Professional Documents
Culture Documents
iii
Acknowledgements
Appreciation for special contribution
Dr. Nadeem-ul-Haq, Deputy Chairman, Planning Commission of Pakistan, H.E. Mr. Abdul Wajid Rana, Secretary,
Economic Affairs Division (EAD) and Executive Director of IDB Board; Mr. Hassan Nawaz Tarar, Additional
Secretary, EAD; Mr. Ahmad Farooq, Senior Joint Secretary, EAD; Mr. Sajjad Ahmed Shaikh, Joint Secretary,
Ministry of Finance; Dr. Vaqar Ahmed, National Institutional Advisor, Planning Commission of Pakistan; Mr.
Qaiser Bengali, Adviser to the Chief Minister of Sindh; Mr. Yaseen Anwar, Deputy Governor, SBP; Prof. Atta-urRahman, Coordinator General, COMSTEC; Mr. Irfan Nadeem, Secretary, Ministry of Science and Technology;
Mr. Mir Nasir Abbas, Pakistan Federation of Chamber of Commerce and Industry; Mr. Ali Tahir, Secretary,
Planning and Development, Government of Punjab; Dr. Amjad Bashir, Director General, Lahore Chamber of
Commerce and Industry; Ms. Fozia Naseem Awan, Section Officer, EAD; Mr. Khurshid Anwar, Section Officer,
EAD; Mr. Abdul Vakil, Assistant Protocol Officer, EAD; and Mr. Khalid Mehmood, Assistant Protocol Officer,
EAD.
IDB Group Teams
Country Department (Overall Coordinator)
Mr. Mohammad Jamal Al-Saati, Director; Mr. Ahmed S. Hariri, Division Manager; Mr. Ahsanul Kibria,
Economist; Mr. Saeed Ibrahim, Economist; and Dr. Muhammad Ahmed Zubair, Principal Economist (Peer
Reviewer).
Dr. Zafar Iqbal, Lead Economist, Country Department
Mr. Cafer Bicer, Country Manager for Pakistan, Country Department
Team-I
Team-II
Team-III
Core Engagement Areas
Private Sector Development,
Resource Mobilization and
Investment and Trade Finance,
Partnerships
(Mr. Gurbuz Gonul, Team
Insurance
and
Risk
(Mr.
Wasim
Abdulwahab,
Leader)
(Mr. Asif Mahmud, Team Leader)
Team Leader)
Infrastructure Department
Mr. Gurbuz Gonul
Dr. Farid Ahmed Khan
Mr. Misbah Uddin Khan
Mr. Intikhab Alam
Mr. Mohammad Asheque
Moyeed
Human Development
Department
Dr. Albasher Altayeb
Dr. Muhammed Suhail
Agriculture and Rural
Development Department
Mr. Ali Mohammad Khan
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vii
Table of Contents
Executive Summary
xiii
Strategy Part-I
I.
II.
i.
ii.
iii.
iv.
v.
vi.
Introduction
Country Context.....
Recent Economic Development, Outlook and Key Challenges..
Social Development.
Binding Constraints to Economic Growth...
Country Risk Rating and Outlook....
1
1
2
5
i.
ii.
III.
IV.
10
15
i.
ii.
iii.
15
18
20
23
i.
V.
7
8
23
29
i.
29
29
32
ix
36
VI.
38
40
43
i.
43
ii.
iii.
43
45
47
65
B.
79
C.
85
i.
ii.
85
Agriculture......
90
iii.
102
iv.
109
v.
Islamic Finance...
112
119
D.
STRATEGY PART-I
EXECUTIVE SUMMARY
Islamic Republic of Pakistan is a founding
member of the IDB. It is also a member of all
the IDB Group entities (ICD, ICIEC, ITFC,
and IRTI), all of which have played an active
role in countrys socio-economic development.
Pakistan is the second largest beneficiary of the
IDB Group financing. Since inception, the
Group portfolio in Pakistan has been dominated
by trade financing followed by ordinary capital
resources for project financing, and technical
assistance, which mainly favored the public
sector.
xiii
xiv
i.
ii.
Country Context
5.
The Islamic Republic of Pakistan
emerged as an independent sovereign state
on 14 August 1947. Pakistan covers 796,095
which
is
divided
into
four
km2
provinces: Sindh, Punjab, Khyber Pakhtunkhwa
(formerly known as the North-West Frontier
Province or NWFP), and Baluchistan. The
current population of Pakistan is 173.5
1
6.
After independence in 1947, a
parliamentary and participatory political
system took root slowly, with the first
nationwide general election held in 1970.
In the 38 years between 1970 and 2008,
Pakistan was under effective military rule for
a period of 20 years. Six civilian
governments were elected to office for the
remainder of the period; none completed its
term before being dismissed. Unrest in
northern areas has kept the government under
pressure. Security situation in Pakistan
started to deteriorate progressively from 2001
with the political and military spillover of the
war in Afghanistan. The deployment of
suicide attacks and the high rate of increase
in fatalities have significantly raised the
perception of insecurity in Pakistan,
iii.
8.
Pakistans economy experienced
high volatility in terms of economic
growth during 2000s due to several
internal and external shocks. In particular,
high growth rates during early 2000s were
interrupted in 2007/08 and 2008/09 because
of the sharp rise in international oil and food
prices, and global financial and economic
crisis, combined with policy inaction and
1
11.
The fiscal deficit has increased
recently but is projected to decline in the
medium-term. The budget deficit reached
6.0 percent of GDP in 2009/10, owing to a
substantial overrun on electricity subsidies
and flood reconstruction spending as well as
shortfalls in tax revenues. The fiscal deficit is
projected to decline from 5.0 percent of GDP
in 2010/11 to 2.1 percent of GDP in 2015/16
(Figure 1.2). It is worth noting that the
government has recently borrowed heavily
from the State Bank of Pakistan (SBP) to
finance its higher budget deficit.
12.
Although, Pakistans external
position has improved overtime, recently
the current account balance has come
under pressure mainly due to higher
energy
prices
and
post-flood
reconstruction activities. The current
account deficit improved significantly from
2001/02
2002/03
2003/04
2004/05
2005/06
2006/07
2007/08
2008/09
2009/10
2010/11
2011/12
2012/13
2013/14
2014/15
2015/16
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
9.
With regard to medium-term
outlook, real output growth is projected to
decelerate to 2.5 percent in 2010/11 due to
the effects of floods, power shortages, and
security concerns. However, economic
growth is projected to accelerate from 4.3
percent in 2011/12 to 5.4 percent in 2015/16.
-2.0
10.
Consumer price inflation has
started slowing down. The average inflation
rate in 2008/09 was 20.8 percent, the highest
rate during 2000s, mainly due to rise in fuel
and food prices. Recently, inflation slowed to
15.0 percent in 2009/10. Besides the adverse
effects of recent floods, expansionary fiscal
policy and monetization of government debt
have also added to the inflationary pressures.
The inflation rate is projected to decline
-4.0
-6.0
-8.0
-10.0
Overal Fiscal Deficit
Source: Pakistan Economic Survey 2009/10 and Ministry of
Finance (projection, March 2011).
14.
Agricultural growth in Pakistan
has been below its potential over the past
several years. Despite a structural shift
towards industrialization, agriculture is still
the largest sector of the economy and has a
great
impact
on
socio-economic
development. The majority of the population,
directly or indirectly, is dependent on this
sector. It accounts for 21.5 percent of GDP
and about 45 percent of the total employed
labor force. In 2009/10, the agriculture sector
grew by 2 percent compared to previous
years growth rate of 4 percent, while the
sector achieved a maximum growth of 6.5
percent in 2004/05. Its growth in 2010/11 is
projected to be slow as the largest impact of
the recent floods was on agriculture with $5
billion loss (over 14 percent of the sectoral
income).
15.
A large amount of funding
(between $7-9 billion) is required for
reconstruction and rehabilitation of flood
damages. According to the World Bank and
AsDB estimates, total flood damage cost for
the whole country is around $10 billion, of
which Sindh Province accounts for $4.4
billion; Punjab $2.6 billion; Khyber
Pakhtunkhwa $1.2 billion; Baluchistan $0.6
billion; and Federal/ cross cutting sectors
$1.1 billion. Among various sectors,
agriculture was the most damaged sector
with $5 billion; followed by physical
infrastructure
($2
billion);
social
infrastructure ($1.9 billion); financial ($0.7
billion); and private sector and industries
($0.3 billion each). Total estimated
reconstruction cost in all the provinces
13.
In recent years, industry has
surpassed the agriculture sector to become
the second largest contributor to GDP.
Industrys share in GDP has increased from
23.3 percent in 1999/02 to 25.2 percent in
Growth
in
large
scale
2009/10.3
manufacturing, which was contracted by 3.7
percent in 2008/09 due to the global financial
and economic crisis and energy shortage,
posted a 5.2 percent rate of growth in
2009/10. The cotton, textile products and
apparel manufacturing are Pakistan's largest
industries, accounting for 51.4 percent of
total exports. Other major industries include
food processing, beverages, construction
materials, clothing, and paper products.
Although, the industrial sector was not much
affected by the recent floods, some industries
3
Pakistan
Sindh
Punjab
4.4
2.7 - 3.2
1.2
1.2 - 2.1
2.6
Khyber Pakhtunkhwa
Baluchistan
0.6
1.1
AJK/FATA/Gilgit Baltistan
0.2
Sector-Wise
1.1 - 1.4
0.3 - 0.7
1.1 - 1.1
0.6 - 0.9
Economic Sectors
6.0
1.5 - 2.3
Social Infrastructure
1.9
2.0 - 2.8
Physical Infrastructure
2.0
0.1
3.0 - 3.5
0.3 - 0.3
Source: AsDB and World Bank (November 2010), Pakistan Floods 2010, Preliminary Damage and Needs
Assessment
16.
The deteriorating internal security
situation remains a pressing issue. The
global war on terror has been imposing a
heavy cost on the economy. Besides human
causalities, the fallout of the war on Pakistan
has been immense in terms of the economic
impact. It is officially estimated that
Pakistans economy has been impacted to the
extent of over $43 billion between 2001 and
2010.5
iv.
Social Development
17.
Pakistan is unlikely to meet most
of the MDGs targets. Since 2006, the
18.
Pakistan saw a remarkable decline
in poverty up to 2005, but the poverty
situation has worsened since 2006, making
19.
Income distribution in Pakistan
has worsened overtime. The Ginicoefficient values show an overall increase
in inequality between 1992-93 (0.27) and
2005/06 (0.30). Income distribution is likely
to deteriorate further with rising poverty in
the coming years. It appears from the
inequality information that during the period
when poverty declined overall as well as in
rural and urban areas, the gap between rich
6
v.
23.
It is extremely important to find
out critical development constraints in
developing IDB Group Member Country
Partnership Strategy for Pakistan. Once
the binding constraints are identified, then
the MCPS process can help the country in
relaxing some of the binding constraints to
economic growth. With this objective, using
the growth diagnostic approach developed by
Hausmann, Rodrik, and Velasco (2005),8 the
detailed diagnostic of binding constraints is
undertaken for the overall economy as well
as some selected sectors.
22.
While there has been noticeable
improvement in some health indicators
over the years, on the whole, Pakistan
ranks poorly on this count. Some of the
MDG-related health indicators such as
under 1 year children immunized against
measles; children under five years who
suffered from diarrhea; lady health workers
coverage of target population; HIV
prevalence; and TB cases have improved in
the past few years and Pakistan is ahead or
on track on these MDG targets while
progress in improving child, infant and
maternal mortality as well as the provision
of reproductive health services has been
lagging or slow. Under-five mortality and
fertility rates remain the highest among
South Asian countries. Chronic child
malnutrition is about 40 percent. Significant
gender and rural/urban disparities also
24.
Based on the detailed analysis
undertaken in Knowledge Part-II, B. on
Critical
Constraints
to
Pakistans
Economic Growth, the following binding
constraints are identified:
The country has poor quality and
quantity of infrastructure, particularly
energy9 and transport infrastructure.
vi.
25.
The country risk and outlook for
Pakistan has been rated by main rating
agencies namely Standard & Poors and
Moodys while it is not rated by the Fitch
(Table 1.2).
Table 1.2: Pakistan: Sovereign Risk Ratings
LongTerm
ShortTerm
Outlook
Standard
& Poors
B-
Stable
Moodys
B3
Stable
Fitch
Not Rated
II
PAKISTANS DEVELOPMENT STRATEGY
26.
Pakistans current development
strategy is based on its Vision 2030; PRSP-II
(2008-2012), and New Growth Framework
(2010). These are briefly described in the
following sub-sections.
i.
27.
The Vision 2030 envisioned a
developed, industrialized, just and
prosperous Pakistan through rapid and
sustainable development by deploying
knowledge inputs. The basic goal of the
Vision is achievement of a just and
sustainable society. A number of critical
benchmarks for progressing towards a
modern state are identified such as
establishing an independent judiciary;
improving the efficiency of the government
and the quality of bureaucracy; addressing
the democracy deficit; minimizing the
influence of non-state actors; integrating
Pakistan with global economy; changing the
nature of work and workplace; and adapting
to competition from competitor Asian
countries.
29.
However,
the
Vision
2030
anticipated a number of challenges in
achieving the targets. These include
increasing the levels of savings and
investments;
achieving
broad-based
economic growth; sustaining high growth
rates over the time horizon; and assuring
trickle down effects of growth for bringing
substantial benefits to the poor. Moreover,
some specific challenges are deemed
pressing for achieving Vision targets. For
example, by the end of 2030, Pakistan is
projected to become the fifth largest country
in the world with a population ranging
between 230 and 260 million, which may
have
huge
consequences
for
the
governments poverty reduction and service
delivery ambitions. This challenge will also
have a bearing on the governments ability to
meet another related crucial challenge,
namely providing sufficient employment to
its people, which will be critical to meeting
the objectives related to sustainable
economic growth and maintaining social
stability. Similarly, natural resources
depletion especially water, land and forests,
food security and meeting energy needs are
28.
The Vision expects Pakistan to join
the rank of middle-income countries with
GDP per capita of around $4,000 by 2030,
which would require an average economic
growth rate of around 7 - 8 percent per
annum. In particular, the share of the
manufacturing sector to increase from 18.3
percent of GDP to nearly 30 percent, which
requires the sector to grow at an average 10
10
ii.
Medium-Term
Strategy
32.
The PRSP-II is built upon the
following nine pillars:
(a) Macroeconomic Stability and Real
Sector Growth: The PRSP-II outlines
interventions to achieve sustained
economic growth, which serves as a base
for all government policies and identifies
macroeconomic stability as the key factor
for achieving sustainable economic
growth for longer periods.
(b) Protecting the Poor and the Vulnerable:
Enhancing social safety nets by providing
minimal safeguard for the poor and the
vulnerable is the focus of this pillar.
Pakistan has both direct (such as
Employees Old Age Benefit Institution,
Workers Welfare Fund, Zakat and
Pakistan Bait-ul-Mal) and indirect (such
as the minimum wage, lifeline tariff on
electricity, subsidy on the price of flour
and food subsidies etc.), and social
protection mechanism. However, there is
a further need for enhancing such
mechanisms as the number of people
who are living on just above the poverty
line, has been increased over the years.
Development
11
10
(d) Integrated
Energy
Development
Program: This pillar identifies energy
security and energy efficiency as one of
the top priorities of the government. As
more and more population is moving to
the urban areas in Pakistan, it has
brought tremendous challenges. The
focus areas of the energy sector are
promoting energy efficiency; fuel
diversity; and interventions that take
climate change into consideration; and
transcend the boundaries of promoting
energy conservation and demand
management measures.
(e) Making
Industry
Internationally
Competitive: Competitiveness remains a
key area of improvement. Focus areas for
this pillar include raising investment
levels;
attracting
foreign
direct
investment; and encouraging private
sector involvement in all spheres of the
economy coupled with improvement in
education and health sectors to create
skilled and healthy labour force. Once
the improvement in the business
environment takes place, it is expected to
increase
competition,
firm
level
productivity,
and
expansion
and
diversification of exports.
35.
According to the World Bank/
IMF joint assessment (June 2010), PRSPII provides a strong analysis of the
characteristics of poverty in Pakistan as
well as the macroeconomic trends since
early
2000.
It
also
emphasizes
macroeconomic stability, infrastructure,
human resources and strong institutions as
the key building blocks; and productivity at
the firm level as being the means through
which to promote Pakistans economic
competitiveness. However, weaknesses were
identified in the existing monitoring and
evaluation system to which PRSP-II
proposed a reform plan to address these
weaknesses.
(ii) New Growth Strategy
36.
Although, the PRSP-II will be
continued till the new strategy paper
(PRSP-III) is prepared, the Planning
12
13
III
IDB GROUP INTERVENTIONS IN PAKISTAN:
LESSONS LEARNED
i.
(i)
38.
The first IDB operation in Pakistan
was approved on 5 June 1977, when the
Bank financed the National Refinery LTD by
way of equity with an amount of $4.0
million. The most recent approval is for an
agricultural project with an amount of $95
million. Total IDB-OCR approvals have
reached to $1.7 billion for 60 operations as of
5 March 2011; of which, 19 operations are
still under implementation (Figure 3.1).
37.
Pakistan joined the IDB on 12
August 1974 as a founding member.
Pakistan is a member of all the IDB Group
entities (ICD, ICIEC, ITFC, and IRTI).
These entities have played an active role in
countrys socio-economic development.
Since inception, the IDB Group portfolio in
Pakistan has been dominated by trade
financing followed by ordinary capital
resources (OCR) for project financing, and
favored mainly the public sector. The IDB
Group operations in Pakistan are classified
under three main categories: IDB-OCR
operations, trade financing, and private sector
operations. As of 5 March 2011, IDB Group
net approvals for Pakistan totaled $7.6
billion; of which the share of project
financing was 30 percent and trade financing
70 percent (Table 3.1).
2008
Project
Financing
(incl.
