Economic Survey Pakistan 2007 2008

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Chapter 09

EXTERNAL DEBT AND LIABILITIES

9.1 Introduction

High and rising external debt burden constitutes a serious constraint for development; a major impediment to macroeconomic stability and hence, to growth and poverty reduction; a discouragement to foreign investment because it creates a high risk environment and exchange rate depreciation; and a discouragement for government to carry out structural reforms in the various sectors of the economy. Empirical evidence suggests that external debt slows growth only if it crosses the threshold level of 50 percent of GDP or in net present value terms, 20-25 percent of GDP. Pakistan has experienced serious debt problems in the recent past and accordingly witnessed deterioration in the macroeconomic environment, leading to deceleration in investment rate and economic growth and the associated rise in the incidence of poverty.

Borrowing from within and outside the country is a normal part of economic activity. Developing countries, like Pakistan, would need to borrow to finance their development; however, they need to enhance their debt carrying capacity as well. In other words, the borrower must continue to service its external debt obligations in an orderly and stable macroeconomic framework. Furthermore, the borrowed resources must be utilized effectively and productively so that it generates economic activity. Prudent debt management is therefore, essential for preventing debt crisis.

Fiscal indiscipline is the root cause of rising debt burden leading to macroeconomic imbalances. A large fiscal deficit worsens current account deficit by strengthening aggregate demand which, in turn, is translated into higher imports. Fiscal discipline is therefore, vital for preventing debt crisis and maintaining macroeconomic stability – a critical element for promoting growth and poverty reduction.

Pakistan has pursued a sound fiscal policy and maintained financial discipline until 2006-07 and reaped the benefits of strong economic growth, declining debt burden, rising foreign exchange reserves, growing confidence of domestic and foreign investors, stability in exchange rate and continuous improvement in its credit ratings by the international ratings agencies. The hard earned macroeconomic stability which was underpinned by pursuing a sound fiscal policy appears to have been lost just in a space of one year (2007-08) of financial indiscipline. The macroeconomic imbalances have increased, the debt burden which was on a downward footing until recently, is likely to be reversed this year, both investment and growth have decelerated, foreign exchange reserves have declined and the exchange rate has come under severe pressure. Pakistan has paid a heavy price for financial indiscipline in the past and is likely to pay the same in the coming years unless sharp adjustment is made on the fiscal side quickly to regain the macroeconomic stability.

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9.2. Historical Perspective

The total stock of external debt and foreign exchange liabilities (EDL) in Pakistan declined from 51.7 percent of GDP at end-June 2000 to 28.1 percent by end-June 2007, and further declined to 26.9 percent of GDP by end-March 2008. The EDL grew at an average rate of 1.2 percent since 2001 to 2007, however, during the last nine months (July-March 2007-08) the EDL grew at an unprecedented pace of 13.3 percent — the highest ever in almost one decade. The debt management efforts during 2001-07 were supported by a rise in foreign exchange earnings. For example, the EDL as a percentage of foreign exchange earnings which stood at 297.0 percent in 1999-00, declined to 127.1 percent by end-March 2008 [See Table-9.3]. Notwithstanding this improvement, the current fiscal year remained the most difficult year for external debt management. This year has witnessed a sharp deceleration in non-debt creating inflows to finance the highest ever current account deficit in recent economic history, therefore the recourse to debt creating inflows or drawdown on foreign exchange reserves were the only viable options. The external debt situation in a historical perspective is documented in Table-9.1.

This rise in the external debt burden reinforced the need for prudent debt management. Following a credible strategy of debt reduction based upon principle of sound debt management over the last several years, Pakistan has succeeded in reducing

the country’s debt burden by ensuring that the growth in EDL should remain far less than the nominal GDP growth. Consequently, the burden of the debt has declined substantially during the same period.

9.2. I: External Debt and Liabilities

External debt and liabilities (EDL) at the end of March FY08 stood at US$ 45.9 billion. This represents an increase of US$ 5.4 billion, indicating a 13.3 percent increase over the stock at the end of FY07 [See Table 9.1]. Borrowing from multilateral and bilateral lenders accounts for 80 percent of outstanding debt, and are mostly in the form of medium and long-term debt [See Table 9.2]. The share of short-term debt, on the other hand, is extremely low at 1.3 percent. Pakistan took advantage of an earlier Paris Club rescheduling to re-profile its debt at a more favourable term.

End 1990 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 *

18.2 28.35 25.431 28.2 27.5 29.2 29.9 31.1 32.9 35.3 40.7A. Medium & long term (Paris Club,

Multilateral & other Bilateral 14.7 25.4 25.301 25.6 27.3 28.0 28.7 29.2 30.5 32.4 37.2B. Other medium & long term (Bonds,

Military & Commercial) 2.7 1.6 2.3 1.0 1.2 1.6 2.2 2.9 2.9C. Short term (IDB) 0.8 1.3 0.13 0.3 0.2 0.2 0.0 0.3 0.2 0.0 0.6

0.3 3.4 2.842 2.5 2.226 2.0 1.7 1.3 1.6 2.3 2.5

0.7 1.8 1.550 1.5 1.939 2.1 1.8 1.6 1.5 1.4 1.419.2 33.6 29.82 32.1 31.6 33.3 33.4 34.0 36.0 39.0 44.6

1.3 5.3 5.664 5.0 3.132 2.1 2.0 1.8 1.6 1.5 1.3

20.5 38.9 35.487 37.2 34.8 35.4 35.3 35.8 37.6 40.5 45.9- - 0.989 1.679 4.329 9.5 10.6 9.8 10.8 13.3 11.1

* Provisional Source: State Bank of Pakistan

ItemEnd June

1. Public & Publicly Guaranteed Debt

2. Private Non-guaranteed Debt

3. IMF

Total External Debt (1 through 3)

4. Foreign Exchange Liabilities

5. Total Debt and Liabilities (1 through 4)

6. Official Liquid Reserves

Table 9.1: External Debt and Foreign Exchange Liabilities ($ Billion)

Component % ShareParis Club 31.6Multilateral 46.9Other Bilateral 2.6Short-Term 1.3Private Non-Guaranteed 5.4IMF 3.1Other 6.2Forex Liabilities 2.9

Source: SBP

Table 9.2: Structure of EDL (End Mar 08)

External Debt and Liabilities

157

It is important to note that from a policy perspective, a critical appraisal of the external debt and liabilities should not be entirely focused on the variation in the absolute stock but, instead, it should focus on the incidence of the debt burden. The external debt and liabilities (EDL) declined from 51.7 percent of GDP at the end of FY00 to 26.9 percent of GDP by end-March 2008. Similarly, the EDL were 297.2 percent of foreign exchange earnings but declined to 127.1 percent during the same period. The EDL were 19.3 times of foreign exchange reserves at the end of FY00 but declined to 3.4 times by end March 2008. Interest payments on external debt were 11.9 percent of current account receipts but declined to 2.5 percent during the same period [see Table 9.3]. The maturity profile also showed an improvement over the last eight years as short-term debt was 3.2 percent of EDL but declined to 1.3 percent during the period under review.

