Allama Iqbal, the thinker of Pakistan, underscored the relationship between economic activity and human psychology and raised the question of the effect that it would have on a man's body and mind which would affect his human soul very deeply.
The mirror of the soul is tarnished and man is reduced to a nonentity, both morally and socially. He felt deeply for the poverty of the people, in the then British sub-continent, in the post 1857 war period.
He identified the following soul searching questions:
Is poverty indispensable in the present day world economic order? Is it not possible to free each individual from the shackles of poverty? Is it not possible that the heart-rending wails, of the poor in the streets of British India, are silenced for ever? Is it not possible that the heart rending and pathetic scenes of poverty are removed from the world map for ever?
The above questions were raised in his book Al-Iqtisad in 1903. He found the answer in 1930 when he delivered the historic address at the Allahabad session of the All India Muslim League. At that time, poverty in India, specially of Muslims, had touched rock bottom due to the British policy of Imperial Preferences which was to shift the burden of the world economic crisis namely, the Great Depression of 1929-30, to the colonies.
The questions created awareness about the crucial issue of poverty and helped develop a sound framework to reduce the poverty and finally eliminate it.
Economists have created a Gini index. This measures the level of income equality. Its scale is from 0 to 100. The higher the scale, the bigger is the level of inequality.
The lower the scale the lesser is the level of inequality.
Based on the World Development Report 2003, the following box has been prepared:
Box No 1: Gini Index - Global
===============================
Class Interval Frequency (f)
-------------------------------
1-20 01
21-30 15
31-49 98
50-63 19
133
===============================
Computed from: World Development Report 2003: Selected World Indicators, Table 2, pp 233-237.
The best country, based on the above calculation, is Singapore where the Gini Index is 19.
The highest Gini Index is 62, relating to Sierra Leone. The World mean is 41% and the Gini Index relating to Pakistan for 1998-99 is 41%. It is a coincidence that the Gini index of Pakistan represents the average of the World.
Efforts need to be made to ensure a steadily declining Gini Index.
Most of the researches conducted during 1990s have highlighted that poverty has been on the rise. However, General Pervez Musharraf, the President of Pakistan, has recently stated that during 2002 poverty has reduced by 0.8% for the first time compared to the decade of 1990s.
Based on various researches the growth trend of poverty presents a rising position namely, Amjad & Kamal, 1997: 22.1% in 1991 and 22.4% in 1993, Ali & Tahir: 27.9% in 1994, Federal Bureau of Statistics: 32.2% in 1999.
Pakistan is still in search of an economic system. We tried to follow capitalism during the 1950s and 1960s but the gap between the haves and have nots widened. Social destabilisation took place and resulted in the breaking away of former East Pakistan, which became Bangladesh towards the end of December 1971. During 1970s an attempt was made to introduce socialism - later labelled as Islamic Socialism. This also failed.
In 1980s and 1990s, we tried the mixed economic system but ended as a messed up economic system. Now in the 2010's we are now trying P3 (Public Private Partnership) but continue to await for the results ensuring a declining trend in poverty.
It would be interesting to note an excerpt from the inaugural speech of Quaid-e-Azam Mohammad Ali Jinnah, the father of Pakistan, of July 01, 1948, delivered in Karachi on the establishment of the State Bank of Pakistan, the Central Bank of the Country:
"In achieving our goal of creating a happy and contented people, we must work our destiny in our own way and present to the world an economic system based on the true Islamic concept of equality of manhood and social justice."
The crystallisation of the dream, of the father of the nation, stays as a future hope.
