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Poverty alleviation a la Chinese style

Prime Minister Imran Khan while addressing the opening ceremony of the second Belt and Road initiative (BRI) summit in Beijing titled “Shaping a Brighter Future” reiterated his admiration for China in lifting 800 million Chinese out of poverty within a matter of decades yet again.

Researchers Ke Zhang, John Dearing, Terence Dawson, Xuhui Dong, Xiangdong Yang and Weiguo Zhang acknowledge the significant gains made by China in eradicating poverty and in a scholarly article identify the cost of the Chinese growth model: “Spectacular economic growth over the past 30 years has made China the world’s second largest economy, taking more than 600 million people out of poverty (World Bank 2007). At the same time, environmental deterioration has become a major threat to China’s future sustainable development (Liu and Diamond 2005). With growing evidence for reduced crop yields (Guo et al. 2010, Ray et al 2013), polluted water bodies (Gao and Zhang 2010) and higher frequencies of extreme flood events (Dai and Lu 2010) as unintended consequences of agricultural development, it seems that a conventional approach to environmental management in China is failing.”

In 2017, China released details of its national carbon market covering power generation (contributing to half of China’s overall emissions) subsequent to the 2009 pledged 34.6 billion dollars for development of clean technology; however other major emitters including automobiles, industrialization of the agriculture sector, chemical complexes, steel mills and cement factories did not initially fall under this programme. Chinese initiative for the development of clean technology was deemed necessary given that high growth had led to an increasingly unstable farm output, with a projected decline in output of wheat, corn, rice; with the ecosystem more vulnerable with an increased frequency of pests and diseases (exposure to 50 percent higher malaria transmission probability rate), decrease in water resources, more floods, and drought and extreme weather conditions.

Many of these negative environmental factors plague Pakistan today and one wonders at the nature of the recommendations pertaining to the agriculture sector under preparation by the supposed PTI expert on farming, Jehangir Tareen. To produce a higher output than one’s competitors in a micro context is not the same within a macroeconomic context, and one would hope the Prime Minister has learnt this lesson from his earlier confidence on Asad Umar’s capacity to deliver on the economy which after less than eight months, he was compelled to acknowledge was misplaced.

Irrespective of Prime Minister Imran Khan’s pledge to follow the Chinese model for poverty alleviation his administration has been effectively disabled from following it given the prior International Monetary Fund (IMF) conditions (two already implemented while implementation of the third, notably a primary deficit of 0.6 percent of the GDP in the budget 2019-20, would be revealed on 11 June) and during programme conditions that are widely known (though the precise quantitative time bound structural benchmarks would be made available as and when the IMF uploads the entire agreement on its website). The IMF had projected a growth of 2.8 percent for next year before the staff level agreement was reached and after the agreement it would be safe to assume that growth would be further downgraded to around 2.5 percent at most, notwithstanding the over optimistic figure of 4 percent cited during the APCC.

Imran Khan has pledged house ownership for the poor at cheaper rates. In 1999 China established a housing fund (after millions were laid off in state owned entities) by which employees would contribute to it (the exact amount was left to the local governments to determine as they would be in a better position to be aware of land values and associated construction costs in their area of operations) and be eligible for preferential mortgage rates, be able to repair/maintain houses and/or get a rent subsidy; if the fund remained unused it could be redeemed on retirement and would function as a secondary pension. Additionally, the Chinese government allowed these funds to be used during emergencies for example unforeseen medical expenses.

In April, the Pakistani cabinet approved the Naya Pakistan Housing Authority for construction of 13500 apartments in Islamabad and Balochistan in the first phase for targeted construction of 5 million houses in five years pledged by the Prime Minister. The Authority has yet to be established and there is no clarity as to who would initially fund the houses as the Prime Minister has repeatedly stated that the federal government would not fund them and that it would be through public private partnership. He further stated that the World Bank has said it would help but the terms and extent remain a mystery probably because a formal request has not yet been submitted to the World Bank; China and Malaysia have shown an interest in the project, the Prime Minister added, but their interest may fizzle out unless a profit can be made. The question therefore would be who would pay for the initial cost of building flats/houses and at what agreed price would then be on-sold to the poor? And the solution: why not follow the Chinese model as it takes account of all issues including extending assistance to those with an emergent need for funds.

