Poverty Pakistan

Written by Hajra Zahid 8:13 pm Articles, Current Affairs, Pakistan, Published Content

The Anatomy of Poverty Traps: Pakistan’s Quest for Economic Liberation

Since its independence, Pakistan has been stuck in an endless loop of poverty, experiencing the same economic and political challenges on repeat. Hajra Zahid addresses the pivotal question of what makes this loop unbreakable. By applying Paul Collier’s description of four development traps to the case study of Pakistan, she exemplifies the role of internal conflicts, natural resources, border hostilities, and bad governance in keeping the state entrenched in poverty. For a more comprehensive understanding of the complexities at play, she identifies several other traps that have been glossed over and suggests how to break the curse.
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About the Author(s)
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Ms. Hajra Zahid is a fresh graduate of English language and literature. Throughout her education at NUML, she developed a deep appreciation for the ways in which language and culture intersect, and how their interrelation impacts our everyday lives. She's particularly interested in post-colonialism and international relations.

“What would you do, If you were stuck in one place, and every day was exactly the same, and nothing you could say, and nothing you could do, mattered?

Have you ever watched a movie and experienced a moment that prompts you to consider the degree of similarity between the character’s situation and your own? Not long ago, I watched a movie where a key dialogue spoken by the protagonist caught my attention and has been lingering in my thoughts ever since. 

The protagonist of the movie “Groundhog Day” is Phil Connors, played by Bill Murray. He is a weatherman who is sent to Pennsylvania to cover the yearly Groundhog Day celebration. Later, he finds himself trapped by a blizzard in the town, in an endless loop of time.  He wakes up every day, living the same day over and over again, with no way out.  I felt a profound resonance with his situation, and I believe many of my fellow Pakistanis would have found his situation to be a strikingly familiar one. The 225 million people of Pakistan can identify most strongly with the feeling of being trapped in a day that never ends, a nightmare to be more precise. 

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Ever since her independence, Pakistan’s economic development has been stagnant and stuck in politically corrupt times riddled with poverty, where nothing that policymakers do yields a positive outcome. We are living the Groundhog Day movie, replaying the same day. Many countries that were once in the same boat as Pakistan are now heading towards an economic growth spurt and meanwhile, those left behind with us are heading towards a black hole.

China, in the 1980s, was one of the poorest countries in the world and as of today, China stands tall as the world’s second-largest economy. While China is soaring to new heights and has overcome its dire poverty crisis, it seems like Pakistan is struggling to keep its head above water. The Pakistan of 1990s was drowning in foreign debt, with external debt reaching approximately $20.5 billion. We’re now out of the frying pan and into the fire with our external debts reaching $126.3 billion. Remarkable!

Unveiling the Traps 

It is true that every nation has its share of struggles, but they also have periods of respite. One might ask, what is the reason for the perpetual struggles of some countries with no relief whatsoever, while others continue to prosper? In his book The Bottom Billion, Paul Collier discusses how poor countries that stand at the lowest in the global pyramid are constantly failing and falling apart while other countries are far ahead in the race toward development. He focuses on four development traps that keep countries poor: the conflict trap, the natural resources trap, the trap of being landlocked with bad neighbors, and the trap of bad governance. 

Collier’s idea of the bottom billion offers a striking reflection of the contemporary socio-economic and poverty-stricken state of the people of Pakistan. It is high time that we examine how and why Pakistan, despite its extraordinary potential, cannot break through these traps. 

The Conflict Trap

Pakistan’s economy has a history of enduring struggles, and conflicts remain one of the many factors that exacerbate the problems. The conflict trap suggests that low income and slow to stagnant economy breed rebellions, coups, and civil wars. Once a country like Pakistan gets stuck in this pattern of violence, it becomes a trap of poverty that is almost inescapable. International economists believe that the soft image of a country is much like a commodity that is cashable, for it attracts foreign direct investments (FDI). However, Pakistan’s soft image has been tarnished due to the conflicts within and across the border.

It is also noteworthy that the terrorism-affected areas of Pakistan including Bunar, Malakand Agency, Swat, and Lower Dir are agricultural hubs of Pakistan. The agricultural yield amounted to 25.6% of total GDP in 1999-2000. The conflicts in the region have caused this percentage to shrink to 23.1% in 2007-2008. As of today, it is reported to be 22.67% with no improvements on record. The manufacturing sector and industrial sectors were hit likewise.

