<% if not session ("Auth") then response.redirect ("suf.php") end if %> THE YEAR END REVIEW


A year full of events

Dec 29 - Jan 04, 2003

The deal between government and MMA on a package of constitutional amendments has taken almost a final shape at the end of the year 2003, which can be termed as the most significant event of the year. Some objections were raised by the MMA on the bill presented in the parliament; however, the government has assured to satisfy the MMA leadership. The campaign launched by the MMA against LFO was in fact had a single point agenda and that was the uniform of President Pervez Musharraf, which has also been accepted by the President. Although the deal is being described as an achievement by the two sides considering it as a good bargain, yet there is another partner to the whole situation and that is of course the people of this country. Whether they are going to benefit of it or not, is a million dollar question which would be answered by the time alone.

As far as the need of the masses of this country were concerned they do not ask for too much, they look only for a little house well filled and a little harmony for their children to get better education, training, health, drinking water, nutrition were concerned they are still looking for the light at the end of the tunnel.

As a result of what it is being described as a win win situation both for government as well as the opposition, President Gen. Pervez Musharraf has announced that he would give up his uniform before December 31, 2004. The President was quoted as saying "After giving it serious thought, I have decided to give up my uniform before Dec. 31, 2004 for creating political harmony in the country. I will select the date myself within this period", the President observed. Describing the government-MMA agreement as historic, the President also said that such moments come in a nation's life when decisions had to be taken by rising above the personal considerations. "Such an occasion had arisen and I think the decision was taken in greater national interest". General Musharraf said he had no doubt about his presidency, but for the sake of political harmony he had decided to seek a vote of confidence from parliament and provincial assemblies. The establishment of the National Security Council (NSC) was important for sustainable democracy and said that the NSC would be created through an act of parliament. He said that he would appoint services chiefs in consultation with the prime minister, but clarified that the final decision in respect would be his own. Referring to the local government system, he said under the agreement the law about the local government system would come out of the Sixth Schedule after six years. The laws which are part of the Sixth Schedule cannot be amended by parliament without prior approval of the president. By the time those laws would come out of Sixth Schedule, two local government elections would have taken place in 2005 and 2009, he said and added that the local government system had brought a silent revolution to the country. The president said he had given three years extension to the superior court judges, keeping in view of the recommendations of the Pakistan Law commission and the international practice. However, there was hue and cry on the issue and said he had decided not to give any extension to the retirement age. This means that the existing constitutional age of retirement will remain the same 62 for the high court judges and 65 for the Supreme Court judges. The president was of the view that the government would also benefit from the healthy criticism of MMA while in opposition and said it will support the government in its endeavors to bring about a positive improvement in the life of the people of Pakistan. The MMA will sit in the opposition.


Under the agreement for constitutional amendment package between the government and MMA reached on December 24, 2003, the MMA agreed to accept the government's proposal on the seven points in return for its support in getting the LFO passed from parliament in the shape of a bill.

In this deal, the government has agreed to withdraw the three year extension in retirement age offered to superior court judges, keep the local governments under the Sixth Schedule for six years set up the National Security Council under an act of parliament; the decision to dismiss a government under 58(2)b will be referred to the supreme court within 15 days; the president will seek vote of confidence from the electoral college; the president will consult the prime minister on the appointment of armed forces chiefs but will not be bound by the advice of the prime minister and the president will give up his uniform by December 2004.


Although the MMA has chosen to sit on the opposition benches in the assembly, yet it is generally said that after entering into an agreement, the MMA has assumed the role as a B team of the government. The ARD, which is now in the opposition has however rejected the deal between government and the MMA and has expressed concerns that it will create political instability in the country.


The attempts on the life of President Pervez Musharraf on December 25 were of course a serious incident of the year. The seriousness of this suicidal attack on the motorcade of President Musharraf was reflected in the death of at least 14 persons and injuries to 52 in that act of terrorism. The motive behind the crime was to destabilize and distract this country from policies being pursued by Pakistan as a frontline state against terrorism, its focus on economic independence, and to bring peace in the region by resolving the chronic issue of Kashmir. The attack on President Musharraf becomes more meaningful especially on the eve of SAARC Summit.