Technical
and Special
Assistance)
255.2
388.7
543.6
2,369.6
Trade
Financing
110
5,191.0
Total Net
Approvals
365.2
388.7
543.6
7,560.6
2009
2010
Agriculture
Water,
sanitation
13%
Transport
ation
29%
Industry
and
Mining
3%
Informati
on and
Communi
cations
0.01%
19762010
7%
Education
3%
Energy
41%
Health
4%
Finance
0%
39.
Considering the current energy
deficit, and aging and inefficient
transportation network in the country,
IDBs leading role is likely to be continued
in these sectors during the MCPS period.
The structure of the IDB portfolio in Pakistan
has been changing significantly in recent
years. Total approvals have surged
considerably in the last 5 years ($1.3 billion)
and the average size of a single project has
15
The first Donors Conference of the FODP was held on 17 April 2009 in Tokyo, and the Government of
Pakistan presented its development plan under five clusters: (i) security; (ii) energy; (iii) transport; (iv)
poverty reduction; and (v) institutional capacity building and reform. During the pledging session,
donors pledged over $5 billion over the next two years. The IDB announced a total of $1.25 billion for
project and trade financing during 2009-2011. Since its pledge, the IDB approvals to Pakistan have
reached to $916 million for project financing. In addition, the IDB participated into the Steering
Committee meeting of the Energy Sector Task Force under the auspices of the FODP and contributed
to this initiative by providing a short-term expert.
The third Ministerial Meeting of the FODP was held in Brussels on 15 October 2010. The primary
focus was to assess the damage of the 2010 Floods and to raise awareness of the international
community on the severity of the disaster. The participants reiterated their continued support to relief
and reconstruction efforts of the government.
16
42.
IDB has also been assisting the
country aftermath of the natural disasters.
After the October 2005 earthquake in
Northern Pakistan, the IDB approved several
projects amounting to $300 million in order
to help reconstruction and rehabilitation
efforts in the affected regions. Recently, the
IDB has approved $11.2 million loan for
emergency rehabilitation and early recovery
from the 2010 flood disaster. IDB is also an
active partner of the Friends of Democratic
Pakistan (Box 3.1).
Competitive pricing
Identification of quality sponsors
Project implementation issues
Difficulties in syndicating for projects in
Pakistan in the international markets
Difficulty in resource mobilization
(iv) Operations by ICIEC
45.
Similarly, another IDB Group entity
Islamic Corporation for Insurance of
Investment and Export Credit (ICIEC)
provides credit insurance and re-insurance
for exports and investment for foreign
investment flows to facilitating customer's
trade finance activities by offering
comprehensive commercial and political
risks cover. With its developmental mandate,
ICIEC operations in Pakistan have focused
on facilitating exports (i.e. insuring exports
receivables), strategic imports (insuring
confirmed import L/C's) and foreign direct
investment (insuring foreign investments).
By the end of 2010, ICIEC operations in
ii.
47.
In
order
to
assess
overall
performance of the IDB assistance in
Pakistan, IDB Evaluation Department carried
out a Country Assistance Evaluation (CAE)
in 2008. This CAE exercise covered the
period 1977-2007 and analyzed Bank
interventions across various sectors; the
consistency of the Bank support with the
countrys development strategy; and the
economic and social outcomes of the IDB
support. The main findings of CAE report are
summarized below.
Lack
of
Institutionalized
Credit
Insurance, restricting exporters to expand
the existing portfolio and penetrating into
new markets
In-active Export Guarantee Schemes in
the country
No clear precedents or existing policy
level frameworks
supporting and
explaining the "Export-Led Growth
Strategy"
Capital intensive nature of projects
(i)
Portfolio Assessment
48.
The IDB interventions during the
period 1977-2007 were assessed as
relevant, timely, broadly aligned its
Strategic Thrusts, and consistent with the
governments development strategies. The
funded
projects
achieved
reasonable
outcomes, complementing the governments
ability to meet infrastructure and rural
development
needs.
The
overriding
objectives of the IDB operations during this
period were poverty reduction; social sector
development; and sustainable economic
development. In connection with these
objectives, four major sectors namely social
sector, energy, rural and urban development,
and trade were assessed. The main sectoral
findings are as follows:
49.
While the assistance was found
relevant and consistent with the priorities
of the government and needs of the people
of Pakistan, a number of following issues
have been raised by the stakeholders.
19
50.
Following possible actions for
addressing the causes of delay in project
implementation and project cancellations
were suggested in the CAE.
iii.
World Bank
52.
The Country Partnership Strategy
(CPS, 2010-2013) of the World Bank is
centered on four pillars namely improving
economic governance; accelerating delivery
of human development and social protection
services; improving infrastructure to
support growth; and improving security and
reducing the risk of conflict. The CPS has
indicative financing of $6 billion for 4 years
with $3.7 billion allocation during 20102012. After the 2010 floods, the World
Bank has also extended $300 million in
import financing to assist the government.
The overall program for the first year will
be over $1 billion through International
Development Association (IDA).
20
56.
Since 2002, United States Agency
for International Development (USAID)
has provided over $3.9 billion to support
economic growth; improve education;
revitalize health; promote good governance;
facilitate earthquake reconstruction; and
provide humanitarian assistance. USAID
Country Assistance Strategy for Pakistan
(2010-2014) aims to strengthen the
Government of Pakistan's capacity to provide
services effectively to its citizens. Assistance
also focuses on immediate post-crisis and
other humanitarian assistance needs and
prioritizes energy, agriculture, education, and
health sectors.
54.
The priority areas identified by
Japan International Cooperation Agency
(JICA) in assisting Pakistan include: (i)
ensuring human security and human
development; (ii) development of sound
market economy; and (iii) achievement of
balanced
regional
socio-economic
development. In consistent with the above
direction, JICA is actively implementing
various sector specific programs including
health/sanitation, education, irrigation/water
resource development, agriculture, industrial
development, governance, and environment.
For more than 30 years partnership with
Japan, JICA has extended about $7 billion as
official development assistance loans, $2.1
21
IV
DESIGNING IDB GROUP PARTNERSHIP STRATEGY:
ALIGNMENT, SELECTIVITY, AND FOCUS
i.
57.
In order to formulate Partnership
Strategy, the IDB Group Technical
Mission visited Pakistan during 13-22
March 2011. The mission held wide-range
consultations with key stakeholders in order
to formulate a comprehensive IDB Group
Strategy for the country for the period 20122015. In this regard, the Mission held
bilateral meetings with various line
ministries, government agencies at the
federal and provincial levels. Consultations
had also been conducted with representatives
from the private sector, academia,
multilateral and bilateral development
partners, specialized UN agencies and civil
society.
59.
Bilateral Meetings in Karachi
(Sindh Province): The Mission conducted
meetings with provincial Education and
Agriculture Departments; Karachi Electric
Supply Company; Tameer Micro Finance
Bank; Meezan Bank Limited; Trade
Development Authority; State Bank of
Pakistan; Karachi Port Trust; Karachi
Chamber of Commerce and Industry; The
Citizens
Foundation;
World
Health
Organization; and Pakistan Petroleum
Limited.
58.
Bilateral Meetings in Islamabad:
The IDB Group Mission held extensive
meetings with key Federal Ministries/
Agencies namely Economic Affairs Division;
Planning Commission of Pakistan; Ministry of
Finance; Statistics Division; Ministry of
Science and Technology; Ministry of
Education; Ministry of Health; Ministry of
Commerce; Ministry of Water and Power;
Ministry of Petroleum and Natural Resources;
Pakistan Poverty Alleviation Fund; Public
Procurement Regulatory Authority; Ministry
of Food and Agriculture; Securities and
Exchange Commission of Pakistan; Higher
Education Commission; Rural Support
Programme Network; COMSAT; Pakistan
60.
Bilateral Meetings in Lahore
(Punjab Province): A series of meetings
were held with Water and Power
Development Authority; Pakistan Electric
Power Company; National Transmission and
Despatch Company Limited; Technical
Education and Vocational Training Authority;
Kashf Micro Finance Bank; Akhuwat
Foundation; Farz Foundation; and University
of Lahore.
61.
The Mission also organized three
consultation workshops in Islamabad,
Karachi and Lahore in close coordination
with the Federal
and Provincial
Governments. These workshops were
23
62.
The first consultation workshop was
held on 15 March 2011 in Islamabad. The
Planning Commission elaborated key
elements of the New Growth Strategy
24
25
64.
The final workshop was held on 21
March 2011 in Lahore. Similar to Workshop
in Karachi, discussions in this workshop have
also more concentrated on private sector
development, capacity building and reverse
linkages. The Government of Punjab
appreciated the extensive consultation
process that the IDB Group has been engaged
in with various stakeholders and envisaged
the final partnership document will be a true
representation of private/ public needs.
26
65.
Following the agreement reached by
the Government of Pakistan and the IDB
Group Mission on the focused areas for the
Group interventions during the MCPS period
2012-2015, Minutes of Meetings were signed
by the IDB Group and the Government of
Pakistan on 22 March 2011. It was agreed
that all future IDB Group interventions (with
indicative/ notional financing envelop of
$2.5-3.0 billion) will be explored and
designed through future Programming
Missions. They will be anchored and guided
by the framework of this MCPS until 2015.
27
V
IDB GROUP MCPS-FOCUSED PROGRAMS
i.
(i) Energy
67.
Based on the development challenges
facing Pakistan (described in Section I);
government
development
priorities
(highlighted in Section II); and the lessons
learned from the previous operations and
activities of the IDB Group (mentioned in
Section III), as well as extensive
consultations with the key stakeholders in the
country (explained in Section IV), the MCPS
is designed to be centered on the following
Key Pillars and Cross-Cutting Areas for the
IDB Group interventions during the MCPS
Period (2012-2015), which are fully aligned
with the key strategic thrusts of the IDB
Vision 1440H (2020) and the development
priorities and needs of the Government of
Pakistan (Figure 5.1).
69.
The energy sector is crucial for the
current and future socio-economic
prosperity of Pakistan through the supply
of dependable electricity at rates that
maintain the competitiveness of its economy
and generate revenue for the financial health
of the sector.
70.
Pakistan is experiencing acute
power shortage of more than 5000 MW.
Peak demand has risen from 10,459 MW in
2001 to 18,521 MW in 2010 while the
corresponding supply increased from 10,894
MW to 13,163 MW. Transmission and
distribution network capacity has also not
risen commensurate to demand growth. As a
result, the system is presently experiencing
widespread planned blackouts, of more than
12 hours/day in both urban and rural
communities. The acute power shortage is
adversely affecting the country in achieving
sustainable economic growth, discouraging
both local and foreign private investments
and forcing local industry to close shop or
generate their own captive power at
uncompetitive
rates.
Further,
power
generation costs are also escalating owing to
high dependence on expensive imported
furnace oil for power generation and
continued reliance on de-rated and low
efficiency
generation
infrastructure
(Knowledge Part II, C. on Energy Sector
Diagnostic Analysis).
Area
1:
Private
Sector
71.
The IDB Group plans to facilitate
the Government of Pakistans efforts to
adequately address the major power
shortfalls, the security of energy supply
and its move towards more sustainable
and
least-cost
power
generation
alternatives. The IDB Group will continue
supporting development of indigenous on-
30
74.
"Clean" coal opportunities will
also be explored. Although, the country has
abundant coal reserves, which can be brought
into the generation mix at competitive prices.
This sector has not been sufficiently
developed so far. Given the significant
financing needs for developing the coal
generation sector as well as the associated
environmental concerns, the Bank will
consider financing "clean" coal technologies,
which have widespread support within the
government as well as multilateral donor
community. Moreover, to expedite the
achievement of energy security, the Bank
will examine the possibility of financing high
efficiency coal-based power plants based on
imported high quality coal (Result Matrix-I
for Pillar 1 on Improving Infrastructure
Development).
(ii) Transport
75.
High cost of transport logistics
hinders trade competitiveness of Pakistan
and its stronger involvement in global
markets. The poor performance of the
transport sector is estimated to cost the
economy 4-6 percent of the GDP each year
(PRSP-II). In particular, high freight costs
and transport bottlenecks cause long shipping
times to reach major markets. Pakistan is a
key country with respect to regional
73.
Regional and cross-border gas and
electricity interconnections will help
Pakistan improve energy security. Due to
the rising gas demand and the declining
indigenous gas production, Pakistan is
tending towards a gas-deficient economy.
12
31
76.
Enhancement of the road network
will constitute the primary axis of the IDB
Group support, given the boosting effect of
improved connectivity and regional trade
on economic growth. The Bank will support
development of the North-South transport
corridor that is currently exposed to 80
percent of the passenger and freight traffic.
Given the fact that Karachi and Qasim ports
hold 95 percent of international trade in
Pakistan, improvement of port infrastructure
and allied road-network will constitute an
essential component. The IDB will also focus
on the establishment of major missing links
along
the
East-West
corridor
for
improvement of national road connectivity
and trade.
79.
Technical assistance will focus on
urban transport planning and institutional
capacity building. The IDB contemplates
support for development of urban travel
demand management to help reducing road
traffic congestion and greenhouse gas
emissions as well as for proper land use
planning. Additionally, the IDB support for
capacity building will aim at more efficient
project implementations in the sector which
will diminish the risk of time extension, cost
escalation and other inefficiencies. The focus
will be on development of training academy
as well as capacity development activities in
the rail transport sector.
77.
Integrated development of road
and rail networks will revamp regional
connectivity and trade. Rail network
development is essential, particularly, for
long-haul freight transport in Pakistan. In this
context, the IDB Group recognizes the
governments ongoing efforts to improve
institutional and financial viability of railway
operations (including the reform and
privatization process). In the light of the
sectoral developments and in collaboration
with other development partners, the Group
will further examine cost-effective and
83.
Based on the above challenges, and
principles of selectivity, focus, and
alignment, the IDB core strategy for
agriculture and rural development will
focus on the following four broad thematic
areas: (a) Infrastructure Development in
Flood Affected Areas; (b) Water Resource
Management; (c) Enhancing Food Security
(with focus on access and production); and
(d)
Value-Chain
Development
for
Horticulture Crops. The future engagement
of the IDB Group would involve a mix of
methodology, with greater emphasis on
provincial consultations, and using local
systems for implementation. Lack of
81.
Pakistan has comparative advantage
in various agricultural sub-sectors, which
remain unexploited. While the country has
made strides in enhancing production of
major crops, and is now the third largest
grower of wheat in Asia and fourth-largest
producer of cotton in the world, the
horticulture and livestock sectors remain
unexploited. It remains a net importer of
horticulture products, in which it has the
potential to capture $1 billion share of
worlds horticulture export market, and the
productivity in livestock sector remains low.
82.
The future growth of the
agriculture
sector
needs
to
be
strengthened by addressing four key
interlinked challenges. They are high food
insecurity, resource scarcity, rural inequality
and poverty, and flood impact. Nearly half
of the population is food insecure in
Pakistan, with issues of both production as
well as access (household food security).
This insecurity needs to be addressed with
scarce land and water resources, which are
under stress due to inefficient resource
management and rising population. Nearly
31 percent of arable land is uncultivable or
under high stress, and per capita water
availability of 1,066M3 puts the country
under high water stress category. Further,
these limited resources are unevenly
Infrastructure Development
Flood Affected Areas
in
84.
Agriculture, including irrigation
infrastructure, was the worst hit sector by
the 2010 Floods and needs special
33
34
88.
A broad microfinance development
program under the private sector
development pillar of the strategy will also
help alleviate the rural credit availability
constraint. In areas where institutional credit
is not available for poor farmers, local
indigenous tested models, including locally
managed revolving funds will be supported,
which will be embedded in programs for
livelihood development. To use crop produce
as collateral for obtaining financing and
minimizing role of middle-man, focus of
interventions would be on providing on-farm
storage facilities in high production areas to
be managed by farmer groups/ private
agencies.
(iv) Value-chain Development
Horticulture Crops
for
89.
Pakistan has huge potential in
developing horticulture value-chains with
multiple benefits relating to increased
exports, income enhancement and nonfarm rural employment generation,
especially for women. The IDB support for
value-chain development would focus on
relatively developed value chains with
potential for growth. At the initial stage,
value-chains will be identified for potential
crops (basically horticulture crops), and
clusters of area/ value-chain will be targeted
for integrated development using holistic
farming system approach. Supply chains for
major horticulture and vegetable crops (for
example potatoes, mangoes, chilies, dates
35
91.
The administration of primary and
secondary education is in the process of
devolvement from the federal level to the
provincial levels in line with the structural
reform undertaken under the 18th
Constitutional Amendment. Greater need
appears to come from less-developed
provinces of the country, particularly,
Baluchistan and Khyber Pakhtunkhwa. The
Higher Education Commission (HEC) will
remain to be the federal body to oversee
tertiary education in the whole country with
clear developmental goals and ambitious
plans.
92.
Tertiary education as well as
modernization and development of
Madrassa shall be the two main axes of the
IDB support. Focus will be given to higher
education related to science and technology
and vocational training for skills development
through supporting the Technical Education
and Vocational Training Authority (TEVTA)
(Result Matrix-III for Pillar 3 on Strengthening
Human Development).
93.
In the education sector, the IDB
Group is also initiating Public Private
Partnership for helping the government in
achieving MDG-related education, which is
also aligned with the key strategic thrusts of
IDB Vision 1440H of universalization of
education in member countries like Pakistan
(Box 5.1).
36
Box 5.1: IDB PPP Initiative for Universal Primary Education in Pakistan
The Citizens Foundation (TCF) is a professionally managed, non-profit organization set up in 1995 by
a group of citizens concerned with the state of basic education and out-of-school in Pakistan. It is now
one of Pakistan's leading organizations in the field of formal education. TCF targets 100 percent poor
families believing that access to basic education is the right of each individual and not a privilege.
Apart from the curriculum, TCF focuses on the character building of students to equip them with high
moral values and confidence.
