Has poverty really gone down?

Society Pakistan & World Affairs
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An interesting article on figure fudging by the government and the opportunities that this military government is letting slip away:

Poverty and vulnerability

By Dr Faisal Bari
The government has been making a big deal of the 10 percent decrease in poverty that they have been able to manage in the last 6 odd years.
**The facts that a) the recent and last surveys are not strictly comparable, b) the government has not released the raw household data on which the claims are based, c) they have not shared the methodology for the poverty line, and d) the poverty line is delimited poorly not withstanding, it is still true that most researchers (and these include World Bank, ADB and donor experts too and not just the local lesser mortals) agree that a very large number of people remain quite vulnerable to shocks of all sorts in Pakistan. **Given that most people do not have access to employment guarantees, unemployment benefits, social security and welfare, access to quality education and health services, it is not surprising that people are vulnerable to shocks. What this means is that even if we allow that poverty has come down so drastically, the question as to whether this is sustainable and whether people will be able to remain out of poverty or not, as agriculture, industry and service sector go through the natural fluctuations common in market economies, remains an open question.
Human security, the opposite of vulnerability, comes from creating an atmosphere and environment where people have a level of income that gives them the basic necessities of life, and a bit more, that provides some guarantees for that level of income, that offers, for the person and his/her family and community, opportunities to lead a healthy life (access to quality health services) and opportunities for growing (access to quality education, vocational training, and credit). It provides a framework where the person and the community are safe from disasters, natural or otherwise, or have access to facilities that allow coping with disasters. It is a state of affairs where each individual has some control over his/her life (participation in local affairs), has a voice in larger issues (representative systems of governance), and has guarantees of basic rights like life, liberty, basic freedoms, access to justice and fair and transparent processes. And it is a state of affairs where individuals can hold those on whom the burden of responsibility has been delegated, accountable and answerable (for a more detailed discussion of the concept of human security, see the Mahbub ul Haq Human Development Center’s 2005 report on Human Security).
On the other hand is the entire discussion on how the economy is growing rapidly and how the key issue has to do with the sustainability of this growth. The government seems to be thinking that if they can sustain the inflow of foreign currency, through selling Pakistani assets to foreigners (some of the privatisation), providing opportunities for direct foreign investment through liberalisation and specific incentives for foreign companies, through foreign assistance and loans and through remittance flows, it could not only sustain this positive growth phase for a number of years, but eventually this could turn into a positive growth path that could shift our equilibrium level of growth to a higher growth trajectory on a permanent basis. The government is also hoping that the incoming investment will bring with it better management practices as well as better technological options.
But the dream appears farfetched. **The investment that has come in or is coming in or is likely to come in seems to be a) in some sectors of the economy only, and b) does create the possibility of the reverse flow of profits as well.
The sectors that are being targeted thus far, like telecommunications, information technology, construction, and hospitality are not only heavily protected, they are also ones that have a lot of specific incentives and protections so that the FDI is not really entering a competitive playing field in these sectors. **This means that high level of current profits might be able to attract foreign buyers and investment but it can, in due course, cause problems for the society at large when it would want to liberalise these sectors and allow local players equal entry and protections as well. Any protection given now will make it difficult to change things later: for example take the case of automobile industry and the early Japanese entrants.
More importantly, the sectors that have so far gotten foreign investment are not really high technology sectors so that hopes of technology transfer are likely to remain only partially fulfilled. Even more importantly, the sectors where investment is coming in are also predominantly not exports related sectors. FDI is coming in to earn profits from the Pakistani market.
This can create real problems for us in the future. Our trade gap is already quite large and if exports do not respond soon through high growth, the large gap can not only continue, it will start putting pressure on our exchange rate as well. Our reserves can only sustain the gap to an extent.
Furthermore any time the inflow of funds reduces, due to lower aid flows or lower FDI flows, it can make foreign exchange problems more serious. Moreover, when these firms start earning from the local market, in Rupee terms, and want to remit dollars back to their home countries, we could have a serious compounding of the foreign exchange issue.
In the foreign exchange market FDI profit flows work like foreign loan servicing, but since these flows are market based and cannot be controlled by the government, their impact can be larger or unanticipated. When things take a turn for the worst, in the economy, foreign capital, especially from portfolio and financial markets, can disappear quite rapidly. In light of the above, it is difficult to argue that the foreign flows alone can provide sustainability to the growth spurt that we have experienced in the last few years.
But there is an even bigger problem that we have. If our labour force is not literate or semi-literate, is not trained or is only poorly trained, if our labour is not healthy, does not feel they are protected from unemployment and the horde of other risks and threats that have been mentioned above, it is unlikely that we will be able to attract any investment for setting up export industries, and even for local production. If the people living in the country are not protected they can not take risks even in activities that they should. We want entrepreneurs who want to try out crazy ideas and crazy products, we want risk-takers in our manufacturing and services sectors, we want our agriculturalists to be able to try out new seeds, new input management systems and new ways of managing water. But none of these can happen without the basic securities and basic systems that have mentioned.
Access to health and education, access to basic infrastructure, access to credit and training facilities, protection from risks that we can insure against, and governance systems that ensure transparency, accountability and fairness are essential for making people more secure and able to develop themselves. The sustainability of a high growth path is crucially linked to the above.
The issues of poverty and vulnerability are not about numbers, poverty lines and so on, they have to do with what humans have the potential of doing and what they are able to achieve. But the latter has to do with how well provided for are the people and whether they have been provided with protection and insurance against some of the more common risks that life offers. Our hopes for the future, in terms of sustaining rapid rates of growth and development, crucially depend on the above.
It is here that we are, as a nation, failing very badly. More damagingly, it seems that we, again as a nation, have not even started to think about these issues seriously.
E-mail: [email protected]