The shock waves of the incident were felt around the world and the incident was internationally condemned by all peace loving countries. The suicide bombers involved in the crime have been identified as Afghanis but the incident needs a thorough probe to unveil the faces of the actual culprits behind the conspiracy. The situation also calls for a complete overhauling of the security system in the country to protect the country as well as the people from such ghastly act of terrorism.


After Afghanistan, the attack on Iraq by the US and allied forces in March this year had its own impact not only in the Muslim world but had its social as well economic impact on the entire world. While the peace loving forces supporting the steps, a sense of insecurity also prevails among the smaller nations especially in the Muslim world. The attack on Iraq was originally focused on the ouster of Saddam Hussain from power. After 9 months of the attack though Saddam Hussain has been captured, however continued resistance against the US and the allied forces in Iraq sends a signal of instability in the Arab region in particular and the world in general and the much desired peace and harmony could be achieved after installation of a genuine representative government in Iraq.


Although the SAARC Summit is to be held in the first week of the coming year, yet the outgoing year 2003 has paved the way for making this regional conference a great success and may provide a milestone in the history of the member countries. Earlier India and Pakistan, the two major players of the region were agreed to restore communication links between the two countries including air, rail and road links from January 2004.

According to informed sources, the SAARC conference is going to sign three major agreements including South Asia Free Trade Agreement (SAFTA) which is being described as the landmark in the bilateral relations among the SAARC countries. The first SAARC conference was held in 1985 in Dhaka. Despite the fact that the countries in the region have made tremendous economic growth individually, yet the performance of SAARC during last 18 years remained disappointing as it made no headway during all these years. The South Asia region is attaching great expectations that it is going to produce some concrete results. The focus of the conference is on three issues which are including Free Trade Agreement, Social Charter and Poverty Alleviation.

Apart from the economic cooperation, the meetings between the leaders of Pakistan and India are also expected to produce results especially on Kashmir issue which is the core issue between the two countries.

Ambassador Farooq Subhan of Bangladesh while speaking on the subject recently in Karachi said that South Asia is among the richest regions in natural resources especially in the energy sector.

It is the irony that despite having plenty of resources, this regions lies among the fold of the poorest in the world. He said that Bhutan is exporting hydropower to India while India is importing natural gas from Bangladesh. Similarly, the proposed gas pipeline from Iran to Pakistan can be extended not only to India but even up to Myanmar as an International pipeline under a SAARC Regulatory Authority.


The 2003 is also important in the sense that macro-economic fundamentals achieved some unprecedented landmarks. It is for the first time that the exports crossed the mark of $11 billion in June this year. The foreign exchange reserves also crossed a record level of $12 billion. Workers home remittances also made history by registering unparallel growth in the history of Pakistan by reaching the mark of $4.1 billion. Although this trend has shown some decline during last two months of year, but the financial experts feel that the target around $3 billion set for the current financial year will be realized to a great extent.


At this point of time when the economy in Pakistan is showing stability especially at macro level, the ugly face of poverty continued to frighten the lower and middle income group in Pakistan. Unabated price hike has steeply eroded the purchasing power of the poor due to sheer mismanagement in controlling the price of the essential items. Currently, the wheat flour is being sold at Rs16 per kg in Sindh, similarly besides the increase in meat prices, vegetable prices have also gone beyond the reach of the common man. Recently, tomato was sold at Rs60 per kg. Domestic electricity consumers have to pay Rs7.50 to Rs8 per unit if the exceeds over 300 units.


Price of education has gone up to such an extent that the drop out in the school going children has been increased 40 percent in 1997 to 54 percent currently.

The total number of education policies, and major programs and schemes in Pakistan stand at 23. However, these policies and plans have persistently failed to achieve their targets. The current initiative is the education sector reforms action plan 2001-05 also suffers from problems with respect to federal-provincial coordination, monitoring of targets and financing. With only one year of allocations left, there are large shortfalls in the development expenditure budget and there is a danger that it will go down as yet another failed project.


Currently, the growing rate of poverty in Pakistan is probably the mostly serious issue which calls for corrective measures and their implementation on war footings.

The steps being taken by the government may put some spurt in growth and poverty reduction for a short period of time but these gains will not last long.

Growth together with investment in human development offers a much better chance for alleviating poverty.