9.2.2 Outstanding External Debt and Liabilities

Pakistan’s external debt and liabilities (EDL) is comprised of all Government debt denominated in foreign currency, loans contracted by enterprises with Government ownership of more than 50.0%, as well as the external debt of the private sector

which is registered with the State Bank of Pakistan (SBP) and finally benefits from a foreign exchange convertibility guarantee from the SBP. Pakistan’s total stock of external debt and foreign exchange liabilities grew at a compound average rate of just 1.2 percent per annum during 2001-07 – rising from $ 37.2 billion in 2001 to $ 40.5 billion by end June 2007. However, in the first nine months of fiscal year 2007-08, the stock of external debt and liabilities grew by 13.3 percent [See Table-9.1].

The EDLs have once again started to rise at a much faster pace, firstly on account of additional borrowing for the earthquake-related spending. Secondly, the growing external imbalances particularly, over the last two years have also

necessitated large borrowing. Finally, and most importantly, the weakening of the dollar with respect to leading currencies like the Euro and Japanese Yen have contributed to the surge in EDL, particularly over the last two years but more

Fig-9.1: External Debt & Liabilities (% of GDP)

5 1. 0

4 3 . 0

3 6 . 1

3 2 . 7

2 9 . 52 8 . 1

2 6 .9

51. 7 5 2 . 1

2 0

2 5

3 0

3 5

4 0

4 5

5 0

5 5

FY00

FY01

FY02

FY03

FY04

FY05

FY06

FY07

FY08*

* End March

Year EDL/ GDP EDL/ FEE EDL/ FER STD/EDL INT/CARRatio

FY00 51.7 297.2 19.3 3.2 11.9FY01 52.1 259.5 11.5 3.7 13.7FY02 50.9 236.8 5.8 1.4 7.8FY03 43.1 181.2 3.3 1.2 5.3FY04 36.7 165.0 3.0 0.6 4.9FY05 32.7 134.3 2.7 0.8 3.9FY06 29.4 121.6 2.9 0.4 3.1FY07 28.1 124.1 3.0 0.1 3.4FY08* 26.9 127.1 3.4 1.3 2.5Source: EA Wing and SBP Bulletins.* End March 2008EDL: External Debt and Liabilities, FEE: Foreing Exchange Earnings, FER: Foreign Exchange Reserves, STD: Short-term Debt, INT: Interest Payments and CAR: Current Account Receipts

Table 9.3: Trends in External Debt Sustainability Indicators, FY00-FY08

(Percent) (Percent)


158

so in the current fiscal year. The EDL grew by 5.0 percent in 2005-06, 7.7 percent in 2006-07 and 13.3 percent during July-March FY08. Since end-June 1999, the EDL stood at $38.9 billion but the stock in absolute terms started declining until 2003-04. The stock of debt started rising but thereafter grew at a much faster pace in the last two years. The current year witnessed even higher levels of stock at $45.9 billion by end March FY08. Notwithstanding, the rise in EDL in absolute number, the burden of the debt has declined on account of faster growth in nominal GDP. As can be seen in Table 9.3, EDLs as percentage of GDP have declined from 51.7 percent in FY00 to 28.1 percent in FY07 and further to 26.9 percent of the GDP by end-March 2008. However, EDL as percentage of GDP is likely to rise further by end-June 2008 and expected to be at last years level.

The single largest increase in the stock of debt was seen from multilateral donors with a change in stock of $ 4.8 billion or 13.1 percent. The foreign exchange liabilities showed a decline of $ 200 million (13.3 percent) but this was more than compensated for by fresh borrowing from the multilateral lenders as well as on account of the valuation effect at the back of a depreciating dollar vis-à-vis major currencies. Interest payments on EDLs were $ 1.6 billion and the amortization payments stood at $ 946 million.

Fig-9.2: EDL to Foreign Exchange Earnings Ratio

10 0

12 5

15 0

17 5

2 0 0

2 2 5

2 5 0

2 7 5

3 0 0

* End March

During the first nine months (July-March) of FY 08 the bulk of the increase in stock of EDL came

from public and publicly guaranteed debt, as it increased by US$ 5.4 billion (15.3 percent) while the external liabilities continued on their downward trend, declining by $US 0.2 billion (13.3 percent). The major chunk of increase in public and publicly guaranteed debt came from the weakening of the dollar. The stock of EDL increased to $ 45.9 billion by end-March 2008 as against $ 40.5 billion by end-June 2007, showing an increase of $ 5.4 billion in the first nine months of the current fiscal year.

As mentioned earlier, the real incidence of the debt burden should be given more importance from a policy making perspective and not on the variation in the absolute stock of external debt and liabilities. There are a number of different indicators which are commonly used by the international community and financial institutions to determine the debt carrying capacity and the amount of risk associated with a particular country. These indicators include the stock of external debt and liabilities as percent of GDP, export earning, foreign exchange earning, foreign exchange reserves, and debt servicing as percentage of current account receipts etc. Figure 9.2 shows a declining trend in the EDL to foreign exchange earnings ratio since FY00. It is evident that the ratio declined sharply until 2005-06 but thereafter it exhibits a muted rising trend.

9.2.3 Impact of Exchange Rate Fluctuations

Pakistan’s external debt is contracted and thus denominated in multiple currencies but for accounting purposes, it is reported in equivalent US dollar. Thus shifts in cross exchange rates among various currencies, especially against dollar are translated into changes in the dollar value of the outstanding stock of external debt. The change in the outstanding stock of the external debt is normally explained through new disbursements adjusted for amortization plus revaluation impact of non-US dollar debt. During July-March 2007-08, total disbursements amounted to $ 2.065 billion and repayment of principal was amounting to $ 878 million. The net impact of these two factors increased the stock of public and publicly guaranteed debt (PPG) by $ 1.187 billion. The rest of the net addition of $ 4.163 billion in the total addition in the external debt stock of $ 5.4 billion


159

was the result of depreciation of US $ against hard currencies like Japanese yen (JPY), Euro, SDR and others.