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Re: Has poverty really gone down?

I dont know what you read, he is focusing more on the suatainability of the growth and sustainability of the poverty alleviation. so while he whines about lack of access to data, he fails to factor in WB and ADB reports on Pakisan's improvement, he does however find reports abot human development aspects, which is an issue in third world countries and is not something this government created, nor is it something that has gotten worse during this govt.

he also goes on a series of what if scenarios, all of which are based on some sort of change taking place. Well obviously if there is a change from teh course due to internal or external factors, there will be impact. Its interesting that he has taken WB and ADB statements regarding the shock vulnerability to ppl in Pakistan, but has conveniently forgotten to mention WB and ADB reports that have been extremely positive about Pakistan's policy, prospects as a result of the policy, reforms and reults.

I am however surprised at his concern over the impact of foreign ownership of companies as well as foreign direct investment. or of investment in certain industries, its a start and the industries targeted not only provide the greatest gain to consumers but also to the businesses as a whole, a better telecom infrastructure is just one thing that will help the country and its businesses be able to compete.

I do agree with him that much work neds to be done in terms of providing safety nets to ppl, unemployent benefits, health coverage, education availability etc etc.

None of that changes anything regarding what this govt has been able to deliver, and what type of growth we can see if it continues on its plan.

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Re: Has poverty really gone down?

How the poverty is measured, what scales are used ... I agree can be altered to suit your needs, but I think there are good number of people that I know have crossed above the poverty line, that was not by 'illegal' means though. May be not 10%, lets say 5% poverty has come down.... still good to an extent, it could've been brought down much better, no doubt, but whatever good has happened should be appreciated. The inflation has pushed poor to 'poorer', I don't think that has been captured using any data around.

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Re: Has poverty really gone down?

Not really.

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Re: Has poverty really gone down?

this will not go overnight anyway. i assume it has gone down, but certainly it hasnt gone up.

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it has certainly gone down alot since last 5 years.