Pakistan has inherited the following significant legacies which are directly attributable to growing poverty:
a) Debt-burden: At present, there is an internal debt burden of Rs 1.17 trillion and $ 36 billion as external debt. Debt servicing of these debts has put a 40% burden on the recurring budget for 2003-2004 of Pakistan. This significant amount is not available for poverty reduction.
b) Defence imperatives: Due to the hostile posture of a neighbouring country, Pakistan is forced to maintain a large standing army. This has put a 36% burden on the above budget. If a diplomatic initiative is unleashed, twenty years no war pact execution between Pakistan and India can enable both countries to save a substantial amount and divert it to development which, in turn, can reduce poverty in the SAARC region and usher in an era of prosperity. Based on India-Pakistan foreign exchange parity, India has allocated Pakistan rupee equivalent of Rs 934 billion in their recurring budget, for 2003-2004, which is higher than the total federal budget of Pakistan for the above year, namely, Rs 805 billion.
c) Privatisation: Due to the globally unsupportive scenario and perhaps because of the lack of law and order situation in Pakistan, the privatisation process of state owned loss making enterprises has not been completed. The consequential effect has been in the shape of a burden of loss burden on the federal budgets.
Hopefully, the situation will improve in the future and therefore it is expected that due to accelerated efforts of the Privatisation Commission and Board of Investment, the privatisation process will be speeded up and, accordingly, the possibilities of collection of money due to privatisation will brighten up. Thus more proceeds will be available for allocation to poverty reduction.
d) Population growth: Based on Pakistan's Census of 1981, the yearly population growth was 3.1%. However, the actual results turned out to be around 2.6% per annum, based on the population census of 1998. The population growth of the past has been instrumental in the increase of poverty. Fortunately, a declining trend is now seen in the recent few years. If this continues in the future, a poverty reduction curve would be seen.
e) Tax Evasion: Tax evasion is a curse and instrumental to poverty increase. This is due to three major factors, namely:
i) Lack of commitment to contribute to the national exchequer due to low moral standards and the tendency to keep self interest above the interests of the country.
ii) Availability of tax exemption regime and tax immunities of the past: The existence of the second schedule, annexed to the Income Tax Ordinance 2001, is also instrumental for poverty increase. The vested interest need to be given a good bye and the coffers of the state would be beefed up if the above schedule, exempting for pensioners, is scrapped immediately.
iii) The total number of income tax payers, as on 30-06-2003, is around 1.5 million, which is slightly above 1% of the population. The potential, according to several sources, is much higher than the above number. Some estimate this number to be in the neighbourhood of 7 to 10 million. If the Central Board of Revenue accepts this single item agenda, prosperity will usher in and poverty trends will manifest a declining curve. This niche needs to be tried and will substantially increase the revenue base and accordingly will make a lot of funds available for poverty alleviation.
f) Burden of autonomous bodies: A sum of Rs 36 billion (23%) has been allocated in Pakistan's Federal Budget, for 2003-2004, for autonomous bodies. These bodies should be asked to undertake domestic resource mobilisation from the capital market and spare the consequential savings for poverty reduction.
PAKISTAN: POVERTY REVIEW AND STEPS FOR POVERTY REDUCTION: It is generally believed that one third (1/3) of Pakistan's population (45 million) is unable to generate income sufficient to provide minimum nutrition and other necessities of life. The break-up of the above number is: Rural - 32 million and Urban - 13 million.
Poverty alleviation measures have included the following:
1) ISPWP (Integrated Small Public Works Programmes):
These have now been transformed to the provinces - which are expected to properly utilise the amounts for efficient and effective development needs. They must ensure that the fruits of development reach the doors of the poor segment of society and their socio-economic plight continues to be ameliorated. A strong and effective monitoring system should be institutionalised to achieve productive results.
2) Food stamp scheme:
This scheme is being steadily expanded to alleviate poverty.
3) Zakat and Ushr system and Bait-ul-Mal:
The government deducts Zakat at source before disbursement of specified amount and later distributes. The informal sector is said to distribute around Rs 70+ billion for poverty alleviation. No winder the social order is not cracking down. The management system of Zakat and Ushr leaves much to be desired for improvement. An action plan needs to be developed for starting income generating efforts to alleviate poverty rather than perpetuate it.
