The Political Economy Of Poverty Reduction

by

Sartaj AzizPresented By:

Muhammad Gulfam Arshed

Zulfiqar Ahmed

Malaika Abbas

Sartaj Aziz is an eminent economist and politician. He was born on 7th

February, 1929 in Mardan.

Education • He raised in Peshawar and Abbotabad.• After arrival at Lahore, he got

admission in Islamia College Lahore.• After this, Mr. Sartaj Aziz obtained a

Degree in Commerce from Hailey College of Commerce (Punjab University) in 1949.

• In 1962, he proceeded to Harvard University (USA) where he earned a Master's Degree in Public Administration (Economic Development).

• He also got training and acquired expertise in development planning and management sciences.

1st phase of career; Civil Servant

• He joined Government service in 1950, held various posts and rose to the level of a Joint Secretary in the Planning Commission in 1967.

• He was one of the principal contributors to the Third and Fourth Five-Year Plans of Pakistan

2nd phase of career; International Career

• Mr. Sartaj Aziz started his international career in 1971 in Rome, Italy and held important positions in the United Nations, Food and Agriculture Organization (1971-75), World Food Council (1975-77) and International Fund for Agricultural Development (1978-84).

• He participated in a number of international conferences and was an active participant in the North-South dialogue and South-South Cooperation.

3rd phase of career; Political Career

• Mr. Sartaj Aziz started his political career in April 1984 when he returned to Pakistan and joined the Federal Cabinet as Minister of State for Food, Agriculture and Cooperatives.

• He was elected as a Senator from KPK in 1985 and returned again to the Senate of Pakistan from the Federal Capital Territory in March 1988 for a six-year term.

• He was again elected as a Member of the Senate from the KPK Province in March 1994 for another six-year term.

3rd phase of career; Political Career

• He served as Federal Minister for Finance, Planning and Economic Affairs from August 1990 to July 1993, a position he rejoins from February 1997 to August 1998.

• After it, he took over as Minister for Foreign Affairs till October 1999.

• He performed above mentioned duties in the regime of Mian Nawaz Shareef.

• In July 1993, Mr. Sartaj Aziz was appointed as Secretary General of Pakistan Muslim League (N).

4th phase of career; Education Sector

• Mr. Sartaj Aziz currently working as Vice Chancellor of the Beaconhouse National University, Lahore.

• As well as he is professor of economics and management sciences.

• Mr. Sartaj Aziz wrote in his book “Between Dreams and Realities” He is much satisfied this phase of career.

Publications• Hunger Politics and Markets (1975).• Rural Development: Learning from

China (1978).• Report of the National Commission

on Agriculture (1988).

• Agriculture Policies for the 1990s (1990).• Privatization in Pakistan (1996)• Between Dreams and Realities:

some milestones in Pakistan’s history.

Awards• Mujahid-e-Pakistan Medal (1947).• Tamgha-e- Pakistan (Medal of

Pakistan)(1959)• Sitara-e-Khidmat (Star of Service)

1967.

Overview

• The UNDP;s Human Development Report 1996, explored the linkage between economic growth and human development and pointed out five types of policies and intuitional failures.

Jobless Growth

• Economic growth is not accompanied by an increase in employment or income earning opportunities for the poor because the expansion is based on capital intensive investment primarily in urban areas.

• It is the growth that does not create new employment opportunities with it.

Ruthless Growth

• Economic growth also increases inequalities because the benefits of growth do not flow equitably to all sections of society.

• It is the growth that only benefits the rich, and leaves the poor in their poverty.

Voiceless Growth

• Economic expansion occurs without simultaneous improvements in participation opportunities for people, rendering the process unsustainable.

• It is the growth without improvement in democracy or social inclusion.

Futureless Growth

• Economic expansions disregards the need to the nature the averment.

• It is the growth at the expense of cultural identity, or the loss of minority identity.

Rootless Growth

• Economic growth failed to succeed as a result of disregarding the local socio-cultural context.

• Growth that undermines future generations by depleting resources or destroying biodiversity.

Causes of poverty

• The root cause of poverty are deep and complex and spring from the power structure of a society, with its skewed distribution of assets and an economic system often dominated by feudal, tribal and ethnic elites in most developing countries.

• In most developing countries policies are urban biased, positive incentive for industry and negative protection to agriculture.

• Policies in developing countries have negative impact on poor by cutting down expenditures, reducing subsidies, raising taxes and utility charges.

• These policies lead to rising unemployment, growing inequality and shrinking social services.

• The MDG,s of halving poverty by 2015 will be difficult to achieve unless these obstacles and negative policies are fully explored and effectively tackled.

Political Factors

“Development first , Democracy later”

Some experts support this statement by arguing that a stable democratic system requires universal literacy, liberal attitudes, strong judicial system and free media and it can be achieved only through the process of economic growth.

• Some experts give empirical evidence against this statement .