As of 2011, TCF has established 730 school units with purpose-built campuses nationwide with
enrollment of 102,000 students. It encourages female enrollment and boasts of a 50 percent female
ratio in almost every campus. TCF has a full Female Faculty of 5,400 members, trained and supported
on a continuous basis. More than 8,000 jobs have been created in communities in which TCF operates.
IDB/ISFD in supporting universal primary education intends to work together with provincial
governments to leverage TCF's evidence-based success and work with TCF in districts with low
literacy and primary enrollment rates. This will be done through a community driven process targeting
children between 5 and 16 years age, particularly from poor and disadvantaged households. The
collaborative effort, as a large-scale public-private (not-for-profit) partnership intervention addresses
the Education-for-All target. The project will: (i) demonstrate participatory educational planning; (ii)
provide a baseline for quality early childhood education and primary education; and (iii) build capacity
to develop public private partnerships for uniform and standard delivery of quality public education in
the provinces.
(ii) Health
94.
Health indicators of Pakistan are
well below the MDG targets and their
improvement is the priority of the
government. Contributing factors include
inadequate public budget allocations, high
poverty, low literacy, lack of proper water
and sanitation, prevalent malnutrition, and
weaknesses in the healthcare delivery system
including insufficient focus on preventive
interventions. Further, population is under
the heavy burden of communicable diseases,
which are the major causes of morbidity and
mortality. Life-style related and noncommunicable diseases also play significant
role in the disease dynamics of the country.
Nutritional disorders are common, which
particularly affect women and children. The
expansion and diversity of health care
facilities in Pakistan fall short of the fast
population growth and the ever mounting
95.
The IDB Group focus will be on
supporting the government efforts to meet
the health related MDGs through the
following interventions (Result Matrix-III
on Human Development):
37
97.
Private sector, being the engine of
economic growth, has been central to
development policies of the government.
The government demonstrates its strong
confidence in the role of the private sector,
particularly in the industrial development.
The reaffirmation of private sectors central
role in the industrial development of Pakistan
happened through the drive to privatize stateowned assets which began in the early 1980s.
Pakistan Vision 2030, Medium-Term
Development Framework (2005-12) of the
GoP, and the Strategic Trade Policy
Framework (2009-12) by the Ministry of
Commerce, laid great emphasis on the
leading role of the private sector for the
development of wide-ranging economic
activities. It clearly acknowledges the need
for emphasis on deregulation and
liberalization leading to greater private
investment as the key pillar of sustainable
economic growth. In this regard, the PSDTF
takes a lead in enhancing private sector role
in investment and trade. (Knowledge Part, C.
on Private Sector Diagnostic Analysis).
98.
The MCPS process, particularly
by the entities of the IDB Group (ICD,
ICIEC, and ITFC) for private sector
development intends to enhance trade and
investment activities through the following
initiatives:
13
38
39
Institutions,
Meezan
Bank,
various
governmental
and
non-governmental
organizations in the country dealing with
microfinance, and Security Exchange
Commission of Pakistan. The IDB
Microfinance Development Program (IDBMDP) is proposed to be expanded to include
Pakistan among other member countries. As
such, an Islamic microfinance institution will
either be established or an existing institution
will be strengthened through equity
investment and technical assistance. A
proposal is also being prepared by Pakistan
Microfinance Network in coordination with
Farz Foundation for IDB-MDP.
101.
The IDB Group intends to
strengthen the Takaful sector through
equity participation in Takaful companies
and technical assistance. Discussions were
held with various institutions regarding this
issue and a proposal is under preparation.
Assisting in providing continuing education
in Islamic finance to branch level staff and
senior management in commercial banks
would be another area for the IDB Group
support.
The
Group
is
exploring
opportunities to provide domestic and cross
border trade receivable insurance products
for exporters and domestic manufacturers
through supporting the establishment of an
EXIM Bank. The IDB Group will consider
providing equity through IDB/ICD and
consultancy, advisory, training and reinsurance services through ICIEC.
99.
For the promotion of Islamic
banking in Pakistan, the State Bank of
Pakistan (SBP) three pronged strategy
includes establishment of full-fledged
Islamic Bank(s) in the private sector;
setting up subsidiaries for Islamic banking
by existing commercial banks; and
allowing stand-alone branches for Islamic
banking in the existing commercial banks.
As a result, currently all Islamic banks,
subsidiaries, and stand-alone branches offer
Shariah-compliant products and services. The
IDB Group strategy will focus on four
interrelated areas: (i) Islamic Finance; (ii)
Resource Mobilization; (iii) Capacity
Building; and (iv) Reverse Linkages.
(i)
Islamic Finance
100.
The IDB Group strategy for
Islamic finance proposes to strengthen and
support the strategy adopted by the State
Bank of Pakistan for the development of
Islamic banking in the country. This
strategy is based on discussions with relevant
stakeholders including Islamic Financial
102.
According to SBP estimate,
Pakistans Islamic banking assets increased
at an average rate of 30 percent annually in
the past four years to PRs. 411 billion
($4.8 billion) as of June 2010, which is 6
percent of the financial industrys total
40
105.
The IDB is a South-South
multilateral development bank with 56
member countries in all the four continents.
It facilitates continuously transfer of
resources and the sharing of knowledge
among its member countries. Under the new
business model of the IDB Group, Reverse
Linkage is a unique feature of the MCPS
exercise through which one member country
can provide support, and share knowledge
and best experiences with other member
countries through its unique experience and
expertise in various socio-economic areas.
Through this win-win process, the IDB
Group, the MCPS country and the
beneficiary country can benefit from
interventions proposed within the Reverse
Linkage framework.
103.
The IDB will consider raising a
portion of the funds needed by its selected
projects in local currency. The local
currency funds could be raised by issuing
Sukuk mainly using the assets of the selected
projects. The market response to such Sukuk
is expected to be encouraging for the
Pakistani banks, in particular Islamic banks
have ample liquidity and they find it harder
to directly finance large projects especially in
the infrastructure sector on their own. There
are two main challenges for them; (i) they
have limited capacity to handle large
infrastructure projects; (ii) the tenor of
financing for such projects is relatively long
causing a mismatch in their assets and
liabilities. The IDB, taking a lead position in
the financing of such projects, will provide
comfort to the local financiers of the project,
whereas choosing the Sukuk route for
financing the projects would help the local
banks address the mismatch issue and the
106.
Under the Reverse Linkages
initiative, the IDB Group will facilitate and
support initiatives aiming at transferring
knowledge and experience of Pakistan in
the areas of Islamic finance and science
and technology to other member
countries. Further, Pakistan has also
41
developed
technology
for
industrial
machinery in the field of sugar and cement
production as well as the textile sector.
Furthermore, reverse linkages with training
institutions to conduct regional training
programs will also be explored. Proposals
have been requested from the State Bank of
Pakistan and Federal Bureau of Statistics in
this regard (Result Matrix-V for CrossCutting Area 2 on Islamic Finance, Resource
Mobilization, Capacity Building and Reverse
Linkages).
42
VI
MCPS PROGRAM IMPLEMENTATION AND
THE WAY FORWARD
i.
ii.
107.
For the implementation of the
MCPS focused programs, the IDB Group
has indicated (notional) financing envelop
between $2.5 - 3.0 billion during the
MCPS period of 2012-2015. The indicative
financing envelop estimate is based on
consultations with the key stakeholders
including the line Ministries of the Federal
and Provincial Governments, representatives
of the private sector, and donors community.
The financing will be further firmed up
during the IDB Group Programming
Missions to Pakistan. However, the size of
the financing envelop will be eventually
determined by the borrowing appetite of the
Government of Pakistan, identification of
bankable projects, the IDB Group operational
risk ceilings and resource mobilization by the
Group.
Key Success
Group Level
Factors:
IDB
109.
It is essential that all the IDB
Group operations during 2012-2015 to be
placed under the umbrella of the MCPS.
The MCPS approach as a New Business
Model was initiated as one of the main
aspirations of the recent reforms process by
the IDB Group. The objective of the new
business model was to move IDB Group
operations from project-led lending to
program-based financing in member
countries. Therefore, one of the main
benchmarks for the success of the MCPS
exercise will depend upon the extent on
which future operations of all the IDB Group
entities in Pakistan come under the umbrella
of the MCPS during 2012-2015.
110.
The MCPS Programming Missions
need to be undertaken at the IDB Group
level. The MCPS exercise is undertaken at
the IDB Group level, including activities and
programs for various Group entities.
Therefore, it is critical that the programming
phase of the MCPS process is also
undertaken at the Group level so that each
entity may derive its work program based on
identified focused areas.
108.
With regard to distribution of
indicative financing envelop, among the
three Pillars, the infrastructure sector is
envisaged to receive the major share of 50
percent (energy 30 percent and transport 20
percent) followed by agriculture and rural
development by 20 percent; human
development by 15 percent (education 8
percent and health 7 percent). Similarly,
among the two Cross-Cutting Areas, 10 per
cent has been earmarked for the private
sector development and 5 percent for the
111.
It is also essential that the progress
reports of the MCPS to the IDB
Management and Board of Executive
Directors are prepared at the IDB Group
43
Table 6.1: IDB Group MCPS Focused Programs for Pakistan, 2012-2015
Key Pillars
Improving
Infrastructure
Development
Energy
On-grid and off-grid renewable energy projects
Supporting Energy efficiency enhancement
Strengthening energy transmission and distribution
Improving energy security through regional and cross-border gas and electricity
interconnections
Exploring clean coal technology
Encouraging PPP
Transport
Assisting in development of north-south transport corridor including ports
infrastructure and allied road-network
Indicative
Financing
Envelop
($2.5 3
billion)
30%
20%
Enhancing Human
Development
Education
Improving tertiary education, in particular higher education and vocational training
Development of Madrassa education institutions
PPP initiative for universal primary education
Health
Implementation of health system recovery plan targeting areas affected by the
earthquake and the floods
Enhancement of the urban Primary Healthcare
Expansion of Immunization (EPI) with emphasis on polio eradication
Establishment/ functioning of health training institutions to train physicians/ CMWs/
LHs
Creation of demand for utilization of the available basic MNCH services
Cross-cutting Areas
Private Sector
Development
ICD
ICIEC
ITFC
Supporting Islamic
Finance, Resource
Mobilization, Capacity
Building, and Reverse
Linkages
44
20%
8%
7%
10%
5%
112.
Mid-term review will be undertaken
after two years to evaluate the progress of
the MCPS exercise. The progress report will
be prepared by taking into account all the
operations/ activities at the IDB Group level,
which will be reported to the Management as
well as to the IDB Board of Executive
Directors.
115.
The implementation of the MCPS
program needs to be managed in such a
way so as not to exceed the IDB Group
country exposure limit for Pakistan. Since
this limit includes ongoing operations for the
IDB Group as a whole, the implementation
of a program of operations amounting to
$2.5-3 billion requires timely project
implementation.
113.
There is a compelling demand by
the Government of Pakistan for the IDB to
enhance its presence in Pakistan by
establishing a local Country Office. This
would allow for stronger follow up on the
IDB Group portfolio in the country and
consequently a better implementation and
performance of the MCPS program. The
current portfolio of ongoing projects ($1.4
billion) is being followed by a single IDB
Field Representative in Pakistan. With the
MCPS exercise expected to result an increase
in IDB Group operations, the chances of
successful implementation of the MCPS
Program will be greatly enhanced with the
establishment of a Country Office. Similarly,
collaboration and coordination with other
MDBs and bilateral development partners
will be strengthened by establishing a local
IDB Office, which will ultimately boost IDB
visibility in the country.
iii.
116.
The improved political and
security situation of the country will
inevitably a key success factor for the
MCPS exercise. The political and security
concerns in Pakistan are well documented.
Moreover, the recent CAE report also
identified that the instability in the country as
a whole but especially the conditions in KPK
and Baluchistan Provinces had contributed
considerably to the countrys assistance
performance evaluation as unsatisfactory.
With the MCPS expected to bring a
significant scaling up of the IDB assistance
in the country, the performance of any future
IDB Group project will undoubtedly be
affected by any further deterioration in
political and security situation.
117.
The
implementation
of
the
devolution of some ministries from Federal
to Provincial Governments will have a
114.
The issue of the competitiveness of
IDB Group pricing may affect the success
of the MCPS. In the recent Country
45
118.
Weak institutional capacity results in
delaying procurement and implementation of
the projects. In the past, implementation of
the IDB-supported projects was generally
slow, resulting in multiple extensions, cost
escalation and inefficiency. The CAE
findings indicated that most of the
implementation problems revolved around
country capacity, consultant selection,
procurement, supervision and disbursement
issues. Therefore, through the MCPS
process, the implementation capacity of
executing agencies/ institutions needs to be
properly evaluated and improved, when
necessary, in order to complete the projects
in a timely manner.
119.
Process of land acquisition needs
to be streamlined to minimize costly
implementation delays as well as expensive
changes in project design. As mitigation, the
Bank will mainly consider those projects,
which have already completed the land
acquisition process.
120.
Strong government support to IDB
Group Entities and Funds are considered
to be the key success factor for the MCPS
process. The Government of Pakistan is full
member of all IDB Group Entities and Funds.
Therefore, the successful implementation of
46
Insufficient institutional
capacity for prioritization
and timely
implementation of
projects
Fuel supply shortages due
to:
high dependence on
expensive imported oil
declining natural gas
reserves
minimally developed
local coal resources
Weak financial viability
due to:
absence of time
differential tariffs
high level of circular
debt
inadequate maintenance
of public sector
facilities leading to
declining efficiencies
and higher cost of
operations
overloaded power
transmission and
distribution system
leading to significant
system losses
Accelerate economic
growth by
eliminating the
currently existing
power supply deficit
through:
Development of
new reliable and
affordable green
electrical energy
Promotion of
energy efficiency
and energy
conservation to
make the
economic growth
less energy
intensive
Optimization of
fuel mix to lower
dependency on
imported oil for
power production
Enhancing
regional energy
trade
Binding Constraints
Current Challenges/
Development Goals
/ Targets
foreign exchange
savings through
(i)
Improved security,
reliability and
affordability of
energy supply in an
environmentally
sustainable manner
by:
diminishing the
currently prevailing
5,000 MW
electricity supply
deficit
reduced
transmission and
distribution losses
increased
electrification
coverage
decreased cost of
electricity
generation through
greater share of
hydropower in the
generation mix
creation of an
Energy Sector
Development Fund
Positive externalities
such as:
Development
Outcomes
47
Reduction in planned
outages by 20 percent
Energy Sector
Expected Intermediate
Results / Milestones
facilitation of power/gas
interconnection initiatives
between energy rich
Central and West Asia,
and Pakistan
Cross-cutting initiatives (to
be implemented with
Agriculture and Rural
Development Pillar) by:
supporting construction
of multi-purpose dams to
enhance water security as
well as energy security
Exploring "Clean" coal
technologies
Ensuring sustainability by
encouraging use of PPP
On-grid
and
off-grid
renewable energy projects
(hydropower, wind, solar,
geothermal and bio-fuels)
Prioritizing support for
energy efficiency
enhancement initiatives
Strengthening energy
transmission and
distribution infrastructure
Improving energy security
through regional and crossborder gas and electricity
interconnections through
Proposed Areas of
Interventions
Kurram-Tangi
Co-generation
Development of indigenous
renewable energy potential
including:
Expected Outputs
Reducing transport
cost and enhance
affordability
Establishing
efficient and well
integrated transport
system to achieve
competitive
economy
Slow responsiveness to
investor needs and
timeframes because of
multiple Regulatory
Authorities creating
jurisdiction overlaps
and bottlenecks
absence of one window
streamlined operations
Shortage of availability of
long-term financing for
new power infrastructure
projects:
$23 billion needed over
the next five years
security perceptions
minimal support from
the insurance
companies
Lengthy land acquisition
process
Inadequate site
accessibility hindering
expeditious construction
of hydropower projects
Reduced cost of
trade and transport
logistics
Shortened shipping
time to major
markets
Improved trade
competitiveness of
the economy
creation of new
"Green"
employment
opportunities by
encouraging local
manufacturing of
needed spares as
well as transfer of
technology
avoidance of green
house gas (GHG)
emissions through
promotion of
renewable energy
reduced reliance on
imported fuel oil
for power
generation
48
Establishment of major
missing links along the
east-west corridor for
improvement of national
road connectivity
Diamer-Basha
promotion of bio-fuel crop
production
Turkmenistan-AfghanistanPakistan-India Gas Pipeline
Clean coal power generation
development
Creating a hub of
regional
connectivity
between high
growth East Asia
and resource rich
Middle East
Increasing road
density
acquisition
Poorly targeted
investments for the
development of transport
infrastructure
Inadequacy of welltrained labor
49
Institutional capacity
building in the transport
sector
Development of urban
travel planning
railways
Railways rehabilitation and
modernization
Toll roads and connectivity
infrastructure at Karachi Port
(railway line, road, and bridge)
under PPP scheme
Ensuring
National Food
Security for the
growing
population
through boosting
production,
productivity, and
access
weak tenancy
Lack of access to credit resulting from:
Current Challenges/
Binding Constraints
Development
Goals / Targets
Expected Intermediate
Results / Milestones
50
Achieved
sustainable
growth of major
food crops
Increased water
and land
productivity
Enhanced water
management for
harvesting,
particularly
assisting in
bringing 8 million
hectares of land in
barani areas under
cultivation
Increased access
to modern/
productive
cultivation
techniques and
inputs
Enhanced access
to agricultural
credit, storage
facilities, and
markets
Developed local
value-chains
Reduced rural
poverty
Increased
i.
