PERSISTENTLY high inflation in Pakistan is eroding the purchasing power of the poorest, limiting access to basic facilities. The World Bank estimates that poverty will remain around 40 per cent, with 10 million people at risk of falling below the poverty line due to potential economic shocks. Despite this, social protection programmes receive minimal attention, with Pakistan allocating less than one per cent of GDP to social assistance, thus offering little relief to the poor.

With the government’s limited fiscal space and competing priorities, it is clear that investment in social sectors is likely to remain low. Therefore, the government must focus on creating a conducive environment for social delivery organisations (SDOs) to step in and address these gaps.

The Doing Good Index of the Centre for Asian Philanthropy and Society examines the regulatory and societal environment in which private capital is directed towards philanthropy. It ranks countries in four categories based on its findings: ‘doing well’, ‘doing better’, ‘doing okay’, and ‘not doing enough’ (from best to worst). According to the DGI 2024 report, which surveyed 122 SDOs in Pakistan through the SDPI, the country is classified as ‘doing okay’, indicating an unfavourable regulatory environment. This classification represents a decline from its ‘doing better’ status in 2020.

The report highlights a drastic increase in the regulatory burden for SDOs between 2020 and 2024. This period coincides with severe impacts on marginalised communities in Pakistan due to Covid-19, climatic shocks, and the Russia-Ukraine war. Instead of easing the regulatory burden for SDOs during this critical period, further hurdles were put up with primary focus on heightened scrutiny of political funding and rigorous monitoring of financial flows to NGOs under the pretext of preventing money laundering and terrorism financing.

SDOs are struggling to meet their financial needs.

The report shows that in Pakistan, the process for obtaining clearances and registering an SDO takes an average of 360 days, significantly longer than the Asian average of 123 days. Once registered, additional complex laws hinder the smooth functioning of SDOs, creating disincentives for philanthropic work.

In terms of finances, SDOs are facing growing difficulties in transferring and receiving foreign funds. This issue is compounded by a decline in local funding due to reduced purchasing power, which limits individuals’ capacity to donate. Consequently, SDOs are struggling to meet their financial needs and to expand their coverage. The absence of incentives and hurdles in claiming tax incentives for corporate donors exacerbates the situation.

Furthermore, the procedures for accessing government procurements are reported to be highly complex. Non-transparency remains a significant concern. The proportion of SDOs receiving government contracts has noticeably declined between 2020 and 2024, alongside a sharp decrease in the perceived transparency of the procurement process. During 2020 to 2024, the percentage of SDOs that viewed the procurement process as transparent dropped from 48pc to 10pc. Additionally, the percentage of SDOs that found it easy to win government contracts fell from 30pc to 6pc, and those finding it easy to access procurement information decreased from 64pc to 11pc.

Unfortunately, it is not the first time in Pakistan that political agendas have taken precedence over social welfare and public well-being. As with many other decisions, the move to increase regulatory burdens on SDOs appears largely driven by the desire to undermine a particular political party. The PTI foreign funding case, coupled with Pak­istan’s efforts to comply with FATF requirements, led to tighter controls on foreign funding, not just for political parties but also for NGOs. Along with decreased funding for NGOs, this has created rent-seeking opportunities, as most government contracts are awarded to well-connected SDOs.

According to the report, the majority of SDOs believe that the removal of this undue regulatory burden can significantly enhance their performance, allowing them to better cater to the needs of an increasingly deprived population. Moreover, a single oversight department should be established to streamline the process and reduce procedural delays and red tape.

While philanthropy is ubiquitous in Pakistan, much of it is informal and unrecorded. Regulating these activities is crucial to ensure comprehensive coverage and to prevent duplication. With negligible public spending in social sectors, it is essential for the government to set political agendas aside and create a conducive environment for SDOs to address these deficiencies.

The writer is a senior research associate at the Sustainable Development Policy Institute, Islamabad. The views are the writer’s own and do not reflect the SDPI’s position.

X: @AroojWDar

Published in Dawn, August 21st, 2024