The magnificent Karakorum Mountains and the mighty Indus River combine to cast a steely image for the remote communities living in this picturesque environment. For centuries, the poor farmers in the village valleys of Gilgit Baltistan in Pakistan have been enduring natural disasters,poverty and climate change, making it even harder for them to break out of the cyclical pattern of inherited poverty. As they continue to live amongst mountains, glaciers and frozen lakes, we see in parallel Pakistan’s middle class emerge stronger than ever. Almost 90% of the increase in national consumption over the past two years has come from the middle class with almost 38% of the country comprising the middle-income class. While of course, this is tremendous reason to celebrate, it also provides an opportunity to reconsider development priorities and encourage a shift towards the poorest segments.
The age-old debate on public vs. private sector engagement for provision of economic benefits seems to be more relevant now than ever in the specific context of Pakistan. While the public hand continues to have a wider and deeper impact reach, the private sector promises solutions that are not only sustainable but also systemic. Pakistan has seen several aid programs crumble and disintegrate as soon as aid dollars are pulled away, while also simultaneously cutting off any benefits they may have been providing. If there is anything to be learnt from our experience of working with donors, it is to consider a systemic approach as policy makers and development practitioners while setting pro-poor growth priorities.
With USAID historically being the largest source of donor funds in Pakistan and the Trump Administration nowvowing to slash aid to developing countries by over one-third, it is imperative to decrease reliance on aid andsupport private sector engagement in grass-roots poverty alleviation programs. While private sector led development is still relatively new in the global development landscape, it is one that has proven to be successful even in its nascent stages. Especially in emerging economies such as Pakistan that are struggling to transition towards sustainable growth patterns, there is a general tendency for development to be biased, unequal and limited to a particular economic class, with little or no trickle-down effect of benefits to the poorest. Private sector development addresses just this problem by making markets work for the poor and supporting a more egalitarian division of benefits.
Private sector development entails investment in private enterprises to promote the inclusion of the poor segments of society in the benefits realised by the enterprise. It could either be through direct employment at the enterprise, through increased employment in an associated enterprise, through inclusion in their supply chain, or through other production processes so that the poor can also earn an income as the enterprise grows. This development strategy promises inclusive growth and allows the poor to also benefit from any economic growth by being included in the formal economy. The systemic nature of this approach also ensures that the poor continue to benefit even after donor aid is pulled away.
The world saw the East Asian economies such as Singapore, Taiwan and Japan rise as an example of quick, sustained and most importantly, shared economic growth from 1965 to 1990, by supporting a bottom-up approach.The common denominator in all the East Asian Tigers seemed to be the flourishing private enterprises and a push towards utilising human talent and resources to support the private sector and consequently tackle varying socioeconomic inequalities.
Private sector development promises great benefits, waiting to be tapped into by the Pakistani economy. Benefits that are not only limited to the select few in the plains of Punjab but also those residing in the remote mountainous valleys in regions such as Gilgit Baltistan.
n The writer is a freelance contributor.
