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Strategies for Socio-Economic Development in Pakistan

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The Real development transforms people’s lives not just reflect the economic statistics meant to impress the public that Government has undertaken various development projects to improve the living standards, but it would make no sense if human Development Index paints a  dismal picture since Countries Like Bangladesh and Sri Lanka are seen well ahead of Us in HDI rankings calling for gigantic Steps on war footing basis to improve our HDI, Economic and Social Development Indicators.

As per Statistics of United Nations Development Program (UNDP), Pakistan ranks 150 as per statistics of the last year 2017, whereas India and Bangladesh retain their upward trends since Pakistan slipped down from the Rank # 117 in 1994 and ranked at the bottom 150. This is really terrible as, despite the passage of 71 Years of Independence, our policies have failed miserably to boost the human development indicators and socio-economic uplift in our country.

Each year, billions of rupees are allocated for the development projects as proposed by the legislators at Provincial and National level, yet these development projects have so far failed to enhance the country’s human development outlook since these development projects are targeted towards benefitting the big fish rather than bringing any change in the downtrodden masses as real development means more than that, not just economic number game .

Most of the developing countries focus on education, health, Rule of Law and Peace since these are the driving forces to change the troubling figures of HDI and contribute largely to the sustainable development where people are ready to accept change and sustain it for the long run.

The failed policies of development are the main causes that led to stagnant development as, before the launch of any new product or service, a company or firm trains the staff to learn the complexities and then launch it for the mass public through its marketing force.

The developed means to tap or harness the resources to bring in a social economic and political change that boosts the economy and brings prosperity to the country. Real Development also means that if you believe that any community needs anything from the Government; it must be provided to them given the circumstances. The timely provision will stop the issue from further aggravation but in case of delay, it may lead to anti-government sentiments and the government may start losing its hold over the public affairs.

We have been habitual or have become used to the idea that getting foreign development aid or grants will help develop our poverty-ridden areas especially the rural areas and the slums in urban cities but real development starts with self-development, self-reliance, education and health. The state can provide the infrastructure such as roads, electrification, water supply Healthcare, schools, colleges and universities but to use all these resources we have to focus on our self-development goals and tap the resources as per the desired requirements.

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Suppose, if we want to educate our children then we should send our children to school to get education and training. Inversely, if we are reluctant to send our children to school and prefer sending them to work as child labour then we cannot blame the government for this since our way of thinking has not changed though, the infrastructure has changed and the Government has fulfilled its promise of providing basic facilities to its people at their convenience and on need-based policy.

The modern development entails four major aspects these are Equality, participation, Empowerment and sustainability. It means that whatever the development initiatives are undertaken, these must make sure that these are carried on equality basis by promoting participatory development approaches and empowering people to have their say socially, economically and politically that may create the basis of sustainability of such endeavours.

The development and economic experts are of the view that genuine advancement should change the individual living standards and it should not be limited to have simple monetary benefits.

Pakistan has carried out some socio-economic initiatives such as BISP, Pakistan Baitul Maal and other poverty reduction initiatives but these programs and projects are aimed at providing the fish rather than the hook it is a rather flawed strategy.

The monetary grants will never serve as solutions for poverty reduction strategies rather make the poor community dependent on these cash grants that will ultimately destroy their abilities. The Government should impart some technical skills and fund their small enterprises through which the have-nots may generate income and change their financial ability that may raise their economic level to self-reliance.

The socio-economic programs should not be aimed at creating beggary or mockery or greed for money violating cultural norms but these should be directed to income generation and skill development.

To bring real development, we need to study various development models of various nations to know that how these countries transformed the lives of people and brought lasting change by implementing effective development policies. In this regard, we can use the development or advancement models of China, Malaysia and Sri Lanka to find out the workable and feasible trends suiting Pakistan’ Development strategies given the current circumstances.

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Besides advancements, we can also study these models to explore their strategies which helped increase the literacy rate and education standards in these countries.

The formative development policies must be people-centric devoid of other political reasons. The development policies must be comprehensive to attract people’s attention and transform their social-economic living standards.

The Government in this regard should come up with clear policy by taking all the stakeholders i.e NGOs, INGOs including UNDP and World Bank Experts, development and economic Experts, legislators and policy think tanks such as Sustainable development Policy Institute (SDPI), Institute of Policy Studies   (IPS), Prime Institute, SPDC, PIDE, IDEAS-LUMS, NSPP, PITAD and IPRI for policy advice and suggesting strategies that may help Pakistan get out of the crisis.

The International Development organizations, Policy Think Tanks and Planning bodies such as Planning Commission of Pakistan may work out on the plan and may help government devise sustainable Development policy that works for many reasons as in past the flawed policies have dragged the country into the quagmire of Socio-Economic issues causing economic crisis and increasing the debt burden over GDP.

