What is Corruption 2

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UNIVERSITY OF CENTRAL PUNJAB

Business Ethics Project

Topic: Corruption in Pakistan Railways and Banking Sector

Presented To: Prof. azhar

Presented By:

SAQIB ARIF (L1F06MBAM2922)

Section: A

Date of Submission: 02nd June, 2010


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Corruption in Pakistan Railways and

Banking Sector

What is Corruption:

The word corrupt(Middle English, from Latin corruptus, past participle

ofcorrumpere, to destroy: com-, intensive pref. and rumpere, to break) when


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used as an adverb literally means "utterly broken". In modern English usage

the words corruption and corrupthave many meanings:

Political corruption: the abuse of public power, office, or resources bygovernment officials or employees for personal gain, e.g. by extortion,

soliciting or offering bribe.

Corporate corruption: corporate criminality and the abuse of power bycorporation officials, either internally or externally.

Putrefaction: the natural process of decomposition in the human andanimal body following death.

Data corruption: an unintended change to data in storage or in transit. Linguistic corruption: the change in meaning to a language or a text

introduced by cumulative errors in transcription as changes in the

language speakers' comprehension.

Bribery in politics, business, or sport (including match fixing).

Corruption in Pakistan:

Pakistan 2008 Corruption Perceptions Index Score is 2.5. Out of 180

countries, it is ranked as the 46th most corrupt country in the world.

Corruption jumps 400% in Pakistan in 3. Corruption in Pakistan has surged by

whopping 400 percent in the last 3 years, said National Corruption Perception

Survey 2009 carried out by Transparency International. The National

Corruption Perception Survey 2009 (NCPS 2009) indicates that the overall

Corruption in 2002 has increased from Rs 45 Billion to Rs 195 Billion in 2009.

Corrupt Sectors of Economy:


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Police and Power Health and Land Judiciary Railways Customs & Taxation Banking

Pakistan Railways:

To provide a safe reliable, modern ,efficient and cost effective infrastructure

to its customer, to contribute in building the economy ofPakistan and to look

after the welfare of its employee.

Basically Pakistan railway has two Motos

Safety first and always Avoid accident at all cost

Pakistan Railways (reporting mark PR) is a national state-owned rail

transport service ofPakistan, head-quartered in Lahore. It is administered by

the federal government under the Ministry of Railways. PR provides an

important mode of transportation throughout Pakistan. It is commonly

referred to as the "life line of the country", by aiding in large scale movement

of people and freight throughoutPakistan.

Role of Pakistan Railways:


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Passenger traffic comprises 50% of the total revenue annually. During

1999-2000, this amounted to Rs. 4.8 billion. Pakistan Railways carries

65 million passengers annually and daily operates 228 mails, express and

passenger trains. Daily, PR carries an average of 178,000 people.The Freight

Business Unit, with 12,000 personnel, operates over 200 freight stations on

the railway network. About 39% of the revenue is generated from the

transportation ofPOL products, 19% from imported wheat, fertilizer and rock

phosphate. The remaining 42% is earned from domestic traffic.

Corruption in Railways:


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There is a lot of corruption in various departments such as finance

department, material department, and purchase department and in employee

hiring.Pakistan Railways is continuously facing economic losses despite the

injection of subsidy worth billions of rupees to make it a profitable public

sector organization over the last two years. The National Assembly was told

on Thursday that during 2007-2008 it suffered a loss of Rs12.66 billion which

increased to Rs18.609 billion in 2008-2009. A fresh study for updating

valuation of railways assets is currently in progress, the minister said. During

2007-2008, the minister for railways said, 15 per cent increase in pay and

pension of federal government employees, phenomenal increase in oil priceswere the main reasons behind PRs losses. Moreover, on the eve tragic death

of ShaheedMohtarma Benazir Bhutto, railways assets suffered a massive loss

of Rs6.5 billion. The incident also caused a loss of Rs0.994 million due to

suspension of train services. It also faced a shortfall of revenue of Rs9.017

billion. Similarly, during 2008-2009 the organization had to face a shortfall in

it revenue of Rs6.439 billion. Likewise, the government increased pay,

allowances and pensions up to 20 percent which the PR had to pay from its

kitty.