Amartye Sen’s words,

“No democracy with a free press has ever experienced a major famine”

Political Factors

The pre-requisites for poverty reduction in the light of the experience of several Asian countries would include the following:

1. The pattern of land ownership, the degree of skewness and prospectus for land reforms.

2. The political power base of the Government in power and the actual nexus between the power structure and major stake holders and the extent to which country elites are committed to development.

3. Extent of decentralization of governing structure and its nature.

4. Extent of power sharing and participation of the poor in governance and the process of development at different levels.

5. The degree of tribal, religious and ethnic polarization in the country.

6. Capacity of the administrative structure to implement economic and pro-poor reform programmers.

7. State of political rights and civil liberties in the country as whole and for the segment of the society including the effectiveness and independence of institutions like the judiciary and the media.

8. The relative term of trade for the agriculture sector in relation to the industrial and urban sectors including the share of credit flowing to the rural sector.

9. The proportion of budgetary sources for social sectors expeditors like education and health that actually reach the poor.

LESSONS OF EXPERIENCE

This section of the handbook tries to identify the political factors that have facilitated seven Asian countries to adopt pro-poor reforms and policies. These countries are

1. China

2. Viteman

3. South Korea

4. Indonesia

5. Malaysia

6. India

7. Pakistan

The main lessons that throw some light on the complex relation between politics and poverty reduction are summarized as follows

CHINA• China has achieved a sustained GDP growth rate of 10.1% from 2000-

2011

(World bank stats.)

• According to Human Development report of 2013. China is ranked 101 out of 186 countries securing a medium category in human development. China’s HDI for the year 2012 is 0.699

(UNDP Report 2013)• China's Gini coefficient, an index used to indicate a given country's

wealth gap, reached to 0.474 in 2012, down from 0.477 in 2011 and from a peak of 0.491 in 2008

(National Bureau of Statistics China)

• China has successfully lifted 600 Million people out of poverty. Population in china living below poverty line was estimated to be 49% of the population in 1980 which had been reduced to 13.1% in 2008

• Main features of china’s success are as follows

• Strong commitment of Chinese leadership towards broad base development and pro-poor reforms.

• Land reforms of 1950’s enabled farmers to pool their resources and rural industrialist to generate additional employment opportunities.

• It was then followed by the priorities that were set in 1977-78 towards poverty reduction along with economic liberalization.

VIETNAM

• Vietnam, a socialist country has achieved a sustained GDP growth rate of 7.1% from 2000-2011

(WORLD BANK STATS.)

• According to human development report of 2013 vietman is ranked 64 out of 186 countries securing a high category in human development. Vietman’s HDI for the year 2012 is 0.769

(UNDP report 2013)

• About 28 million people are estimated to have been lifted out of poverty over approximately two decades from 70% of the population to 35%. Vietman’s poverty rate was reduced to 12% in 2011

• Like China, Vietman’s success story also started off with the land reforms

• Which was then followed by the policy of economic renovation and liberalization in 1986

• Their success was made possible by the social transformation through equitable distribution of land which was preceded by the process of economic and technical change

SOUTH KOREA

• South Korea which is an emerging economy has achieved GDP growth rate of 4.0% from 2000-2011

• According to Human development report of 2013 South Korea is one of the developing countries to place a high category position in Human development and is ranked 12 out of 186 countries . Its HDI for 2012 is 0.909

• South Korea a country with limited mineral and naturel resources has done remarkably well in poverty reduction by investing in EDUCATION

• They focused on their human resources and have achieved 100% literacy rate combined with 34% enrollment in sciences mathematics and engineering.

• South Korea improved terms of trade for agriculture which ensured wide industrial growth may not lead to wide disparities between rural and urban areas

MALAYSIA• Malaysia a country in which state has played a significant

role in guiding economic activity through macroeconomic plans has achieved GDP growth rate of 5.0% from 2000-2011

(World bank stats.)

• According to human development report of 2013 Malaysia is ranked 64 out of 186 countries securing a high category in human development. Its HDI for the year 2012 is 0.769

(UNDP Report 2013)

• Malaysia success towards poverty reduction comes from promoting national unity and by adopting practical strategies for power and wealth sharing.

• This eventually helped them to overcome the racial and ethnic divide within their country

• They adopted policies to provide equal opportunities to all communities and religions by protecting the rights and interests of the weaker segments of the society including women

INDONESIA

• Indonesia according to WTO the 27th biggest exporting country in the world in 2010 has maintained the GDP growth rate of 7% for three consecutive decades (1967-1997)

• 1997 economic crisis of Indonesia turned to serious political crisis with led to breakdown of the governing structure.

• There GDP fell down by 14% in 1998 and poverty doubled to 28% of the total population.

• Indonesia has been trying to regain its momentum and has achieved a sustained GDP growth rate of 5.3% form 2000-2011

• Poverty rate of Indonesia for the year 2012 is estimated 11.9% of the population.

