Poverty in Pakistan and Its Eradication

INSTITUTE OF BUSINESS AND TECHNOLOGY

Poverty in Pakistan and its Eradication

Prepared By

RAM GUPAL SINGH

BM-250XX

Course Code : MKT-606

MBA (Banking and Finance)

FACULTY OFMANAGEMENT AND SOCIAL SCIENCES

FALL - 2010

Poverty in Pakistan and Its Eradication

ACKNOWLEDGMENT

I first of all - thank Allah, the Almighty, for making the achievement of this

endeavor possible. It has been a great experience and a time I was given the

opportunity to put to practice what I have been taught.

I would like to thank my Project instructor Dr. Noor Ahmed Memon for the

Guidance and support he gave me through my journey of writing this project,

though I am finance student I decided to write something about Poverty

eradication, Its my dream to eradicate poverty or at least reduce to some extent if

I had the chance to do so. then I submitted to my instructor for giving permission

though I was worried what would be his answer, but he gave me the permission

and I was so excited for chance I was given.

This report is the product of teamwork and cooperation; a team that included

everybody who has contributed to this research in one way or the other - from

the individuals who generously accepted to respond to my questionnaires and

interview questions to those who gave their constructive criticism about the

content of the report.

At the head of this very long list of individuals to whom I would like to extend our

most sincere thanks and appreciations goes my Research Project instructor Dr.

Noor Ahmed Memon who has guided me during the research. Your

constructive criticism has helped shape this report into something I feel so proud

of. Special thanks also go to Mr and Mr for their support while working on this

research.

The following individuals were a good source for the information presented in this

report – which is also the basis of the conclusion and recommendations. They

_____________________________________________________________________ Institute of Business and Technology

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have helped me with information that one could hardly find in published material.

I thank you all for your selfless contributions.

INSTITUTE OF BUSINESS AND

TECHNOLOGY

ABSTRACT SUBMITTED BY: Kamal Guled Mohamed

DISCIPLINE: MBA (BANKING AND FINANCE)

TITLE OF PROJECT REPORT: Poverty in Pakistan and its eradication

MONTH OF SUBMISSION: April, 2010

NAME OF PROJECT SUPERVISOR: Dr. Noor Ahmed Memon

ABSTRACT

The project about is about poverty eradication. This work – which i consider a

success under the circumstances – will discuss topics

Such as poverty measurement, factors that impact poverty rates, poverty

reduction, and strategies that have been proved effective in combating poverty. It

will present an analysis on the findings from our research as well as suggest

methods to reduce or eradicate poverty. Other interesting perspectives on

The topics as well as those we have just mentioned are presented in this report.

The report might be used as another reference material on the subject of poverty

in Pakistan and its eradication. However, it might also be used as a blueprint for

a poverty reduction strategy that might be put to work in not only Pakistan but the

world at large

The important points of my article are:

1. Understanding Poverty

2. Poverty Factory

3. Measurement of poverty


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4. Poverty: prevention, reduction or eradication

CHAPTER 01: INTRODUCTION

1.1 Introduction…………………………………………………………………... 04

1.2 Research Objectives…………………………………………………………05

1.3 Literature Review …….………………………………………………………06

1.4 Research Methodology ……………………………………………..............07


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1. INTRODUCTION

1.1 Introduction

According to a UNDP-published glossary, this report, which is the product of a

research I have conducted, revolves around the issue of poverty and the

possibility of its eradication. It explores the means of poverty reduction and their

effectiveness. The objective is to facilitate the formulation of initiatives and

strategies to counter poverty, eradicate it (if possible) or at least reduce its rate.

The coverage of this report is geographically limited to

Pakistan; it takes into account the poverty factors in that

area and the social issues that impact the poverty rate. It

does not discuss or compare poverty facts in the other

poverty-stricken regions of the world; however, poverty

combating scenarios and strategies in other parts of the

world will be show-cased as examples or models to be

followed.

The research whose fruit/culmination is this report has been assigned to me as

part of the coursework for the Research Project course. . Noor Ahmed Memon

– the course instructor - has authorized its initiation and given me till the end of

the semester as the deadline for its submission. The completion of this task -

including all its subtasks – has taken us approximately four months.

The sources of information and facts in the report include primary ones such as

questionnaires and interviews, as well as secondary ones mostly comprising of

material published on the Internet or printed in research papers or magazines.

For the questionnaire, we have selected a sample size of 100 individuals


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Poverty is the state of being deprived of the essentials of well-being such as adequate

housing, food, sufficient income, employment, access

to required social services and social status.


randomly chosen as respondents. Five scholars who have knowledge of the

economic state of Pakistan and poverty in the country have been interviewed to

get their valuable insights.

The report might be used as another reference material on the subject of poverty

in Pakistan and its eradication. However, it might also be used as a blueprint for

a poverty reduction strategy that might be put to work in not only Pakistan but the

world at large.

In the process of carrying out the research and writing this report, we have faced

some challenges whose struggle to overcome taught us a lot and helped us gain

hands-on experience on research methodologies. The language barrier was the

most obvious of these challenges. Most of those people with whom we had to

interact during the data gathering phase could not speak English. With the help

of some native friends, we eventually resolved this issue. Other obstacles

included the vast amount of published material on the subject we had to go

through to get to the information that was relevant to our research purposes.

Filtering all that information was time consuming but worthwhile.

The product of this work – which we consider a success under the circumstances

– I will discuss topics such as poverty measurement, factors that impact poverty

rates, poverty reduction, and strategies that have been proved effective in

combating poverty. It will present an analysis on the findings from our research

as well as suggest methods to reduce or eradicate poverty. Other interesting

perspectives on the topic as well as those we have just mentioned are presented

in this report.

1.2 Research Objectives

The main objectives of this project “poverty in Pakistan and its eradication ” are

to find solutions and ways for eradication poverty or at least a strategic ways of

reducing poverty, poverty is the mother of crime, not only poverty means we

lack money or the life's necessities, but our hearts are poverty, Such as we lack


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the legal consciousness, moral consciousness or something else. So getting

solution poverty will help the world to live in peace and prosperity, so the main

goal is to find any sign that we can eradicate poverty

1.3 Literature Review

Different researchers and authors on the subject have different opinions about

poverty, its current status in the country and the strategies for its reduction or

eradication. They subscribe to different schools of thought that end up with

different strategies for poverty combating. The most common areas of the subject

that have had their share of controversy are poverty measurement and poverty

reduction schemes.

In the light of poverty measurement, Dr Akmal Hussein, a prominent researcher

on the topic of poverty, believes that unless we develop an effective paradigm for

poverty measurement and unless we view poverty as

occurring when the individual household in a fragmented

community is locked into a nexus of power that

systematically perpetuates poverty., we will not be able to

solve the poverty crisis. In reducing poverty, thus the

analysis and evidence within this new poverty paradigm

suggest that the key to overcoming poverty is to empower

the poor to get better access over markets, governance,

and the institutions that provide public services such as

health care, education and justice.

Empowerment in this specific sense means establishing

autonomous community based organizations of the poor at the local level.

According to his study, Mr Hussein suggests that the poor lose as much as one-

third of their income due to unequal access over input and output markets and

extortions by the local administration.


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Unless we develop an effective paradigm for poverty

measurement and unless we view poverty as occurring when the

individual household in a fragmented community is locked

into a nexus of power that systematically perpetuates

poverty., we will not be able to solve the poverty crisis.

Unless we develop an effective paradigm for poverty

measurement and unless we view poverty as occurring when the

individual household in a fragmented community is locked

into a nexus of power that systematically perpetuates

poverty., we will not be able to solve the poverty crisis.


Many other researchers agree with him in this respect, and the details follow in

the rest of our report. What most of these researchers fail to recognize is the use

of other poverty combat scenarios that have been successful as role models

upon which to base their long term solutions. The other shortcoming of the

solutions proposed by them is the implementation of the projects and poverty

solutions which mainly focus on urban areas, thereby disregarding and ignoring

the neediest of the community.

1.4 Research Methodology

In this study/research, we used two methods for gathering primary data. We also

had to go through earlier studies of the subject and used already printed material

as a secondary information.

Primary Data Collection

Two important tools for data collection has been used:

1. A Questionnaire (a copy is included in the appendix) which collects

information on the individuals and their poverty related issues. This

questionnaire is intended to serve as a tool to collect information for the

study on Poverty Eradication in Pakistan. It is to facilitate the gathering of

reliable, unbiased facts about the actual poverty status in the country.

2. Interviews conducted with scholars and academicians in the area of

poverty fighting.

The Sample Size:

I have distributed 120 questionnaires to be filled out by representatives of

households or any individual who is in the capacity of providing reliable


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information about his/her household. 105 were responded to, and the remaining

15 have been wasted.

Sample Unit:

The sample unit in this survey is an individual household represented by each

respondent to our questionnaire.

Secondary Data

The Secondary data mostly involved reading already printed material and

searching for what has been said about the subject earlier. We had to go through

a junk of reports and studies from the past.


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CHAPTER NO. 2 THE PERCEPTION OF POVERTY

2.1 Understanding the Poverty………………………………….10

2.2 Voices of Poor…................................................................13

2.3 Poverty Cycles ……………………………………………..18

2.4 Poverty and Power ……………........................................21

2.5 Pacts on Poverty in Pakistan…………………………….23

2. THE PERCEPTION OF POVERTY


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2.1 Understanding Poverty

Poverty is defined as a state in which a family’s income is too low to be able to

buy the quantities of food, shelter and clothing that are deemed necessary. For

some people, the term 'poverty' is relative; it has a specific meaning to each

group or individual since some people are poorer than others. However, there is

a universal conception of poverty which is determined by the lack of sufficient

food and other very basic human needs such as shelter. Scientifically, poverty is

defined with reference to a poverty-line which is measured considering factors

such as family size, age composition, educational level, etc. Families below the

poverty-line are assumed to be poor.

Although poverty is a factor of a number of issues such as educational level and

employment, some families tend to be poor and still remain so for generations

and generations. This phenomenon, known as the poverty live cycle, has been

observed far too commonly, and is an indicator that if we really want to eradicate

poverty and eliminate anything to do with it, we should go to the root of the

problem and find what generates these cycles.

Being poor does not only cause inability to eat something decent or edible. Most

poor people face other difficulties that make recovering from this inability almost

impossible. Poor people are often discriminated which in turn deprives them from

rights including earning decent wages or even getting employed. It deprives them

from being accepted at educational institutions which discourages them from

studying further or joining schools. In more than one region of this world, poverty

has created other worse circumstances and unfair social class systems that

exaggerate discrimination.

Discrimination and social classes shift the power balance in societies, making a

group of people inferior to another only because of their economic statuses.

These class systems give power to the richer class or classes, letting these

classes make all their decisions.


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Two basic “levels” or “types" of poverty are identified in the development

literature: absolute poverty and relative poverty. Simply put, absolute poverty is

defined as the cost of the minimum necessities needed to sustain human life.

The World Bank currently regards people earning less than US$ 1 a day (in 1993

purchasing power parity) to be absolutely poor. Relative poverty is defined as the

minimum economic, social, political and cultural goods needed to maintain an

acceptable way of life in a particular society. The European Union defines the

relatively poor as “... persons, families and groups of persons whose resources

(material, cultural, social) are so limited as to exclude them from the minimum

acceptable way of life in the member state in which they live.”

Terms such as poverty eradication and poverty alleviation are often used

interchangeably in the development literature. Before discussing causes,

aspects, policies and approaches to either eradicating or alleviating poverty, it is

important to distinguish what these terms imply. While absolute poverty can be

eradicated, relative poverty can only be alleviated, because what is minimally

accepted today may vary over time, from villages to urban areas and from

country to country.1 Relative poverty also varies with levels of economic

development, and the perceptions and expectations of the majority on what is

minimally acceptable. For example, while clean piped water may be a minimum

acceptable standard of living in a city, it may not be a minimum requirement in a

village. Similarly, while possessing a telephone may be a minimum necessity in a

country like the United States, it may not be a minimum requirement in a country

like Pakistan.

