Political Economy of Elite Capture and Clientelism in Public Resource Distribution: Theory and Evidence from Balochistan,Pakistan

Abstract

The article critically examines the presence of political and bureaucratic capture in public sector resource allocation in the province of Balochistan, Pakistan. The article applies robust empirical techniques to evaluate how the political and bureaucratic elite indiscriminately and disproportionally allocate public sector funds to meet two overarching ends: (a) to allow maximum misappropriation of public funds for their benefits and (b) to make constituency/district-specific allocations to buy political allegiance and promote pork barrel and patronage politics (political clientelism). For the empirical purpose, the article uses an unbalanced panel technique using data for districts from provincial-level sources. The empirical results show a strong capture and clientelism in the process of budget making and the allocations of resources/projects to districts/constituencies for incumbent politicians and senior career officials who are at the helm of affairs, making disproportionate budgetary allocations of public resources to their home districts or constituencies or the projects with much leverage of extraction (read bribes) in the process of project allocations, bidding and execution. The evidence suggests that districts, which are neither represented by the incumbency of provincial government nor by senior bureaucrats in ministries that make public policy, receive far lesser budgetary allocations than their proportionate share despite the prevailing poor social and economic landscape. Such capture suffices personal interests, supports clientelism in resource sharing and creates an inter-regional and inter-district/constituency disparity in terms of economic and social development within the province.

Keywords

Political economy elite capture clientelism distribution of resources Balochistan

Introduction

This article presents the political economy of public resource distribution in Balochistan, Pakistan, during the budget-making and distribution processes. It examines how political and bureaucratic vested interests and clientelism influence the funds’ allocations to the districts/constituencies. The article gives a systematic and robust empirical insight into how politicians in office and civil servants consistently and disproportionally allocate public sector funds to meet primarily two implicit purposes: to allow maximum misappropriation of public funds that suit their best personal benefits and to constituency/district-specific allocations to ascertain political allegiance and promote pork barrel and patronage politics. In the process, the article argues that they invariably discard the developmental and socio-economic needs of the districts or constituencies in public resource sharing.

Balochistan is the largest province of Pakistan, covering 44% of the total landmass of the country and endowed with abundant natural resources. Yet only 6% of the total population of Pakistan resides in Balochistan (Census, 2017). The province has a vastly undeveloped economy with primary modes of production. Its economy rests on natural resources—the majority of them still untapped—fruits and crops, livestock, fisheries and (in)formal border trade with neighbouring Afghanistan and Iran. Agriculture consists of high-value and non-staple products that are favourable for the water-scarce high-altitude environment in midland, north and south of the province. Yet agriculture in Balochistan has invariably remained at a subsistence level, with no marked potential for further growth. However, crop cultivation in the canal-irrigated districts in the northeast of the province follows the general trends of agricultural growth in the Indus Basin region of Pakistan.

While the economy lacks diversification at the local level, the distinct ecological systems in different areas—flood plains, uplands and deserts to the coastal area—lead to considerable variety at the provincial level. As the northern area specialises in horticulture, the central and western districts engage mostly in livestock rearing, and southern Balochistan relies on (in)formal border trade with Iran and subsistence agriculture based on perennial water sources (Kahn and Kareez1), fisheries and service provisions to the public sector in Balochistan and elsewhere in the Middle East (Bengali, 2018). Whereas rich mineral deposits, such as coal, copper, gold and natural gas, are scattered around the province, a few influential tribal chiefs (Sardars, Nawabs) with strong control of these resources extract these using rudimentary and inefficient means although these play a substantial role in the provincial economy. Balochistan’s economic and social development faces daunting challenges. The province lags behind other provinces of Pakistan in all socioeconomic and development indicators such as basic healthcare, education (primary and secondary), gender equity, economic, social and physical infrastructure (Ahmed & Hassan, 2020).

To meet its fiscal needs, the province heavily relies on federal transfers through the National Finance Commission (NFC) Award and other straight transfers. Given that the horizontal distribution of the NFC Award had historically been based on a single criterion of population, the province receives merely 5% of the total horizontal distribution. The historic underdevelopment of the province is squarely based on the lack of available resources, with a certain degree of justification. However, the 7th NFC Award, which was constituted and implemented in 2010, has changed the fiscal landscape of Balochistan. The 7th NFC Award changed the vertical share of provinces from 54% to 57% in the total divisible pool. More criteria, such as backwardness/poverty, revenue generations and collections and inverse population density, were included for horizontal distribution besides population—although the latter, with 82% weight, still takes a far greater share. The share of Balochistan has doubled to 9.09% (Iqbal et al., 2012). However, this somewhat consolidated fiscal position of the province owing to the 7th NFC Award and the 18th Constitutional Amendment in 2010 has so far failed to bring a visible and meaningful change to the social and economic landscape of Balochistan, which has further pushed the province backward compared to the other provinces of the country. Resultantly, most districts in Balochistan are multidimensionally poor (Naveed et al., 2016), and their status has further worsened since 2009.

