The NWFP Government is holding its first development forum to discuss issues of economic growth and policy. This paper written for the Regional Institute of Policy Research & Training, Peshawar and presented to the forum raises important issues for deliberation.
The United Nations decided through the Millennium Declaration, 2000 to halve poverty by 2015. Pakistan is a signatory to this declaration. The declaration was translated into a set of 8 Millennium Development Goals;
Development Goals-1-6 define key dimensions of poverty
– Low income and hunger
– Lack of access to education
– Gender inequality
– Child and maternal mortality
– Exposure to pandemic diseases
Goal 7 deals with environmental sustainability
Goal 8 deals with global partnership, sustainability and development which could eradicate poverty.
The good news
The performance of Pakistan and NWFP in reaching the MDGs in;
– Adult literacy
– Action against TB
– Women participation in assemblies / local council
– Pro-poor expenditure increase
– Public investment in education
– Initiative for skill training and job creation
– Limiting government’s direct economic role
Are all matters on which some progress has been made; it is however, debatable whether limiting government role is good for the poor?
The bad news
As the enclosed chart indicates selected MDG trends for Pakistan are falling short from the millennium targets in the following areas;
– Reduction of poverty; although it has begun to decline but not according to the indicated MDG rate of decline.
– We have not met the target for reduction of under 5 mortality rates
– We have failed to increase the net primary enrollment ratio
– We have met the target of population with access to safe water. However, the worrying factor is that our higher coverage then the MDGs has begun declining and during 2000-05 it dropped from 69% of coverage to the millennium target of 66%.
Graph adapted from an article Understanding the MDGs at age Five
By Jan Vandemoonrtele, UNDP
The MDG target of reaching gender parity in primary education has not been met; although there has been progress.
– The MDG target of reducing proportion of under weight children has not been met. Actually there is an increase of such children from 40% in 1990 to 42% in 2000 and the trend line appears to increase the gap between target and performance. This is an indicator which shows poverty increasing and therefore supports the first conclusion that poverty has increased.
Causes of poor performance
The Planning Commission has indicated that income distribution is skewed, and the Gini Co-efficient has increased despite healthy economic growth. Growth, without policies for income distribution will increase poverty both population wise and regionally, and lead to future social problems. The very outcome which the MDGs want to avoid. The main reason for this is because of mal-distribution of assets in the population.
Our tax policy is based on indirect taxation, which increases the deprivation of poor, who are taxed to subsidize the rich. In spite of rapid growth and higher capacity utilization in manufacturing sector, the tax to GDP ratio has fallen in the last 2 years (2005).
If rapid growth was to act as the fuel for increased spending on MDGs then that has not happened and the benefit of growth has gone to the higher income groups. For instance last year the collection by the government from petroleum levies alone was approximately Rs. 35 billion; the poor obviously paid a far higher percentage of their income into this forced tax.
There is a lack of emphasis on pro-poor livelihood measures like;
– Increasing their share in productive assets like land, water, forest, irrigation, roads, livestock, agriculture extension, micro credit and land distribution. Witness the rapid decline of the road infrastructure in NWFP and the decline in the quality of government regulation in the rural areas; the state inadvertently has played into the hands of the feudal rural elite. The class divisions have become greater.
– Unless supportive policies are in place to achieve public sector policy and budgetary transformation for addressing the above problems, measures like the PRSP will be scratching the surface of poverty and not challenge its endemic causes.
– The governments must rejuvenate minimum responsible public sector institutions, which will deliver the goods and policies helpful to the poor.
– Their design should be anchored in accountability, based on performance auditing as a permanent function of government and incorporating a public accountability law, where each budgetary grant is tagged to performance indicators based on outputs and outcomes.
– The poor need assistance to be socially mobilized by building collective organizations enabling collective decision making by strengthening community and community action.
– In this connection, the NWFP had developed a Sarhad Provincial Conservation Strategy as far back as 1996. It is so far the best policy prescription to have come out in the last decade, which is pro-poor and aims to remove poverty through communal action and empowerment. In many ways the MDGs and PRSPs are already incorporated within it; in its presence is their a need to re-invent the wheel? Why don’t we fine tune this policy prescription and put it into practice in meeting the MDG goals?
– We must review cost recovery policies based on user fees. For example all basic social services which comprise basic education, primary health, reproductive health, water and sanitation, nutrition, maternal and child care are all public goods with positive externalities and must be either free or subsidized, Most states need to expand, not contract, their public sector,(South African Finance Minister).
– Steps should be taken to avoid subsidy capture by the rich for goods meant for the poor. Administering such programmes can be expensive. Such programmes should be delivered to the mobilized poor, who have been organized for it otherwise programmes for the poor become poor programmes.
– Pakistan must review financial deregulation, which has been put into the national PRSP, as it is deeply embedded within Williamson’s liberal market economy; most banks here have shifted to urban based consumer lending rather than concentrating on the more expensive & tiresome but poverty effective rural based lending. Urban lending leads to under cutting of rural jobs and increasing income disparities.
Problems of the NWFP
This province suffers from the above drawbacks as well as additional ones.
– The MDG goals need to be more closely aligned with other provincial activities under taken through different policy reform programme like the MTDF, PRSP or the new World Bank credit. The throw-forward of all the policy prescriptions will be way beyond this province’s capacity; we are in many ways mimicking the regime prevailing during the period of the Social Action Plan, which was again a pro-poor programme, which met an untimely end. Are the MDGs heading the same way a monetary melt down? I hope not because that will be tragic.
– The emphasis of the reform agenda is primarily to focus on increasing employment in the private sector as the main weapon for removal of poverty. For instance the PRSP-II approved by the NWFP cabinet projects an increase in job creation between 2005-10 of 1.2 million in the private sector and a reduction of unemployment from 13% to 9.6%. Both measures will need job creation of above 2, 50,000 jobs per year; under the existing circumstances the target appears too ambitious.
– The areas in which capacity is required within government to manage the PRSP-II reforms is beyond the present or the likely future capacity of government. Therefore, we must be creative and begin delivery of services and programmes through civil society organizations, which are regulated by government but which leave no pension or other traces on the fragile financial profile of NWFP.
– There are no indicators to suggest that the capture of reform process by the vested interest has been less than in the past; we have as yet not found the formula of who will watch the watchman?
– The expenditure accountability levels are not robust and policy is driven more by maintaining security of finances rather than provision of better services to the poor; jobbery rules priorities.
– The Finances of the province are so dependent upon centralized distribution by the federation (90%), that a small problem could be calamitous for the financial managers.
– Although there is devolution from the province to the district yet there is no such transfer from the federal to the provincial level.
– Sadly, the federal ministries have begun preparation of PC I, projects for meeting MDG targets based on federal rather than provincial leadership; this will further reduce the provinces capacity and will disempower it even more. This will not help the pro-poor policies which the province and the donor community support for this province.