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The Strategy Of Economic Revival And Poverty Alleviation: The Challenge Of Implementation
Dr.Akmal Hussain
Newspaper: News Pre-Budget Seminar, 2000-2001 May 9, 2000
Dated: May 19, 2000

Poverty Alleviation initiatives have traditionally been mere marginal additions to mainstream policy. For the first time in Pakistan's history, poverty alleviation has become the centre piece of the strategy of economic growth. In this context a two pronged approach has been adopted. The first prong consists of a set of policies that would not simply accelerate GDP growth but would also induce a change in the structure of growth itself so as to enhance its capacity to alleviate poverty. The second prong consists of building institutions both at the national as well as grassroots level through which a direct attack on poverty could be undertaken. In this essay policy initiatives with respect to each of the two prongs would be briefly elaborated, the strategic linkages between the two prongs specified and finally the necessary conditions for successful implementation indicated.

Poverty in Pakistan has grown during the last 12 years at a rate unprecedented in the country's history and perhaps in the contemporary developing world. For example the percentage of population below the poverty line has increased from 17% in 1987-88 to over 30% in 1998-99. The levels of unemployment have increased even faster as a sharp slow down in economic growth has been accompanied by a decline in the employment elasticity of GDP growth. The social dimension of this phenomenon can perhaps be grasped by the fact that every third household in Pakistan to-day is going hungry. The overwhelming emotional pressures of hunger and unemployment in families has been poignantly expressed in the fact that for the first time in Pakistan's history large numbers of men and women have committed suicide leaving behind written evidence that they chose to die rather than bear the indignity of being unable to feed their families. Given the magnitude and pace of increase in poverty and unemployment, it is clear that macro economic growth must be restructured so as to increase employment and incomes of the poor for given growth rates of GDP. This concern has been addressed by three macro economic policy initiatives: (i) Policies for increasing the production of milk, fisheries, vegetables and flowers. The output of each of these products can be increased by poor peasants and small farmers living close to urban centers. If credit, marketing facilities, refrigerated transportation and storage for exports could be facilitated for these products, then not only could the incomes of poor peasants be sharply increased but Pakistan's GDP growth and exports could also accelerate significantly. (ii) A sharp increase in small and medium scale industries producing high value added exportables is being aimed at by providing the necessary support system. This support would consist of (a) providing credit, (b) technical support for quality control, (c) common facilities for heat treatment and forging, and (d) marketing facilities. Small industries have been known to generate higher employment output and exports per unit of investment compared to large scale manufacturing. Therefore it is clear that an increase in the weight of these industries in total GDP would help to accelerate national output employment and exports at relatively low levels of investment. (iii) The tax structure in Pakistan is not only skewed in favour of indirect taxes but is also characterized by a low tax elasticity with respect to GDP growth. Consequently not only is Government operating under pressure of low tax revenues but also the burden of taxes adversely affects the poor rather than the rich. For example according to a recent study the burden of indirect taxation reduces the real income of the bottom ten percent of the people while it increases the real income of the top ten percent of the population. The policies of restructuring GDP growth would be incomplete if the tax structure was not rationalized in such a way that the percentage of direct taxes is increased and the tax GDP ratio is improved. Rationalization of taxes is also necessary to remove distortions whereby investors in high value added goods and exports are discriminated against.

The second prong of the strategy of economic revival and poverty alleviation consists of establishing both national apex institutions as well as village/mohallah level institutions through which a direct attack on poverty can be launched. In this regard new apex institutions such as the Pakistan Poverty Alleviation Fund (PPAF) and the Micro Finance Bank have been established. The purpose of these institutions is to help, foster village level community based organisations (CBOs.) which could provide skill training, technical support and micro credit for income generation projects of poor households in both the rural and urban sectors, to initiate a process of Participatory Development. This process involves creating organisations of the poor, through which the poor can acquire new skills, increase their productivity, savings, incomes and thereby become active subjects rather than the victims of the process of economic growth. As the poor get capacitated and begin to take the decisions that affect their economic lives and as their incomes and savings increase, the poor could become significant contributors to GDP growth. This is the second prong, through which as the poor shift out of poverty the GDP growth would become higher and more equitable.

As far the people of Pakistan are concerned what matters to them is not that an imaginative new strategy for poverty alleviation has been articulated. What matters to them is that such a policy be implemented rapidly to make a palpable impact on their lives. If the policy of economic revival and poverty alleviation is to come to fruition, three challenges to implementation must be addressed: (i) At least 400,000 community based social mobilizers/facilitators must be developed over the next three to five years. These social mobilizers should be trained in community management skills, village level banking and a wide range of skills necessary to support micro enterprise projects. These social mobilizers/facilitators would have the task of organizing and managing community based organisations (CBOs.) at the village/mohallah level and to access micro credit and technical support from government, donors, larger NGOs and the private sector. It is only when a large reservoir of village/mohallah level social mobilizers is created that it will be possible to implement and sustain government policies of decentralization at the district level. In the absence of social mobilizers and the countervailing power of the poor, devolution to district level governments will increase oppression and injustice in those districts where powerful feudal and other vested interests dominate the local structures of power.

The second challenge of implementation is to undertake a Civil Services Reform. Such a reform should aim to reduce the number of civil servants drastically, fill key positions by professionals and create adequate goal oriented evaluation and monitoring systems. An essential feature of the civil services reform would be the training and orientation of a new cadre of district level professionals who would be trained and committed to serve the people rather than rule over them at the district level.

The third challenge of implementation is to create a new data set at the village level that would enable the formulation and implementation of development policy at the district level. Such a data set would provide district level information on three issues: (a) A Poverty Map that should show the location and size of poor communities in each district. (b) The map should also articulate the specific mechanisms through which the poverty of each community is reproduced. It should also identify the interventions that can be made to break the nexus of poverty in each district. (c) An assessment of the various actors on the ground that are claiming to alleviate poverty in each district. Such an assessment should present a typology of NGOs, government departments, donors and private sector in terms of the impact on the poor, cost effectiveness, speed of coverage and quality of leadership. It is only such a dynamic Poverty Map that would set the stage for efficacious action by district level governments and provide a basis for evaluating the impact of such action over time.

In this essay I have indicated the outline of a strategy for economic revival and poverty alleviation on the one hand and the challenge to implementation on the other. The seriousness and effectiveness of the government will be judged not merely in terms of what it says but in terms of the result that it produces on the ground.

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