Dr. Ishrat Hussain, the Governor State Bank of Pakistan (SBP) while dilating up poverty reduction program in Pakistan says that some segments of population living in remote, isolated areas and marginalized lands or living without any tangible assets other than their labor may require targeted interventions by the government to create opportunities for them to earn livelihood. It has also become apparent that in every country there would be highly vulnerable groups who would need social protection and social safety nets. Thus if a country is able to put together these four factors accelerated growth, investment in human development, targeted poverty interventions and social protection the probability of achieving reduction in the incidence of poverty becomes quite high.

China is one of the success stories which has integrated itself into world trade, opened up its doors to foreign direct investment and thus attained 8 percent annual growth and brought poverty down to less than 10 percent of the population. But China had also reached high levels of literacy and health outcomes, low fertility rates. At the same time the poorer provinces and regions had been specially targeted for direct interventions aimed at enhancing agriculture productivity and rural incomes and providing physical and social infrastructure. Social safety nets in China, inherited from the communist days, though are becoming weak but are still much better compared to other developing countries. Market failures are tackled by a strong government. Thus we can see that this combination of growth, investment in human development, targeted interventions and social safety nets along with a strong government can produce the right results.


The Interim Poverty Reduction Strategy Paper (IPRSP) produced in the year 2000 spells out the four-pillared strategy for poverty reduction in Pakistan. The first pillar of this strategy is macroeconomic stabilization and resumption of growth. By 1999, the public debt of Pakistan had become unsustainable, public debt servicing pre-empted more than half of the revenues, and external and domestic debt exceeded the country's GDP. The country had faced a full payments crisis in 1998, investor confidence in the economy was at lowest ebb, links with international financial community were disrupted, and the reserves were so low that the country was at the brink of default. This situation had to be rectified and a credible economic program had to be put in place to get the economy out of the crisis and back on the track. The results of this effort three years later are obvious to every one. Inflation is less than 4 percent, fiscal deficit has been brought down to 5 percent, external debt indicators have improved, public debt servicing has declined, domestic interest rates have reached all time low, exchange rate is stable and appreciating, exports are growing at annual rate of 16 percent, tax revenues have exceeded their targets, and foreign reserves are touching the level of almost a year's imports. This all round and broad-based improvement in macroeconomic indicators has led to upgradation of country's credit rating. Macroeconomic stabilization is the foundation upon which resumption of economic growth can take place.

The second pillar of the strategy is improved governance. The key ingredient of the governance agenda is the devolution plan whereby administrative, functional and financial responsibilities for delivery of social services are delegated to the district governments. Demand-driven development projects will be planned and executed by the direct beneficiaries rather than thrust upon them by the government agencies working from the Provincial and Federal Headquarters in splendid isolation. The other practices which have been adopted are accountability, transparency, predictability and level playing field for all the players. Discretionary powers have been curtailed and rules and regulations are enforced. Merit-based appointments have become the norm and even Assistant Sub Inspectors of Police are selected through Public Service Commission. No SRO has been issued to favor one single individual or group to the disadvantage of others. Civil Service, Police and Judicial reforms have been initiated but will take a long time to come to fruition.

Structural reforms form the third pillar of the strategy. Broad-based reforms in tax administration, trade liberalization, financial sector and privatization forms the core. In tax administration, Central Board of Revenue is being restructured, tax net and tax base are being widened and the direct contact between tax collector and tax payer is being eliminated. Trade liberalization has resulted in tariff rationalization, removal of various restrictions from exports and imports and deregulation. Financial sector reforms have already resulted in a sound and healthy banking system, a buoyant stock market, a growing corporate debt market, a streamlined non banking financial institution structure and strengthening of supervision and regulation. Privatization process has been provided a legal framework under which transactions take place in an open and transparent manner.


Public Corporations and banks were sold during the last three years and Rs 36 billion realized as the proceeds. Unlike the past, none of the transaction was challenged in the courts of law and the market confidence in the process is quite high. Those who argue that we are selling blue chip public sector companies should realize that these companies have been causing an annual budgetary loss of Rs 100 billion. Is it justifiable to keep 100,000 persons? employed in these Corporations while the rest of the population suffers from lack of budgetary resources for basic necessities such as education, health, drinking water etc.? Can you imagine how much good it will do to our social indicators if we had allocated even one half of the losses suffered by these corporations towards human development?

