Tuesday, December 29, 2009
Monday, December 28, 2009
Replace ‘income support’ programme with ‘employment generation’ plan
The News
23-11-2009
By Dr. Sabur Ghayur
The “welfare” and “workfare” programmes are two important instruments of policy makers outreaching the poor and marginalised segments of the population in times of distress.
Termed as important components of social safety nets, it is quite common for governments of poverty stricken regions to recourse to such programmes at the time of need, for economic development and improving the lives of the societies’ underprivileged.
A variety of governmental programs designed to protect citizens from economic risks and insecurities of life have been experimented in a number of developing countries. Such programs mostly provide financial assistance to beneficiaries; however, they also contain certain positive and life changing conditions. Such as, the beneficiaries of these programmes have to enrol their children in schools etc.
Bangladesh launched a targeted food rationing programme in 1993. It was later replaced with food for education programme, which provides a free monthly ration of rice or wheat to poor families if their children attend primary school. Poor households are provided monthly 15 kg of rice per child with a maximum of 20kg, if all the children of a family are enrolled in primary schools. The goals of this program are to increase primary school enrollment, promote attendance, reduce dropout rates, and enhance the quality of education.
Progresa – a social assistance program in which cash is transferred to poor households was introduced in Mexico. Federally designed and implemented cash transfers were conditioned with: (i) enrolment of children aged 6-17 years in schools, and ii) regular visits to health centres with full attendance at information sessions.
The workfare programmes (WFPs) have come into existence in response to the crisis of unemployment and poverty having cropped up in recent times, due to macro-economic instability or climatic disasters owing to global warming. Such programmes were introduced in different regions under different circumstances. For example, South Korea in response to the Asian financial and economic crisis of 1997-98, north-east Brazil due to the prolonged drought that destroyed it in 1998, and in Argentina, where in 1997 unemployment had reached 18 per cent because of recession.
In our neighbouring country India, the Maharashtra state was first to guarantee statutorily to the principle of “right to work”; making employment an entitlement for everyone to empower the poor living in slums. The Maharashtra Employment Guarantee Act was enacted in 1979. In 2004, the then newly elected government launched the national rural guarantee scheme, initially in 150 districts and then later covering the entire country.
Successful workfare programmes have been found to be linked with citizens earning low wages in mostly poor countries of the world. However, it has been witnessed that when market wages fall, programme wages are also reduced. Like in the case of Argentina’s trabajar programme, where low wages were paid to the rural population on the basis that it was just a form of economic assistance only and not a hefty remuneration amount. In Korea, the programme wage was set slightly below the market wage for unskilled labour. The programme in Brazil also paid benefits below the minimum wage.
Pakistan also has various welfare or social security programmes aimed for the betterment of the unemployed or poor people. Many of these programmes announced have found later to be either abandoned or replaced with others. The “guzara” (sustenance) allowance and permanent rehabilitation programs under Zakat have been in place for decades; reaching over a millions of families. In addition to this, cash transfer, individual financial assistance, food support and vocational training programmes are reaching over a million needy and destitute through the Pakistan Baitul-ul-Mal (PBM). Further, there is the wheat subsidy and the mid-day meal for school students under Tawana Pakistan programme, however this has been dis-continued. Except the programmes under Zakat, the rest are funded through budgetary allocations, on many occasions based on foreign loans.
The People’s Party government launched a rather ambitious income support programme in August 2008, targeting 3.5 million households in its initial year of inception. With a huge financial allocation of Rs.35 billion, the funds for Benazir Income Support Programme (BISP) have been doubled for the current fiscal year. The international financial institutions are the major providers of funds, in the form of loans for this particular programme. While not denying the need for a well prepared social safety net programme, one is really astounded by the ease with which such an uneconomic, unsustainable and ineffective programme has been launched and that too on borrowed money.
A look at the current employment and labour market situation lands us into a rather discomforting situation. The signs emanating from the labour market are alarming. The economic side is exacerbating at a fast rate. Rapid depleting regular employment has become a norm. The unemployed workforce escalating at a swift pace is being confronted with absorption difficulties. Furthermore, those employed; a large proportion of them have to be satisfied with such working environments having longer hours of work, lesser remunerations with an overall poor working conditions. Females and the youth are the most disadvantaged segments of the society as poverty and unemployment are fast engulfing them, even though many of them are educated and skilled. Unemployment and poverty are fast returning and surging the economy.
Indeed the current situation, besides other interventions deserves a well designed and implemented workfare programme. A mechanism of WFP that can provide a guaranteed wage employment for 120 days can be worked out rather easily. The pubic sector development programmes (PSDPs) do contain huge allocations for a large number of smaller projects, many of them related to infrastructural development. These need to be linked with an employment generation programme (EGP) primarily for the rural areas and slums. The citizens’ community board is to be consulted, as well as local bodies involved with the national and provincial parliamentarians in the design and monitoring of the programme, along with other schemes. The activities that can be undertaken under the EGP may also include: (i) soil conversation and development, (ii) developing waste lands, (iii) water conservation, (iv) minor irrigation, (vi) flood protection, (vii) improving water courses, (viii) brick-lining of canals, (ix) supply of clean drinking water, (x) electricity, (xi) building of streets, (xiii) horticulture, (xiv) forestation, and (xv) roads building and maintenance.
Whereas, diversion of financial resources from the Benazir income support programme can be the immediate source of funding, whereas, levy of EGP tax on motor vehicles, all non-food and non-oil imports and a rise of GST by 0.5 per cent would be the other sources of funding. Furthermore, the international financial institutions can also provide financial assistance to meet their goal of poverty reduction.
As far as the much broadcasted BISP is concerned, it should not be discarded. In fact, it should be amalgamated with the Pakistan Bait-ul-Maal and Zakat but with significant reforms in the governance of these institutions.
The introduction of the employment generation programme, owing to the worsening labour market situation and large infrastructural gaps especially in rural areas is quite essential for us and long overdue. It will address the three most critical obstacles faced by Pakistan’s economy; unemployment, poverty and slow economic growth. Moreover, it will also be a face saving for the much trumpeted BISP, providing it a safe exit.
— (The writer heads Islamabad-based centre for labour advocacy and dialogue (CLAD).)
23-11-2009
By Dr. Sabur Ghayur
The “welfare” and “workfare” programmes are two important instruments of policy makers outreaching the poor and marginalised segments of the population in times of distress.
Termed as important components of social safety nets, it is quite common for governments of poverty stricken regions to recourse to such programmes at the time of need, for economic development and improving the lives of the societies’ underprivileged.
A variety of governmental programs designed to protect citizens from economic risks and insecurities of life have been experimented in a number of developing countries. Such programs mostly provide financial assistance to beneficiaries; however, they also contain certain positive and life changing conditions. Such as, the beneficiaries of these programmes have to enrol their children in schools etc.
Bangladesh launched a targeted food rationing programme in 1993. It was later replaced with food for education programme, which provides a free monthly ration of rice or wheat to poor families if their children attend primary school. Poor households are provided monthly 15 kg of rice per child with a maximum of 20kg, if all the children of a family are enrolled in primary schools. The goals of this program are to increase primary school enrollment, promote attendance, reduce dropout rates, and enhance the quality of education.