Development
Outcomes
Enhancing food
security with
focus on access
and production
Proposed Areas
of Interventions
Barani Areas:
Community Development and
Management of Water Resources
using integrated rural development
approaches
Second Phase of Chaghai Water
Management Program II
Horticulture Value-chain
Development Programs
Support for National Bio-Saline
Program:
Build on the first phase, with focus
on Sindh and Punjab to promote
cultivation of food and fuel crops in
saline affected lands
Establish linkages and provide expert
support from ICBA
National Level and On-farm Storage:
Construction of Grain Silos
On-farm multipurpose storage in
high production areas to be managed
by farmers/ farmer groups
Input Supply Support:
Rolling credit line to import urea/
phosphate mixed fertilizer
Promotion of Crop/ Livestock Local
Supply Chains for Livelihood
Development:
Development of local agricultural
value chains, through community
Expected Outputs
Results Matrix-II for Pillar 2: Supporting Sustainable Agriculture and Rural Development
ii.
51
Value-Chain Development
productivity of
livestock and
inland fisheries
Enhanced
farmers income
in saline affected
areas
Reclaimed 9.4
million hectares of
culturable waste
Enhanced
nutritious quality
of basic staples,
and increased
control and
management of
basic staple crops
Increased farmers
access to markets
with reduced role
of intermediary
Strengthened
private markets
for farm
technology/
machinery
Reduced poverty
Sustainable use of
land and water
resources
Increase in
agricultural
value-added in
exports
Conduct study to
identify potential
value-chains and
location clusters
Develop value-chain
infrastructure
Provide technical
assistance to enhance
SPS management
systems
52
Undertake
integrated water
resource
management
Increased storage
capacity
Enhanced water
availability in
Barani areas and
at tail ends
Improved on-farm
water use
efficiency
Reduced system
loses
iii.
Developed valuechain of
horticulture crops
Increased exports
of horticulture
crops
Water resource
management
Value-chain
development
for horticulture
crops
Rehabilitate
infrastructure
damaged due to
floods
outdated infrastructure
Diminishing arable land resources:
rehabilitation of Mirani
Dams are initiated.
Adopt resource
conservation
technologies
Promote modern
irrigation practices
Rehabilitate and line
watercourses
53
Initiate works on
rehabilitating irrigation
infrastructure
Clear and level
damaged land
Rehabilitate village
infrastructure in
Southern Punjab and
Northern Sindh
Reconstruction of
damaged
infrastructure and
building-backsafer measures
against flash
floods
Strengthened
flood control
structures
iv.
Restructuring
IBIS
infrastructure and
its governance
Infrastructure
development in
flood affected
areas
Attaining Health-related
MDGs
MDG Goals
Improving educational
outcomes for primary,
secondary as well as
tertiary students
Improving post-primary
access and quality
Promoting gender
equality for education to
achieve universal primary
education
Improving equitable
access to quality
education at all levels
through
Development Goals /
Targets
Current Challenges/
Binding Constraints
By 2015:
Health Sector
54
Strengthened
Health System to
be able to provide
equitable access
and delivery of
quality health
services to all with
ii.
Expected Intermediate
Results / Milestones
Education Sector
Increased access to
schools
Improved higher
education and
vocational training
Enhanced
education quality
i.
Development
Outcomes
Implementation of
health system
recovery plan
targeting areas
affected by the
earthquake and the
vocational training
Development of
Madrassa education
institutions
higher education
Improvement of
tertiary education, in
particular:
Proposed Areas of
Interventions
training of CMWs
training of LHWs
Support to medical/
paramedical training
institutions:
Establishment and
modernization of Madrassas
Establishment /
improvement of higher
education facilities related
to science and technology:
Expected Outputs
Expanding access to
quality health service
through alternative health
financing to the poor and
underprivileged
55
Access to quality
health services is
increased to 70
percent in the rural
and remote areas
NNMR reduced by
50 percent of the
current level
An appropriate
number of
physicians/
supporting staff
generated and
deployed to needy
areas
Covered
remote/needy areas
with skilled birth
attendants
By 2014 &
thereafter:
emphasis on
underprivileged
strata/regions
Additional CMWs/year
trained
Health facilities
reconstructed established
in target areas/districts
Health facilities equipped
and maintained in the
priority regions.
By 2015 & thereafter,
Universal coverage with
the basic child survival
interventions attained
By 2015 & thereafter,
Utilization rate increased
by 50 percent
Births attended by skilled
attendants increased by
50 percent
Health facilities
reconstructed/established
in target areas/districts
supported
Creation of demand
for utilization of the
available basic
MNCH services
Establishment/
functioning of health
training institutions
to train physicians/
CMWs/LHs
floods
Enhancement of the
urban Primary
Health Care to
address the gaps in
quality health
services
Expansion of
immunization (EPI)
with emphasis on
polio eradication
Support to the
national/provincial and
district plans
Promote partnership with
key stakeholders (including
communities participation,
co-financing with donors
and specialized agencies
such as WHO, Benazir
Income Support Program,
CBOs, NGOs etc)
training of physicians
National/provincial plans
for health system
strengthening (including
reconstruction /
rehabilitation of PHC,
secondary and
referral/teaching facilities,
health facilities, disease
prevention/control and
training) in areas affected
by the floods
Identification and
development of new
high potential products
for exports
Bringing further
improvement in the
export marketing
function
Developing the
downstream sub-sectors
of the existing exporting
industries
Improving international
competitiveness of
products from Pakistan
by:
Development Goals /
Targets
i.
Binding Constraints
Expected
Intermediate
Results /
Milestones
Proposed Areas of
Interventions
ii.
Development
of at least
three projects
in the
downstream
sub-sectors of
identified
exporting
industries
Identification
of at least 2
new nontextile product
segments with
high potential
for exports
BMR (Balancing,
Modernization and
Replacement) projects-ICD
TA to identify potential sectors
offering the greatest growth
potential for exports-ITFC
TA for marketing and branding
strategy of high potential
domestic products-ITFC
TA to create awareness for
international compliance among
the exporters-ITFC
TA to develop a study to
increase the share of high
growth emerging markets in the
export markets for exportsITFC
backward integration-ICD
56
Reduction in primary
and low tech portion in
the total exports in the
form of a shift to
medium- tech and
high- tech products
Overall improvement
in the export margins
Reduction in the
Concentration Ratio in
respect of the product
segments (shift from
textiles to non-textiles)
and target exports
markets
Improvement in
perception of Pakistani
exports
Development Outcomes
Projects aiming to
develop/enhance:
downstream exporting
industries focusing on
value addition
product diversification
away from the traditional
portfolio of exports
Study identifying new nontextile products for greater
product diversification
Development of Brands
with regional if not global
reach
Quality Certifications and
Compliance with
international market and
product related regulations
Study on recommendations
to improve the geographical
mix of exports
Expected Output
Result Matrix-IV for Cross-Cutting Area 1: Private Sector Development Through Improving Investment and Trade
Increasing access to
capital
Improving infrastructure
Strengthening human
capital
Improving International
Competitiveness of
Exports by addressing
key supply side
constraints by:
non-availability of the
required number and
quality of teachers and
doctors/ paramedical staff
57
TA
and training to key trade
supply gap
the education
facilitation agencies for better
improvement in
and health
execution of trade related
market access
sectors
negotiations-ITFC
avenues
Infrastructure:
Access to Capital:
Infrastructure Development:
financing/
improved access to
investment of
financing/ investment in IPPs
finance
2 IPPs
with a particular focus on
influencing the
including at
Renewable Energy-ICD
development of the
least 1
TA for the need assessment of
Islamic Microfinance
project based
the market access
subsector
on
infrastructure-ICD
Renewable
greater advocacy for
financing/
investment of
Energy
regulation and
market
access
infrastructure
development
supervision
e.g. warehousing, cold
of farm/
human resource
storage, silos etc-ICD
industry to
development and
market
Access to Capital:
building capacity of
infrastructure
advisory for the establishment
providers by
e.g.
of an EXIM Bank-ICIEC
improving
warehousing,
direct
investment/financing
governance, IT
cold storages,
initiatives for the
systems,
grain silos
establishment of new
management and
etc.
institutions equity in existing
outreach
Access to
institutions and lines of
Human Capital
Development:
Development of healthcare
projects including specialty
and general hospitals,
diagnostic centers, wellness
centers etc.
Study identifying the market
needs to provide a better
focus for the development
tertiary and technical
training institutions
Projects for the creation and
expansion of existing
tertiary and
vocational/technical
institutions
Development of market
access infrastructure e.g.
warehouses, cold storages,
grain silos etc.
Development of IPPs based
on conventional fuel with
projects based on
environment efficiency e.g.
Renewable, Biomass, and
RDF.
Provision of pre/post
shipment export finance and
export credit insurance to
private sector players
Institutionalization of
corporate health insurance
with a major insurance
player
Lines of finance to existing
financial institutions
catering to the requirements
of SME sector
Development of local
lack of documentation in
creating governance and
information transparency
issues
58
study to
develop a
local
currency
financing
product
study to
explore to
develop a
comprehensi
ve
mechanism
and
institutional
framework
for export
credit
insurance
direct
disseminatio
n of export
credit
insurance
products
Capital:
increasing awareness of
export credit insuranceICIEC
TA to develop Shariah
compliant products for the
SMEs-ICD
Lack of
coordination
among stakeholders
such as regulators,
Ministries, Takaful
participants etc
Improving the
competitiveness of the
Takaful sector, according
to international best
practices, to enable it to
fully contribute to
economic development
Non-availability of
long-term financing
Non-availability of
requisite budgets
Non-availability of
financial and
human resources
from the
government and
private sector
Current Challenges/
Binding Constraints
Development Goals /
Targets
Influencing the
Feasibility study
by ICIEC/TDAP
Implementation
plan by mid-2013
and
commencement of
implementation
by the
stakeholders
59
and
all
articulate
roles
responsibilities
of
stakeholders
ii.
Proposed Areas of
Interventions
Enhanced availability of
Credit Insurance Cover for
Pakistani exporters by
creating level playing field,
and enhancing the depth
and width of Pakistani
exports
Availability of a broader
range of products and
solutions, including microTakaful, for the
consumption of people of
Pakistan
i.
Development Outcomes
Expected
Intermediate
Results /
Milestones
ICIEC to provide
consultancy and training,
advice
Expected Outputs
Results Matrix-V for Cross-Cutting Area 2: Islamic Finance, Resource Mobilization and Reverse Linkages
Development of the
Islamic micro-finance
subsector
Supporting access to
Islamic finance for the
poor
development and
ppoverty reduction
through:
Macroeconomic
and resource
constraints
Non-availability of
high quality
feasible projects
Lack of support of
all stakeholders
such as regulators,
Ministries,
multilaterals etc
Lack of ensuring
sustainable
economic returns to
maintain investors
interest
Weak building
scale to realize
tangible impact
Lack of technical
and institutional
capacity of IMFI/
IMFB
Non-alignment of
development vision
with investors
commercial
interests
due to investors
constraints
Implementation
plan by mid-2013
and
commencement of
implementation
by the
stakeholders
regulatory,
supervisory and
institutional
requirements)
expected by mid2012
60
Assigning
mandate to IDB
for arranging
financing on a
project by project
basis during the 4year MCPS period
Identification of
project pipeline
with the
Government of
Pakistan and the
private sector by
end-2011
iii.
Human resource
development and building
capacity of providers by
improving governance, IT
systems, management and
outreach
Syndications
Development of Islamic
financial services industry
and enhancement of
intra-member country
technology transfer
Improving statistical
capacity
Developing a uniform,
modern, transparent and
cost effective public
procurement system
Non-availability of
sufficient budget
Lack of availability
of the requisite
knowledge
Lack of sufficient
budget
Lack of sufficient
resources
Increase in remittances
Technology transfer
iv.
iii.
Identification of
opportunities for
utilizing expertise
of Pakistan
61
Reverse Linkages
Arrange statistical
training courses
Enhance the
capacity of public
officers through
training
Capacity Building
manufacturing of heavy
machinery for sugar and
cement industries and
textiles sector
Islamic banking
Utilization of Pakistans
expertise in the field of:
Strengthening statistically
capacity building of the
relevant statistical institutions
Development of a
comprehensive eprocurement system through
Public Procurement
Regulatory Agency (PPRA)
Agriculture
Human Development (Education and Health)
Private Sector Development
Islamic Finance
A.
30-35c
An Overview of Poverty
2.
Historically Pakistan has not
witnessed a secular decline in poverty.
Rather, the poverty levels have fluctuated
considerably. This has also been the case for
the last decade when first the country
witnessed a decline in poverty between 2000
and 2006 period. Later, because of both the
high inflation and slow economic growth,
3.
The 1990s witnessed a gradual
increase in poverty level, from 26.8
percent in 1992-93 to 30.6 percent in 199899.2 This rise in poverty was because of a six
percentage points increase in rural poverty
while urban poverty declined during this
period. The rising trends in overall poverty
continued up to 2000/01 period (34.5
percent), but this time the increase was both
in rural as well as urban areas. In addition to
65
5.
The war on terror has resulted to
divert the public expenditure from
development to security. The economy of
Pakistan has been facing severe challenges
since 2007/08 with a declining rate of
economic growth; double-digit inflation
particularly the food inflation; power
shortage; soaring oil prices; and poor law and
order situation. The present socio-economic
situation is likely to have adversely affected
the government efforts for poverty reduction.
The government sources consider that
poverty is likely to have increased from 22.3
percent of the population in 2005/06 to 30-35
percent in 2008/09.4 In 2008, the Planning
Commissions Panel of Economists reported
in its Interim Report that poverty might have
increased by 6 percentage points from 23.9
percent in 2004/05 to 29.9 percent in
2008/09.5 It is most likely that the poverty
head-count ratio in 2010 could be as high as
in 2001.
4.
A sharp decline in poverty was
observed during the first half of the 2000s,
from 34.5 percent in 2000/01 to 22.3
percent in 2005/06 - a decline of more than
12 percentage points in only five
years3.The percentage of population living
below the poverty line in rural areas declined
from 39.3 percent in 2000/01 to 27 percent in
2005/06 while the corresponding decline in
urban areas was from 22.7 percent to 13.1
percent, suggesting that sharp decline in rural
areas could not narrow the rural-urban gap;
rural poverty in 2005/06 was more than
double the urban poverty. One of the main
reasons of poverty reduction during 2000-06
was the high economic growth recorded by
most sectors. In addition to high growth, other
factors which are likely to have contributed to
poverty reduction include the increased public
spending especially on education, health and
infrastructure (rural electrification, roads, and
irrigation improvements). Overall, pro-poor
expenditures increased from 3.8 percent of
3
6.
The province level poverty
estimates show that poverty declined in all
four provinces between 2000/01 and
2004/05. However, there is a great deal of
variation across the provinces in terms of
percentage decline. Rural Sindh has shown a
huge reduction in poverty, from 48.3 percent
in 2000/01 to 28.9 percent in 2004/05 - a
decline of about 20 percentage points, mainly
attributes to exceptionally high agriculture
66
7.
One common characteristic among
the selected countries and Pakistan is that
the poverty is largely a rural phenomenon.
According to the Economic and Social
Survey of Asia and Pacific (ESCAP 2010),
the decline in poverty rate was sharpest in
China (rural poverty declined from 74.1
percent to 26.1 percent and urban poverty
from 23.4 percent to 1.7 percent during 19902005. In case of Indonesia, rural poverty
declined from 70.5 percent to 24.0 percent
and urban poverty from 62.0 percent to 18.7
percent during 1990-2005. In Malaysia, rural
poverty declined from 21.8 percent to 7.1
percent and urban poverty 7.5 percent to 2.0
percent during 1990-2007. Poverty rate in
Thailand declined from 17.2 percent in 1990
to 0.4 percent in 2005. Compared to other
countries, India succeeded to reduce its
headcount poverty rates in both urban and
rural areas but with less speed. Urban
poverty is almost non-existence in China and
Malaysia. For India, Indonesia and Pakistan,
higher rural poverty persists but relatively
with less gap than the former twos.
However, no uni-directional movement of
headcount ratio has been observed in
Pakistan while comparing it with the other
selected countries. The other selected
countries noticed a decline in poverty in both
urban and rural areas; whereas in Pakistan, it
Final
26.1
1.7
43.8
36.2
24
18.7
3.6
2.0
7.1
13.1
27.0
0.4
ii.
Trends in Inequality
8.
The Gini-coefficient values show
an overall increase in inequality between
1992-93 (0.27) and 2005/06 (0.30) in
Pakistan. Two measures are commonly used
to examine levels and trends in inequality:
Gini-coefficient and income or consumption
share by quintiles (e.g. the bottom 20
percent). The same pattern has been
witnessed in urban as well as rural areas
(Table A.3). It appears from the inequality
information that during the period when
poverty declined overall as well as in rural
and urban areas, the gap between rich and
poor widened. It indicates that the benefits of
growth during the high growth period (200006) were relatively higher for the rich than
for the poor.
67
10.
A cross-comparison shows that
during the selected period (initial and
final), the share of bottom 10 percent
population in total income or consumption
has improved in Pakistan, China,
Malaysia, and Thailand; whereas it
declined in India and Indonesia. However,
the ratio of the bottom 10 percent to top 10
percent indicates the presence of inequality in
all the selected countries.
9.
All selected Asian countries have
enjoyed respectable growth during the last
quarter century; however, inequality
remains an issue. Table A.4 shows the Ginicoefficient and the ratio of the consumption
or income share of the top 10 percent to the
bottom 10 percent of the population among
the selected six East and South Asian
Table A.4: Gini-Coefficient and Inequality in Income or Expenditure in Selected Asian Countries
Indicators
Initial Period
Poorest 10percent
Richest 10percent
Ratio of Richest
Poorest 10percent
Richest 10percent
Ratio of Richest
China
2001-07
India
1999-07
Indonesia
Malaysia
Pakistan
Thailand
1.8
3.9
3.6
1.7
3.7
2.5
2002-07
33.1
27.4
28.5
0.447
0.325
2.4
3.6
18.4 a
7b
31.4
31.1
0.415
0.368
13.2 b
1998-07
38.4
28.3
0.343
3
7.8 b
8.6 b
1997-07
22.1a
33.8
0.492
7.6 b
0.330
13.4 b
2.6
3.9
2.6
32.3
28.5
26.5
0.394
0.379
0.312
10.8 b
2000-07
11 a
6.7 b
0.432
33.7
13.1 b
0.425
68
11.