Pakistan benefited from the exchange rate fluctuations for many years in the past, particularly when major currencies were depreciating against the dollar. Unfortunately, in the current fiscal year, Pakistan was on the receiving end of the valuation impact. For the period July-March 2007-08, the exchange rate applied was of end-June 2007 and end-March 2008. During reporting period July-

March 2007-08, US dollar depreciated against Japanese yen, Euro and SDR by 18.7 percent, 14.9 percent and 8.2 percent, respectively. Thus the exchange rate movements during the period have caused changes in the reported US dollar equivalent amount of $ 4.2 billion while net new disbursement impact was just $1.2 billion. The outstanding stock in yen alone witnessed a rise of $2.2 billion because of massive appreciation of yen against US dollar. The exchange rate variation in Euro cost an additional $915 million to the external debt [See Table-9.4].

9.3 Composition of External Debt and Liabilities

Public and Publicly Guaranteed Debt

The contribution of Paris Club debt stock in total public and publicly guaranteed debt was declining since FY04, when its share in the EDL stood at 45.4 percent and by end-March 2008, its share has declined to 35.9 percent. Between FY06 and FY07, the stock of Paris club debt fell by another $ 100 million, but in the first nine months (July-March) of the current fiscal year saw a huge increase of US$ 1.8 billion dollars in its outstanding stock. Since a large chunk of Paris Club debt is denominated in Euro and Japanese yen, the recent weaknesses of the US dollar against these currencies had a significant impact in raising debt to the tune of $1.8 billion. This increase can be attributed to the exchange rate depreciation of the U.S dollar in terms of other major currencies over the course of the year. This re-evaluation impact has adversely affected Pakistan’s Paris club debt stock. The US$ 182 million rise in the stock of

other bilateral debt was principally due to higher receipts from China. The major projects for which these loans were acquired include: the Gwadar deep water port project (US$ 36.8 million) and the acquisition of railway locomotives (US$ 23.95 million).

As of end-March 2008, medium and long-term public and publicly guaranteed debt amounted to US$ 40.08 billion, of which almost 53.7 percent or US$ 21.5 billion is owed to multilateral creditors and 36.3 percent, or US$ 14.5 billion, is owed to Paris Club official creditors. Medium and long-term public and publicly guaranteed debt also included US$ 1.2 billion owed to official creditors that are not represented in the Paris Club, as well as US$ 2.7 billion of international bonds and US$ 124.0 million of commercial bank loans. Public and publicly guaranteed short-term debt amounting to US$ 614.0 million was owed to the Islamic Development Bank.

CurrencyOutstanding

Balance in BC

Exchange Rate as on 31.03.2008

Equivalent US$

Exchange Rate

30.06.07Equivalent

US$ Difference1 2 3 4=2/3 5 6=2/5 7=4-6

Euro 3,865 0.633 6,110 0.744 5,195 915JPY 1,189,625 99.555 11,949 122.48 9,713 2,237SDR 5,900 0.607 9,715 0.661 8,930 785US $ 10,479 1 10,479 1 10,479 0

2,438 2,211 22640,691 36,528 4,163

Table-9.4: Translational Exchange Rate Loss($ Million)

OthersTotal

Source: EAD & Staff CalculationsBC: Base Currency


160

Multilateral Debt

The borrowing from multilateral agencies, mainly from the World Bank and the Asian Development Bank (ADB) has outpaced the borrowing from the Paris Club since 1999-2000. Its share in total public and publicly guaranteed debt has increased from 37.5 percent in FY 1999-00 to 52.9 percent in Jul-March FY 2007-08. The stock of debt from multilateral agencies amounted to $21.4 billion by end-March 2008. A detailed analysis of recent developments in commitments and disbursement in respect of bilateral and multilateral external assistance is given in the subsequent section.

Short-term-IDB Loan

After declining substantially during 2003-04, the stock of IDB loans rose during 2004-05 but again started to decline. The short-term IDB loans are obtained largely for financing oil and fertilizer imports and the rise is a consequence of the termination of the Saudi Oil Facility (a grant that covered a major share of oil imports) in 2003-04, which coincided with the extraordinary rise in crude oil prices in the international market. Resultantly, the stock of short-term debt rose from $ 22 million in 2003-04 to $ 271 million in 2004-05 but declined drastically to $ 25 million by the end of FY 2006-07. However, by end-March FY08, it has shot up to $ 614 million.

Private Sector Debt. The stock of private sector non-guaranteed debt had been declining from FY00 till FY05. The stock of private non-guaranteed debt started to rise during the last few years, and by FY07 it had reached $ 2.2 billion;

and further increased to $ 2.5 billion by end-March 2008. Medium-and long-term private sector debt registered with the SBP (and benefiting from an SBP foreign exchange convertibility guarantee) amounted to U.S. $964.0 million. No short-term

FY02 FY03 FY04 FY05 FY06 FY07 FY08*

1. Public and Publically Guaranteed debt 29.24 29.20 29.94 31.08 32.90 35.35 40.69A. Medium and long term(>1 year) 29.05 29.01 29.91 30.81 32.73 35.32 40.08

Paris club 12.52 12.59 13.63 13.01 12.79 12.69 14.53Multilateral 14.33 14.95 14.35 15.36 16.82 18.69 21.52Other bilateral 0.43 0.47 0.69 0.81 0.92 1.00 1.18Euro bonds/Saindak Bonds 0.64 0.48 0.82 1.27 1.91 2.71 2.68Military debt 0.82 0.26 0.20 0.19 0.13 0.08 0.05Commercial Loans/credits 0.31 0.25 0.22 0.18 0.17 0.15 0.12

B. Short Term (<1 year) 0.18 0.19 0.02 0.27 0.17 0.03 0.61IDB 0.18 0.19 0.02 0.27 0.17 0.03 0.61

2. Private Non-guaranteed Debt (>1 yr) 2.23 2.03 1.67 1.34 1.59 2.25 2.493. IMF 1.94 2.09 1.76 1.61 1.49 1.41 1.41Total External Debt (1 through 3) 33.40 33.32 33.37 34.04 35.97 39.01 44.60

Of Which Public 29.9 30.6 31.3 32.1 33.9 36.5 41.34. Foreign Exchange Liabilities 3.13 2.12 1.95 1.80 1.59 1.47 1.33Total External Debt & Liabilities (1 through 4) 36.53 35.44 35.32 35.83 37.56 40.48 45.93

(of which) Public Debt 29.9 30.6 31.3 32.1 33.9 36.5 41.3Official Liquid Reserves 4.34 9.53 10.56 9.81 10.77 13.35 13.37