Progresa – a social assistance program in which cash is transferred to poor households was introduced in Mexico. Federally designed and implemented cash transfers were conditioned with: (i) enrolment of children aged 6-17 years in schools, and ii) regular visits to health centres with full attendance at information sessions.
The workfare programmes (WFPs) have come into existence in response to the crisis of unemployment and poverty having cropped up in recent times, due to macro-economic instability or climatic disasters owing to global warming. Such programmes were introduced in different regions under different circumstances. For example, South Korea in response to the Asian financial and economic crisis of 1997-98, north-east Brazil due to the prolonged drought that destroyed it in 1998, and in Argentina, where in 1997 unemployment had reached 18 per cent because of recession.
In our neighbouring country India, the Maharashtra state was first to guarantee statutorily to the principle of “right to work”; making employment an entitlement for everyone to empower the poor living in slums. The Maharashtra Employment Guarantee Act was enacted in 1979. In 2004, the then newly elected government launched the national rural guarantee scheme, initially in 150 districts and then later covering the entire country.
Successful workfare programmes have been found to be linked with citizens earning low wages in mostly poor countries of the world. However, it has been witnessed that when market wages fall, programme wages are also reduced. Like in the case of Argentina’s trabajar programme, where low wages were paid to the rural population on the basis that it was just a form of economic assistance only and not a hefty remuneration amount. In Korea, the programme wage was set slightly below the market wage for unskilled labour. The programme in Brazil also paid benefits below the minimum wage.
Pakistan also has various welfare or social security programmes aimed for the betterment of the unemployed or poor people. Many of these programmes announced have found later to be either abandoned or replaced with others. The “guzara” (sustenance) allowance and permanent rehabilitation programs under Zakat have been in place for decades; reaching over a millions of families. In addition to this, cash transfer, individual financial assistance, food support and vocational training programmes are reaching over a million needy and destitute through the Pakistan Baitul-ul-Mal (PBM). Further, there is the wheat subsidy and the mid-day meal for school students under Tawana Pakistan programme, however this has been dis-continued. Except the programmes under Zakat, the rest are funded through budgetary allocations, on many occasions based on foreign loans.
The People’s Party government launched a rather ambitious income support programme in August 2008, targeting 3.5 million households in its initial year of inception. With a huge financial allocation of Rs.35 billion, the funds for Benazir Income Support Programme (BISP) have been doubled for the current fiscal year. The international financial institutions are the major providers of funds, in the form of loans for this particular programme. While not denying the need for a well prepared social safety net programme, one is really astounded by the ease with which such an uneconomic, unsustainable and ineffective programme has been launched and that too on borrowed money.
A look at the current employment and labour market situation lands us into a rather discomforting situation. The signs emanating from the labour market are alarming. The economic side is exacerbating at a fast rate. Rapid depleting regular employment has become a norm. The unemployed workforce escalating at a swift pace is being confronted with absorption difficulties. Furthermore, those employed; a large proportion of them have to be satisfied with such working environments having longer hours of work, lesser remunerations with an overall poor working conditions. Females and the youth are the most disadvantaged segments of the society as poverty and unemployment are fast engulfing them, even though many of them are educated and skilled. Unemployment and poverty are fast returning and surging the economy.
Indeed the current situation, besides other interventions deserves a well designed and implemented workfare programme. A mechanism of WFP that can provide a guaranteed wage employment for 120 days can be worked out rather easily. The pubic sector development programmes (PSDPs) do contain huge allocations for a large number of smaller projects, many of them related to infrastructural development. These need to be linked with an employment generation programme (EGP) primarily for the rural areas and slums. The citizens’ community board is to be consulted, as well as local bodies involved with the national and provincial parliamentarians in the design and monitoring of the programme, along with other schemes. The activities that can be undertaken under the EGP may also include: (i) soil conversation and development, (ii) developing waste lands, (iii) water conservation, (iv) minor irrigation, (vi) flood protection, (vii) improving water courses, (viii) brick-lining of canals, (ix) supply of clean drinking water, (x) electricity, (xi) building of streets, (xiii) horticulture, (xiv) forestation, and (xv) roads building and maintenance.
Whereas, diversion of financial resources from the Benazir income support programme can be the immediate source of funding, whereas, levy of EGP tax on motor vehicles, all non-food and non-oil imports and a rise of GST by 0.5 per cent would be the other sources of funding. Furthermore, the international financial institutions can also provide financial assistance to meet their goal of poverty reduction.
As far as the much broadcasted BISP is concerned, it should not be discarded. In fact, it should be amalgamated with the Pakistan Bait-ul-Maal and Zakat but with significant reforms in the governance of these institutions.
The introduction of the employment generation programme, owing to the worsening labour market situation and large infrastructural gaps especially in rural areas is quite essential for us and long overdue. It will address the three most critical obstacles faced by Pakistan’s economy; unemployment, poverty and slow economic growth. Moreover, it will also be a face saving for the much trumpeted BISP, providing it a safe exit.
— (The writer heads Islamabad-based centre for labour advocacy and dialogue (CLAD).)
Employment generation through overseas migration
The News
07-12-2009
Overseas migration plays an important role in the economic prosperity of individuals as well as of nations - both for countries of origin and destination. The economic contribution of migration, especially towards poverty reduction, employment generation and women’s empowerment is extensive
By Dr. Sabur Ghayur
Close to 200 million people that is 3 per cent of the world population is estimated to be the international migrants; half of them are females. Whereas, 1 in 35 is a migrant globally, in case of OECD countries it is 1 in 10. Some 4 million emigrated to the OECD during 2006 alone on “permanent” visa type – the USA receiving 1.3 million. In the Gulf countries, the emigrants largely outnumber the local population. The migrant workers alone are estimated to be about 95 million; more than half of them are females.
Overseas migration plays an important role in the economic progress and prosperity of individuals as well as nations - both for countries of origin and destination. The economic contribution of migration, especially towards poverty reduction, employment generation and women empowerment is extensive. It is also an effective mechanism of transferring new skills to labour when they migrate to other nations. Indeed, on return the migrants bring knowledge and skills as well as social capital to their countries. The remittances sent by migrants, not only provide livelihood to their families but the much needed funds for the development policies and programs.
The remittances help in building foreign exchange reserves and providing balance of payment support. Remittances sent by them form an important source of foreign exchange earnings. In case of the Philippines, some Central American states and Bangladesh, these were 12 per cent, 10 per cent and 8 per cent respectively of the GDP. Migrant workers from Pakistan have also been significant contributors in providing the much needed foreign exchange for development needs including import facilitation. They remitted about US $29 billion in six years up to 30th June 2008; $5.5 billion in 2006-07, $6.6 billion 07-08, $7.81 billion in 2008-09 and a monthly average of $772.45 million during July – October 2009.
There is also no denying the fact that the host countries receive substantial benefits, such as, meeting labour shortages, enrichment of human capital and augmentation of economic activities. It is, therefore, an important source of economic growth and development for individuals as well as nations.
