POVERTY ALLEVIATION

OBJECTIVE CAN'T BE ACHIEVED WITHOUT ADDRESSING THE ROOT CAUSES

SHABBIIR H. KAZMI
(feedback@pgeconomist.com)

Nov 26 - Dec 2, 2012

It may not be wrong to say that more and more people are being pushed below the poverty line because of incoherent and inconsistent policies being followed by the Government of Pakistan (GoP). Some of the support is coming from international donors but lopsided programs prove beneficial only for the selects as these are driven by political agenda rather than the necessities. Experts even go to the extent of saying, "Though billions of rupees are being distributed every year under the Benazir Income Support Program it is supporting only the selects. It may add a few thousands to the pockets of people but does not help in creating skills, new job opportunities and the person remains dependent on stipend.

Rising poverty can be attributed to various factors that include: 1) shrinking of purchasing power due to persistent as well as substantial increase in prices of items of daily use, 2) oil and commodity prices hovering at record levels, 3) failure of the government in containing profiteering and 4) above all political uncertainties and precarious law and order situation.

It is on record that price of almost every item has gone up significantly high over the last few years and the most obvious examples are POL products, CNG, electricity and gas, wheat flour and pulses, edible oil and even fruits and vegetables. Hike in POL, CNG, electricity and gas is attributed to linking local prices with international prices. However, woes of consumers are multiplied when government tries to compensate shortfall in revenue collection by imposing huge oil and gas development surcharges. Hike in energy cost inflates cost of production as well as freight charges, force people to pilfer electricity and gas and the government keeps on increasing electricity and gas tariff in the hope of improving cash flow of electricity and gas distribution companies.

It is true that crude oil price has risen due to turmoil in the Middle East and North Africa (MENA), but rise in POL quantities imported is the outcome of following incongruous policies. Despite higher prices being offered to exploration and production companies, indigenous production has been proving grossly insufficient. Depreciation of rupee also contributes in the cost but ever rising circular debt is pushing companies to virtual default.

Hike in prices is also attributed to profiteering. While farmers and manufacturers get paltry returns, the middlemen are minting hefty money. Added to this is the booty culture where from a large enterprise to the smallest vendor has to pay Bhatta or face burning of its assets, kidnapping and even murder of near and dear. Even hiring of private security guards fails in creating a feel that one is safe. On the rise are street crime, from snatching of mobile phones and valets to cars and from ripping off people travelling in public transport to extortion of money in the name of 'party fund'.

If one looks at the local stock exchanges the number of new listings has remained dismal. Owners of industrial establishment say that if they can't operate the productive facilities at optimum capacity utilization why they should be investing in the creation of new productive facilities. The industries facing dismal capacity utilization are textiles and clothing, fertilizer, crude oil refining and assemblers of two and four wheelers. Due to disruption in electricity and gas cost of production of virtually item is one the rise, which is most adversely affecting the exporters as they can't compete in the global markets.

Following bad policies is not only pushing prices of everything up ut the situation is getting real precarious as the rate of unemployment is on the rise. Depleting purchasing power proliferate katchi abadis as people can't afford to live in the main city and even suburbs. This forces them to spend more on utilities, adds to spending on fuel/bus fares and face worst congestion on roads.

Most of the experts are of the view that the government should focus of creation of new jobs. With the deployment of mechanization in agriculture more and more people are shifting to urban areas. Therefore, there is a need to keep these people busy in their home towns. This can be done by offering them appropriate education and vocational training. Most of the cottage industries located in rural areas faces extinction due to lack of financing facilities.

Growers demand regular increase in support price of cotton, wheat and sugarcane on the pretext that cost of inputs is going up. It is partly true because prices of seeds and fertilizers have gone up but the real cause is failure to improve yield. Experts are of the view that using primitive methods of agriculture, fragmenting landholding, absentee landlords and use of funds borrowed as agri loans for purchasing expensive cars and properties in urban areas are the main cause of poor yield.

While farmers can be accused of improper crop management, it is also a fact that they suffer the most because of shortage of irrigation water. Their woes are double because they suffer in either case, face drought like situation which downpour is low and experience devastation when there are torrential rains and subsequent deluge. This happens because the country has failed in building water reservoirs, keeping canals and water courses clean and maintaining embankments.

Experts say that Pakistan must make the best efforts to achieve food security by offering attractive prices for agricultural produce. However, there is a consensus that nearly 40% of the produce goes stale because of highly inadequate storage facilities and farm to market roads. If any significant part of this loss can be contained not only income of farmers will be increased but additional export proceeds can be realized by exporting the surplus quantities.

Focusing on rural economy is a must because two of Pakistan's major industries, textiles and sugar are agro-based. Achieving higher production of cotton and sugarcane can help in boosting exports. The real focus should be on sugar industry which is called the driving engine of rural economy.