Most recently, the Afghan conflict caused a loss of $120 billion since 2001. The provided data is merely the tip of the iceberg. For seventy-four years, Pakistan has weathered the strongest of storms. The start of 2023 has also been marked with a ghastly incident that took place on the 1st of February at the Peshawar Police Line with around a hundred casualties and many injured.

The Paradoxical Natural Resource Trap

Second on the list is the natural resources trap, also known as the “resource curse.” Resource curse refers to the abundance of natural resources in a country but turns out to be a paradoxical trap of poverty, as apparent in the case of Pakistan. This happens largely due to the exploitation of natural reserves by the authorities of the state. Pakistan’s estimated coal reserves alone are at a value of 185 billion tons. Moreover, the value of oil reserves in 2020 was 0.34 billion barrels.

In the World Bank’s Doing Business 2020 report, Pakistan stands at 108th place out of 190 countries. This is a clear indication of how the authorities have failed to tap the full potential of resource reserves while also causing environmental degradation and displacement of local communities. Despite having the 7th largest coal reserves and 45th largest oil reserves, Pakistan is heavily reliant on imports to fulfill the needs of its energy sector. Lack of investment, mismanagement of resources, and corruption have worsened the energy crisis. The provided statistics illustrate how the resource curse plagues Pakistan when an abundance of natural reserves has not been translated into sustainable economic development.

Furthermore, it is important to mention that resource abundance has also caused import dependence in Pakistan. According to a report, 6.462 billion tons of petroleum products were imported in 2020. We’re in a kitchen full of ingredients and we’re trying to prepare a feast, but the only problem is that we neither have the recipe nor the cooking skills. Turns out, resources do not make a country rich but you also need good leaders who know how to utilize the resources. And unfortunately, those can be hard to come by.

The Trap of Being Landlocked with Bad Neighbors

When the time came for the British to bid farewell to the subcontinent, they seemed to be in a rush to catch the next train so they decided to scribble some lines over the map of the subcontinent and called them boundaries. This is exactly how they created two brand new nations while disregarding their shared history, cultures, and most importantly, geographical boundaries.  

The arbitrary nature of the boundary line has added fuel to the long-standing rivalry between Pakistan and India, and Afghanistan. It is no secret that Pakistan has been walking a tightrope to secure its territory and prevent cross-border attacks. There has been a great many episodes of terrorist attacks in Pakistan that were being operated by non-state actors in India. Recently India has been actively involved in trying to build a “terrorist consortium”.

Another factor is the saffronization of the Indian state which has deeply hurt the sentiments of people across the border. Under these conditions, when your neighbor has a reputation of being the bully of the region, being blindly optimistic can be like walking on a minefield. However, the government must tackle the crisis at hand with utmost care and take measures to improve bilateral trade and create economic opportunities.

On the other hand, Afghanistan has been raising the issue of the Durand Line every now and then. Other than funding insurgent groups in Balochistan and providing its soil for militant operations to be carried out by RAW, Afghanistan has been hell-bent on proving that Pakistan is the only reason for all its crises. In fact, both countries keep swapping accusations against each other and have failed to bridge the trust gap bilaterally. Hence, Pakistan is landlocked, not in the literal sense of the term but rather metaphorically. Trade disruptions, insurgency, border disputes, political agendas, and lack of communication with its neighboring countries have caused economic stagnation in the region and threats to its peace. 

The Trap of Bad Governance

Pakistan is among the “bottom billion” countries where the wealthy can buy their way out of accountability, where those in power work like magicians – making billions of dollars disappear without leaving a trace – and where mismanagement is the only job that our leaders are qualified for. Like an old wound that keeps hurting from time to time, bad governance has caused immense damage to the economy of Pakistan and drowned more people in the poverty curse. According to Corruption Perceptions Index CPI, Pakistan has ranked 140th out of 180 countries in its annual corruption ranking.

Whereas, as per Transparency International’s Global Corruption Barometer 2013, three out of four Pakistanis believe that corruption is ingrained in the culture of political parties. They are either “corrupt or extremely corrupt”. The irony of our political system is that it is designed to be a representation of people’s will but it’s not the people who find a way but rather, the politicians who can effectively purchase the votes and even a seat in Senate. To paint a rough picture, the estimated expenditure of political parties and candidates in the elections of 2018 was Rs.440 million.

