Posts Tagged ‘Development’

Miseducating Pakistan

December 14, 2018

By Anjum Altaf

Education is a big-ticket item. Clarity is needed about its relationship to economic growth and development before betting the house on it. Otherwise a lot of resources would end up being misallocated.

It is in this context that I respond to Mr. Miftah Ismail’s diagnosis and prescription presented in his opinion in this newspaper (‘Educating Pakistan,’ December 5, 2018). Mr. Ismail begins by asking why any country is richer than another and answers with the assertion that “education is probably the most important factor in determining the wealth of nations.” From this follows the prescription that the path to richness is education.

I offer some cross-country evidence using literacy rates as a proxy for education and GDP per capita as a proxy for wealth — for each country the data that follows in parentheses shows percent of adult population that is literate and GDP per capita in US dollars adjusted for purchasing power parity. Consider the pair Uzbekistan (100; $6,856) and Mongolia (98; $13,000): the latter is almost twice as wealthy at about the same level of education. Now consider Pakistan (58; $5,527) and Bangladesh (73; $3,869): the former is actually wealthier at a lower level of education. Consider Myanmar (76; $6,139) which is one-and-a-half times wealthier than Bangladesh at almost the same level of education and comparable in wealth to Pakistan despite having a considerably higher level of education. For historical evidence consider the fact that in 1700 India had 25 percent of the world’s wealth with virtually no literacy. How did that happen if wealth is the outcome of education? This share dropped to 6 percent by 2015 despite increasing education for a host of unrelated reasons that cannot be ignored in drawing conclusions about the relationship between education and wealth. It is equally important to be aware that both in 1700 and 2015 wealth in India was not widely distributed but was concentrated in very few hands.

The bottom line is that there is no simple correlation between education and wealth and it is deceptive to derive such a conclusion by looking at education levels in developed countries like Japan while ignoring the many other factors that might have been more critical like, for example, the Meiji reforms of 1868. Nor is there a simple relationship between wealth and its distribution. Leaving aside the accidents of history, many, more crucial, factors can determine a country’s development path of which the policy framework is paramount. While it is true that China invested in education, its growth dynamic was triggered by the policy changes in 1979 while earlier, despite the education, it had suffered unimaginable catastrophes during the Great Leap Forward and the Cultural Revolution.

This last point highlights the damning inference that it is disingenuous to blame the lack of mass education for lack of development which is primarily due to misgovernance — keep in mind that all policy decisions are taken not by illiterate citizens but by the well-educated rulers. Just like the Great Leap Forward and the Cultural Revolution in China, the policies in Pakistan to promote fundamentalism and hostility towards neighbours are solely attributable to its well-educated ruling classes. While Chinese leaders learnt from their mistakes, Pakistan’s rulers remain enmeshed in their mindless jingoism and container thought. It is naive to hope that mere education can get them out of this mess of their own creation.

The greater irony is that the kind of education being promoted by Pakistan’s elite is exacerbating and not alleviating the problems of misdevelopment. Fundamentalism and intolerance are the more obvious outcomes of an education designed not to encourage creativity but to buttress a chimerical national identity rooted in fear and arrogance. One must remain cognizant of the difference between the quantity of education and its quality.

Deep down I believe Mr. Ismail is aware that there is no straight road from education to richness because the party to which he belongs did little for education during its tenure. Go over the list of heads of educational institutions appointed during that period and it would be obvious that improving education was not the motivation. Little was done to regulate private colleges that are nothing more than diploma mills turning out graduates without any prospects of employment. And higher education remained plagued by the virus of plagiarism in which the Executive Director appointed by the government to the watchdog institution, the Higher Education Commission, was himself complicit.

Mr. Ismail has made other debatable claims in his article. For example, he has asserted that “for some reason education is not very valued by our modern culture.” This is not consonant with the back-breaking sacrifices made by poor parents to put their children through school and simultaneously pay for supplemental tuition to compensate for the low quality of the latter. This, despite the fact that returns to education are very low in Pakistan where connections matter more than knowledge or merit.

Mr. Ismail also claimed, citing Aristotle, that “if parents do their jobs and raise their children well, in one generation all of society’s problems will go away. Every citizen would be educated, decent, kind and well mannered.” How one wishes this were true. What proportion of the set of educated people in positions of authority today are decent, kind and well-mannered? The educated who routinely slap low-paid public servants, mistreat maids, and use foul language in public discourse offer sufficient contrary evidence to challenge this claim.

Good and meaningful education is a basic human right which ought to be pursued for its own sake and not for any instrumental reasons. It is essential for individuals to live fulfilling lives to which they are entitled by virtue of being born. It is a grave failure of the state to have deprived the majority of good education for so many decades. It is adding insult to injury to attempt to pass the buck for this neglect and criminal misgovernance of the ruling class onto powerless people, an allegedly apathetic culture, and parental negligence. The first step towards a better future requires the state to own its responsibility for the welter of serious problems enmeshing the country of which lack of education is only one. The problem is not that people do not value education; it is the abuse of education for patronage, profits, and political ends. This abuse needs to end before the journey to development can begin.

An edited version of this opinion appeared in The News on December 9, 2018 and is reproduced here with the author’s permission.

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Chickens: A Debate

December 9, 2018

[Editor’s Note: Imran Khan’s suggestion to alleviate rural poverty by giving chickens to women was greeted with much ridicule but is there the germ of an idea there that public policy wanks can shape into a viable scheme? On the contrary, is there a convincing enough critique that can show how and why the idea might be infeasible.

Myrah Nerine Butt took the first step in a blog published in Dawn on December 5, 2018 and I requested Faizaan Qayyum to comment on her article. Myrah and Faizaan were Teaching Assistants for a course (ECON 100: Principles of Economics) I taught at LUMS in 2013 and it is gratifying to see them both emerge as articulate public policy practitioners.  Myrah completed a MA in Poverty and Development from the University of Sussex and Faizaan a MA in Urban Studies from the University of Illinois at Urbana-Champaign where he is currently pursuing a PhD. After a few email exchanges we decided we would all benefit from making this debate public and provide others a forum for reasoned discourse.

Towards that end, Myrah’s article is reproduced below followed by the discussion to date. We invite others to join and enrich the debate in order to make a contribution to how the issue of poverty can be addressed in Pakistan.]

