is not going to be trivial. Why should DHA be allowed to keep it? Why should it not be returned to the people? Or if keeping deposits for this period is necessary, why should DHA not be made to donate the interest to charity.

It is okay for DHA, Lahore to sell plots and get a premium on them. It is not okay for them to fleece the public. The Competition Commission of Pakistan, charged with probing unfair practices, and the courts, should have a look at this latest DHA scheme closely.

From the Dawn, Pakistan, Friday February 26th, 2016.

Hippocratic Oath: A Myth


MY friend’s father, who is in his late eighties, is ailing. He has a number of health issues. Some such as bone degeneration, hearing and sight issues are age-related, while others have to do with other problems.

The challenge for my friend is to find the right doctor(s) for his father. When his father has heart issues and visits a cardiologist, the latter deals only with that specific ailment; he does not even inquire about other health problems. He does not want to hear about them and does not take other ailments into account when prescribing medicines for the heart. The same is true for the gastroenterologist. And the same happens when the gentleman has to consult the nephrologist.

The poor gentleman takes a fistful of pills without knowing if all these medications should be taken together, how they interact with each other and how they are going to impact a body that has seen more than 80 years of life.

There is no single doctor who is able to provide the crosscheck that is needed, especially for the old. Geriatrics, even today, is not a very developed field in Pakistan.

But there is more to it than that. When each specialist is visited, they order a panel of tests to be done before they will even start talking of treatment.

For an old person to go through this battery of medical tests is not easy even if we put aside the cost issue. Maybe all these tests are essential or maybe they are not. There is no way for the patient to find out conclusively. Even if a second opinion is taken, there can be genuine differences in the opinions of different doctors. It is also not easy getting a second opinion even in big cities like Lahore and Karachi: most well-known specialists give appointments weeks, sometimes months, in advance.

Hospitalisation is sometimes the only option left if you want a team of doctors to examine the patient holistically. But even that is not easy. Getting admitted into a private hospital is costly and even there you are placed under the care of a particular doctor. It may not be easy to get other specialists to come and visit.

More importantly, even if they do, they still diagnose and prescribe in isolation. There is no primary doctor who coordinates with other specialists or looks at issues of medicinal interactions, the effects of one treatment on another, and so on. It comes down to the patient himself/herself or to the family of the patient to coordinate between doctors. But they have no way of knowing medicinal or treatment interactions.

There is no working regulatory framework that governs the health sector in Pakistan. Where markets are incomplete (no doctors for the old) and have large information asymmetries (where it is not clear if what is being prescribed is in the patient’s best interest), regulation becomes very important. Otherwise, the temptation to take patients for a ride becomes too much. Even if some doctors and hospitals do not indulge in unethical or illegal practices, it becomes impossible to differentiate between these and the less scrupulous ones. Word of mouth is not enough to make clear distinctions.

Almost every friend or relative I have spoken to about this, over the last few years, shared a story where he or she felt that they were unfairly treated by a doctor or a hospital. There are too many cases of women having to go through operations for childbirth. In fact, there are hospitals, especially in the peri-urban areas, whose main source of income is maternity-related surgical procedures. Has natural birth actually become more dangerous? Or does the fact that hospitals stand to make a lot more money from cases involving surgery have anything to do with it?

There are too many friends who mention that their loved ones were put under the knife even when the chances of success were very low. Hospital stays are strongly recommended or are extended even when they are not really needed. We have already mentioned excessive testing and diagnostics as a problem (many doctors and hospitals get a share of revenues from testing service providers).

We are not talking of errors of omission and commission here. There are too many cases in Pakistan that one hears of where mistakes have been made by doctors and care providers. Though even in that area we do not have effective remedies or censure mechanisms for the offenders, that is not what this article is about.

Here we are talking more about the incompleteness of medical markets, the information asymmetries present and the lack of an effective regulatory structure that should have been created for this sector.

In some places the laws are far more strict. Judicial institutions are also quick to dispense justice. This allows for a certain degree of remedy against malpractice. But not every dubious case can be taken to a court of law. Usually hospitals have strong internal peer group-based quality audit systems.

These are in place because the governments, usually local governments, impose strong external quality assurance audits on hospitals, medical practices and doctors. There are strict licensing requirements as well. And, usually, in an acknowledgment of the other problems in the sector, the medical profession also has membership requirements, standards and checks and balances.

The strength of each of these checks can vary across societies. Nonetheless, almost all checks and regulatory structures are in place in most societies. In some places we even have insurance companies and other intermediaries coming in on behalf of the patients. We have none of these in Pakistan. It is no wonder medical markets are lucrative in Pakistan but provide, on the whole, terrible service to the people.

From the Dawn, Pakistan, Friday 15th January, 2016