At the provincial level, the Provincial Finance Commission (PFC) was established in 2001 with the advent of the Devolution Plan2 to distribute the provincial share of resources among the districts. Besides allocations through the PFC, the districts received resources (funds, grants, etc.) from the federal government on a random basis.3 However, in 2008, the PFC was abandoned with the shelving of the Devolution Plan. Thus, in the absence of criteria-based PFC, looking at the public finance distribution in Balochistan, one can easily notice unbalanced (not considering the developmental and social needs of the respective districts/regions) and biased allocations to districts beyond their just share based on no judicious criteria that led to creating a significant intra-provincial disparity in Balochistan as well as a sheer wastage of public resources through misappropriations, kickbacks and pork barrel politics by public officials and politicians.

Such lopsided and distorted resource allocations to districts/constituencies appear to be based on politico-bureaucratic considerations that warrant a sound theoretical insight and empirical inquiry to understand the underlying political economy behind such practices. This article, therefore, is an attempt to investigate and explain this issue and make a plausible contribution to the existing literature on public finance and political economy. The article postulates the presence of a phenomenon of preponderant elite capture and clientelism on the public finances of the province, particularly the annual budgetary share allocated for public sector development (in the Annual Development Plan), in which the discretionary powers and manipulations by public officials and politicians are instrumental.

Interestingly, there is no systemic and criteria-based policy for resource distribution among districts in the province. The allocations to districts for their recurring and development expenditures remain at the discretion of the head of the provincial government, the cabinet allies and senior bureaucrats. They reveal strong biases and political motives to give disproportionate priority to their home districts/constituencies to mollify two very conspicuous interests, as earlier mentioned. Socioeconomic districts are not considered while allocating developmental funds, which should be a priority in any normal and transparent resource-sharing process.

The rest of the article is organised as follows. The second section describes the elite capture and sheds a brief light on the Balochistan economy. The third section explains the empirical methodology, and the fourth section presents the empirical results and their discussions. The fifth section concludes the article and provides some policy recommendations.

Elite Capture and Institutional Aspects of Corruption

Social scientists tend to be sceptical about the motivations of politicians and public officials in countries where institutions are weak. When encountering politicians or bureaucrats, the tendency is to think not about the leadership skills and competence that allowed them to obtain these positions but rather to imagine all the myriad ways that they are scheming to extract from public resources. The common belief that the political and bureaucratic elites stealthily capture resources has deep roots in almost all underdeveloped societies (Hamilton et al., 1787; in the development context, see also Dreze & Sen, 1989; Wade, 1982). More recently, the phenomenon of elite capture has been further explored and developed in such works as Bardhan and Mookherjee (2000), Acemoglu (2006) and Acemoglu and Robinson (2012). Rumbul et al. (2018) define elite capture as the dominance of political elites in all stages of the budgeting process, often resulting in budget policies that fail to promote the provision of public goods. The elite can be defined along a variety of criteria including income, professional, social, power, education attainment and gender.

According to Laffont and Tirole (1991), the origin of the elite capture phenomenon can be traced back to the ‘interest group capture’ paradigm in the works of Marx, Stigler and Peltzman. The interest group capture happens because of information asymmetry, inefficiency or lack of regulation and allocation of public resources. The two main ways of bringing about capture are bribes and collusion. Collusion is one such quality that is easier to notice at lower levels, where public officials invariably collude with local politicians or their loyalists. These public officials and politicians are more prone to elite capture than higher/central government agencies (Platteau & Gaspart, 2003).

Looking at elite capture in terms of access to power, Bardhan and Mookherjee’s (2002) work is suggestive about the idea of ‘relative’ capture. They investigate the greater vulnerability of subnational governments to relative capture through an extended version of the Baron (1994) and Grossman and Helpman (1996) models of the electoral process, which are subject to the influence and lobbying of special interest groups. The basic presumption of why subnational governments and electoral processes are more prone to elite capture in these models is similar to the Laffont and Tirole (1991) and Platteau and Gaspart (2004) premise, that is, information asymmetry and collusion. Lieten (1996) mentions that the extent of information asymmetry will depend upon the economic base of the political structure and the robustness of the administrative structure of the state.

The existence of vested interests that come in the way of establishing a more equitable system by local and national elites has been discussed by Acemoglu and Robinson (2002). They note that in countries like Chad and Niger in Sub-Saharan Africa, the ‘existence of powerful “interest groups” blocks the introduction of new technologies, or any other vehicle of development to protect their economic rents’. Their analysis tries to differentiate and identify which type of elites are most likely to feel threatened and block development. In the case of Sub-Saharan Africa and the case for the introduction of new technology and beneficial economic changes, Acemoglu and Robinson (2002) argue that elite ‘groups whose power and economic rents are eroded will block technological advances. Similarly, it is perhaps a useful exercise to differentiate various local elite groups and identify who stands to lose most if elite capture of public resources is eliminated.