Badan Pusat Statistik (Statistics Indonesia)

• According to UNDP report of 2013 Indonesia’s HDI is 0.629 placing in medium human development by securing 121 out of 186 countries

(UNDP Report 2013)

• Main reasons of success of Indonesia is the presence of strong institutions and stable political system

INDIA

• India, one of the world’s fastest growing economy, has achieved GDP growth rate of 7.1% from 2000-2011 and have ranked 136/186 countries in human development placing medium category. Its HDI for the year 2012 is 0.554

• An estimated 29.8% of Indians live below the country's national poverty line (2010)

• Success of India mainly lies in the strong democratic system which provides scope for empowering poor.

• Having strong institutions like free judiciary independent election commission and media has helped India to uphold the rule of law and basic human rights.

• Indian experience shows that its economic progress is based on solid foundations of education science and technology creating vast employment opportunities for educated youth and expanding the scope of growth for civil society

PAKISTAN• Pakistan is a rapidly developing country. Its economy

grew by an average rate of 5% between 1950 to 2000• From 2000-2011 it has achieved growth rate of 4.4%. It

is ranked as low human development country its HDI for the year 2012 is 0.515 (146/186)

• Decentralization and transfer of power and resources to grass route level helps creating better results in poverty reduction.

• This is partly the case of Pakistan. We shall discuss that in detail

• If we summarize the success stories of these Asian countries we end up with the following conclusions

1. All the countries which have substantially reduced the level of poverty have had an average growth rate in per capita income which was atleast 3% per anum. 60-70% reduction in poverty can be attributed to the growth in per capita incomes.

2. These countries were able to achieve macro economic stability through fiscal discipline. They expanded their public sector investment in infrastructure and also increased the social spending on education and heath.

EMPOWERMENT AND COLLECTIVE ACTION

• Empowerment of the poor becomes sometimes difficult in countries where political system is neither genuinely socialist nor truly democratic.

• Reason for that is, power structure is often pro-rich in its policies through hidden subsidies and by fiscal policy serving upper income groups

• Also because organizations representing the poor can’t easily challenge the monopoly power and resources hold by these politically dominant groups

• In Author’s view, these obstacles can be overcome by organizing collective actions. Collective actions can be organized by building powerful coalitions based on the following concepts

1. Evolving a legal framework for including “the right to development” in the concept of basic human rights

2. Extending the human development perspective into broader and more meaningful concept of human security

3. Enforcing the principle of democratic governance, by supporting leaders committed to development and building participatory institutions that are responsive to the needs of the poor

• The concept of right to development leads us to the path of adopting “rights approach”

• It is important in a sense if it is applied through coalition of supportive political parties and civil society organizations

• it leads us to a coherent framework of laws, rules, standards and enforcement procedures which is capable of influencing national policies and actions

• Author has pointed out two main pre-requisites for extending the concept of human rights approach to development. There must be a national level consensus on at least following two approaches

1. Right of food and right to basic education

2. Strong coalition in support of the poor

Right to food and right to basic education

• World food summit which was held in ROME in June 2002 the international community has reaffirmed “the right of everyone to have access to safe and nutritious food”

• If the two rights are accepted and gradually enforced through a series of policies structure and monitoring system other elements of the broader concept of development can be added to the package

• On part of education, to make elementary education a fundamental right India has done a constitutional amendment in 2002

• They encouraged their states to insert this right into their respective education laws.

Strong coalition in support of poor

• The second pre-requisite towards human rights approach is the strong coalition of all stake holders in support of the poor.

• Even if pro-poor laws are there they don’t lead to the desired policies and actions without awareness in general public and public pressure.

• Policy makers should be shaken into action along with the power of public pressure from civil society to force government to adopt pro-poor policies.

• This interaction will ensure participation of poor and will lead to empower them.

CONCLUSION• As it was mentioned earlier that in countries where political

system is neither genuinely socialist nor truly democratic the state is generally dominated by governing elites in other words political power structure is highly centralized.

• In such cases the right moment will have to follow a decentralized approach based on different issues like lack of good quality schools non-avaliability of clean drinking water etc.

• Community organizations should concentrate on the needs of special interest groups like minorities and women.

• Efforts should put to organize the poor to compete in the labor and product markets and the right to buy their minimum requirement of good and other essential products at reasonable price which would place them on high moral grounds

Safeguarding Human Security

• The concept of human development by UNDP is now widely accepted as a more meaningful framework for formulating and implementing development strategies and policies at the national and international levels.

• But in practice and in most countries the concept has had a limited impact on development policies.

• With the spread of diseases like AIDS, continuing environmental degradation and the threat of international terrorism the concept of human development has transformed itself into the broader concept of human security.

• Human security is more global today than global trade because poverty and desperation cannot be stopped at national borders.

• It travels in unpleasant forms like drugs, aids, pollution and terrorism.

• The concept of human security encompasses a broader set of development objectives, namely “an expansion of human capabilities, a widening of choices, an enhancement of freedoms and a fulfillment of basic human rights and the security of all the people everywhere in their homes, jobs, streets and in their communities.”

• The pursuit of these objectives will lead not only to new criteria but new policy instruments.

