Policy against poverty

  • Subsidising essential goods and services frees people to concentrate on their careers

Feb 13, 2018-

The 2017 Multidimensional Poverty Index (MPI) was produced jointly by the National Planning Commission (NPC) and UK-based Oxford Poverty and Human Development Initiative (OPHI). It is an effective way to determine the country’s poverty status, and measures three major themes: education, health and living standards. According to the OPHI, “A person is poor if she or he is deprived in one-third or more of these weighted indicators.”

As per the MPI report, 28.6 percent of Nepal’s population suffers from poverty, 8.1 million Nepalis are deprived of accessibility, and one out of three people is deprived of the essential. The report has also listed Nepal as the top performer in terms of MPI reduction. Nepal was able to show improvements in the nutrition and child mortality segments from 2006-10, besides reducing its official MPI digit from 0.313 to 0.127 from 2006-14.

Globally speaking, 1.45 billion out of the 5.4 billion people in the world are MPI poor, and 48 percent of them are children aged up to 17 years. This means there are 689 million MPI poor children globally. Among them, 44 percent, or 300 million, live in South Asia. This figure represents half of all the children in South Asia. According to the MPI, South Asia holds 48 percent of the world’s multidimensionally poor people. Nepal and Bangladesh have been reducing their poverty levels faster than India. Between 2004 and 2007, Nepal reduced its poverty rate by 4.1 percentage points per year while Bangladesh slashed its poverty rate by 3.2 percentage points per year.

Great strides, yet not enough

Among the MPI destitute people in South Asia, 66 percent (2010-11) live in Afghanistan, 54 percent (2005-06) in India, 44 percent (2012-13) in Pakistan, 41 percent (2014) in Bangladesh, 28 percent (2014) in Nepal, 27 percent (2010) in Bhutan and 5 percent each in Sri Lanka and the Maldives. Nepal remained a star performer in the MPI report by reducing poverty significantly from 64.7 percent to 44.2 percent between 2006 and 2011. However, despite the constant efforts that are being made to tackle poverty, Nepal has not been able to extricate itself from the list of the poorest countries in the world.

Nepal’s development process has been slowed by political instability. One of the powerful forces that is pulling Nepal out of poverty is remittance. The money sent home by migrant workers abroad has halved Nepal’s poverty in less than a decade. Therefore, strengthening the management of foreign labour migration can do a lot more in reducing poverty. The MPI poverty reduction success has a direct relation with remittance in terms of increasing purchasing power, boosting education and closing the gender gap.

However, there is still a lot to be done before Nepal can graduate from a least developed country (LDC) to a middle income country (MIC). The country needs to reduce poverty and increase the people’s income level. Nepal has implemented several options and has succeeded in reducing poverty, but reforming and strengthening the education system is the evergreen approach. The next option could be implementing a ‘voucher system’ for low-income groups.

Lessons to development

Education reform is not a new thing in Nepal. All politicians and policy wonks talk about education reform. The government has been investing in the development of education. Government funding for public schools is spent on school management committees, teacher training and salaries and physical infrastructure development.

‘Red tape’ in the government mechanism is another problem that influences the effectiveness of the work. In the fiscal year 2016-17, the share of education in the national budget reached 11.6 percent despite government plans to raise it to 20 percent. When the government invests in education, it is not always sure that every student will perform exceptionally well. There are also ‘wastage’ students, especially dropouts and failures. Exceptionally good students perform well in their careers and easily get jobs; but for dropouts, career options are limited.

Therefore, in order to strengthen these students, the government can provide them with vocational training (including IT and software) and equip them with skills which are in high demand these days. This training will ensure jobs for them. Jobs will put money in their pockets and allow them to live well. Investing in education (whether academic or vocational) truly builds human capital that is vital in reducing poverty.

Poverty is a policy failure. Ineffective policies drive poverty. If the cost of goods and services are high, people won’t be able to afford them. This keeps people trapped in poverty. And in order to provide goods and services conveniently and cheaply, policy innovation is required. In Finland, the government is planning to give every citizen a basic income of €800 by replacing benefits.

Similarly, a voucher system can be one option to kill poverty in Nepal. Under this system, vouchers will be provided to low-income families. The voucher can be exchanged at selected government centres for essential goods and services including education free of cost. By subsidising people’s basic needs, the government is enabling them to focus on their career and professional development. Investing in human capital rather than physical capital is a sure and certain way to beat poverty.

Limbu is a research associate at Garjan-Nepal

Published: 13-02-2018 08:10

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