World Environment Day 2010: Cause for Pause or Celebration in Pakistan?

So another World Environment Day has come and gone. Doubtless, our environmental managers at the federal and provincial Environmental Protection Agencies would have organised some workshops and/or walks. Commitment to putting a stop to environmental degradation and to achieve all the targets contained in the National Environmental Policy (yes, we have one) would have been routinely expressed, sans conviction and without any explanation of how these commitments would move off the pages of policy documents and transform into tangible results. A profound sense of deja vu hits one at these events. Same promises, different faces, same frustration at lack of outcomes despite considerable inputs.

There may be even greater cause for alarm this year.

First, a few days before World Earth Day, the provincial government of Punjab announced, quite shamelessly and with great fanfare, that it had decided to allot more than 30,000 acres of forest land to 'jobless youth' (no doubt a euphimism for political cronies) for agricultural use, along with seed money (pardon the pun) of Rs.900,000 each. Amendments in the Forest Act 1927 were made to enable this plan because the British-enacted legislation prohibited conversion or use of forest land for any other purpose. And all this happens in the background of warnings by experts about the alarming rate of deforestation in the country (second worst in the world according to one source) and the fact that more than 1.44m of agriculture land is lying unutilised in Punjab.

Second, the Pakistan Economic Survey 2009-2010 released yesterday paints a dim picture of, amongst other things, the state of environmental management in the country. Consider this: only 44% of the population has access to sanitation facilities; the level of particulate matters in major cities is nearly 4 times higher than safe limits (see Figure 1); 40% of all deaths and 60% of those of children are related to water borne diseases with only four cities (Karachi, Faisalabad, Peshawar, Islamabad) equipped with water treatment plants, all workin under capacity and only the one in Islamabad meeting the National Environmental Quality Standards (NEQS); 92% of the industrial wastewater is dumped untreated into surface water resources like canals, rivers etc. Depressing is too mild a word to encapsulate the enormity of challenges.

And what of the industrial and corporate sector? Industries in Pakistan consume 23% of total water available and discharge around 9000 million gallons of wastewater from industrial activity into water bodies in Punjab and Karachi. Untreated. Daily. Nearly 70% of biological load is generated by textile and beverage industry with other notable (and habitual) partners in crime being the textile, tannery, paper and pulp.

Several positive initatives have emerged and often spearheaded from or facilitated by the public sector: the initiative to raise environmental awareness in schools, promotion of the use of CNG (Pakistan is the world's largest consumer of CNG according to the International Association of Natural Gas Vehicles, with 2.4m CNG-fueled vehicles as of the start of 2010) and moves for collaborative efforts to combat industrial pollution, such as the Effluent Treatment Plant in Korangi industrial area at Karachi, established at a cost of Rs500 million by a consortium of the government of Pakistan, the embassy of Netherlands, and Karachi’s district governments in addition to the Pakistan Tanners Association (PTA); even the controversial amendment by the Punjab government in the Forest Act 1927 referred to above has a silver lining in the form of enhancing the lefine for various offences, including theft of forest wood from the previous level of up to Rs500 (yes Rs.500!!) to Rs.1 million. The industry itself has also tried to address the problem, including through the installation of water treatment plants (133 in Punjab, 207 in Sindh and 2 in Khyber-Pakhtunkhwa). But there are miles to go and promises to keep for the private sector. Indeed, studies such as the one by the SDPI suggest that the only way to effectively tackle environmental issues such as deforestation, is for the private sector to come good on its CSR promises and practices.

The problem, as always, lies with the utter failure to implement plans. And the pain of that failure is hightened by hollow politico-speak and designer commitments to for e.g enhance forest cover in Pakistan from the existing level of 5.2% to 6% by 2015, uttered in photo-op events and then signing into law decisions that will go the exact opposite way.

Philanthropy On the Rise in Pakistan: Whither CSR?

Over the years, I have been struck by the inability of a segment of the corporate sector in Pakistan and almost all the bureaucrats, to distinguish between philanthropy and corporate social responsibility (CSR). While one can expect bureaucrats to be lost betwixt the two (as they are with most other things), I find myself flummoxed for an answer as to why otherwise smart corporate managers do the same. Discussions on CSR often immediately veer off into talk of donations to one charity or the other; or this madrassa or another. This tendency to equate donations and charitable giving with CSR is stronger amongst local and smaller companies and can perhaps be linked to the ingrained religious concepts of giving and sharing of wealth, but it is also evident in some managers at MNCs and larger local firms. More importantly, in my view at least, it has clouded both the dialogue and the practice of CSR in Pakistan.

To my mind, this represents--and stems from--a failure of education and awareness about CSR. As a result, while philanthropy in general has doubled in value from Rs. 70b in 2000 to Rs.140b this year and as corporate philanthropy has seen a similarly impressive growth--touching Rs. 1.67b in 2007 from a low base of Rs. 228m in 2000--the growth of CSR in Pakistan does not compare favorably. One measure of this is that membership in the Pakistan Global Compact network comprises only 83 members. The number drops to only 55 if the local network's own website is to be trusted.

While there is nothing wrong with corporate giving, it is a subset of the broader notion of CSR. And as the global turmoil caused by irresponsible behaviour of managers across the world points to, the need of the hour is for corporate responsibility, not giving alone. Judging from the evidence, it appears Pakistani businesses may be taking the easy way out by doling out large sums of money, rather than adhering to ethical and more responsible modes of corporate action, right from sourcing to fair wages to better working conditions and occupational safety and health practices to using cleaner,environment-friendly production technologies.