Pakistan too is an important source country. Whereas, the size of the Pakistani diaspora is estimated to range between 6-7 million, the people leaving for work during 1971 - 2008 was recorded as 4.5 million. Till the end of 2008, the average number of workers emigrating annually had been over 140,000, the number exceeding 280,000 in 2007 and 430,000 in 2008. This year is expected to record highest number of workers emigrating – about half a million.
The destination of our workforce has been to over 50 countries. However, Gulf countries notably Saudi Arabia and UAE remain the most important countries for Pakistani migrant workers. No doubt, the contribution of Pakistani migrant workers and Diasporas to the national economy is significant. It is not only the much needed foreign exchange support that is being provided through these remittances, but equally important are the numerous economic activities undertaken or the consumption that is being supported by the remittances receiving households.
The overall number of emigrants and annual flows, no doubt, has been instrumental in addressing employment and poverty issues in the country. Moreover, the remittances sent to Pakistan helped in tackling development resource constraints. Many while working overseas acquired new skills and accumulated knowledge that contributed in human capital formation. The importance of migration is gaining new “heights” under the current socio-economic situation.
It is not only the existing underutilisation of workforce, both unemployment and underemployment – affecting about a-fifth of the workforce - that is a cause of concern. The situation is being aggravated further by a labour force growing by about 2 per cent annually in an environment of the current economic depression, along with the deteriorating law and order situation.
This situation is and will continue to exert pressure on the policy makers and planners to explore all avenues for gainful and decent employment including “safe” emigration. Thus, a renewed focus on tapping employment opportunities overseas would be an important factor in not only tackling unemployment and poverty in the country, but also in raising the levels of remittances.
In the migration process, we are currently confronted with a number of issues – rather challenges. The availability of information regarding the very process of migration, such as emigration policies of competitors, economic plans and sectoral priorities of the host countries, return migration, etc is conspicuous with absence; at best are inadequate. An increasing number of the workforce considers overseas migration as an escape route out of poverty and unemployment. However, not sufficient amount of technical vocational education and training (TVET) competence matching the demand overseas as well as necessary facilitation have been provided to migrants. Furthermore, focus on seeking increasing work opportunities overseas has not been coordinated with developing a mechanism for workers’ protection and welfare. Efforts are also wanted with regard to: (i) ensuring transparency in recruitment procedures, (ii) protecting borders, (iii) readily accessible support of the Pakistani missions abroad in the event of a need, (iv) welfare of the family members left behind, and (v) effective reintegration of returning migrants.
The foremost action that needs serious consideration is none other than maintaining our size and share in the traditional destinations in the Gulf countries and also responding to the changing patterns in demand taking place over there. It should then be supplemented by concerted efforts exploring new avenues in the selected non-traditional destinations in East and South East Asia, namely: Malaysia, Singapore, Hong Kong, Taiwan, Korea and Japan. To these should be added countries like Australia, New Zealand, United Kingdom, etc - that have introduced point system for “immigration.”
Disciplined, trained and motivated workforce is the key to keep the size of Pakistani workforce intact in the traditional destination countries and penetrating in the non-traditional destination countries. “Sufficiently trained” is emerging as a determining factor in the non-traditional destination countries. Timeliness in processing overseas demand with ensuring relevance and quality of the workforce is a critical factor in new destination countries.
Pakistan today, with a long history of migration notwithstanding, finds itself challenged in terms of: i) improving capacity to regulate the recruitment process; ii) eliminating unsafe; exploitative and abusive situations of migration; iii) improving protective and welfare mechanisms for emigrants; and iv) importantly, not only retaining and expanding share of our workforce in the traditional host countries but also emerging as an important source country for other labour receiving countries. No doubt, safe emigration requires a simultaneous focus on matters related to four main areas, namely: (i) pre-departure, (ii) the country of work, (iii) families left behind, and (iv) re-integration on return.
The first ever National Emigration Policy (NEMP) was prepared and finalised by the Policy Planning Cell of the M/O Labour and Manpower in early 2009. This policy has dealt with all aspects relating to emigration process rather extensively. Its recommendations are on the basis of a consultative process that took place in federal and provincial capitals as well as some other important cities. The recommendations do carry answers also for tackling unemployment and under employment through better managing migration under safer conditions.
This policy is awaiting presentation to the Cabinet since January 2009!
— (The writer heads Islamabad-based centre for labour advocacy and dialogue (CLAD). E-mail: sabur@clad.org.pk)
07-12-2009
Overseas migration plays an important role in the economic prosperity of individuals as well as of nations - both for countries of origin and destination. The economic contribution of migration, especially towards poverty reduction, employment generation and women’s empowerment is extensive
By Dr. Sabur Ghayur
Close to 200 million people that is 3 per cent of the world population is estimated to be the international migrants; half of them are females. Whereas, 1 in 35 is a migrant globally, in case of OECD countries it is 1 in 10. Some 4 million emigrated to the OECD during 2006 alone on “permanent” visa type – the USA receiving 1.3 million. In the Gulf countries, the emigrants largely outnumber the local population. The migrant workers alone are estimated to be about 95 million; more than half of them are females.
Overseas migration plays an important role in the economic progress and prosperity of individuals as well as nations - both for countries of origin and destination. The economic contribution of migration, especially towards poverty reduction, employment generation and women empowerment is extensive. It is also an effective mechanism of transferring new skills to labour when they migrate to other nations. Indeed, on return the migrants bring knowledge and skills as well as social capital to their countries. The remittances sent by migrants, not only provide livelihood to their families but the much needed funds for the development policies and programs.
The remittances help in building foreign exchange reserves and providing balance of payment support. Remittances sent by them form an important source of foreign exchange earnings. In case of the Philippines, some Central American states and Bangladesh, these were 12 per cent, 10 per cent and 8 per cent respectively of the GDP. Migrant workers from Pakistan have also been significant contributors in providing the much needed foreign exchange for development needs including import facilitation. They remitted about US $29 billion in six years up to 30th June 2008; $5.5 billion in 2006-07, $6.6 billion 07-08, $7.81 billion in 2008-09 and a monthly average of $772.45 million during July – October 2009.
There is also no denying the fact that the host countries receive substantial benefits, such as, meeting labour shortages, enrichment of human capital and augmentation of economic activities. It is, therefore, an important source of economic growth and development for individuals as well as nations.
Pakistan too is an important source country. Whereas, the size of the Pakistani diaspora is estimated to range between 6-7 million, the people leaving for work during 1971 - 2008 was recorded as 4.5 million. Till the end of 2008, the average number of workers emigrating annually had been over 140,000, the number exceeding 280,000 in 2007 and 430,000 in 2008. This year is expected to record highest number of workers emigrating – about half a million.
The destination of our workforce has been to over 50 countries. However, Gulf countries notably Saudi Arabia and UAE remain the most important countries for Pakistani migrant workers. No doubt, the contribution of Pakistani migrant workers and Diasporas to the national economy is significant. It is not only the much needed foreign exchange support that is being provided through these remittances, but equally important are the numerous economic activities undertaken or the consumption that is being supported by the remittances receiving households.