The essence of this chapter and the rest of the ensuing subtopics in it, revolve

around poverty and the poverty cycle, and social classes and the impact of

poverty on social power.

1 Regional High-Level meeting on Asia and Pacific region development, October 2000_____________________________________________________________________ Institute of Business and Technology

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Poverty in Pakistan is a major economic issue. Nearly one-quarter of the

population is classified poor as of October 2006. The declining trend on poverty

in the country seen during the 1970s and 1980s was reversed in the 1990s by

poor Federal policies and rampant corruption. This phenomenon has been

referred to as the "Poverty Bomb". The government of Pakistan has prepared an

"Interim Poverty reduction Strategy Paper" that suggest guidelines to reduce

poverty in the country. According to the World Bank, the program has had

tangible success, with the World Bank stating that poverty has fallen by 5 percent

since 2000.2

As of 2006, Pakistan's Human

Development Index is 0.539, higher

than that of nearby Bangladesh

(0.530), which was formerly a part

of Pakistan, but lower than that of

neighboring India (0.611).

Incidences of poverty in Pakistan rose from 22–26% in the Fiscal Year 1991 to

32–35% in the Fiscal Year 1999. They have subsequently fallen to 25-26%

according to the reports of the World Bank and UN Development Program

reports. These reports contradict the claims made by the Government of

Pakistan that the poverty rates are only 23.1%. The CIA fact book places the

2006 poverty rate at 24 percent.

2 Wikipedia the Free Encyclopedia, Poverty in Pakistan_____________________________________________________________________ Institute of Business and Technology

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“... persons, families and groups of persons whose resources (material, cultural, social) are so limited as to exclude them from the minimum acceptable way of life in the member state in which they live.”

The European Union defines the relatively poor


2.2 Voices of Poor

At the turn of the new millennium, the World Bank collected the voices of more

than 60,000 poor women and men from 60 countries, in an unprecedented effort

to understand poverty from the perspective of the poor themselves. Voices of

the Poor, as this participatory research initiative is called, chronicles the

struggles and aspirations of poor people for a life of dignity. Poor people are the

true poverty experts. Poor men and women reveal, in particular, that poverty is

multidimensional and complex -- raising new challenges to local, national and

global decision-makers. Poverty is voicelessness. It's powerlessness. It's

insecurity and humiliation, say the poor across five continents.

The immediate impetus for the Voices of the Poor study was to prepare the

World Development Report 2009/01. Published every year by the World Bank,

the World Development Report is a leading resource on development strategies.

In the World Development Report 2009/01 on" Attacking Poverty", the World

Bank wanted to make sure the voices of the poor - their experiences, priorities,

and recommendations - would be taken into account.

The poor view wellbeing holistically

Poverty is much more than income alone. For the poor, the good life or wellbeing

is multidimensional with both material and psychological dimensions. Wellbeing

is peace of mind; it is good health; it is belonging to a community; it is safety; it is

freedom of choice and action; it is a dependable livelihood and a steady source

of income; it is food.

The poor describe ill-being as lack of material things - food especially but also

lack of work, money, shelter and clothing -- and living and working in often

unhealthy, polluted and risky environments. They also defined ill-being as bad

experiences and bad feelings about the self. Perceptions of powerlessness over

one's life and of voicelessness was common; so was anxiety and fear for the

future.


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http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTPOVERTY/0,,contentMDK:20194762~menuPK:336998~pagePK:148956~piPK:216618~theSitePK:336992~isCURL:Y~isCURL:Y,00.html


"Poverty is like living in jail, living under bondage, waiting to be free" — Jamaica

"Poverty is lack of freedom, enslaved by crushing daily burden, by depression

and fear of what the future will bring." — Georgia

"If you want to do something and have no power to do it, it is talauchi

(poverty)." —Nigeria

"Lack of work worries me. My children were hungry and I told them the rice is

cooking, until they fell asleep from hunger." — An older man from Sialkot, Sindh.

"A better life for me is to be healthy, peaceful and live in love without hunger.

Love is more than anything. Money has no value in the absence of love." — a

poor older woman in Somalia.

"When one is poor, she has no say in public, she feels inferior. She has no food,

so there is famine in her house; no clothing, and no progress in her family." — a

woman from Uganda.

"For a poor person everything is terrible - illness, humiliation, shame. We are

cripples; we are afraid of everything; we depend on everyone. No one needs us.

We are like garbage that everyone wants to get rid of." — a blind woman from

Tiraspol, Moldova.

"I repeat that we need water as badly as we need air." — a woman from Tash-

Bulak, The Kyrgyz Republic.

"The waste brings some bugs; here we have cockroaches, spiders and even

snakes and scorpions." — Nova California, Brazil.


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Insecurity has increased. Violence is on the rise, both domestically and in

the society. And the poor feel they have been bypassed by new economic

opportunities.

By and large poor people feel they have not been able to take advantage of new

economic opportunities because of lack of connections and lack of information,

skills and credit. Unemployment and lack of food and money appear as problems

in many communities. The poor, who work primarily in the informal sector, report

experiencing life as more insecure and unpredictable than a decade or so ago.

This is linked to unpredictability of agriculture, jobs that are unreliable and with

low returns, loss of traditional livelihoods, breakdown of the state, breakdown of

traditional social solidarity, social isolation, increased crime and violence, lack of

access to justice, extortion, and brutality from the police rather than protection.

Illness is dreaded and lack of affordable health care pushes many families into

indebtedness and destitution.

"Everyday I am afraid of the next" — Russia

"Wasta (nepotism or connections) is the most important thing. If one has wasta

then one can work." — Egypt

"Life in the area is so precarious that the youth and every able person has to

migrate to the towns or join the army at the war front in order to escape the

hazards of hunger escalating over here." — a discussion group in rural Ethiopia

Gender inequity is widespread, domestic violence pervasive and gender

relations stressed.

With increased economic hardship and a decline in poor men's income earning

opportunities, poor women across the world report "swallowing their pride" and

going out to do even demeaning jobs to bring food to the family. In their struggles

to adapt to changing economic roles in the household, women widely report

greatly increased work burdens; and men in many communities express


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frustration and humiliation with the lack of livelihood opportunities. This loss of

traditional male "breadwinner role" and female "caretaker role" is traumatic for

both genders, and family breakdown, domestic violence and increased

alcoholism among men are often mentioned. In some communities, awareness

raising by NGOs, churches and women's groups is contributing to changing

social norms and eventually to harmony and equity within the household.

"Sister, if you don't beat them they'll stop being good. And if they're good and you

beat them, they'll stay that way." — Bangladesh

"Men rape within the marriage. Men believe that paying dowry means buying the

wife, so they use her anyhow at all times. But no one talks about it." — Uganda

"When my husband died, my in-laws told me to get out. So I came to town and

slept on the pavement." — a middle-aged widow in Kenya,

"Rather than suffering from poverty, we should better go sweep up the garbage

in other people's houses." — a woman in Moldova

The poor want governments and state institutions to be more accountable

to them. Corruption emerges as a key poverty issue.

Corruption emerges as a core poverty issue. Poor people engaged in the study

reported hundreds of incidents of corruption as they attempt to seek health care,

educate their children, claim social assistance, get paid, and attempt to access

justice or police protection, and seek to enter the marketplace. In their dealings

with officials, poor men and women are subject to insults, rudeness, harassment,

and sometimes assault by officials. Harassment of vendors in urban areas is

widespread. Poor people's evaluations of institutions that are important in their

lives show that while politicians, state officials and public servants are sometimes

viewed as important they rarely show up as effective, trustworthy, or

participatory. There are exceptions. Provision of basic infrastructure is valued

and has made a difference.


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"The municipal Congressmen are all thieves … they do not solve anything, there

are no schools, no health care. They do not vote issues that interest the people."

— Brazil.

"Nobody is able to communicate our problems. Who represents us? Nobody." —

discussion group in Foua, Egypt

"If you have no relatives among high government officials, people treat you as

second rate. If you have any problems with your business, or get in trouble with

the police, you will lose your case and won't have your problems resolved. Those

who have power and money will always win." — At Bashi, The Kyrgyz Republic

"We keep hearing about monies that the government allocates for projects, and

nothing happens on the ground." — South Africa

"People place their hopes in God, since the government is no longer involved in

such matters." — Armenia

Healthcare

"Before everyone could get healthcare, but now everyone just prays to God that

they don’t get sick because everywhere they just ask for money." Vares, Bosnia-

Herzegovina

"If you don’t know anyone, you will be thrown to the corner of a hospital!" – India

"[I]n the hospitals they don’t provide good care to the indigenous people like they

ought to, because of their illiteracy they treat them badly … they give us other

medicines that are not for the health problem you have." -- a young man from La

Calera, Ecuador


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Education

"Teachers do not go to school except when it is time to receive salaries." –

Nigeria

"The school was ok, but now it is in shambles, there are no teachers for weeks….

There is no safety and no hygiene." Vila Junqueira, Brazil

"If parents do not meet these payments, which are as high as Rs. 40 to 50 per

month, the teachers were reported to beat the student or submit a failing grade

for her/him." – Pakistan

2.3 The Poverty Cycle

This creates some kind of poverty chain or cycle that continues or generations

due to the lack of the necessary resources to get out of that cycle or loop. These

resources include but are not limited to financial capital, education and

connections that enable them to access these resources.

The nature of the income of the families or individuals in this category can be

described as “hand to mouth”. This means that most or all of what they earn in

the form of wages are not more than what they consume or spend in a single day

or payment period; therefore they become unable to make savings or spend in

their own development.

The poverty cycle is an impediment to human development. It reduces the

potential for skill-based and knowledge-based development since the

impoverished cannot invest anything in education. They have to work for a living

and can hardly get the time to invest in education. On the other hand, they

cannot afford to invest in education since whatever they earn can barely cover

their nutritional requirements.

As to the reasons or causes of the poverty cycle, there exist different schools.

Some belief that the poverty cycle is created and promoted by racism, social

injustice and social inequality. This leads to a situation where the wealthy keep

earning more wealth and the poor are not able to create enough of it. Another


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school has it that the poverty cycle is the product of the strong presence of the

state (i.e. Government regulatory agencies, etc) in the economy erodes property

rights thus killing the incentive to create wealth. The two major factors in the

creation of poverty are:

1. Unbalanced distribution of wealth:

Lack of education, or human capital, is thought by many to be one of the

biggest causes of the poverty cycle. Education in a modern knowledge-

based economy is one of the conditions to achieving economic growth, as

it increases skill. A maximized education would require devoted time and

energy, or extra-curricular reading. Children who are from poor families

and have to work cannot maximize their education, even if the education

is free. It would also require a conducive and hygienic environment, which

is often not available to the poverty-stricken. Tertiary education is often not

free. Some theorists believe that children often will not be able to break

out of poverty because their reduced skill-set reduces their potential

income. With no means to provide a conducive educational environment

for their own children, the cycle begins again.

2. Excessive intervention by state or government:

Many neoliberals attribute certain cycles of poverty to insufficient

protection or recognition of property rights. To be more exact, in an

environment where one's property can be stolen at any time, such as

countries with a weak rule of law, there is very little incentive to save and

invest.

Free market proponent Hernando De Soto argues that poverty is

sustained by government over-regulation that generates high costs to

property ownership through bureaucracy and big government. He argues

that many of the poor in the world economy are unable to own or develop

property because this regulation is too costly to overcome. As a result,


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they argue they are unable to generate wealth in a legal market that is full

of regulation and are forced to resort to operate in an extralegal market

that hampers wealth creation, thus hampering their ability to be pulled out

of poverty.3

Economists such as Milton Friedman argue that tariffs, income taxes,

payroll taxes, savings tax and tax on investments all provide perverse

incentives toward wealth creation that hurt the poor the most. He further

argues that some of these arrangements are also wealth transfers from

poor to rich; such as tariffs and social security. He argues that these

regressive tax burdens encourage low productivity and little savings and

investment that would otherwise lift the poor out of poverty.

