THE government is now trying to contain the widespread discontent with a number of half-baked and hurriedly put-together economic programmes. The latest is the President¹s Rozgar scheme launched early this month.

Besieged by a widening opposition from both, within and outside, the ranks of the alliance of the conservative and self-seeking cabal that constitutes the regime¹s political base, the government is dithering on a number of fronts, domestic and external, on which it had overextended itself. Its economic agenda seems to be driven largely by the instinct of self-preservation and self-perpetuation, without any serious debate on its merits.

These external considerations seem to have pushed the government to resort to ad hoc decision-making, epitomised by the ³indecent haste² with which it decided to de-nationalise the Pakistan Steel Mills, giving the needed grist to the opposition¹s mill for staging a no-confidence motion against the prime minister.

Although most political pundits are inclined to give the current regime a walkover in the planned 2007 elections, there is likely to be a many a slip between the cup and the lip from now until the E-Day, during which all possible political manoeuvres by the military regime to manipulate a ‘favourable’ outcome can be expected.

It is in this light that the Rozgar scheme primarily aimed at stemming the rising tide of discontentment against the government’s economic policies, which are hurting the poor while giving an illusion of prosperity and affluence, needs to be viewed.

The much-trumpeted President¹s Rozgar scheme, is actually a misnomer, for it can do little to alleviate poverty and unemployment and smacks strongly of an electioneering gimmick to distribute patronage among prospective voters and to improve the bottom lines of the National Bank of Pakistan.

As the Chairman of National Bank of Pakistan, Mr Ali Reza, admitted on the launching of the scheme that ‘it would be beneficial not only for borrowers but also for the bank and would increase the prestige of the country.’

While the borrower will be charged six per cent per annum, the bank will receive almost an equal percentage amount as subsidy, raising the mark-up of the scheme to 12 per cent per annum. It seems rather strange that instead of entrusting the scheme to the Khushhali Bank and other micro credit institutions created to alleviate poverty with the help of grassroots NGOs and rural support programmes, the government has decided to work with the largest commercial bank which is highly bureaucratized and has little expertise in the disbursal of micro-credit funds.

Other banks flushed with liquidity, whose female telemarketers are calling selected account holders to avail of pre-approved bank loans of Rs0.5 million and above, may also join this lucrative scheme.

What is even more strange about this scheme is that it seems to be trying to kill too many birds with the same stone and its focus is very diffused. Although the scheme was announced in the last budget by the minister of state for finance, Omar Ayub, it seems the ministry of finance and the Planning Commission, who are primarily responsible for implementing poverty alleviation programmes, were not involved in working out its details or fixing its launching date.

Dawn¹s Afshan Subohi¹s persistent efforts to draw out responsible officials on the subject proved to be of no avail. Instead, it turned out that the scheme was the brainchild of the Presidency and that the new Minister for Women Development, Sumeira Malik, was given the charge of implementing it, although there was no mention of any specific focus on women in the scheme.

In any case, the scheme was sub-contracted to the National Bank of Pakistan, which was more concerned about making sure it did not hurt its bottom line than about alleviating the poverty of its prospective clients. All this illustrates the lack of close co-ordination among policy-making institutions in the government and the centralised nature of decision-making which revolves around the Presidency.

Political expediency, rather than economic rationality, seems to underline such decision-making. Even on that account, the scheme fails to meet the challenge the government faces in Balochistan, where the scheme is unlikely to find many takers and where, as admitted by the NBP President, that the bank’s branch network is not very strong.

The scheme envisages the creation of 400,000 jobs with the expenditure of Rs12-20 billions per year to the exchequer for the next five years. The fiscal and monetary implications of such a large credit creating scheme, which requires the subsidisation of about half of the interest cost of the loans, have not been clearly spelled out or evaluated by the government or the State Bank of Pakistan.

Since no additional taxation is envisaged and the funds are internally generated, unlike other micro-credit programmes which are backed by external resources, the inflationary impact of this scheme is likely to be significant.

The employment and income generation effects of the scheme seem to be highly exaggerated and have not been clearly spelled out. The National Bank of Pakistan has hardly the capacity or expertise to undertake a rigorous economy-wide study to evaluate these effects, which should have preceded the launching of the scheme with such fanfare.

As a strategy of alleviation poverty alleviation, the scheme is deeply flawed in many respects. First, it is profoundly lacking in its outreach and scope and fails to reach the poorest of the poor or the most deserving among them.

The scheme is restricted to matriculates between the age of 18 and 40 years who would be willing to borrow money at the rate of six per cent per annum for investment in five specified projects, viz. Karobar utility, Karobar mobile general store, Karobar transport, Karobar PCO and Karobar tele-centre, which could require an investment of up to Rs0.2 million.

The requirement of a guarantee by someone with verifiable assets. The lending bank has asked the government to amend the banking recovery laws contained in the Financial Institutions Ordinance 2001, so as to permit summary attachment and sale of moveable and immovable assets of the guarantors including borrowers without first obtaining a decree.

Secondly, the government claims that it had conducted a study which showed that out of total 16 million youth in the country, 40 per cent will be entitled to benefit from this scheme. Even if this claim is taken at its face value, it would be ingenuous to assume in view of the government¹s dubious record on economic data. It shows that the scheme would cover only the upper 40 per cent who have the ability to borrow, while the more needy 60 per cent will be left out.

Even out of these 40 per cent youth, many will not be able to afford the loan package or provide the necessary guarantee. The eligible borrowers will be required to make a down payment of 15 per cent.

Asset and Life and Disability insurance will be mandatory under this scheme. Such strict provisions are likely to restrict the access to the scheme to relatively well-heeled people or their relatives.

No provision has been made to ensure the avoidance of ‘elite capture’, which similar employment-generation schemes, such as the ‘Youth Investment Promotion Society’ (YIPS), ‘Public Transport Revamping Scheme’ (Yellow Cab scheme) and ‘National Self-employment Programme’ (NSP) have suffered from in the past.

Thirdly, the scheme fails to address the real issue of unemployment and poverty faced by the majority of the poor, which only a massive employment scheme guaranting sufficient employment to each household, would enable it to live above the poverty line. The launching of such a scheme, which has been in operation in for over three decades and has recently been implemented in India on a country-wide basis through an act of Parliament passed a year ago, can alone address the poverty problem at its roots.

Indeed when I heard of the Rozgar Scheme, without any details, I thought that the government had belatedly awakened to the need for such a scheme, with appropriate modifications in the Pakistani context.

Unfortunately, while the Indian government may be paranoid about cross-border terrorism, Pakistan is equally averse to the transference across the border of good economic ideas and experiments which have been widely acclaimed the world over.

The approach of EGS as a poverty alleviation strategy is unique because it guarantees employment at a defined wage work programme- ‹an unprecedented feature in a public works programme. By making employment an entitlement, EGS facilitates collective political action by the poor, and promotes the realisation of their common interest.

However, the scheme that the government is going to spend billions of rupees on in the next five years, is highly politically motivated and, like the previous such schemes, is designed to maintain the elitist social and economic structures.

It is about time that the government and development specialists in Pakistan gave serious thought to the development of a national employment guarantee scheme as an instrument of poverty alleviation and unemployment reduction.

sm_naseem@hotmail.com