The overall number of emigrants and annual flows, no doubt, has been instrumental in addressing employment and poverty issues in the country. Moreover, the remittances sent to Pakistan helped in tackling development resource constraints. Many while working overseas acquired new skills and accumulated knowledge that contributed in human capital formation. The importance of migration is gaining new “heights” under the current socio-economic situation.
It is not only the existing underutilisation of workforce, both unemployment and underemployment – affecting about a-fifth of the workforce - that is a cause of concern. The situation is being aggravated further by a labour force growing by about 2 per cent annually in an environment of the current economic depression, along with the deteriorating law and order situation.
This situation is and will continue to exert pressure on the policy makers and planners to explore all avenues for gainful and decent employment including “safe” emigration. Thus, a renewed focus on tapping employment opportunities overseas would be an important factor in not only tackling unemployment and poverty in the country, but also in raising the levels of remittances.
In the migration process, we are currently confronted with a number of issues – rather challenges. The availability of information regarding the very process of migration, such as emigration policies of competitors, economic plans and sectoral priorities of the host countries, return migration, etc is conspicuous with absence; at best are inadequate. An increasing number of the workforce considers overseas migration as an escape route out of poverty and unemployment. However, not sufficient amount of technical vocational education and training (TVET) competence matching the demand overseas as well as necessary facilitation have been provided to migrants. Furthermore, focus on seeking increasing work opportunities overseas has not been coordinated with developing a mechanism for workers’ protection and welfare. Efforts are also wanted with regard to: (i) ensuring transparency in recruitment procedures, (ii) protecting borders, (iii) readily accessible support of the Pakistani missions abroad in the event of a need, (iv) welfare of the family members left behind, and (v) effective reintegration of returning migrants.
The foremost action that needs serious consideration is none other than maintaining our size and share in the traditional destinations in the Gulf countries and also responding to the changing patterns in demand taking place over there. It should then be supplemented by concerted efforts exploring new avenues in the selected non-traditional destinations in East and South East Asia, namely: Malaysia, Singapore, Hong Kong, Taiwan, Korea and Japan. To these should be added countries like Australia, New Zealand, United Kingdom, etc - that have introduced point system for “immigration.”
Disciplined, trained and motivated workforce is the key to keep the size of Pakistani workforce intact in the traditional destination countries and penetrating in the non-traditional destination countries. “Sufficiently trained” is emerging as a determining factor in the non-traditional destination countries. Timeliness in processing overseas demand with ensuring relevance and quality of the workforce is a critical factor in new destination countries.
Pakistan today, with a long history of migration notwithstanding, finds itself challenged in terms of: i) improving capacity to regulate the recruitment process; ii) eliminating unsafe; exploitative and abusive situations of migration; iii) improving protective and welfare mechanisms for emigrants; and iv) importantly, not only retaining and expanding share of our workforce in the traditional host countries but also emerging as an important source country for other labour receiving countries. No doubt, safe emigration requires a simultaneous focus on matters related to four main areas, namely: (i) pre-departure, (ii) the country of work, (iii) families left behind, and (iv) re-integration on return.
The first ever National Emigration Policy (NEMP) was prepared and finalised by the Policy Planning Cell of the M/O Labour and Manpower in early 2009. This policy has dealt with all aspects relating to emigration process rather extensively. Its recommendations are on the basis of a consultative process that took place in federal and provincial capitals as well as some other important cities. The recommendations do carry answers also for tackling unemployment and under employment through better managing migration under safer conditions.
This policy is awaiting presentation to the Cabinet since January 2009!
— (The writer heads Islamabad-based centre for labour advocacy and dialogue (CLAD). E-mail: sabur@clad.org.pk)
PAK-SRI LANKA FREE TRADE AGREEMENT
The News
14-12-2009
A step forward in the right direction
By Alauddin Masood
Eager to reap maximum benefits from the Free Trade Agreement (FTA) between Pakistan and Sri Lanka, the Karachi Chamber of Commerce and Industry is holding a seminar to discuss ways and means to give a boost to the two-way trade between both the countries.
Scheduled to be held in early December of this year, the seminar would offer a good opportunity to the local businessmen to gain awareness and knowledge about the prospects for expansion of the two-way trade between Pakistan and Sri Lanka.
The bilateral trade between Pakistan and Sri Lanka has already doubled and touched $400 million during the last three years as a result of the bilateral free trade agreement which the two countries signed on August 1, 2002, but became operative in June 2005.
Under FTA, both Pakistan and Sri Lanka have granted duty free access to each other on several tariff lines, agreeing to eliminate custom tariff on almost 90 per cent of products by June 2010.
As per FTA’s provisions, Sri Lanka has granted duty free access to Pakistani products on 102 tariff lines; while Pakistan has granted Sri Lanka duty free access on 206 tariff lines. By June 2010, Sri Lanka will eliminate the customs duty on 4,527 tariff lines out of 5,224 products at six digit level. On the other hand, Pakistan has agreed to eliminate by June 2010 the customs tariff on 4,680 tariff lines at six digit levels, covering about 90 per cent of products. The elimination of customs duty will cover 69 per cent of the actually traded goods between the two countries.
The FTA enables Sri Lanka to export it natural rubber, coconut products, spices, natural graphite, paper and paper products, copper and aluminum products duty-free to Pakistani market. Similarly, Pakistan has duty-free benefits for its exports of oranges, basmati rice, chick-peas, cumin seeds, fennel seeds, motorcycles and accessories to the Sri Lankan market.
While keeping the negative lists to the minimum, the two countries have granted each other tariff rate quotas (TRQs) and higher margin of tariff preferences on a number of products on the negative list.
Pakistan has granted TRQs to Sri Lanka, on an annual basis, on 10,000 metric tonnes of tea at zero rate of duty and 1,200 metric tonnes of betel leaves at a preferential margin of 35 per cent against the pre-2005 import duty of Rs.150 per kilo. Before 2005, Sri Lanka exported about 3,000 metric tonnes of tea to Pakistan and the annual TRQ of 10,000 metric tonnes enabled Sri Lankan tea trade to make a fresh start. Likewise, TRQ on betel leaves has resulted in enhancing the income of betel growers in the rural areas of Sri Lanka.
Pakistan also granted Sri Lanka TRQs for three million pieces of apparel products, covering 20 categories where there was market potential without restrictions regarding the fabric’s country of origin. The apparel categories also qualify for 35 per cent preferential tariff margin. In addition, Sri Lankan ceramic tiles and tableware also enjoy 20 per cent of preferential tariff margin.
Sri Lanka has granted to Pakistan TRQs for duty free exports of Kino and 6,000 metric tonnes of long grade basmati rice, in addition to 1,000 metric tonnes of potatoes per annum.
Under FTA, both the countries have agreed to a 35 per cent domestic value addition and change of tariff heading at a six digit level, which provides flexibility for Sri Lankan and Pakistani investors to source their inputs from third countries and export manufactured products to each other.
Following FTA’s coming into operation on June 30, 2005, bilateral trade between both the countries has been strengthened through an increase in the number of products that they can now import from each other. Resultantly, Pakistan has now become the second largest trade partner for Sri Lanka in the South Asian region.