1. Public and Publically Guaranteed debt 40.8 35.4 30.6 28.4 25.8 24.6 23.8A. Medium and long term(>1 year) 40.5 35.2 30.5 28.1 25.7 24.6 23.5B. Short Term (<1 year) 0.3 0.2 0.0 0.2 0.1 0.0 0.4

3. IMF 2.7 2.5 1.8 1.5 1.2 1.0 0.8Total External Debt 46.6 40.4 34.1 31.1 28.2 27.1 26.14. Foreign Exchange Liabilities 4.4 2.6 2.0 1.6 1.2 1.0 0.8Total External Debt & Liabilities (1 through 4) 51.0 43.0 36.1 32.7 29.5 28.1 26.9Official Liquid Reserves 6.1 11.6 10.8 9.0 8.5 9.3 7.8

Exchange Rate (Rs./U.S. dollar, Period Avg.) 61.4 58.5 57.6 59.4 59.9 60.6 61.3GDP (in billions of U.S. dollars) 71.7 82.4 98.0 109.5 127.4 143.9 170.8

Table-9.5: Pakistan: External Debt and Liabilities

* End March Source: State Bank of Pakistan

(In billions of U.S. dollars)

(In percent of GDP)

Memo:


161

private sector debt has been registered with the SBP. The stock of private non-guaranteed loans also contains $250 million and $ 275 million worth of private sector’s bonds for FY 07 and FY 08, respectively.

Foreign Exchange Liabilities

Foreign exchange liabilities have shown a steady decline since FY99 from as high as $ 5.7 billion in 1999 to $ 1.5 billion by 2007. It further declined to $ 1.3 billion by end March 2008. This decline is largely due to the encashment of various bonds (on maturity) and Foreign Currency Accounts (FCA).

9.4 Composition of Foreign Economic Assistance Commitments

The declining trend in annual average level of commitments of foreign aid continued in the first nine months of the current fiscal year (July-March 2007-08). However, the share of project aid increased to 38.1 percent during July-March 2007-08 as against 22.6 percent in 2006-07 while the

share of non-project aid declined from 77.4 percent to 61.9 percent in the same period. The quantum of the project aid has declined to $ 869 million in absolute terms during July-March 2007-08 as compared to $ 924 million in the last year. The Non-project aid reduced to $ 1,410 million during July-March 2007-08 from $ 3,170 million during 2006-07. Since 2003-04, no food aid received; therefore, the non-project aid has also been reduced. Overall, a reduction in both Project as well as non-project aid has been recorded during July-March 2007-08 as summarized in Table-9.6.

During the first nine months (July-March) of the current fiscal year, total commitments stood at $2.3 billion with earthquake relief assistance of $ 0.5 billion. The aid inflows for budgetary/BOP support has nose-dived from $2.1 billion in 2006-07 to just $557 million during July-March 2007-08. Earthquake relief assistance is also gradually declining since its peak level of $1.9 billion in 2005-06. Quantum and composition of commitments is documented in Table 9.6.

Disbursements

The disbursement of external assistance maintained its pace at around $2.4 billion per annum during the 1990s. It has risen to $3.2 billion during 2006-07 mainly because of massive inflows on account of aid inflows for budgetary support/ BOP. Total disbursements stood at $ 2.5 billion in the first nine months of the current fiscal year as against $3.2 billion worth of inflows in 2006-07. Contrary to commitments, the share of project aid in overall disbursements declined from 25 percent to 18.8 percent while the share of non-project aid has increased from 75 percent in last year to 81.2 percent in the first nine months. The disbursement

of the project aid stood at $471 million in the first nine months (July-March 2007-08) which was $ 808 million for the full year of 2006-07. Disbursement of Non-project aid was recorded at $ 2,032 million during July-March 2007-08 which is slightly lower than the full year figure of $2,424 million during 2006-07. The aid inflow on account of budgetary support/ BOP was again on the top of the recipient sector while disbursements on account of project aid have declined substantially during the current year. Disbursements on account of earthquake relief assistance bounced back after remaining subdued in 2006-07. The summarized distribution of disbursements of foreign assistance among various sectors is given in Table-9.7.

(July-Mar)2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

I. Project Aid 860 1,233 1,965 1,021 924 869II. Non-Project Aid 1,188 960 1,117 3,261 3,170 1,410a) Food Aid 22 12 0 0 0 0b) Budgetary Support/ (BOP) 1,158 943 1,115 1,330 2,152 557c) Relief Assistance for Afghan Refugees 8 5 2 1 413 303d) Earthquake Relief Assistance 0 0 0 1,930 605 550Total (I + II) 2,048 2,193 3,082 4,282 4,094 2,279P= Provisional Source: Economic Affairs Division* Excluding IDB Short-term, Commercial Credits and Bonds.

Table-9.6: Commitments of Aid by Use* (US$ million)


162

(July-Mar)2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

Project Aid 705 525 741 878 808 471Non-Project Aid 848 745 1,534 1,985 2,424 2,032a) Food Aid 10 0 0 0 12 0b) Budgetary Support/ (BOP) 830 741 1,532 1,069 2,007 1,016c) Relief Assistance for Afghan Refugees 8 4 2 1 380 516d) Earthquake Relief Assistance 0 0 0 915 37 500Total (I + II) 1,553 1,270 2,275 2,863 3,232 2,503P= Provisional Source: Economic Affairs Division* Excluding IDB Short-term, Commercial Credits and Bonds.

Table-9.7: Disbursements of Aid by Use* ($ million)

Sources of Aid

The major sources of foreign economic assistance to Pakistan have been through the aid to Pakistan Consortium (Paris Club Countries and Multilateral Institutions), Non-Consortium (Non-Paris Club Countries) and Islamic Countries. Among these, the Aid-to-Pakistan Consortium, formulated in 1960 and now renamed as the 'Pakistan Development Forum' (including assistance from Consortium sources but outside Consortium umbrella arrangements), is the largest source of economic assistance to Pakistan. There are two major sources of foreign aid; bilateral and multilateral source. Multilateral sources comprise of multilateral institutions like the World Bank, Asian Development Bank etc. has gained much more importance in recent times as providers of development assistance to Pakistan.

The composition of assistance from bilateral sources has declined over the year and the share of economic assistance from multilateral sources is on the rise. During July-March 2007-08, the commitments for aid from bilateral sources has increased from 24.4 percent of the total in 2006-07 to 34.7 percent and according the share of committed amount from multilateral sources has declined accordingly. However, the share of actual disbursements in overall disbursements from bilateral sources has marginally declined while that of multilateral has increased. The multilateral institutions has committed an amount of $1.5 billion and disbursed $1.9 billion in July-March 2007-08, whereas, the commitment and disbursements were $ 3.1 billion and $2.4 billion, respectively in 2006-07. Source-wise commitments and disbursements are summarized in Table-9.8.