• These goals of human security cannot be reached without the empowerment of the poor.

• At the level of the individual, empowerment depends primarily on the level of human development, through education and training.

• At the community level, empowerment comes from social mobilization through which effective community organizations can create awareness and generate political and moral pressure to protect the rights of the poor and the deprived.

• At the national level all the threads of empowerment if they are strong enough can converge into strong coalition in support of the poor.

Securing Democratic Rights • A peoples movement to secure their democratic rights

cannot be suppressed.• Once such movements gather momentum they can lead

to far reaching political changes just like in Egypt.• There are many views on the main elements of a genuine

democratic system but three ingredients are universally accepted:

• The ability of the population to elect their leaders through periodical free

• And Fair elections• Free media and institutional checks on the exercise of

power to ensure that the laws of the land are uniformly enforced.

• Democratic system tends to be pro-poor, partly because power is not exercised by a single dictator but is shared more broadly .

• In such a system the flow of information through many channels encouraged by the free media also leads to a free exchange of ideas and debates on alternative policies.

• Different regions, provinces or communities can highlight their needs through a gradual process of administrative and political decentralization of the governing structure.

• In the past two decades many countries under a democratic dispensation have not only actively pursued pro poor policies to increase agricultural yields, improve education and health services, provide clean drinking water and expand non-farm employment, but have also decentralized the governing system to make it more responsible to the needs of the public just like in Malaysia.

• The emergence of such activist states can become a powerful catalyst in networking and strengthening various global movements of the people to gain their right to development even at the international level, and to end discrimination against the weaker members of the global community just like the Egypt revolution.

The International Dimension• The international community has taken a giant

historical step by adopting the Millennium Development Goals of halving hunger and poverty by 2015.

• But it has not yet adopted policies to move towards those goals.

• In fact the incidence of poverty if Chinese figures are excluded seems to have increased.

• What needs to be done to achieve these MDG’s. • Official Development Assistance, more extensive debt

relief and better market access for agricultural and non-agricultural exports from developing countries.

• But the obstacles that stand in the way are political in nature.

• The cold war ended 15 years ago and the incident of September 11 changed the geo-political landscape of the world and effectively shifted the focus from the war against poverty to the war against terrorism.

• This focus can be brought back if it is realized that in the long run the two wars are interconnected.

• There is also a moral obligation which should require the international community to modify in the interest of equity and justice policies like agriculture subsidies that discriminate against poor countries and poor people.

Conclusion • After the commitment of halving the poverty

and hunger by 2015, the prospect for achieving this goal do not look very promising in fact if Chinese figures are excluded the poverty has actually increased.

• Global civil society will have to intensify pressures on donor governments to honour their commitments, the developing countries themselves have to evolve and implement with the support of civil society and participation of the poor, pro-poor policies and programmes.

• Regarding MDGs with few consequences attached to their non-fulfillment, states are under little incentive to comply and seldom challenged.

• The activities and impacts of trade, aid and debt offered by donor countries should be closely monitored

• MDGs should be broadened enough to bring slums, women, working poor and children under their close consideration and marginalized communities should be provided guidance and assistance.

• Preceding Annexures offer some useful insights and guidelines regarding the political economy and reduction in poverty.

Malaysia• Malaysia is a multi-racial country which faced a

set of challenges: Achieving rapid economic growth Reducing poverty Redressing equalities Promoting racial harmony.• A masterful strategy evolved and Malaysia

achieved a sustained increase of 4.1% in per capita GDP and improved its HDI rank and also its gender related development Index.

• Which is a result of comprehensive and sound policy framework whose main aim was not just maximum growth but national unity.

• Malaysia’s policy framework for equitable growth and poverty reduction has evolved through three medium term plans supplemented by a series of sectoral plans and as a result problems of poverty and hunger have been virtually overcome.

• The core policies were incorporated in the New Economic Policy (NEP) for 1970-90 aimed at national unity through:

Rapid and continuous economic growth with equitable distribution

Eradication of poverty Restructuring of society• The main thrust of the poverty reduction strategy of Malaysia

was on increasing the productivity of the poor and diversifying the sources of their income by expanding non-agricultural activities for poor households.

• Income tax rate for the poor were either eliminated or reduced.

• The private sector and the civil society played a major role in this effort and particularly in transforming the economy and that was made possible by the prolonged period of peace and security in the country.

• This core poverty reduction strategy was supplemented by special programmes to target the poor and by providing welfare assistance to the disabled and the handicapped.

• Every effort was made to maintain stable food prices trough government intervention in the production and marketing of essential items.

• Malaysia’s success in poverty reduction seems to be the importance of overcoming racial or ethnic strife through an active policy of promoting power sharing and wealth sharing.

• Secondly chronic disparities were narrowed through pro-active policies to provide equal opportunities to all and to protect the rights and interests of the weaker segment of society including women.

• Thirdly a policy framework with active government intervention Malaysia succeeded in evolving a complimentary framework for cooperation between public and the private sector.