There is a great demand in Sri Lanka for Pakistani products. Pakistan can export cotton yarn and fabrics, potatoes (fresh/chilled), pharmaceutical products, knitted or crocheted fabrics, articles of iron and steel, galvanised pipes, rice, fish and many other kinds of sea food items, textile made-ups, apparel and clothing accessories and rods of refined copper.
Sri Lankan products in demand in Pakistan include: Coconut products, tea, rubber and rubber-based products, while Pakistani products in demand in Sri Lanka are rice, vegetables, pharmaceuticals, potatoes, textiles and apparel. Only the export of value-added textiles has reached more than $100 million.
14-12-2009
A step forward in the right direction
By Alauddin Masood
Eager to reap maximum benefits from the Free Trade Agreement (FTA) between Pakistan and Sri Lanka, the Karachi Chamber of Commerce and Industry is holding a seminar to discuss ways and means to give a boost to the two-way trade between both the countries.
Scheduled to be held in early December of this year, the seminar would offer a good opportunity to the local businessmen to gain awareness and knowledge about the prospects for expansion of the two-way trade between Pakistan and Sri Lanka.
The bilateral trade between Pakistan and Sri Lanka has already doubled and touched $400 million during the last three years as a result of the bilateral free trade agreement which the two countries signed on August 1, 2002, but became operative in June 2005.
Under FTA, both Pakistan and Sri Lanka have granted duty free access to each other on several tariff lines, agreeing to eliminate custom tariff on almost 90 per cent of products by June 2010.
As per FTA’s provisions, Sri Lanka has granted duty free access to Pakistani products on 102 tariff lines; while Pakistan has granted Sri Lanka duty free access on 206 tariff lines. By June 2010, Sri Lanka will eliminate the customs duty on 4,527 tariff lines out of 5,224 products at six digit level. On the other hand, Pakistan has agreed to eliminate by June 2010 the customs tariff on 4,680 tariff lines at six digit levels, covering about 90 per cent of products. The elimination of customs duty will cover 69 per cent of the actually traded goods between the two countries.
The FTA enables Sri Lanka to export it natural rubber, coconut products, spices, natural graphite, paper and paper products, copper and aluminum products duty-free to Pakistani market. Similarly, Pakistan has duty-free benefits for its exports of oranges, basmati rice, chick-peas, cumin seeds, fennel seeds, motorcycles and accessories to the Sri Lankan market.
While keeping the negative lists to the minimum, the two countries have granted each other tariff rate quotas (TRQs) and higher margin of tariff preferences on a number of products on the negative list.
Pakistan has granted TRQs to Sri Lanka, on an annual basis, on 10,000 metric tonnes of tea at zero rate of duty and 1,200 metric tonnes of betel leaves at a preferential margin of 35 per cent against the pre-2005 import duty of Rs.150 per kilo. Before 2005, Sri Lanka exported about 3,000 metric tonnes of tea to Pakistan and the annual TRQ of 10,000 metric tonnes enabled Sri Lankan tea trade to make a fresh start. Likewise, TRQ on betel leaves has resulted in enhancing the income of betel growers in the rural areas of Sri Lanka.
Pakistan also granted Sri Lanka TRQs for three million pieces of apparel products, covering 20 categories where there was market potential without restrictions regarding the fabric’s country of origin. The apparel categories also qualify for 35 per cent preferential tariff margin. In addition, Sri Lankan ceramic tiles and tableware also enjoy 20 per cent of preferential tariff margin.
Sri Lanka has granted to Pakistan TRQs for duty free exports of Kino and 6,000 metric tonnes of long grade basmati rice, in addition to 1,000 metric tonnes of potatoes per annum.
Under FTA, both the countries have agreed to a 35 per cent domestic value addition and change of tariff heading at a six digit level, which provides flexibility for Sri Lankan and Pakistani investors to source their inputs from third countries and export manufactured products to each other.
Following FTA’s coming into operation on June 30, 2005, bilateral trade between both the countries has been strengthened through an increase in the number of products that they can now import from each other. Resultantly, Pakistan has now become the second largest trade partner for Sri Lanka in the South Asian region.
There is a great demand in Sri Lanka for Pakistani products. Pakistan can export cotton yarn and fabrics, potatoes (fresh/chilled), pharmaceutical products, knitted or crocheted fabrics, articles of iron and steel, galvanised pipes, rice, fish and many other kinds of sea food items, textile made-ups, apparel and clothing accessories and rods of refined copper.
Sri Lankan products in demand in Pakistan include: Coconut products, tea, rubber and rubber-based products, while Pakistani products in demand in Sri Lanka are rice, vegetables, pharmaceuticals, potatoes, textiles and apparel. Only the export of value-added textiles has reached more than $100 million.
NFC Award: some positive development
The News
21-12-2009
The basis of horizontal distribution is made more complicated after the inclusion of vague concepts like poverty and backwardness. The population factor remained the most dominant basis for distribution of resources
By Zafar-ul-Hassan Almas
The government has finally resolved the thorny issue of NFC (National Finance Commission) in its Lahore meeting by accepting the provincial governments' demand for a greater share in the national resources.
The government has finally resolved the thorny issue of NFC (National Finance Commission) in its Lahore meeting by accepting the provincial governments' demand for a greater share in the national resources. The federation has sacrificed its chunk of share along with reduction in collection charges from five to one per cent. The horizontal and vertical issues are almost done as well. The basis of horizontal distribution is made more complicated after the inclusion of vague concepts like poverty and backwardness. The population factor remained the most dominant basis for distribution of resources with 82 per cent of them being distributed on this basis. The sympathy towards war torn province of NWFP is yet another positive development besides Punjab’s all out support for the NFC.
The fact that the federal government and the four provinces have come to an agreement in the current round of NFC negotiations is very encouraging and has been hailed as a victory for democracy. However, the worrying thing about the arrangement is that it has not taken into account the ground realities of the budgetary dynamics. The federation has surrendered portion of its 52.5 per cent stake to 44 per cent in this award and if we include four per cent point reduction in collection charges, the sacrifice is even greater. But without transferring expenditure assignments to provincial governments, the federation will face dire resource shortages. Federal government is already responsible for creating major portion of the fiscal deficit, when we are committed to abide by fiscal discipline through restricting ourselves to fiscal deficit target assigned in the SBA package. Now the federation has indulged itself into a situation where attaining fiscal deficit target has become a gigantic task.
With the current revenue short-fall and growing expenditure needs in the wake of security needs compounded by ever increasing debt servicing liabilities, the center needs more resources. In this situation, the provincial share has to be increased at the expense of the federal government. The poor resource mobilization effort on the part of the provinces is likely to remain a hallmark of this NFC. There is a huge untapped potential in the provincial revenue account. Even the local government could amass a huge chunk of revenue from the structure of the local resources. The own revenue concept has to be given more weight without enhancing multiplicity of the taxes.
The right of provincial governments on sales tax of services is also accepted. However, a million dollar question is whether GST on services will remain non-starter like the agriculture income tax. The ability of the provincial governments to collect this tax with efficiency is also doubtful and to devise a mechanism for tax collection will take time.