OUR FIRST EVER E-SHAADI!!!
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I am not sure whether poverty has gone down or up, but if you see the number of cars on the road and the sale of split air conditioners in the last two years, one would like to think that Pakistan is doing good economically.

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Yep, no matter how you crunch the numbers it has definately gone down and will continue that path. If you want to reverse it just bring in the great democrats and see how it sky rockets.

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Re: Has poverty really gone down?

Shahid Kardar has pointed out the increasing inequality thats is developing because of the economic changes:

A mixed economic profile

By Shahid Kardar

RECENT economic data for the year suggests a mix of both good and bad tidings. First, the pleasant news. The rate at which prices were rising appears to be declining, albeit not dramatically. Although it may be too early to predict that this trend can be maintained, since there continues to be a sharp growth (in excess of 11 per cent) in the price level of food items, there is reason to look forward to a period of a more subdued rate of inflation.

The inflation rate in respect of food items is expected to fall over the next quarter, as a result of an improved supply position and the reduction in demand for some items witnessed after Ramazan. However, the slowing down in the pace of inflation will not bring much joy to the poor for whom the rise experienced in the price level is of a permanent nature that they have difficulty in supporting with the purchasing power at their command.

The efforts of the State Bank to raise interest rates to check the unbridled increase in private credit and reduce overheating of the economy through the demand pull pressure on prices also seem to be bearing fruit. We are witnessing a deceleration in the rate of inflation. Although the annual target of 6.5 per cent for the inflation rate may be difficult to achieve (especially with reserve money continuing to grow at almost a double-digit rate), the directional shift, provided that it is maintained with determination, should be appreciated.

External conditions have also continued to be favourable in terms of availability of concessional aid, reduction in debt liabilities following the restructuring of existing debts, the surge in remittances and low world interest rates, which enabled Pakistan to float bonds and raise foreign currency relatively inexpensively (even if these bonds ended up being picked up largely by the underwriters).

Another welcome development of the State Bank’s tightening policy is the deceleration in the rate of an increase in imports. This has been due in no small part to the downslide in the international price of oil and to some slowing down in imports of investment and other goods, the latter partly owing to a sharp decline in the rate of increase in exports. However, the adverse impact on the balance of payments will not be reduced substantially because, as already indicated above, the growth in exports has also reclined. We are likely to still encounter the prospect of a huge trade deficit by the end of the financial year. This gap in the external account will have to be financed by remittances and external borrowings at nominal interest rates, with the rest of the chasm to be filled by GDRs of OGDC, UBL, etc and proceeds of some other privatisations, the latter clearly not being a sustainable option when we run out of assets to sell.

This brings us to some of the bad news. Export earnings from textiles (our principal export) have actually declined by 10 per cent, the brunt of this having been borne by the value-added sector (particularly the knitwear industry, a large chunk of which, if not having virtually closed down, near to pulling down its shutters). This has been happening despite oil prices having dropped, which should have made it possible for our trading partners to import other products.

Although the value-added sector has been hit badly, the yarn manufacturing sub-sector, despite its complaints and recent battles with the government the lack of public sector support in maintaining its competitiveness in international markets, appears to have managed to increase its exports,. This outcome suggests that perhaps one way of reducing the value-added sector’s cost of doing business and improving its competitiveness would be to make yarn imports duty-free.

There is little doubt that some of the woes of the manufacturing sector are because of poor planning and managerial and other practices (affecting their international competitiveness) and for failing to have revamped their organisations to be able to operate under the new international trade regime fashioned by the WTO-driven world order.

However, the public sector must also share a large part of the blame for the less than desirable results that has led to the private sector’s cost of doing business continuing to be high, and thereby affecting its competitiveness. It either administers the prices of some key inputs like that of oil (which it has maintained at a high level although its international price has fallen) or actually provides/produces them, like energy and fuel (electricity and gas) whose availability, prices and quality are critical ingredients in the cost structure of industry.