• Malaysia’s rapid growth is its ability to innovate to plan and to implement its plans effectively.

• Malaysia had regular five year plans, long term 20 year perspective plans and even a 30 year vision in the future.

• These were not idle dreams but were clear and practical road maps which were all seriously implemented.

• It is this ability to plan innovatively and implement the plan on a practical and realistic basis that enabled its multi-racial population to overcome serious inter-racial disparities and become stable and to achieve remarkable economic development.

• Malaysia was faced with the traumatic race riots, economic and financial turmoil caused by external forces which was not within their control.

• Selective capital controls after the financial crisis of 1997 worked and enabled Malaysia to recover strongly.

• The currency traders can not blamed for the damage done to these countries.

• The blame is put squarely on the shoulders of the governments.

• An important lesson is that Malaysia must always be careful in the management of its economy.

• It must never allow to be weakened by carelessness in the maintenance of its financial and economic strength.

• Only with absolute vigilance can we ensure that its rate of growth will be sufficient to achieve developed country status as envisaged in vision 2020.

• The currency crisis is an unnecessary crisis and need not have happened.

• Big capitalist powers want to promote their political agenda as well and it is because of this political agenda that the international financial system not only permitted but at times encouraged currency trading, which destroys more wealth than it creates.

Indonesia • From 1967 to 1997 Indonesia’s GDP grew by an average

of 7 percent per annum. • Rapid growth was accompanied by significant gains in

the development of human capital and a diversification of the economy away from agriculture.

• Poverty fell from 70 percent in the mid 1960’s to 11 percent in 1996.

• The economic miracle was built on strong macroeconomic policies, support for agriculture, investment in physical and human capital and increasingly liberal policies in the financial sector, trade, and foreign investment.

• Economic policies were largely managed by a group of technocrats isolated from the political sphere, who used windows of opportunity to push through reforms and make good policies in bad times.

• In Indonesia continuing institutional weakness made the country vulnerable to shocks.

• Lack of appropriate controls and regulation for example had weakened the financial sector and increased external vulnerability, while corruption undermined the credibility of economic policies.

• When the Asian crisis hit , the absence of strong institutions compounded the crisis and made recovery more difficult and more costly for Indonesia than other crisis affected countries.

• The absence of a functioning political system also prevented consensus building on measures to fight the crisis and a weak judiciary could play no role in several key areas, like corruption whose control was necessary for restructuring the economy.

• The crisis had exposed the weak governing structure of Indonesia and that made the process of recovery much more painful for the population.

Economic policies 1967-97• Macroeconomic stabilization the first phase of economic

liberalization proceeded through several steps:o Restoration of external viability: debt rescheduling, adoption

of a unified, fully convertible fixed exchange rate.o Fiscal constraints: severity measures, including reduction in

government spending and subsidies to state-owned enterprises, elimination of most price controls and adoption of a balance budget policy.

o Restoration of the banking system: creation of a strong central bank, improved access to credit, rules for the establishment of foreign bank branches and private domestic banks.

o Liberalization of the investment regime: incentives and assurances to new foreign investors return of previously nationalized foreign-owned industrial and trading properties.

o Food security: achieving self-sufficiency in rice production, price stabilization and other agricultural support programmes.

• After import substitution and the public financing of a limited number of capital-intensive mega projects in the public sector, Indonesia’s system began to develop into a kind of “bureaucratic capitalism”, in which powerful public figures especially in the military gained control.

• Private sector resources were misallocated and price distortions depressed the overall level of private investment.

• Over the next decade as oil prices fell, Indonesia faced a rapid decline in government and export revenues, triggering a series of adjustments, including banking and finance sector deregulation, trade reforms and liberalization of the investment regime to integrate Indonesia into the international financial markets.

• Adjustments challenges that emerged from the price shocks reflected structural problems that resulted primarily from the government’s regulatory framework.

Institutional underpinning• New order asserted that a strong state capable of suppressing

hostility based on ethnicity, religion, or geography was a precondition for industrialization.

• The military became the key instrument for eradicating “revolutionary and destabilizing” forces within society and the administration severely limited popular participation in politics.

• New order led to total breakdown of the core judicial system. • A system of merit-based personnel management and

continuous internal assessment was abandoned .• A scarcity of skilled and experienced technicians and

managers led to highly centralized decision making, which reduced accountability, retarded the development of public infrastructure, adversely affected rates of return on public sector projects and constrained the development of local institutions.

• Deregulation and economic growth seemed to be benefiting the segment tied to political elites.

• 1997 currency crisis in Indonesia rapidly turned into a financial crisis, an economic crisis and then a political crisis.

• GDP fell by 14 percent in 1998, poverty doubled to almost 28 percent, inflation peaked at 80 percent and much of the banking system and corporate Indonesia was left in bankruptcy.

• The first democratically elected president came in 1999.• After the crisis Indonesia’s GDP has not yet fully recovered to

pre-crisis levels.• The country has continued its difficult transition from a

centralized, autocratic regime to a more decentralized democratic system of governance.