The last formal NFC award was promulgated in 1997 for a period of five years by a caretaker set up and it generated a lot of controversy. The award after its expiry in 2002 remained formally operative until 2009. The politics of the NFC got messier and no consensus was reached among the federating units for many years. All provinces had taken positions and nobody was ready to compromise even a slight fraction of their position in the larger interest of the country. The deadlock forced the last government to prevail upon the provincial chief ministers to authorize the then president to announce an award by using his powers under Article 160(6) of the Constitution. Subsequently, then president of Pakistan amended the “Distribution of Revenues and Grants in Aid Order, 1997” and announced the NFC award which took effect on July 1, 2006. Then president gave the formula which promised more resources to the provinces. The resources are being distributed on the basis of this formula since the last three years.
Since 1997, the share of the government in the divisible pool had been fixed at 62.5 per cent while the share of the provincial governments was fixed at 37.5 per cent. However, in the provisional award of 2005, the share was enhanced and beginning 2006-07 it was decided the share of the provincial governments in the divisible pool will rise annually to 41.5, 42.5, 43.75, 45.0 and 46.25 per cent thereafter in coming years. This arrangement is going to expire in the end of 2010-11.
The provincial share has already reached 45 per cent in the current year. In the negotiation process of the current NFC, provincial governments demanded 60 per cent share in the revenues. More importantly, they were not demanding expenditure assignments equal to this additional revenue. The dichotomy is that expenditure assignments have continued to perform by the federation with reduced resources.
This is the most trying time for Pakistan when expenditure needs are growing but the revenue base is shrinking with imports contracting, negative growth in industrial output and deteriorating governance. Pakistan has already earned a distinction of having low tax-to-GDP ratio, even in the South Asian region. In this environment we are replicating the performance of the 1990s when additional tax measures were taken more frequently but tax-to-GDP ratio persistently fell. If we are transferring more resources to provincial governments then we have to redefine expenditure assignments because going forward, there is a likelihood of a rising expenditure burden on the federal government.
There is always a question mark on the provinces’ ability to spend because whenever enormous growth in allocations to provinces is witnessed, the provincial governments were not able to consume despite the spendthrift and profligate attitude of the government. The NFC award has badly ignored the most pressing demand of value for money assessment of spending.
The lower tiers of the government are bestowed with new assignments under the decentralization program without any guaranteed resource inflows from provincial governments. We should learn from the experience of our next door neighbor India where distribution of resources is a normal function of the government without any controversy. Indian resource distribution also makes it obligatory on the part of the states to further specify the share of local governments in their resources. In Pakistan’s case, lower tiers of the government are ignored in the process and discretion of the provincial government is adding to their woes. Resource shortage is hampering their simple development needs in many cases while resource abundance is feeding fat cows in pro-government district governments.
Another lesson from India is professionalism because their resource distribution is professional in approach. The composition of the NFC is again political rather than professional. The NFC award should be manned by professionals from different federating units. The countries which have centralized government structures with diversity, the distribution and burden sharing among federating units is always cumbersome. It is natural that resource generating abilities and resource consumption requirements of different regions is different and some sort of burden sharing is a must for the federation to run efficiently. The amicable agreement between the stakeholders requires intricate, professionally designed and unbiased formula based on sacrifices and tolerance. This needs a permanent structure and professionally managed independent body.
Political backing and commitment is a must but if a political solution is tried in an emotional environment like Pakistan’s, the result would be disastrous. Pakistan has a long history of NFC awards’ failure.
Punjab has been generous with respect to smaller provinces and its attitude has remained accommodative with three provincial governments having acknowledged the contribution of Punjab. Every province should have been generous and take into account growing expenditure needs generated in the center. The NFC should also devise a mechanism for equitable distribution of resources to the lowest tiers of the government.
With Musharraf’s devolution system, significant responsibilities have been transferred to lower tiers of the government. The federal government is obliged to share its revenue with provincial governments, but the provincial governments are not bound to share any amount with local governments. The centralized revenue generation to the extent of almost 95 per cent and subsequent transfer of resources among different tiers of the government creates problems and frictions.
We need more professional debates on inter-governmental relationship and consensus building. The provinces should be given some sort of fiscal autonomy by allowing them to generate more revenues. The local taxes like property taxes should be made into important vehicles of revenue mobilization by local governments. True, is the fact that waste and corruption increases with the downward movement of tiers but this is because of weaker monitoring and accountability. Once rule of the law is established and an accountability process is at place, the effectiveness of public spending at the lowest tier of the government would be increased.
21-12-2009
The basis of horizontal distribution is made more complicated after the inclusion of vague concepts like poverty and backwardness. The population factor remained the most dominant basis for distribution of resources
By Zafar-ul-Hassan Almas
The government has finally resolved the thorny issue of NFC (National Finance Commission) in its Lahore meeting by accepting the provincial governments' demand for a greater share in the national resources.
The government has finally resolved the thorny issue of NFC (National Finance Commission) in its Lahore meeting by accepting the provincial governments' demand for a greater share in the national resources. The federation has sacrificed its chunk of share along with reduction in collection charges from five to one per cent. The horizontal and vertical issues are almost done as well. The basis of horizontal distribution is made more complicated after the inclusion of vague concepts like poverty and backwardness. The population factor remained the most dominant basis for distribution of resources with 82 per cent of them being distributed on this basis. The sympathy towards war torn province of NWFP is yet another positive development besides Punjab’s all out support for the NFC.
The fact that the federal government and the four provinces have come to an agreement in the current round of NFC negotiations is very encouraging and has been hailed as a victory for democracy. However, the worrying thing about the arrangement is that it has not taken into account the ground realities of the budgetary dynamics. The federation has surrendered portion of its 52.5 per cent stake to 44 per cent in this award and if we include four per cent point reduction in collection charges, the sacrifice is even greater. But without transferring expenditure assignments to provincial governments, the federation will face dire resource shortages. Federal government is already responsible for creating major portion of the fiscal deficit, when we are committed to abide by fiscal discipline through restricting ourselves to fiscal deficit target assigned in the SBA package. Now the federation has indulged itself into a situation where attaining fiscal deficit target has become a gigantic task.
With the current revenue short-fall and growing expenditure needs in the wake of security needs compounded by ever increasing debt servicing liabilities, the center needs more resources. In this situation, the provincial share has to be increased at the expense of the federal government. The poor resource mobilization effort on the part of the provinces is likely to remain a hallmark of this NFC. There is a huge untapped potential in the provincial revenue account. Even the local government could amass a huge chunk of revenue from the structure of the local resources. The own revenue concept has to be given more weight without enhancing multiplicity of the taxes.
The right of provincial governments on sales tax of services is also accepted. However, a million dollar question is whether GST on services will remain non-starter like the agriculture income tax. The ability of the provincial governments to collect this tax with efficiency is also doubtful and to devise a mechanism for tax collection will take time.