Why PM Khan’s chicken and eggs solution has been mocked for all the wrong reasons

By Myrah Nerine Butt

At a ceremony to mark the Pakistan Tehreek-i-Insaf (PTI) government’s 100 days in office, Prime Minister Imran Khan announced that his government would provide chickens to underprivileged women in order to lift them out of poverty.

While a number of political stakeholders have ridiculed his statement, there is a lot of research on how and why this intervention can work. The people who are mocking the initiative are actually far removed from the context and lived experiences of rural women.

To understand the magnitude of the problem of poverty — 7.7 million households are living below the cut-off score of poverty developed by the Benazir Income Support Programme (BISP).

The fate of a lot of lives rests upon the policies developed by the government and trivialising such programmes can be incredibly detrimental to positive change.

To place the chickens within the policy context of Pakistan, I will compare the chicken intervention to one of the most successful poverty alleviation programmes in recent times, the BISP — an unconditional cash transfer programme.

Any woman who falls below a multidimensional poverty line is eligible for a cash handout. This intervention has been seen as a useful tool in alleviating poverty in Pakistan. As per the Food Energy Intake poverty line, BISP reduced the poverty rate by seven percentage points.

I will start by comparing the cash handout with the chickens handout to poor rural women and why chickens might work better given the household dynamics in place.

Firstly, one is a cash transfer while the other can be termed as an asset transfer. Money is more fungible than chickens. While money can be controlled by the men of the household and spent on non-productive or non-household activities, it is likely that chickens would remain in the hands of the women.

Typically, the men tend to goats, cows and buffaloes; there is a masculine connotation attached to tending to superior forms of livestock.

Because chickens are culturally seen as inferior forms of livestock, women are likely to retain control of these assets.

This is likely to increase the role of women in household decision-making: they control the chickens so they may decide on how to divide the eggs in the house or where to spend the resulting income.

On the note of fungibility, a chicken would also limit spending decisions of the household by virtue of being less liquid. Money can be spent on various activities, both good and bad, like responding to health shocks or gambling.

A chicken is a tied investment or forced saving, nudging people away from certain kinds of spending.

***

As opposed to a cash handout, chickens are an investment. They require low capital and the turnover is high.

They can also potentially help households climb out of poverty. However, the return on investment argument can be slightly confusing.

The remarkable high returns on investment are linked to commercial poultry farming; there are economies of scale on large chicken farms.

Rural households cannot tap into these massive economies of scale.

So, while rural households might not be able to capture the economies of scale, the eggs would still initially support subsistence of households and provide a steady basic income once the brood of chickens multiplies.

The idea of handing out chickens instead of cash is largely appealing because there is some evidence of its effectiveness in South Asia.

In addition to supplementing household income and providing subsistence, research shows that increased capacity gained by women and children through village poultry projects have impacts well beyond the improved village poultry production: chickens have increased food security and improved nutrition.

A possible pitfall of the chicken intervention could be the crystallisation of the role of women in the households.

A conditional cash transfer programme in Mexico handed out the cash to women if certain conditions were met, one of which was that the children of the household must regularly go to nutrition monitoring clinics.

The idea was to spur a household-level behavioural change.

However, because the money was handed out to women, they were responsible for meeting the requirements enforced by the state and thus the women had to take the children to the clinics, rather than the men.

This crystallised their role as caregivers and increased their burden of work.

Similarly in this case, women might be limited to the role of raising chickens and could be actively discouraged from other activities, like seeking higher education or formal employment.

It may also contribute towards increasing hidden child labour. Unintended consequences are always a possibility that should be considered when designing an intervention.

Ensuring an intervention that works

The chicken intervention cannot be rolled out in a vacuum — there would be a need to set up supporting infrastructure as well. Ancillary facilities like veterinarian services and training support need to be setup.

Additionally, serious work needs to be done to provide the women access to markets and strengthening market linkages.

There also need to be steps to organise women to work collectively in order to gain from some of the economies of scale and connect to markets.

Poverty alleviation interventions should be incremental and build on lessons learnt from previous interventions. The poverty scorecard developed by the BISP is a huge step in terms of understanding the dimensions of poverty.

The BISP has been able to develop an extensive database of poor households. The scorecard collects information on the various characteristics of the household as well as its assets.

It enables the programme to identify eligible households through the application of a proxy means test, which determines the welfare status of the household on a scale of zero to 100.

This can be very useful for targeting poor households in this programme too.

Additionally, the BISP has been tested and retested, its impact measured at each step. An intervention of such nature would require similar level of rigour in its design and implementation.

Bill Gates and the chickens

The global world is obsessed with finding a magic bullet to eliminate poverty. There is a reason why big donor organisations like the Bill and Melinda Gates Foundation love such interventions.

They demonstrate quick results and are easy to measure. The global push towards “value for money” pushes policymakers to consider such interventions.

I would add a note of caution here. Poverty is deprivation on multiple fronts, not just income.

Aspects of time use, productive resources, health, education, rights and availability of services are equally important. Income is used as a crude indicator for all these other aspects.

Because of the multidimensional nature of poverty, it cannot be alleviated with one-time interventions. The causes of poverty are structural and run deep within societies.

Rather than viewing poverty as material deprivation, we need to understand it as a product of inequality and prevalent power relations. We need to analyse the process of design and implementation critically while being realistic about the impact.

The chicken intervention can and should be one of a number of poverty alleviation interventions, not a comprehensive solution. We cannot put all our eggs in one basket at the end of the day.

My fear, therefore, is that the intervention is top-down instead of being bottom-up. While global research and evidence is important, we need to ask ourselves: would it work in our context?

I am curious to find out whether a needs assessment has been conducted. Have the beneficiary women been consulted? Do they want chickens or are we going to force an additional burden on them? What kind of chickens work best in the local context?

For any intervention, the local communities need to be consulted right from the design stage. The intervention should be context-specific and bottom-up rather than top-down.

My key suggestion is to ignore the politicians sitting in the centre. They don’t need chickens like the rural woman might, but ask her before investing money first.

There is a need to step away from mocking PTI’s move to push forth this intervention. The decision is based on international research rather than a complete blind jump.