• The crisis cost the state some 40 percent of GDP for bailing out the banking system probably the most expensive financial crisis ever recorded.

• The weak legal system, lack of a legal threat to bad debtors aggravated the losses to the state and delayed the economic recovery substantially.

The crisis and the clean-up

• The people of Indonesia and particularly the poor have suffered enormously from these economic, political and ethnic crisis. In terms of poverty reduction, Indonesian development experience offers many lessons:

• Without the rule of law and strong institutional reforms an increasingly complex economy is hard to manage

• Without a clean, efficient civil service implantation of those policies and their effects may diverge strongly from the intentions and targets of policymakers.

• Without an independence regulator the financial sector needed for a modern economy can become an accident waiting to happen.

• Without popular participation in political decision making the increasingly difficult choices a government must make, lack the legitimacy needed to make these decisions effective.

• Indonesian experience illustrates the consequences of weak political system.

• Longer term political stability and a responsive democratic set up will require sustained commitment and a lot of hard work in the years to come.

• The rate of economic growth has recovered to over 50%. • The unpopular decision of cutting the fuel subsidy on

domestically consumed oil has saved a part of amount which is being used for a programme of welfare payments to 16 million poor households covering quarter of the population.

• It is now being expanded to make monthly rather than quarterly payments to all the low income families but on the condition that their children attend school regularly.

• Hence we see they are targeting several objectives with just one consistent measure.

INDIA• India’s economic record for 1990’s and 2000 onwards is

quite promising. It has achieved an average annual GDP growth rate of 5.8% from 1990-2003. From 2000-2011 its GDP growth rate was 7.1% .Last year its GDP grew by 6.3%

• Gross primary enrollment in India has crossed 100% and adult literacy has moved up to 58% ,70% for male and 47% for female.

• India’s HDI which was 0.590 in 2002 has decreased to 0.554 in 2012 but still ranks in medium category of human development

• Decline in poverty in India has been relatively slower. From 1991 to 2003 India has lifted 70 Million people out of poverty.

• Population living below national poverty line has decreased form 36% to 26% from 1991-2003

• An estimated 29.8% of Indians live below the country's national poverty line (2010)

• There has been two different schools of thoughts with respect to the policies and approaches to poverty reduction in India

• Some of the economists argue that sustained annual GDP growth rate of 7-8% is the only cost effective route to eradicate poverty

• While some argue that poverty should be addressed through direct intervention programs and safety nets for the poor.

• As mentioned above, India has achieved a sustained GDP growth rate of 7.1%. This paper highlights the main features of second approach that how did India implemented direct intervention programs to address the poverty. These are as follows

1. India has successfully implemented the democratic decentralization of power to empower poor.

• They introduced “Panchayati-rat” to institutionalize the third tier of government in 1992 constitution amendments.

2. India implemented mid-day meal program in schools.• Supreme court of India ordered government to use its

large reserve stock of wheat and rice to reduce hunger to provide cooked meal in all the country’s school.

• It has immensely decreased the school dropout rate particularly for girls

• Congress the current ruling party in India started Common Minimum program with emphasis on poverty reduction

• Common Minimum program is a National employment guarantee program for which an allocation of Rs 110 billion was announced by the ministry of finance in 2005-2006.

• Under this program at least one member of every rural household will be guaranteed employment of 100 days a year.

• The village itself is expected to design a program of preferred work according to their local priorities

• The National employment guarantee program for the first time gives the right to work in principle for the poor rural population of India

• But without improved governess at the local level the desired impact in terms of poverty reduction will be difficult to achieve

• A National rural health mission is also being launched in India to strengthen primary health care.

• The total allocation for this program in 2005-2006 was Rs 103 Billion and allocation of Rs 47 billion for national drinking water.

FUTURE PROSPECTS• India with having a strong political structure the prospects

for poverty reduction is much promising if these points are be considered

1. There has been substantial decentralization of the state structure from province to district and then down to village level.

2. The allocation of financial resources for social services and pro-poor expenditures is very substantial and has been rising at a rapid pace.

3. India has maintained an average growth rate of over 6% in its GDP over last 15 years. With a declining trend in population growth which means that per capita increases by 4.5% per annum (2005)

PAKISTAN• Pakistan is a rapidly developing country. Its economy

grew by an average rate of 5% between 1950 to 2000

• From 2000-2011 it has achieved annual GDP growth rate of 4.4%.

(world bank stats)

• According to Human Development report of 2013. Pakistan is ranked 146 out of 186 countries securing a low category in human development. Pakistan’s HDI for the year 2012 is 0.515

(UNDP report 2013)

POLITICAL SYSTEM OF PAKISTAN

• Political system of Pakistan is very uncertain. In the history of 66 years 31 year have been ruled by Military dictators rest 35 years were left for civilian governments.

• It has been examined that under Military rule a higher GDP growth rate has been achieved in Pakistan. This is because of the fact that Military regimes are competitively stable then the civilian governments.