Project Vs Non-Project Aid

The share of project aid in the total disbursement has exhibited a fluctuating trend over the years. Project aid in the 1990s averaged at $1,589 million per annum, but declined substantially to $471

million during July-March 2007-08. The non-project aid averaged at $626 million per annum during the 1990s and increased substantially to $2,032 million during the first nine months of 2007-08 [See Table-9.9].

$ Million

Amount % Share Amount % Share Amount % Share Amount % Share

I) Bilateral 998.1 24.4 791.6 34.7 819.9 25.4 613.7 24.5

II) Multilateral 3,096.2 75.6 1,486.9 65.3 2,412.1 74.6 1,889.2 75.5

Total (I+II) 4,094.3 100.0 2,278.5 100.0 3,232.0 100.0 2,502.9 100.0

Commitments

(July-March)

Table-9.8: Sources of Foreign Aid*

Particulars

Disbursements

2006-07 2006-072007-08

(July-March) 2007-08

* Excluding IDB Short-Term, Commercial Cedit and Bonds Source: Economic Affairs Division


163

TotalYear Amount % Share Amount % Share1990's 1,589 71.7% 626 28.3% 2,2152000-01 247 28.1% 633 71.9% 8802001-02 1,113 32.5% 2,311 67.5% 3,4242002-03 860 42.0% 1,188 58.0% 2,0482003-04 1,233 56.2% 960 43.8% 2,1932004-05 1,965 63.8% 1,117 36.2% 3,0822005-06 1,021 23.8% 3,261 76.2% 4,2822006-07 808 28.9% 1,985 71.1% 2,7932007-08 (Jul-Mar) 471 18.8% 2,032 81.2% 2,503

Project Aid Non-Project Aid

Source: Economic Affairs Division* Excluding IDB Short-term, Commercial Credits and Bonds.@ Non-Project aid includes Non-food, food, program loans/budgetary grants, earthquake and Afghan Refugees Relief Assistance.

Table-9.9: Disbursement of Project and Non-Project Aid* (US$ million)

Similarly, the share of project aid has declined compared to non-project aid over the period. The share of project aid in the decade of the 1990s averaged 71.7 percent per annum with strong fluctuation ranging between 55 and 84 percent. The share of non-project aid during the same period fluctuated in a much wider range of 16 to 45 percent with an average of 28.3 percent. The share of non-project aid has increased substantially at the expense of project aid since 2004-05. During the first nine months of the current fiscal year 2007-08 (July-March) the project aid accounted for 18.8 percent stake while non-project aid share was 81.2 percent of overall external assistance inflows. The share of project aid is at its lowest level in the last two decades while the share of non-project aid is the highest ever in this period. The rising demand for resources because of the earthquake related expenses is but one reason for this structural shift.

Composition of External Assistance

The composition of external assistance over the years has undergone considerable change from grants and grant-like assistance to hard term loans. The share of grant and grant-like foreign economic assistance in total commitments continued to exhibit a declining trend over the years. It declined to 13 percent in 2002-03 from 32 percent in 2001-02. However, it increased to 23 percent during 2004-05. During the first nine months (July-March) of the fiscal year 2006-07, the share of grants declined to 19.5 percent mainly on account

of the Earthquake relief assistance. The grant element in agreements signed with multilateral sources was $ 63.2 million during 2006-07 but apart from the amount of $ 1.4 million assistance for Afghan refugees, no grant agreement has been signed by multilateral sources during July-March 2007-08.

GrossNet

TransfersDisbursements * (N.T)

1990-91 2045 1316 729 361991-92 2366 1513 853 361992-93 2436 1648 788 321993-94 2530 1746 784 311994-95 2571 2042 529 211995-96 2555 2136 419 161996-97 2231 2265 -34 -21997-98 2800 2353 447 161998-99 2440 1638 802 331999-00 1426 1778 -352 -252000-01 1599 1546 53 32001-02 2316 1190 1126 492002-03 1553 1327 226 152003-04 1270 2978 -1708 -1342004-05 2275 1461 814 362005-06 2863 1572 1291 452006-07 3232 1748 1484 462007- 2503 1413 1090 44@ July-March Source: Economic Affairs Division* Excluding relief assistance for Afghan Refugees and Earthquake (2005-06) ** Excluding debt servicing on short-term borrowings, IMF Charges and Euro Bonds up to the year 2003-04. From the years 2004-05 onwards debt servicing in respect of short-term borrowings and Euro Bonds is included.

Table-9.10: Debt Servicing and Net Transfers (US$ million)

YearDebt

Servicing**

NT as % of Gross

Disbursements.

Debt Service Payments and Net Transfers

Foreign economic assistance is primarily directed to upgrade the productive capacity of resource starved economies. However, debt servicing


164

liabilities of the economy have become an important component with the accumulation of debt. The increased liability of debt service payments has squeezed the net inflow of foreign resources. The net transfers of aid actually depicted the net resource inflow in the economy. For instance, in the 1990s, the net inflows of resources averaged at US$ 534 million per annum but declined in subsequent years by a considerable extent. Net transfers turned negative by the end of the 1990s and it reached negative $1,708 million in 2003-04 due to lower disbursements and ever increasing debt servicing liabilities on external debt.

Debt-servicing of external medium & long-term loans amounted to $1,413 million during July-March, 2007-08 which include $779 million principal repayment and $635 million interest payments. Making Adjustments for gross disbursements worth $2.5 billion, the net resource inflow amounted to $1.1 billion. Table-9.11: Pakistan’s External Debt and Liabilities Servicing

Years Actual Amount Paid

Amount Rolled Over Total

1999-00 3756 4081 78372000-01 5101 2795 78962001-02 6327 2243 85702002-03 4349 1908 62572003-04 5274 1300 65742004-05 2965 1300 42652005-06 3115 1300 44152006-07 2977 1300 42772007-08 * 2202 1300 3502* July-March Source: State Bank of Pakistan

($ Million)

Over reliance on external resources have implications for the debt-servicing problem. A higher level of debt-servicing is tantamount to net transfer of the external resources. Net transfers have declined substantially in the past for higher incidence of debt servicing. Net transfers as percentage of total disbursements were 25% for the decade of 1990’s. For the last seven years, net transfers were negative for only one year i.e. 2003-04 and that was mainly because of prepayments of the expensive loans owed to the ADB. For July-March 2008, the net resource inflow accounted for 44 percent of the gross disbursement. A summarized position of the disbursements for

various years, debt-servicing and net transfers is documented in Table-9.10.