Others have argued that welfare perpetuates poverty by providing

incentives counter to wealth creation. Proponents of the Fair Tax and

economists such as Milton Friedman favor eliminating welfare programs

that prevent benefits from those earning above a certain income. They

believe that these income caps as eligibility to receive benefits provide an

incentive for laborers to earn less than they actually could in order to gain

free benefits from government programs. In the same way, incentive to

find work can be reduced by the effect of income tax on low-income

earners. As money is earned by a person receiving welfare, the amount of

welfare they receive is reduced. This money earned - for example, through

part time work - may also be taxed. Thus, there is reduced incentive for

those who are part of the cycle of poverty to find work.

The solutions to the poverty cycle vary. Some modern governments have taken

to the improvement of public education and welfare as methods to break the

poverty cycle. In many places the rule of law also needs to be strengthened, by

creating efficient legal systems that protect the acquired capital of the poor.

Mixed-income housing is being implemented in more and more cities as a

possible solution to poverty issues. It is an attempt to bring middle and lower

3 Wikipedia, the free encyclopedia_____________________________________________________________________ Institute of Business and Technology

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class families together in the same neighborhoods. This interaction between low

and middle-income families, according to supporters, helps the low-income

families.

Others who believe in free markets disagree with the above theory. Free market

economists argue that planned economies and welfare will not solve poverty

problems but only make them worse. They believe that the only way to solve

poverty is not by shuffling and sharing existing wealth through redistributing

wealth but by creating new wealth. They believe that this is most efficiently

achieved through low levels of government regulation and interference, free

trade, equal property rights, money systems, wages, and tax reform and

reduction, thus converting even the poor members of society into capitalists.

All in all, poverty essentially has three closely interrelated aspects: “poverty of

money”, “poverty of access” and “poverty of power.” These make the working,

living and social environments of the poor extremely insecure and severely limit

the options available to them to improve their lives. Without choices and security,

breaking the cycle of poverty becomes virtually impossible and leads to the

marginalization and alienation of the poor from society.

2.4 Poverty and Power

The poor suffer from both traditional and modern environmental health risks in

urban areas. They suffer from diseases associated with poor sanitation, lack of

clean water, overcrowded and poorly ventilated living and working environments,

as well as from modern risks caused by air and industrial pollution. While the

poor suffer the most from dysfunctions in cities, they are the least able, as

individuals, to influence how cities are governed.4

In many Asian cities, both the formal structures of government and the culture of

governance tend to exclude the poor from decision-making and tend to

concentrate decision-making among a small number of formal and informal elite.

4. Unites Nations Economic and Social Commission for Asia and the Pacific, paper on urban poverty alleviation._____________________________________________________________________ Institute of Business and Technology

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The poor have a greater possibility to influence decision-making under conditions

of good governance, i.e., a system of government and a culture of governance

that is participatory, inclusive, consensus-oriented, based on the rule of law,

responsive to the needs of the population, efficient, transparent and accountable.

Another important aspect of power is information. The poor often lack access to

information that they can use to advance their case when dealing with other

actors in the city. Even when information is available, it is often in media and

forms that are neither not accessible to nor understandable by the poor.

How do we alleviate the poverty of power?

1. Supporting Collective Mechanisms: Experience from the region has shown

that whenever the poor have been organized, united and in possession of

technical and managerial skills, they have improved their own conditions and

broken the cycle of poverty. They have resisted stronger groups, been able to

influence decision-making and build equitable partnerships with governments

and other actors in society. Several non-governmental organizations have made

valuable attempts to catalyze coalitions of the poor in the form of slum and

squatter dwellers’ federations, rickshaw pullers’ associations and hawkers’

welfare cooperatives. These coalitions have strengthened the bargaining

positions of the poor and have assisted them in building beneficial partnerships.

Experience has also shown that many of the collective mechanisms of the poor

have been short-lived, particularly those that developed in response to external

threats such as evictions, or around a particular issue such as provision of water

or housing. Often once the external threat was resolved, these community-based

organizations disintegrated. While making important contributions, such

organizations are often transitory in the struggle to break the cycle of poverty. On

the other hand, community-based organizations and collective mechanisms that

are developed around issues of long-term concern, and that are able to engage

the poor continuously and sustainably, such as community or trade-based


24


savings and credit schemes, have a greater potential for empowering the poor

and breaking the cycle of poverty. This is because they create a core, organized

group within communities around which other issues of common concern can be

discussed and addressed by activating other community members.

Another reason for the failure of organizations of the poor is a lack of skills in the

operational and financial management of organizations, in group interaction and

in negotiation and consensus-building. Governmental and non-governmental

organizations that assist the urban poor in acquiring such skills help to empower

them. In contrast, those who speak on behalf of the poor or provide them with

services, while doing valuable short-term work, often tend to make the poor

dependent on them.

2. Increasing Access to Information: One of the key components of power

and wealth creation is access to information and knowledge and the ability to use

that information or knowledge for economic or social gain. Programms and

initiatives that seek to provide information to the poor in easily understood media

and forms greatly contribute to their empowerment.

A free flow of information also contributes to transparency in decision-making.

Some governments in the region, for example, now require public hearings

before large infrastructure projects are initiated. Even where such public hearings

are impartial, the poor are often unable to participate or influence decision-

making because they do not have the financial or human resources to interpret

the information provided. Some non-governmental organizations and academic

institutions are working to fill this gap. Most notable among these initiatives are

urban resource centers (URCs). The URC approach links non-governmental

organizations and academic institutions to analyze and evaluate trends and the

feasibility and impacts of programmes and projects in the city, and where

needed, to work out alternative solutions to governmental proposals. This

information is then provided in an understandable form to the groups and

communities that would most likely be affected. Equipped with such information,

several poor communities have been successfully able to resist projects that _____________________________________________________________________ Institute of Business and Technology

25


were either unnecessary or whose negative impacts would have been far greater

than their potential benefits.

2.5 Facts on Poverty in Pakistan

An analysis of poverty by socio-economic groups, focusing on key demographic and

economic characteristics, reveals the following stylized facts of poverty in Pakistan.

Poverty in Pakistan has remained fairly stable during the 1990s, from

29.3% in 1993- 94 to 32.2% in 1998-99.

Poverty is considerably higher in rural as compared to urban areas.

According to calculations by FBS based on PIHS data poverty headcount

in 1998-99 was 36.3% and 22.4% for rural and urban areas of Pakistan,

respectively. Poverty incidences vary significantly between provinces.

NWFP has the highest rural as well as urban poverty followed by Punjab.

Baluchistan data for 1998-99 shows relatively low poverty; however,

poverty in Baluchistan is as high as in NWFP as in other years.

Poverty is strongly related to lack of basic needs, especially education and

cultivable land

The poor have a higher dependency ratio, as households with a large

number of children, and single earning member, are more likely to be

poor. On average the poor have almost five household members less than

18 years of age, while the number for the non-poor is three. Average

number of births by a poor woman (married and of age 15-49) is almost

five, compared to four for a non-poor woman.

More than one third of the poor households are headed by aged persons

who are

Dependent on transfer incomes, such as pensions and other forms of

social support.

Education is the most important factor that distinguishes the poor from the

non-poor. The percentage of literate household heads is 27 in poor

households while for non-poor households it is 52.


26


The poor are also characterized by relatively low access to health related

infrastructure, like sanitation. While 76% of the poor live in households

with no toilet with flush, compared to 53% of the non-poor. The poor are

also less likely to have access to electricity and gas – 60% and 10% of the

poor live in households with electricity and gas connections, compared to

75% and 24% of the non-poor, respectively.

Relatively poor communities also seem to have less access to health

facilities and immunization coverage. 45% of the children in poor

households aged one to five years have been fully immunized as against

58% in non-poor households.

Poverty is (relatively) higher when head of the households are unskilled

agricultural workers, engaged in services, transport, production, and sales

occupation.

The non-poor own 0.84 acres of cultivable land per capita, while the poor

own only 0.27 acres per capita. In addition the poor are less able to

diversify their agricultural production and are thus more susceptible to

economic shocks.


27


CHAPTER NO. 3 POVERTY FACTORS

3.1 Poverty Factor………………………………………………27

3.2 Causes of Poverty………………………………………….29

3. POVERTY FACTORS

3.1 Poverty Factors


28


According to an ADB Poverty Assessment, there was a declining trend in poverty

in Pakistan during the 1970s and 1980s was reversed in the 1990s. The

incidence of poverty is estimated to have increased significantly after 1997,

coinciding with the onset of a period of slow growth in the country. It increased

from 26.6 percent in 1993 to 32.2 percent in 1999 and the number of poor

increased by over 12 million people during this period. Since 1999, economic

growth has slowed further, development spending has continued to decline, and

the country has experienced a severe drought. It is therefore estimated that the

incidence of poverty in Pakistan today is higher than in 1999.

The identification of vulnerable elements within the poor has also received little

attention in Pakistan. While poverty manifests itself as material deprivation,

studies on poverty in Pakistan stress that the poor rarely speak of lack of income

per se, but tend to focus on the constraints

that they face in managing their assets,

whether human, material, social or political.

The capacity of the poor in Pakistan to access

public entitlements like political processes or

goods and services which determine human

development contrasts strikingly with that of

the rich - for example, 52 percent of the

population in the highest income quintile will have attended school at some

stage, but this proportion falls to 27 percent for the lowest income quintile. 5

Poverty in Pakistan has historically been higher in rural than urban areas.

Poverty rose more sharply in the rural areas in the 1990s, and in 1999 the

incidence of rural poverty (36.3 percent) was significantly higher than urban

poverty (22.6 percent). Inequality also increased in Pakistan during the 1990s, in

both urban and rural areas, which enhanced the negative impact on poverty of

the slowdown in growth during this period. While agriculture is the predominant

activity in rural society, a substantial proportion of the rural labor force, estimated

at more than 40 percent, depends entirely on non-farm activities. The growth of

5 Mr Mushraq Ali Shah presentation on Poverty Alleviation in Pakistan_____________________________________________________________________ Institute of Business and Technology

29

● ● ●Poverty in Pakistan has

historically been higher in rural than urban areas.

Poverty rose more sharply in the rural areas in the 1990s, and in

1999 the incidence of rural poverty (36.3 percent) was

significantly higher than urban poverty (22.6 percent).

● ● ●


non-farm activities appears to have been severely affected by low economic

growth, decline in public sector development spending, and lower worker

remittances during the 1990s.

There are a number of attributes, besides location, which characterize the poor in

Pakistan.

Education is the most important factor that distinguishes the poor from the

non-poor, for example the proportions of literate household heads in poor

households are almost half that in non-poor households.

Second, poor households on average had 75 percent more children that

the non-poor households. Most of these children are not receiving any

education, and thus the cycle of poverty is perpetuated.

Third, more than one third of the poor households were headed by aged

persons who were dependent on transfer incomes, such as pensions and

other forms of social support.

Fourth, the poor had few physical assets, and according to one study, if a

rural household possesses physical assets (land/livestock) the probability

of it being poor declines by 55 percent.

Fifth, the poor rely disproportionately on informal sector employment. The

incidence of poverty is the highest among household heads with

occupations such as day laboring in agriculture, construction, trade and

transport sectors. Incidence of poverty is also high among self-employed,

which includes street vendors in urban areas, and sharecroppers in rural

areas.

Gender discrimination is another key attribute that characterizes the poor.

Incidence of poverty among women in Pakistan is higher compared with

men, and is characterized by low endowment of land and productive

assets, unemployment, discrimination in the labor market, and limited

access to economic options and political processes.


30


The poor are also characterized by their vulnerability to environmental

degradation and deterioration of the natural resource base, given that they

tend to be strongly dependent on the exploitation of such resources.

