A new Pay and Pensions committee (PPC) is being formed. I fervently hope that it will be different from the past in seeking a far-reaching reform of an extremely outmoded system. I do hope that the government will constitute a committee of technically competent and reform-minded people. I also hope that the process of this committee will be open to include public hearings and culminate in a public debate based on a full publication of all findings and views of all members of the committee. All civilised countries conduct such committees on such principles. Pakistan should stop being an exception. We are facing a deep crisis primarily because we avoid reform of any kind and want to keep all privilege alive. The PPC offers us a good occasion to initiate a much needed reform of our civil service system. Government bureaucracy (i.e., all functionaries paid for by the taxpayer) is now fully maintaining all rent-seeking games - ranging from outright corruption to various subsidised land deals. This group has a deep vested interest in maintaining the current system that gives it a wealth transfer. To my mind, the key to civil service reform lies in. ? Opening out and breaking up of the monolithic structure to merit and external competition. For most appointments should be subject to external competition. ? Incentives for the civil service must be changed up front so that they side with the reform. Life in the public sector especially at senior levels is great because of perks. They have the best housing in town; the most prestigious spots are preserved for them in every city from Karachi to Peshawar. Their bills are taken care of. Cars are available free. Some servants are thrown in. They also have rent-seeking opportunities ranging from outright corruption to subsidised land in various governments operated housing schemes. And they do accumulate a lot and end up very rich. This system of perks has many drawbacks and exists nowhere except in the most backward developing countries. ? It creates an infrastructure for the maintenance of housing and cars which at its best is inefficient and at its worst both inefficient and corrupt. Tax resources are wasted as a result. ? It insulates public servants who are in charge of policy from the realities of life such as renting houses, paying bills, paying for cars etc. ? Protection of the perks/rent-seeking game becomes a priority of the incumbents since their comforts and cash income comes from there. Ethical standards decline as more and more dodgy schemes are introduced to increase their cash flows. Soon corruption is not regarded with any sense of moral outrage. The incumbents get more united in their common goal - the protection of the rent-seeking regime. ? Such a regime selects out the more honest and competent who may not wish to participate in the corruption and perks game. Such people would also be the more competent professionals who have a market worth outside the government. This means the more competent exit the government leaving behind not only the less productive people but also those with a greater proclivity towards corruption. ? Land development has become hostage to this system of compensation. It is not a commercial activity as it should be but a rentseeking opportunity involving all in power from the army to the judiciary. Accumulation of wealth should not depend on public handouts of land but on genuine savings through hard work and use of talent and knowledge. An important and critical reform would be a simple "one stroke" policy - monetize all perks and open every senior position to external competition. To begin with the salary could be fixed by monetizing all perks on very generous terms. To this monetized value could be added a premium to sweeten the offer. It should be generous and attractive to make the reform successful. Annual increases could be based on the rate of inflation and knowledge of what is happening in the market that could be obtained from market surveys. Dismantle the system of occasional pay commissions. Consider the advantages. ? With better salaries and open competition, we will be able to attract better talent into the government and encourage more mobility to and from the government. Officials need not protect their positions since there would be a good salary with no perks and privileges. ? By letting the secretary or minister not live in protected enclaves with rent paid by government, they will participate in the housing, car and financial markets as ordinary consumers learning how the ordinary people live. They will be more sensitised to the impact of their policy designs. ? The government will get out of the wasteful housing and car maintenance business. Not only will waste be eliminated but large tracts of city centres will be available for investment, hence opening out investment possibilities. ? By bringing in a better crop of people into government, increasing mobility in and out of government and shifting their focus to careers based on realistic salaries, they will be better focused on economic development policies. Wasteful activities like complicated regulation for bribe or perk extraction will be eliminated. The premium on housing schemes to get plots will be reduced. And so on and so forth. ? Maybe then we would be able to eliminate all government land development which is currently done only to provide subsidised plots to bureaucrats and army officials. Land development should be purely a private sector, for profit activity. Eliminating perks has the additional advantage of breaking the colonial mindset that permeates the public sector. The symbols of colonialism lie in the perks. Since all his needs are taken care of by the public sector, he is automatically put in a welfare mindset which guides his policymaking. The public servant is humanised to our level if he gets a straight salary and then operates like an ordinary citizen, feeling the pain of policy not being sheltered from it though perks. How do we finance such a scheme? Three means available. ? Privatisation of the perks, especially the urban land will certainly finance a large portion of the cost. ? The rest can come from clearly linking productivity in each department to the salary increase or decrease in each department thus motivating further reform for productivity. ? Finally donor resources are easily available for such a reform. So let us not hold back because of the lack of resources This crucial reform if implemented will shake up the system enough to cascade other reforms that we have been talking about for so many years. With good salaries and a more talented reform minded group moving into key positions looking for public sector productivity, the pace of reform should accelerate. The archaic system of competition and recruitment to the civil service has held us back for a long time. No developed country has a closed civil service system with compensation based on perks, rent-seeking and favourable land awards. Why do we keep these wasteful activities and continue to look for fiscal balance and growth? The writer is a former vice chancellor of the Pakistan Institute of Development Economics (PIDE)