The last formal NFC award was promulgated in 1997 for a period of five years by a caretaker set up and it generated a lot of controversy. The award after its expiry in 2002 remained formally operative until 2009. The politics of the NFC got messier and no consensus was reached among the federating units for many years. All provinces had taken positions and nobody was ready to compromise even a slight fraction of their position in the larger interest of the country. The deadlock forced the last government to prevail upon the provincial chief ministers to authorize the then president to announce an award by using his powers under Article 160(6) of the Constitution. Subsequently, then president of Pakistan amended the “Distribution of Revenues and Grants in Aid Order, 1997” and announced the NFC award which took effect on July 1, 2006. Then president gave the formula which promised more resources to the provinces. The resources are being distributed on the basis of this formula since the last three years.
Since 1997, the share of the government in the divisible pool had been fixed at 62.5 per cent while the share of the provincial governments was fixed at 37.5 per cent. However, in the provisional award of 2005, the share was enhanced and beginning 2006-07 it was decided the share of the provincial governments in the divisible pool will rise annually to 41.5, 42.5, 43.75, 45.0 and 46.25 per cent thereafter in coming years. This arrangement is going to expire in the end of 2010-11.
The provincial share has already reached 45 per cent in the current year. In the negotiation process of the current NFC, provincial governments demanded 60 per cent share in the revenues. More importantly, they were not demanding expenditure assignments equal to this additional revenue. The dichotomy is that expenditure assignments have continued to perform by the federation with reduced resources.
This is the most trying time for Pakistan when expenditure needs are growing but the revenue base is shrinking with imports contracting, negative growth in industrial output and deteriorating governance. Pakistan has already earned a distinction of having low tax-to-GDP ratio, even in the South Asian region. In this environment we are replicating the performance of the 1990s when additional tax measures were taken more frequently but tax-to-GDP ratio persistently fell. If we are transferring more resources to provincial governments then we have to redefine expenditure assignments because going forward, there is a likelihood of a rising expenditure burden on the federal government.
There is always a question mark on the provinces’ ability to spend because whenever enormous growth in allocations to provinces is witnessed, the provincial governments were not able to consume despite the spendthrift and profligate attitude of the government. The NFC award has badly ignored the most pressing demand of value for money assessment of spending.
The lower tiers of the government are bestowed with new assignments under the decentralization program without any guaranteed resource inflows from provincial governments. We should learn from the experience of our next door neighbor India where distribution of resources is a normal function of the government without any controversy. Indian resource distribution also makes it obligatory on the part of the states to further specify the share of local governments in their resources. In Pakistan’s case, lower tiers of the government are ignored in the process and discretion of the provincial government is adding to their woes. Resource shortage is hampering their simple development needs in many cases while resource abundance is feeding fat cows in pro-government district governments.
Another lesson from India is professionalism because their resource distribution is professional in approach. The composition of the NFC is again political rather than professional. The NFC award should be manned by professionals from different federating units. The countries which have centralized government structures with diversity, the distribution and burden sharing among federating units is always cumbersome. It is natural that resource generating abilities and resource consumption requirements of different regions is different and some sort of burden sharing is a must for the federation to run efficiently. The amicable agreement between the stakeholders requires intricate, professionally designed and unbiased formula based on sacrifices and tolerance. This needs a permanent structure and professionally managed independent body.
Political backing and commitment is a must but if a political solution is tried in an emotional environment like Pakistan’s, the result would be disastrous. Pakistan has a long history of NFC awards’ failure.
Punjab has been generous with respect to smaller provinces and its attitude has remained accommodative with three provincial governments having acknowledged the contribution of Punjab. Every province should have been generous and take into account growing expenditure needs generated in the center. The NFC should also devise a mechanism for equitable distribution of resources to the lowest tiers of the government.
With Musharraf’s devolution system, significant responsibilities have been transferred to lower tiers of the government. The federal government is obliged to share its revenue with provincial governments, but the provincial governments are not bound to share any amount with local governments. The centralized revenue generation to the extent of almost 95 per cent and subsequent transfer of resources among different tiers of the government creates problems and frictions.
We need more professional debates on inter-governmental relationship and consensus building. The provinces should be given some sort of fiscal autonomy by allowing them to generate more revenues. The local taxes like property taxes should be made into important vehicles of revenue mobilization by local governments. True, is the fact that waste and corruption increases with the downward movement of tiers but this is because of weaker monitoring and accountability. Once rule of the law is established and an accountability process is at place, the effectiveness of public spending at the lowest tier of the government would be increased.
Failure can be a beginning
The News
27-12-2009
We need a new approach to deal with climate change so that the world trundles along on a business-as-usual basis
By Pradeep S Mehta
With the end of Copenhagen talks and the delegates returning home nearly empty-handed, one can safely say that this much touted summit was, alas, a failure. It is not very difficult to diagnose the causes for this utter fiasco. Without going into the numbers game which was played at the summit, let us understand clearly that countries the world over, both rich and poor, still define their aspirations in terms of economic growth.
Proactive measures to mitigate climate change impacts based on reduction in emissions, however, requires tempering of growth aspirations which no country is yet willing to undertake. To resolve this conundrum, we need a new approach so that the world trundles along on a business-as-usual basis.
While it is natural for the developing world to promote economic growth, the reasons for rich countries pursuing the same are more subtle. While all rich countries enjoy a very high level of per capita income, by definition, incomes are still unevenly distributed and unemployment is rampant. Thus, even with the present high levels of average income, the level of satisfaction of wants is still low.
If people concentrated in the lower half of the income distribution are to pursue their economic dreams, these countries would have to continue growing as drastic redistribution is politically infeasible. This tendency is reinforced by multinationals and other business players continuing to measure success in terms of financial turnovers. In other words, economic growth still remains a top domestic priority for even rich countries and cut backs like the ones required for mitigation of climate change impacts do not constitute an attractive electoral agenda.
To add to this, the immediate effects of climate change are being felt almost entirely by poor tropical and island economies. In fact, in the near future, it is expected that life in the more prosperous temperate zone will become more productive as well as pleasant, though temporarily so.
In other words, the present circumstances are not ideal for rich countries offering to make sacrifices at the world stage for the sake of global welfare. Hence the tensions, as we saw at Copenhagen. For emerging and developing economies, even the levels of per capita income do not correspond to a satisfactory quality of life. This makes non acceptance of the burden of mitigation measures justifiable both from a moral and practical point of view.
From the above discussion, it is quite clear that governments, whose fortunes are tied to the aspirations of local constituencies, cannot afford to cooperate with each other in pursuing domestic agenda that collectively contributes to global good while seemingly sacrificing narrow national interest. The same equation also applies to the stalled Doha talks of the WTO.
The Copenhagen talks were based on the assumption that a top-down mechanism of signaling works. Thus, it was envisaged that a consortium of global representatives could persuade individual countries to get producers operating within their boundaries to reduce their emissions. However, this plan underestimated the lobbying power that big businesses as well as the electorates have with individual national governments. Thus, Copenhagen outcomes turned out to be more a reflection of what powerful domestic stakeholders wanted rather than unencumbered opinions of national representatives open to influence at the world stage.
