October 27, 2003	Monday	Sha’aban 30, 1424

Pakistan is trapped in poverty. The trickle-down theory is not working. Human development indicators are falling and poverty is rising.

The absence of “feel good” factor has provoked many independent economists, scholars, social planners and researchers to lend support for a more holistic approach towards sustainable development.

A number of policy options that help and not hurt the poor while sustaining macro-economic stability, were spelt out by Dr Kaiser Bengali at a conference in his presentation on “towards development for the people.”

The echoes of “social exclusion” now resound louder than the sermons that, “ pains now will bring gains in the future.”

According to the SPDC estimates, the per capita income at constant prices of 1980-81 has gone up by 27 per cent between 1988-1999 for ten per cent richest households. For the ten per cent poorest households, there has been a drop in incomes by 16 per cent. The trend has been strengthened since then by market reforms and focus on macro-economic stability.

The UNDP report 2003 shows that the country’s ranking on human development index (HDI) has fallen and 19 per cent of its total population is under-nourished. About 65.6 per cent of the people earn less than two dollars a day. Thirty four per cent of the children do not reach the primary school. Estimated maternal mortality rates have doubled from 200 in 1995 to 400 per 100,000 live births. Infant mortality rate is 84 per 1000 live births. Youth unemployment has increased from 5 per cent of the labour force in 1990 to 13 per cent in 2001. Latest figures put the unemployment rate at 8.3 per cent, up from 7.8 per cent.

Social planners look at human development indicators as a useful, if not a perfect, measure of development outcomes. Macro-economic data, such as GDP growth, is not seen as indicator of development as a whole. It may be relevant to add that the economic growth rate ceases to be of any social utility once the trickle-down theory is proved redundant.

In the realm of policy-making, there is much divergence of views between independent and official economists as was evident in the deliberations of the two-day conference organized by SZABIST on “budgets and sustainable development.”

Economists and researchers stressed that missing in the budgets are the two key aspects,efficiency and equity, whether it is household or regional incomes. Governance suffers from lack of capacity of the administration to deliver.

To quote a leading industrialist, “ authoritarian rule has destroyed institutional framework and institutions based on diffusion of power.” The parliament stands paralysed.

“The political backdrop for reforms in Pakistan remains somewhat fragile,” says a deputy managing director of the International Monetary Fund (IMF). He elaborates, “such a fragility can be exploited by the opponents of reforms and government may feel constrained in its ability to move ahead on reforms, given the need to give social stability.”

And the authority and responsibility for economic and social development are not equitably shared by the various institutions and tiers of the governments that could impart efficiency to the economy.

Not a single major tax that could yield handsome revenues has been devolved. The nation’s purse-strings are controlled by the centre. The provinces and the districts have been denied fiscal autonomy. The people are not being empowered to shape their own destiny.

There is no constitutional or political forum for distribution of development budget among the provinces and the federation.

Often, mega projects are launched for exclusive benefit of one province at the cost of other provinces. The priorities in the PSDP are set and controlled by the federal government and only residual is passed on to the four provinces. The approval of projects is done, on case by case basis, by the ministry of finance though the development priorities are determined by the Planning Commission.

The devolution at the district level, a good move though executed badly, has created over-dependence of the districts on the federal and provincial governments for resource generation. For example in Sindh, the districts have a very narrow base of their own resources,just Rs1 billion against fiscal transfers of Rs34.5 billion.

A major chunk of the resources goes towards establishment charges whose efficiency, competence and integrity is doubtful, says Mohammad Sabir, economist at SPDC and adds: “Of the total current revenue, Rs20.8 billion is spent on salary and Rs2.5 billion on non-salary account. No less than 31 departments and sub-departments have been transferred from the provinces to the districts. Thus, the district governments are left with inadequate resources for maintenance and creation of assets.

Over-centralization has discouraged revenue mobilization and has constrained the economic development based on local potential. The absence of provincial autonomy has created conflicts between district and provincial governments, between MNA/MPAs and local body representatives. The National Finance Commission has not been constituted since the elected government assumed office.

The National Economic Council has deviated from principles of policy stated in chapter 2 Part II of the Constitution by ignoring the issue of regional development. Article 37 on promotion of social justice lays down that NEC should promote, with special care, the education and economic interests of backward classes and areas. This is outside the vision of policy makers.

Many more drawbacks in budget formulation and execution have been pointed out by a social planner and a retired UN official Nazar Memon, leading to the conclusion that budget-making process should be totally revamped.

The “on-going projects” and heavy recurrent budget allocations blur targets and leave very little room for innovative approaches.

Budgets do not show how projects are related to overall programme and make assessment of resource use very difficult, if not impossible.Monitoring is focused on financial targets and not on physical achievements resulting in escalation of project costs and misuse of funds.

Too much focus on departmental allocations and physical targets do not correspond to terms of key strategies. They completely fail to align with particular strategies.

And the conceptual approach to development contains what Nazar Memon says, a “missing middle”: that of human development, human behaviours, values and practices.” Human development approach in development process gives emphasis to “investing in people.” Studies have revealed that returns on basic education are in the range of 15-18 per cent at primary and secondary levels and have also strong positive effects on poverty reduction.

But scholars, researchers and economists fail to take into account political factors that influence the course of economic development. They look at the economy and not political economy. The solution of the economic problems lies in the realm of politics. What is needed to put things right, is a power shift towards building of democratic institutions and abolition of authoritarian rule.