It also guides a taxation system of non-adjustable turnover and withholding taxes, which raises the cost of production. Also required are timely decisions by the government in a rapidly changing global trading environment — another area in which Islamabad fares poorly.

While the value of the rupee has depreciated over the course of the year against other currencies, and despite the pressure in the international currency market on the US dollar, the rupee continues to be overvalued against the dollar. To this end, the claim of the State Bank that the value of the rupee is determined by market forces while making amusing reading (considering the decline in foreign exchange reserves — from covering 11 months of imports not that long ago to under four months of imports — in spite of external borrowings, donor funding and foreign investment inflows) brings little comfort to the export sector. The latter’s cost curve, for reasons mentioned above, has shifted to a higher level with a rising gradient.

The other area of concern is the government’s budgetary deficit. It has borrowed over Rs200 billion in just three months. This has happened despite the decision not to lower prices of oil following the decline in its world price to cover earlier revenue losses when domestic prices were not raised to fully reflect the increase in world prices, use of privatisation proceeds to fund the deficit, increasing resort to ad hoc borrowings from the State Bank (reflecting poorly on the latter’s claims of independence), as well as from the banking and non-banking sectors. The example of the latter is the use of national savings schemes to raise money from institutions, ostensibly to force commercial banks to pay higher interest rates on deposits).

In the opinion of this writer, the availability of consumer finance and the possible ill-advised easing of interest rates sometime in early 2007 (on the plea that the inflation rate has fallen to more manageable levels) will ensure continued healthy growth in the manufacture of durable goods financed from this source of funding. Hence, we are likely to soon see the production of motor cars rise to 350,000, that of motorcycles to one million and TV sets to one million and beyond, and a similar spurt in the demand and supply of refrigerators and washing machines.

The progress of the domestic manufacturing sector producing other consumer goods will depend on a number of factors. These include the ability of domestic industry to compete with imports by lowering its operational costs through efficiency improvements, entrepreneurial willingness to narrow gross profit margins and rely on turnover instead to increase overall profits (through fundamental changes in managerial practices which are beginning to become visible) and the ability of the CBR to check under-invoicing of imports, etc.

That part of the domestic retail sector providing luxury goods and services to the more privileged households, which have made lots of money in the last few years (from the temporary boom in the real estate and stock market and the increased production of goods funded by consumer finance), will also continue to thrive in the near future.

The real unknown is what has been happening to the poor. The evidence on the growth in their real incomes and purchasing power is at best anecdotal. There appears to have been some growth in demand for labour, including that of the unskilled variety. Industry has been complaining about the severe skill shortages, which is reflected in the rise in real wages of certain types of skilled manpower. Incomes in the agriculture sector for landless and casual/seasonal labour have also apparently risen.

However, much of this improvement in real wages has been in Punjab and the main urban centres in Sindh. The picture of what has been happening to real wages in the rest of the country is somewhat murky. Anecdotal evidence suggests little improvement, if not some worsening, especially in rural Sindh and most of Balochistan. In the country today there are huge and widening disparities in incomes and wealth between the rich and the poor (which also seem to be polarised along ethnic and regional lines).

This has been the major cause of the deterioration in the law and order situation, growing alienation, disaffection and social discontent. In this context, it is important to bear in mind that the greater the income and wealth inequality the more difficult it will be to reduce poverty through economic progress, since the benefits of growth at rates of around six per cent will largely flow to the more privileged segments of the population.

The writer is a former finance minister of Punjab.

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Re: Has poverty really gone down?

This is well known for those living in Pakistan. Post 9/11 bononza has created much for certain people in urban areas, especially those connected to the govt.

However the gap grows between rich and poor, with the poor increasing in numbers.

A fact only doubted by Army families,MQM/PMLQ and those living abroad believing fool's tales.

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Re: Has poverty really gone down?

such powerful words are used by weather men on local cable access channels.