Debt Servicing of External Debt and Liabilities

Pakistan’s economy has got much strength and confidence from a strong build-up in foreign exchange reserves during the last few years. In FY 2000 Pakistan paid $ 3.8 billion on account of debt servicing and $ 4.1 billion worth of payments were rolled over. This shows the strength of the debt carrying capacity of the economy at the end of the 1990s. The combination of re-profiling of Paris Club bilateral debt on a long-term horizon, the substantial write-off of the US bilateral debt stock, the prepayment of expensive debt worth $ 1.1 billion and the relative shift in contracting new loans on concessional term has begun to yield dividend. The annual debt servicing payments made during the period 1999-2000 to 2003-04 averaged just above $ 5 billion per annum. This amount has drastically come down to around $ 3 billion in FY07. An amount of $ 2.2 billion has been paid during July-March 2007-08 and the amount rolled over declined from $ 4.1 billion in 1999-2000 to $ 1.3 billion in July-March 2007-08. The trend is not likely to persist in the medium-term because of rising stock of external debt as well as pressure on current account deficits in coming years. The gradual improvement in the external liquidity position, leading to a build up in foreign exchange reserves the actual paid amount continued rising until FY 04 but for the last three years the amount actually paid has declined which is reflection of lower stock of debt and lower interest rate. The amount rolled over remained constant for the last five years. [See Table-9.11 & Fig-9.3].

Fig-9.3: Servicing of External Debt & Liabilities

500

1500

2500

3500

4500

5500

6500

1999-00

2000-01

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08 *

$ M

illio

n

Actual Amount PaidAmount Rolledover


165

9.5 Dynamics of External Debt Burden

The dynamics of external debt burden is well-documented in Table 9.12. The real cost of foreign borrowing which includes the interest cost, as well as the cost emanating from the depreciation of the Pak-rupee (or capital loss on foreign exchange) was on average, 3.4 percent and 2.7 percent per annum in the 1980s and 1990s, respectively. During the 1990s, rising real interest rate and along with sharp depreciation of exchange rate, led to a substantial rise in real cost of borrowing. However, the pendulum swung to other extreme during 2000-04, when real cost of borrowing declined to an average of 1.3 percent per annum on account of benign interest and inflation rates and more so, with the appreciation of the Pakistani rupee. The period 2004-08 witnessed a further decline in the real cost of borrowing, which turned negative mainly because of higher inflation and some depreciation of the rupee value.

As a result of the sharp fluctuation in the real cost of borrowing, the dynamics of external debt burden have also changed over the time. The changing dynamics of external debt burden as documented in Table 9.10 shows that external debt burden. The debt burden declined sharply in real terms during the period 2000-04 because the external debt witnessed negative growth of 2.6 percent while foreign exchange earning have risen in real terms by 9.9 percent and thus debt burden was actually reduced by 12.5 percent. The reduction in debt burden continued in the last four years (2004-08) in general and last two years in particular, was moderated to a decline of 6.2 percent mainly because of slight correction in growth of foreign exchange earnings to 7.2 percent as well as

positive real growth of 0.9 percent in external debt. The growth in external debt has risen significantly during the last two years (FY 07 and FY 08). However, it did not immediately lead to a sharp increase in external debt burden because the debt carrying capacity (real growth in foreign exchange earnings) of the country was rising at a healthy rate. The prospects for external debt management are becoming a real challenge because real growth in foreign exchange earnings has slowed substantially for the last two years, and on the other hand the sharp real depreciation in exchange rate is raising the real cost of borrowing. It may also be noted that Pakistan maintained a non-interest current account surplus (surplus in primary balance) to an average of 3.8 percent per annum during 2000-04, which helped reduce the country’s debt burden at a relatively faster pace. During the last four years (2004-08), the non-interest current account balance again followed the historical pattern by turning into negative 3.2 percent and real growth in foreign exchange earnings slowed to 7.2 percent, mainly because of the depreciation of currency and a rise in the value of the deflator. However, the real cost of borrowing nosedived to a negative 4.4 percent, during 2004-08.

The analysis of dynamics of the external debt burden provides a useful lesson for the policy-makers to manage the country’s external debt. Firstly, the gap in the current account should be minimal so as to limit external borrowing. Attempts should be made to finance the current account deficit primarily from non-debt creating inflows (foreign investment, grants and assistance etc.) Secondly, stability in exchange rate is critical for prudent debt management. Thirdly, if there is need to borrow, the interest cost should be minimal. One way to keep interest rate low is to avoid going to bilateral and multilateral donors for large scale borrowing. Finally, the pace of foreign exchange earnings must continue to rise to increase the debt carrying capacity of the country. Centre to the prudent debt management is the pursuance of prudent monetary, fiscal and exchange rate policies.

Non-Interest Current

Account Deficit/ Surplus

Real Cost of Borrowing

Real Growth of External

Debt*

Real Growth in Foreign Exchange Earnings*

Real Growth of External

Debt Burden

Period (% of GDP) (%) (%) (%) (%)1980s -1.2 3.4 6.4 4.7 1.71990s -2.7 2.7 6.5 5.5 1.01990s-I -2.7 -3 7.1 6.6 0.51990s-II -2.8 5.5 6 4.4 1.62000-04 3.8 1.3 -2.6 9.9 -12.52004-08 # -3.2 -4.4 0.9 7.2 -6.2

# Up to March

Source: SBP & Debt Office, Finance Division* Unit Value of imports of industrialized countries at 2000=100 is used as deflator

Table 9.12: Dynamics of External Debt Burden


166

9.6 Pakistan’s Link with International Capital Market

International capital markets have witnessed one of the most turbulent years in recent history. With the financial crisis instilling a sense of distrust amidst the market, access to financing has been restricted, with spreads widening for both developed and emerging economies alike. Given the negative sentiment surrounding capital markets, and a domestic economy with substantial macroeconomic imbalances and political uncertainty, Pakistan has not issued any new instruments in FY 08. However, the country is still pursuing a comprehensive external borrowing strategy consistent with borrowing constraints such as the saving/investment gap, amortization payments, keeping adequate reserves and most importantly the government’s medium-term development priorities. The government plans to continue to tap the global capital markets, when conditions are more favorable, through regular issuance of bonds (conventional and Islamic) to ensure a steady supply of Pakistan’s sovereign paper, establish a benchmark for Pakistan and to keep Pakistan on the radar screen of global investors. This will keep spreads on Pakistani paper low, give more borrowing options to Pakistani borrowers including the government and ensure that Pakistan is covered by various investment research products.

