Ali Salman / Usman Ali

Success demands wide-ranging programme with right choice of beneficiaries, stringent monitoring

ISLAMABAD: According to the United Nations Development Programme (UNDP) 2019 report, 21.5% of the population is living in severe multidimensional poverty while 12.9% are vulnerable to multidimensional poverty.

This suggests a relative decline in poverty as compared with 2018 when 24.7% of the population was living in severe multidimensional poverty.

However, Pakistan is still far from the target of Sustainable Development Goals, which is to reduce poverty up to 9% by 2030. To fight poverty, the government needs to come up with a proper poverty reduction strategy and it is time to rethink the whole social protection approach based on income transfer. The Benazir Income Support Programme (BISP) offers an unconditional cash flow of Rs5,000 per month to the deserving families. This amount merely covers the food expense as the price of the basket of food keeps on increasing.

When the families spend all the amount, they start waiting for the aid of the new month. It means they are dependent on government aid and has no proper income generation source. Recently, Prime Minister Imran Khan launched the Ehsaas Amdan programme that would give 200,000 livestock assets to the deserving families (60% women and 30% youth beneficiaries) to improve lives of 1.4 million people.

The total budget of the programme is Rs15 billion and it is a four-year programme that ends in 2023. The prime objective of the Amdan programme is to develop better livelihood opportunities for the deprived families.

It is commencing in 375 rural union councils in 23 of the poorest districts, which are selected on the basis of three parameters – level of human development, level of poverty and food insecurity. In the Ehsaas Amdan programme, deserving families will receive small assets, including livestock (goats, buffaloes and cows), agricultural inputs, rickshaw and inputs for small retail outlets and small enterprises. If put into proper use with an entrepreneurial mindset, these assets will help in income generation.

Ehsaas will help in alleviating poverty, especially in backward areas, and it is structurally different from BISP in the sense that it is offering assets, instead of income transfer.

In the short run, the families who will receive assets will have to bear the cost of maintenance, but in the long run, they can sustainably generate income from their animals and agricultural inputs. A question that arises here is whether offering livestock to families will be useful in poverty alleviation or will it result in an additional burden or just a one-off encashment opportunity?

Many families will find it challenging to bear the day-to-day operational cost. It may be the cost of feed, veterinary care and related expenses. In some cases, the livestock may put pressure on some families, which may lead them to sell their assets.

Secondly, not every family will be able to rear livestock. It can be due to shortage of space in the house or may be due to the illness of the family head. One can also observe changes in the livelihood patterns of rural families. There was a time when rural people were strong enough to do multiple tasks ie crop sowing and animal rearing. Now, many young people do not live or work in rural areas and these rural households are also shifting from farm income to non-farm income.

The government must ensure that there is a fully functional veterinary hospital or a care centre in those areas where livestock will be distributed. Moreover, necessary awareness programmes should be initiated that help the families to fight fatal diseases like the foot and mouth disease in livestock.

Now, let’s have a bird’s eye view of what China did to alleviate poverty. If you look at the poverty level in China back in 1978, you may find that 97.5% of the population in rural areas was living below the poverty line.

The Chinese government initiated different poverty alleviation campaigns to bring a positive change in the people’s lives. Currently, it is focusing on eliminating absolute poverty by the end of 2020. China’s government mainly focused on the provision of education, skill development and creation of employment opportunities near people’s homes. In this sense, Ehsaas is quite different because it is offering assets and interest-free loans that will help in the long run to earn a better living.

Even if some families misuse or underutilise this programme, it is likely to help in generating cash at the time of emergency. Success demands a comprehensive and wide-ranging programme with the right choice of beneficiaries and a stringent monitoring mechanism.

The writers are associated with PRIME – an independent think tank in Pakistan

Published in The Express Tribune, March 2^nd, 2020.

Ali Salman / Beenish Javed

Joint efforts by govt, private sector will turn opportunities into concrete gains

ISLAMABAD: China and Pakistan have signed phase-II of the free trade agreement (FTA), which has become effective on January 1, 2020, 15 years after the phase-I was operationalised.