• In terms of policies it is difficult to see any major revolutionary changes because military led growth models are not driven by investment in human development but is relied largely on foreign assistance.

• Each of the military rule is linked with some important international developments in which Pakistan has played a role and in return received benefits in the form of foreign assistance like

1. Membership of defense pacts like Cento and Seato during Gen. Ayub Era (1958-69)

2. Active support of Mujahidins in Afghanistan after 1979 Russian invasion under Gen. Zia (1977-1988)

3. Participation in the international campaign against war on terror after 9/11 under Gen. Musharraf (1999-2008)

• By contrast during democratic rule foreign assistance declined invariably

THE RISE OF POVERTY

• Total number of population living below poverty line in 1980 was 40% which went down to 26% in 1990 partly due to accelerated agriculture growth.

• It went high again 35% by 2003 largely due to a decline in net flow of foreign assistance and decline in remittances

• According to world bank stats number of population living below poverty line in Pakistan is 21.12% in 2008

• It is evident that accelerated GDP growth is a necessary condition for poverty reduction but Author holds the view that its not just sufficient.

• Poverty reduction also requires improved income or asset distribution and sustained human development.

• That is why high growth rate in 1960’s around 6.8% per annum was not accompanied by a corresponding decline in poverty, but there was some decline in poverty in 1970’s despite a slower growth rate of 4.8%

• Following are the key features of Pakistan’s economy which are trapped with the high incidence of poverty, low employment and growing inequality.

• The present structure of Pakistan economy is so skewed that any increase in per capita income automatically leads to greater inequality.

• As per study conducted by Social policy and development center Karachi in 2004 shows:

• Out of every increment of Rs. 100 in GDP 48 rupees accrues to richest 20% of the population, while the poorest 20% gets only 7%

• The poverty reduction strategy that was formulated in 2001-2007 focused mainly on growth and stability and did not include any policies to reduce inequality and promote greater equity

• As per target of UNESCO (4%) Pakistan’s public spending on education increased from 2.2% in 2003-04 to just 2.5% in 2007-08.

FUTURE PROSPECTS FOR PAKISTAN• Future prospects for Pakistan are both positive and

negative

• Positive factors for poverty reduction includes acceleration in the rate of growth, favorable terms of trade for agriculture sector and rising budgetary resources allocated for poverty reduction

• Whereas negative factors include skewed pattern of land distribution, extensive religious, ethnic and sectarian polarization in the society, limited participation of poor in decision making.

• In order to take poor out of vicious circle of poverty, author suggests a more meaningful poverty reduction strategy which should be implemented by considering following policies and programs

1. Ownership to land in rural areas through land reforms or allotment of new land to poor households

2. Ownership of livestock through micro-credit on a substantial scale

3. Greater home ownership for low income households

4. Further improving agriculture terms of trade that the prices that farmers pay for agriculture inputs do not rise faster then the prices which farmers receive for their output

• Process of decentralization through transfer of power and resources to local layers helps a lot to empower poor.

• Pakistan introduced “local body system” in 2001 under which 6400 district and union councils have been created with 142000 elected officials.

• 25% of the seats were reserved for the women• Nazism's (Administrators) have been given responsibility

for providing services like education and health and to address the problems of population

• The system of local bodies was disapproved by the newly elected government in 2008 and restored the old commissionaire system which clearly indicates that we need to have perpetual forms of institutions.

• Efforts to address the poverty continued in Pakistan when PPP government came into power in 2008

• They introduced the a social safety net for poor by introducing Benazir Income Support Program.

• BISP was initiated in Oct. 2008 with an initial allocation for Rs. 34 billion for the financial year 2008-2009

• The allocation for financial year 2012-2013 is 70 billion rupees to provide cash assistance to 5.5 million families which constitutes almost 18% of the entire population and 40% of the population below poverty line

• The enrolled families are paid cash assistance of Rs. 1000 per month throughout the country

• BISP was not a big success because it addressed the victims of poverty not the factors which causes poverty.

CONCLUSION

• Political factors especially political instability has been a key issue for growth and poverty reduction in Pakistan. Since political instability causes inability to realize it full development potential.

• Since its creation in 1947, Pakistan has been in clash with India throughout past five decades. Because of this undue favor has been given to military regimes which has destabilized the political system of the country

• Large role assigned to military in managing state affairs has weakened the democratic foundations of the country somehow weakens the federal structure of state and threaten its unity

• For poverty reduction and sustained economic growth we need to empower the poor through genuine democracy.

Annexure - ǀChina

• First phase (1978-1985),the focus was on rural reforms through institutional changes in land holding such as the house hold responsibility system, liberalizing procurement prices and quotas and an active research and extension programs in support of agriculture. This led to an accelerated pace of development and a sharp reduction in rural poverty from 250 million in 1978 to 125 million in 1985.

• Second phase (1986-1993),

The focus shifted from rural to urban and industrial growth, especially in the coastal areas.