So what is Imran Khan’s poverty alleviation strategy? He has frequently referred to the launch of a targeted poverty alleviation programme called Ehsaas, or feeling, (with “Mazdoor-Ka-Ehsaas” launched on Labour Day – 1 May – falling on the same day as the 23 foundation day of Pakistan Tehrik-i-Inssaf). The same day the Prime Minister further pledged that “a number of policy measures have been approved for the welfare of overseas Pakistani workers under Ehsaas, such as enhancing the number and quality of institutional arrangements that are responsible for protecting migrant workers, creating online interfaces to facilitate them, negotiations with host countries aimed at increasing the duration of the first contract of migrant workers and subsidies on air tickets for the workers who haven’t returned home for 7 years.”

The actual modalities of the Ehsaas programme were worked out by his Special Assistant on social protection and poverty alleviation Dr Sania Nishtar who outlined four pillars on Sunday last. And to appease the Prime Minister’s sensibilities she stated that the Ehsaas programme was formulated keeping in mind the principles of the state of Madinah whose objectives she defined as reducing inequality, investing in people, and lifting lagging districts. The Ehsaas programme Dr Nishtar revealed would comprise of 115 policies and four pillars which are as follows: (i) all departments including Benazir Income Support Programme (BISP), Pakistan Bait-ul-Mal, Zakaat, Pakistan Poverty Alleviation Fund, Trust for Voluntary Organizations would work under an umbrella of the ministry to address issues in efficient way. This would do away with duplication and be a one-window operation for the beneficiaries, a pillar that can be fully supported; (ii) Kifalat programme (stipends to be distributed to 7 million women to undertake their own business – BISP envisages a similar programme) while the tahafuz programme, an entirely new programme, would be geared towards those who suffer an unexpected financial problem (perhaps this can be better handled through the housing fund as in China), and opening of half way houses in various cities is also appreciated though only a small number would be able to enjoy this facility; and a welfare and pension scheme for the informal sector would be launched as per the recommendations of the Labor expert group and for welfare of workers abroad; (iii) Human capital development ranging from tackling malnutrition, preschool or early education, protecting children from harm, ensuring access to quality education, skills and jobs, long-term commitment to Universal Health Coverage, and measures for empowering women and girls with many components envisaged in BISP; and (iv) employment generation.

These are good pillars however the amount budgeted for next fiscal year is, as per the Prime Minister and his Advisor on Finance, around 180 billion rupees – an amount that PTI claims is double what has been spent in the current year. Revised estimates of 2017-18 reveal that BISP was disbursed 113 billion rupees, while other development expenditure (including grants for poverty alleviation fund) accounted for another 40 billion rupees. Allocation for the current year in the April 2018 PML-N budget was 180 billion rupees hence claims of 180 billion rupees being double what was targeted this year are inaccurate however the available funds from other government entities that would henceforth be working under the umbrella of the Ministry have not been identified and may well double the funds of the ministry.

To conclude, there is much good in the programme formulated by Dr Nishtar though its ambitious nature requires funds well in excess of what the government can possibly provide today given the appalling state of the economy. But as envisaged and implemented under BISP there would be a steady refining and expanding of the Ehsaas programme but under a name that would be associated from henceforth with PTI rather than the PPP.

Anjum Ibrahim, "Poverty alleviation a la Chinese style," Business Recorder. 2019-06-10.
Keywords: Economics , Environmental deterioration , Ehsaas programme , Social protection , World Bank , Poverty , BISP , PTI , PPP