Elite capture often takes place and nurtures in an institutional framework. Thus, a brief understanding of institutional nature is imperative to grasp the nature of elite capture. North (1990, p. 3) offers the following definition of institutions: ‘are the rules of the game in a society or, more formally, are the humanly devised constraints that shape human interaction.’ Three important features of institutions are apparent in this definition: (a) that they are ‘humanly devised’, which contrasts with other potential fundamental causes, like geographic factors, which are outside human control; (b) that they are ‘the rules of the game’, setting ‘constraints’ on human behaviour (c) that their major effect will be through incentives (see also Acemoglu & Robinson, 2010).

Corruption is very much shaped by the nature of institutions. A survey of different societies around the world indicates how levels of corruption are shaped by institutions. Theoretical insight into political clientelism (see Mookherjee & Bardhan, 2012) explains that with weak and unaccountable governance and power structure, the political elite tends to capture pubic services not only for themselves and their immediate families and friends but also use them for clientelistic purposes: to reciprocate favours to their voters. The absence of different mechanisms necessary for making politicians and public officials accountable to the people promotes corruption, clientelism and capture, which leads to the inefficiency of institutional structure and encourages elite capture through institutional corruption.

The extent of relative elite capture (possible) of government in Balochistan is crucial to understand the likely impact of unconstrained elites and their capture of public resources elsewhere in similar societies in the developing world (Jayal, 2008). We postulate (tentatively) that the capture of provincial resources by the local elite depends on the interplay of a large number of underlying institutional factors such as the efficiency of bureaucracy (meritocratic recruitment and promotion, technical expertise, formality, etc.), social and economic inequalities, inequality within and among communities and districts (share of each district in the overall development and non-development funds), the nature of elections and political representations, the cohesiveness of special interest groups, the decision-making process and transparency (checks and balances) in public accounts.

Political Economy of Resources Distribution

In a country like Pakistan, where politics is very much patronage-based and resource distribution is undertaken largely on political priorities and considerations rather than socioeconomic grounds, resource distribution is driven largely by political economy dynamics (Finan, 2004). In Pakistan—and particularly in the Balochistan province4—the political process has consistently been selective and unrepresentative. Some of the historical trends show that (see, for example, Ahmed & Khan, 2014; Khan, 2012) during both political dispensations or military regimes, the representation and the resources sharing mechanism, determined purely on population bases, have disproportionately favoured the bigger federating unit(s)/province(s), which cost Balochistan (with just 6% of the population) heavily in terms of deficiencies in all socioeconomic and political dimensions.

In more democratic societies, the political process intrinsically is a key driving force through which the resources and wealth of nations may reach across all segments of society. Yet in less developed and less democratic countries like Pakistan, politics is the vehicle through which patronage is used to flatter and buy off loyalties and allegiances, which entrenches public resource capture of the conventional elite as well as produces local interest groups that will enhance their political influence for further resource capture. This political ecology tends to pave the way and further facilitates favouritism, despotism and corruption, which tend to support elite capture. The remainder of the section discusses very briefly the resource distribution in Pakistan.

Pakistan is a federation of four federating units/provinces: Balochistan, Sindh, Punjab and Khyber Pakhtunkhwa. The tax and non-tax revenues are largely collected by the federal government, which further distributes them vertically and horizontally based on a systematic mechanism of the NFC Award. Looking at the historical processes of the NFC, one can notice extremely uneven resource sharing in Pakistan.5 As discussed earlier, population has remained the sole criterion for resource distribution among provinces, with an adverse impact on smaller provinces. While the political economy of resource distribution has endowed Punjab and Sindh, it has adversely affected Balochistan and KP, leading the country to a course of negative politics of discontent and disenchantment.

According to Ahmed and Baloch (2017), resource distribution in Pakistan follows the principle of a typical game-theoretic bargain, where the province with more political and bureaucratic clout at the federal level has far greater leverage to get a disproportionate amount of resources—far in excess of its size and just share. Such political leverage normally leads of a situation where the economic interests of the dominant provinces or regions/districts are reflected in the public finance distribution of the country/province, while weaker provinces/districts/constituencies with lesser political influences to manoeuvre would receive far less resources than their just share.

The resource distribution pattern—both at the federal and provincial levels—is driven largely by politics and the vested interests of a political and bureaucratic elite with significant manoeuvring power. The apparent preferences of politicians for their constituencies in resource allocation are, as explained earlier, driven by patronage and resource extraction through bribes and kickbacks. This may not necessarily reflect the economic needs of regions or constituencies in the funds allocated to the national/provincial exchequer. Looking at budgetary documents in Pakistan, it is conspicuously illustrative that the political and bureaucratic elite and their preferences always influence project and scheme selection and resource distribution. And such an uneven distribution tends to create a huge and chronic disparity among the provinces, districts and constituencies in terms of development and social and economic status of those communities.