3.2 Causes of Poverty

A number of factors explain the existence of and increase in poverty in the last

decade. Poor governance has been identified as the key underlying cause of

poverty in Pakistan. Poor governance has not only enhanced vulnerability, but is

the prime cause of low business confidence, which in turn translates into lower

investment levels and growth. Governance problems have also resulted in

inefficiencies in provision of social services, which has had serious implications

for human development in the country. The lack of public confidence in state

institutions, including the police and judiciary, have eroded their legitimacy and

directly contributed to worsening conditions of public security and law and order

observed throughout most of the 1990s.

With regard to economic factors, decline in GDP growth is the immediate cause

of the increase in poverty over the last decade. In the 1990s, growth declined in

all sectors and was slower than average in labor intensive sectors. However, the

causes of the slowdown in growth may be divided into two categories, i.e.

structural and others, with the former being more long-term pervasive issues,

which have persisted because of deteriorating governance. Among the structural

causes, the burgeoning debt burden and declining competitiveness of the

Pakistan economy in the increasingly skill-based global economy are the most

important. While the former occurred due to economic mismanagement, the latter

was because of Pakistan's low level of human development.

With regard to the debt burden, increasing debt service requirements resulted in

a growing fiscal squeeze, which in turn led to a declining proportion of GDP being

spent on development and social sectors in the 1990s. Falling public investment,

together with unsuccessful attempts at macroeconomic stabilization also

adversely affected private investment. At the same time, reduction in tariffs,

exhaustion of simple import substitution opportunities, and elimination of export


31


subsidies in the 1990s meant that international competitiveness became an

increasingly important determinant of investment opportunities in Pakistan.

Because of the low level of human development and poor state of physical

infrastructure, areas where Pakistan was competitive were not many. As a result,

investment declined significantly, bringing about a fall in the economic growth

rate. The effects of poor governance, furthermore, served to reinforce the

adverse impact of structural factors.

In a rapidly integrating global economy, countries need to diversify their export

base, and encourage low cost production of more value added high technology

products to stay competitive. This in turn requires the mobilization of a highly

skilled and specialized labor force. If this key resource has not been developed,

as is the case in Pakistan, the economy tends to be mired in a low value

production mode.

The adverse impact of structural factors was reinforced by other problems such

as ethnic and sectarian violence, poor state of law and order, and a high degree

of economic and political uncertainty because of the many changes in

government. Throughout the 1990s, the Government was implementing a series

of medium term structural adjustment programs under the aegis of the

International Monetary Fund (IMF). However, because of frequent changes in

government, adherence to the adjustment program was unsatisfactory, and as a

result, the 1990s can be characterized as a decade of stop-go stabilization

policies, with the attendant negative impact on growth, but without the desired

improvement of macroeconomic fundamentals.

Economic factors can explain primarily short-term fluctuations in poverty indices.

The existence of pervasive poverty, wherein a significant proportion of the

population remains poor over an extended period of time is, however, attributable

more to social than to economic factors. For example, cultivated land is highly

unequally distributed in Pakistan. About 47 percent of the farms are smaller than

2 hectares, accounting for only 12 percent of the total cultivated area. Access to

land, which is the basic factor of production, is crucial to reduce poverty in rural

areas. Pervasive inequality in land ownership intensifies the degree of


32


vulnerability of the poorest sections of rural society, because the effects of an

unequal land distribution are not limited to control over assets. The structure of

rural society, in areas where land ownership is highly unequal, tends to be

strongly hierarchical, with large landowners or tribal chiefs exercising

considerable control over the decisions, personal and otherwise, of people living

in the area of their jurisdiction, as well as over their access to social infrastructure

facilities.


33


CHAPTER NO. 4 MEASUREMENT OF POVERTY

4.1 Poverty Measurement……………………………………………...334.2 Method of Measurement…………………………………………..334.3 Measuring Poverty at Global Level………..................................364.4 New direction in Poverty Measurement........................................364.5 Types of Data…………………………………………………………374.5.1 Administrative Data…..................................................................404.5.2 Population Census……...............................................................404.5.3 Household Survey.......................................................................414.5.4 Qualitative Data…….....................................................................44

4.MEASUREMENT OF POVERTY

4.1 Measurement of Poverty

Discussing the issue of poverty measurement is a key to its eradication or reduction. It is

also crucial for accurate and reliable reporting on the subject to facilitate the formulation

of strategies to combat poverty. It has been found out that the estimates of poverty are

very sensitive to the measure used to calculate poverty lines.


34


The extent and nature of poverty, as defined by its three aspects and its impact on

marginalizing and alienating segments of the urban society, are difficult to measure.

UNDP’s Human Development Index is an attempt to compile and compare all the above

aspects of poverty. As the Human Development Report of 1999 shows, the extent and

nature of poverty vary considerably in countries of Asia and the Pacific, and that of urban

poverty varies considerably between countries, between rural and urban areas, among

urban areas within a particular country, among neighborhoods of a given urban area and

even within neighborhoods.6

Poverty also has a gender dimension. In most countries, the poorest of the poor tend to

be households headed by women. Even within the family unit, the poverties of money,

access and power vary based on gender, with women and female children suffering

more than their male counterparts. Thus to meaningfully measure poverty,

disaggregated data and information are often needed, which in many countries do not

exist.

4.2 Methods of Measuring Poverty

Poverty is a global problem being faced by nations around the world and

happens to have no common definition which is generally accepted. However,

researches have looked at poverty at two perspectives as we mentioned in the

first chapter of this report. These are the relative poverty and the absolute

poverty. Giving an exact and accurate measure of poverty has never been easy,

and comparing poverty data or information from different regions of the world has

even been more difficult. The following methods are used to measure poverty:7

a. Head Count Ration: the individuals who earn income which cannot meet

the daily intake of a certain amount of calories are considered to fall below

the poverty line. For example, in Pakistan this certain amount of calories is

approximately 2350 calories. Accordingly, a person whose earn is less

than $874 per year is considered to have fallen below the poverty line.

According to the head count ratio, the percentage of population living

6 UNDP paper on poverty alleviation in urban areas7 Economics of Pakistan textbook, Nasir & Hyder_____________________________________________________________________ Institute of Business and Technology

35


below the poverty line in 2005 has decrease from 34.46% in 2001 to

23.9% in the period 2004-2005, a decrease of 10.6 percent.

b. Poverty Gap: This is an aggregate measure of the spread of the poor

below the poverty line. It indicates the distance of all the poor individuals

from the poverty line. A lower value indicates that most of the poor are

circling around the poverty line. In Pakistan the value of the poverty gap

has fallen from 7.03 in 2001 to 4.76 in 2005.

c. Severity of Poverty: This indicator also shows the remoteness or

distance of the poor individuals from the poverty line. Accordingly, the

lower value shows that the majority of the poor persons are hovering

around the poverty line. The severity of poverty in the country has

decreased from 2.13 in 2001 to 1.48.

Table 1: The following table shows the above poverty indicators from 2001 to 2005 as published by Nasir and

Hyder.

Head Count Poverty Gap Severity of Poverty

2001 2005 2001 2005 2001 2005

Pakistan 34.46 23.90 7.03 4.76 2.13 1.48

Urban 22.69 14.90 4.55 2.87 1.35 0.84

Rural 39.26 28.10 8.04 5.64 2.44 1.77

Earlier studies on poverty in Pakistan simply estimated the headcount rations i.e.

The proportion of the poor in the population for single years based on the

available household income and expenditure survey (HIES) data. These studies

were limited by the grouping of published data from these surveys and by the

selection of somewhat arbitrary poverty lines. The resulting estimates were very

sensitive to the choice of the poverty line.

By the mid 1970's and 1980's the focus shifted to estimating the extent of poverty

and trends in poverty based on absorption of minimum diet for meeting nutritional


36


requirements. Later work used the basic needs approach to estimate poverty

lines. This approach refers to the position of the individual or a household in

relation to the minimum cost of a set of basic needs and food consistent with the

spending patterns of the poor.

Measuring poverty at the country level

A common method used to measure poverty is based on incomes or

consumption levels. A person is considered poor if his or her consumption or

income level falls below some minimum level necessary to meet basic needs.

This minimum level is usually called the "poverty line". What is necessary to

satisfy basic needs varies across time and societies. Therefore, poverty lines

vary in time and place, and each country uses lines which are appropriate to its

level of development, societal norms and values.8

Information on consumption and income is obtained through sample

surveys, with which households are asked to answer detailed questions on their

spending habits and sources of income. Such surveys are conducted more or

less regularly in most countries. These sample survey data collection methods

are increasingly being complemented by participatory methods, where people

are asked what their basic needs are and what poverty means for them.

Interestingly, new research shows a high degree of concordance between

poverty lines based on objective and subjective assessments of needs.

4.3 Measuring poverty at the global level

When estimating poverty worldwide, the same reference poverty line has to be

used, and expressed in a common unit across countries. Therefore, for the

purpose of global aggregation and comparison, the World Bank uses reference

lines set at $1 and $2 per day (more precisely $1.08 and $2.15 in 1993

Purchasing Power Parity terms). It has been estimated that in 2001, 1.1 billion

people had consumption levels below $1 a day and 2.7 billion lived on less than

$2 a day. These figures are lower than earlier estimates, indicating that some

8 World Bank, Paper on Understanding Poverty_____________________________________________________________________ Institute of Business and Technology

37


progress has taken place, but they still remain too high in terms of human

suffering, and much more remains to be done.

The Global Poverty Monitoring Database, by Chen and Ravallion at the World

Bank contains global and regional poverty estimates for the years 1981, 1984,

1987, 1990, 1993, 1996, 1999 and 2001 as well as data on the share of people

living below the national poverty line by country for the years when household

surveys are available. The methodology used for the Global Poverty Monitoring

Database is explained by Ravallion and Chen in "How did the worlds poorest fare

in the 1990s?" (2000).

4.4 New directions in poverty measurement

While much progress has been made in measuring and analyzing income

poverty, efforts are needed to measure and study the many other dimensions of

poverty. Work on non-income dimensions of poverty -- defining indicators where

needed, gathering data, assessing trends -- is presented in the World

Development Report (WDR) 2000/01: Attacking Poverty . This work includes

assembling comparable and high-quality social indicators for education, health,

access to services and infrastructure. It also includes developing new indicators

to track other dimensions -- for example risk, vulnerability, social exclusion,

access to social capital -- as well as ways to compare a multi-dimensional

conception of poverty, when it may not make sense to aggregate the various

In addition to expanding the range of indicators of poverty, work is needed to

integrate data coming from sample surveys with information obtained through

more participatory techniques, which usually offer rich insights into why programs

work or do not. Participatory approaches illustrate the nature of risk and

vulnerability, how cultural factors and ethnicity interact and affect poverty, how

social exclusion sets limits to people’s participation in development, and how


38


barriers to such participation can be removed. Work on integrating analyses of

poverty based on sample surveys and on participatory techniques is presented in

the WDR. An example of participatory work is given by the Voices of the Poor

studies.

4.5 Types of Data

Many sources of data can be useful for poverty analysis and the evaluation of

policy interventions. Some data, such as central public finance data and national

accounts, exist only at the national level. Often, these data are collected centrally

by the statistical institute or the central bank. Local-level data are often collected

through local offices of the statistical institute or the Ministry of Finance. Such

data -- for example, data by region, province, or district -- often include

availability and use of services, such as education, health, water, and electricity,

and may include economic and price information, such as regional inflation. Few

countries produce national accounts at the sub-national level. 9

Household or individual-level data on welfare components, such as income,

consumption, illness patterns, and household priorities and perceptions, present

the most disaggregated data. These data are typically gathered through

household surveys, and they can be summarized at higher levels (at the local or

national level) to produce aggregate statistics. For example, household-level data

are needed to determine whether the members of a particular household are

income poor. Aggregation across households will provide regional or national

estimates of poverty.