Eurobond 2017

Continuing the credible debt policy, Pakistan successfully issued a US$ 750 million 10 year note at a fixed rate of 6.875% in May 2007. This was the largest 10 year deal to date, beating the previous deal of US$ 500 million. The transaction priced at an impressive UST (US Treasury) +200 basis point which is 40 bps (basis points) tighter compared to last year’s deal that priced at UST +240 basis points. The deal priced at the tight end of a revised price guidance of 6.875-7.00 percent. The issue was highly oversubscribed with the largest ever order book amassed for Pakistan. The order book of US$ 3.7 billion meant an oversubscription of over 7 times on the original

deal of US$ 500 million. The resounding demand allowed Pakistan to upsize the deal by 50% to US$ 750 million.

Eurobond of 2017 and 2036

On March 23, 2006, Pakistan successfully issued US$ 500 million new 10-year Notes and US$300mm new 30-year Bonds in the international debt capital markets. This transaction, which represented the first international 144A bond issued by Pakistan since 1999, raised significant interest amongst US QIBs and international institutional investors. The 10-year notes were priced with a coupon of 7.125% to yield 7.125%, framing a spread of 240bps over the relevant 10-year US Treasury benchmark and 187bps over the US$ mid-swap rate. The 30-year bonds were priced with a coupon of 7.875% to yield 7.875%, framing a spread of 302bps over the relevant 30-year US Treasury benchmark and 256bps over the US$ mid-swap rate. Pakistan was able to achieve spreads on both the new 10 and 30-year bonds that were tighter than its previous 5-year issues. The issue was over 2.5 times oversubscribed.

Recent Performance of 2017 and 2036 Eurobond

The present year has seen increased volatility in international credit markets. The fallout from the sub-prime crisis and the ensuing credit crunch gripping the world has impacted Emerging Market debt significantly. Spreads have been increasing across the board and access to financing has decreased. Pakistan is no exception, with spreads on its 2017 and 2036 trading at higher spreads than last year, translating to a higher cost of financing. Worsening imbalances in the domestic economy and political uncertainty have also played a part in widening the spreads on Pakistan sovereign debt. Pakistan's credit rating was cut for the first time in nine years by Moody's and Standard & Poor’s rating agencies, which cited ``growing economic imbalances and renewed political difficulties.'' As compared to the issue spread of UST + 200bps, the 2017 bond is trading currently at a spread of UST +629 bps.

Table-9.13

Issuer

Colombia Turkey Venezuela PhilippinesPakistan Indonesia Indonesia Indonesia

The 2036 UST + 30UST + 50was the lBoth the offerings

Table-9.14

Issuer

Colombia Turkey PhilippinesPhilippinesPakistan Indonesia

Fig-9.4: P

3: Selected Sec

(Mo

B

s

bond, as com02bps, is trad07 bps, about longest ever

10 and 30 for Pakistan

4: Selected Sec

(M

s s

Pakistan Risk

condary MarkRatings

oody’s/S&P) Ba2/BB Ba3/BB- B2/BB- B1/BB- B2/B

B1/BB- B1/BB- B1/BB-

mpared to theding currently69% higher. tenor achieveyear offerin

n which exte

condary MarkRatings

Moody’s/S&P) Ba2/BB Ba3/BB- B1/BB- B1/BB-

B2/B Ba3/BB-

k Premium

ket Benchmar

(Coup7.877.0008.508.006.8757.2506.7506.875

e issue spready at a spread The 2036 bo

ed by Pakistngs were debended the yie

ket Benchmar

(Coup7.3756.8757.7506.375

7.875%8.500

rks (as of 23 MDetails

pon/Maturity5%/Jan 20170%/Mar 20160%/Oct 2014

00%/Jan 20165%/Jun 20170%/Apr 20150%/Mar 20145%/Mar 2017

d of of

ond an. but eld

curve tmarketextend Philippto exten

rks (as of 23 MDetails

pon/Maturity)%/Sept 2037

5%/Mar 2036 0%/Jan 2031 5%/Jan 2032 %/Mar 20360%/Oct 2035

May 2008)

) Spre

to 30 years it sovereign istheir yield cu

pines 4 years nd their yield

May 2008)

) Spre

External D

ead over UST (bps) +199 +309 +684 +223 +629 +298 +305 +289

in just 2 yearsuers have taurve from 5 tand Brazil a

d curve to 30 y

ead over UST (bps) +195 +315 +245 +211 +507 +315

Debt and Liab

Bid - Y(%)

5.586.63

10.065.66

10.146.296.036.50

Source: Bloom

rs. Most emeaken longer tito 30 years. Itnd Turkey 3 years.

Bid - Y(%)

6.487.636.736.689.647.72

Source: Bloom

Source: Bloo

bilities

167

Yield ) 0 0

60 0

42 0 0 0 mberg

erging me to t took years

Yield ) 0 0 0 1 0 6 mberg

mberg


168

Since early 2007, Pakistan bonds have been underperforming (much more than the peer group), due to the combined impact of the global credit crisis and investor concern over Pakistan’s political environment. Figure 9.4 gives a chronological account of local political and economic instability and the widening of spreads that followed. A sharp increase in the spreads can be seen starting in July 2007. The month saw local political tensions rise to the forefront and military action being taken against the Red Mosque. Grim news from the financial markets of the developed world regarding a deepening of the financial and credit market crisis also caused a jump in spreads. A widening of

spreads for other developing countries like Indonesia, Turkey, and Philippines was also witnessed in July 2007, with credit markets showing signs of wariness and hesitation due to the international financial environment. Spreads continued to widen for Pakistan, with only a brief respite around October 2007 with the re-election of the President. However, a string of bomb blasts and violence around the country followed by declaration of a state of emergency halted the tightening of spreads. Political uncertainty and violence kept spreads at high levels and general elections held in February have so far failed to bring spreads back down to lower levels.