Politics of Resource Allocation and Development of the Provincial Economy

The barren and desolate terrains of Balochistan are full of natural treasures and wealth, which make the province the richest of all provinces in the country. Balochistan commands 75% of the total coastal line, with immensely rich marine life and coast-related wealth. Yet, despite the vast potential for development, the coastal belt—comprising Districts Gwadar and Lasbela—is underdeveloped to the extent that both districts are among the 10 most deprived districts of Pakistan (Naveed et al., 2016). Thus, the natural wealth of Balochistan has not been used to improve the lives of its people or develop its economy and society. By all measures, the people of Balochistan are the poorest if compared to any other province or region of Pakistan. The World Bank estimates show that Balochistan, with around 70% of rural poverty, is the poorest region of Pakistan, even surpassing many of the poorest countries in the world (World Bank Group, 2018). The physical and economic infrastructure of the province resembles an ancient infrastructure. There are multiple political and economic reasons that make Balochistan a poor region, despite having remarkable economic potential and resource endowments, which are sharply evident in all dimensions—social, economic or political.

On the socio-political front, Balochistan in the nineteenth century was only partially integrated into British India. This partial integration, keeping in view the strategic importance of the region, was dictated by the strategic and imperial interests of the British, which wanted to ensure its imperial interests in the region, to secure the western frontier of colonial India from Russian imperial expansion, were secure.6 To promote and protect its imperialistic policies and objectives in the region, the British Raj then resorted to encouraging and fostering the patrimonial and dynastic retrogressive polity based on the sardari system or decadent tribalism in Balochistan. Under this scheme of fostering feudalism in Balochistan, the British greased the palms of feudal chiefs and strengthened their power to increase the dependence of local chieftains on the then imperial and colonial administration and to have those feudal chiefs and their tribal followers not oppose and resist the imperialistic and colonial interests of the British in Balochistan against the Russian expansionism (Baluch, 1958; Schultz, 2002).

Whereas Balochistan failed to figure prominently in the policy-making circles at the federal level in seeking its just resource share, which caused a huge deficit in its economic and social landscape, however, whatever meagre resource share the province gets from the national divisible pool and straight transfers from the federation is captured by local (read provincial) political, social (in terms of tribal chiefs) and bureaucratic elites. The politics and state apparatus in Balochistan are predominately controlled and operated by a tiny elite—comprising tribal chieftains who wield significant political powers and politicians with inherent support from the military establishment—who capture not only state resources but also use the same for clientelist purposes. In addition, the colonial-style civil servants in Pakistan function more as rent-seekers when they are posted in peripheral regions like Balochistan. This trio of tribal chieftains, the political class—both reinforced by the help of the state apparatus—and civil servants invariably enter into an unholy alliance to control and seek the financial resources in Balochistan. The overarching question, on which the article builds a critical argument, is to examine the underlying political economy dynamics of budgetary allocation and to evaluate how this allocation in the province is controlled and channelled to serve their vested interests (both personal and political through clientelism) instead of maximising the provision of public services.

The proposition implies that if the provincial budgetary allocation, b, to that specific constituency is larger, then the overall resource availability to that constituency is greater. Since a larger provincial budgetary allocation to one constituency comes at the cost of another constituency/district, we would expect total fund allocations (TFAs) and the total number of schemes to be negatively related to the indices for poverty, deprivation and backwardness of the districts/constituencies, but the same will adversely affect the other districts/constituencies.

Thus, the ‘elite capture’ is conspicuous in the resource sharing at the provincial level, where, unlike social and economic indicators, the political and bureaucratic representation in the provincial cabinet and top-ranked bureaucracy determine the budget allocations and resource share to districts and constituencies. The ‘influence’ or ‘capture’ of the chief minister (CM)/finance minister (FM), key cabinet members or bureaucracy (that includes the head of the Planning and Development Department—additional chief secretary (ACS) development, FM, chief secretary, etc.) defines the allocations of development budgets to the districts/constituencies. We postulate that the constituency/district to which the CM, FM, ACS, etc., belong gain a disproportional development budgetary allocation in the provincial budget. The bureaucratic corruption may not be clientelistic, as bureaucrats would not engage in reciprocity or exchange any favour.

The overarching proposition is that the public resource distribution takes place more on political considerations and less on economic and social grounds. The study assumes that if the CM or a member of his cabinet belongs to constituency/district i, during his/her tenure the constituency/district invariably has disproportionate resource allocation. Since the cabinet minister for finance or senior minister (SM) plays an important role in budget making and fund allocation like the CM, the FM is inclined to allocate more resources to his/her home district/locality. Another key player in budget-making and public resource sharing is the ACS. The ACS is a top-ranked bureaucrat who hails from one of the districts/constituencies of Balochistan. We assume that the incumbent ACS allocates more funds to his/her home district/constituency.

Methodology for Empirical Inquiry

Our primary objective is to assess the presence of elite capture, clientelism and a strong influence of politicians and public officials on public resource distribution in the process of provincial-level budget-making process. We operationalise this empirically by using TFAs and several schemes in absolute terms for each district as outcomes and as measures of political and bureaucratic capture and clientelism.