Along with providing national averages, local-level data can be important because local

realities vary, and so do the key dimensions of poverty and the indicators that are useful

to analyze and monitor. Moreover, some decisions—increasingly more as

decentralization advances—are made at the local level and require local information. In

many instances, however, the collection and monitoring of local level data will be set up

differently, since local capacities vary and there is greater potential for community

involvement

9 Coudouel et al. (2002) paper on Poverty Measurement and Analysis_____________________________________________________________________ Institute of Business and Technology

39


DATA AGENCY SOURCE FREQUENCY

National-level data :

National accounts: GDP,

Consumption, Investment,

Exports, Imports, and so on

Central statistical

agency

System of National

Accounts, trade statistics

Monthly or quarterly

where possible--trade

statistics, for example;

at least yearly

Public finance data:

revenues, spending by

category

Ministry of

Finance, central

statistical agency,

sectoral ministries

Budgets and actuals Monthly or quarterly

where possible--trade

statistics for example;

at least yearly

Consumer and producer

prices

Central statistical

agency, central

bank

Price surveys Monthly; CPI basket

updated at least every

five years

Social Indicators Management

information

systems (MIS) of

sectoral ministries

Administrative systems Yearly where possible

Local-level data:

Consumer and producer

prices, climatic data,

national accounts at regional

level

Central statistical

agency, central

bank

Price surveys, systems of

national accounts

Monthly; CPI basket

updated at least every

five years

Availability of services Local

administration,

sectoral ministries

Multi-topic household

surveys; employment

surveys, qualitative studies

Yearly

Use of services Local service

providers

Rapid Monitoring and

Satisfaction Surveys

Yearly

Individual and household-level data:

Household consumption and

income; living conditions,

social indicators

Central statistical

agency, Ministry of

Labor/Employment

Household budget,

expenditure, income

surveys, multi-topic

household surveys,

demographic and health

Every three to five

years


40


surveys

Population statistics, access

to services—no

consumption or income;

literacy

Central statistical

agency

Population census Every five or ten years

Household living standards

—no detailed consumption

or income; illness patterns,

malnutrition, education

profile

Central statistical

agency, Ministry of

Labor/Employment

, others

Rapid Monitoring Surveys,

demographic and health

surveys

Yearly

Household priorities,

perceptions of well-being,

user satisfaction

Central statistical

agency, sectoral

ministries, others

Qualitative studies; Rapid

Monitoring Surveys

Every one to three

years

Table 2: Data Types and Agencies

The role of administrative data and the population census are worth commenting

upon:

4.5.1 Administrative Data

In many countries, administrative data are the most accessible data source.

Usually provided by line ministries and specialized agencies, these data describe

specific activities and programs such as school enrollment, disease prevalence,

malnutrition information, hospital expenses, road network information, and

income and expenditure for decentralized units. This information is important in

assessing levels of public and private inputs, outputs, and outcomes, as well as

their distribution within the country. For example, it is possible to compare how

the distribution of enrollment rates matches spending on primary schools; how

the structure of health spending-- primary versus tertiary care --reflects disease

patterns; or how agricultural productivity of main crops varies with land tenure

patterns.

Administrative data can often provide an important entry into poverty analysis,

especially if it they are used to compare need and demand for services.

However, administrative data do not allow for cross-tabulating or analyzing


41


poverty across different dimensions. For example, it is generally not possible to

look at enrollment rates of children by the income group of their parents. (Multi-

topic household surveys, which are discussed below, differ from administrative

systems in that they allow the analyst to relate indicators with each other.)

4.5.2 Population Census

A population census contains basic information on all citizens of a country. The

census is carried out for all households to obtain basic information on the

population, its demographic structure, and its location. The census is typically

carried out by the national statistics institute, which then provides data to lower

levels of government tailored to local information needs. Since the census covers

the whole population, it is costly, and most countries conduct a census only once

a decade. The census can provide policymakers with important data for planning

in the years directly following its implementation, but its usefulness diminishes

after that.

Since the census is carried out across millions of households, the information

gathered is, by necessity, limited. Information on household income,

consumption, disease patterns, and poverty perceptions are generally not

included. However, the census usually contains descriptive statistics of the

housing stock, access to basic services such as water, electricity, and sanitation;

information on education and employment patterns, and population statistics.

The census has the advantage of being able to provide information at low levels

of aggregation, such as the municipality level. Census data are also an important

tool to check how representative other surveys are. The usefulness of sample

surveys can be increased substantially if they are combined with census

information, for example for providing poverty maps.

4.5.3 Household Surveys

Household surveys are essential for the analysis of welfare distribution and

poverty characteristics. At the same time, aggregate household-level analysis

can provide only limited understanding of the intra-household distribution of


42


resources, especially of income and consumption. Moreover, while the census

covers the whole population in the country, surveys interview only a subset,

generally a small fraction, of all households. This sample of households must be

carefully chosen so that the results of the survey accurately describe living

conditions in the country, and different parts of the country.

Sampling should be based on mapping of actual settlements, including newly-

formed informal urban settlements. Sampling is most often informed by a recent

population census. The sample size -- the number of households interviewed --

will vary with several factors, including:

the indicator that is to be measured (a survey that aims to measure

countrywide averages of income may require a larger sample than a

survey designed to measure the percentage of the population with water

connection, in part because the later is easier to measure);

the level at which the policymaker needs the information (a national

electricity connection rate will require fewer households to be interviewed

than regional or district rates).

Different types of household surveys are presented directly below.

Household Survey Advantage Limitations

Multi-topic surveys Measurement and analysis of different

poverty dimensions, their inter-

relationships, and correlates

Time-intensive (collection and

evaluation)

Demographic and

health surveys

Health-poverty measurement, health

behavior analyses, basic poverty

diagnostics

Measurement of other

dimensions of poverty limited,

diagnostics limited

Employment

surveys

Analysis of employment patterns, wage

income analysis (link to education)

Limited use for poverty

measurement and

diagnostics


43

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Single-topic

surveys

Income-poverty measurement (or one

other dimension)

Limited diagnostics possible

Rapid monitoring

surveys and

service satisfaction

surveys

Quick and cost-effective monitoring of

key welfare indicators

Income-poverty measurement

not possible, limited

diagnostics

Living Standard Measurement Study (LSMS) surveys and other multi-topic surveys

Multi-topic welfare surveys, like the LSMS, are geared towards measuring and

analyzing poverty and are important instruments for poverty diagnostics. LSMS

surveys collect information on household expenditures and income, health,

education, employment, agriculture, the ownership of assets such as housing or

land, access to services, and social programs. Dozens of countries have

implemented multi-topic surveys and many now have several rounds of surveys

that allow rich comparisons across time. Multi-topic surveys can also be used to

measure the impact of public policies and programs on poverty.

Demographic and Health Surveys

These are special household surveys geared to exploring the incidence of

diseases and use of health facilities. They collect anthropometric data—height,

weight, and age of children, that can be used to calculate malnutrition rates--and

many other health and health behavior-related variables that enable such factors

as survival rates, birth histories, and disease incidences to be computed. The

surveys also contain basic data about housing conditions, educational

attainments, and employment patterns. Although they do not include income or

expenditure data, they can be used to calculate household wealth and carry out

important poverty diagnostics.

Employment surveys

Labor ministries use employment surveys to gather information on employment

and wages. These surveys include questions about household income,

demographics, and housing features. They can be good sources for employment


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http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTPOVERTY/0,,contentMDK:20240661~menuPK:497974~pagePK:148956~piPK:216618~theSitePK:336992,00.html#Rapid



http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTPOVERTY/0,,contentMDK:20240661~menuPK:497974~pagePK:148956~piPK:216618~theSitePK:336992,00.html#exp

http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTPOVERTY/0,,contentMDK:20240661~menuPK:497974~pagePK:148956~piPK:216618~theSitePK:336992,00.html#exp


statistics, income-based poverty indicators—if the income module is good—and

input indicators such as access to basic services. Employment surveys tend to

be more important information sources for heavily urbanized countries.

Expenditure and income surveys

Contrary to multi-topic surveys, expenditure and income surveys are narrower in

scope. They are useful instruments to measure different dimensions of poverty—

such as income- or education-poverty—but are limited in their ability to relate

household well-being to underlying causes such as asset distribution or

productive activities.

Rapid Monitoring and Satisfaction Surveys

These surveys are generally large, contain relatively short questionnaires, and

include predetermined data entry packages. They are easy to implement and

have a rapid turnaround time. The Core Welfare Indicator Questionnaire (CWIQ)

—widely applied in Africa—is one example. Unlike other surveys, the CWIQ is

not designed to serve as a tool for measuring whether poverty levels are

increasing or decreasing. It is intended only to measure whether or not public

services and development programs are reaching the poor and benefiting them,

and to monitor selected indicators—those that contain advance warnings of the

future impact of policies and events—and assess household living conditions,

access to basic social and infrastructure services, and the satisfaction of the

population with these services. Satisfaction surveys are best viewed as

complements to multi-topic household surveys and have been used in many

countries to monitor access to and quality of basic services.

Specialized Surveys

Many other, specialized surveys exist that can be used for poverty diagnostics.

These can range from violence surveys--for example, in Lima, Peru--to opinion

surveys--for example, those conducted by the Social Weather Station in the

Philippines. Several countries also have surveys of health centers, schools, or

other public institutions. Firm surveys can be essential to understanding the

impact of crisis on employment and specific groups at risks and were used

extensively in understanding the impact of the East Asian crisis. Food security


45


assessments identify high-risk groups and are often used by relief organizations.

Typically, the websites of national statistical institutes and international

organizations will provide information about the availability of such data.

4.5.4 Qualitative Data

Qualitative research tools range from participatory assessments to ethnographic

and sociological case studies, and institutional to political investigations. Some of

these tools are described below. These tools help in gathering information that

household surveys are not able to capture, or can capture only partially,

including:

Subjective dimensions of poverty and variations in perceptions along

gender, urban/rural, or ethnicity lines;

Barriers that poor people themselves believe are stopping them from

advancing;

Intra-household inequalities; poor people’s priorities for action;

Cultural factors determining poverty, such as gender roles and some

traditional beliefs;

Political factors determining poverty, such as trust, corruption, and conflict;

Certain social factors determining poverty, such as the role of community

networks.

The tools may also help in the design appropriate household survey

questionnaires-- for example, in the section on reasons for use or non-use of

health and education facilities. Finally, the tools may help for assessing the

validity of survey results at the local level and to evaluate how much general

policy design should consider the heterogeneity of local conditions.

Data Collection Methods for Qualitative and Participatory Assessments

Data Collection in: Methods

Beneficiary

Assessments

Participant observation and more systematic data collection methods like

structured interviews over a limited time span.


46


Ethnographic

Investigations

Anthropological research techniques, especially direct observation, to

analyze the influence of ethnicity, gender, and village stratification on the

household and group well-being and behavior.

Longitudinal Village

Studies

Wide variety of methods ranging from direct observation and recording

(tabulation), periodic semi-structured interviews with key informants (for

example, health center staff) and village population, to survey interviews

in several different observation periods.

Participatory

Assessments

Ranking, mapping, diagramming, and scoring methods are prominent

besides open interviews and participant observation. The time horizon of

participatory assessments is often short. They build on local populations

describing and analyzing their own reality surrounding poverty and well-

being.

Participatory assessments can help policy makers determine the type of

indicators important for the poor—is it housing, employment, or income?. They

can also capture information that other sources cannot capture, for example, the

incidence and effect of domestic violence.

Beneficiary and participatory assessments, which can take different forms, also

involve the population more than household surveys. In town-hall or village

meetings, citizen groups or their representatives can discuss poverty problems

and policies, rank what they consider the causes of poverty, and map out new

infrastructures in actual planning exercises. Individual interviews can investigate

the problems of women or children in households. Participatory methods do not

necessarily guarantee, though, that all groups in the community are given an

equal voice. There is a danger that women may be under-represented. This

danger may be even more present for the very poor. Whenever possible, it is

important to link participatory and qualitative investigations with household

surveys and population censuses in a formal way. This can be done by:

Collecting variables in participatory studies that allow for easy comparison

with regional or national averages obtained from quantitative sources;

Designing qualitative case studies so that they are done on sub-samples

of larger surveys; and


47


Following formal sampling and data recording procedures that allow for

systematic analysis and reliability of qualitative results.