Let’s try giving the chickens a chance.

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Plain Truths About the Economy

July 30, 2017

By Anjum Altaf

Every so often someone promises to turn Pakistan into an Asian tiger. It is not a bad ambition but it hasn’t happened yet. Not just that, we don’t seem to be moving forward much. All the more reason for an honest examination because knowing where one is starting from is just as important as knowing where one wants to go.

With help of some illustrative numbers one can establish three points. The Pakistani economy is existing at a low level; it is in relative decline; and too many of its citizens are struggling at or below subsistence level. Getting from here to Asian tiger status would require something beyond more of the same.

First, the state of the economy. The Federal Bureau of Statistics website shows that in 2015 per capita income in current prices was Rs. 153,620 per year or about Rs. 13,000 per month (in round numbers) which is also the current minimum wage. This means that if Pakistan’s total yearly income was divided equally among its citizens, each person would get Rs. 13,000 per month – a household of four would have around Rs. 50,000 a month to live on. Add up essential household expenditures and it is obvious this is a survival-level allocation implying that the Pakistani economy in aggregate is a survival-level economy for its citizens.

Easily available data allows for comparisons with Malaysia, an Asian tiger cub, and South Korea, an Asian tiger. Adjusting for purchasing power, the respective yearly income per person in the two countries is five and seven times that of Pakistan. In other words, instead of Rs. 50,000 a Pakistani household of four would require Rs.2.5 lakh or 3.5 lakh per month to attain the average standard of living in Malaysia or South Korea. That is the difference between a survival economy and a prospering one. No wonder people would like to leave Pakistan to work in Malaysia but none would want to migrate in the other direction.

To achieve the status of an Asian tiger like South Korea, Pakistan’s income per person needs to multiply seven times. How long would that take? Even if the economic rate of growth increases from the existing 5% to 7% and is sustained year after year, it would take over 25 years to reach where South Korea is today. Getting there in 15 years would require a growth rate of 12% which is way beyond anything Pakistan has ever achieved.

Second, while the Pakistani economy is growing, it is declining relative to most other developing economies. In 1990, India’s per capita income was 40% lower than that of Pakistan; by 2009 it had drawn level; today, it is around 20% higher. China’s per capita income in 1990 was 50% less than Pakistan’s; today it is 200% higher. At these relative rates, far from becoming an Asian tiger Pakistan will soon be relegated to the status of an also-ran.

Third, if income were equally shared and every individual received a monthly amount of Rs. 13,000 the reality of the survival economy would be inescapable. It is masked by the illusion of opulence created by a highly unequal income distribution – so unequal that half the total national income goes to just the richest 20% of households.  A recent news report discussing salaries of bank CEOs revealed that Rs. 50 lakhs per month was not an outlier. With some individuals living at first world elite levels, it follows there must be others living below the average in order to keep the total income constant. In fact, the majority of individuals in Pakistan have monthly allocations well below the survival level of Rs. 13,000.

Given the extreme inequality, independent estimates suggest that over half the individuals in the country could be classified as vulnerable in the sense that any unforeseen expense can plunge them into poverty. Thus not only is the Pakistani economy a low-level economy in the aggregate, the majority of its citizens are living at well below an acceptable survival income, in fact in various degrees of deprivation.

How do individuals exist at this level of deprivation? By being poorly educated, in fragile health, increasingly indebted, and overworked because of dependence on multiple jobs. Care to follow the story of someone earning the minimum monthly wage of Rs. 13,000 and you will appreciate the real state of the Pakistani economy. Given this human capital, how do its leaders propose to turn Pakistan into an Asian tiger in our lifetimes?

Understanding our existing predicament raises the real question: How did Pakistan get left behind in this impoverished state? Obviously it is not Pakistan’s fault – nothing says this was its fated destiny – but that of those occupying the driver’s seat all these years. How come China and India starting way behind have overtaken the Pakistani economy and moved so far ahead all in a matter of a few decades? Or how a small country like South Korea became so prosperous with limited natural resources? How come Malaysia has leveraged its strategic location and managed its ethnic diversity while Pakistan has not?

As we move into the election cycle we should be asking political parties some tough questions about their visions and development plans. We should not be fobbed off with easy answers. Corruption is not a good enough reason; it exists everywhere and the sizes of scams are in fact much greater in India. Overpopulation is also an unconvincing explanation given that both China and India are six times more populous. We should also not be distracted by the promise of CPEC. Even if it comes off perfectly it will add at best another 2.5% to the rate of growth of national income without any accompanying reforms of a fundamental nature.

Pakistan’s predicament is clearly related to some very poor policy choices, badly misplaced priorities and shockingly abysmal governance. We can infer some of these from the comparative experience of China which trailed us less than three decades back and is now so far ahead that we look upon it as a saviour. Such an exploration would be the subject of a subsequent article.

This opinion appeared in Dawn on July 25, 2017 and is reproduced here with the author’s permission. The writer would like to thank the following colleagues and students for very valuable suggestions on a number of early drafts: Dr. Ali Cheema, Dr. Farrukh Iqbal, Dr. Ijaz Nabi, Dr. Nadeem ul Haque, Dr. Anupam Khanna, Mr. Shahid Mehmood, Mr. Faizaan Qayyum and Ms. Marwah Maqbool. Any residual errors are the responsibility of the author.

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A Guide to Inequality

June 14, 2017

By Anjum Altaf

It is good that inequality is attracting attention in Pakistan because there are significant gaps in our understanding of the phenomenon.

What is under scrutiny in the West is economic inequality which is only one aspect and that too a rather peculiar one. Inequality has at least two other important dimensions – political and social. Political inequality refers to unequal say in choosing how one wishes to be governed and within the representative form of governance such equality is now ensured by giving every citizen a vote. Although the struggle for political equality goes back at least four centuries, its full achievement is quite recent. Very few are aware that only around 15 percent of the adult population was eligible to vote in the 1946 elections in India. Women obtained political equality as late as the 1940s in some European countries and Blacks became eligible to vote much later than Whites in the U.S.