In this article, we weigh the possible benefits Pakistan can draw from this agreement.

China is already ranked as the second largest export destination for Pakistan with a share of 8% in Pakistan’s total exports, after the United States (17%).

Unsurprisingly, Pakistan’s exports to China are heavily concentrated in a few products such as cotton and rice, which account for 75% of Pakistan’s total exports to China.

China also occupies the largest share in Pakistan’s total imports at 29%. Since the Sino-Pak FTA, the trade volume between the two countries has increased from $2.2 billion in 2005 to approximately $15.6 billion in 2019.

Pakistan’s exports jumped to $1.74 billion in 2017-18 from $575 million in 2006-07. Correspondingly, China’s exports to Pakistan increased to $15.74 billion in 2017-18 from $3.5 billion in 2006-07.

The bilateral trade balance has remained tilted in China’s favour as Pakistan’s exports to China could not keep pace with its imports from the country.

In FY19, the trade deficit with China came down to $10.89 billion, which accounted for 34.22% of Pakistan’s total trade deficit.

According to Adviser to Prime Minister on Commerce and Investment Abdul Razak Dawood, the FTA-II is targeted to generate an additional $500 million in exports in its first year of implementation. Hopes are high.

A review of the new FTA deal reveals that market access given to Pakistan is on a par with Asean member countries – something that was missing in the previous FTA and, therefore, was a major concern for Pakistani exporters.

It also seems that the private sector has been thoroughly consulted before operationalising the agreement.

The FTA-II offers new opportunities to the exporters. This calls for joint efforts by the government and the private sector to turn these opportunities into concrete gains for Pakistan, otherwise, this may become another case of GSP Plus status, which could not be leveraged substantially.

Some challenges to convert this opportunity into material gains are worth repeating.

A high cost of production and the subsequent lack of competitiveness has always been a setback for the major export industries such as textile and leather.

Industrialists should utilise the provisions under the new phase to import cheaper inputs and focus should also be placed on product branding and marketing as this remains a weak area of the country’s trade strategy.

It is pertinent to note that neither the new FTA nor the previous one catered to the stringent non-tariff barriers (NTBs) that restrain Pakistan’s agro-based exports to China.

According to the World Trade Organisation (WTO), in 2016 alone, China initiated and enforced 87 technical barriers to trade and 12 sanitary and phyto-sanitary cases on exports of certain products from Pakistan such as organic chemicals, oilseeds, meat, fruits, grains, seeds, animal fodder, etc.

Including a provision or two on the NTBs in the new FTA could have been beneficial for boosting agro-exports to China.

Since Pakistan will be lowering its tariffs for China on 5,237 items over time, there is a possibility of increased import bill given the nature of those items (high-value products). Not to mention, the devaluation of yuan amidst the US-China trade war is also not auguring well for Pakistan.

Therefore, we should proceed with caution since China has a strong manufacturing base for export of goods as compared to imports.

Nonetheless, the ball is in Pakistan’s court now. It needs to take certain measures so as to ensure exports grow in the long run.

Firstly, it is important that Pakistan examines the impact of reduced tariffs on each product and correspondingly rationalises its import tariffs to avoid trade diversion as happened previously.

Secondly, Pakistan needs to expedite the completion of Special Economic Zones (SEZs) under the China-Pakistan Economic Corridor (CPEC) so that Chinese investments can flow into the sectors that will benefit from the new FTA.

Thirdly, there are various internal barriers to trade that require attention such as cumbersome regulations, poor infrastructure, multiplicity of taxes, high energy prices, lack of research and development, just to name a few.

Therefore, unless the government improves the regulatory environment, enhances supply capacity, broadens export basket and takes measures to develop a footprint in global value chains, FTAs will do little to improve Pakistan’s struggling exports in the long run.

The writers are affiliated with PRIME Institute, an independent economic policy think tank based in Islamabad

Published in The Express Tribune, January 13^th, 2020.