CHAPTER NO. 5 Study result and the household income expenditure report 5.1 Study Results and the HIES Report……………………….485.2 Household Income and Expenditure Survey…………...52_____________________________________________________________________ Institute of Business and Technology

48


5.3 Survey Methodology………………………………………...545.4 Data Collection, Concept, Definition and Classification…555.5 Data Processing, Analysis and Dissemination. …………585.6 The result of our survey……………………………………. 59

5. STUDY RESULT AND THE HIES REPORT

5.1 Study Results and the HIES Report

The following data published by the World Bank points out the status quo of the

economic situation in Pakistan and poverty related issues. One of the major

reasons almost always cited for poverty is the ever-increasing population of the

subject countries; Pakistan is no exception to that. It happened that many

authors and researchers include the population phenomena in their list of poverty

causes in Pakistan. However, it is believed by others that this is not the case,

and there are always far more realistic causes of poverty and the poverty life


49


cycle. These people cite the case of China as an example; China which has a

population much more than that of Pakistan has managed to fight and reduce the

poverty rate significantly.

POVERTY and SOCIAL Pakistan South Asia Low-income

2006

Population, mid-year (millions) 159.0 1,470 2,353

GNI per capita (Atlas method, US$) 800 684 580

GNI (Atlas method, US$ billions)

Average annual growth, 2000-06

126.7 1,005 1,364

Population (%) 2.4 1.7 1.9

Labor force (%)

Most recent estimate (latest year

available, 2000-06)

3.8 2.1 2.3

Poverty (% of population below national

poverty line).. .. ..

Urban population (% of total population) 35 29 31

Life expectancy at birth (years) 65 63 59

Infant mortality (per 1,000 live births) 79 66 80

Child malnutrition (% of children under 5) 38 45 39

Access to an improved water source (% of

population)91 84 75

Literacy (% of population age 15+) 47 60 62

Gross primary enrollment (% of school-age

population)87 110 104

Male 99 116 110


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Female75 105 99

Key Economic Rations and Long-term Trends

The economic condition of the country is what defines the rate of poverty, and

determines to a large degree the living conditions of the people. The GDP of

Pakistan has increased significantly since the 1980s (232%). This data is also a

publication of the World Bank Group. This table was prepared by country unit

staff; figures may differ from other World Bank published data. The data is as it

has been adapted from their website.

1986 1996 2005 2006

GDP (US$ billions) 38.1 76.2 109.5 126.8

Gross capital formation/GDP 18.5 18.9 19.1 21.7

Exports of goods and services/GDP 10.3 14.0 15.7 15.3

Gross domestic savings/GDP 6.7 12.0 15.2 13.7

Gross national savings/GDP 16.5 15.2 25.6 23.6

Current account balance/GDP -2.0 -6.0 -1.0 -4.3

Interest payments/GDP 1.5 1.6 0.7 0.7

Total debt/GDP 39.3 39.1 30.8 28.4

Total debt service/exports 25.0 28.3 10.9 8.8

Present value of debt/GDP .. .. 25.8 ..


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Present value of debt/exports.. .. 125.9 ..

1986-96

(average annual growth)

1996-06 2005 2006 2006-10

GDP

5.04.2 7.7 6.9 6.6

GDP per capita

2.31.8 5.1 4.7 4.5

Exports of goods and services 8.2 9.6 9.9 4.1

The Structure of the Economy

(% of GDP)1986 1996 2005 2006

Agriculture 27.6 24.7 21.5 19.4

Industry 23.4 23.5 27.1 27.2

Manufacturing 16.3 15.2 18.6 19.5

Services 49.0 52.2 51.4 53.4

Household final consumption expenditure 77.3 74.4 76.9 75.5

General govt final consumption

expenditure10.7 10.5 7.8 10.9

Imports of goods and services 16.9 17.8 19.6 23.3

(average annual growth)1986-96 1996-06 2005 2006

Agriculture 4.3 2.4 6.5 1.6

Industry 5.8 5.5 12.1 5.0


52


Manufacturing 5.2 7.1 15.5 10.0

Services 5.1 4.8 8.5 9.6

Household final consumption expenditure 4.7 3.7 12.1 3.3

General govt final consumption

expenditure3.0 4.5 1.7 48.3

Gross capital formation 4.3 2.2 16.7 12.1

Imports of goods and services 4.3 3.1 40.5 18.7

5.2 Household Income and Expenditure Survey


53


The Information in this section was acquired and is available from

the Federal Bureau of Statistics, Statistics Division. Data have been

collected by household survey since 1963.

Purpose and coverage

The following purposes are considered to be very important or of some

importance:

To estimate household expenditure for national accounts

To study the general structure of household incomes/expenditures

To study income/expenditure patterns of disadvantaged groups, including

pensioner households, single parent households, etc

To study income/expenditure disparities among socio-economic groups

To study consumer behavior among socio-economic groups

For general poverty and/or income distribution studies

To study effects on income and expenditure of policy changes, especially

tax changes

For market research purposes

Geographic coverage: National with the following geographic areas excluded:

military restricted areas and protected areas of NWFP are excluded .

Population coverage:

The following types of household are included in the data collection:

One person private households

Private households with more than one person

The following types of household are excluded in the data collection:

Those in collective housing (such as long term hospitals, prisons,

monasteries, military quarters)


54


Non-resident households of nationals (households of nationals located

abroad)

Diplomatic households in the country

Households of other foreigners in the country

Armed forces residing in private housing within military base

Armed forces residing in private housing outside military base

Units:

Dwelling units are used in the sample selection and are characterized by:

Single structure - detached housing unit

Data are recorded for the household unit which is characterized by:

Two or more people living together:

sharing meals

One or more persons living together and sharing meals

Data are recorded for the family unit which is characterized by:

Two or more people:

living in the same household

sharing a single dwelling unit or compound

sharing meals

Data are recorded for the income unit which is characterized by:

Two or more people:

living in the same household

pooling their income to some extent

Unit members: Usual residents temporarily living away from the dwelling are

included, if away continuously for less than 9 months. Visitors (not usual

residents) temporarily living in the dwelling are not included as unit members.

Domestic staff living in same dwelling/compound are included in the unit. Renters

living in same dwelling/compound are not included in the unit. Boarders living in

same dwelling/compound are not included in the unit.


55


Head of unit:

The concept of head of household/other unit is used in this survey and is

characterized by:

Acknowledged as such by other household/unit members

Reference periods

The time period to which income and/or expenditure statistics refer when

released/published is from 01/00 to 12/00. This survey is conducted annually.

The statistics are published annually.

5.3 Survey Methodology

Sample design

The Primary, Secondary and Ultimate Sampling Units are enumeration

area/district, none and household respectively.

Stratification:

Areas/districts were stratified using the following criteria:

Rural/urban

Households/Consumption Unit, Income Unit, Family Unit were stratified using the

following criteria:

Income class

The sampling frames for the Primary Sampling Unit (PSU) and Ultimate

Sampling Unit (USU) were the list of Census enumeration areas and none

respectively.1 Primary Sampling Units (PSU) were selected using probability

proportional to size and Ultimate Sampling Units (USU) were selected using

systematic random sampling.. Errors/biases were minimized by using an updated

sampling frame.


56


Enumeration procedure: Enumeration uses a single round survey design in

which each reporting unit is enumerated only once. The sample is not divided

into representative sub-samples. No action is taken to select a smaller set of

reporting units for more detailed questioning.

5.4 Data collection, concepts, definitions and classifications

Income data

Income data are collected. Receipts do not have to be regular and recurring to be

considered as income. Income excludes receipts resulting from the sale or

reduction of assets and/or from incurring liabilities. Income includes receipts that

are not currently available to the unit.

The following receipts are collected separately:3

Wages and salaries

Cash bonuses and gratuities

Employee income in-kind provided free or subsidized: housing

Employee income in-kind provided free or subsidized: meals

Services from owner-occupied dwellings

Interest received

Dividends

Other pensions

Free government dwelling

Subsidized government dwelling

Other social insurance benefits

Other social assistance benefits


57


Regular support received from non-profit institutions serving households:

goods and services


free dwelling


subsidized dwelling

regular inter-household transfers received from: free dwelling

Regular inter-household transfers received from: subsidized dwelling

The following receipts are collected but not separately:3

Commissions and tips

Remuneration for time not worked, e.g. leave pay

Goods produced for own consumption

Rentals (payment received for produced assets e.g. house)

Rousing allowances

Food subsidies

Medical reimbursements


cash, e.g. scholarships

Regular inter-household transfers received from: family, e.g. alimony,

child/parental support

Regular inter-household transfers received from: regular cash gifts

Regular inter-household transfers received from: regular in-kind gifts

Regular inter-household transfers received from: regular free services

Social transfers in kind: medical services


58


The following receipts are classified as income from paid employment:

Wages and salaries


The following receipts are collected using the last month as the reference period:

Wages and Salaries


Income data were collected separately for each person receiving income.

Components of income for an individual were collected directly from the

individual. Negative values (business losses) were included when computing

self-employment income.

Expenditure data

Data collection method:

Diaries are not used to collect expenditure data.

Interviews are used to collect expenditure data with the respondent completing

the interview by recall only.

Data for the following expenditure items are collected by referring:2

To expenditures in last one month:

other household non-durable goods

To expenditures in last 12 months:

clothing, footwear

housing

other durable goods

households services

personal services

Other Data Collection Issues

The following other topics are covered:

Demographic characteristics


59


Education attainment of members

Employment status of members

Occupation of members

Ownership of selected durable goods

Savings

Indebtedness

Households are not requested to indicate whether durable goods are new or

second-hand when their acquisition is recorded.

Non-response: There is no substitution for non-response, whether by non-

contact or by refusal.

Non-response is reduced using more than one repeat visits.

5.5 Data processing, analysis and dissemination

Answers are pre-coded on data collection forms to the extent possible.

The responses are edited field supervisors.

Extreme values are deleted. Consumption of own production is included in the

estimates, but in-kind receipts are not. Consumption of own production is valued

using: the imputed by field staff using market prices.

Treatment of owner-occupied housing: Values of owner-occupied housing are

included in the total income/expenditure estimates and are valued using the

current market value. ( )

Treatment of selected groups/values in analysis: Some households/units are

excluded from analysis because of incomplete response. Missing values are

imputed only on some occasions possible correct the values otherwise treat as

missing values. Supplementary sources are not used to adjust estimates for

under- or over-reporting. none are excluded from data analysis.


60


Weighting:

Weighting factors are used to adjust for:

Sampling

Sampling errors: Sampling errors are computed for for Internet analysis but

these sampling errors are not available.

Tabulation and Analysis: Statistics are presented showing averages per month

and statistics are analyzed and tabulated for households only.

The following classifications are used for tabulation and analysis of income

statistics:

Age of reference person or head of household

Sex of reference person or head of household

Occupation of reference person or head of household

Absolute income groups

Principal source of household income

Household size

5.6 The Results of Our Survey

This study - which focused on poverty and its status in Pakistan as well as the

possibility of its eradication or at least its reduction – depended on two activities

as its source for information. The previous sections covered what other surveys

and studies have said about the subject; the following section is going to discuss

our small survey – its outcome and indications.

Although the objective of the study was to cover all Pakistan, the survey was

conducted only in Karachi due to obvious reasons and obstacles most important

of which is the fact that I am one student and do not have the manpower to

execute such a large-scale research and study . Another reason is the limitation

of our mobility and the fact that we cannot travel to other areas of Pakistan which


61


should have been visited if a comprehensive information was to be gathered; a

result of our being students with other binding commitments.

The scope of the study have been restricted in different perspectives. The first is

the geographical one and the second is the sample size restriction. Around

above hundred individuals responded to the questionnaire, most of who where

were considered victims of poverty, especially in financial terms, who live in the

most poverty-stricken areas of the city. This was another limitation in the

information presented in the study.

