Loan to Create Nonfarm Jobs in Pakistan's Rural Areas

MANILA, PHILIPPINES - A US$5 million technical assistance loan from ADB will help create nonfarming jobs in rural areas of Pakistan.

Drought and the poor performance of crops and livestock often force rural people to migrate to the cities, which are increasingly ill-equipped to handle the overcrowding and pressure on the urban infrastructure and environment.

"There is a pressing need to create an enabling environment to stimulate enhanced employment opportunities in rural areas," says Ahsan Tayyab, an ADB Project Economist. "Efforts must be made to diversify the rural economy in nonfarm sectors such as services, small-scale manufacturing, and value-added agricultural processing.

The project aims to diversify job and income-earning opportunities in rural and other areas, particularly for the landless, wage earners, and women.

The project will analyze the outreach and resources required to build the business skills of small rural enterprises, and design and implement pilot projects in selected subsectors with considerable potential, such as in ceramics and textiles.

It will also develop a comprehensive database on the rural nonfarm economy that would serve as a "one-stop shop" for rural development workers. The database will identify where and how product subsectors tend to "cluster," allowing the selection of specific businesses to work with within a subsector.

The project will assess the feasibility of establishing a Rural Enterprise Modernization Company, a not-for-profit company, that would serve as a focal point for initiatives to support the development and growth of rural businesses.

"International experience indicates that opportunities in rural competitiveness can be stimulated by access to a range of business development services," says Mr. Tayyab.

ADB's loan comes from its concessional Asian Development Fund, carrying a 32-year term, including a grace period of 8 years. Interest is charged at a rate of 1% per annum during the grace period, and 1.5% thereafter.

The Government will contribute $1.5 million toward the project's total estimated cost of $6.5 million. The Ministry of Industries, Production, and Special Initiatives is the executing agency for the project, which will be carried out over three years to December 2008.