The fact that this is not done, makes one wonder: is the rise in corporate philanthropy due to mere ignorance? Or is it a sort of corporate qisas and diyat--or blood money?

Microfinance in Pakistan: Stymied Future?

Microfinance in Pakistan has been the subject of much discussion. It was one of the important initiatives of the last decade, seeking as it did, to reach out to the millions of poor people particularly in the rural areas who lack access to formal mechanisms for financing their needs. Financial and technical support from the ADB and World Bank and leadership from the State Bank of Pakistan helped establish several institutions, most notably the Khushali Bank, as well as put in place a regulatory framework for the sector.

Did all of this work?

If you listen to industry practitioners such as Roshaneh Zafar, founder of Kashf Foundation, there is much to rejoice about. In an interview recently published in the daily Dawn, she outlines Kashf's rise from a small organisation to one that now has over 150 branches and has disbursed over $202m in loans to over 300,000 families. Kashf claims to be a sustainable organisation and its efforts have been lauded and supported by various international organisation. In her interview, Ms. Zafar paints a fairly optimistic picture for the organisation itself, if not the sector.

But independent analysis of the sector and its future is not as rose-tinted. One analysis by Rauf and Mehmood published in the Pakistan Economic and Social Review points out that the sector is charactersied by operational and financial sustainability, the overall cost per borrower is high and increasing, while productivity ratios are low. The outreach and size of the sector is also small and growing slowly, with only 1.14m active borrowers in 2007. The cost per borrower at 32.5% suffers in comparison to 18% in South Asia as a whole.

The study identifies several problems, including overambitious outreach and expansion programs, particularly of the Microfinance Banks (which the study highlights as being the most inefficient) and points to the need for consolidation before expansion. In her interview, Ms. Zafar also points to the impact of the economic downturn as a constraint for growth.

Despite its problems, investment in improving and expanding the microfinance sector in Pakistan is important, given the extremely low coverage of the banking sector of the rural areas. However, there are a few other considerations: one, the firewalling between the social and commercial aspects of microfinance needs to be defined further and understood by all players. Microfinance is a business and should be run like one. Confusing it, as some politicians and bureaucrats tend to do, with alternative pro-poor initiatives such as cash transfer schemes such as the Benazir Income Support Program (BISP), would only exacerbate some of the difficulties the sector faces in terms of policy and political support under populist governments. Lest this be misconstrued, let me state that I believe the cash transfer initiatives like the BISP to be effective short term means of reducing the impact of poverty. Despite issues of poor targeting and potential for rent seeking which Ms. Zafar points out, the BISP offers a complementary mechanism for poverty alleviation. However, it is NOT a business and hence its operational model has to be necessarily different from that of Microfinance institutions. The pressure on MFIs (I use the term here to cover microfinance banks, rural support programs and micfrofinance institutions) is therefore that much greater to raise their efficiency and to become more sustainable. I often get the feeling the sector is dissipated in its efforts, with too many small players. Mergers and consolidation, as well as partnerships may be the way forward.

There is another angle to the need for strengthening MFIs: social enterpreneurship. In order to promote the concept in the rural areas, MFIs would need to be able to support entrepreneurs through microloans and other products like microinsurance. At the moment, that is an untapped, virgin market but one which will hopefully come under the radar of the MFIs sooner than later.

Nestle Pakistan Talks CSR

Pakistan is the world's fourth largest milk producer so its understandable that Nestle has such a large dairy operation in the country. Nestle not only has a community-based milk purchase system which entails collection of milk twice a day from over 150,000 dairy farmers, but has also a program in collaboration with UNDP to train over 4000 women livestock workers in rural Punjab, Pakistan's largest province, in primary animal healthcare. Nestle also has several other CSR programs ongoing.

More recently, Nestle has come under immense fire due to its bungling of the 'no logo fiasco' on Facebook, which really does amaze one as to how wrong even the best of corporate entities can go when dealing with the consumers and also how poorly some large corporations understand the new social media.

Eversince, Nestle has been trying to do damage control. And although not directly aimed at addressing the logo (or no logo) fiasco, this podcast of an interview with some senior Nestle Pakistan executives, makes for interesting hearing. Have a listen.

Calls for Stronger Monitoring of the Extractive Industry

Participants at a recent conference on the oil and gas sectors called for stronger legislation that empowers the government for assuming a stronger role in monitoring of extractive practices in these sectors. The range of recommendations was quite diverse and included providing provincial and local governments with a enhanced role in development of projects in their geographical jurisdictions, better oversight of CSR fund uses and reduction in 'payments' (read bribes) to fedual lords.

The oil and gas sector is an important part of the Pakistan economy, attracting substantial Foreign Direct Investment ($612m in 2008-2009). By most accounts, there is huge potential for expanding the size of this contribution and the Government has taken several measures to promote further investments including allowing for 100% foreign equity, easy repatriation of profits etc. (see www.boi.gov.pk for details). For all these efforts, critics including the Oxfam supported Participatory Development Initiative have argued that the extractive industry regularly and blatantly violates provisions for CSR as contained in the Petroleum Concession Agreements, which legally bind companies in the sector to undertake CSR activities in the regions where they are extracting oil and/or gas.

Civil society discontent against the extractive industry, both in terms of its impact on the environment and its implications for local population, is not limited to Pakistan and the sector has been at the centre of much heated debate and resulting in the Extractive Industries Transparency Initiaive, a global call for action for responsible practices, established in 2003 and which outlines a set of principles for the industry to follow. Pakistan, despite its sizeable sector, is not a part of the EITI and it's about time that it should.