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Poor investment in human capital

The Sustainable Development Report 2022 indicates the overall progress towards achieving all 17 sustainable development goals, adopted by all United Nations Organization (UNO) member states in 2015. The report shows that Pakistan’s overall ranking stands at 125 out of 163 countries whereas on the sustainable development goal (SGD) index we achieved a score of 59.3 out of 100. The sustainable development goals (SDGs) include eradication of poverty, zero hunger, gender equality, climate actions, good health and well-being, industry innovation and infrastructure; reducing inequalities, establishing peace and justice, including strong institutions and others.

The Report indicates Pakistan’s poverty headcount ratio at $1.90 per day. According to World Data Lab, the number of people living under extreme poverty condition is over 12 million, whereas the current escape rate is 2.2 percent and the targeted escape rate is 2.7 percent

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The ranking assigned to us by the SGD index on zero hunger goals is quite pathetic which shows that prevalence of undernourishment was 12.9 percent in 2019, whereas prevalence of stunting in children under the age of five was rated as 37.6 percent in 2018. Statistics show that prevalence of wasting in children under 5 years of age for the same year was noted as 7.1 percent.

The Report further shows that our ranking on other SDGs is equally disappointing. SDG16 that relates to peace, justice and strong institutions shows that homicides (per 100,000 population) were 3.8 in 2019, whereas un-sentenced detainees (% of prison population) were 65.7 in 2016. It further states that population, feeling safe walking alone at night in the city or areas where they live, is around 63% in 2021. However, our ranking related to property rights (worst 1–7 best) was 3.9 in 2020.

Similarly, birth registrations with civil authority (% of children under age 5) 42.2 as per 2020—as per Corruption Perception Index  (worst 0–100 best) 28 in 2021, Children involved in child labour (% of population aged 5 to 14) 11.4 in 2019, exports of major conventional weapons (TIV constant million US$ per 100,000 population) 0.0 2020 and Press Freedom Index (best 0–100 worst) 46.9 in 2021. The access to and affordability of justice ranked as (worst 0–1 best) 0.4 in 2020.

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The Report unequivocally shows that not only do we have to work on the improvement of social sector but on governance as well. Both are interlinked and cannot be improved in isolation. Being an underdeveloped country, our current challenges are rise in debts, export marginalization, energy crisis and climate vulnerability. However, these challenges are the result of bad governance for a long period of time. In the last four years, the country witnessed approximately 80 percent rise in public debt yet the volume of our economy kept shrinking and even witnessed negative growth with inflation skyrocketing. Large scale manufacturing, foreign direct investment and exports witnessed downward trend in the last few years. On the other hand, Pakistan’s ranking on ease of doing business still needs substantial improvement. The recent ranking, —at 108 out of 193 countries—though slightly improved, is still not satisfactory.

The cost of doing business in Pakistan is very high mainly due to 15% policy rate of State Bank of Pakistan (SBP), which is very challenging for businesses to meet their running finance needs. On the one hand, Pakistan is facing worse electricity crisis, including both load shedding and high cost per unit. On the other, high energy prices are the main factor, triggering the double digit inflation and negatively impacting businesses, besides creating extreme financial hardships for ordinary citizens.

Recently, the Federal Finance Minister negotiated electricity rate with exporters. However, this decision was considered by various financial experts as a violation of the existing agreement with International Monetary Fund (IMF). Pakistan, being in the IMF programme, is under obligation to follow the conditions for its smooth completion and to improve the economic outlook of the country. However, merely implementing action items to fill the revenue gap and ignoring policy actions mentioned in the IMF agreement will create hurdles for the government and the people in future. Therefore, we should focus on introduction of fiscal reforms and implement the policy actions to generate enough revenues (tax and non-tax) to improve our social sector indicators.

The rulers must realise that investment in people’s health and education can earn a huge dividend in the long run. Our current spending in health, education, special assistance and revenue collection apparatus is very low as against regional income groups’ average. We need to continuously work on improving our social sector indicators, For this, we must take full advantage of the 5th United Nations Conference on the least Developed Countries (LDC5) providing an opportunity to least developed countries (LDCs) to get the support they genuinely need to deal with their sustainable development challenges. Planned to be held in two parts, the first was held in New York on March 17, 2022 that adopted the Doha Programme of Action for Least Developed Countries. The Doha Programme offers stronger support to help them overcome the structural challenges they encounter. The second part of the conference to be held in Doha from March 5-9, 2023 will be attended by global leaders, civil society personnel, private sector representatives, youth representatives and other stakeholders to formulate a new plan for the delivery of the programme of action over the following decade.

The Doha Programme of Action mainly focuses on following six key areas:

  • Investing in people in least developed countries: eradicating poverty and building capacity to leave no one behind;
  • Leveraging the power of science, technology, and innovation to fight against multidimensional vulnerabilities and to achieve the SDGs;
  • Supporting structural transformation as a driver of prosperity;
  • Enhancing international trade of least developed countries and regional integration;
  • Addressing climate change, environmental degradation, recovering from COVID-19 pandemic and building resilience against future shocks for risk-informed sustainable development; and
  • Mobilizing international solidarity reinvigorated global partnerships and innovative tools and instruments: a march towards sustainable graduation.

We need to realise that we cannot eradicate poverty without investing in human capital. Our neighbor, India has realised the importance of investing in human capital and producing the best human resource in the world. In the United States, many from Indian origin are leading major corporations. As per the Human Capital Index 2020, India was ranked 116/174 and receiving huge amounts of foreign remittances.  On the other hand, Pakistan ranked at 164th, placed behind Rwanda ranked 163rd. Pakistan’s budget on higher education has witnessed downward trend in recent years testifying to our apathy towards producing a much-needed skilled workforce.

In the era of Fourth Industrial Revolution, our traditional style of running affairs of the state cannot bring any good, but is bound to burden the nation with further costly debts, higher inflation and rising unemployment. We are currently facing a major climate crisis in the form of heavy floods and rains, the recent ones causing a loss of over US$ 30.1 billion that includes $ 14.9 billion worth of destruction and $15.2 billion in losses as per Post-Disaster Needs Assessment (PDNA). The report further states Pakistan needs around US$ 16.3 billion as rehabilitation and reconstruction cost. For an already struggling economy that is unable to meet its current account deficit, raising additional funds of over $ 30 billion is an uphill task. We will keep on suffering, unless we learn from the success stories of our neighboring countries and friends.

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Dr. Ikramul Haq, Advocate Supreme Court, specialises in constitutional, corporate, media, ML/CFT related laws, IT, intellectual property, arbitration and international tax laws. He is country editor and correspondent of International Bureau of Fiscal Documentation (IBFD) and member of International Fiscal Association (IFA). He is Visiting Faculty at Lahore University of Management Sciences (LUMS) and member Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE).

Abdul Rauf Shakoori, Advocate High Court, is a subject-matter expert on AML-CFT, Compliance, Cyber Crime and Risk Management. He has been providing AML-CFT advisory and training services to financial institutions (banks, DNFBPs, investment companies, money service businesses, insurance companies and securities), government institutions including law enforcement agencies located in North America (USA & CANADA), Middle East and Pakistan. His areas of expertise include legal, strategic planning, cross border transactions including but not limited to joint ventures (JVs), mergers & acquisitions (M&A), takeovers, privatizations, overseas expansions, USA Patriot Act, Banking Secrecy Act, Office of Foreign Assets Control (OFAC).

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