The writer is a corporate and social entrepreneurship lawyer, founder of SEPLAA and a doctoral candidate
With the new PTI government at the helm of affairs, all eyes are now following their reform strategies in all the sectors across the board. One such sector that has been badly hit by poor policies in the past is the social sector.
The purpose of the social sector is to support the government in carrying out those activities for the welfare of the people where such support is lacking or where gaps exist. A surge in donor-funded activity in Pakistan was witnessed in two instances. In the first, a significant rise was witnessed after the Kerry-Lugar-Berman Act was passed into law on October 15, 2010. This authorised the release of $1.5 billion per year to Pakistan’s government as non-military aid from 2010 to 2014. In the second instance, the 2010 Pakistan floods saw a large inflow of funds into Pakistan, some of which is still unaccounted for due to a lack of a comprehensive social-sector policy that required regular checks. It was these unregulated activities which were then swiftly curtailed by the government departments and agencies from 2015-2017. Unfortunately, this did not solve the situation of the poorest of the poor who were dependent on the work of several of the NGOs curtailed. The social-sector gaps were at a risk of being widened unless the NGOs were not supported by the government. The government wanted all funds to be routed directly through them to their selected NGOs and not directly to the NGOs. This raised alarm and fear of corruption.
A new Social Welfare Policy Draft was floated to the Social Welfare Department and the Planning & Development Department after a year of discussions with relevant stakeholders, including department, NGO and social enterprise representatives, by the Center for Public Policy & Governance Forman Christian College University Lahore from January 2017 to January 2018. However, the document could not see the light of the day due to the elections and change of government and was therefore not followed up by the relevant departments. The new PTI government, which was seen to be pro-development in K-P, must be invoked to revisit the national SWP, in the interest of the entire country.
Meanwhile, the Securities & Exchange Commission of Pakistan, under which the not-for-profit companies were hitherto registered under section 42 of the Companies Ordinance of 1984, was also amended. With the Companies Act 2017, promulgated on May 30 2017, the objective of reforming the company law to facilitate the corporate sector and not-for-profit companies was put into shape. The new section 42 of the Act lays down greater control of the Commission on the working of the not-for-profit companies. Section 42(1)(c) states, “Where it is proved to the satisfaction of the Commission that an association is to be formed as a limited company — c) such company‘s objects and activities are not and shall not, at any time, be against the laws, public order, security, sovereignty and national interests of Pakistan.”
Similarly, section 42(5)(e) states, “The Commission may at any time by order in writing, revoke a license granted under sub-section (1), with such directions as it may deem fit, on being satisfied that — (e) the company has acted against the interest, sovereignty and integrity of Pakistan, the security of the State and friendly relations with foreign States.”
These section sub-clauses point directly to the ‘anti-state’ accusations of the intelligence agencies pointed earlier towards rights-based NGOs.
Social impact creators need another form of legal identity to create sustained social impact without continued foreign aid dependency. Such a tool for development is the social enterprise model, but there are no laws presently available for social enterprises, apart from the NGO laws and Companies Act 2017, which do not support for-profit social enterprises.
The time is ripe for the 500,000-plus social enterprises operating in Pakistan to be recognised as agents of creating employment, economic activity and grassroots level change, and be awarded the support from the government. And the first step would be to legally recognise them as separate entities from companies, NGOs and charities.
Published in The Express Tribune, August 30th, 2018.