The Empirical Models

For the empirical model, following the empirical models of Barankay and Lockwood (2007), Faguet and Sánchez (2014) and Faguet et al. (2020), our strategy proceeds as follows:

Y_{i t} = α_{i} + \emptyset X_{i t} + γ P_{i t} + δ K_{i t} + β_{1} D 1 + β_{2} D 2 + β_{3} D 3 + β_{4} D 4 + β_{5} D 5 μ_{i t}

(1)

Where outcomes Y are total yearly fund allocations (TFA) in absolute terms and the share of the district to total schemes (Share) to total provincial-level schemes and developmental funds. This captures the effects of districts/constituencies with political and bureaucratic clout disproportionately credited with developmental schemes. α captures the regional/district fixed effects. X is the index of multiple deprivations. Multiple deprivations are made up of separate dimensions or ‘sectors’ of deprivation. Four key dimensions, such as education, housing quality and residential housing service and employment are used to construct the multiple deprivations index. These sectors reflect different aspects of deprivation. Each sector is made up of several indicators, which cover aspects of this deprivation as comprehensively as possible (for more discussion, see Jamal et al., 2003). Data on the deprivation index show Jafarabad, Harnai and Awaran as the most deprived districts in Balochistan, while Quetta, the capital city, is the least deprived district. The index ranges from a maximum of 96% to a minimum of 13%.

‘P’ is the population of each district according to current and previous Census reports that capture the per capita expenditure. Poor data even affects regional population estimates, which are entirely based on three censuses 13 years apart (1981, 1998 and 2017), with no annual population data other than projections derived from these. Following Faguet et al. (2020) to address potential inaccuracies in regional population data, we instead use each region’s population share. We assume that even if absolute population estimates are inaccurate, population shares will be more accurately estimated. This measure is likely to mask rural–urban migration within a region, unfortunately. But it seems like a reasonable second-best option for dealing with poor data availability. K is the area of the district that allows the capture of the developmental funds needed for physical infrastructure. All subscripted by year t and district index i. Quetta is the largest district of Balochistan in terms of population and the smallest in terms of area after Ziarat. Chagai is the largest district in terms of area, and if development funds/resources were allocated considering areas/inverse population density, the maximum share would go to Chagai.

D1, D2, D3, D4 and D5 are the dummy variables that capture the effect of the CM of the province, the SM or P&D minister, the FM, the ACS and members of the provincial assembly who are the coalition partners of the incumbent government (CG). ACS heads the P&D Department, undertakes the entire budget- making process and constitutes the Annual Development Plan. His influence in diverting funds and schemes to his/her home district is remarkable. Dummy variables zero (0) shows that the official(s) and politicians are not from that district/constituency, and one (1) shows that they are from that specific district(s). See Table 1 for variables and data sources used.

Variables and Data Sources

Table 1.

Variables and Data Sources.

Variable	Symbol	Sources	Measurement
Total yearly funds allocations to each District7	TFAs	Budget documents, Finance Department Government Balochistan	Expressed in absolute terms, in millions of rupees
Yearly hare of each district to total projects in the province	Share	Budget documents, Finance Department Government Balochistan	Expressed in percentage share
Total number of schemes in each district	TS	Budget documents, Finance Department Government Balochistan	In absolute numbers, in millions of rupees
Index of multiple deprivation of the districts	IMD	SDPI, OPHI,8 UNDP	1 = least deprived 100 = most deprived
Chief minister	CM		A dummy variable (0,1)
Senior minister/P&D minister/finance minister	SM		A dummy variable (0,1)
Additional chief secretary	ACS		A dummy variable (0,1)
Finance minister	FM		A dummy variable (0,1)
Members of provincial assembly in coalition government	CG		A dummy variable (0,1)
Population of district	Pop	Census reports, Government of Pakistan	Expressed in millions
Area/inverse population density of district	Area	Government of Pakistan	In Square Km

Note: Sustainable Policy Institute (SDPI); Oxford Poverty and Human Development Initiative (OPHI); United Nations Development Programme (UNDP).

Results and Discussions

The empirical results obtained using the model specification (a) portray a clear and sharp presence of ‘political and bureaucratic capture’ in the process of budgetary allocations for development schemes to districts and constituencies. The salient statistics of variables are described in Table 2 to show a clear picture of the dataset used. Using a panel dataset, in the following, we present and discuss descriptive statistics. Before the empirical results, we present and report the descriptive statistics to get prior information on the subject matter. The results obtained from both fixed effect (FE) and random effect (RE) models are discussed and analysed correspondingly.

The results using FE and RE models are reported in Tables 3 and 4, showing significant political considerations and other vested interests in the budget allocation process. More pressing indicators like poverty, socioeconomic backwardness (captured by index of multiple deprivation [IMD]) and poor physical infrastructure (captured by the geographical size of the district) are ‘not’ considered. The regression results are presented with the sign and level of significance of the coefficient of all included variables reported results to follow rigorous analytical discussions.

Table 2.

Descriptive Statistics—First Set of Variables.

