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Countries and Regions Country Partnership Strategies Document
II. Implementation of the Country Strategy and ProgramA. Poverty Reduction9. After falling in the 1980s, poverty has been rising in Pakistan during the 1990s. At the end of the 1980s, one of five Pakistanis were poor; today it is one of three. Pakistan’s social indicators are given in Appendix 2. Although Pakistan has no official poverty line and estimates vary, there is agreement that the incidence of poverty currently ranges between 30 to 35 percent. Despite the Social Action Plan, primary and middle school enrolment rates have declined during the 1990s. Infant and maternal mortality rates and the total fertility rate have declined, but they continue to be among the highest in the region. More specifically, poverty is higher in the rural areas where two of five people are poor. In the rural areas, pockets of severe poverty exist in southern Punjab, large parts of Sindh, and almost all of Balochistan. Primary school enrollment rate in the rural area is two thirds of that in urban areas and child labor is a serious issue. While the gender gap is declining, literacy among the adult female population is still only about half that of the male population. However, the incidence of poverty is neither very deep nor entrenched, implying that the right policies and programs can yield significant reduction in poverty in the near term. 10. The major causes of poverty in Pakistan include (i) lack of employment opportunities, which in the rural setting is caused by the absence of rural–urban linkages; (ii) a slowdown in the pace of economic growth in the 1990s; and (iii) with the burgeoning debt obligations, a decline in the public sector development program. ADB’s poverty analysis also indicates that the failure of governance is a key determinant of poverty. The governance concerns include social exclusion of the poor and their lack of political voice and ethnic and sectarian differences, poor fiscal management, persistent failures to address accountability and performance issues with the public service, and continuing tensions between federal and province levels of government. 11. ADB’s poverty analysis and approaches to poverty reduction in Pakistan were discussed at the High Level Forum on Poverty Reduction on 23 April 2001. The forum generally supported the findings of ADB’s poverty analysis, including the causes, trends, and severity of poverty in Pakistan; the development priorities needed to reduce poverty; and the policy and institutional constraints to poverty reduction. 12. Priorities that emerged from the poverty analysis and forum included (i) the need to achieve broad-based growth through development of small and medium enterprises (SMEs) and promotion of exports of higher value added agricultural products; (ii) promotion of physical assets for the poor through support of microcredit and poverty reduction programs; (iii) social asset creation, including social sector programs for education and health; (iv) social safety nets with targeted programs for excluded groups; and (v) improved governance that covers judiciary reforms and public sector efficiency. B. Thematic Priorities1. Economic Growth13. Slow economic growth (only 1.3 percent increase in per capita income between 1991 and 1999) has been the major cause of the increase in poverty in Pakistan. Economic polices encouraging capital intensive investment over a long period resulted in serious macroeconomic imbalances, and contributed to the slow economic growth and the rise in poverty in the 1990s. To reverse this trend and significantly reduce poverty over the next decade, growth must be accelerated and made more broad based. The Government target is to revive GDP growth to an annual rate of 5.5 percent by 2004, and establish the basis for more rapid and sustained growth for the rest of the decade. The Government also aims to reduce population growth to below 2 percent by 2004, and thus achieve sufficient growth in per capita incomes in the second half of this decade to reduce poverty significantly. The sectoral focus during this period will include (i) agriculture and small and medium industry, because of their pro-poor, employment generation potential; and (ii) energy, to reduce pressure on the balance of payments. 2. Human Development14. Pakistan ranked 138th out of 174 countries in the 1999 human development ranking of the United Nations Development Programme (UNDP). Despite the efforts of the Social Action Plan launched in 1993 with broad-based external support, the impact on the social indicators was mixed. The literacy rate remained at about 43 percent (53 percent for men and 30 percent for women) and the net primary school enrollment rate declined to 42 percent. The population growth declined from 3.1 percent in 1985 to 2.3 percent in 1999 and the infant mortality rates from 124 in 1980 to 90 in 1999 per thousand, and the rural population’s access to safe drinking water increased from 27 to 50 percent. 15. The major challenge facing Pakistan remains the improvement of prevailing low levels of human development. This will prove more daunting due to the severe fiscal situation of the country. In addition, the issues of good governance, quality of social workers (such as teachers and health workers), and institutional capacity are all clearly recognized as key factors in improving the poor delivery and quality of social services. ADB’s operational program will continue to prioritize direct social interventions to address these challenges. This approach will also support the Government’s ongoing plans to devolve powers to the district levels. 3. Gender and Development16. The UNDP’s gender development index ranks Pakistan 115th out of 143 countries. By almost any measure, the status of women in Pakistan remains low despite efforts by the Government, nongovernment organizations (NGOs), civil society, and funding agencies to improve their situation. Rural women, in particular, face greater constraints including poor access to potable water and to basic sanitation. While the Government has made some highly positive policy gestures, such as ratifying the Convention on the Elimination of All Forms of Discrimination Against Women (CEDAW) and launching the National Plan of Action, many policies either discriminate against women or fail to address the gender implications of their actions. 