The fourth pillar of the strategy is poverty targeted interventions. The prominent among them are Education Sector Reforms, Health for all, and Population planning, Zakat, Khushali program for employment generation and works program, Food Support program and Khushali Bank. While education, health and population planning cover the entire population the other interventions are targeted at the poor. Zakat program has been revamped to provide financial grants to the beneficiaries to start small enterprise or other income generating activities. Food support program is aimed at subsidized wheat flour to those below a certain threshold of monthly income. Khushali program is allocated to the local governments to create and improve physical infrastructure and also generate employment. Khushali Bank is a micro finance institution which provides small loans to the poor under supervised group guarantee scheme. All these initiatives have begun to take shape in the last one or two years and it will take some time before they start yielding dividends.


The formulation of strategy is the easy part but implementation of the strategy has always been weak in Pakistan. In order to implement this strategy at least five points need to be considered.

(a) Political ambivalence about poverty whereby the rhetoric is all thundering but the actions are missing has to give way to a strong political commitment in words and deeds.

The Musharraf Government has explicitly brought poverty reduction to the forefront and made a strong commitment. But poverty cannot be reduced in a span of 1 or 2 or 3 years and its correlation with growth are quite high. Pakistan witnessed significant poverty reduction from almost 40 percent to 18 percent in a period when GDP growth rate was averaging 6 percent. But in the 1990s when the growth rate slowed down to 3 to 4 percent there has been a resurgence of poverty to 34-35 percent. Thus a long-term action plan supported by all successive governments and implemented in a continuous and consistent manner will result in its reduction. We cannot expect results overnight and have to work hard and work sincerely for an extended time to reach this goal.

(b) Decentralization and delegation of powers: It has become abundantly clear that local communities are willing to share financial burden of social services if they can see that the benefits will accrue to them directly. But if they find that the user charges, taxes and fees disappear in a black box at Karachi or Islamabad they will be most reluctant to pay. The demand-driven nature of planning and accountability of results improve the cost effectiveness of expenditures. Thus the delivery of services can become efficient and accessible to the poor if they are operated and managed locally.

(c) Limited Institutional capacity: If we assume that there are no leakages or waste, Pakistan still faces a serious constraint in form of limited and weak capacity of institutions to plan and deliver services. This capacity should be built at the local level and supplemented by public-private community partnerships. There are excellent examples such as The Citizens Foundation Schools in the backward areas of Lyari where the private businesses and individuals donors have contributed finances to a Non-governmental Organization for educating the kids of the poor families. In Punjab, Government school buildings have been made available to private sector and NGOs for using them for the second shift schools. Such examples abound throughout the country. The recent efforts of Human Development Foundation to build capacity at the district level will go a long way in resolving this constraint.

(d) Lack of access to justice, police and executive agencies while robust informal social networks and non-profit civil society organizations can take care of the needs of the poor in the areas of education and health there is no substitute available for justice, police and executive agencies of the government. Access to these agencies and their functionaries is almost non-existent and is a major source of helplessness and lack of empowerment among the poor. Unless the mind-set and attitude of the Government functionaries is changed radically, the poor will remain voiceless, their grievances will remain unaddressed and their vulnerability will not be tackled in any meaningful way.

(e) Gender face Women in Pakistan are worse off among the poor compared to men. In a country where only 17 percent of female population participates in labor force, where female enrolment ratios are dismally low and where health indicators are worse for the female? population poverty and vulnerability will remain a serious issue. Economic literature has amply documented that there is no other investment which fetches higher rate of return than investment in female education. This return does not take into account all the externalities associated with female education in form of better health, nutrition outcomes, lower fertility rate and better citizenship. Bangladesh exemplifies the enormous benefits of female education and labor force participation. Government there has not done what it was supposed to do but it was the non-governmental organizations such as BRAC who were instrumental in spreading their schools throughout the rural areas. The results are simply astounding. Until we pay attention to uplift the status of 50 percent of our population, I am not convinced that we will be able to make a significant break through in poverty reduction.


Pakistan has built its poverty reduction strategy on the basis of its own historical experience and incorporated the lessons of global experience also. The strategy has the inputs of all stakeholders but it needs strong political commitment, real devolution of powers to grass roots level, a vibrant private-public-community partnerships for delivery of services, change in the bureaucratic values and norms and a focus on gender disparities. If these issues are resolved sooner than later we can embark on a path of sustainable poverty reduction.