The Bait-ul-Mal system of Malaysia needs to be properly comprehended for implementation in Pakistan. A delegation may be sent to benefit from the above system, in vogue, in Malaysia.
4) Micro Credit:
Several countries have tried the introduction of micro credit to alleviate poverty. Two successful examples from Bangladesh include: Grameen Bank and activities of BRAC. Pakistan has made a modest start in the government and private sectors. The performance of these institutions need to be carefully studied to examine their impact on reduction of poverty. The earlier this is done, the better. Greater allocation to these institutions needs to be made with a quantum jump to achieve earlier results in respect of poverty reduction.
Pakistan's interim poverty reduction strategy:
Effective 2002-2003, Pakistan is following an Interim Poverty Reduction Strategy with financial assistance from the IMF. This is a part of poverty reduction and growth facility.
This strategy together with our review is given below:
1) Accelerating economic growth and maintaining macro economic stability:
During the last several years of the 1990s, GDP growth has been volatile. However, during 2002-2003, GDP growth was achieved at 5.1%. The forecasted growth for 2003-2004 is 5.4% and for 2004-2005 is 5.8%. Macro economic stability has been achieved. It will be further strengthened in the future years, as is apparent from the following forecasts:
Box No 3: Forecasted Indicators
=====================================
Indicator 2004(%) 2005(%)
-------------------------------------
1. GDP 5.3 5.8
2. Agriculture 4.0 4.3
3. Manufacturing:
Large scale 8.8 9.0
SME 7.8 8.0
4. Other Sectors 4.7 5.7
5. Inflation 5.0 5.0
=====================================
Source: Extracted from: Federal Budget in Brief. 2003-2004, Islamabad: Finance Division, Government of Pakistan, Table 33, p.38.
Economists strongly believe that there is a positive correlation between growth of GDP and reduction in poverty. Therefore, Pakistan is on the right track, but a significant increase in GDP is a long term goal.
However, the government of Pakistan, in the Economic Survey 2002-2003 (p-52) has listed the following aspects to be pursued for productive results:
a) Maintaining fiscal discipline,
b) Rule based fiscal policy,
c) Financial sector reforms,
d) Investment climate and privatisation,
e) Augmenting regulatory framework and
f) Building supportive infrastructure.
It is too early to comment on the above. However, the steps being pursued by the government are in the right direction.
2. Investing in human capital:
Earlier there lip service was paid to HRM/HRD efforts. It is high time that it is realised that the developed countries successfully followed the path of economic development through the HRM/HRD revolution. The success story of Japan, South Korea, Singapore, Taiwan, Malaysia, etc testify and strengthen the above hypothesis. The government has identified the following dimensions of work:
a) Comprehensive reforms in education including:
i) Special education, health and population welfare.
ii) Capacity building for service delivery through the National Commission on Human Development.
b) Involvement of the private sector through public-private partnership (P3) and NGOs. The government of Punjab has allocated a sum of Rs 5 billion for the Special Education Programmes of the Chief Minister, in a total allocation of Rs 6 billion in ADP, of Rs 30.5 billion for 2003-2004. Hopefully the other suggested directions will be pursued in future.
3. Augmenting targeted interventions:
Targeted interventions to be made by the Government Include:
a) Small and Medium Enterprises
b) Micro Finance
c) Public Works Programme (Tameer-e-Pakistan Programme, Khushal Pakistan Programme, Drought Emergency Relief Fund)
d) Rural Development (including: agriculture, irrigation, livestock and fisheries and rural electrification)
e) Housing
The government is pursuing an institutionalised approach for (a) Projects to be undertaken for (b) have been authorised to be undertaken by provinces. Solid efforts are needed for achieving higher results under (c) and (d) by all stakeholders. A confident start has been made under (e) by the government. This housing sector has backward and forward linkages. Several industries get energised and employment openings grow in numbers. Therefore the implementation of the foregoing will be instrumental in alleviating poverty.