17. ADB’s new gender strategy for Pakistan will be based on incorporating gender considerations into all ADB activities, and will include (i) institutional strengthening, (ii) policy reform, and (iii) legal reform and literacy. Support to assist the Government’s efforts to ensure that a third of all local government representatives are women, as indicated in the devolution plan, is a key policy area where efforts will be made to mainstream gender issues. ADB’s operational program will be implemented to mainstream gender-specific issues and gender reform programs have been included to implement this strategy. 4. Good Governance18. Pakistan faces daunting governance challenges. Analyses of linkages between poverty and governance highlight five issues of priority concern: (i) poor fiscal performance, including management of external and domestic debt, and budget planning and expenditure for pro-poor investments; (ii) political and social exclusion of the poor, women, and minorities from access to basic services and entitlements; (iii) persistent failure to address accountability, corruption, and poor public sector performance; (iv) ineffective and inefficient intergovernmental relations between federal and provincial levels and marginalization of local governments; and (v) loss of trust by the common citizenry in public institutions. 19. The Government has identified “good governance” as one of the five “strategic pillars” of its poverty reduction strategy (para. 12). Good governance includes improved strategies and management for external and domestic debt; medium-term budget and expenditure management and financing for pro-poor public services; restructuring of intergovernmental relations, including devolution and civil service reform; access to justice, including legal, judicial, and police reform; and capital markets development. 20. The main thrust of ADB’s assistance for governance reform will be on decentralization, devolution, and governmental restructuring. Closely linked with devolution and public sector restructuring, will be efforts to improve the performance of legal and judicial services to enhance access to civil, criminal, administrative, and social justice-in accordance with the Government's motto “to bring justice to the doorstep” of all citizens. 5. Private Sector Development21. The private sector in Pakistan consists of millions of privately owned farms, thousands of small and medium enterprises, extensive service sector providers, and the informal sector providing goods and services. The key challenges facing development of the private sector are crowding out of investments by the public sector, lack of consistency in sectoral policies, deficient incentive policies, inefficient banking and capital markets, legal and regulatory constraints, labor market distortions, and physical infrastructure constraints. 22. The Government’s support for larger participation of the private sector in the development process marks a shift from the past and is reflected in Poverty Reduction Strategy Paper, Three-Year Poverty Reduction Programme 2002-2004, and Debt Burden Reduction and Management Strategy. In addition, the Government is implementing plans to accelerate the privatization SOEs and banks as well as promote increased agricultural production by the private sector. 23. ADB’s support for private sector development will continue for the privatization of SOEs in the energy sector, development of the microfinance sector, development of the capital markets and reforms to improve trade and trade related financing. Additionally, ADB’s assistance will focus on improving incentives and legal framework for greater private sector participation in the productive sectors, including small and medium enterprises (SMEs). 6. Environmental Protection24. The annual cost of environment damage to Pakistan is estimated at $1.8 billion.4 The main environmental issues pertain to natural resources degradation, scarcity of freshwater, and poor human health as a result of air and water pollution. On the positive side, however, following the enactment of the Environmental Protection Act in 1997, the Government has refined and rationalized national environment quality standards, pilot-tested the self-monitoring and reporting tool, and approved the Guidelines for Determination of Pollution Charge for Industry. Efforts are also under way to set up a provincial sustainable development fund to be administered by multiple stakeholders and provide assistance for environment management. More recently the National Environment Action Plan was approved in February 2001 by the Government. However, the Government needs to integrate environmental concerns into the development process. Pakistan’s environment indicators are given in Appendix 2. 25. ADB’s assistance and will focus on mainstreaming environment concerns into its operations program. In addition ADB will support capacity building to undertake and coordinate policy initiatives and monitor and minimize the environmental damage. To complement this assistance, significant potential exists for cofinancing from the Global Environment Facility (GEF) resources. 7. Regional Cooperation26. Pakistan has substantial potential to cooperate with Afghanistan, India, and the Central Asian republics given its strategic location and complementarity in resources and markets with its neighbors. Cooperation could proceed in such areas as energy – including oil, gas, coal, and electricity. ADB has initiated consultations with the Government to explore avenues for Pakistan’s involvement with the Central Asian Regional Economic Cooperation. The Government has informally designated the Economic Affairs Division of the Ministry of Finance and Economic Affairs to coordinate with all concerned line ministries and agencies. As conditions improve, ADB will help Pakistan to formally develop and implement a strategy for regional cooperation. ____________________
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