Political goodwill & Strong Institutions: An Effective Tool for Reducing Poverty!

Over four decades ago, Pakistan and China both experienced high rates of rural poverty. While China was able to reduce poverty to a great extent over the past four decades (since its reforms, mainly institutional reforms, in the late 1970’s) the poverty rates in Pakistan varied and remained relatively high. China’s success in decreasing poverty is well rooted in its political goodwill and strong institutions which have aided in securing economic stability and resultantly in the implementation of effective poverty reduction strategies. On the contrary, successive poverty alleviation strategies in Pakistan have failed owing to various policy gaps, poor implementation due to lack of political goodwill and institutional failures. China’s success story provides considerable policy lessons for Pakistan for achieving tangible results in mitigating poverty.

The root cause of Chinese success is its strong stance of implementing the policy of empowerment by allocating the entire agricultural land to the farmers individually, without any discrimination, within a short span of five years. Landholding plays a significant role in empowering the rural population by improving their quality of lives. However, in Pakistan since the landowners are the same parliamentarians who are responsible for making bills in the parliament will never make any sort of bill that will deprive them of their feudalistic privileges. So no radical step of redistribution landholdings among the landless households is taken on the government’s part owing to which land reforms had not been successful in Pakistan. The public policies developed in China aimed at benefiting the peasant community through land reforms whereas in Pakistan all the subsidies and taxation are only beneficial for either large or medium farmers.

The highest incidence of poverty exists in areas which are considered as feudalistic societies, for instance, areas of Punjab, Interior Sindh and Baluchistan, and some Tribal areas in KPK. These feudal lords does not only control the social and economic lives of the rural people but have a greater influence in the decision making at local as well as provincial level. In Pakistan, the land holdings depend upon power, the more powerful you are the more the landholdings you will have. The feudalistic system in rural areas tends to give rise to inequality which leads to poverty. The small farmers are exploited at the hands of landlords paying more for inputs and receiving less for outputs. Forced labor is another common practice in feudalistic societies, where poor farmers have to work on lower wages for their landlords. This power game in rural areas needs to be tackled by the government with an iron hand.

Agricultural growth, alone, is not an enough measure for the rapid alleviation of poverty because mostly the benefits are obtained by the households having an access to land rather than the poor landless households. Thus it is very critical to increase the non- farm incomes in the rural areas for poverty reduction, which basically constitutes of 2 sectors; income and employment. Pakistan inherently does not have any practical policy to mushroom its non-farm economy within rural areas. The enterprises in rural areas of Pakistan are still immature and very traditional in nature which lack good quality products due to the absence of innovation. On the other hand, in China the Township and Village Enterprises (TVEs) are competing with the urban industry. So Pakistan needs to take measures to promote the indigenous rural enterprises. The initial drivers behind the impressive China’s economic growth were the TVE’s which were highly encouraged by the government. These enterprises were very effective in absorbing massive surplus labor into the manufacturing sector through the adoption of labor-intensive approaches. The leading roles of TVEs in lifting millions of people out of poverty cannot be neglected. This, non –farm rural sector has not only alleviated poverty had played a significant role in the diversification of rural income.

The biggest challenge that Pakistan is faced with is poor investment in the two most significant sectors of any economy, education and health. Pakistan hardly spends 2.3 % of its GDP on education and only about 0.9% on health sector. Owing to this, the labor force has not been able to enhance the skill sets that they have. Poverty alleviation can never be achieved unless and until the social sector in any economy does not flourish. On the other hand China has heavily invested in building human capital by making it compulsory to attend 9 – years of schooling. It played a critical role in both agricultural and industrial growth. Education plays a very important role in distinguishing between poor and non- poor. Education has a proportional relation with chances of employment. Since the poor lot have low level of education and hence low skill sets so they end up doing low paid jobs. Similarly poor health is also parasitic for achieving economic well-being. Health in most cases becomes the pushing factor for households into the deeper poverty, which ultimately forms a vicious cycle. Pakistan is paying a high price for not investing in social development.

Hence, we have seen that institutional efficiency is a major pillar for the effective and maximum utilization of the resources. In order to hamper the mismanagement of public resources, Pakistan has to work towards the strengthening of the institutions. A strong negative connection exists between the poverty incidence and the maintenance of rule of law. The poor law and order situation in Pakistan played a hampering role in growth and poverty alleviation efforts. Pakistan has to work towards the capacity building of institutions just like China, which made its institutions strong enough through the implementation of supportive policies.

The lesson to takeaway is that the increase in public expenditure should always be backed with strong institutions. Institutional efficiency is a must, otherwise public spending, alone, is not capable of doing any good on its own. The role of government to cater to all these identified issues has to be reviewed and adjusted accordingly to formulate effective policies. In order to achieve effective poverty alleviation, Pakistan requires proper planning and management of its safety net programs. Not only do these programs need to be transparent but also well-integrated and synced.

The participatory approach is critical for empowering the poor. Local people need to be involved in the designing of poverty reduction schemes in order to cater to their needs, building of their self-development capacity, to efficiently use finances for improving their lives. Holistic systems for assessment and impact evaluation should be established to help point out the factors and policies responsible for inefficiencies in the management of fund collections. In order to cater to this problem of accountability, a third party needs to be introduced that should be responsible for accountability and transparency.

In a nutshell, China owes its success in poverty alleviation to the very strong, deep rooted basis of political determination for maintaining macroeconomic stability and strong institutional power to achieve significant poverty alleviation. Pakistan owes its failure to alleviate poverty to the policy gaps and substandard implementation of those policies. Weak institutions being a critical factor in this failure, in addition a number of reasons including poor governance, low public investment, lack of social security net, instability and conflicts and higher rate of population had been responsible for this failure. Hence a few policy suggestions have been suggested above to help Pakistan achieve its goal of poverty alleviation.

Disclaimer: The views expressed in the article are the author’s own and do not necessarily reflect Dunya News’ editorial stance.

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