Countries and Regions

	Table of Contents
p. 19 of 25 BACK | NEXT I. Country Performance Assessment II. Country Operational Strategy III. Sector Strategies A. Agriculture B. Infrastructure C. Social Infrastructure and Environment D. Governance Dimensions of ADB Operations E. Gender Dimensions of ADB Operations F. Province Level Interventions G. Private Sector Development IV. Regional Cooperation V. Donor Activities and Aid Coordination VI. Cofinancing and Catalyzing External Resources VII. ADB’s Operational Program VIII. Economic and Sector Work Program IX. Local Cost Financing

Country Assistance Plans - Pakistan : III. Sector Strategies

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G. Private Sector Development

86. The uncertain political and economic situation in Pakistan has reduced the potential for an increase in ADB's Private Sector Operations in the short to medium term. Loss of investor confidence has reduced the country's ability to raise long term financing for projects, both domestically and internationally, and is one of main challenges now facing Pakistan. Despite the clear need for new infrastructure development, the current political and macroeconomic situation is not conducive to privately-led infrastructure activity of any significance. There are a few exceptions, such as the telecommunications sector, but the immediate outlook for ADB-supported private sector infrastructure pipeline in Pakistan is not encouraging. Assistance to small and medium enterprise development initiatives is, however, an area of potential growth for ADB in the short/medium term, given that the Government has now recognized the critical importance of supporting smaller industries (which account for a large portion of GDP). Initiatives aimed at strengthening the domestic debt and equity capital markets are also being explored by ADB, with a view to freeing domestic liquidity and reducing dependence on foreign capital. Looking to the future, some private investors are attempting to improve the country's educational system, and new private tertiary institutions are being conceived in the field of business administration/economics, information technology, medical sciences and law. The Lahore University of Management Sciences and the Aga Khan University in Karachi are two high quality tertiary education institutions which may collaborate with ADB in the near future in, for example, legal education. Other areas being explored are Joint Public-Private Partnerships in the energy sector that may be supported under public sector operations. Microfinance will become increasingly important in small private sector development in the rural sectors.

87. ADB support to the private sector during the program period, in addition to the above, will concentrate on improving the policy and regulatory framework for enhanced private sector growth, including: (I) trade and export promotion through policy reform, and restructuring of sector institutions; (ii) improved resource mobilization and financial intermediation through debt and equity markets, including micro equity funds; (iii) privatization support in the industrial and energy sectors, including oil and gas; (iv) policy and institutional adjustments to effectively deal with industrial pollution and assist Pakistan's industrial and trade sectors meet international standards; (v) reform of economic laws, arbitration laws, and other legal and judicial bottlenecks affecting the private sector; and (vi) development of a suitable policy and institutional environment for an increased private sector role in the delivery of urban and health services. Consistency of a legal/regulatory framework and policies that engender investor confidence are also essential for continued ADB support for unguaranteed private sector exposure. A private sector focused ADTA for Agribusiness Development has been programmed for 2002. The ADB's private sector strategy is currently under review in preparation for the new Pakistan COS, including staff consultant studies.

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