The Questionnaire/Survey Outcome

According to our survey, 70 percent of respondents said that their family size was

between four to five members, while 15 percent said they belonged to families of

seven to ten members. On the other extreme was those who said they belonged

to families of two members; these formed around 10%.????

It was also apparent from the survey that most of the families were supported by

male members. Only 13 percent of the respondents said their families were

supported by female members (mothers or elder sisters mostly).

The gender ratio part of the questionnaire has been included because of the

impact of gender issues on the welfare of societies and their poverty rates. The

ratio of male to female members according to the respondents was

approximately 2 to 1. While almost the same ratio should have been maintained

in the gender ratio in education, our results show otherwise; the results were

almost the reverse claiming that the female members who are have been

educated or are studying at the moment outnumber the number of male

members in the same respect.

In terms of the dependency ratio, the data shows that roughly 5 people depended

for leaving on every working individual; that is to say that the ratio is 5:1.


62


79 percent of the respondents said that the working members of their family were

self-employed, while the rest said they worked for the government in the civil

service and armed forces sectors. 60 percent of these people worked for the

government, while 31 percent worked in the business sector, and 9 percent were

in the agriculture industry.

The study showed that there is a strong relationship between education and the

poverty condition of households; households with educated members seem to be

in a better condition and less susceptible to poverty. According to our statistics,

50 percent of the total members of the families of the respondents are

unschooled.

The average income of 60 percent of the respondents' families were between

10,000 rupees to 30,000 rupees; whereas their average expenditure was about

6000 to 10000 rupees. 70 percent of the members lived in rented houses while

the remaining 30 percent lived in their own houses.

The Interview Results

Members of the academia who have conducted earlier researches and who

happen to be very knowledgeable about the poverty status in Pakistan have

been requested to give one-on-one interviews to share their views and ideas

towards poverty eradication in the country. The following is the sum of what they

had to say as a response to the questions listed in the appendix.

The micro-finance approach to fighting poverty has worked in different places

around the world, and it is agreed that in those scenarios and cases it has been a

success, however that same success cannot be duplicated in every other

environment. There are certain other factors that that have a great influence on

poverty and its rate in a community. A mostly cited example case is that of

Bangladesh. The interviewees agree that micro finance is a temporary solution to

the poverty crisis; and to ensure its success as a viable long term solution certain

measures which involve the social behavior and the monetary should be taken.


63


Consideration should be given to who is to be given the loan in a micro financing

scheme. It is believed by some of the interviewees that women have a high

probability of paying back the loans which makes the micro financing scheme

more viable and effective since the loan money will be circulated among many

individuals and groups, thereby increasing the number of beneficiaries from the

program.

Micro financing schemes to combat poverty in Pakistan have been launched.

Among the well-known of these projects are the Yellow Cab scheme and the

Presidential scheme for Rickshaws.

The solutions to the poverty crisis as cited vary a lot. The common solution as

suggested by the interviewees is working on the educational sector, improving

educational development, and skill development.

The government has done a lot about the education to fight illiteracy and

ignorance, indirectly combating poverty. It has launched such schemes in Sindhi

and Punjab in the form of scholarships and cash payments. In Sindhi the

government has increased the money it used to give the students from 200 to

300 rupees.

As to the causes of poverty, they have mentioned un-productivity on the side of

the people and the fact that they do not consider saving for tomorrow, the ever-

increasing inflation, and the lack of proper governance of resources.

Many NGOs are working in Pakistan at the moment under the theme of Poverty

Reduction. These NGOs including Orel, AQWA and Rahim work in developing

the individual capacity, creating job opportunities, dealing with social problems

that exaggerate poverty, and building independent lives for the members of the

community.

Foreign Direct Investment (FDI) was a controversial issue among the

interviewees. Some believe that it has benefited the economy of the country and

hence helped reduce poverty to some degree. In addition to bringing investment

into the country, the concerned companies have brought a long corporate culture

and liberated the minds of the people.


64


On the other hand, others believe that foreign direct investments have no impact

whatsoever on poverty eradication or reduction since the profits mostly go to the

pockets of the already-rich portion of the community.

Privatization is agreed that if applied to certain institutions, it might affect the

poverty rate and reduce it; however it must not be applied to the public service

sector and should be in the hands of the government. Examples of these

services include the utilities companies such as the gas, water and electricity

bills.

They [the interviewees] agree that the development and deployment of long-term

plans and strategies and their implementation in a pilot approach on an area by

area basis is the key to poverty reduction and eventually its eradication.


65


CHAPTER NO. 6 Poverty: Prevention, Reduction or Eradication

6.1 Prevention, Reduction or Eradication……………...... 65 6.2 Poverty Combat Paradigms…………………………… 68 6.2 The Task force of Poverty Eradication………………… 70


66


6. POVERTY: PREVENTION, REDUCTION OR ERADICATION

6.1 Poverty: Prevention, Reduction or Eradication

In earlier chapters we have discussed poverty and the creation of poverty cycles.

We have also seen the determinants and factors that cause poverty and its

propagation. Considering all those given factors, can poverty be eradicated? Or

we can only reduce its rate? It is said that prevention is better than cure; a

relevant question under this theme would be: can we prevent poverty in the first

place?

Knowing the factors that help poverty to spread and its cycles to create is one

important step forward to finding solutions to the poverty crisis and finding

answers to the questions above. Many countries and states have devised

strategies to fight poverty; they have there own merits as well as their issues and

opponents. Overcoming poverty means shifting the location of the poor in the

local power structures from being victims to active subjects in achieving equitable

access over markets and over institutions.10

About two-thirds of Pakistan’s population and almost 80 percent of the country’s

poor live in rural areas. According to the 1998 census, 89.3 million people lived in

rural areas of Pakistan in that year. Household incomes are lower and poverty

rates are higher in rural areas than in urban areas. Average per capita

expenditures of rural households in 2004-2005 were 31 percent lower than those

of urban households (Rs 1259/month and Rs 1818/month, respectively). The

10 Dr Akmal Hussein, paper on Poverty in Pakistan_____________________________________________________________________ Institute of Business and Technology

67


poverty rate in rural areas is estimated at 34.0 percent, about 15 percentage

points higher than the 19.1 rate in urban areas (World Bank 2006b).

Rural, as well as total population growth rates are declining, which bodes well for

future

per capita income growth. Average fertility rates (the average number of births

per woman over her lifespan) have declined sharply since the mid-1980s from

about 6.8 children per woman to 4.1 in 2001, although this is still high compared

to that of Bangladesh (3.3) and India (3.2). Rural population growth rates have

also fallen from 3.5 to 2.6 percent. Nonetheless, the rural population is likely to

continue to grow, reaching 122 million in 2015 (64 percent of the total population)

at historic rates of migration of 1.2 percent per year. The urban population would

reach 70 million in this scenario, and 82 million (43 percent of the population) if

net migration rates doubled to 2.4 percent per year (See the Annex to Chapter

one). During the 1970s and 1980s, agricultural growth was accompanied by

substantial reductions in rural poverty, but rural poverty rates in Pakistan did not

decline in the 1990s despite substantial growth in agricultural GDP. Even though

real agricultural GDP rose by 4.6 percent per annum, the percentage of the rural

population living below the poverty line remained essentially unchanged between

1990-91 (36.9 percent) and 1998-99 (33.8 percent).

Several factors explain the non-correlation between relatively rapid agricultural

growth and rural poverty reduction, including a possible overestimate of

agricultural GDP growth and an increase in real consumer prices of major staples

since the mid-1990s. In addition, because of the skewed structure of ownership

and access to factors of production in rural Pakistan, 46 percent of the rural poor

in non-farm households do not share directly in incomes derived from agricultural

crop production. Moreover, even accounting for growth linkage, effects from

increases in traditional crop agriculture are relatively small in comparison with the

sector’s large size.

Positive developments in agricultural output, rural poverty reduction and social

welfare


68


indicators in 2004-05 represent a sharp break with 1990s trends. These

improvements have been achieved through a combination of increased overall

development expenditures and improved service delivery at the local level (in

some localities at least), supported by a sound macro-economic environment

including a liberalized trade and exchange-rate policy regime with relatively low

inflation. The latter in turn spurred high GDP growth and increased demand for

construction and other labor-intensive services. Factors that are likely to be more

transitory also played a role, including increased increases in workers’

remittances and bumper crops related to good weather

The challenge now will be to extend the success of recent years to the medium

term so as to further reduce still-high rates of rural poverty in Pakistan. The

strategies adopted to achieve these goals will need to take into account gradual,

but increasingly important long-term changes 2 “Rural” here is defined according

to administrative definitions at the time of the 1998 census. Since the 2002

devolution, there has been no formal administrative distinction between urban

and rural areas. Official government estimates show poverty at 35.9 percent in

1998-99 (Pakistan Economic Survey, 2005-06). Poverty estimates vary,

however, because of changes in definitions of poverty lines over time

and methodological issues related to price de-flators. Though levels of

remittances and crop yields may be maintained, growth rates are likely to fall.

In Pakistan’s economy, particularly rural-urban migration, a declining share of

agriculture in total economic output and increasingly severe environmental

constraints (particularly related to growing water demand in urban areas and

environmental degradation due to drainage problems).

Most importantly, a rural poverty-reduction strategy should focus not on rural

sectors, but

on rural people. Many of today’s rural poor may migrate to small towns and large

cities or be employed outside of rural areas for all or part of the year. Because of

this, reducing rural poverty rates will not be merely a function of agricultural and

rural non-farm growth, but also of development in urban areas (including small

towns) and overall economic growth. Investment in rural and small-town


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infrastructure can facilitate these economic linkages. Likewise, investments in

human capital (education and health) can increase the productivity and welfare of

the rural poor irrespective of whether they remain in rural areas or not.

6.2 Poverty Combat Paradigms

Those who are trying to find solutions to poverty have their own paradigms to

analyze and take action against poverty. Dr Akmal and proponents of his

ideology state that the current paradigm for poverty analysis and eradication is

not effective. Organizations and other entities combating poverty mostly follow

the approaches of providing micro-credit to the poor or increasing resources. He

argues that the poor in Pakistan cannot simply be seen (as much of the literature

does) as free individuals suffering from merely adverse ‘resource endowments’,

and making choices in more or less ‘free markets’. It is such a paradigm, which

induces the government to think that all it needs to do to reduce poverty is to

allocate more resources to the poor or to the local governments who are

supposed to ‘represent’ them.

By contrast one can propose an alternative paradigm within which one can

understand poverty occurring when the individual household in a fragmented

community is locked into a nexus of power that systematically perpetuates

poverty. Within such a paradigm it is possible to understand a fact that eludes the

conventional paradigm: The poor face markets, state institutions and local

structures of power that discriminate against the poor and deprive them of a large

proportion of their actual and potential incomes.

This is documented for the first time on the basis of new survey data in the just

published National Human Development Report. The data set is new simply

because the underlying questions have not been asked before. Some of the

questions one has raised are: How do distorted markets for inputs and outputs of

goods and services result in the loss of the actual or potential income of the

poor? If this is indeed the case then what is the magnitude of the income loss? _____________________________________________________________________ Institute of Business and Technology

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How do local structures of power with respect to landlords, local administrative

officials, and institutions for the provision of health, credit and dispute resolution

deprive the poor of their income, assets and the fruits of their labor?

Most studies on poverty in Pakistan have examined the problem simply in terms

of measuring the number of people below certain poverty lines. However if

poverty is to be overcome what is required is to understand the processes of

poverty creation and to identify the points of intervention in the poverty process

through which the poor can be enabled to overcome poverty on a sustainable

basis. That is what one has attempted to do in the Report.

The new survey evidence shows that the poor lose as much as one-third of their

income due to unequal access over input and output markets and extortions by

the local administration. For example, as much as 51 per cent of the extremely

poor tenants, borrow money from the landlord. The leverage of power available

to the landlord on the basis of tenants’ dependence for both operation of the land

and loans from the landlord, enables the latter to appropriate the only resource

which the poor have, namely their own labor.