Variable	Obs.	Mean	SD	Min.	Max.
Total fund transfer to district (TFA)	319	930.2168	1,440.348	0	14,206.57
Total number of schemes district (TS)	319	52.5799	67.1033	0	652
Percentage share of the district to total projects/schemes (Share)	319	1.9531	2.3722	0	23.39
Index of multiple deprivation (IMD)	318	52.1509	12.0604	13	96
Chief minister (CM)	313	0.0288	0.1674	0	1
SM/FM (senior minister/finance minister)	314	0.0350	0.1842	0	1
Geographical area of district (Area)	314	1.2803	1.3480	0.15	5.055
The population of district (Pop)	319	0.3591	0.3269	0.03	2.54
Member of provincial assembly in a coalition government (CG)	312	0.6025	0.4902	0	1
Additional chief secretary (ACS/SM)	274	0.0328	0.1786	0	1
Finance minister (FM)	274	0.0328	0.1786	0	1

Table 3 shows the empirical result by using the FE and RE models correspondingly. The results explain that the IMD, an important variable in capturing the socioeconomic landscape of districts, is ‘insignificant’, showing that the socioeconomic conditions of districts may not reflect the overall consideration of the planners at the provincial level while devising the provincial budget. The ‘area’ or geographical length of the district also has a weak correlation with the TFAs. The coefficient of the deprivation index is negative (i.e., –1.37), which suggests the fact that deprivation and poverty in any district are not reflected in TFAs, no matter how deprived the district may be. It does not get the least footprint and reflection in overall budgetary allocation. In a normal scenario, however, the most deprived districts should have attracted more allocations/projects to address the deprivation level.

Likewise, the CM coefficient is positive (i.e., 789.24) and statistically significant, showing the fact that the home district of the CM would receive disproportionately more funds/schemes from the provincial budget. Also, the high-level significance for the FM and P&D ministers shows the relevance and predictive power of this variable in the model. The variable is positively correlated with the TFA, which means, like the CM, the minister also grabs more funds and schemes for his constituency/district. The variable CG (part of the coalition government) is statistically significant, illustrating the fact that the minister/MPA being part of the coalition government also influences the budgetary allocation and therefore allocates more projects to the district that he belongs to. The population variable of all districts is also positive and statistically significant, with a clear illustration that more populous districts, like Kech and Quetta, attract more schemes, irrespective of their representatives being in the incumbent government. The ACS variable is also significant and shows the hypothesised sign, exhibiting that the ACS disproportionally allocates more projects and schemes to the district to which he belongs.

Table 3 also reports the empirical results using the RE model. Like the FE model, the RE model results also show a similar trend where one can notice the presence of political and bureaucratic capture, clientelism and pork barrel in overall fund distributions during the Annual Development Plan. The concerned variables that would potentially indicate any possible existence of elite capture and pork barrel in the budgetary allocation process show the expected signs and are also statistically significant. While the empirical results not only support our main hypothesis of the strong presence of political and bureaucratic capture in fund allocations to districts and constituencies, but they also corroborate the predictions discussed in the theoretical framework of the article.

Table 3.

The Determinants of Total Fund Allocations (TFA) to Districts.

TFA	Fixed Effects		Random Effects
TFA	Coefficient	t-Statistics	Coefficient	z-Statistics
Cons	–1,232.31 (2,563.13)	–0.48	–523.226** (158.58)	–3.30
IMD	–1.3702 (3.022)	00.45	–2.105622 (2.63)	–0.001
CM	789.2422*** (194.90)	4.05	633.4927*** (172.0)	3.68
PDM/FM	129.1641** (201.59)	2.64	165.942*** (157.7)	3.05
Area	405.1006** (2061.7)	2.20	43.19005** (22.92)	1.88
Pop	2,036.975*** (326.16)	6.25	1147.993*** (152.55)	7.53
CG	178.052* (73.076)	2.44	93.5656** (66.391)	3.41
ACS	675.536** (243.67)	2.77	34.45721*** (199.52)	2.17
FM	543.112** (432.04)	3.1	27.56801*** (201.12)	3.12
F-test	117.96***
Wald χ2			1,990.88***
Fixed effect (F-test)	F (24, 232) = 2.36***
No. of observations/ groups	265/25		265/25
Hasuamn test result χ2 (10) [p value] 19.31 (0.0133)

Notes: Values are in million ₹.

Panel regressions robust standard error in parentheses.

*p < .10, **p < .05, ***p < .01.

Table 4 shows the results where the ‘share of districts to the total annual development budget of the province’ is the dependent variable. Like the previous models on total fund transfers, the share of total projects or schemes variable is significant, with all expected signs vis-à-vis dummy variables detecting the presence of ‘elite capture’ (the influence of CM, senior cabinet members, powerful coalition partners and senior bureaucrats like ACS). Whereas the wrong signs of coefficients of the variables included in the model to capture the social and economic landscape of the province (what they should have theoretically been) or the statistical insignificance of the variables that show the social and economic status of the districts are a clear manifestation of the fact that the planners are least interested in taking such determinants into account during budgetary allocations for developmental schemes. In other words, political and vested interests are key in this entire process of public finance allocation for development schemes, where influential politicians and bureaucrats tend to prefer their home districts/constituencies at the very cost of the developmental needs of many other regions and districts. Such a practice is bound to lead to more uneven social and economic development and create acute inequality and economic and social disparity among districts and constituencies.

Table 4.

The Determinants of ‘Share of Each district to Total Projects (Share)’.