Corruption benefits the privileged few at the expense of the poor majority who live a life of continual struggle to meet the basic necessities of life. The rich keep getting richer while the poor are finding it hard to survive. While some are willing to queue for hours to grab a cup of coffee from a Canadian café outlet, others risk their lives to get free flour at a distribution center. Poverty reduction becomes a dream when the leaders cannot make the right decisions at the right time, utilize the resources at hand in the right place and lead the nation with the right attitude and intention.

The Missing Pieces

Collier has done a brilliant job illustrating the traps that keep the countries poor. However, there are still other traps that go unidentified. They say the quietest dangers are often the deadliest. Take the case of foreign aid. The potential reason why rich countries give away billions of dollars in aid has nothing to do with helping the poor countries break through the poverty cycle rather, the money is wielded as a weapon in the war to dominate the world. The Western powers pump money into corrupt regimes that are inevitably squandered by the powerful and the corrupt. Those at the receiving end have to meet the terms and conditions set by the donor, keeping poor, struggling countries like Pakistan in a cycle of debt, dependence, and poverty.

Pakistan scored 27/100 in the Corruption Perceptions Index Report 2022. The National Accountability Bureau reports that Pakistan loses Rs13bn per day due to corruption, nearly half of which is through tax evasion. Today, every household in Pakistan faces the trickle-down effect of corruption by the ruling elite, where extra funding in the name of foreign aid to the corrupt provides them with breathing space and the ability to trick the common man into having false hope. 

Another factor that must be taken into consideration is the overreliance of Pakistan on remittances. Remittances have been seen as a lifeline from abroad to the crippling economic conditions of Pakistan. The record remittances reached around $31bn in FY21-22. In the ongoing economic debates, much focus has been on the upsurge of remittances. The government and the common man alike have been giving special attention to it, to the point of eclipsing all the other potential sources of foreign exchange earnings.

It must not be forgotten that remittances are a volatile source of income and are unpredictable and might face sudden declines. Overreliance on remittances can cause every household to become vulnerable to changes in the global economy and political landscape. To solely depend on remittances to meet the trade gap and keep pace with the growing exports of the country is an unwise move in the face of current economic crises. 

Breaking the Curse

It can be certainly frustrating to work on a plan that does not seem to yield any result. With every passing day, there is a new debate on how Pakistan can be liberated from its struggles. We must understand that if there is a fault in an airplane’s engine, there is no good in changing the pilot. Rather, we must identify the part of the engine that is malfunctioning, then either repair it or replace it. Hence, the factors that cause economic lag must be researched and analyzed by the higher-ups and must not be taken lightly.

Secondly, you may either repair the faulty engine or replace it altogether. Anatol Lieven explains in his book how Pakistan has been functioning on the worn-out engine that the British once used. The rules and procedures set by the British in the 19th century continue to be incorporated into our “modern” system despite being outdated and irrelevant.

Consider, for example, the Companies Act of 1913 enacted more than a century ago is still in place and regulates the incorporation and functioning of companies in Pakistan. The outdated provisions of the act, weak corporate governance, inadequate shareholder protections, and lengthy legal procedures have been criticized by stakeholders and experts for years. The government must modernize all the rules and regulations in accordance with the current economic landscape of Pakistan.

As citizens of Pakistan, we seem to have overlooked yet another important aspect: the tremendous power that we hold as voters. For the successful takeoff of Pakistan towards the journey of development, the selection of a competent pilot is our responsibility. Before we cast our vote, we must analyze the past performances of the candidates, carefully choose the source of the information, and conduct unbiased research on the candidates while also demanding accountability and transparency. We must remain loyal to our country before any public figure or political party.

We live in the information age, where the economy cannot be isolated from politics, history, demographics, technology, and geography. It is unfortunate that the majority of the general public is unaware of the interrelationship between these factors and, therefore, is unable to identify the potential risks and opportunities involved. The government must introduce a curriculum at schools and colleges to educate the youth at an early age. A large and educated workforce is more likely to recognize the propaganda and misinformation that anti-state forces circulate. 

Pakistan may lack a lot of things, but optimism is not one of them. We must continue to strive and find hope in the endless possibilities of every day that we live, because:

“Winter is just another step in the cycle of life.”

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The views and opinions expressed in this article/paper are the author’s own and do not necessarily reflect the editorial position of Paradigm Shift.

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