Over Sale of Tickets:


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Train is always overloaded with the

bundle of people and Customer feel very

difficult to take their seats. AS the railways

sold extra tickets to customers and the money

earned from them is been taken some officials

in their private pockets.

Overpriced Tickets:

Small level employees of Pakistan

railway place stamps on the price of the ticket.

This disguises the price of the ticket and after

that employee can charge the amount that

they want. They sale there tickets to

consumer and charge high rate. Some time

employee does not check tickets and charge

directly from the passengers.

Train Parts

When train imported from other countries their parts are good. But the

employees of the company sale the original parts of train in high price and

purchase the cheap parts for the train. Railway assets are suffering the

massive loss of 6.5 billion.

Corruptions in Railway Funds


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Higher authorities of railway are misusing the fund of railway this is the

reason that it is suffering the loss of over 18 billion rupees.

In-efficient and Overhired Staff

Railways have hired extra staff due ti some causes like

political pressures and many of them are earning

salaries by sitting idle at homes or working at other

places. If it is a big seat then there will be allot of

bribery and references for that individual. And the

working staff is a glowing example of mismanagement.

Railway land

There is major corruption on the land of the railway. The people occupy

a large amount of railway land. Some time government sale the land of railway

to private people in very less price and take commissions for that purpose.

Financial Corruption:

There is a great amount of burden on

PR of international debts as the previous

members of the institution have done a lot of

frauds and manipulated the accounts in their

personal favours. Now the amount of debt

has reached to 20.7 billions.


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Other Corruptions:

Sale of scrap at lower price Purchase of various equipments without bidding or from bogus parties Theft in furnace oil Theft in railway warehouses Goods stolen from carriage boogie Ticket prices increased at holidays (Eid, Other Festivals)

Corruption in Banking of Pakistan:


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Something that is evil but is supposed to be good

The banking sector is among the key domains of national economies around

the world. In addition to being the backbone of economic structures, it is an

important service provider from consumers perspective. It provides the

citizens a safe place for their savings, enhances their financial strength

through investment and saving schemes, and provides loans for self

employment.

In Pakistan Corruption become a very serious problem and corruption bring

down the money (wealth) in a country. In Pakistan there is no any department

where corruption does not survived.

Types of Corruption:

Bribery:

An offer of money or favor to influence a public official

Nepotism:

Favoritism can be seen by public officials to relatives or fast friends

Embezzlement:

Take the property of government and money of others without

permission or right


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Causes of Corruption:

The absence of an inquirys structure to deal with corruption. A weak civil society Low and imbalance economic growth Low political competition

Following are the few factors of corruption in the banks ofPakistan

Sales force Invigilation team Bank account International currency conversion rates

Consumer products Limited information to clients IRR ATMs Investments Reinvestments Profit rate Deduction of taxes Financial statements of the banks Operations department General banking


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Commissions system Hidden charges Hidden information Commitments

Sales Force

Sales force of the bank is the most

corrupt department of the bank. Mostly

these employees of this department are

on the contractual basis so they are not

loyal to the banks or not take the job

seriously. They can do the same job for

other banks.

The sales forces are the people who interact and make network with the

clients. These sales people commit very different thing to the costumer, even

not given by the bank. Most of the times the sales team lie to the costumer for

making the sales and for commissions. There is no check and balance for the

sales team in any bank ofPakistan.

It is a common practice of the sales teams that they work for many banks as a

free lancer at a time. So they try to sale for the high commission rate, not for

the sales of banks products.


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Invigilation TeamThe teams which normally go to the costumers for the verification of

willingness and eligibility of the costumer who applied for the consumer

product of bank. This team generates a report about the costumer and at the

basis of these reports, banks decide to provide the facility to the costumer or

not.

If this department works in a good way then they put a check and balance on

the sales force. But this department bribe from the costumer for making the

report.