Variable	Fixed Effects		Random Effects
Variable	Coefficient	t-Statistics	Coefficient	z-Statistics
Cons	3.087 (4.57)	0.68	1.078*** (0.374)	2.88
TS	0.0094** (0.0014)	6.68	0.0073*** (0.001)	4.97
DP	–0.012 (0.0053)	–0.26	–0.021167 (0.0058)	00.65
CM	0.899** (0.347)	2.59	0.5730*** (0.3811)	2.50
PDM/SM	0.286** (0.35)	0280	0.19124** (0.376)	2.51
Area	–1.054 (3.67)	–0.29	–0.00714 (0.082)	–0.09
PP	0.120* (0.581)	0.21	3.1743*** (0.412)	7.61
CG	0.518*** (0.130)	3.98	0.6544*** (0.142)	4.58
ACS	1.93*** (0.434)	4.46	0.239*** (0.451)	4.53
FM	2.66** (0.5440)	5.22	0.155*** (0.342)	5.13
F-test	17.99***
Wald χ2			341.14***
Fixed effect (F-test)	F (24, 232) = 9.21***
No. of observations/groups	265/25		265/25
Hasuamn test result χ2 (10) [p value] 23.45 (0.0038)

Notes: Values are in million ₹.

Panel regressions robust standard error in parentheses.

*p < .10, **p < .05, ***p < .01.

Like the earlier results and discussions, using the RE model and regressing the share of schemes/projects of districts/constituencies to the total developmental schemes of the province gives identical results, where virtually all variables with a certain degree of statistical significance suggest a strong ‘elite capture’ in the process of budget making and fund allocations to various districts and constituencies in the Annual Development Plan. With a certain degree of confidence we, therefore, can argue that, in line with basic postulations and theoretical prediction(s) in the article, the allocations of publicly funded schemes and projects are allocated mainly on political and vested interests’ considerations than social and economic needs of the districts and constituencies. This suggests a strong elite capture in the entire process of budget-making in Balochistan.

Conclusions and Policy Recommendations

It is commonly understood that public resources, particularly the development budget, in Balochistan are ‘not’ distributed among districts and constituencies, considering largely the social and economic landscape and physical infrastructural needs of the districts/constituencies. In a normal scenario, nevertheless, indicators such as poverty, low literacy, poor healthcare facilities, economic backwardness, inverse population density, etc., should catch the attention of the planners during the budget-making process and Annual Development Plan allocations. In such an ideal case, political and bureaucratic considerations would play a minuscule role in the overall resource distribution to the districts in Balochistan. Yet, nothing of the sort exists during the resource allocation process in the annual budget where, on the contrary, politics and strong bureaucracy call the shots, favouring excessively their home districts/constituencies during the development budget-making process. Thus, the evidence of this warrants a systematic and robust study of the political economy of resource distribution in Balochistan. This article was an attempt towards that direction.

The empirical evidence shows that politics and bureaucratic considerations have significant influence and intervention in the budget-making process and the allocation of projects to districts or constituencies. The political elites and top-ranked bureaucrats/administration are more cognisant of their interests and clientelistic considerations in the resource allocation process in a way that their districts/constituencies get the major share of the cost of other poor districts. Better represented districts in the incumbency get a larger share of funds/resources and create in the process a huge disparity in the shape of development, even though these districts are better off at all levels: They are better nourished, attaining better health and education facilities.

Both the theoretical prediction and empirical evidence of the article suggest a strong presence and prevalence of political and bureaucratic capture and clientelistic behaviour in resource distribution in Balochistan. The main argument of the article is in line with some of the profound theoretical and empirical work in the existing literature. Scholars (see, for example, Bardhan, 2002; Bardhan, 2006; Laffont & Tirole, 1991; Zaidi, 2005) believe that elite capture makes resource allocation ineffective in addressing some of the important social and economic challenges because it may increase the chances of some districts or constituencies to usurp the rightful shares and allocations of their counterparts (Dillinger, 1994; Krishna, 2003). Bardhan and Mookherjee’s (2005) work in this regard provides a fine insight into understanding more of the elite capture phenomenon in resource allocation during the budget-making process. They propose that in the absence of a transparent electoral process, the lack of political awareness and the presence of strong and rich lobbies to influence political parties and representatives through their finances, the resource allocation process tends to be much more prone to elite capture and clientelism.

The scale of capture and clientelism is high in those countries or provinces where institutions are weak and dysfunctional. Balochistan is not only the poorest province of Pakistan, lagging behind other regions and provinces on almost all social and economic fronts, but its public institutions are also abysmally weak, with virtually no checks and balances or accountability. The weak institutional setup coupled with an undemocratic culture defined largely by tribal allegiances and kinship not only supports pork barrel and patronage-based politics but also encourages unrestrained corruption and misappropriation of public resources. In such a situation, politicians and bureaucrats are less likely to be accountable for any possible lack of transparency and political retributions to weaker and poorer districts or constituencies. Bardhan and Mookherjee (2005) further highlight that under the central budget-making process, given the ‘bureaucratic corruption’, the stronger and more representative districts/localities may receive better allocations provided that aggregate supply is greater than the black-market demand, which comes from the rich.

