Pakistan, alongside other nations, cannot achieve sustained growth and reduce poverty unless it strengthens its institutions, especially at grass-roots level.
This was stated here on Tuesday by Dr A R Kemal, Director, Pakistan Institute of Development Economics (PIDE), at the inaugural session of the 19th Annual General Meeting and Conference of Pakistan Institute of Development Economics (PIDE).
Dr Kemal gave presidential address on 'Institutional Change Growth and Poverty Levels in Pakistan', and his views were corroborated by Dr Ishrat Hussain, Governor, State Bank, later while talking to media.
Dr Ishrat further said that a layman should get better health, education and civic facilities at local level, for which work going on.
Dr Kemal said that poor institutions result in higher costs, mainly due to inadequate information, enforcement of property rights and sometimes blocking new entrants.
Montek Singh Ahluwalia, Director IEO IMF, and former Indian Finance Secretary, counted agriculture modernisation, higher labour usage, better social service delivery, competitive private sector, opening up of trade, financial sector reforms and participatory approach as tools for pro-poor growth. He said economists have ended up in sustained poor growth, while tackling higher poverty in growing economies like South Asia.
Dr Kemal, supporting strong institutions, contended that better institutions help manage risk from exchange market risks, increase efficiency and raise investment returns. Policy formulation and implementation of policy need to be separated because the implementers, most of the time, obstruct change in status quo.
Decay in institutions has emanated from poor governance, creating corruption, inefficiency, ineffectiveness, inaccessibility, intractability and lack of motivation and incentives. The poor in particular have been hit hard by dysfunctional governance.
They have to resort to the informal institutions and unfortunately even those have been used largely by elite group for their own advantage. The service delivery is so poor that they prefer not to avail those facilities.
Police Force, instead of protecting the rights of the poor, harass them and in general the public officials take certain actions, which deny them their basic rights. With a view to creating better institutions, it is of great significance that formal and informal institutions are better integrated.
Given the fact that it might be very difficult and may not even be desirable to change the indigenous social structure, there is an urgent need to know more about the conditions that would help in functioning of the institutions.
This would be quite helpful in the governance structure of a country, ways of participation in political decision making process, ways of fighting social exclusion, etc.
While formulating and reforming the institutions, following should be taken into consideration:
-- The differentiation between the development of exogenous and endogenous institutions;
-- Existence of different levels of institutions with different time horizon of change; and
-- Importance of the local setting.
The government has taken various measures over the last few years to set up new institutions and reforming the existing ones. The PRSP reiterates the resolve of the government towards further reforming the institutions. Whereas the devolution is the most significant policy change in the institutional development in Pakistan, it must be ensured that the experiment succeeds.
Similarly, the efforts made to provide the poor an easy access to justice should continue. Police force needs to be so reformed that instead of being an instrument of government coercion, it should emerge as an institution which is trusted to be a protector of the poor.
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