• Third phase (1994-2000)

The government initiated the National Plan for Poverty Reduction. It will lift 80 million people from poverty within 7 years, this plan also called “8-7 plan "it focused on three main programs subsidized loans, food for work and government budgetary grants.

• After “8-7 Plan” the chins government launched a “New Centaury Rural Poverty Alleviation Plan” for the period 2001-2010.

• The new plan targeted the 50,000 poor villages.

• This includes poor villages in non poor countries.

• Other policies included increased agriculture price, reduced agriculture taxes and more liberal migration policies.

Growing Inequality• In pursuing its successfully development

oriented poverty reduction program for rural China at the end of the 20th centaury, China has however increased the degree of inequality between urban and rural areas and especially coastal areas of South East China and remote areas of central and western China.

• The Chinese president Hu Jintao, in a land mark statement on 16 April 2006 admitted the structural weakness of china high speed of growth model and said;

“We concerned about the pace of development and the quality and the effect of our growth. We are also concerned about saving our resources, environmental protection and improvement of our people livelihood.”

Annexure - ǀǀ Vietnam

Strategy for Socio economic Stabilization and Development:

Before this strategy, in 1990 Vietnam economy was suffering multi dimensional economic and social crises with 70% poverty and inflation rate 100 to 200% a year.

After this strategy, from 1991 to 2000 Vietnam reduced the poverty level from 70 to 35%, average growth rate 7.6%, average growth rate of industry was 11.2% and agriculture 4.2%.

inflation was gradually brought down to 5%. Vietnam’s HDI has improved from 0.582 in 1985 to 0.688 in 2001.

It was due to land reform and economic liberalization.

In 2002, Vietnam adopted its poverty reduction and growth strategy as a part of the comprehensive socio economic development strategy for the period 2001 to 2010.

Major Factors to Reduce Poverty

The most important factor was land reform in the late 1980s.The doi moi policy initiated in 1986introduced more fundamental reforms and substantially liberalized the agriculture sector.This reform led to a sustained increase in agricultural out put , created demand for more rapid industrial growth and also reduced poverty at very raped pace.

The second important factor was the liberalization of the markets and prices the open door policy.

• This expanded opportunities for trade and small enterprises in the private sector.

• The open door policy attracted the large number of foreign companies in Vietnam.

• These new industries are able to meet growing domestic demand and take advantages of low wages for export.

• Foreign investment stabilized at the level of about 2 billion a year.

The third factor was the reform of public administration and decentralization of authority.

• It enhance the quality and efficiency of governance and simplify administrative procedures.

• The decentralization has been underway for some time, but is now being extended on a more systematic basis.

The fourth factor was the acceptance of a broader concept of human development that goes away from incomes, education and health to enlarging choices and the opportunities the people.

• This broader concept flows directly from Vietnam’s socialist philosophy of a rich people, a strong nation and lays the basis for institutional and governance structure, that have broad popular support.

Effective implementation of these factors was due to political stability.

• The cautious approach adopted by Vietnam towards the pace of reform was very likely influenced by the experience of many of former Soviet Union countries that attempted speedy transition without taking adequate time to develop the necessary supporting institutions.

Future Prospects

• Vietnam will be able to maintain an average GDP growth rate of 7% in the decade 2001-2010.

• Growing inequality between and rural areas.• Pace of poverty reduction will be low than the

pace of GDP growth of 7%.

Annexure-ǀǀǀ South Korea

We take over look of South Korean economy from 1975 to 2001.

• Rapid economic growth• Significant reduction in poverty• Per capita income grow at an average of 6.2

percent per annum• Human developed index has moved up to the

high category with a score of 0.879

Major Factors to Reduce Poverty

• Land reforms• High agriculture prices• Low price of agriculture inputs

Due to these factors yield of rice increased by 50%.

• South Korea have 25% cultivated land and very few natural recourses. But Korea cover this problem through an active policy of human and skill development i.e 99.8% literacy.

Productive Welfare Approach

• The Korean model for poverty alleviation on this approach which seeks

“improvements in the lives of all low income households, promote programs for human development to create opportunities for self reliant development and guarantee a basic living standard by expanding the coverage of social insurance to all people”

Four Major Policies of Production Welfare Approach

1. National basic livelihood security act.

2. Expansion in the coverage of social insurance including two health insurance schemes.

3. Human resource development programs to enhance the access of vulnerable groups, to the labor market and protect the rights of irregular employees.

4. Extending the policy of minimum wage.

Factors of success• In the short period of 18 month, South Korea came

over the economic crises of 1997.• Investment in human resources was another important

ingredient in Korea’s success..• One of the main achievement of the Korean

government during the 1950’s was the eradication of illiteracy through a rapid expansion of educational institutions.

• Major research programs to upgrade and incorporate a higher level of technology, it created vast employment opportunities for the educated youth of country.

Regional Stability

South Korea played a constructive role in promoting regional stability by maintaining strong economic links with its neighbors North Korea, Japan and China.

Key words,“They do what they said, it is not

only lip service like Pakistani political leaders”.