Social inequality can be appreciated by thinking of who can share your dining table. Your uncle surely can but your cook would most likely eat in the kitchen in separate utensils. Societies stratified by status are socially unequal, caste-based systems being the most obvious examples in South Asia. Some aspects of gender and race discrimination like prohibiting women to drive in Saudi Arabia or restricting Blacks from certain schools in the U.S. are or were forms of social inequality.

Political and social inequalities have engendered protracted struggles over a number of centuries with very clear goals – the achievement of full equality. These goals have been largely achieved in the West which is why one doesn’t hear much about them anymore. The situation is quite different in South Asia where social inequality is the norm. Political equality does exist in principle but in a peculiar form because of the nature of its origin – a fallout of decolonization and not the outcome of a prolonged popular struggle. Consider how one-person-one-vote is moderated through biraderi and caste identities and how many women cast their votes as instructed by men.

Economic inequality is quite different because complete parity has never been a serious popular demand. It is relevant in restricted domains like gender and ethnicity where the call for equal-pay-for equal-work remains cogent but across-the-board equality has been espoused only by some utopian movements. Even Marxism didn’t subscribe to it – its maxim was ‘from each according to his ability; to each according to his needs.’

The reason economic equality has not been a political demand is that it contradicts the demand for freedom. Individuals wish to choose between work and leisure for themselves and since it is highly unlikely that everyone will have the same preference, income inequalities are accepted as inevitable. Political and social equality are considered birthrights but economic achievement is a function of choice as well.  

The recent attention to economic inequality in the West is not the outcome of a sudden popular yearning for parity. It has more to do with the realization by the elites that inequality might have crossed the point where it threatens both capitalism and democracy, the pillars of the current world order.

Economic inequality was not considered a threat to capitalism as long as it was believed that everyone was becoming better off albeit some more than others. This trickle-down theory has been exposed as mistaken. Since around 1980, the output of the capitalist economy has been sucked up – the richest have gained, the middle has stagnated, and the bottom has lost in real terms. This explains the emergence of the Occupy Wall Street movement and the resulting blasphemous references to socialism in the recent elections in the U.S.   

The concentration of wealth has also distorted democracy because the rich have used  money to protects their assets. It is common for tycoons to pay a lower income tax rate than their secretaries and legal mechanisms have been created to shelter wealth offshore – Trump is reported to have paid no tax for 18 years. Democracy has morphed into plutocracy with one-person-one-vote replaced by one-dollar-one-vote and a growing reaction is paving the way to right-wing populism.

Economic inequality is extreme in South Asia –  the richest 57 individuals in India are reported to own as much wealth as the bottom 70 percent of the population. However, there is no significant political mobilization because people continue to accept economic inequality as the norm. They have always known that it exists – how could they not when it is always in their face – but its wider implications for capitalism and democracy are not issues that agitate the minds of the rulers or the ruled.

Much more relevant for the individual in the economic sphere is equality of opportunity. It is a meaningful political demand that irrespective of the economic status of individuals their children should be entitled to the same opportunities as anyone else’s. This would begin to erode the cumulative accumulation of privilege and wealth that characterizes South Asia.

The real issue remains social inequality. Without gains on this front economic justice would remain unattainable. Not all South Asians have been unaware of this truth. Reflect on the words of Dr. Ambedkar, the author of the Indian Constitution: “On the 26th of January 1950, we are going to enter into a life of contradictions. In politics we will have equality and in social and economic life we will have inequality… How long shall we continue to deny equality in our social and economic life?…  If we continue to deny it for long, we will do so only by putting our political democracy in peril. We must remove this contradiction at the earliest possible moment or else those who suffer from inequality will blow up the structure of political democracy which this Assembly has so laboriously built up.”

This opinion was published in Dawn on June 13, 2017 and is reproduced here with the author’s permission. For a related article, see Poverty and Human Rights.

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CPEC: The Case for Full Disclosure

May 19, 2017

By Anjum Altaf

I am now less interested in CPEC, which is unstoppable, and more fascinated by how people think. Conventional wisdom has individuals using reason to objectively weigh the costs and benefits of an option and then choosing it if benefits exceed costs. More and more evidence on actual behavior suggests that individuals start with their minds already made up and then pick and choose arguments to support their positions.

At this time PML supporters are convinced CPEC is a game-changer while those opposed to the party believe it is a recipe for disaster. The former claim Nawaz Sharif is an astute industrialist and China a trusted friend. The latter argue Nawaz Sharif is corrupt and is using hype to distract attention from his troubles. Supporters are not willing to consider that their party can make bad decisions; opponents are unwilling to concede the the PML could get something right. No one is basing their position on factual information which remains irrelevant to the debate.   

Such attitudes make it difficult to convince anyone that their views might be mistaken. Objectively speaking, everyone should be neutral on the CPEC at this time as enough reliable information is not available to evaluate costs and benefits within reasonable bounds. The rational individual should be withholding judgement and demanding the numbers. Instead, stormtroopers on both sides are frothing at the mouth, ready to dismiss all contrary arguments as treason.

Although I am convinced that few minds are likely to be changed by my opinion, I still feel a responsibility to present the case for neutrality till more data is available for credible analysis. I believe my argument will make sense even to those lacking the expertise of  economists and financial analysts.

The starting point is the acknowledgement that $56 billion is a significant amount of money in the Pakistani context and that an infusion of this magnitude has the potential to do a lot of good. The big question is: Will the potential be realized?

Instead of answering this question on faith, I suggest participation in a thought experiment. Imagine your family is facing financial hardship and everyone you have approached has turned you down. Now someone comes along offering a loan of a million dollars, an amount that can solve all your problems and change your life. Would you accept the money with your eyes closed?

I am hoping you will ask for the terms of the loan. Suppose you are told you would be expected to convert to another religion. Or that you would have to indenture your children in case you fail to meet the repayment obligations. Would you accept the money on such terms?

These are hypothetical examples. I am not saying the Chinese are asking Pakistanis to give up their religion or indenture future generations. The extreme examples are only meant to dramatize the essential point that only a very foolish or reckless or desperate person would be willing to sign on the dotted line without knowing the terms of the deal. Is that an unreasonable conclusion?

Let us return to CPEC assuming the Chinese would not be asking for any such thing. But let us think of what the Chinese might ask for. Suppose they ask that whatever we buy with the money must be purchased from Chinese suppliers. Would you accept such a condition on a personal loan? If not, would you not worry if the nation is being asked for such an arrangement?

