Rethinking Strategies for Poverty Alleviation in the South Asian Context

Bushra Gohar


Background:

South Asia is home to the poorest with 43.5% of the world’s poor surviving on less than a dollar a day, is the most illiterate with some 400 million illiterate adults, the most malnourished with over 80 million malnourished children and above all the least gender sensitive region. Preventable diseases kill 3.2 million children each year. Girls and women form the vast majority of these deprived millions. The region has also emerged as the most poorly governed regions in the world.

Though the estimates of the incidence of Poverty vary widely in the region, the basic fact that all the seven countries in South Asia are deeply entrenched in mass poverty remains unchallenged. A recent UNDP’s report an increase in the number of poor people in South Asia in the 90s with the exception of Sri Lanka. This is indicated in the graph below.

As observed earlier the region has made very little progress in eliminating illiteracy. With over 400 million (1) illiterate adults, nearly one half of the world’s total and over 50 million out of school children it is the most illiterate region in the world. 45 percent of the world’s illiterate female adults live in South Asia. The social and economic implications of such neglect are without doubt huge.

Reproductive health in the region is in a dire state because of neglect of women’s health and nutrition during pregnancy and lack of facilities for safe delivery. Similarly the incidence of malnutrition among children is very high. Although income poverty remains a severe problem in the South Asia, Human Poverty affects a larger share of the population. In income poverty Pakistan appears to do better than India, but in human poverty India fares better. The dimensions of human poverty vary in intensity across countries in the region. This is highlighted in a UNDP 1999 report analysing Human Poverty in four of the South Asian countries as follows:

Human Poverty Indicators:

Source UNDP-1999a

The region has a very high population growth, which according to one report is expected to cross 1330 million in the 2000-2005. Given the slack in economic growth in the region, the problems of mass unemployment, health erosion, illiteracy and inequality, hunger and malnutrition will invariably increase with the population growth. The ecological imbalance emanating from the heavy erosion in the mountainous region may lead to serious problems of flood, drought and other national disasters of catastrophic magnitude. It is one of the most disaster prone areas—with recent floods and drought in India, Bangladesh and Pakistan devastating the areas where they occurred.

Rapid urbanisation in South Asia is giving an explosive dimensions to its widespread poverty and human deprivation. Today about one in four South Asian or roughly 330 million live in cities. South Asia’s rate of urbanisation over the last quarter of a century has been faster than all the regions of the world except East Asia and the Pacific. At the rate it is multiplying, nearly half of South Asia’s population will be living in urban areas by the year 2025 (2).

The regional growth patterns in most of the critical sectors, including agriculture, industry, manufacture and services have not recorded any perceptible increase.

With the regional average savings rate of 13.28 percent and investment rate of

18.65 percent, South Asia has been in the vortex of resource crunch. The situation has been further affected by the ever, increasing balance of payment deficits. With no immediate shift in the production and export structure of the region, this deficit dynamics will further deepen thereby aggravating the dependence on external finance. Presently the regions external debt exceeds 150 billion dollars.

Despite the poor economic and social sector development, the spending levels on defence are very high, particularly in India and Pakistan, who together spend over USD 12 billion a year on defence. The international aid for social sectors development i.e. education, health and people’s empowerment is approximately 9 percent not an adequate level to ensure human poverty alleviation in the area.

Despite such a daunting situation, there is an apparent absence of political will for tackling the growing human poverty in the region. The previous very slow annual rate of progress is maintained the region will take over century to move to high development category.

Why is the region in such dire state?

The nature of poverty in South Asia is characterised by common symptoms of :

• socio-economic deprivation,
• rampant corruption,
• poor governance,
• political instability,
• Religious fundamentalism
• Regional volatility
• politico-cultural alienation,
• inaccessibility to state resources and technology.

It is important to note that the identification of these symptoms have always been a complicated in the region and administratively problematic exercise. Over the years, the very profile of poverty has become multidimensional requiring comprehensive and well-devised measures to combat it.

