ECONOMIC GROWTH NOT TRANSLATED INTO POVERTY ALLEVIATIONS

Poverty cannot be reduced until the equitable growth reaches all parts of the country

SHAMIM AHMED RIZVI, Bureau Chief, Islamabad
June 04 - 10, 2007

The impressive rate of economic growth in South Asia during the last decade has not been translated into a consistent and significant decline in poverty. In fact, the decline in poverty incidence has been much slower compared to other regions with similar economic growth trends, says the Human Development in South Asia 2006 report. The report, which was recently released by the "Mehbub ul Haq Human Development" center in Islamabad, presents an in-depth analysis of poverty in all its aspects its scale, characteristics and manifestations as well as the policies and programs of South Asian governments to address this challenge. The statistics of South Asia's poverty and deprivation quoted by the report are staggering:

* While South Asia's share in the world population is 22 percent, it contains more than 40 percent of the world's poor.

* Nearly half a billion people live on less than US $ 1 a day, while three fourths of the population survives below US $ 2 a day.

* In the year 2004, more than 200 million individuals lacked access to safe water, while nearly 900 million were without access to basic sanitation.

* According to the latest estimates, there are 380 million adults who cannot read or write, making South Asia the most illiterate region in the world.

Speaking at a seminar entitled "Poverty in South Asia. Has poverty gone down in South Asia? an analysis of poverty alleviation in India, Pakistan and Bangladesh", Prime Minister Shaukat Aziz said that poverty "is still a major challenge" in South Asia as it harbours 40 percent of the world's poor. He said that South Asia has tremendous potential to move forward in a big way, which needed to be exploited with ensuring peace and stability through dispute resolution.

He claimed that Pakistan presented a model of development, which is based on equitable growth equitable distribution of macro economic growth. He said that poverty cannot be reduced until the equitable growth reaches all parts of the country. He said that the income of a common man has increased, along with purchasing power, and at the end of next financial year the per capita income would be $ 1000.

The prime minister said that government has made a commitment towards creating sustainable poverty reducing strategies, accelerating economic growth, maintaining macro-economics, improving governance and devolution, involvement of people and investment in human capital. He said the other element of the strategy was to provide a safety net to the poor such as Zakat and Bait-ul-Mal which were designed to be key elements of delivering those people who cannot use opportunities to improve their own livelihoods. The upcoming budget is to include focus in these specific areas.

Regarding Human Development, investment in social sector was increasing and recorded an annualised rate of increase of about 23 percent of the allocation. He said the pro poor expenditure had been increased from 4 percent of GDP during the 90s to 6 percent now, and the government realizes to improve it further. He said that 48 percent of the development programme was directly or indirectly related to the social programme and that under the Khushhal Pakistan Programme, local projects can create jobs in remote areas to help the local people. This would also be assisted with use of micro credit and micro finance institutions.

The Prime minister claimed that Pakistan Poverty Alleviation Fund was providing support to fund institutions and which was one of the best ways to alleviate poverty. Pakistan has shown one of the steepest declines in poverty rates from 2001 to 2005 from 34.15% to almost 24% He said that 30 million people have come out of poverty during the last several years, of which 10.5 % were still rural based.

The findings of research consolidated in the 10th report launched by The Dr. Mehbub ul Haq Human Development Center which is now being run by his widow, Dr. Khadija Haq, an equally outstanding personality in this field. The purpose of these reports were to carry on the very rich legacy and commitment her late husband had towards the human development in Pakistan and globally. She, however, does not support the optimistic claim of the decline in poverty level in Pakistan. The findings of the Center show that three fourth's of the population of South Asia which included Pakistan survived on below US $ 2 a day (Pak Rs. 120/per day). The World Bank, in its latest report, has also confirmed these figures.

In her opening speech, Dr. Khadija Haq, officially launched the tenth report on Human Development in South Asia 2006. Dr. Haq asserted that all processes of economic, political and social development must be judged by only one criterion what tangible results they actually create for the lowest income families. From this perspective, despite impressive economic growth rates across the region, for the sheer magnitude of the number of poor people in South Asia, this growth has actually meant very little. A people-centred development perspective has to be the heart of the human development model and not just investment in human resources or plain concern with human welfare, even though these are critical to the overall success and sustainability of development programmes.

The main findings of the report covered the following issues:

* Poverty reduction is not possible without growth, but growth that is happening in South Asia is not led by job creation and thus not socially sustainable without participation of the poor in the growth process.

* Despite the recent efforts of South Asian governments to integrate the policies for economic growth with those of poverty alleviation, the rate of decline of poverty reduction (the head count ratio of poverty) is far below the economic growth rate.

* Women continue to bear the heaviest burden of poverty in South Asia.

* Globalization has increased the vulnerability of South Asian poor in the job market, in rural economy and in food security.

* The specific poverty alleviation programmes implemented in all the countries have been able to provide some relief to the poor but, based on limited evaluation reports, all these programmes suffered from major implementaiton problems, and none succeeded in reducing poverty to significant extent.

* Finally, all the countries have been implementing decentralization polices for bringing governance closer to where people live. But poor governance has limited the effectiveness of decentralization to empower the poor.

South Asian countries have been implanting various poverty alleviation programmes. However, most of the state run poverty alleviation programmes in South Asia have not worked as effectively as intended due to the following reasons:

1. Weak administrative capacity
2. Lack of monitoring and evaluation mechanisms
3. Corruption, inefficiency and leakage of funds
4. Unnecessarily rigid and complex procedures

South Asia's economic growth in terms of GDP has been impressive over the last two decades. In 2004, India, Pakistan and Bangladesh experienced a spurt in GDP growth achieving growth rates of 6.9, 6.4 and 6.3 percent respectively.

The high economic growth has not addressed the issue of income/consumption inequality in South Asia which has increased in almost every South Asian country since the 1990s.

* Poverty remains endemic in backward and underdeveloped areas as well as among certain groups like women and minorities.

* Empirical evidence indicates that the rate of agricultural growth is the key macro economic determinant of the degree of pro poor growth. However, output from the agricultural sector as a proportion of the GDP has declined significantly in all countries of South Asian and agricultural productivity has also remained stagnant.

* To labour force participation rate is going down in all South Asian countries accompanied by the rising trend in unemployment rates.

However, since early 1990s to mid 2000s there has been a marked decline in poverty in South Asia. Poverty has decreased from 41.8 percent to 30.9 percent in Nepal; from 34.5 percent to 23.9 percent in Pakistan; from 58.8 percent to 49.8 percent in Bangladesh and from 36 to 28.6 percent in India. Only in case of Sri Lanka has the poverty worsened from 20 percent to 25 percent. But the fact that South Asia is still home to the largest number of poor in the world underscores the imperative that economic growth must be complemented with pro poor policies to ensure broad based participation of the poor in the growth process.