Consider the personal risks of accepting such a demand. The lender could sell you second-rate goods at above-market prices. Any tied arrangement would deprive you of better alternatives available in the market. At the national level, sole-sourcing would eliminate the efficiency gains resulting from procurement of supplies via competitive international bidding. Therefore, we should be reluctant to accept loans conditional on sole-sourcing.

The Chinese may not insist on sole-sourcing but ask instead for guaranteed charges and exorbitant rates of return on the investments independent of whether the projects are profitable or not. Many people know someone unfortunate enough to get enmeshed in exploitative arrangements with loan sharks and are aware of the consequences. This kind of outcome is not to be taken lightly.

These examples are speculative and may appear outlandish and I have no idea if CPEC involves anything of the kind. But that is exactly the point because such examples are by no means purely a figment of the imagination. Readers are well aware that usury, the charging of exorbitant rates of return on loans, is prohibited in most religions for good reason. They know that bonded labor still exists in some industries. Some who know their history would recall that the British passed an act in 1938 to rescue the heavily indebted Punjabi peasantry from the clutches of moneylenders. And there are records of violent opposition to alleged attempts by missionaries to influence people by offering them material temptations.     

The bottom line is that it is never a good practice to accept loans without full knowledge of the terms and conditions, more so when one is desperate for financial assistance. Readers would do well to read Shakespeare’s Merchant of Venice to reinforce this conclusion. And, if convinced, wouldn’t it be ethically wrong to urge the country to accept something that one would personally reject? You should not do to others what you would not do to yourself.

Intellectual honesty demands a stance of neutrality on CPEC till the terms and conditions are disclosed without which one cannot arrive at an objective assessment of whether it could be potentially beneficial for the country. Only then could one move to the next stage of appraisal knowing that even potentially beneficial projects of this magnitude depend for their success on many other factors. Asides from the truly random and uncontrollable ones, these would include the implementation capacity of Pakistani governments whose probity and track record is not one to inspire confidence. What would we need to do to hold the government’s feet to the fire and prevent another Reko Diq?

This opinion appeared in Dawn on May 15, 2017 and is reproduced here with permission of the author. See also, CPEC: Lessons from History and CPEC: Questions Persist.

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Silly Season in Pakistan

April 5, 2017

By Anjum Altaf

The last shred of doubt regarding the reality of climate change should have been removed by the unnaturally early arrival of the silly season. One warming outcome has seen the hot-air balloon of the Pakistani economy lifting off into the stratosphere without anyone ever noticing what happened.

First there was the upward draft in the Wall Street Journal and the Washington Post that removed the veil from the transformation we had failed to observe. Not wanting to leave anything to our blinkered visions, the WSJ blared it all out in one breathless headline: “Pakistan’s Middle Class Soars as Stability Returns: Consumer spending rockets as poverty shrinks, terrorism drops and democracy holds.”

Before the excitement could die down and lest a couple of eyebrows be raised, the redoubtable Economist added the gravity of its authoritative voice with an article titled “Pakistan confronts something unfamiliar: optimism” reiterating thereby that we were too befogged to see what was happening before our eyes.

Leave aside the fact that the land wouldn’t know real pessimism if it were staring it in the face, populated largely, as it is, with optimists of which one can count three types. First, those who can only be called ‘resigned optimists’ who subscribe to the Allah maalik hai philosophy that everything would come good in the end because we are God’s chosen people. And who can quarrel with them given that the nation has survived the most incredible stupidities that any ruling class can visit on a country.

Second, the ‘oppositional optimists’ who indulge in temporary pessimism only because it is not their charioteer that is leading the charge. Give a chance to the theocrats or the autocrats or the bureaucrats or the cricket bats and watch how we emerge roaring as the tiger of Asia if not of the entire world.

Third, the ‘incorrigible optimists’ who really need no excuse to feel positive. After soberly recalling all the gross errors committed over the past seventy years and recounting all the obvious but unfortunately missed chances, he or she arrives inevitably at the cheerful “I remain staunchly optimistic” conclusion. For this set, optimism need not be based on any evidence; it is more a genetic trait like green eyes – one is just born so. Press them a bit and they will pluck anything out of the air as the reason for their buoyancy – a very youthful population would do as well as anything else. Never mind we haven’t invested a penny in potty training.

For the EconomistA cricket match and an obscure administrative reform” in FATA are sufficient signs for the great leap forward. Add to that the handy standby: “Pakistan’s stock market has risen faster than any other in Asia over the past 12 months, by a heady 50%.” Heady, indeed. For years the Economist has been warning of dreaded bubbles underlying the heady rise of the Chinese stock market but no such qualms are warranted in the case of Pakistan even as its own regulator cracks down on malpractices in the exchange. It is all a matter of the balloon one wishes to float.

One does wonder though what caused the Economist to so radically change its story. It was just a couple of months back that it posted its last roundup of the Pakistani economy under the title “Roads to nowhere: Pakistan’s misguided obsession with infrastructure” with the despairing subtitle “The government is building more airports, roads and railways, even though the existing ones are underused.” That article labeled our last great economic corridor, the Lahore-Islamabad motorway, a “$1.2bn white elephant” and compared the Prime Minister to Sher Shah Suri. It ended with dripping sarcasm: “the railways minister, recently admitted to parliament that the country would not be getting a bullet train after all. “When we asked the Chinese about it, they laughed at us,” he said.”

The Economist clearly doesn’t expect much of Pakistanis not least to pay attention to what they read. The conclusion to its suddenly upbeat and optimistic gushing notes with genuine surprize: “For Pakistan, however, even to be debating the subject is encouraging.”  

Just to prove wrong the charge that Pakistanis are unable to recognize optimism when they see it a motley set of experts jumped into the fray adding colour to the silly season. Some excoriated the detractors for failing to appreciate the economic takeoff. Others claimed we were already much richer than we believed. Yet others asserted poverty was a thing of the past. I can only presume the malnutritioned children (nearly half of all children in the country) must be so because their parents have better things to do with their wealth much as the unemployment in the Great Depression had been an outcome of the voluntary trade- off between work and leisure.