4. Expanding social safety nets: Unfortunately we, in Pakistan, have neither pursued the western model of social safety nets nor here we implemented the spirit of the Quran and Sunnah. Consequently, we could not provide relief to the poor sector of our economy. A suggested approach of the Government will be as under:
a) Zakat Program
b) Food Support Program
c) Employees Old Age Benefits Institution
d) Indigenous Philanthropy
Comments on the above have already been offered. The following box captures budgetary expenditure in respect of the above aspects:
Box No 4: Pro-Poor Non-Budgetary Expenditures
===============================================
(Rs in Billion)
Sectors 2000-01 2001-02 2002-03
(9 Months)
-----------------------------------------------
1. Zakat Disbursements 2 5 3
2. EOBI Disbursements 1 1 1
3. Micro-Credit Disbursements 1 1 2
4 7 6
===============================================
Source: Extracted from the Economic Survey 2002-2003, Islamabad, Finance Division, Government of Pakistan, Table 4.5, p-54.
Some pertinent figures relating to 2002-03 (9 months), other aspects include: Land Distributed 2,538 acres, food support program 1 million persons, Zakat 617,000 persons, temporary employment 318,089 persons, micro credit 225,000 persons, EOBI 132,000 persons and state land recipients 310 persons.
5. Improving governance:
Suggested directions to be followed include:
a) Political and Administrative devolution:
District Government experiment has been introduced and is expected to inspire confidence for local level decision making.
b) Fiscal decentralisation:
A sizeable chunk of money is being allocated to the district level governments out of the Provincial Annual budgets. A sum of Rs 65 billion has been allocated out of the Rs 148 billion revenue budget of Punjab for 2003-2004.
c) Access to Justice:
Through the establishment of the Ombudsman at the Provincial level and the Federal Tax Ombudsman, access to justice is being facilitated.
d) Civil Service Reforms
e) Freedom of Information Act
f) Anti-corruption strategy:
Steps are being initiated in respect of the above dimensions.
Financial Allocations:
Since there is no five-year development plan in Pakistan, a Medium-term budgetary framework(MTBF) is being pursued. The 9th five year development plan could not be finalised during Nawaz Sharif's government. Accordingly, financial figures are now available regarding pro-poor budgetary expenditures. The following box includes data relating to pro-poor expenditures:
Box No. 5: Pro-Poor Budgetary Expenditures.
=========================================================
(Rs in Billion)
Sectors 2000-01 2001-02 2002-03
(9 Months)
---------------------------------------------------------
1. Education 57 66 51
2. Health 18 19 14
3. Rural Development 11 12 10
4. Food Subsidies 9 6 3
5. Irrigation 8 10 8
6. Roads, highways & bridges 8 6 5
7. Water Supply and Sanitation 5 5 2
116 124 93
8. Others (Population planning, 6 10 6
social security, natural disasters
and calamities, land reclamation
and food support programme)
122 134 99
=========================================================
Source: Computed from the Economic Survey 2002-2003, Islamabad, Finance Division, Government of Pakistan, Table 4.4, p-53.
There is a need to substantially increase allocations to generate employment and result in income generating activities.
Poverty among farmers:
Most of the farmers depend on farming or farm-related jobs for their livelihoods. Two-thirds live in South Asia and Sub-Saharan Africa. Possible solutions to the poverty of farmers lies in the following areas:
1. Increase in yields
2. Switching to horticultural and animal products of a higher value
3. Improving the marketing and transportation system and related institutions
By the grace of Allah, Pakistan has achieved macro stability. All the macro indicators have been positive. The expectations of the common man are rising. It is high time that all stakeholders should commit themselves and pursue the noble cause of reducing poverty in the short run and eliminating the same in the long run. Positive consideration be given to various suggestions offered in this piece. Indeed the curve of poverty decline will take its shape and the dawn of prosperity will benefit millions of people and indeed the wish list of poverty reduction will crystallise into reality.
Comments
Comments are closed.