Pakistan – Managing Reputational Risk

Time after time, governments, donors, and humanitarian agencies step in with support to people affected disasters and economic crisis. They often do this on an ad hoc basis, improvising how and what support to provide. Why not build systems that could respond quickly wherever and whenever crisis or disaster strikes? Disasters wipe out homes and livelihoods in an instant. Millions of workers lose their jobs in economic crises. Food price spikes put basic staple foods out of the reach of the poor. Governments often feel compelled to act in such situations. To be effective, support to crisis and disaster-affected people needs to be provided rapidly.
Pakistan sits on the tip of the ice berg , as one of most under protected countries as far as government community support & assistance is concerned. Elected governments ensure that they go asking for financial assistance on regular basis without spending half half as much in the required areas. How can governments improve income support to people facing major income shocks?
The most important step is to ensure that programs to provide income support are in place before shocks hit and that income support and other social services remain accessible during shocks and crises. This can be done by enhancing existing programs so they better capture the newly vulnerable and by adding new social protection programs geared for shocks and crises. This has fiscal implications: spending on social services should be counter-cyclical and strive to protect access to health, education, and social protection during crises, whether its war or elections is insignificant , as billions of rupees are spent every few years on election campaigns and securing votes banks through financial “ incentives “ , derived out of borrowed funds.
Keeping health, education, and vocational training free (or at least affordable) during crisis helps maintain enrollment, use of health services, and human capital. In part because schooling is free in most countries did the food, fuel, and financial crises that started in 2008 not precipitate declines in school enrollment–withdrawing children from school doesn’t add to the family budget; school lunches provide an added incentive to attend school in many countries. Health use, in contrast, declined markedly in some countries during the most recent crisis. Surveys have found that crisis-affected people reduced medical care and prescription drug use significantly. Pakistan s recent floods created an un-paralleled emergency crisis in most parts of our interior Punjab, KPK and Sindh , spiraling health issues and disease all over the country, leading to massive issue of immunization for millions of people. People lost immunity to minor ailments turning into major health concerns , due to a chronic lack of focus by government and socio development institutions , as media and politics was serving democracy not development.
As the old Japanese proverb goes: Vision without action is a daydream, while Action without vision is a nightmare. This could not be more prophetic as we turn our attention to what’s next for the Millennium Development goals (MDGs). Now, after more than ten long years since the launch of the eight MDGs, we have real targets that move toward ending hunger and, for example, improving maternal health. We have reached agreement about “What” development success would look like if results were achieved on the ground and what targets should be used to measure this success. Our country enrolled almost 14 million people on the BISP – income support program enforced by the last government whereby 7 million people are getting a financial grant every month to support malnutrition and reduce hunger. Apart from that, a lot remains undone.
As we look to 2015 and beyond, it’s time to ask another set of questions: the HOW questions. How does Pakistan implement development programs to deliver the results needed, on time, at the lowest cost, and to the maximum number of people who need them? How do we identify and remove bottlenecks that keep the work from getting done? How do we learn as we go to make sure that problems are identified, fixed, and the project stays on track to achieve the results the country cares about? The next governments economic managers need to decide and bring out the right answers.
Ninety years ago, in his A Tract on Monetary Reform, Keynes famously wrote “In the long run we are all dead”. That observation recently stirred a lot of debate for all the wrong reasons. The actual context in which Keynes wrote this observation was a discussion about the quantity theory of money, which states that doubling the supply of money will only double the prices, but will have no consequences for other parts of the economy. In Pakistan , the theory has proven as the truth. Higher fuel means higher travel costs for the commoner here and a lower devalued rupee obviously means reduced buying power and endless pain , to match the need with the affordability. Most of us today are talking savings rather than investments, as liquidity is reduced within the market, hence highlighting the need for better governmental reforms and allotting better budget to GDP ratios, to certain sectors where we expect to raise outside funding and financial aid.
Economists will have to make their hands dirty and delve into the complicated dynamics of the here and now ,as simple theories that might describe long-term relationships are just not good enough to deal with current issues. Educational emergency persists in most parts of the country and health care suffers due to reduced focus by change agents and NGO s. Risk management needed to secure future development goals for the country will be the step in the future by identifying pockets of direct and indirect corruption and by automating checks and balances at NADRA and other focal points of massive people contact. Hospitals need to revisited as budget flows are impacted due to mismanagement of funds , allotted to them. Careful analysis of salaries for medical and health care professionals must be scheduled, in view of the required need to increase the speed of provision of services.
We must also look at coming trends in saving and investment. The share of developing countries in global investment was stable at around 20 percent for many decades. In the last 10 years that share has started to rise rapidly and the report anticipates that, within 15 years, two-thirds of global investments will take place in developing countries. That raises many questions. Will these economies save enough to finance all the investment opportunities? That is not obvious as ageing populations will save less. Even with enough saving it is a huge challenge to create the needed efficient financial intermediation in the fast growing developing world. Till now, developing countries have been virtually absent from the international financial arena. Once their share in global investment and saving rises to two-third, that is no longer possible. Policy makers will have to carefully prepare an increasingly responsible role in international financial markets and manage risk effectively by lending only to “ responsive governments”.
Emerging long-term trends pose key challenges for Pakistani policy makers and economists alike, with current issues like flawed elections results leading a delayed democratic transition. Little things count. Energy crisis that could further lead to inefficiencies and affect the people , their children and their livelihoods. Next change in the government must have the “ right think- tank “ in the corridors of power , to bring the power from the government into the arms of the people – to live , thrive and to prosper in their country that is a pearl in the desert : the resilient economy in the making. Until then, we manage risk to ensure future development.
The writer is a banker and media broadcaster.