Wake up Pakistan: feudalism is dead, we are all urban now, poverty is licked, every city is a growling tiger cub, and the Chinese are coming. The writing is on the wall. “Yes, how many times can a man turn his head / Pretending he just doesn’t see? / The answer my friend is blowin’ in the wind / The answer is blowin’ in the wind.”

Think what you may. It is the silly season. It is the season for feeling good. March madness has barely ended. April is the kindest month in our part of the world. But still, why the obsession with the economy? Why not just fly a kite?

This opinion appeared in The News on April 4, 2017 and is reproduced here with permission of the author. See related article Economic Bullshit.

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CPEC: Questions Persist

March 20, 2017

By Anjum Altaf

Is there a fruitful line of inquiry regarding the China Pakistan Economic Corridor (CPEC)? That depends on the questions with which one initiates the inquiry.

Would CPEC be a game-changer for Pakistan? This drawing-room question is particularly useless to begin with. With so much uncertainty and so many variables beyond human control no one except a clairvoyant can predict with any confidence. It is just as pointless, if not actually silly, to take sides. Enough hard information is not available for one side to convince the other on the basis of analysis – believers will continue to believe and doubters will continue to doubt for reasons having little to do with the intricacies of the initiative.

The following questions pertaining to details of the deal are more useful: Under what conditions are the various components of the initiative being negotiated? What are the financial obligations and terms of repayment? What tax concessions are being offered? What are the revenue and capital cost projections of the various components? Who will bear the operating and maintenance costs?

Citizens responsible for the debt liabilities have a right to ask for this information and expect it to be provided. What are the reasons for the secrecy? What is there to hide? The numbers that are filtering out in dribs and drabs on guaranteed rates of return are not very reassuring. The very fact that information is not being fully shared is a major cause for doubt – people are naturally apprehensive in the absence of transparency.

It is good that the government has set up a CPEC website (http://cpec.gov.pk/) but at this time it is only a list of projects with costs and timelines. The terms of financing and revenue projections are missing. In addition, the website suffers from information overload. For example, it includes the Karachi Circular Railway, Peshawar Mass Transit, Quetta Mass Transit, and the Lahore Orange Train.

These are all plausible projects with individual justifications and may all involve Chinese funding but what do they have to do with the corridor? It seems suspiciously the case that various stakeholders are being bought off by including their pet projects under the CPEC umbrella.

The case with the power projects listed on the website is similar. Each might be justified but why is a wind farm in Bhambore lumped under the CPEC? Wouldn’t it make more sense to treat them as independent projects with separate feasibility studies as is the norm. The indiscriminate lumping together of everything happening in the country is another red flag regarding the coherence of the initiative.

It would help to strip out the core corridor investments and share details of their financing and cost-benefit projections. It is reasonable to expect that barring unforeseen events, a functioning corridor would be beneficial for China. But what would be in it for Pakistan except collecting a toll on the transit trade? How much toll collection is being projected? What would Pakistan be exporting via the corridor given its grossly uncompetitive economy? Why would industrial estates succeed along the isolated corridor when they have failed in major locations like Peshawar and Quetta? How many permanent jobs are expected to be created?

These are legitimate questions deserving answers in order to build consensus and take citizens into confidence. It is not enough for the government to say ‘trust us’ because governments in Pakistan have done nothing to earn that trust. Neither international agencies nor Pakistani citizens believe the various governments have been upfront with facts. Such behavior is not unique to Pakistan – after all, Bush and Blair lied to their citizens to invade Iraq.

In the absence of honest answers, those without vested interest in deal-making can only point to historical precedents and past evidence. Take, for example, one of the most significant trade corridors of recent times, the Suez Canal. Was it a game-changer for the people of Egypt? Or take the game-changers for Pakistan promised in the past – Thar Coal, Saindak, Reko-diq, all, incidentally, with Chinese involvement. What happened? They certainly changed the game for those involved in the multiple transactions but is there anything to show for the people of Pakistan or even the locals of the project sites?

The attempt to turn such questioning into issues of patriotism or of maligning our best friends strengthens the impression that all is not above board. These are the standard tactics of those who wish to divert discussion from facts and stifle inquiry with intimidation. Under normal circumstances citizens would be within their rights to examine the track record of Chinese investments in other countries like Sri Lanka (Google Hambantota) or prior deals with Pakistan like the railway locomotives. In all such cases the Chinese are not to blame – ‘buyer beware’ is rule of the market. The concern is with those negotiating the deals on our behalf and the question remains the same: Do you trust them? If so, on what basis?

Given the lack of transparency and the historical evidence, the following outcomes appear likely: For better or for worse, the CPEC momentum is unstoppable; It will be beneficial for the Chinese economy; It will generate toll revenues for Pakistan which may be more or less than operating costs depending upon contractual terms, much as for the Lahore-Islamabad motorway; Without inclusiveness, economic gains might be outweighed by political stresses; It will definitely change the fortunes of a few thousand individuals in Pakistan; It is unlikely to be a game-changer for the Pakistani people much as the Suez Canal was not one for Egyptians.

On the other hand, this could be the mother of all miracles. Let us bow our heads and pray while the untethered camel wanders into Kashgar.

This opinion was published in The News on March 19, 2017 and is reproduced here with permission of the author. See also, CPEC: Lessons from History.

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Economic Bullshit

March 6, 2017

By Anjum Altaf

A lovely little book came out in 2005 titled On Bullshit. Written by a professor of philosophy at Princeton, it remained a bestseller for months. Its principal message was that “bullshit is a greater enemy of the truth than lies” because “Liars at least acknowledge that it matters what is true.” Bullshitters, on the other hand, convey impressions without being concerned about whether anything at all is true. They quietly change the rules governing their end of the conversation so that claims about truth and falsity are irrelevant.”

I recalled the book after reading two articles within a week talking up the Pakistani economy in the Wall Street Journal and the Washington Post. Both employed the classic bullshitter’s gambit of throwing out random facts to convey a favorable impression without caring in the least whether the inferences were in any way supported by fact or argument. Had a PR person been paid to write these articles, he or she couldn’t have done a better job.