An important caveat of provincial autonomy and devolution is indeed the elite capture and clientelism (Mookherjee & Bardhan, 2012) in the process of budgetary allocation at the provincial/local level, particularly in those subnational units where the institutional structure is weak and without any robust system of accountability (Bardhan & Mokeerjee, 2005, 2012 showed elite capture in relation to decentralisation in India). The political economy literature (see Bardhan, 1996; Bardhan & Mookherjee, 2000; Laffont & Tirole, 1991; Persson & Tabellini, 1994) points out that the fruits of devolution and fiscal autonomy are likely to be jeopardised because of the presence of the ‘elite capture’ and clientelism on public resources once they are devolved. Therefore, the essence of devolution may fail to produce any tangible outcomes due to such practices.

Balochistan is a kind of society where strong chieftains, tribal elders and a few well-connected families and their kin have a high stake in explaining the trend and nature of the political economy of public resource distribution and expenditure/consumption, as they normally tend to capture political control. The influence of these individuals or families is conspicuous in rural areas. In the case of decentralisation and devolution, they potentially have the power to divert public resources to their own interest as well as indulge in clientelism at the expense of public benefits at large at the provincial level.

Our theory indicates the extent of elite capture in resource allocations: the disproportionate allocations to projects of their own choice as well as clientelistic transfers. The empirical evidence in Tables 3 and 4 supports our theoretical predictions of elite capture and institutionalised nature of corruption. The kind of capture and clientelism that we witnessed in our empirical investigation is a form of institutional corruption. Weak governance and a lack of institutional checks and balances provide unbridled leverage to the political and bureaucratic elite to capture resources in the form of disproportionate allocation and political clientelism. Whereas our analysis is in tune with existing literature (see, for example, Kitschelt & Wilkinson, 2007), which provides an overview of studies from Africa, India, Latin America and South Asia documenting the pervasiveness of ‘patronage-based clientelism and capture, our research adds a new dimension to the understanding of capture and clientelism. Our research implies that in weak governance and poor accountability frameworks, as we witnessed in the case of Balochistan, public resources are captured and diverted to suffice the interests of politicians and senior bureaucrats, not necessarily reflecting the developmental and social needs of the districts or constituencies to which disproportionate funds are allocated, as we know that there are much poorer districts in Balochistan (see MPI, 2016; Naveed et al., 2016).

Our analysis shows that given the current trends of clientelism and elite capture, Balochistan, and for that matter, other peripheral regions in Pakistan with somewhat similar clientelist behaviour, are likely to remain not only underdeveloped but also disillusioned with a tendency to drift further away from the mainstream politics and economics. Such trends can potentially further weaken the already fragile centre-province relationship between Balochistan and Islamabad. The people, disillusioned from a starkly weak and dysfunctional provincial apparatus in terms of social and economic service provision, feel more adrift from the state, as it is perceived that the prevalent clientelism and elite capture in the periphery are invariably supported by the state. As a federal state, Pakistan can hardly afford to fail to maintain a fine balance between the federation and the federating units. However, what we see is that the clientelist trends and capture of state resources illustrate the conspicuous weakness of the state institutions in Pakistan, which poses a serious threat to the federal project of the state. In addition, Balochistan relies heavily on federal transfers; hence, misappropriation and capture clientelism will fundamentally deprive the people at large of their just share of state resources. This is bound to create centrifugal tendencies, with adverse consequences for regional stability. South Asia is largely a multinational, multi-ethnic and multi-lingual region with diverse cultures and historical imaginations. Therefore, federalism is the only suitable system of governance for the region, and for the success of federalism, a cordial state-province relationship is imperative. The clientelist trends would lead to endangering such relationships with an impact on regional stability in the long run.

Policy Recommendations

Given the theoretical predictions and empirical evidence, the article may provide the following policy recommendations for the planners at the provincial level to consider:

The development budget may be processed and prepared purely by the Planning and Development Department with the consultation of line departments.

Influence of politics and political elite in reflection and the allocation of projects and funds to their districts/constituencies may be abandoned.

A comprehensive annual or 5-year development plan for the province may be devised at the earliest so that funds could be allocated to those sectors and districts that are in dire need of resources to come at par with other districts and constituencies of the province, if not the country.

Sectoral criteria for the allocation of the fund should be strictly followed to avoid wastage of resources.

The budget calendar may be strictly followed up so that the projects should be processed and included in the budget book on time and completed timely.

For proper implementation of the schemes and projects, the monitoring and evaluation wing of the Planning and Development Department must be staffed with relevant experts and made fully functional and autonomous.

Planning may be carried out by experts—economists, social scientists, educationists, etc.—in close consultation with district-level think tanks and universities, whereas bureaucrats should be restricted only to the implementation of the planned projects and schemes.

Footnotes

Declaration of Conflicting Interests

The author declared no potential conflicts of interest with respect to the research, authorship and/or publication of this article.

Funding

The author received no financial support for the research, authorship and/or publication of this article.

Notes

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