II I C AU S E S OF P OVE RT Y

Poverty is impacted by a these number

manner in which power is exercised institutions, political, adminis-
growth inmay
theof last decade,
be factors. Some
in and
that ofthe
theypersistence of a regressive
in the management social
of a country's structure,
trative, stemming from the high
and judicial.
general
may serve to create or intensify social and economic resources for
1

development. Good governance 1. Governance, Political

privation across all sectors of the implies a capacity to turn public
economy, and across different
Instability and Poverty
income into human development
population groups. Other causes of outcomes. Good governance is an
Political stability is fundamental
poverty may be more specific or essential pre-condition for pro-poor
to the creation of an enabling
localized, and their effects may be growth as it establishes the enabling
environment for growth and
more apparent in particular regulatory and legal framework
development. Economic agents,
population groups, or in populations essential for the sound functioning of
particularly investors, must be
associated with specific sectors of the land, labor, capital and other factor
reassured with regard to the
economy. The factors or causes of markets.
continuation of policies, should have
poverty can, furthermore, be
confidence in the government's
grouped into categories based on the By the end of the 1990s,
credibility in order to operate
channels through which they affect governance had clearly emerged as
effectively, and in the case of
poverty levels. Thus, for example, Pakistan' s foremost development
investors, be induced to take risks.
they may originate from issues of concern. Corruption and political
The perceived security threat on its
governance and the structure of instability resulted in waning
eastern border which has dominated
institutions or be economic or social
business confidence, deteriorating
Pakistan's political culture has
in nature. In most cases, however, economic growth, declining public resulted in the domination of the
poverty is likely to be the result of
expenditure on basic entitlements, military in politics, excessive public
several mutually reinforcing factorslow efficiency in delivery of public
that together define its scope and services as discussed in the earlier
pervasiveness. The prime causes of section on human development, and
a serious undermining of state
institutions and the rule of law. The
lack of public confidence in state
institutions, including the police and
judiciary, eroded their legitimacy
poverty in Pakistan are detailed in and directly contributed to
this chapter. worsening conditions of public
security and law and order. The
present Government has committed
A.POOR GOVERNANCE
to thorough reforms to restore the
Governance is defined as the legitimacy and performance of all
 POVERTY IN PAKISTAN
spending on defense at the expense of social disputes took four years to resolve, and had
sectors, and erosion of the rule of law. extremely adverse impacts on foreign
Politically, Pakistan has alternated with investment inflows into the country. Other
regularity between democratic and military examples of policy inconsistency in the
governments. Between 1947 and 1988, 1990s include the reversal of decisions on
1990s were dismissed prematurelymilitary
by successive presidents
governments wereonincharges of corruption.
power for 24 withdrawal of tariff concessions and
out of the 41 years. During the period of incentives for certain industry groups in at
parliamentary democracy between 1988 and least one case, an industrial zone, the
1999, there were four national elections and Gadoon Amazai project. All these factors
nine changes of government. In addition, have in turn affected growth, and
Pakistan's involvement in the war during subsequently poverty levels in the country.
the 1980s and 1990s in Afghanistan was In general, political instability and macro-
responsible for the growth of extremist economic imbalances have been reflected in
groups, spread of weapons, and frequent poor creditworthiness ratings, even
breakdowns of internal security. The compared to other countries of similar
uncertainty created by these frequent income levels, with resulting capital flight
changes of government, the associated and lower foreign direct investment
economic policies and lapses in internal 3

security has had a negative impact on private inflows.

investment and growth.
2 . Non Transparency in Resource
Three of the last four civilian Allocation
governments that were in power in the
1990s were dismissed prematurely by The lack of transparency in public
successive presidents on charges of
2 sector planning, budgeting and allocation of
corruption. Although the accountability resources in Pakistan has ensured that those
drives that followed each change of govern- who do not constitute the political elite are
ment were flawed in many respects, there is unable to make political leaders and the
little doubt that corruption was pervasive
3
Government responsive to their needs or
through much of the last decade. The accountable to promises. This has led to a
incidence of corrupt practices, as well as the supply driven approach to service
atmosphere of uncertainty that followed the provision, with development priorities
fall of each successive government, were being determined not by potential
not conducive to the growth or use of sound beneficiaries but by the bureaucracy and a
business practices. These and other factors political elite which may or may not be in
not only discouraged private investment, touch with the needs of the citizens. The
but prompted capital flight, as businessmen results manifest themselves in, for example,
either migrated in large numbers (most the existence of "ghost schools" (which
notably to Canada), or shifted assets to more
favorable locations (such as the United Arab
Emirates).

The change of governments in the 1990s

was also characterized by extreme policy
reversals as well as one sided and non-

transparent accountability drives that have

sapped the morale of public servants and
private entrepreneurs alike. The most
relevant example of the effects of reversal of
policy is the renegotiation of agreements
with independent power producers IPPs
which started in 1997. The resulting
 CAUSES OF POVERTY
2.While the immediate causes of the dismissals in each case may have been tensions in the centers of
power, the reasons for dismissal cited in each case were the prevalence of corrupt practices in government.
3.Pakistan was ranked the second most corrupt country in the world by Transparency International in 1996.
Its ranking had improved to 12th most corrupt by 2001.