It is unlikely that Pakistan will
achieve the poverty-related MDG targets
by 2015. The country was on the track to
achieve MDG poverty related targets up to
2006 when a sharp reduction in poverty was
witnessed during the 2000-2006 period in
both rural and urban areas. However, at
present, the ground realities and official
estimates reveal that it is difficult to achieve
the poverty target by 2015. With regard to
other poverty-related targets (i.e. the
prevalence of underweight children and the
population below the minimum dietary
energy consumption levels), Pakistan is also
lagging in these indicators, therefore, it is
most likely that the poverty-related targets
will not be met by 2015 (Table A.5).
1990/91
2005/06
Current Status
(2008-09)
26.1
23.3
13
Worsened since
2006
40
38
<20
Worsened since
2006
25
n/a
13
Worsened since
2006
Source: Pakistan Millennium Development Goal Report, 2010, Planning Commission of Pakistan
12.
Targeting the poor and vulnerable,
which has been integral component of
both PRSP-I, PRSP-II, and New Growth
Framework, includes some narrowly
targeted interventions of the government
to transfer benefits directly to the poor.
Some of them include Benazir Income
Support Programme launched in 2008;
Punjab Food Support Scheme initiated in
2008; Pakistan Bait-ul-Mal; Regular Zakat
Programme; and Microfinance provided by
69
10
70
Province
Distance
to Metal
road<1
iii.
14.
The latest official statistics based
on the Labour Force Survey of Pakistan
(2008/09) shows that the total labour force
volume is 53.7 million with an annual
growth rate of 3.7 percent. Rural areas have
almost more than double share in the total
employment, which is primarily due to the
absorption of employment in the agriculture
sector. The labour force participation rates
have witnessed an increase of 2.1 percentage
points during the last decade. Female
participation in the labour market has
gradually increased. However, it is still very
low, around 22 percent. Overall, the youth
have a lower participation rate than the adult
Soling
street
Punjab
80.0
47.0
66.0
Sindh
67.0
10.0
30.0
KPK
38.0
34.0
29.0
Baluchistan
20.0
12.0
8.0
Source: MOUZA Statistics for Pakistan, 2008
Employment Situation
Drain
Piped
water
Education
Ins.
Health Ins.
58.0
23.0
19.0
7.0
9.0
7.0
20.0
9.0
34.0
37.5
33.3
22.3
30.5
27.3
24.5
11.3
15.
According to the official data, the
overall unemployment rate increased from
6 percent in 2000/01 to 8.3 percent in
2003/04. However, it declined during the
next four years to 5.2 percent. During this
period,
the
economy
witnessed
comparatively high growth and poverty
reduced sharply. However, the estimates
71
Table A.7: Labour Force Participation Rates and Unemployment Rates (percent)
2000/01
2001/02
2003/04
2008/09
Change b/w
2000 & final
(percentage
points)
52.5
82.4
21.8
+2.1
-0.08
+5.5
44.2
69.2
18.4
+3.7
-0.1
+8.2
7.6
5.2
9.6
5.3
8
6.2
4.2
8.6
4.7
6.6
5.2
4.3
8.5
4.7
8.3
5.2
4.7
7.1
-0.8
-1.1
-7.3
-2.2
-2.8
8.6
8.4
9.6
11.8
7.2
7.5
7.1
8.9
10.5
6.1
2005/06
2006/07
53
84
21.1
52.5
83.1
21.3
45.9
72.2
18.6
2007/08
Sources: Pakistan Economic Survey 2009/10; and Pakistan Employment Trends (2008, 2009)
Table A.8: Pakistan: Share of Employed Labour Force in Major Sectors (15+)
2000/01
2001/02
2003/04
-5.9
-4.0
-20.4
-6.3
-5.6
2005/06
2006/07
2007/08
2008/09
72
Change
2000 to
2008
(percentage
point)
-2.7
-6.1
0.3
1.4
1.8
3.9
1.3
4.3
-4.2
16.
With regard to sector-wise,
agriculture is the largest sectors in terms
of employment provision with 45.1 percent
in 2008/09. However, its share in total
employment declined by 2.7 percentage
points during the last decade, with more
decline among the males (6.1 percentage
points), probably due to changes in the
agrarian structure including a decline in
sharecropping and increased mechanization
in the agriculture sector. The services sector
Table A.9: Pakistan and South Asia: Employmentto-Population Ratio among Adults and Youth
Change
between 2000
and 2008
2000/01
2001/02
2003/04
2005/06
2006/07
2007/08
(percentage
points)
Employment-to-population ratio in Pakistan for Adult
49.9
Overall
46.8
46.5
47.0
49.7
49.8
+ 3.1
79.1
Male
78.6
77.6
77.6
79.6
79.6
+ 0.5
19.9
Female
13.7
13.6
15.6
19.0
19.4
+ 6.2
Employment-to-population ratio in South Asia for Adult
Overall
58
57.3
56.7
56.7
Male
80
78.8
78.4
78.2
Female
34
34.4
33.8
34.0
Youth Employment-to-population ratio
Overall
35.1
37.6
38.5
42.0
40.9
+ 5.8
Male
61.6
61.8
62.7
66.1
64.2
+ 2.6
Female
7.2
11.8
13.7
16.8
16.8
+ 9.6
Youth Employment-to-population ratio in South Asia
Overall
43.3
43.1
42.5
42.6
Male
59.3
58.5
57.8
57.6
Female
26.1
26.4
26
26.3
Pakistan Employment Trends (2008) and ILO, Guide to the New Millennium Development Goals Employment Indicators
73
19.
The Pakistan MDG Country
Report 2010 enfolds the old MDG target
which is to promote gender equality and
women empowerment by ensuring
employment in the non-agriculture sector.
Table A.10 shows that womens share in
non-agriculture employment has increased
from 8.1 percent in 1990 to 10.6 percent in
2008. However, this share in 2008 is much
below the MDG target by 2015 (14 percent).
The progress to achieve this target is very
Indicator
Share of
women in
wage
employment
in the nonagriculture
sector
1990
2001
2005
2008
MDG
Target
2015
8.1
9.7
10.9
10.6
14.0
74
196369
197176
197687
198792
199298
199801
200105*
GDP growth
rate
7.2
4.8
6.7
4.8
4.2
3.2
6.0
Labor force
growth rate
1.7
3.5
2.5
1.9
3.6
2.5
Employment
growth rate
1.5
3.4
2.5
1.5
3.4
1.6
1.02.0
2.12.6
2.63.1
3.14.7
4.75.9
5.98.3
6.07.6
40.2
46.5
46.530.7
30.717.3
17.322.4
25.732.6
30.632.1
34.122.3
Unemployment
rate
Poverty
Incidence
2.6
2.6
Source: Extended the study of Kemal A. R. (2004), An Employment-based Poverty Reduction Strategy for Pakistan,
Working Paper No. 1, Islamabad, CRPRID/UNDP.
*The numbers from the last column has been taken from Pakistan Economic Survey 2009/10, Pakistan Employment
Trends 2008, Ministry of Labour, Manpower, and overseas Pakistanis, Government of Pakistan.
22.
The literature in Pakistan14 shows
that GDP growth alone is not sufficient
until the quality of jobs is improved and
the access to modest earning opportunities
for the poor are enhanced. Economic
growth that results in increased employment
opportunities in less productive jobs sector
may not be enough to alleviate poverty. To
GrowthEmployment-Poverty-Inequality
Nexus
21.
There is a broad consensus in the
literature that economic growth would
be only effective to reduce poverty if it
improves the quality of jobs and the
access to modest earning opportunities
for the poor.13 During 2001-07 period, the
high economic growth in Pakistan not only
14
75
for
23.
Pakistan has so far launched six
labour polices in 1955, 1959, 1969, 1972,
2002 and 2010. All these policies laid-down
the parameters for the growth of trade
unionism, the protection of workers rights,
the settlement of industrial disputes and
redressal of workers grievances. The basic
aim of all plans and policies was to accelerate
pro-poor economic growth by creating new
job opportunities and skill development of
the poorest of the poor. The poor and
vulnerable have also been directly targeted
by safety net programmes. In particular,
during 2002-2010 period, around 70-80
percent of the PRSP budget has been spent
on three sectors: human development, rural
development and safety nets. As poverty is a
rural phenomenon, the PRSP strategy revolves
around the promotion of rural development by
community development, raising agricultural
productivity as well as the rural non-farm
economy. All these policies and programs
were designed for poverty reduction but
through employment creation. The microfinance is one of the major targeted
interventions to address poverty and
unemployment by enabling the poor to
become self-employed. Perhaps, at present
there is no other large-scale development in
76
25.
As poverty and employment are
highly correlated, a number of binding
constraints are also linked with the labour
market concerns. A number of the
following critical constraints have been
identified.
Table A.12: Ranking of Labour Market Efficiency in Selective Countries in 2010 (out of 139 countries)
Efficiency Indicators
Pakistan
China
India
Malaysi
a
16
Thailand
49
Indonesi
a
47
104
58
104
56
61
98
44
90
Rigidity of employment
34
110
78
77
100
18
25
51
62
89
38
50
31
93
15
61
20
29
Brain drain
68
37
34
27
28
38
137
23
128
109
111
57
125
92
108
95
99
96
77
78
B.
26.
During the last decade (2000-2010),
Pakistans real growth slowed and remained
unsustainable compared to selected high
performing Asian countries (India, China,
Indonesia and Malaysia and Thailand). These
economies also recovered much faster
compared to Pakistan from the global
2000
Table B.1: Real GDP Growth in Selected Asian Countries (percent, p.a.)
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Average
Pakistan
4.3
1.9
3.1
4.7
7.5
9.0
5.8
6.8
3.7
1.2
4.1
4.7
China
8.4
8.3
9.1
10.1
10.1
11.3
12.7
14.2
9.6
9.1
10.5
10.3
India
4.4
3.9
4.6
6.9
8.1
9.2
9.7
9.9
6.4
5.7
9.7
7.1
Malaysia
8.7
0.5
5.4
5.8
6.8
5.3
5.8
6.5
4.7
-1.7
6.7
5.0
Indonesia
5.4
3.6
4.5
4.8
5.0
5.7
5.5
6.3
6.0
4.5
6.0
5.2
Thailand
4.8
2.2
5.3
7.1
6.3
4.6
5.1
4.9
2.5
-2.2
7.5
4.4
Sources: For Pakistan, Pakistan Economic Survey (2009/10) and for other countries, IMF World Economic Outlook (October
2010)
27.
Growth diagnostic framework
developed by Hausmann, Rodrik, and
Velasco (2005) is a powerful tool used here
to find out critical constraints to
Pakistans economic growth. The problem
tree (Figure B.1) provides a framework for
diagnosing critical constraints to economic
growth in Pakistan. It starts by asking what
keeps the level of private investment low. Is
private investment low due to low return on
17
79
poor
geography
Low appropriability
bad
infrastructure
government
failures
market
failures
information
externalities:
self-discovery
low human
capital
micro risks:
property
rights,
corruption,
taxes
coordination
externalities
low
domestic
saving
macro risks:
financial,
monetary,
fiscal
instability
poor
intermediation
Table B.2: Quality of Infrastructure in Selected Asian Countries (out of 139 Countries)
Overall
Infrastructure
Roads
Railroads
Ports
Airports
Electricity
Fixed Tel. lines
Thailand
46
36
57
43
28
42
93
18
80
29.
International
competitiveness
remains a key issue for the economy. The
scale of the challenge is manifested in
Pakistans global ranking of 101 (out of 132
countries) in the Global Competitiveness
Index 2010/11, compared to Malaysia (24),
China (29), India (49), and Indonesia (54)
(Table B.3). This issue of competitiveness is
30.
Weak software (i.e. innovation,
business sophistication, quality of education,
and spending on R&D) is also constraint to
growth. Pakistan is lacking in growth
software compared to its most of the
Table B.3: Global Competitiveness Index
Rankings for Selected Asian Countries
Pakistan
China
2009-2010
(out of 133
countries)
101
2010-2011
(out of 132
countries)
118
49
51
29
India
Malaysia
27
24
Indonesia
26
54
Bangladesh
44
106
103
Innovation
Business
Sophistication
Quality of
Education
Spending
on R&D
Pakistan
79
75
87
67
India
44
39
39
37
China
Malaysia
Indonesia
Thailand
41
25
37
48
26
53
24
36
52
23
16
40
26
66
81
22
48
31.
Declining levels of investment and
savings is worrisome. The investment as
percentage of GDP ratio was maximum at
22.5 percent in 2006/07, which declined to
19 percent in 2008/09 and 16.6 percent in
2009/10, which is significantly low compared
to investment rate in China (45 percent) and
India (27 percent). Similarly, the level of
domestic savings was 15.6 percent of GDP in
2006/07, which declined to 9.9 percent in
2009/10 (Figure B.2).
15.0
10.0
33.
While
human
development
indicators have improved since 2001/02,
they still lag well behind even compared to
low income countries. Pakistan has been
struggling with low human development
indicators, ranking 125 out of 169 countries
in the Human Development Index 201021.
5.0
0.0
Total Investment
Source: Pakistan Economic Survey (2009/2010)
(Percentile Rank between 0 - 100, lower the values, worst the indicator)
Voice and Accountability
Political Stability
Government Effectiveness
Regulatory Quality
Rule of Law
Control of Corruption
Pakistan
China
India
Malaysia
Indonesia
Thailand
21
60
31
48
34
30
13
47
24
15
19
58
54
80
47
60
33
46
44
60
43
62
19
45
56
65
34
51
13
36
47
58
28
51
32.
Pakistans
another
major
constraint in achieving macroeconomic
stability, sustaining economic growth and
delivering public services is weak
governance. Recent studies have established
positive
relationships
between
good
82
125
119
108
92
89
50
57
34.
Business climate is relatively
unfavorable. According to World Bank
Doing Business Report 2011, out of 183
countries, Pakistans ranking fell from 75 in
2010 to 83 in 2011. Private entrepreneurs
claim that deteriorating investment climate is
mainly due to corruption, government
instability, policy instability, rising inflation,
and inefficient government bureaucracy. The
rising corruption is also evident from
Transparency International Perception of
Corruption Index as Pakistan fell to 143
position (out of 178 countries) in 2010 from
139 ranking in 2009.22
22
83
C.
Diagnostic Analysis of Critical Constraints to Key Sectors
(Infrastructure, Agriculture, Human Development, Private Sector
Development, and Islamic Finance) in Pakistan
i.
Infrastructure
(i)
Energy Sector
36.
Country is facing acute power
shortage of more than 5000 MW. Peak
demand has risen from 10,459 MW in 2001
to 18,521 MW in 2010-11 while the
corresponding supply increased from 10,894
35.
State remains the dominant
shareholder in the power sector. Currently,
all transmission and distribution (except
Karachi Electric Supply Company - KESC)
remain under full government ownership.
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
85
10,894
10,958
11,834
12,792
12,600
13,292
12,442
13,637
13,413
13,163
Surplus/Shortfall
435
-86
236
197
-1247
-2546
-4,956
-4,215
-5,170
-5,358
39.
Insufficient institutional capacity for
prioritization and timely implementation of
projects. There is an urgent need for
allocating adequate resources to build
capacity of the concerned institutions to
properly equip them to be able to prioritize
least cost solutions to achieve energy
security. Moreover, increased focus needs to
be given to timely and within budget
implementation of projects as per contractual
obligations of all parties concerned.
reliable
and
40.
High dependence on expensive
imported furnace oil for power generation.
The country is currently producing about 70
percent of its electricity using oil and gasbased thermal power generation. While gasbased generation continues to use
domestically produced gas, oil-based
capacity mostly relies on imported expensive
furnace oil. Prospects for a decline in
indigenous gas reserves combined with the
increasingly volatile global oil prices make it
a great challenge to be able to fuel the
thermal generation at affordable prices in
order to support the desired expansion of the
power sector.
41.
Escalating production costs owing
to continued reliance on de-rated and low
efficiency power generation plants. Owing
to financial constraints, mainly due to
historically below cost recovery tariffs as
well as high commercial losses, the
maintenance of public sector power plants
continues to be neglected which results in
sustaining the vicious cycle of deteriorating
operational efficiency of the plant resulting in
continuously increasing the cost of electricity
generation.
42.
Shortage of availability of long-term
financing for new power infrastructure
projects. The Energy Sector Task Force
86
Needed Capacity
29,301
31,633
34,298
36,829
39,950
41,443
44,460
48,196
52,229
43.
Site accessibility a major hindrance
for realizing the hydropower potential of
the country. Most hydropower projects
(HPPs) are located in northern part of the
country where landslides are common, which
adversely affect the site accessibility making
the timely delivery of construction material
and equipment a major challenge. As part of
the project preparation, the Bank will give
due consideration to assuring adequate site
accessibility prior to undertaking the project
financing of new HPPs.
Planned Capacity
23,788
26,279
29,405
33,630
42,530
45,338
50,034
53,284
57,470
Surplus/Shortfall
-5,513
-5,354
-4,893
-3,199
2,580
3,895
5,574
5,088
5,241
44.
Process of land acquisition needs
to be streamlined to minimize costly
implementation delays as well as expensive
changes in project design. As mitigation,
the Bank will only consider projects which
24
87
51.
Recent competitiveness data shows
that the overall transport infrastructure,
e.g., road, rail, ports, and airport, is not up
to the standard in comparison with some
selected East and South East Asian
countries. Accessible and affordable
transport system helps in enrollment in
primary school and benefits of getting child
and maternal health facilities, but current
data reveal that rural road density is
significantly low in Pakistan, which affects in
achieving these MDGs.
48.