The evidence shows for example that of those tenants who borrow from the

landlord as many as 57.4 per cent work on the landlord’s owner cultivated portion

of the land without any wages at all, and 14 per cent work for a daily wage of only

Rs 28 which is substantially below the market wage rate for unskilled labor.

Similarly the extremely poor sections of the rural population when they are locked

into a dispute related with land, water or theft, are forced to spend as much as Rs

18,333 in trying to resolve the dispute through local structures of power and yet

only 38.5 per cent of the disputes get resolved. Since the expenditure on dispute

resolution by the extremely poor is more than their annual income, involvement in

disputes means borrowing money and getting into a debt trap.

The evidence shows that health is a major trigger that pushes people into poverty

and the poor into deeper poverty. As many as 65 per cent of the poor were ill at

the time of the interview and lost as much as three months of the year to illness.

Given the inadequacy of the government’s health facilities as many as 85 per

cent of the poor go to private allopathic medical practitioners for treatment.


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The expenditures on such treatment are so high that poor households are

obliged to borrow mostly from informal sources to finance the medical expenses

of their families. Consequently they gradually lose whatever few assets they have

(such as farm animals) and being unable to earn a livelihood for long periods due

to illness, they are then forced to borrow money even for food expenses. Access

over good quality health services is a question not just of money but also of

power and influence to get hold of a proper doctor or a hospital bed.

Thus the analysis and evidence within this new poverty paradigm suggest that

the key to overcoming poverty is to empower the poor to get better access over

markets, governance, and the institutions that provide public services such as

health care, education and justice. Empowerment in this specific sense means

establishing autonomous community based organizations of the poor at the local

level. These organizations would be quite distinct from the ‘village organizations’

set up by large cross-district NGOs.

6.3 The Task Force on Poverty Eradication

In the 1990's a task force on poverty eradication has been established with the

purpose of formulating a strategy to combat poverty and eradicate it. To be more

specific, on 25th March 1997, the Federal Finance Minister, Mr. Sartaj Aziz

constituted the Task Force on Poverty Eradication (D. O. No. 25-FM/97, see

Annexure 3). The Task Force completed its work and submitted the draft report

on 30th May 1997. Within days of its submission the government adopted some

of the major proposals of the Report and the

Federal Finance Minister announced them in his budget speech on June 13,

1997. (See relevant extracts in Annexure 2). Subsequently, the government of

Punjab initiated the process of establishing regional support organizations in the

Punjab province as proposed in the Report. This is part of a major initiative by

the Chief Minister, to alleviate poverty in the Punjab. As various departments and

personnel in the federal and provincial governments begin to focus their energies

on the task of facilitating the process of overcoming poverty in Pakistan, it is _____________________________________________________________________ Institute of Business and Technology

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important to achieve clarity on the methodology and institutional mechanism of

this process.

The central goal of the institutional strategy articulated in this report is to enable

over 4 million households (approximately 29 million people) who are currently

living below the poverty line, primarily in the rural areas, to overcome their

poverty. The strategy has five broad programs:

I. A program for overcoming poverty over the next five to ten years through

Participatory Development at the village and mohalla levels.

II. A program for micro-credit to the poor in both rural and urban areas

through which the poor would be able to develop an asset base which

could increase their regular income earning capability.

III. A mass training program in basic skills combined with an employment

provision program through the proposed National Reconstruction Corps.

This would enable the poor to make use of the employment opportunities

which are expected to be available over the next decade. It should help

generate the following types of employment:

a) Employment in village based development projects.

b) Self-employment in the urban informal sector.

c) Employment as technicians in the formal large scale manufacturing

i) sector and the large scale infrastructure construction projects expected

to

ii) be initiated over the next five years.

iii) Jobs in the rural off-farm sector.

iv) Employment in the computer software service industry.

IV. A program for eliminating the practice of employing child labor in hazardous

industries.

IV. A food security safety net for ensuring availability of food for the indigent

and the handicapped in urban areas, and free lunch for school children in

poor rural schools.

6.4 The Government's Poverty Reduction Strategy_____________________________________________________________________ Institute of Business and Technology

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The Government's poverty reduction strategy affirms that Pakistan is faced with

the twin challenges of reviving growth and reducing poverty. The Strategy has

identified five major areas of intervention for poverty reduction in the country.

These are

Revival of economic growth

Income generation

Creation of employment opportunities

Human development

Strengthening of social safety net programs to reduce vulnerability

Improvement in governance

The Strategy also focuses on reforming formal institutions of governance while

working towards attainment of specific human development goals in the areas of

education, health, population welfare, water supply and sanitation. It incorporates

the key features of the education and health reform programs launched in 2001,

while addressing a broader agenda of structural reform.

An increase in GDP growth rates will, however, only lead to appreciable

reduction in poverty levels if growth is broad based. To generate employment

opportunities on a scale needed for long-term poverty alleviation, it is necessary

to create an environment conducive for private economic activity, and encourage

domestic and foreign investment. That requires significant improvements in

management of public resources, establishment and enforcement of the rule of

law, and a move to a less intrusive system of economic regulation. 11

For the longer term, it is imperative to not only bring about a significant decrease

in the incidence of poverty, but also to reduce vulnerability to economic

fluctuations, and alleviate the feeling of powerlessness that is the most important

intangible that shapes the lives of the poor. Poverty alleviation thus has to be

effected not only through macroeconomic policies, but also by bringing about

significant improvements in the structure and functioning of systems of

governance

11 Asian Development Bank paper presented at the Institute of Public Administration in Lahore on Poverty Alleviation in Pakistan_____________________________________________________________________ Institute of Business and Technology

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CHAPTER 07. CONCLUSION AND RECOMMENDATIONS

7.1 Conclusion…………………………………......................................75

7.2 Recommendations……………………………………………………75

7. CONCLUSION AND RECOMMENDATIONS

7.1 Conclusion

Poverty rates in Pakistan have been decreasing lately but not to a satisfactory

degree. The measurement of poverty and the techniques used in that process

have a great impact on the formulation of viable strategies to counter poverty and


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its aftermath. It is imperative to consider the social factors that accelerate poverty

and create the poverty cycle.

The factors affecting the poverty rate in the country are mostly ones caused

themselves by poverty? The most obvious of these factors is education and the

lack of it. If someone is poor, access to education (schools, educational material,

etc) is limited, thereby discouraging education since the family has more pressing

issues do deal with such as working for the daily living. This creates a cycle that

is very hard to break out of. Good governance of resources is another commonly

cited factor that impedes the poverty reduction efforts.

The micro finance approach to fighting poverty has become somewhat

controversial as a viable means of poverty combating. To make it work in

Pakistan, this method that has become successful in some regions of the world,

we should not merely copy it, but should shift ourselves and the attitude of the

people in a way that it can operate effectively and produce tangible results.

Privatization has been seen as another effort to fight poverty if the proper

measures are taken to ensure that the advantages and profits reach those areas

and portions of the community that has the most need for the resources.

7.2 Recommendation

After conducting this research and perusing all the means we could put our

hands on to find as much possible information on the subject of poverty

eradication in Pakistan, we would like to present the following recommendation:

1. Reforms in the educational sector and syllabi in educational institutions

should be made to teach the students not only about their subject matters

but to be productive. The system should concentrate on skill development

and vocational and technical training.

2. Amendments should be made to the governance policy of the resources to

make it reach those who need it most.

3. Proper family planning and population control should be exercised since

poverty is also a matter of fewer resources and more consumers.

4. Implementing micro finance in a more controlled setting by the


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government, non profit organizations and the business sector; and giving

more attention to the really poverty stricken areas of the country.

5. Passing new resolutions and amendments to the national constitution that

disallow land lordship since it is the source the unequal distribution of

wealth in the country. If the individuals working for the landlords are given

their share of the land as they deserve, their productivity might be

increased, and they might generate an income more than the hand to

mouth one they get at the moment under the land lordship system.

6. Allow privatization but in a restricted way, preventing the application of

privatization to public services such as electricity and gas.

7. Allow foreign direct investment ensuring that the investment and their

profits are distributed rationally across the country, thereby giving the

poverty stricken areas the opportunity to take their share of the products of

these investments.

8. Formulate long term strategies for poverty reduction or eradication and

performing periodic evaluation of progress for effectiveness.

7.3 References & Bibliography

Altaf Zafar (2004), Poverty (practical solution to Pakistan’s economic

problems), Ushba Publishing International, Pakistan

Malik, S. (1992) A Study of Rural Poverty in Pakistan w.s.r. to Agricultural

Price Policy. Ph.D. Dissertation submitted to the University of Sussex,

U.K.

Mr Mushraq Ali Shah (2002), Poverty Alleviation in Pakistan

Naseem, S. M. (1973) Mass Poverty in Pakistan: Some Preliminary

Findings. The

Pakistan Development Review 12:4 317–360.

Regional High-Level Meeting on Asia and the Pacific (2000), Report on

Poverty Reduction in South Asia

SDC (2000), Social Development in Pakistan – the Poor


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World Bank (2005), World Development Indicators

Zaidi & Iftikhar (2003) Poverty Environment Nexus, series on Poverty

Reduction and Human Capital – Best Investment for Future


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QUESTIONNAIRE

1. Respondent Name (Optional): ___________________________________

2. Role in family:

Father

Mother

Elder brother

Elder sister

Other ___________________________

3. In which area do you live?

Town/Area City Province

4. How many members does your immediate family consist of? (family size)

2 members

4 – 5 members

5 – 7 members

7 – 10 members

More than 10 members

5. Who supports your family (in terms of living expenses, etc)? [Please tick all that apply]

Father

Mother

Elder brother/sister

Relatives

Other _________________

6. How many of your family's members are female and how many are male?


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Male Female

7. How many members of your family work? _____________________

8. Please specify whether the members supporting the family are:

Self-employed OR

Employed by another entity (i.e. Company or individual)

9. What area of profession do they belong to (if any)?***

Business

Agriculture

Government service

Civil service

Other _______________

10. What is the educational level of your family members? [Please indicate the number in each category below.]

Never gone to schoolElementary schoolIntermediateCollege/ UndergraduateGraduate and Higher education

11.What is the average income of your family?

Below 3000 PKR

3000 – 10000 PKR

10000 – 30000 PKR

30000 – 60000 PKR

60000 – 100000 PKR

Above 100000 PKR

12.Do you live in your own house or in a rented house?


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Own house

Rented house

13.How much do you spend on living expenses?

Less than 2000 PKR

2000 – 6000 PKR

6000 – 10000 PKR

10000 – 20000 PKR

20000 – 50000 PKR

Above 50000 PKR

APPENDIX IIINTERVIEW QUESTIONS

These sets of questions are for individuals, scholars and social workers who have knowledge of the Pakistani economy. The questions revolve around the possibility of poverty eradication, the causes of poverty in Karachi and other poverty related factors that affect its rate in the region. They also explore ideas that can be part of a greater initiative to combat poverty and its effects.

1. Do you believe that poverty can be eradicated?2. What, in your opinion, are the major causes of poverty in Pakistan? What

factors affect the rate of poverty in the country?3. Some countries have devised plans to counter poverty; examples include

the Micro-financing initiative started by Mohamed Yussuf – a banker in Bangladesh. What do you think about the possibility of devising and implementing plans such as this one in Pakistan? If possible, what would you say, are the critical success factors of an initiative like this one?

4. Could you think of any similar plans to fight poverty in the country?5. Are there any organizations doing something about the poverty issue in

the country? Can you give examples?6. Has the government done anything about the poverty in the country? If

not, then what do you think might be the reason? Is it corruption, the very large population of the country, or simply that the government chooses to ignore the existence of poverty?

7. Do you think that foreign direct investments in Pakistan might help reduce poverty in the country?

8. What impact, in your opinion, does privatization have on poverty in Pakistan? Do you think it is a positive factor for the struggle against poverty?


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Documents

Poverty in Pakistan and Its Eradication