Case Study: A Profile of Poverty in Pakistan:

More than fifty years after independence, Pakistan’s most critical socio-economic problem remains its widespread human poverty. According to the Poverty Report 1997-1998 published by UNDP, Pakistan has not been able to provide a better or satisfactory standard of living for its people. The current level of unemployment/under employment is about 16%. Since the population growth is 2.8% per annum, 1.1 million people would be added to the labour market each year. With the limited absorption capacity of the labour market, nearly half of these new entrants would be unable to find jobs.

In the 1999 HDR Human Development Index (HDI), Pakistan ranked 138 out of 174 countries (previous ranking: 134). Its Gender Development Index (GDI) for 1997 was 116 lowest being 143, with a Gender Empowerment Measure (GEM) of 101, where only one country scored a lower ranking (Niger at 102). Both the percentages as well as the absolute numbers depicting this deprivation are mind boggling:

• 42 million people—or roughly 30 percent of the population in Pakistan are income poor;
• 47 million adults or 62 percent of the adult population cannot read or write;
• 29 million of these or 76 percent are women.
• 8 million children are out of school;
• 61 million people or 45 percent of the population have no access to safe drinking water;
• 54 million people or 40 percent of the population have no access to even basic health services;
• 72 million people or 53 percent of the population have no access to sanitation;
• 9 million children under the age of 5 or 38 percent of the under 5 population are malnourished.

The bulk of the poor are rural and female. Mounting debt service payments and military expenditures leave very little for social sector investments. Government expenditures on the social sectors have averaged less than 3% of GNP. In addition, factors such as skewed income distribution, absence of land reforms and agriculture income tax, an overwhelming reliance of fiscal policy on indirect taxes, rampant inflation, weak public sector and weal or mal governance have caused social indicators to remain unacceptably low and have perpetuated and exacerbated geographic disparaties.

One report (Mahbub ul Haq Centre, 1999) concludes that the number of absolute poor increased from 24 million to 42 million between 1990 and 1995. This is consistant with the slow down in economic growth experienced by Pakistan in the 1990s, the drop in foreign investment, falling remittances, inflation and cuts to the development budget. It is also consistant with Pakistan’s high population growth rate. Despite a fall in the fertility rate to 2.8% in the late 1990s, the current population of 130 million is likely to increase to 250 million by the year 2020 (UN, 1997).

National Poverty Reduction Strategy

The Government of Pakistan has undertaken a number of initiatives to address poverty over recent years. It constituted a Task Force on Poverty Eradication in 1997 and established a Working Group on Poverty Alleviation in 1998 to contribute to the 9th Five Year Plan.

Critically though, Pakistan still lacks a formal poverty reduction policy and action plan, but the preparation of such a strategy is underway.

In the first quarter of 1999, UNDP (through the Local Dialogue Group Process involving government, civil society and the international community) supported the Government of Pakistan in the drafting of Pakistan’s first ever "Federal Human Development and Poverty Strategy". The draft strategy was not adopted by the GoP formally because the Pakistan Development Forum in Paris, where it was to be launched, was deferred twice in 1999 and then the government changed in October 1999.

Since then, the GoP has been involved in a lengthy process of drafting the Interim Poverty Reduction and Growth Strategy Paper, in an attempt to meet IMF terms and conditions. The most recent IPRSP was released just in September 2000, and is widely circulated amongst the international community. It is expected that the final PRSP will be approved in early 2002, with the draft having been through a series of consultative workshops in 2001. In the meantime, a standby loan is being negotiated with the IMF to cover the next 10 months.

There are a number of Poverty Alleviation Programmes established in Pakistan:

• Social Action Programme (SAP), the main Government Social Sector Programme
• Pakistan Poverty Alleviation Fund Corporation (not-for-profit, private company established by the government to provide microcredit, community based infrastructure and capacity building to NGOs working with the poor).
• Rural Support Programmes

The extended family system remains Pakistan’s important social safety net (World Bank, 1995). Pakistan has two major Government cash transfer safety net programmes, Zakat and Ushr and the Bait-ul-Mul. In recent years, the government also established several credit schemes to promote self-employment and employment, examples being the Yellow Taxi Scheme and Small to Medium Enterprise Development Authority (SMEDA).