Strengthening
the
transport
infrastructure has a direct impact on
economic growth. Transport sector has
about 10 percent contribution in the overall
GDP of Pakistan. It provides over 6 percent of
employment in the country and has a direct
contribution to poverty reduction. The sector
accounts for about 35 percent of the total
energy consumption annually and receives
about 15 percent of the annual Federal Public
Sector Development Program (PSDP).
49.
The transport is mainly roadoriented. As a result, impact of over loading,
early deterioration and accidents are
unavoidable. Therefore, proper attention is
necessary in the future on road asset
management. The other sectors need
improvements to harmonize inter modal
transport system in Pakistan.
52.
Several strategies have been set for
development of the transport sector to
achieve the related targets set in the Vision
2030, PRSP-II (2008-2012), and the
National Trade Corridor (NTC, 20072014). The Vision 2030 is a long-term
strategy towards achieving a well developed
nation through sustainable development,
which sets out the following sectoral targets:
50.
Road transport carries about 91
percent of passenger traffic and 96 percent
of freight traffic, whereas, railways carries
only 5 percent of the traffic. About 80
percent of the freight and passengers are
being carried out by the north-south corridor
from Karachi seaport to Peshawar (border
city to Afghanistan) connecting major cities.
Traffic has been shifted to roads due to
motorization at a rate of 4.3 percent every
year. The growth of passenger traffic was 3.4
88
53.
Transport development is the 7th
pillar of the PRSP-II, which emphasizes on
corridor development and connectivity for
trade, road maintenance, capacity building,
rail development and reform, project
management, and private sector participation.
Private investors are encouraged in transport
infrastructure investment and management of
operations to mitigate the burden of
government support and bottlenecks in
development.
54.
The National Trade Corridor
(2007-14) was developed based on the
PRSP-II for the purpose of reducing the
cost of trade and transport logistics and
bringing the services to international
standards, which will eventually reduce
the cost of doing business in Pakistan.
Therefore, the National Trade Corridor
Commercial
and
accountable
environment in railways and enhance
private participation in operation of rail
services;
Improve port efficiency by reducing the
costs for port users and enhancing port
management accountability;
Table C.4: Major Initiatives under the National Trade Corridor Improvement Program (NTCIP)
Road
Regional
connectivity
Modern truck
fleet
Fuel
efficiency
Rural access
N-S corridor
development
Linkage
between
Gwadar port
& the NTC
Upgrading of
Karakorum
highway
Rail
Reform
Commercialization
Connectivity
Private operators
Fast track access
Private freight
forwarders
Port
89
Air
New
international
airport in
Islamabad,
Sialkot &
Gwadar and
upgrading of
Multan
airports
Private sector
airlines
Modernization
Trade
Facilitation
Modernization
Trade
logistics
Strategy
55.
The NTCIP has five sub-programs
for road, rail, water, airways and trade
facilitation (Table C.4). The NTCIP has
been successful in reducing port entry
charges by 15 percent; decreasing port dwell
times to four days and clearing customs in
less than one day for containers; reducing upcountry container travel times by 10-20
percent and free time in port from 7 to 5
days.
59.
Poorly targeted investments for the
development of transport infrastructure
based on the socio-political needs and
demands, rather than solid economic or
commercial viability, costs the government
billions of dollars each year. In this regard,
proper implementation of the NTCIP may
play a crucial rule to channel investments
into the right areas of needs.
56.
The governments initiative on the
National Highway Improvement Program
(NHIP) for 1990-2010 focused on
consolidation and upgrading of road assets,
linkage with Gwadar Port, regional
connectivity and high speed north-south
economic corridor. Pakistan has special road
maintenance account.
60.
Inadequacy and unavailability of
well-trained human resources in the
transport sector created low capacity in
the management and is causing suboptimal performance in the sector.
Moreover, project implementation delay due
to under par capacity of the executing and
implementing agency causes cost and time
over run, and ultimately poor service
delivery.
The
IDB
also
noticed
implementation impediment in the previous
operations resulting in time extensions, cost
escalation and other inefficiencies. Therefore,
it is obvious that capacity needs to be
enhanced in the transport sector.
ii.
Agriculture Sector
61.
Agriculture sector plays a central
role in Pakistans economy. It accounts for
over 21.5 percent of GDP, contributes 60
percent to exports, and remains by far the
largest employer, absorbing 45 percent of
the countrys total labour force. Nearly 62
percent of the countrys population resides in
rural areas, and is directly or indirectly,
linked with agriculture for their livelihood.
While its contribution to growth rate
58.
Difficulty in land acquisition for
developing
various
sub-sectors
of
transport sector remains as a major issue
90
64.
Pakistan possesses one of the
worlds largest contiguous irrigation
system commonly called as Indus Basin
Irrigation System. It commands an area of
about 14.3 million hectares (35 million acres)
and encompasses the Indus River and its
major tributaries. Pakistan is predominantly a
dry-land country where 80 percent of its land
area is arid or semi-arid, about 12 percent is
dry sub-humid and remaining 8 percent is
humid. Irrigated agriculture is the backbone
of the national economy and 86 percent of
the cultivated area is irrigated. There are two
principal crop seasons in Pakistan, namely
the "Kharif", the sowing season of which
begins in April-June and harvesting during
October-December; and the "Rabi", which
begins in October-December and ends in
April-May. The annual rainfall ranges from
125 mm in the extreme southern plains to
500 to 900 mm in the sub-mountainous and
northern plains. About 70 percent of the total
rainfall occurs as heavy downpours in
summer from July to September (Kharif),
originating from the summer monsoons, and
30 percent in winter (Rabi). Based on the
topographic, climatic, land use, precipitation,
and water availability factors, the country is
divided into ten agro-ecological zones. An
important sub-sector, with high potential for
growth,
value-addition,
and
poverty
reduction in Pakistan is horticulture.26
Vegetables and fruits are grown over a
62.
Pakistan agriculture can be
divided into three major sub-sectors:
livestock, major crops, and minor crops.
Livestock is the largest subsector
contributing 53.2 percent, followed by
major crops (32.8 percent) and minor crops
(11.1 percent). Fisheries and forestry
account for the remaining 2.9 percent. The
major crops are cotton, sugarcane, rice,
maize, and wheat. Major crops, such as,
wheat, rice, cotton, and sugarcane account
for 82.0 percent of the value added in the
major crops and cover 67 percent of arable
land area (wheat - 38 percent, cotton - 14
percent, rice - 11 percent, and sugarcane - 4
percent). The four major crops (wheat, rice,
cotton, and sugarcane), on average,
contribute 33.1 percent to the value added in
overall agriculture and 7.1 percent to GDP.
Pakistan is the third-largest grower of wheat
in Asia and fourth-largest producer of cotton
in the world.
63.
Due to the tough topography, only
around quarter of the land area in
Pakistan is cultivated (27 percent) and 30
25
26
According to an estimate, horticulture can raise
income of farmers by nine times compared to
production of grains.
91
66.
Over the past six years, agriculture
has grown at an average rate of 3.7
percent per annum. Major crops and minor
crops have grown at an average rate of 3.7
percent and 1.5 percent over the last six
years. However, volatility in the sector is
high, with the range of growth varying
between 6.5 percent and 1.0 percent. The
fluctuation in overall agriculture has been
largely depended on the contribution of
major crops. The trend in cropping sub-sector
growth since 2003-04 is reported in Table
C.5.
65.
In Baluchistan, nearly 25 percent
of the total cultivated land is used for
horticulture production (mainly fruits). In
Punjab, which also dominates this subsector
in terms of both total area cultivated and total
production, horticulture accounts for around
4 percent of the total cultivated area. Potato
is the major vegetable crop, while citrus,
mango, and guava dominate the fruit crop
subsector.
Sindhs
relatively
small
horticulture sector is dominated by mango,
banana, and dates production. KPK province
Year
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10(P)
67.
During the outgoing year 2009-10,
the overall performance of the agriculture
sector has been weaker than target.
Agriculture
Major Crops
Minor Crops
Livestock
Fishery
6.5
17.7
1.5
2.3
0.6
4.1
7.7
2.4
6.3
1.7
3.9
-3.9
15.8
20.8
4.2
9.2
-6.4
10.9
2.0
-0.2
-1.2
7.3
2.0
0.4
-1.0
1.0
4.0
2.9
2.8
-1.7
3.5
P= Provisional
4.1
15.4
2.3
1.4
92
68.
Agriculture, including irrigation
was the main sector hit by the recent
floods, with total damages estimated at $5
billion (more than 50 percent of the total
cumulated damage). In the more hilly areas
affected by flash floods, mainly in AJK/GB,
KPK and Baluchistan, the rapid and
unexpected flow of water swept away
people, houses, crops, livestock and stores
of feed, food and seed. In the plain areas,
crops were destroyed but as the flood was
slow moving, most people were able to
relocate themselves, their valuables, and
livestock to higher areas. The total damage
in crops, livestock and fisheries sub-sectors
is estimated at about $5.0 billion. Among
the provinces, Sindh suffered most with 46
percent of total damage, followed by Punjab
(36 percent), KPK and Baluchistan (8
percent each), and the rest in AJK and GB.
In the irrigation sector, most extensive
damage occurred in Sindh province ($136.9
million) followed by KPK ($68 million).
Main damage occurred to the infrastructure
includes on-farm water channels and
tubewells.
70.
To achieve these goals, the
government
policy
targets
are
enhancement of productivity, profitability,
and competitiveness of the sector,
achieving in a sustainable manner. Water
resource management has been at the
forefront of governments policy objectives.
It has been envisaged that future
interventions in the agriculture sector would
incorporate and address water availability
issues in their design. The government is also
putting more emphasis on household food
security. It seeks to address this through the
promotion of high-value added cash crops
among small farmers. A Task Force on Food
Security, set up by the government is
formulating a National Food Security
Strategy to address various facets of food
insecurity in the country.
71.
The
governments
strategic
framework identifies twelve areas for
investment for the development of the
agriculture
sector.
These
include:
agriculture education, R&D, and extension;
land improvement, development, and water
management; mechanization; promoting high
quality input use-seed and fertilizer; quality
assurance, and bio-security; post-harvest
handling, processing, and marketing; rural
infrastructure; horticulture value chain; nonfarm rural sector; institutional strengthening;
livestock and dairy development; and
environmental sustainability.
93
72.
Apart from these strategic areas,
the socio-economic access aspect of food
insecurity has been addressed under the
broad theme of poverty reduction as
delineated in PRSP-II. In Water Sector
Policy, the government has devised an
integrated water resource management policy
for the management and development of this
resource. The focus of the policy is on the
following aspects: augmentation of water
resources; conservation measures and use
efficiency; protection of infrastructure from
onslaught of floods; significantly enhanced
public sector investment; construction of
small & medium dams, lining of irrigation
channels, rehabilitation of irrigation system,
surface and sub-surface drainage, lining of
watercourses; and optimization of cropping
patterns.
20
15
10
5
0
12
10
6
1
8
6
45
34
1
Food Insecure
Secure
75.
While wheat accounts for over 55
percent of total caloric consumption,
ensuring food security is much beyond
increased wheat production. Despite a six
percent increase in the wheat producing
districts between 2003 and 2009, the ratio of
surplus food producing districts declined
from 28.3 percent in 2003 to 17.5 percent in
2009. This implies that majority of Pakistan
districts rely on external domestic or
international sources to fulfill their food
requirements. This reliance creates price
differentials between food surplus and food
deficit districts, and often leads to hoarding
of food (and resultant price hikes), putting
food out of the access of people (even in food
surplus areas).
74.
High food insecurity is a major
issue. Currently 77 million people, almost
half of the population, is food insecure in
Pakistan (as measured by daily caloric intake
below the minimum recommended level).
According to a recent report, 80 of 131
districts in Pakistan have inadequate food
security28. However, the situation was much
better in 2003, when the number of such
districts were 54 out of 120. There are issues
of production as well as access, which have
28
94
76.
In terms of access, only 7.6 percent
districts (10 out of 131) fell in the category
of having reasonable conditions for access
to food (compared to 13.3 percent in 2003).
Conditions of access to food in Baluchistan
have particularly deteriorated. Compared to
none in 2003, Baluchistan had 16 districts
with worst conditions of access to food in
2009. Similarly, the number of districts with
worst conditions in Punjab jumped from one
in 2003 to five in 2009, with four of them in
southern Punjab. In FATA, 5 out of 7
Agencies fell in the worst conditions to
access category. The resultant effect of lack
of access is increased spending share on food
items, reduced nutrition, and cut down in
spending on education and health.
79.
With rising population, the land
available per capita has consistently fallen
over the years (Figure C.2). Reliance on
extensive production to meet the future food
requirements is not a potential option, given
that large amount of land is already
cultivated, and water resources are not
expanding (rather shrinking). Nearly 11
percent of Pakistans total arable land is now
uncultivable because of water logging and
salinity, while another 20 percent is under
stress. Further, due to haphazard urban
sprawl, over extraction of ground water, and
resulting depletion of fresh water, the land
available for future produce would continue
to decline, if not properly managed. Given
this scenario, large investments would need
to be made in emerging technologies
including, biotechnology, to significantly
enhance productivity.
77.
To address this situation, Pakistan
needs to adopt a three pronged strategy:
enhancing production of major food items,
focus on household food security in
extremely food insecure regions, and
creating alternate livelihood opportunities
through focus on both cash crops
(horticulture) and non-farming sectors.
The per capita agricultural growth needs to
keep pace with the rising population rate to
avoid food insecurity situation arising from
declining production growth levels. At the
same time, increased importance needs to be
given to the access to food by small farmers
and poor rural households. This would entail
diversification of production, increased
access to inputs/ output markets, creation of
alternate livelihood opportunities, and
promotion of modern technological practices
in production.
0.5
0.4
0.3
0.2
0.1
0
0.42
0.29
0.24
0.18 0.16
0.13
80.
However, there are still options for
extensive expansion - Potential lies in using
saline land, especially in Sindh for the
production of alternate crops, especially biofuel and cash crops, with high resistant to
salinity. The greatest potential in terms of
extensive expansion, however, lies in
bringing culturable waste (10 percent) and
current fallow (6 percent) under cultivation.
78.
Resource scarcity is another issue
of concern. The above increase in production
would need to be done with lesser land and
water resources than are available for
agriculture today.
95
81.
According to the benchmark water
scarcity indicator, Pakistans estimated
current per capita water availability of
around 1,066 M3, which places it in the
high water stress category. Agriculture is
the largest consumer of water, utilizing
around 95 percent of the total resources, but
the use efficiency remains very low.
Currently, the annual shortfall for agriculture
is estimated at between 5 percent and 18
percent of the requirement (Table C.6).
Water productivity in Pakistan is less than
0.1 kg/m3 as compared to 0.39 kg/m3 in
India.
83.
The situation of water availability
and efficiency has deteriorated over the
recent years. Extensive extraction of ground
water resources, salinity, weak drainage
systems, especially in Sindh, unreliability of
the system, outdated infrastructure, improper
management, and water scarcity downstream
have all called for a wide ranging reform and
restructure of the water sector. In this
context, the challenge for the government
will be the formulation and effective
implementation of a comprehensive policy
followed by a set of measures for the
development and management of water
resources. This would include overhaul of the
water sector governance, development of an
integrated water sector policy, change in
cropping patterns, and greater investments
for
enhancing
storage,
conservation
(especially
conveyance
and
on-farm
efficiency), surface and subsurface drainage,
and rehabilitation of irrigation infrastructure.
2010
2015
Head
135.7
155.0
Water
103.8
103.8
31.9
51.2
45.0
50.0
Shortage
Irrigation
(%)
Efficiency
84.
Limits of traditional agricultural
growth and poverty nexus - the majority of
Pakistans rural poor are neither tenant
farmers nor farm owners. According to a
recent study (World Bank, 2007), non-farm
households (excluding agricultural laborer
households) accounted for 47 percent of the
rural poor in 2004-05. Farmers comprised
only 43 percent of households in the bottom
40 percent of rural per capita expenditure
distribution. The remainder 5 percent was
agricultural labourer households. Over 60
percent of Pakistans rural poor are landless,
82.
The water problem is exacerbated
due to lack of storage capacity, which has
only increased at a slow rate over the
years. The countrys current storage capacity
at 9 percent of average annual flows is low
compared with the world average of 40
percent. Further, on average, 35 MAF of
water flows into the sea annually during the
flood season. In addition, extensive damages
96
86.
The most important factor for lack
of impact on rural poverty, however,
remains the inequitable land holding and
water access structures in rural areas.
Small farmers (0-5 hectares), which
constitute the majority of the rural population
(86 percent of farms) own little assets (44
percent of the farm area), and gain little from
new technological breakthroughs and large
untargeted government programs. Similarly,
barani areas, tail-end farms, and saline
ground water areas face water shortage and
volatility issues. The growth of these farmers
is hindered by lack of access (and viability of
use) to productive resources including inputs,
credit, land security, as well as outreach to
output markets. Even other rural farmers,
majority of which are tenants or
sharecroppers, face the same issues given
weak land record system/ land tenure in the
country, which limits their access to credit
and discourages investment in land.
Non-Farm
Others
35%
Farmers
Punjab
24%
85.
The impact of agricultural growth
on rural poverty is limited due to three
important factors: (a) segmentation of
Pakistans agricultural labor market, (b)
agricultures declining contribution to both
total GDP and rural household incomes; and
(c) uneven access to productive assets
especially land and water. Over 72 percent of
agricultural labor is family labor, 25 percent
is tenant farmers, and only 0.8 percent is
casual labor. As a result, most of the direct
gains in labor earnings from increased
agricultural output accrue to farm
households, not to hired agricultural workers.
As a result, incomes of landless agricultural
workers (10 percent of the rural poor) rise
only moderately in these scenarios. Secondly,
since the agricultures share in both the rural
and national economies has shrunk,
multiplier effects originating from the
agricultural sector have a smaller impact on
the non-agricultural economy. Further,
87.
