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Monday, November 27, 2023

How a UNDP report exposed Pakistan’s economic malaise

A UNDP report highlights how privileged groups in Pakistan make use of loopholes, networks, and policies for their benefit. When privileged groups take advantage of the system, Pakistan's economic growth is harmed.

The United Nations’ Pakistan’s National Human Development Report 2020 (Power, People, and Policy) makes startling revelations about Pakistan’s polity and society. It defines “power” as “privileged groups that make use of loopholes, networks, and policies for their benefit.”

People refer to the deeply embedded belief system that stimulates bias, inter alia, against religion or caste. It defines “policy” as “systems and strategies” that are either ineffective or at odds with principles of social justice.

The report is a scathing criticism of “not only inequality of income, but also inequality of opportunity in terms of access to services works with dignity, and more”.

Read more: Poor and the rich in Pakistan are living ‘poles apart’: UNDP report

Major findings

The feudal aristocracy and industrial robber barons together enjoyed privileges of whopping Rs. 1094 billion. The feudal enjoyed Rs. 370 billion while the business tycoons enjoyed Rs. 724 billion.

Being perched in Pakistan’s parliament they ensure that Pakistan’s taxation system remained regressive. The feudal elite of only 1.1 percent of the population owns 22 percent of the country’s farm area.

Read more: Why Pakistan’s feudal class is not worried about the water crisis?

The report depicts how miserable the lifestyle of the average Pakistani is in contrast with a high net worth household. The average income of a high net worth household is 600 times more than that of an average Pakistani household. Despite being filthy rich, the high-net-worth bracket evades taxes worth Rs. 168 billion.

The 20 percent richest devoured 50 percent of the country’s national income as compared to seven percent which the poorest 20 percent get. Instead of paying most taxes, the high net-worth individuals enjoy privileges amounting to Rs. 368 billion.

Read more: Pakistan’s Elites: Top 10 Richest Men Of Pakistan

The report notes the rich have a disproportionately large share in federal and provincial legislatures. This enables them to “safeguard” the tax benefits and special concessions.

They are granted favored tax treatment for agricultural income and land revenues, low irrigation water charges despite Pakistan’s water-stressed status, preferential access to bank credit, and subsidies for fertilizers, and the provision of electricity for tube wells.

Read more: Pakistan needs to increase tax compliance, not new taxes: World Bank

Military expenditure

Besides criticizing the privileges of the civil elite groups, the report has commented on military privileges also. It states that the military was found “to receive $1.7bn in privileges, mainly in the form of preferential access to land, capital, and infrastructure, as well as tax exemptions.

The report noted, also, that Pakistan’s military is also “the largest conglomerate of business entities in Pakistan, besides being the country’s biggest urban real estate developer and manager, with wide-ranging involvement in the construction of public projects”. The views about the military appear to be wishy-washy of Ayesha Sideeqa’s Military Inc.

Read more: Pakistan ranks 10th among biggest importers in Asia for major arms: SIPRI

A bitter lesson of history is that only such states survived and were able to strike a balance between constraints of security and welfare. Garrison or warrior states vanished as if they never existed. The client states, living on doles from powerful states, ended up as banana republics. We should at least learn from the European security experience.

History shows some states collapsed suddenly while others decayed gradually. Just think of what great empires were like Austria-Hungary, Spain, Portugal, the Netherlands, Sweden and Tsarist Russia (exposed to the 1917 revolution), and even the erstwhile USSR.

Read more: Russia rising from the ashes: new cold war for the US?

A common feature of all strong states had been that they had strong military and civil institutions, de jure capability to defend their territory, and policies that favored the citizenry rather than dominant classes — feudal lords, industrial robber barons, and others.

India’s rising defense expenditure ratchets up Pakistan’s defense outlays. Unless India lowers its defense outlay it is difficult for Pakistan to reduce its defense expenditure. With India always at daggers drawn defense deserves to be a priority.

Read more: Rampant corruption in India’s defense purchases

Pakistan’s predicament

The report identified the economic malaise but omitted to pinpoint the major causative factor. Pakistan’s predicament is that it is unable to undertake radical land and capital reforms.

It could not do away with the jagirs granted by the British raj to its “chiefs” and “chieftains” like India. Bhutto’s land reforms were annulled by a majority decision of the Shariat Appellate Bench in the Qizilbash Trust case.

Read more: Pakistan at 70: with issues but many promises

Factors contributing to Pakistan’s economic malaise are obvious. However political will to grapple with them is lacking. We need to learn from Ayub-era planning experience.

We should activate the planning commission and the statistical offices. We should float fair global tenders to tap our mineral resources.

China should launch turnkey projects to utilize our local resources and create jobs. The import-export policy should be bridled. Economic relations with the Muslim world should be improved.

Read more: Who is responsible for decline in Pakistan’s economic growth: Oil prices or government’s ineptness?

Mr. Amjed Jaaved has been writing freelance for over five decades. He has served federal and provincial governments of Pakistan for 39 years. His contributions stand published in the leading dailies and magazines at home and abroad (Nepal. Bangladesh, Sri Lanka et. al.). He is the author of eight e-books including The Myth of Accession. The views expressed in the article are the author’s own and do not necessarily reflect the editorial policy of Global Village Space.