Given that the top-down signaling mechanism has failed at Copenhagen and promises to do so again and again in the near future, what are the options? The obvious one pertains to the use of bottom-up processes for influencing consumer and in turn business preferences. The nerve centre of this mechanism should be located in a coalition of civil society organisations; the only combine which has shown considerable promise of not catering to either narrow economic or restricted national interests. These should not be restricted to the sidelines of global negotiations, but ushered into the centre stage.
Many representatives of reputed CSOs work in countries other than their own and empathise with the interests of the poor and vulnerable, regardless of their national identity. It is, therefore, natural for the civil society to be the flag bearer of the processes of mitigation/adaptation to climate change. The proximity of the civil society to the grassroots and, therefore, its ability to update the world on the impact of climate change on ground realities is another compelling reason for it to lead this movement.
How then should the civil society go about this task so as to exploit its characterised privileged position? The process should start with a broad-based demystification of the causes and impacts of climate change. Such demystification should aim to stimulate both the selfish and altruistic motives of global citizenry.
The goal should be to convince the international community that climate change is a likely outcome of the unscrupulous growth initiatives that are being witnessed all over the world and show no signs of abating; that the outcomes of climate change are bound to be catastrophic and would almost immediately affect two-thirds of humanity and all of the rest within the next fifty years; that even if this likely outcome does not happen, the agenda for mitigating climate change is a worthwhile one given that it would economise on scarce non-renewable resources and lead to breakthroughs in using more abundant renewable ones.
Such an advocacy agenda, when pursued by a global coalition of civil society organisations, is likely to generate a response from individual consumers in terms of higher demand for green goods and services. In other words, consumers would be willing to pay a higher price for these than their non-green counterparts. Businesses would then be compelled to produce more of these not on the basis of altruism but purely to sustain their businesses.
In this way, stimuli applied at the grass roots will generate a whole cycle of responses leading to a cleaner and more harmonious global environment without a total negation of the economic aspirations of individual economic actors, whether on the consumption or the production side.
The first half of the last century belonged to governments. The next half belonged to markets and the actors these staged. Both phases led to euphoria which was short-lived. Hopefully, the civil society can lead to a better deal in this century.
The author is the Secretary General of CUTS International. Siddhartha Mitra and Shruti Mittal of CUTS contributed to this article
27-12-2009
We need a new approach to deal with climate change so that the world trundles along on a business-as-usual basis
By Pradeep S Mehta
With the end of Copenhagen talks and the delegates returning home nearly empty-handed, one can safely say that this much touted summit was, alas, a failure. It is not very difficult to diagnose the causes for this utter fiasco. Without going into the numbers game which was played at the summit, let us understand clearly that countries the world over, both rich and poor, still define their aspirations in terms of economic growth.
Proactive measures to mitigate climate change impacts based on reduction in emissions, however, requires tempering of growth aspirations which no country is yet willing to undertake. To resolve this conundrum, we need a new approach so that the world trundles along on a business-as-usual basis.
While it is natural for the developing world to promote economic growth, the reasons for rich countries pursuing the same are more subtle. While all rich countries enjoy a very high level of per capita income, by definition, incomes are still unevenly distributed and unemployment is rampant. Thus, even with the present high levels of average income, the level of satisfaction of wants is still low.
If people concentrated in the lower half of the income distribution are to pursue their economic dreams, these countries would have to continue growing as drastic redistribution is politically infeasible. This tendency is reinforced by multinationals and other business players continuing to measure success in terms of financial turnovers. In other words, economic growth still remains a top domestic priority for even rich countries and cut backs like the ones required for mitigation of climate change impacts do not constitute an attractive electoral agenda.
To add to this, the immediate effects of climate change are being felt almost entirely by poor tropical and island economies. In fact, in the near future, it is expected that life in the more prosperous temperate zone will become more productive as well as pleasant, though temporarily so.
In other words, the present circumstances are not ideal for rich countries offering to make sacrifices at the world stage for the sake of global welfare. Hence the tensions, as we saw at Copenhagen. For emerging and developing economies, even the levels of per capita income do not correspond to a satisfactory quality of life. This makes non acceptance of the burden of mitigation measures justifiable both from a moral and practical point of view.
From the above discussion, it is quite clear that governments, whose fortunes are tied to the aspirations of local constituencies, cannot afford to cooperate with each other in pursuing domestic agenda that collectively contributes to global good while seemingly sacrificing narrow national interest. The same equation also applies to the stalled Doha talks of the WTO.
The Copenhagen talks were based on the assumption that a top-down mechanism of signaling works. Thus, it was envisaged that a consortium of global representatives could persuade individual countries to get producers operating within their boundaries to reduce their emissions. However, this plan underestimated the lobbying power that big businesses as well as the electorates have with individual national governments. Thus, Copenhagen outcomes turned out to be more a reflection of what powerful domestic stakeholders wanted rather than unencumbered opinions of national representatives open to influence at the world stage.
Given that the top-down signaling mechanism has failed at Copenhagen and promises to do so again and again in the near future, what are the options? The obvious one pertains to the use of bottom-up processes for influencing consumer and in turn business preferences. The nerve centre of this mechanism should be located in a coalition of civil society organisations; the only combine which has shown considerable promise of not catering to either narrow economic or restricted national interests. These should not be restricted to the sidelines of global negotiations, but ushered into the centre stage.
Many representatives of reputed CSOs work in countries other than their own and empathise with the interests of the poor and vulnerable, regardless of their national identity. It is, therefore, natural for the civil society to be the flag bearer of the processes of mitigation/adaptation to climate change. The proximity of the civil society to the grassroots and, therefore, its ability to update the world on the impact of climate change on ground realities is another compelling reason for it to lead this movement.
How then should the civil society go about this task so as to exploit its characterised privileged position? The process should start with a broad-based demystification of the causes and impacts of climate change. Such demystification should aim to stimulate both the selfish and altruistic motives of global citizenry.
The goal should be to convince the international community that climate change is a likely outcome of the unscrupulous growth initiatives that are being witnessed all over the world and show no signs of abating; that the outcomes of climate change are bound to be catastrophic and would almost immediately affect two-thirds of humanity and all of the rest within the next fifty years; that even if this likely outcome does not happen, the agenda for mitigating climate change is a worthwhile one given that it would economise on scarce non-renewable resources and lead to breakthroughs in using more abundant renewable ones.
Such an advocacy agenda, when pursued by a global coalition of civil society organisations, is likely to generate a response from individual consumers in terms of higher demand for green goods and services. In other words, consumers would be willing to pay a higher price for these than their non-green counterparts. Businesses would then be compelled to produce more of these not on the basis of altruism but purely to sustain their businesses.
In this way, stimuli applied at the grass roots will generate a whole cycle of responses leading to a cleaner and more harmonious global environment without a total negation of the economic aspirations of individual economic actors, whether on the consumption or the production side.
The first half of the last century belonged to governments. The next half belonged to markets and the actors these staged. Both phases led to euphoria which was short-lived. Hopefully, the civil society can lead to a better deal in this century.
The author is the Secretary General of CUTS International. Siddhartha Mitra and Shruti Mittal of CUTS contributed to this article
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