With a poorly developed non-farm
sector, the overwhelming burden on
providing livelihoods falls on the
agriculture sector. Historically, demand
linkages ensuing from increased agricultural
output and incomes have been the most
important mechanism for spurring growth in
the rural non-agricultural economy of
29
97
88.
The agricultural growth alone,
without specific interventions targeted to
agricultural laborers and the rural nonfarm poor, can not alleviate poverty for
the poor in rural Pakistan, unless local
supply chains are developed for laborintensive higher value added crops, rural
home gardens are promoted, and small
farmers are specifically targeted under the
development programs.
Crop
Wheat
Rice
Maize
Cotton
89.
The
recent
floods,
which
devastated agriculture and irrigation
sector, would put significant pressure on
the government resources that could have
been diverted to the long-term strategic
development of the sector. The immediate
need is the restoration of canals, drains and
public
tubewells,
and
strengthening
vulnerable and damaged components of
barrages and river training works in the
short-term. The reconstruction needs in the
agriculture, livestock and fisheries sector
could require resources ranging from $257
million to $1 billion.
Pakistan
2657
2347
3415
713
91.
Sluggish, volatile, and slow growth
are the characteristics of agriculture
Table C.9 : Yield of Wheat in Top Producers,
2008
Region
yield: kg/ ha
World
3,086
China
4,762
India
2,802
Russia
2,446
Pakistan
2,451
Source: Agricultural Statistics of Pakistan, 2008-09
92.
Imbalance
Land
Holding
Structure: Very large and very small land
holding characterize farm structure in
Pakistan (Table C.10). Various studies reveal
Table C. 10: Pakistan: Farm Size
Farm Size
Farms
Farm Area
(Hectares)
(%)
(%)
Under 2.0
58
16
5 - <10
19
2 <5
10 <20
20 - <40
40 <60
Above 60
Total
28
4
1
*
*
100
28
94.
Difficulty in Access to Finance: In
Pakistan, agricultural finance is extended to
those
having
safe
collateral.
The
underdeveloped rural financial infrastructure
excludes the small landholders and tenants,
who are unable to invest in productivity
enhancement activities. High interest rates,
limited outreach, and large collateral
requirements are considered the primary
constraints. On the supply side, uneven
distribution of financial institutions, capacity
constraints (especially of microfinance
institutions), and lack of appropriate products
appear to be significant constraints. On the
demand side (especially in Sindh and
Baluchistan), institutional bottlenecks to
obtain passbooks issued by the revenue
authorities are the major issues. Nonavailability of passbooks or fake passbooks
and non-cooperation of revenue authorities
with the banks and borrowers remain the
major bottlenecks in these areas. High
interest rates and large/ safe collateral
requirements have been highlighted as a
major constraint to credit access by farmers.
Analysis of data reveals that availability of
financial services is also one of the
significant determinants of credit availability.
16
10
3
8
100
99
98.
Overlapping Farming Systems:
Another important and common aspect of
low productivity is overlapping between the
cultivation/ harvesting period of wheat and
cotton/ rice, which delays wheat cultivation,
and leads to lower productivity. The main
reasons for this include low prices for wheat
(which leads to its late cultivation in cycle)
and lack of access to modern technology for
cultivation (reduced tillage), which can
minimize the effect of late cultivation.
99.
Lower Input Use: Among the input
uses, pesticide is the lowest and much below
optimal use in Pakistan. The reason for this is
reported to be high cost of pesticides and
lack of information on what to use when,
which is interlinked to weak extension
services. Further, fertilizer application is
much below the recommended dosage,
especially in Baluchistan, AJK, and FATA.
Again, the low usage of inputs ultimately
relates to high price, especially in remote
areas, small land size (which discourages
investment), and lack of access to credit.
96.
Use
of
Limited
Modern
Technologies: In Pakistan, mechanization is
limited to the use of tractor. The next stage in
mechanization is to promote efficient, costeffective machinery in the context of
Pakistan. The main issues that have
constrained this relate to access to finance,
lack of awareness about the efficiency and
use of machinery, non-viable farm sizes,
maintenance issues, ownership of tractor as a
prerequisite, and ineffective extension
services.
100.
Weak Farmer Networks: Many of
the constraints resulting from small farm size
can be eliminated by the use of farmer
groupings and associations to achieve scale
efficiencies. However, such associations
remain unsuccessful in the context of
Pakistan due to local loyalties to landowner
and large famer skewing benefits; lack of
legal institutionalization; and weak tenancy
97.
Low Farm-Gate Prices: Another
major constraint that has limited investment
30
100
101.
Socio-Cultural Aspects: Large part
of uncultivated land is held by absentee large
landlords, who own it as a mandate of their
political/ tribal power, with little interest in
its cultivation.
104.
Less Developed Livestock Sector:
Livestock is a major resource in the rural and
peri-urban areas of Punjab and Sindh. Since,
livestock is a more evenly distributed asset in
rural areas, its promotion can significantly
contribute to increased incomes of
households.
However,
majority
of
households (83 percent) own less than six
animals, they use low quality feeds, have
inadequate access to veterinary services, and
market their milk through traditional
(gawalas) channels thus receiving low
prices. The main challenge in this sector is to
promote private cooperatives, which have the
advantage of using scales of efficiency in
animal rearing and marketing.
102.
Absence of On-Farm Storage:
Farmers are often under pressure to sell their
harvest at low price, usually right after the
harvesting season when the supply is
abundant. This is because of the absence of
good storage facilities, and the need of
immediate cash to cover the operational
expenses for the next planting season. Even
sometimes, the wheat market price at harvest
time is below their planting cost, which
discourages many farmers from planting their
lands at all. Another, negative aspect of this
is the high burden on government finances
who has to procure wheat from the farmers
both to provide support prices and
appropriate storage facilities.
105.
Lack of Access to High Paying
Non-Farm Jobs: Rural households derive 44
percent of their income from non-farm
activities and majority from wage earnings.
Nearly 70 percent of the jobs in the non-farm
sector are unskilled jobs, which pay very
meager wage rates. The main reason for the
lack of access to non-farm jobs is under
developed rural SME sector and low
education levels. Low education levels also
hinder mobility of rural households and limit
access to better paying manufacturing jobs.
According to the World Bank,31 an additional
year of education could raise household
incomes by 45 percent, largely due to
increased productivity in non-farm sector.
103.
Rising Salinity: There are nearly 14
million acres of salt affected wasteland with
brackish underground water as well as large
areas of sandy desert in Pakistan. Inefficient
irrigation techniques, lack of drainage
infrastructure, and unsustainable ground
water extraction have been the main reason
for rise in salinity. Costs associated with loss
of soil fertility due to agricultural soil
degradation (soil salinity and erosion) are
estimated at PRs 70 billion per year (1.5
percent of total GDP and 6.8 percent of
agricultural GDP, based on 2004-05 GDP
estimates). However, these areas can be put
to use by growing drought-tolerant and
water-use efficient crop varieties through
biotechnology. Salt tolerant, fast growing
grasses, shrubs and trees can be grown with
brackish water, and used as a feedstock for
106.
Lack of Incentives for Cash Crop
Production: Despite significant opportunities
31
101
108.
Pakistan has had an enrolment of
about 35 million students and over 1.3
million teachers in the education system.
Half of the population of rural areas lives in
villages where parents can choose from 7 or
8 schools. However, gender gaps remain in
the schools, largely in the rural areas where
22 percent of girls above age of 10 years
have completed primary level or higher
schooling as compared to 47 percent boys.
While the Pakistan Social and Living
Standards Measurement Survey (PSLSMS)
indicates an improvement in Net Enrolment
Rate (NER) from 42 percent in 2001/02 to 52
percent in 2008, it still indicates that almost
half of the primary school age cohort is
currently out of school. In addition, the NER
shows an insignificant gender gap in urban
areas; while NER for rural girls is at 42
percent trails behind rural boys NER of 53
percent.
Human Development
(i)
Education Sector
107.
The education system in Pakistan
has faced significant problems, mainly due
to low public expenditure on education,
which is below the education spending
compared to selected Asian countries as well
as average for South Asia and low-income
countries (Table C.11). The education
Table C.11: Public Expenditure on Education
in Selected Countries, 2009-10
Country
109.
Pakistans school enrolment rates
are lower compared with Bangladesh,
India and Sri Lanka. Primary school
completion rate of 61 percent is low
(compared to India, 84 percent and Sri
Lanka, 108 percent) and the ratio of girls to
boys in primary education is low by regional
average. Female school enrolment and
literacy rates continue to lag those for men,
and there are differences between rural and
urban areas, and between provinces. While
the female primary school completion rates
are already significantly lower than male
completion rates, the difference in the
likelihood of completion for a boy in the
richest quintile compared with a girl in the
poorest is particularly acute.
(percent of GDP)
Pakistan
2.0
Bangladesh
2.4
India
3.7
Sri Lanka
3.1
Nepal
2.9
Average for South Asia
3.1
Average for Low-income
3.3
Countries
Source: Human Development Report, UNDP (2010)
110.
Another important dimension of
low primary school enrolment is poor
102
112.
The review of the National
Education Policy (1998-2010) undertaken
by the Ministry of Education in 2009
which is a landmark and timely exercise.
The
Ministry
realized
that
rapid
developments on both domestic and
international fronts had overtaken the
objectives and projections of the existing
policy, and that a new articulation of the
educational priorities and future of Pakistan
was needed in light of the Devolution of
Power Plan, the Millennium Development
Goals (MDGs) and Education for All. The
Inter-Provincial
Education
Ministers
116.
Access to education remains a
significant challenge, which is even more
problematic at higher levels of education.
Although, literacy and net primary
enrollment rates increased in recent years,
103
117.
High dropout rates are another
area of concern. School dropout rates are
high especially at the secondary level.
Almost 30 percent of Pakistans children
receive secondary education and only 19
percent attend upper secondary schools.
118.
Vocational and tertiary education
system is weak. To equip graduates with the
high-level skills needed to build a knowledge
economy, better access to infrastructure,
teaching and research is needed at the tertiary
level. Currently, tertiary enrollment rates are
approximately less than 5 percent of the
eligible age cohort (17-23 years), which is
around 8 percent of the work force, receives
formal training.
119.
The challenges of the sector call for
commitment from all parties towards
education policy reforms, capacity
building in the education institutions and
increased investment in the education
sector, which is currently at 2.0 percent of
GDP in 2009/10 - lowest among South Asian
countries. Revamping the education quality
requires a multi-directional approach to
improve the effectiveness of the learning
process through enhancement of teaching
techniques, assistance of better learning,
motivation of students to attend school, and
upgrading of education infrastructure.
122.
The average life expectancy at
birth, which was 34 years in 1951 and 59
years in 1990, has increased to 65 years in
2008. Public health services are deemed
inadequate by many Pakistanis, resulting in
continuous low utilization of services. Where
services do exist, there is also a need to
remove socio-economic and cultural barriers
to access through suitable interventions.
Access to health services is estimated to be
available only to 55 percent of the
population, which is further decreased to 30
percent overall for maternal and child health.
104
123.
The level of improvement in the
health status has been unsatisfactory and
many challenges remain, including the
divide in health outcomes between rich
and poor, different provinces and districts,
and rural and urban areas. Contributing
factors include high level of poverty, gender
inequality, low levels of literacy and lack of
appropriate social health determinants
including proper sanitation and water, food
safety regulations and environmental health
action.
124.
Moreover, there are important
weaknesses in the service delivery system
such as insufficient focus on prevention,
gender imbalance, weak human resources
management and planning and insufficient
funds.
125.
Nearly 11,000 women and girls die
annually while giving birth - among the
highest rates in the region. The current
maternal mortality ratio is 276 per 100,000
live births down by half over the past decade.
Skilled birth attendance (SBA) has improved
from 18 percent during the late 1990s to 38
percent in 2006, as have institutional
deliveries to 34 percent.33 The rate of low
birth weight babies was 25 percent during
2000-2001, which fell to 21 percent in 2004
and 20 percent in 2006.
129.
Nonetheless, it is positive that the
National Health Policy (NHP) envisaged
recruiting, training and deploying 100,000
Lady Health Workers (LHWs) in the field
by the year 2005. In June 2005, health
authorities recruited, trained and deployed
80,000 LHWs in the field. It is also positive
that, the NHP intended to reduce low birth
weight babies from 25 percent to 12 percent
by 2010. In practice, the country did not
experience a reasonable improvement in the
number of low birth weight babies.
126.
Pakistans under-five mortality is the
highest in South Asia, except Afghanistan.
Although, a decrease happened from 150/1000
during 1950s to current 94/1000 live births,
this decrease is, and however, not matched
by a decrease in neonatal mortality, which
130.
Pakistan
has
sustained
a
devastating effect of two major natural
disasters at the start of the current decade;
the earthquake and floods in 2005 and
34
33
105
1990
2015
102
78
40
550
276
140
75
83
>90
18
39
>60
140
94
52
Source: Pakistan: Millennium Development Goals Report, 2010 (UNDP) and WHO, 2009
133.
Concerning the reduction of
maternal mortality, Pakistan is unlikely to
achieve most of the set indicators for 2015.
The current maternal mortality rate (MMR) is
almost double of the 2015 target. The same is
true for proportion of deliveries attended by
skilled
attendant
and
contraceptive
prevalence rate.
131.
The urban favored distribution of
both healthcare facilities and providers
needs strong and committed political
intervention to ensure equity and
universal access to basic healthcare
services. Not only the physical accessibility,
but also utilization of services has to be given
attention. For example, deliveries attended by
skilled attendants have decreased from 48
percent in 2004-2005 to 41 percent in 20082009.
134.
The 2008 report of the MDG Gap
Taskforce revealed that while there has
been much progress during the last
decade, the delivery on commitments
particularly in MDG 4 & 5 has lagged
behind schedule. Pakistan has reduced the
under-five mortality rate by 25 during the
1990s but has achieved no further reductions
in the past decade. Similarity, it maintained
the same infant mortality rate of around 78 in
the past decade.
132.
As a signatory to UN MDGs,
Pakistan has adopted 16 targets and 37
indicators and has made concrete
135.
Water supply coverage increased
from 53 percent in 1990 to 65 percent in
106
138.
National Action Plan for Prevention
and Control of Non-communicable Diseases
and Health Promotion in Pakistan (NAPNCD-2004) was launched. It was the first
policy dedicated solely to public health and
health promotion, which gained a prominent
place on the nations health agenda
competing for resources with traditional
health policies that focus on treatment, cure
and evolving technology. The NAP-NCD2004 focused on the community setting
through
two
major
behavioral
communication change initiatives one
through the media and the other by
integrating
non-communicable
disease
prevention into the work plan of the Lady
Health Workers.
137.
In 1997, the second National
Health Policy (Ministry of Health,
Government of Pakistan, 1997) was
launched and health promotion and health
education received a prominent place under
priority health programs and noncommunicable
diseases,
such
as,
cardiovascular disease, cancer and diabetes
were highlighted for prevention and control
measures. The focus for health promotion
was health education and the five
principles of the Ottawa Charter for Health
139.
The government launched the
National Maternal, Neonatal and Child
Health Programme in 2007 to promote
access to evidence-based cost-effective
interventions; strengthen district health
system capacities; empower communities;
expand the community midwives cadre;
and promote utilization of essential
services. The shift from curative to
preventive healthcare, participation of the
country leadership in the preparation of the
107
140.
The health systems ability to
respond and provide adequate and
comprehensive quality services continues
to remain limited in terms of access to and
utilization of preventive and curative
health services. Availability of lady health
workers and lady health visitors has
increased substantially; however, the
availability of women medical officers and
community midwives (CMWs) remains low.
Binding Constraints to Health Sector
Development
144.
Shortage of health professionals is
one of the critical challenges for the
Pakistans health sector. There were
127,859 registered doctors, 6,000 dentists
and 62,651 nurses in the country in 2007
which gives a doctor-to-population ratio of
1:1,225. Likewise, it gives ratios of 1:27,414
and 1:3,096 for dentist and nurse,
respectively. Interestingly, the doctors-tonurse ratio in Pakistan is 2.5:1 contrary to the
expected other way round ratio. The nurse to
bed ratio in Pakistan is 1:6 whereas as
compared to the standard 1:3 ratio set by the
WHO (Table C.13). The current output of
141.
Poor access and utilization of the
health services bundled with the expansion
and diversity of health care facilities in
Pakistan fall short of the fast population
growth and the ever-mounting health care
demand. Moreover, low status of women in
the society also works as a cultural barrier for
accessing to health facility for half of the
population in the country.
142.
Rural-urban disparity in provision
of health facilities/services is a key area of
concern. The urban favored distribution of
108
100
percent
of
the
textile
and
telecommunications sector, and a significant
part of the cement, sugar, automobile and
fertilizer industries are in the private sector.
Estimated
ratio per
10,000
population
Registered
doctors
127,859
8.0
Registered
dentists
6,000
1.0
62, 651
6.0
Selected
Health
Professional
Registered
nurses
and
midwives
146.
The history of a well-rooted and
pervading private sector in Pakistan goes
back all the way to the countrys inception
in 1947. The realization of the private sector
being the engine of economic growth has
been central to each successive governments
development policies. The government
demonstrated its confidence in the role of the
private sector in the industrial development
very early when it created Pakistan Industrial
Development Corporation in 1952. This
organization was set up with the mandate to
establish industries and then sell them to
private investors. The reaffirmation of private
sectors central role in the industrial
development of Pakistan happened through
the drive to privatize state owned assets,
which began in the early eighties and has
since continued. An early step in this regard
was the promulgation of the Transfer of
Managed Establishments Order in 1978 to
provide legal protection to privatization of
state-owned assets.
147.
In order to give a further impetus
to this drive, the Privatization Commission
of Pakistan was established in 1991. The
1990s also saw other major developments
including the liberalization of the financial
sector with the formation of privately held
banks and the privatization of large national
banks e.g. Allied Bank Limited and Muslim
Commercial Bank. The institutional fabric
was further strengthened to provide a
conducive environment for a thriving private
sector base. The government went about a
program under which new institutions were
established and some existing reformed. This
process created Oil and Gas Regulatory
145.