It is high time that we need to address these issues on time, else the circumstances will further aggravate the already dismal situation; Then, it will be beyond our control to find out a remedy or solution for it. The Experts may be taken on board at the national, provincial and District level to form socio-economic development strategies that may bring the real development in the country and the may reap the benefits of the economic boom.

The real development index (RDI)and the Human Development Index (HDI) rankings will only improve if the government and people be on the same page. The people and opinion leaders must identify the gaps through their voice and write-ups so that the same may be filled to fuel the development planning strategies with sustainable initiatives to raise our bottom rankings to higher scales of development.

We have to mull over the Socio-economic models of the countries that have achieved tremendous advancement in Poverty Reduction Strategies, human and economic development rankings.

In this regard, Chinese model may be ideal to get rid of poverty monster and raise the income levels of people so that a lasting change should be brought by tapping the existing resources and providing the basic facilities that may become the hallmark of change and development and setting examples for those who follow these footsteps.

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Development

The Development of microfinance industry depends upon the resilience and risk management: SECP Chairman Amir Khan

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Islamabad : SECP Chairman, Aamir Khan emphasized that in these challenging times the development of microfinance industry depends upon the resilience and risk management, achieved through quintessential pillars of liquidity-tapped through private capital and technology embracement. Khan was addressing the Non-Bank Microfinance Companies Stakeholders Forum organized by SECP to devise a way forward and collaborate strategic response to cope the challenges posed by COVID-19 pandemic and ensuing lockdowns.

The SECP Chairman Amir Khan, along with Commissioner Specialized Companies Division, Farrukh Sabzwari chaired the session. Representatives of Pakistan Microfinance Network (PMN), State Bank of Pakistan (SBP), National Bank of Pakistan (NBP), Pakistan Poverty Alleviation Fund (PPAF), Pakistan Microfinance Investment Company Limited (PMIC), Karandaaz Pakistan and multilateral donor agencies including the World Bank, International Finance Corporation (IFC) and Department for International Development (DFID) attended the session.

 The Chairman SECP advised NBMFCs to go far product diversification to insurance solutions and saving products and build capacity of their workforce to attain business development and operational efficiency. He endorsed formation of a working group consisting of nominees from SECP, PMN, PMIC and NBMFCs to further analyze the situation. The working group will also take up the matters with relevant forums including ministry of finance, SBP and multilateral donor agencies for possible solutions.

Khan expressed SECP’s firm commitment to providing all possible support to industry not only during the current pandemic times but also in developing the industry on a strong footing. SECP Commissioner, Sabzwari highlighted the measures taken by SECP to provide relief and flexibility to the NBMFCs and their wholesale lender in managing funding requirements. He also talked about SECP’s advice to NBMFCs to defer and reschedule borrower loans.

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Participants acknowledged SECP’s timely intervention to provide regulatory relief to NBMFCs in managing their credit lines and funding requirements. However, industry representatives expressed their concerns on potential defaults by borrower and liquidity crunch that may lead to capital crisis in the industry.

They raised the need of new money injection into the industry through collaborative efforts of microfinance regulators and the government. Representatives of international donor agencies attending the Forum expressed their resolve to extend fullest possible support to Pakistan’s microfinance sector.    

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Development

Gov’t releases Rs 533.33 billion for various development projects so far

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Islamabad: The federal government has so far authorized release of Rs 533.33 billion for various ongoing and new social sector uplift projects under its Public Sector Development Programme (PSDP) 2019-20, as against the total allocation of Rs 701 billion.

Under its development programme, the government has released an amount of Rs 230.3 billion for federal ministries, Rs 175.65 billion for corporations and Rs 43.46 billion for special areas, according to a latest data released by Ministry of Planning, Development and Reform.

Out of these allocations, the government released Rs 38.5 billion for security enhancement in the country for which the government had allocated Rs 53 billion during the year 2019-20.

An amount of Rs 81.37 billion has also been released for the blocks managed by finance division under the government’s 10 years development programme.

Similarly, for Higher Education Commission, the government released an amount of Rs 27.07 billion out of its total allocation of Rs 29 billion while Rs 301.47 million were released for Pakistan Nuclear Energy Authority for which the government had allocated Rs 301.48 million in the development budget.

For National Highway Authority, the government released Rs154.94 billion. Under annual development agenda, the government also released Rs 10.7 billion for Railways Division out of total allocation of Rs16 billion, Rs 7.7 billion for Interior Division, and Rs 8.38 billion for National Health Services, Regulations, and Coordination Division.