At the heart of both articles is the blinding vision of a middle class ready to rocket the Pakistani economy into the stratosphere. The WSJ article summarizes its thesis in its title: “Pakistan’s Middle Class Soars as Stability Returns: Consumer spending rockets as poverty shrinks, terrorism drops and democracy holds.” The title of the WP article is more bland –  “Beyond the headlines of terrorism, Pakistan’s economy is on the rise” – but its argument is the same.

Observe how the impression is constructed. First the numbers – 38% of the country is middle class, while a further 4% is upper class. That’s a combined 84 million people.” Then a true fact which means nothing by itself: This size is “roughly equivalent to the entire populations of Germany or Turkey.” And then another less than relevant generalization: “A study by the OECD forecasts that the bulk of the growth in the middle class in the years ahead will come from Asia, which will account for two thirds of the global middle class by 2030.”

Comments culled from international agencies provide a favorable jumping-off point: “What’s more, Pakistan is winning plaudits from the International Monetary Fund, and its economy is forecast for a healthy 5.2 percent growth rate in 2017, according to the World Bank.” That’s enough to conclude that “As Pakistan turns a corner… Three key factors are driving Pakistan’s economic awakening: an improved security climate even despite the most recent attack, relative political stability, and a growing middle class. These three interlocking pieces are fueling Pakistan’s growth story.”

From here the autopilot takes over: “Robust middle classes are vital to healthy societies and growing economies, and Pakistan’s middle class may have reached a tipping point.” Throw in a couple of quotes by experts and the future becomes more than incandescent: “Pakistan’s consumer middle-class market could hit $1 trillion by 2030” and “middle classes are driving impressive 25 percent rates of return for large multinational consumer companies… middle-class growth is sparking increased production of cement, steel, automobiles and the like… one of the key reasons for current bullishness on Pakistan.”

Let us now subject this bullshit to a stool test. First, what does the size of the middle class have to do with anything? Does a population as big as Germany’s mean that a tipping point has been reached fueling Pakistan’s economic takeoff?

Consider several examples in comparison with Pakistan (population 200 million, income per capita $5,100). Singapore, with scarcely any natural resources, has a population of 5.8 million (less than that of Faisalabad) and a per capita income of $87,100. Ask how Singapore’s economy skyrocketed with a middle class that could not have exceeded 5.8 million? Or consider the tiny populations of Dubai and Abu Dhabi which have boomed in front of our eyes. South Korea and Pakistan had roughly the same per capita income in the 1950s (when Pakistan was billed as a model of development with a much smaller middle class). Today, the former with a population of 51 million has a per capita income of $37,900. Does this not suggest that the size of the middle class by itself has very little to do with economic growth? Very clearly it is economic policies and governance that matter much more.

The typical response to such examples is to blame overpopulation for the poverty in Pakistan. Now suddenly the large population has become the magic wand that will even make up for the absence of sound policies. The same fact can fuel very different stories depending on the occasion.

Second, even if the Pakistani middle class is 84 million strong how much purchasing power does it really have? Note that Pakistan’s per capita income of $5,100 is below poverty level income in the U.S.A. Add to that the phenomenon of inequality which is the major issue of the moment. The latest Oxfam numbers inform that in India just 57 individuals own more wealth than the bottom 70% of the population. Isn’t it likely that most of the wealth in Pakistan is concentrated in the hands of the 4% that comprise the upper class. If things were indeed so rosy for the middle class why would almost every member of it want to move to a stronger economy? Can’t they see that Pakistan has turned the corner?

Yes, of course, more cement and steel is being purchased but is it consumption per capita that is going up or simply a reflection that the population of Pakistan has skyrocketed – from 61 million in 1971 to 200 million today. Just keeping up with the additional needs (food, clothing, houses, schools, colleges, hospitals, roads, electricity, etc.) means that commodity sales would increase. And yes, many companies providing these commodities are profitable. But does one see foreign investment rushing into new projects? Even the Chinese have to be guaranteed exorbitant returns to be tempted. In fact, Pakistanis themselves are avoiding new investments preferring to put their money in land or buying property in the Middle East or parking cash in tax havens. Some are even shifting existing manufacturing capacity to foreign countries where costs of doing business are lower.

Ask the middle class if the skyrocketing economy is generating enough acceptable jobs to accommodate those entering the labor force every year let alone the poor who are still in a majority? Is that the reason why more and more people wish to leave to send back money for their families to consume and keep the bleeding economy on life support?

Snake-oil will continue to be sold and there will never be a shortage of buyers. Allah be praised.

This opinion appeared in Express Tribune on March 4, 2017 and is reproduced here with permission of the author.

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Trump, USAID and Funding for Pakistan

January 26, 2017

By Anjum Altaf

The election of Donald Trump has generated much uncertainty. In Pakistan, among other things, concern has been expressed that USAID funding might be affected by the transition. The concern stems from a delay by the incoming administration in meeting the aid agency to discuss the continuity of future disbursements.

The reason for the concern is that USAID disburses millions of dollars in Pakistan every year through NGOs and any disruption of the pipeline would affect their sustainability, the livelihood of thousands of their employees, and the welfare of the intended beneficiaries.

This much is easy to grasp. At the same time, however, analysts have highlighted other, conflicting, dimensions of the assistance. These question the objectives and the consequences of the funding. They suggest that the primary purpose of the aid is to promote US influence in recipient countries, that aid-based development is not sustainable, and that national pride is dented by continued dependence – references to the begging-bowl syndrome abound.

There is thus an obvious dilemma to consider: Which aspect is more important and ought to influence national policy regarding bilateral assistance in general and USAID in particular, the latter because the US has the most obvious security interests in the region? In theory, most analysts prefer development that is financed from local resources with a concomitant winding down of external assistance. In practice, however, they resign themselves to continuation of the status quo. They claim there is no alternative because Pakistan’s population does not wish to pay taxes and believes in getting something for nothing.

Is this claim fair to the population of Pakistan and does it provide a plausible explanation of the present predicament? Start with the fact that the distribution of income and wealth is highly skewed in Pakistan – it can’t be very different from India where the 57 richest individuals are reported to hold as much wealth as the poorest 70 percent of the population. Clearly, any move to tighten the tax net would also impact those at the top of the wealth pyramid many of whom are networked in the ruling establishment. Is it realistic to expect the wealthiest to voluntarily tax themselves? Would they move the country to a model of self-reliance in which they would have to contribute their share or would they rather continue the dependence on external money from which they have something to gain by way of rents and nothing to lose?