PS: Chanda forgot to mention the whole middle class growth phenomenon and its importance etc etc, but hey that wont fit in with the message here :wink:

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Re: Has poverty really gone down?

lol...

On a similar note, TRD, do you have anything other than 'these people know nothing as they dont live in pakistan blah blah'? I mean everytime you see something worthwhile posted about Pakistan, you have 1-2 replies that you put up everytime namely the whole 'pakistani abroad ahve no clue', and 'mushys government being corrupt in a transperancy report' (which I and alot of other posters pointed out was incorrect)

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Re: Has poverty really gone down?

BBC has also done a piece on the increasing rich poor gap

Pakistan growth creates wealth gap
By Paul Moss
BBC News, The World Tonight

Many return to work in lucrative professions
Salman has a way with words. He also has a snappy dress sense, and a keen knowledge of the communications industry. He should be going places.

In fact, Salman was going places, a rising success at the firm where he’s been working in Karachi for the past two years.

That was until they brought the new guy in.

“He didn’t know anything about the industry,” Salman explains.

"But he comes from an important Pakistani family, one with land, power. Our aristocracy.

“The family made a call to my firm, told them to hire this guy, and that was that.”

Salman says that since the new arrival was put in charge of his department, morale and output have both plummeted.

And he has particular reason to be bitter.

He is one of a growing number of Pakistanis who have lived abroad, but decided to come back to work in their homeland, and try to make their mark on its newly-growing economy.

“With this kind of practice going on,” he says, “I don’t think this country will ever progress.”

Big spenders

That is a damning verdict on what, statistically at least, seems to be an extraordinary boom in Pakistan.

It doesn’t matter if you are complying with every regulation, they are after bribes

Zobair

The world may have focused on the political ups and downs of the country’s President, Pervez Musharraf.

But since the General took power in a coup seven years ago, his most radical actions have been on the economic front.

The country has swallowed the usual World Bank-recommended diet of privatisation, liberalisation and opening up of markets.

But what makes Pakistan stand out is the speed it has done this, and the extent of the change.

Growth has soared, foreign debt has been cut, and the nation’s consumers have gone on one of history’s greatest shopping sprees, splashing out in record numbers on anything from fridges and flats, to luxury cars.

Bribes are rife

The World Bank has given the programme a big thumb’s up, and foreign investors show signs of renewed interest.

Poverty often sparks angry responses

But as any economist in the country will tell you, this kind of growth can only continue if people are convinced that the old Pakistan ways of doing business - with corruption, bureaucracy, and an alarming level of regulation - is on the way out for good.

Factory worker Zobair is not convinced.

He acknowledges that things are improving.

Operations at his textile factory, he says, have recently been freer than ever from government interference.

Yet still it comes.

“Eighteen official inspectors visit every year,” he says.

"It doesn’t matter if you are complying with every regulation, they are after bribes.

“Things are getting better, but the pace of change needs to be increased.”

Remaining poverty

Kaiser Bengali is concerned. A Professor of economics at Szabist University, he took me to a village just 10 miles from Karachi City Centre, to show me the people who he says have gained nothing from all the reforms.

The village stank.

Filthy rubbish was piled up everywhere, there was no proper sewerage system, and, as locals explained, health care was grossly inadequate.

Many have no source of employment.

Pakistan’s Government insists the poor have also gained under the new economic regime, but Professor Bengali does not buy it.

Instead, he says, there has been an alarming growth in inequality.

“Try to imagine,” he says, "a man who sees the expensive cars in the street, but comes home unable to feed his children, because he can’t find work. He is angry.

“Or an educated man who cannot support his own parents. He becomes ashamed of himself.”

Angry responses

And Professor Bengali has a warning.

“Anger may lead people into crime, or self harm. Suicide rates are going up,” he says.

“But people also turn to religious radicalism. We see this in Pakistan every day.”