exist only on paper), absenteeism of health
and education staff in rural areas (who are
not held accountable by the authorities, and
are often political appointees rather than
POVERTY IN PAKISTAN
has been the inability of the public sector to
remain competitive in attracting better
qualified and competent people owing to the
dismal financial and career incentives
4

public functionaries appointed on merit) offered. Secondly, there has been a steady
and deterioration in the quality of services weakening of meritocratic selection
wherever they do exist. Poor service procedures in recruitment of staff as a
delivery and the restriction of access of the consequence of rampant systemic
poor to services are key determinants of corruption and nepotism. This has worsened
long term poverty and serve to exacerbate in the last decade, during periods of elected
the vulnerability of the lowest income civilian governments, when recourse to
groups in recessionary periods. In addition, political interference and influence became
the absence of a public debate on resource common and, in fact, almost a pre-condition
allocation, and allocation within the social in getting public sector jobs. As a
sectors has resulted in distortions such as the consequence, the autonomy and objectivity
emphasis on provision of tertiary services in of institutions such as the Federal and
urban areas rather than primary services in Provincial Public Service Commissions
rural areas. charged with carrying out recruitment for a
major proportion of public sector jobs has
On a larger scale, non-transparency in
been affected, and confidence of citizens in
the management of public accounts has led
these institutions has weakened. Finally,
to a distortion of development priorities and
training, capacity development, and skills
a tendency to safeguard the interests of
enhancement opportunities across the board
specific groups at the expense of the larger
have historically been very limited due to
public interest. Examples include the
government's hesitance of public
to which there is no serious and systematic
impose has
in the management accounts led to a distortion of development priorities and a tendency to safeguard
agricultural income tax; the tendency to effort at capacity upgrading of in-service
frequently grant concessions or exemptions employees in most public sector
on taxes and tariffs, which often benefit departments. Somewhat ironically,
powerful pressure groups; and ad hoc however, together with this declining
decision making on imports and exports as capacity to deliver, the State assumed added
well as pricing in the agricultural sector, functions in a number of different areas and
which can favor hoarding and speculation. sectors that were perhaps best left to the
private sector. This has led to an
unsustainable and unnecessary over-
3.Weak Public Sector Capacity extension of the public sector with the result
that whatever internal capacity there was
Public sector capacity in Pakistan,
considered in the 1960s to be in league with had to be more thinly spread over in diverse
that of the top performing Asian countries, sectors rather than being concentrated in a
has eroded significantly for several reasons. few key ones such as regulation and law and
This is despite the massive growth in the order. The result of this development has
numbers of staff employed by the public been the realization of diseconomies of scale
sector over these years. The first and in the public sector (as is evidenced from the
foremost reason for this decline in capacity many examples of loss-making state-owned

4.During a recent monitoring exercise for the SAP, some 19 percent of primary school teachers were not
present at school and only 38 percent of schools could be classified as functional' according to a minimal
criteria. Research also revealed that 21 percent of health staff are absent from basic health facilities. See
Rimmer, M. 2000: Reducing Poverty in Pakistan: Priorities for the Asian Development Bank, Working
Papers, Poverty Assessment. Unpublished report, p. 47.
 CAUSES OF POVERTY
enterprises), and an accompanying judicial arbitration on matters of conflict has
disenfranchisement of the private sector that eroded confidence of investors and
has given rise, as mentioned earlier, to the contributed to the observed stagnation in
flight of capital and of entrepreneurship business activity in the country.
from the country.
The constraints to effective dispensation
Finally,ofover-centralization
atory frameworks in the country on account in the and
which the enforcement public of justice
protection in the country
of property rights,are well known,
especially andof the poor,
those
sector has led to inefficient delivery of summarized recently in an ADB project
5

social sector related and other services with document. These include the weak
the resulting disenchantment of the citizenry governance and administration of the
in the ability of the State to provide effective judicial system; lack of professional
and accessible services. At the same time, management; inadequate budgetary
the role of the private and civil society resources and basic infrastructure; long
sector has not been systematically delays in court case decisions; absence of
encouraged to build synergistic public- client focus; absence of grievance redressal
private partnerships to achieve greater scale procedures; and gender imbalances and
and coverage in the delivery of these under-representation of women in the
services. judiciary. In addition, the access to justice
of the citizenry at large is severely restricted
4. Inadequate Access to Justice by an inefficient and corrupt police system
that is often accused of playing in the hands
of the influentials and victimizing the poor
Inadequate access to justice is widely and the underprivileged. In this regard,
perceived in Pakistan to be a key harassment by the police and its
governance issue that directly contributes to indiscriminate and exploitative abuse of
the powerlessness of the poor and reinforces power has been repeatedly reported by the
social and economic inequities widely poor to be a major source of insecurity and
prevalent in the institutional fabric of vulnerability for their lives and livelihoods.
society. With the general deterioration of
public sector institutions in the country, and
their uncontrolled politicization, those
providing judicial services could not have
been expected to remain insulated from this
trend. Consequently, the state and level of
public confidence in the ability of these
institutions to administer justice in a fair and
equitable manner has been compromised.
One important result of the weakening of
judicial institutions has been a general
decline in the vitality and effectiveness of
regulatory frameworks in the country on
account of which the enforcement and
protection of property rights, especially
those of the poor, has suffered. Side by side,
ineffective regulation and lack of timely
C . SOCIAL DETERMINANTS
The economic determinants of poverty are key to understanding the circumstances that can
intensify poverty, or increase the proportion of people falling below the poverty line. The
existence of pervasive poverty, wherein a significant proportion of the population remains
poor over an extended period of time, is attributable more to social than to economic
factors. The impacts of economic causes of poverty tend to be accentuated under a
regressive social structure, and rigid societal mores can act as impediments to the equitable
distribution of the benefits of growth.