Daily Times

It is global fascination to emulate China in lifting about 700 million people out of abject poverty, in a period of three decades. This is miraculous and countries like India, Turkey, Ethiopia, and Nigeria etc. have already achieved outstanding results by learning various Chinese lessons of poverty reduction.

Poverty can be defined as a condition in which a person or community lacks necessary financial resources and essentials to maintain a minimum standard of living. In fact, poverty anywhere is a threat to prosperity everywhere. Miserable consequences appear in the form of slavery, prostitution, hunger, famine, illiteracy and epidemics in the vicious circle of poverty. Factors contributing to poverty include corruption, debt, bad governance, lack of access to education, underutilization of resources, shortage of capital etc.

Despite robust economic growth rate and the operation of Pakistan Poverty Alleviation Fund (PPAF) since year 2000, 24% population of Pakistan is still languishing below the national poverty line of Rs 3030/- per month. Prime Minister Imran Khan is very keen to take up his crusade against poverty by introducing a comprehensive poverty alleviation package with the help of Chinese success story. In the mid of 1980s, China established Leading Group for the Economic Development of Poor Areas (LGEDPA) as primary decision-making body to collaborate with all country-wide anti-poverty programmes. As a result, profound economic transformation is conspicuous.

Let us analyze the various aspects of Chinese model befitting the situation of Pakistan.

A. The Chinese turnaround kicked off with small farmers and the rural areas. Chinese state authorities ensured that the peasants had the resources, expertise, knowledge and necessary incentives for maximization of output. These policies were supported with the supply of inputs, agricultural research, price control and access to market. As a result, huge reduction in poverty was registered that changed fortunes of rural citizens. Now, the same solution can be applied to around 60% rural masses of Pakistan who are mostly associated with agrarian living.

B. Above development gave birth to township and village enterprises (TVE) that proved the cornerstone of Chinese miracle. Only between 1980 to1985, the rural poverty of China declined sharply from 76% to 23%. Higher production and income gave rise to increased demand of manufactured products and the investment of household savings in the business. These developments led to a large scale growth of rural industry in the form of TVEs. These township and village enterprises pushed the whole China forward, as their contribution in GDP increased from around 6% in 1978 to 26% in 1996. All famous private manufacturing companies of China like New Hope Group, Kelon and Chery etc. sprouted from rural areas. Presently, 95% Chinese villages have electricity, roads, telephone, gas and running water. Large areas of Baluchistan, Gilgit Biltistan, Thar, Southern Punjab and Kohistan in Pakistan await the similar treatment.

C. Heavy investment by China in knowledge infrastructure has also produced outstanding results. Going beyond basic education, advanced research centers were established to extend information and knowledge about innovation, new strategies, production methods and policy making for all sectors of the economy. Special focus was made on dynamic learning process whereby experiment was based on feedback to refine the ideas for maximizing effectiveness. China has built fastest supercomputer, sent its astronauts into space and has created its own system of satellite navigation by harnessing innovation networks and global knowledge. Pakistan can seek Chinese cooperation to develop its own knowledge economy.

D. China secured poverty alleviation with a strong state commitment. The state functions were responsible for micromanagement of markets, a welcome environment for investment, decentralization to accommodate local needs & promote local ownership of policies and ethnic homogeneity despite the overwhelming Hans, Mongols, and Tibetans & Uighurs. In developing countries, the state has mostly been found to be a barrier to progress with nepotism, corruption and destruction of institutions. However, the present government of PTI seems to have the necessary will and resolve of the state to pull hapless millions out of poverty.

E. China first experimented with the new policies and then implemented them to reform the system. It is evident the way state-run communist economy was restructured with capitalist ideas and market based system. This was achieved with piecemeal approach through hit-and-trial. The same approach is required in Pakistan to eradicate poverty.

F. Throughout the unprecedented turn around, China focused on self-reliance by inviting heavy investment in key sectors and building national champions that could compete internationally. Economic pygmies turned into global commercial giants.

G. Another major contribution came from a favourable development of political economy with the annexation of Hong Kong that served as a conduit for 60% foreign direct investment. An identical situation is here in Pakistan with over US $ 50 billion CPEC project. It would certainly prove a main initiative towards poverty reduction. An effort of the present government to revamp the previous agreements, like Malaysia, is a right step.

In addition to the fore-cited Sino-strategy for poverty decrease, easy access to credit, reforms in Usher & Zakat system, development of shelter homes, institutional freedom, provision of basic health & education services and price control etc. can also facilitate the journey from rags to riches.

The author is a banking expert and currently serving as Country Manager of JSC Subsidiary Bank NBP Kazakhstan (Foreign Subsidiary of National Bank of Pakistan).

Published in Daily Times, November 27^th 2018.