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Finding other sources of money to help Pakistan’s flood victims

It is now over 100 days since devastating floods struck Pakistan, destroying villages and crops from the very north of the country right down to the south. An estimated 14 million people have been left in need of aid and soon the hard winter season will be upon them, with temperatures dropping especially sharply in the northern regions. To-date foreign governments have pledged only 40 per cent of the 1.9 billion dollars requested by the United Nations (UN) to help Pakistan. Since there is such a large shortfall, aid organisations are now turning to the private sector for financial assistance.

Recently, the UN Office for the Coordination of Humanitarian Affairs (OCHA) held a conference for companies, philanthropists and charitable foundations to involve the private sector in the humanitarian efforts for Pakistan. Since there is no independent body monitoring donations and with so many aid organisations on the ground, it is hard for companies to know the best route for their giving. The aim of the meeting, entitled “United for a Cause”, was to include companies in the massive aid programme but within a U.N.-backed framework, so organisations can see how their funds are being spent.

Many of the large corporations who attended the meeting have significant business networks in Pakistan. Some were interested in loaning their facilities to assist humanitarian efforts, such as warehouses for storing supplies or trucks for delivering aid. Building companies were also offering their services to help with the reconstruction of houses and schools damaged by the floods, either by providing materials or qualified personnel to oversee the projects. Visits to some of the devastated areas are being organised by the aid agencies and Pakistani authorities so that private-sector companies can see where their donations would be going. Officials from the Pakistani government are keen to encourage such inter-working between the private sector and aid agencies.

This week, the Pakistani government also announced it would increase taxes to help provide more support for flood victims. The government hopes its new measures will raise 765 million dollars in additional taxes for the financial year 2010-2011, with an extra 10% taxed on income between January and June next year. However, it is common in Pakistan for people to avoid paying tax, especially where they are not salaried and the tax cannot be taken at source. Less than 2 per cent of Pakistanis pay income tax, from a working population of around 100 million people. Many private traders and individuals underestimate their income on official forms to avoid paying tax. The US Secretary of State, Hillary Clinton, spoke on this issue last month, calling it “absolutely unacceptable for those with means in Pakistan not to be doing their fair share to help their own people”.

It is unlikely that in the short term, the Pakistani government will be able to implement any kind of significant overall of the tax collection system in Pakistan. Therefore, the country will need as much help as it can get from private industry. A study conducted by the World Bank and the Asian Development Bank estimates the total losses from the floods total around 9.7 billion dollars.

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