Revenue Division received Rs 4.3 billion whereas the Cabinet Division also received Rs 30.18 billion for which an amount of Rs 39.986 billion has been allocated for the year 2019-20.

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The government also released Rs 26.9 billion for Azad Jammu and Kashmir (AJK) block and other projects out of its allocations of Rs 27.26 billion and Rs 16.54 billion for Gilgit Baltistan (Block and other projects).

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Covid-19

Pakistan’s small businesses hit hard by COVID-19

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Small businesses in Pakistan have been adversely affected by the Covid-19 pandemic. The low demand at home, disruptions in supply chains, constraints in international trading, and expected prolonged lockdowns are now leading to severe cash flow problems, the inability to pay back debts and cancellation of orders from clients. 

This rising uncertainty is gradually leading them to lay off employees which will have welfare implications. In some sectors where recovery is difficult to predict, small businesses have started planning for the worst: complete shutdown. This crisis could also imply a much bleaker outcome for the startup ecosystem in Pakistan.  

The government has announced a SME relief package. The central bank has also come forward to relieve some of the funding and finance related concerns of private enterprises. Yet, many micro and small businesses do not understand how to apply or if they are eligible, to receive such assistance. There are others who argue that this one off relief may not be enough given that businesses are going to face depressed demand for a longer term. Pakistan’s past record of small businesses trying to access such fiscal packages is also not encouraging, partly because many such firms do not access formal banking channels for their needs or banks impose steep collateral requirements. Also, large segments of micro enterprises have the entire or some components of their businesses in the informal sector.

Federal and provincial governments have two issues to address now: how to ensure that small businesses are able to access and utilize existing government-provided assistance, and secondly, what more can be done to support private enterprise in these times.

A progressive fiscal policy and commitment to redistributive taxation is in line with the spirit of Riasat-e-Madinah to which Prime Minister Imran Khan often refers to. A sincere effort is required to reduce the burden of compliance costs faced by small firms- often filing returns several times during a year and to multiple tax bodies across the country. 

Dr. Vaqar Ahmed

On the former, it would be best to start by addressing information and outreach gaps. As the problems for businesses are evolving in real-time, hence there remains a need for structured and more frequent public-private dialogue which should be inclusive enough to also give representation to women, youth-led firms and social enterprises. Such a dialogue will also give a sense to the government about how these businesses will get affected in the forthcoming rounds of Covid-19.

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On the latter, I believe the forthcoming budget for the fiscal year 2020-21 should be seen as an opportunity not only to provide support to collapsing businesses but also to put in place economic incentives that encourage enterprises to consider resilient business models. A large part of this has to do with reimagining a better taxation regime.

A progressive fiscal policy and commitment to redistributive taxation is in line with the spirit of Riasat-e-Madinah to which Prime Minister Imran Khan often refers to. A sincere effort is required to reduce the burden of compliance costs faced by small firms – often filing returns several times during a year and to multiple tax bodies across the country. It is an opportunity now to automate, rationalize or eliminate several filing and payment layers in taxation to ultimately help reduce the cost of doing business.

After a lot of persuasion from local think tanks and the International Monetary Fund (IMF), federal and provincial governments agreed to establish a National Tax Council (NTC) to harmonize the general sales tax (GST). 

Currently all provinces have a different structure of GST on services. There are also issues regarding definition of certain activities which the federal government may assume to be under its jurisdiction. Perhaps smaller firms have been the hardest hit due to the fragmented tax structure across the federation and it is time now to expedite NTC’s establishment and work in this direction. Even when the system is finally harmonized, the GST should not be collected by multiple windows at federal and provincial levels. A unified tax return and collection should be made possible through online mechanisms.

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It will also be timely to think about which sectors should be motivated to scale up production and services in the face of this health-related emergency. Hospitals and private clinics operating at micro, small, and medium scale are primary candidates for cut in GST on services and even rationalization in direct tax rates. Firms producing personal protective equipment should also see a relief in taxes. The trade taxes faced by such producers or even hospitals importing from abroad need to be revisited. The agro-based and food processing enterprises will need similar help as their input supplies face price and supply volatilities.

Covid-19 also increased demand on several other sectors providing essential services. Our policy circles have rarely seen these sectors as important for the social and mental wellbeing of society until the pandemic struck. It will now be timely to recognize the services of firms (including schools) providing online services. The economic policy managers must think out of the box how best to leverage e-commerce in the battle against Covid-19. 

– Dr. Vaqar Ahmed is an economist and former civil servant. He is author of ‘Pakistan’s Agenda for Economic Reforms’ published by the Oxford University Press. Twitter: @vaqarahmed

Courtesy : ArabNews

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