Under discussion in the new IPRSP are the following:

• A revamping of the Zakat System
• Food Assistance Programme
• Integrated Rural / Urban Development Programme (an intensive public works programme)
• Microcredit Bank (transferring the loan portfolio of the RSPs to the Microcredit Bank)

Redefining strategies for change:

The growing income and human poverty challenges faced by the region needs to be addressed through integrated policies at the national, regional and international levels. Just as the incidence of poverty is multidimensional the states will need to adopt multidimensional approaches to addressing root causes for the present situation.

In this process it is important for each national government to recognise the potential of the people of the region. Further, in order to formulate a realistic financial strategy, the main focus should be on the reallocation of existing budgets. The current military spending levels, which are quite high, particularly in India and Pakistan, will have to be cut substantially and allocated for the alleviation of human poverty. This expenditure can be considerably reduced if regional and international efforts are strengthened for negotiations and mediation for a peaceful settlement of all outstanding disputes.

South Asia must concentrate all its efforts to ensure basic education for all its children within the next five years. This will require schooling facilities for an additional 65 million children; training for an additional 2.05 million teachers, three fourths of them female; and total estimated recurrent cost of USD 1.15 billion a year or 0.3 per cent of the combined GNP of South asia during this period (3). A number of innovative methods may also provide adequate funding for the goal of universal primary education. Some countries have resorted to special levies earmarked for education spending. Pakistan levied a special Iqra surcharge on all imports to raise substantial revenues for education but, unfortunately, the revenue proceeds were not separated from the general budget and therefore never earmarked specifically for education.

South Asia must also produce sufficient technical skills to accelerate its economic growth and to position itself for the competitive challenges of globalisation in the twenty-first century.

International donors should allocate a higher percentage of their existing aid funds to education, particularly basic education and technical training. At present only 9 per cent of external assistance to South Asia is allocated for human priority needs ie basic education, primary health care, nutrition, safe drinking water, and family planning services. This is less than half of what needs to be done in the spirit of the 20:20 compact endorsed at the World Summit for Social Development held in Copenhagen in 1995.

Another innovative mechanism for addressing the twin concerns of high external debt servicing and low education spending is debt for social development swaps. Unfortunately, South Asia has no been a beneficiary of such swaps even though the region’s external debt exceeds USD 150 billion. If South Asian governments improve their fiscal management and overall economic governance, they will be in a position to negotiate such debt for social development swaps.

Finally and most importantly, Regional cooperation is no longer a matter of choice for South Asia. At a time when countries throughout the world are regrouping on the basis of economic blocs, South Asia can ill afford to remain immobilised in political discord. In fact, the potential for co-operation between the SAARC nations is enormous. The region has a potential market of 1.2 billion consumers; the largest middle class in the world, hard working low wage labour and tremendous potential to unleash the creative energies of chained economies.

On the economic front, South Asian countries have been more enthusiastic about opening their domestic markets to countries outside the region rather than to each other—only 13.3 percent of South Asian total trade is with in the region compared to over 55 percent for ASEAN countries..a small step towards economic integration could translate into net benefits of nearly 1.5 billion dollars (4). Much greater cooperation as envisaged by the 1993 South Asian Prefrential Trade Agreement (SAPTA) could make these gains from cooperation even larger. This would also reduce the extensive smuggling of goods across borders. Greater cooperation will lead to a revolution in the communication and energy sector.

Greater South Asian co-operation could lead to a substantial ‘peace dividend’, without sacrificing human security in the region. Civil society initiatives can also gain new impetus from greater South Asian cooperation. For instance, Bangladesh, which has some of the finest NGOs in the world, has much to teach other South Asian countries about ways to operate successful educational and micro-credit programmes for the poor.

Notes

1) Mahboobul Haq Human Development Report--2000
2) Mahbubul Haq Human Development report 1998
3) Mahbubul Haq Human Development in South Asia 1998
4) ibid