According to the Final Report of
the Private Sector Development Task
Force established under the auspices of the
Planning Commission in 2010, the share of
private sector in the GDP is estimated to
be about 90 percent. In addition to its share
in the economy, private sector is also the
leading generator of employment. Moreover,
out of the total banking assets, 80 percent are
with privately controlled banks. This
corroborates fairly well with the estimates
provided in the ADB Private Sector
Assessment, 2008, which estimates that over
77 percent of the commercial banking sector,
109
148.
Privatization continued to be the
centerpiece of government economic
development policies during the 2000s as
the Privatization Act 2000 was enacted and
the function of privatization was accorded a
full ministry status. Furthermore, in order to
encourage sustained investor interest, the
Board of Investment was established.
152.
The lack of value addition and the
resultant low quality perception of
Pakistans exports are among the main
reasons for the overall lagging export
volumes and the inability of exporters from
Pakistan to sufficiently tap lucrative markets
demanding high quality products and
therefore command higher margins for their
products.
149.
Vision 2030 of Pakistan lays great
emphasis on the leadership of private
sector for the development of wide ranging
economic sectors. Further, it clearly
acknowledges the need for emphasis on
deregulation and liberalization leading to
greater private investment as among the key
pillars of sustainable economic growth. The
Private Sector Development Task Force
(PSDTF) established by the Planning
Commission takes a close look in terms of
trade.
153.
As discussed in the STPF, so far
sufficient steps have not been taken to
increase the sophistication level of Pakistans
exports (Figure C.4).
Figure C.4: Sophistication Share of Pakistani
Exports (2002-03 to 2008-09)
150.
Exports are being seen as the key
driver of growth for both the economy as
well as the private sector. The importance
of growth in exports is equally recognized by
the Government of Pakistan through the
Medium-Term Development Framework
2005-12 of the Planning Commission of
Pakistan, Vision 2030 document and the
Strategic Trade Policy Framework (STPF)
2009-12 by the Ministry of Commerce,
Government of Pakistan.
100%
80%
60%
40%
20%
0%
Primary
Semi-Manufactured
Manufactured
110
154.
There is an immense need to bring
considerable improvements in product
diversification and movement towards
greater value addition. The overtime trends
clearly highlight the need for a greater focus
on the development of the downstream subsectors in the product value chain. The other
important insight is to further develop the
export marketing function both at the public
and private levels.
155.
Lack of diversity in exports
portfolio is another impediment for the
growth of the private sector in Pakistan.
The shortcomings of Pakistans exports base
acts as a vicious circle as it stifles the
development of the skill level of countrys
labor markets, prevents the creation of the
much needed R&D infrastructure, puts
breaks on the formation of a technologically
advanced industrial base and keeps capital in
short supply to go back to the continuing lack
of international competitiveness of the
products from Pakistan.
158.
Labor market inefficiency is one of
the major supply side constraints. A
healthy and well-educated workforce is
critical for any countrys drive towards
sustainable economic growth and prosperity.
A country of about 174 million people,
Pakistan ranked 125th in the UNDPs Human
Development Report 2010. Human resource
development or a lack thereof continues to be
one of the most pressing challenges for
Pakistan. Though managing to hold its place
in the Medium Human Development
category, Pakistan continues to rank below
the average indicators for the category as
well as for South Asia. The challenge to
bring an appreciable improvement in these
indicators is indeed testing, however, an
improving trend for the last 20 years is
observed as reflected by the higher growth in
Human Development Indicators (HDI) for
Pakistan.
156.
The high concentration of exports
to a few products in the primary or lowtech segments or lack of product
diversification has kept total exports
vulnerable to any form of adverse
developments in the product markets.
Slow moving textiles continue to command a
lions share in total exports when the share of
textiles as a percentage of global exports is
on the decline. A gradual move to diversify
away from textiles for faster growing product
segment is important with greater movement
towards higher value added products in the
textiles.
157.
Market access can play a key role
on further development of the private
sector. Pakistans top export destinations
have been the EU and NAFTA markets.
These traditional markets for Pakistan have
159.
The public sector alone cannot
address the huge, time-pressed and ever
111
163.
Islamic finance (IF) is growing fast
in Pakistan. Demand for this sector is driven
by multiple factors such as its faith base
appeal from Muslim population, its potential
to augment financial engineering blended
with socially and ethically responsive
financing; service high net worth clients
(whether Muslim or non-Muslim); and
attract cross border oil revenue surpluses.
The enabling environment for the
commencement of Islamic finance in the
country began to take shape much before
licensing of the first Islamic bank took place.
The measures taken for Islamization of the
country and consequently Islamic finance
include:
160.
Constraints
related
to
the
structural inefficiencies of the labor
markets need to be relaxed. Lack of skilled
labor as demanded by the market is a major
constraint faced by the manufacturing and
services sectors alike. This implies that even
if greater investment is made in enhancing or
upgrading the capital base, the lack of quality
human resources to operate the same may
reduce the growth.
161.
Access to finance and investments
is also a major constraint facing the
private sector. Whether it is investment for
capital projects or finance catering to the
working capital requirements of the private
sector, lack of availability and high cost of
funding (interest rates following a rising
trend since 2003) are major impediments to
growth in private business.
v.
Islamic Finance
162.
The financial sector in Pakistan
comprises
of
Commercial
Banks,
Development Finance Institutions (DFIs),
Microfinance Banks (MFBs), Non-banking
Finance Companies (NBFCs), Modarabas,
Stock
Exchange
and
Insurance
Companies. Under the prevalent legislative
structure, the supervisory responsibilities in
case of Banks, DFIs, and MFBs falls within
legal ambit of the State Bank of Pakistan
(SBP) while the rest of the financial
institutions are monitored by other authorities
such as Securities and Exchange Commission
and Controller of Insurance.
112
164.
The initiative to introduce Islamic
Banking (IB) in Pakistan was launched in
2001 when the government decided to
promote Islamic banking in a gradual manner
and as a parallel and compatible system that
is in line with best international practices.
Meezan Bank Limited (MBL), which was
granted a license on 31 January 2002,
commenced operations from 20 March 2002,
as the first Islamic bank of the country. Since
then the industry has been continuously
165.
The inclusive nature of Islamic
finance and its faith-based appeal will lead
to financial deepening in the country and
hence contribute towards one of the
overall national economic goals, i.e.
expansion of the financial sector. The
industry over the years has managed to offer
a wide array of products encompassing
almost the entire range of Islamic modes of
financing that are able to cater to the needs of
majority sectors of the economy.
166.
Pakistani-IBs have managed to
attract foreign stakes, which give industry
an edge and a diverse look with scope for
successful cross-fertilization and transfer
of experiences for the development of the
local industry. Rapid growth of the industry
has been accompanied by good financial
performance and specific industry niche. The
capital to risk-weighted ratio has invariably
remained significantly above the 8 percent
required level, and non-performing loans
(NPLs) ratios have been considerably low.
169.
State Banks initiative to promote
Islamic banking in Pakistan commenced in
2003.36 With regards to statistics of Islamic
banking, as of June 2010, there were 19
banks involved in Islamic banking with a
network of 583 branches in the country. Of
these, six are full-fledged Islamic banks with
415 branches and 13 of the existing
scheduled banks have 168 branches working
as stand-alone Islamic Banking Branches.
The activities of Islamic banks branches
have shown improvement at end-June 2010
compared with end-December 2009, both in
terms of number of accounts and outstanding
amount for deposits and financing (Table
C.14).
167.
Through SBPs proactive policy
action, a number of developments have
taken place on the regulatory, supervisory
and
Shariah-compliance
framework.
Moreover, the SBP has through its linkages
with internal and external stakeholders (such
as Accounting and Auditing Organization for
Islamic Financial Institutions (AAOIFI) and
Islamic Financial Services Board (IFSB)
attempted to resolve some critical issues
faced by the industry and also to capitalize on
the opportunities available in the local and
international context.
170.
The microfinance sector in
Pakistan is still at an early stage and the
Islamic microfinance sector is almost nonexistent except for a few regional pilot
projects such as Akhuwat and Farz
Foundation, mainly based in urban areas.
168.
The Islamic financial services
industry, despite its remarkable growth
114
Foreign Banks
Jun-10
Dec-09
Jun-10
Dec-09
Jun-10
Dec-09
Deposits
291.0
244.2
23.9
20.1
314.9
264.3
Financing
149.3
142.6
18.9
14.8
168.2
157.4
Investment
(Book Value)
60.8
56.7
1.7
1.7
62.5
58.4
171.
The Sukuk market in Pakistan is
regulated by the Securities and Exchange
Commission of Pakistan (SECP).39 Fifty six
Sukuk issues have been issued for a total
amount of PRs. 234.5 billion. The total
outstanding Sukuk at the end of 2010 were
55 with a total amount of PRs. 224.5 billion.
In Pakistan, domestic Sukuks in local
currency have been issued by the private
sector as well as by the government through
its company namely Pakistan Domestic
Sukuk Company Limited. In addition, the
government has also issued International
Sukuk for an amount of $600 million.
Total
172.
The SBP in 2008 had developed a
strategic plan for the Islamic Banking
Industry in Pakistan, which highlighted the
basic difference in SBPs current policies
regarding Islamic banking and the previous
approach adopted by it. The SBP has not
approached Islamic Banking solely as a
religious or a legal issue. It considers it to
37
39
115
Extension of outreach
Shariah-compliance mechanism
173.
With the SBPs strategy based on
above five pillars, the plan is to take the
market share from a current level of 6
percent to 12 percent by 2012. This will be
achieved through increasing outreach in
current urban consumer and corporate
markets and extending the market to cover
new segments of Islamic micro finance,
agriculture finance, and SME finance. It is
expected that by 2012, micro financing,
agriculture financing, and SME financing
will account for about 0.3 percent, 3 percent
and 20 percent of the total Islamic banks
financing, respectively.
176.
The SBP will coordinate and move
towards integrating the regulation of
Islamic finance industry across sectors and
across regulatory agencies regulating
different areas of this industry. The SBP
will also play a role in the development of
Islamic finance industry globally and become
one of the main hubs for attracting
international Islamic investments.
177.
Regarding Islamic microfinance,
the SBP in 2007 issued Guidelines for
Islamic
Microfinance
Business
by
Financial Institutions, a series of
guidelines intended to increase the scope of
microfinance services and products that
comply with Shariah to bring providers of
such microfinance services under its
regulatory umbrella. The SBP guidelines
174.
The SBP will continue to
strengthen
its
Shariah-compliance
mechanism through expansion of its Shariah
Board, introduction of Shariah inspection for
Islamic banks and conventional banks
Islamic banking operations, gradual roll out
116
181.
Existing vehicles in the microfinance
market have varying objectives and are
generally not commercially driven. Many
smaller institutions are currently facing lack
of scale and sustainability, but show a
positive trend and may qualify for donor
support at a later stage.
182.
The Sukuk market faces some
constraints, which have prevented it from
growing at a much faster rate. Some of
those constraints are lack of secondary
market for trading Sukuk that affect the
liquidity of the Sukuk holders; Shariah
issues; insufficient number of Sukuk issues;
and Sukuks with varying tenors to suit
Islamic banks liquidity needs are not
available.
117
D.
Statistical Tables
GDP
Real GDP Growth Rate (percent)
Agriculture
Manufacturing
Services
Investment and Savings
Total Investment (percent of GDP)
Fixed Investment
Public Investment
Private Investment
National Savings
Foreign Savings
Domestic Savings
Inflation
Consumer Price Index (percent change p.a.)
Budget Deficit
Overall Fiscal Deficit (percent of GDP)
Foreign Trade
Exports (percent of GDP)
Imports (percent of GDP)
Trade Deficit (percent of GDP)
Current Account Surplus/ Deficit (percent of GDP)
Gross Official Foreign Reserves ($ billion)
(in months of imports)
Workers remittances ($ billion)
Total Debt (percent of GDP)
of which Domestic debt
Foreign debt
Infrastructure
Crude Oil Extraction (million Barrels)
Gas Supply (Mcf)
Electricity (installed capacity) (000 MW)
Roads (000 km)
Telephones (Mil. Nos.)
Mobile Phones (Mil Nos.)
Social Development
Population (million)
Unemployment Rate (percent p.a.)
Education
Net Primary Enrolment Ratio (percent)
Literacy Rate (percent)
Male
Female
Expenditure on Education (percent of GDP)
Health
Infant Mortality Rate (per 1000 live births)
Maternal Mortality Rate (per 100,000 live births)
Expenditure on Education (percent of GDP)
2001/
2002
2002/
2003
2003/
2004
2004/
2005
2005/
2006
2006/
2007
3.1
0.1
4.5
4.8
4.7
4.1
6.9
5.2
7.5
2.4
14.0
5.9
9.0
6.5
15.5
8.5
5.8
6.3
8.7
6.5
6.8
4.1
8.3
7.0
16.8
15.5
4.2
11.3
18.6
-1.9
18.1
16.9
15.3
4.0
11.3
20.8
-3.8
17.6
16.6
15.0
4.0
10.9
17.9
-1.3
15.7
19.1
17.5
4.3
13.1
17.5
1.6
15.4
22.1
20.5
4.8
15.7
18.2
4.5
16.3
3.5
3.1
4.6
9.3
-4.3
-3.7
-2.4
12.6
13.0
-0.4
+1.9
7.0
13.1
13.6
-0.5
+3.8
11.5
2.4
83.4
39.9
43.5
2008/
2009
2009/
2010
3.7
1.0
4.8
6.0
1.2
4.0
-3.7
1.6
4.1
2.0
5.2
4.6
22.5
20.9
5.6
15.4
17.4
5.1
15.6
22.1
20.5
5.4
15.0
13.6
8.5
11.6
19.0
17.4
4.6
12.7
13.3
5.7
10.6
16.6
15.0
4.3
10.7
13.8
2.8
9.9
7.9
7.8
12.0
20.8
11.7
-3.3
-3.8
-4.1
-7.3
-5.1
-6.0
12.7
13.9
-1.2
+1.3
13.1
13.2
17.1
-4.0
-1.6
13.3
4.2
76.9
38.9
38.0
3.9
68.2
35.9
32.3
4.2
62.1
33.5
28.5
13.0
19.4
-6.5
-4.4
14.5
4.2
4.6
56.5
30.7
25.9
11.9
18.5
-6.6
-5.1
18.9
5.1
5.5
54.8
30.1
24.7
11.6
24.4
-9.0
-8.7
13.9
2.8
6.5
58.4
32.0
26.4
10.9
21.5
-7.7
-5.8
13.6
3.3
7.8
57.1
30.3
26.8
11.0
19.8
-6.5
-2.3
16.7
4.5
8.9
55.6
30.6
25.0
23.2
923.8
17.7
251.7
3.7
1.7
23.5
992.6
17.8
252.2
4
2.4
22.6
1202.
19.27
256
4.5
5
24.1
1344.
19.49
258.2
5.1
12.8
23.9
1400
19.4
259
5.1
34.5
24.6
1413.
19.46
259.2
4.8
63.2
25.6
1454.
19.42
258.3
4.5
88
24
1460.
19.87
260.2
3.5
94.3
17.9
1109.
19.74
259.6
3.4
97.6
143.2
7.8
146.8
7.8
149.7
8.3
152.5
7.7
155.4
7.6
158.2
6.2
161
5.2
163.8
5.2
173.5
5.5
42
50
1.9
51.6
1.7
53
2.1
52
53
65
40
2.1
53
54
65
42
2.2
56
55
67
42
2.4
55
56
69
44
2.4
57
57
69
45
2.1
77
350
0.7
0.7
0.6
77
400
0.6
76
380
0.5
75
276
0.6
119
2007/
2008
0.6
0.5
0.5
Indicators
Proportion of population below the calorie based food plus non-food poverty line (2005-2006).
2008-09
Lag
Slow
Slow
Slow
Ahead
Lag
Off Track
On Track
Proportion of children under five who suffered from diarrhea in the last 30 days and received ORT
On Track
Lag
Ahead
Lag
Lag
Lag
Proportion of women 15-49 years who had given birth during last 3 years and made at least one antenatal
care consultation
6. Combat HIV/AIDS, Malaria and other diseases
HIV prevalence among 15-24 year old pregnant women (percent)
HIV prevalence among vulnerable group (e.g., active sexual workers) (percent) Proportion of population in
malaria risk area using effective malaria prevention and treatment measures
Incidence of tuberculosis per 100,000 population
Proportion of TB cases detected and cured under DOTS(Direct Observed Treatment Short Course)
7. Ensure Environmental Sustainability
Forest cover including state owned and private forest and farmlands
Land area protected for the conservation of wildlife
GDP (at constant factor cost) per unit of energy use as a proxy for energy efficiency
No. of vehicles using CNG
Sulphur content in high speed diesel (as a proxy for ambient air quality)
Proportion of population (urban and rural ) with sustainable access to a safe improved water source
Proportion of population (urban and rural) with access to sanitation
Proportion of Katchi Abadis regularized
120
Lag
Lag
Ahead
Ahead
Lag
Lag
Ahead
Lag
On Track
Slow
Ahead
Lag
Lag
Lag
-
Pakistan
South Asia
73
88
76
57
83
69
1.6
2.2
3.4
Immunization rate
80
72
78
0.3
0.9
1.6
73
59
80
39
42
42
65
63
57
66
66
59
3.9
2.9
4.2
2.3
1.6
2.2
Source: World Bank/IDA/IFC, Country Partnership Strategy for the Islamic Republic of Pakistan for the Period of 20102013 (July 30, 2010)
121
Irrigation
4
5
Attracting FDI
Education
Health
Population Programme
Gender equality
Development Finance
SME financing
Islamic Finance
Microfinance
Judicial System
Energy security
Corruption
Tax administration
PPPs
122