Even the World Bank acknowledges that the perception of rising inequality may become a problem in Pakistan, and it is launching various programmes to mitigate the worst aspects of social deprivation.

But there is a special urgency to this task.

Pakistan is the venue for an escalating conflict between the State, and local militants with ties to Al Qaeda and the Taliban.

Only this month, a suicide bomber killed more than 40 soldiers at an army base, retaliation for the bombing of a madrassah, which left more than 80 dead.

It is possible that the World Bank and other development programmes will alleviate the poverty and desperation that make people easy recruiting targets for militants.

But it takes far longer to build a new water supply system, or a new village health centre, than it does to spread an angry message, or the tools to make a bomb.

The World Tonight is running a series of reports by Paul Moss on Pakistan - from Wednesday, 29 November, at 2200 UK time.

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Re: Has poverty really gone down?

Anyone living in Pakistan these days would tell us how much cost of basic commodities such as vegitables, edible oil etc. have shooted up during last years.. though opportunities in some sectors have been rosy for few like telecom but those numbers are are very very minute percentage against vast no. of very poor who are below poverty line - and even dangerouly sliding down teh mark..

I am working on a world bank project in Punjab and usually visit far flung areas in southern as well as northern punjab.. and whenever I come back i am totally shattered.. buying power of vast majority is going down at brisk level.. sone of the scenes i see over there are too heartenng to pen down.. claims of govt. are too amusing if we compare exact ground condition of people.. stats are manipulated to appease the top personnels..

Poverty is not just in monetry or wealth terms.. poverty is also non- access to justice is one of teh many indicators.. just visit any curt and one can see how poor people are inhumanly treated by the powerful..

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Re: Has poverty really gone down?

According to the world bank most of the people are still living below the poverty line not even earning 750$ per anum. The infilation rate is around 7.5% which is touching the extreme level. Any country with 2 digit inflation can never turn back.

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Re: Has poverty really gone down?

A further report on poverty, and the lack of govt attention on this matter

http://www.dawn.com/2006/12/14/top1.htm

ISLAMABAD, Dec 13: The United Nations Children’s Fund (Unicef) has painted a bleak picture of the state of Pakistani children, saying some 0.5 million of them die annually before reaching the age of five, mostly from preventable causes.

Unicef’s flagship report entitled “The State of The World’s Children 2007” reveals that Pakistan has made little progress in terms of reducing the under-five mortality and it is very much likely to miss the Millennium Development Goal of bringing down the mortality rate among children of five or under to two thirds by 2015.

Unicef’s acting representative in Pakistan, Mr Terje Thodesen, told Dawn that the progress in the country was too slow. “Pakistan is taking more time than expected.”

The government, he said, would have to attach greater priority to this issue and enhance spending.

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Re: Has poverty really gone down?

This 'growing disparity' arguement is useless. Whever there is progress, by sheer arithmetic the disparity will grow. Just think for example- the poor make 10, some poorer make 0 and the rich make 100. When progress occurs, the rick will be making 120, the poor will be making 15 and the poorer will make make may be 5. all 3 have progressed but the disparity will show 120 minus 5 compared with original disparity of 100 minus 0.

Like I told my eco professor, economists are incapable of basic arithmetic and realistic simplicity in thinking.

The Random Thread
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Thank you dude, someone needed to say that. additionally no one seems to want to talk about the growth in middle class, and that is what is most important.

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Re: Has poverty really gone down?

Most?
WB estimates it at 25% 2004-2005
which btw is down from 32% in 2000-2001

rural poverty down from 39% to 31.8%
urban povert down from 22.7% to 17.1%

even if we go by teh conservative estimates of 30% or so, it does not constitute most.

Now if it was 51% I would say yes ‘most’ was an accurate term.

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u are misunderstanding.

Put very simply,the situation is such that ie.10 people(growing middle class) make more money while life becomes harder, and intolerable for the majority, ie.1000 people.