Bank Account and DeductionsIn the bank accounts, normally we find current

account and profit & loss account in every bank

with different names. The banks use the amount

deposited in the accounts for the profit generation

of bank. At the time of with-drawl, costumer has

to wait for the money if the with-drawl amount is

high.

In the deduction, we find the unusually deduction from the account with many

names; like, service charges, annually charges etc. this deduction is made

without telling the costumers. On the other hand, we find the zakat deduction

without informing the costumer and normally the costumer dont want to

deduction of zakat from the bank.


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International Currency Conversion RatesNormally banks have own rates provider for the

international currency conversion rates and the

bank official do not agree on the other providers.

These minor margins make a huge difference in

the total. Ultimately the banks earn the profit

and the costumer has to suffer with the

conversion rates.

Consumer ProductsIn the consumer department of the banks there is huge margin of corruption

and the department takes full advantage of it. These loss points normally do

not make tight intentionally by the banks officials because these points make

the sales high.

Limited Information To ClientsSales team and other department provide the limited information to the

clients which makes the product very attractive one for the costumers. Once

the sales is made, than costumer comes to know about the reality, the


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deductions, the hidden charges but at that time no one take the responsibility

of it.

IRR And Profit RatesInternal rate of return is the rate on which banks

charge the interest to the costumers for it

products. Normally banks try to hide the original

internal rate of return to the costumers and

provide the false rate to attract the costumers

for the banks products. This tactic is used to

prove the better and cheep service than the competitive banks.

ATMsIn Pakistan, normally all ATMs are online linked to almost

all banks operating in Pakistan. We can with-draw the cash

from any ATM machine. These cash with-drawls have the

hidden charges and in some cases we found that the

costumers get the fake currency note from ATM machine

and no one can take the responsibility of that fake currency note.

Investments & Reinvestments


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Banks make the investments in many areas of the deposited cash by the

costumers. Normally they also generate profits from there and dont share any

profit with the costumers. Banks earn profit from the undefined way and

reinvest the profit to make the further more profits. We dont find any

evidence for this corruption of the bank but it is the common practice and

done on the very large scale.

Financial Statements Of The BanksCostumers have multi accounts and multi consumer bank product attitude in

Pakistan. That is why; the default rate of Pakistan bank consumer is so high.

In order to avail the different facilities and the

products for which bank statement is required, the

bank costumers rotate the money from one bank to

other to make the sound financial bank statements.

Illegally the fake financial statements are also exists in

the banks and the bank managers take bribe for this

act. This is not a very common practice but this

method is used where the high profile financial

statements is required.

Operations Department And General Banking


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In the operations department and the general banking there is lots of paper

works involved. In such documentations there is so many corruption involved

in the internal working of banks. Although we dont have any example of such

corruption and this work is not affected to the costumer directly, so that is

why this case is not discussed in the consumer lobby.

Conclusion

These are the few corruption and loss points in the banking sector of

Pakistan.Government should try to get rid from these points in order to keep

Pakistan Railway and as well as banking sector a prosper business for the

economy.

Case study:


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The former President of Bank of

Punjab (BoP) Hamesh Khan has

been arrested and detained in the

United States.

The United States Department of

Justice (DOJ) confirmed it to the

Pakistani government.

The Bank of Punjab (BoP) had granted a loan of Rs 9 billion to the Haris Steel

Industries (HSI) without fulfilling the legal requirements and the HSI subsequently

defaulted on the loan. The bank then filed a petition against HSI and made BoP

ex-President accomplice in the transaction a charge its then President and CEO

Hamesh Khan denies to-date calling it "witch-hunting" and "politically motivated".

The Spokesman of National Accountability Bureau (NAB), Ghazni Khan, Thursday

confirmed Hamesh Khans arrest in the United States saying that the US Justice

Department had also informed the Pakistani government in writing of his arrest

and detention.

The Supreme Court of Pakistan had directed the federal government to arrest or

has arrested, the former President ofBank of Punjab Hamesh Khan, who is said to

be involved in billions of rupees of fraud case.

Documents

What is Corruption 2