At the same time, is it correct to say that the population does not pay taxes when it is burdened with all kinds of indirect withholdings? Taxes are withheld from everyone who uses a mobile phone, has a bank account, or owns a motorcycle including those whose incomes are below the minimum taxable limit. The injustice is compounded because many of them do not even know how to reclaim the withholdings. Equitable and progressive taxation from above is avoided while oppressive and regressive extortion from below is promoted much as what one would expect from an abuse of power.

The bottom line is that the existing arrangement of development assistance persists because it is in the interest of all the key players – the donor country that uses aid to buy influence, the establishment that does not want to tax itself, the foreign consultants and contractors who feed off inflated charges, and the NGOs that flourish on easy money for which the donors do not demand accountability – the circle thereby completing itself. Each one of these players is happy with the outcome and least bothered by the begging-bowl syndrome that gnaws away at the pride of analysts.

Such is the eagerness to make the good times last that a blind eye is turned to easily available evidence pertaining to the result of billions of dollars of assistance received over the past decades. Major recipients like public health and education are in a state of shambles and people continue to die from lack of access to clean water and sanitation. What is there to show for the thousands of teachers and health workers that have been trained again and again, each training costing millions of dollars?

Why in the face of such clear evidence are the decisionmakers not clamoring for change in the model of development? Is it because all the key parties involved are benefiting while those who will have to pay the future liabilities have no say in the matter?

The only way this gravy train can come to a halt is if President Trump does one of the bizarre things people expect of him. It might well happen in Africa but it is more likely he will be convinced to appreciate what the money is buying in return in a high-stake zone like Pakistan. At most, he will demand a higher price from the establishment which the latter would accept as the new reality.

This opinion appeared in Dawn on January 25, 2016 and is reproduced here with permission of the author. The writer’s evaluation of foreign assistance can be accessed at https://thesouthasianidea.wordpress.com/#Foreign

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Still learning as we go along … are we?

July 23, 2016

By Jacob Steiner

A review of So Much Aid, So Little Development: Stories from Pakistan published by the Johns Hopkins University Press in 2011. The book was republished in 2015 by Ilqa Books in Pakistan and is available there in book stores and online.

Some months back I visited a rural support program in a Central Asian country, executed by one of the world’s biggest development organizations with an excellent repute here and in similar areas in Pakistan. A European consultant, with ample experience in the area and his field – sustainable construction solutions – had recently visited the project. The outcome of this visit, a number of manuals as guidelines for the local execution, had just been printed and handed over to the local engineers. Among them seismic proof housing, and split latrines. These toilets are currently a very fancy topic in sanitary engineering for developing countries when discussed among experts in the West. They are very easy to construct, turn human excrements safely and without special treatment into fertilizer and are hence theoretically a sustainable and environmentally friendly solution. But the link between smart and fancy ideas in the donors’ offices in Europe and sustainable solutions on the ground seem to be a hindrance that few want to deal with.

In default of pre-constructed toilet seats for this system in the respective country, the technical expert thought of a solution. Food bowls in two different sizes were acquired at cheap prices in the local market and assembled to a locally made split toilet. That sounds awfully convincing in a report, “using locally acquired material”, “supporting local merchants”, “easy to assemble”. The local program manager and a village engineer have already assembled the first sample. Sure, a smart idea from their friend the expert. They acknowledge his input and technical expertise, and are convinced that his intentions are the best. “But what will the people say when we propose to them to use food bowls to shit in?” They both laugh heartily. No, that won’t work, but they’ll do it anyway. Results need to be shown, reports are due and they are already behind schedule. It’s a comical situation, if it wouldn’t be frustrating to see so much effort, and money, brought to waste. A new book on similar encounters in Pakistan shows how this phenomenon may be an essential part of failures in international development initiatives.

Samia Waheed Altaf, former senior advisor of the Office of Health in the USAID Mission in Islamabad, has collected such comically frustrating episodes from her participation in the Social Action Plan (SAP) in the 90s in her So Much Aid, So Little Development – Stories from Pakistan (Wilson Woodrow Center Press, May 2011). The SAP was developed by the Pakistani Government and funded by the World Bank from 1993 to 2003 and targeted health supply services amongst others in Pakistan with a multi billion $ budget. It’s probably the most famous failure of aid and development in Pakistan. A number of papers have already been published on this issue, most notably from the CGDEV, which also Altaf refers to time and again. These papers are looking at why that could happen and how it could be avoided in future, providing mainly the dry figures of wasted inputs and unintended outcomes. They are essential reading to grasp how so much money could be invested in the country in recent decades with so little progress and conclude with definite policy recommendations. But they seldom go beyond the gross calculations of a development economist. Altaf portrays how these figures of failure are produced by the “human factor”…

Read the full review here.

Jacob Steiner’s addendum to the review:

There are other reviews out on the book.

In Dawn, by Sakuntala Narasimhan (you may go to the SouthAsianIdea to comment and discuss it with other critical minds) and in Regional Studies, Volume 45 by Claudia R. Williamson.

They are interesting to read together, since they are written from the two perspectives, the Western ‘Expert’ (in this case a researcher) and the Eastern Intellectual (in this case a journalist). Those two which Altaf manages to include in a single narrative. And they are more or less stuck in precast conceptions of the problem. Williamson wants to read more on where failure is to locate in the local institutions, Narasimhan criticises the Western Experts decadence and ignorance. They are both not wrong in their criticisms, their understanding of where failures may be located. But they are both looking for where they are convinced failure emanates from and seem not to be too receptive to an alternative explanation – a change in mindset and acknowledging responsibility. This is which I think both parties – the International (Western) Expert and the Local Expert – should take from the book. If everyone just understands it as a confirmation of ones own best intentions, brought to no avail because of the failure of the Other, we stay stuck in the dilemma. Question expertise – of others and your own – and be prepared to reassess opinions.

Manan Ahmed has been writing on the ‘Expert’ problem on a wider and more political/historical scale. I think his thesis in this aid example so well documented by Altaf is backed up on the local scale and just confirms how this is an issue that should be studied with more depth in future.

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