TABLE 9.1

(US $ million)S.No. Country/Creditor Debt Outstanding

as on 31-03-2008I. Bilateral a. Paris Club Countries1 Austria 872 Belgium 743 Canada 5344 Finland 65 France 2,5546 Germany 2,1597 Italy 2388 Japan 6,2629 Korea 52010 Netherlands 13811 Norway 3112 Russia 12613 Spain 8114 Sweden 15815 Switzerland 11616 United Kingdom 1317 USA 1,550

Sub-Total I.a. Paris Club Countries 14,648 b. Non-Paris Club Countries18 Bahrain 1219 China (including Defense) 90820 Kuwait 8921 Libya 522 Saudi Arabia 9623 United Arab Emirates 66

Sub-Total I.b. Non-Paris Club Countries 1,176Total I. (a+b) 15,824

II. Multilateral & Others24 ADB 9,15725 EIB 7426 IBRD 2,12227 IDA 9,58928 IDB 35029 IFAD 17930 NORDIC Development Fund 1931 NORDIC Investment Bank 1132 OPEC Fund 20

Total II: Multilateral & Others 21,520III. Bonds33 Eurobonds 2,65034 Saindak 3

Total III: Bonds 2,653IV. Commercial Banks 124 Grand Total (I+II+III+IV) 40,121

Source:Economic Affairs Division

PUBLIC AND PUBLICLY GUARANTEED MEDIUM AND LONG TERM EXTERNAL DEBT DISBURSED AND OUTSTANDING As on 31-03-2008

169

Chapter 10

EDUCATION 10.1. Introduction

Education is central to socio-economic development of a country. It plays a critical role in building human capabilities and accelerates economic growth through knowledge, skills and creative strength of a society. Education also creates awareness, tolerance, self esteem and confidence which empower people to defend their rights. The positive outcomes of education include reduction in poverty and inequality, improvement in health status and good governance in implementation of socio-economic policies. The benefits of education are not only confined to the national economy but individual also benefit from it. It has been found that every year of additional schooling increases individual’s wages by 10 per cent globally 1 . The multifaceted impact of education makes it an essential element for policy framework. Developing countries, where majority of the world’s population resides, need to redesign educational policies for promoting productivity in different sectors of the economy by developing highly skilled manpower and addressing their development needs for rapid industrialization.

The government is making serious efforts to improve the quantity and quality of education by enhancing educational facilities within the minimum possible time. Appropriate strategies have been devised for the growth of this sector, however, expansion of education is dependent on fiscal resources. Government has decided to double the education budget (as percentage of GDP) as visualized in Fiscal Responsibility and Debt Limitation (FRDL) Act, 2005. This means an extra spending of 1.8% of GDP over and above the existing funding will be on hand during the next five years. Availability of reliable, comprehensive and update educational data is a pre-requisite for 1 World Bank Report

informed decision making, policy formulation and implementation. In this regard, Academy of Educational Planning and Management (AEPAM) conducted the first National Educational Census (NEC) in 2005.

10.2. LITERACY:

Literacy rate plays a vital role in the development of any nation by transforming into socio-economic prosperity. Literacy rates in developed countries hover around the 100% mark, but such is not the case with developing countries. About two decades ago, Pakistan had only 34% literacy rate (age 10 and above). Population Census 1972 and 1981 data shows that in the 1960s and 1970s, literacy rate improved by 0.5% per annum. However the 1998 Census revealed a growth rate of 1.07% per annum during 1981 to 1998 when the literacy rate (10 years and above) of population rose from 26.2% to 43.9%. In the current decade, the four indicators; Literacy Rate, Enrollment Rate, Gross Enrollment Rate (GER) and Net Enrollment Rate (NER) have improved at a moderate pace.

According to Pakistan Social and Living Measurement (PSLM) Survey data (2006-07), the overall literacy rate (age 10 years and above) is 55% (67% for male and 42% for female) in 2006-07 compared to 54% (65% for male and 42% for female) in 2005-06. Literacy remains higher in urban areas (72%) than in rural areas (45%) and more in men (67%) compared to women (42%). When analyzed provincially, literacy rate in Punjab stood at 58% followed by Sindh (55%), NWFP (47%) and Balochistan at 42%. The literacy rate of Punjab and Balochistan has improved considerably during 2004-05 to 2006-07 (Table 10.1). Adult literacy rate (age 15 and above) has also increased from 50% in 2004-05 to 52% in 2006-07.


170

Table 10.1: Literacy Rate 10+, GER & NER Trends in Pakistan & Gender Parity Index (GPI)

REGION/ PROVINCE

Literacy rates (10 years & above) GER Primary (age 5-9) NER Primary (age 5-9)

2004-05 2005-06 2006-07 2004-05 2005-06 2006-07 2004-05 2005-06 2006-07 Pakistan Male 65 65 67 94 94 99 56 56 60 Female 40 42 42 77 80 81 48 48 51 Both 53 54 55 86 87 91 52 53 56 rural 44 44 45 79 80 84 48 47 52 urban 71 71 72 104 106 106 64 65 66 GPI 0.62 0.65 0.63 0.82 0.85 0.82 0.86 0.86 0.85Punjab Male 65 66 67 100 98 106 60 60 64 Female 44 47 48 89 89 95 55 53 59 Both 55 56 58 95 94 100 58 57 62 GPI 0.68 0.71 0.72 0.89 0.91 0.90 0.92 0.88 0.92Sindh Male 68 67 67 84 88 88 53 54 56 Female 41 42 42 65 71 68 42 47 43 Both 56 55 55 75 80 79 48 50 50 GPI 0.60 0.63 0.63 0.77 0.81 0.77 0.79 0.87 0.77NWFP Male 64 64 67 93 93 96 53 51 56 Female 26 30 28 65 70 67 40 42 41 Both 45 46 47 80 83 82 47 49 49 GPI 0.41 0.47 0.42 0.70 0.75 0.70 0.75 0.82 0.73Balochistan Male 52 54 58 83 79 89 44 39 49 Female 19 20 22 49 50 52 29 27 32 Both 37 38 42 67 65 72 37 34 41 GPI 0.37 0.37 0.38 0.59 0.63 0.58 0.66 0.69 0.65

Source: Pakistan Social & Living Standard Measurement Survey 2006-07 According to the PSLM Survey data 2006-07, the overall school attendance (age 10 years and above) is 57% (69% for male and 44% for female) in 2006-07 compared to 55% (68% for male and 42% for female) in 2004-05. Province-wise school attendance (age 10 and above) for 2006-07 as against 2004-05 shows Punjab to be on the top (60% Vs 58%) followed by Sindh (56% Vs 56%), NWFP (50% Vs 48%), and Balochistan (39% Vs 37%) to be at the lowest level. School attendance (age 10 years and above) remains higher in urban areas (73%) than in rural areas (48%) and more in men (69%) compared to women (44%) (Table 10.2).

Nationally, the GER, sometimes refered to the participation rate, is the number of children attending primary school (age 5-9 years) divided by the number of children who ought to be attending. The GER shows a remarkable increase from 87% to 91% between 2005-06 and 2006-07. Punjab and Balochistan has shown noticeable increase in the respective period (Table 10.1). Similarly, GER at the middle school level (age 11-

13) has increased from 54% to 59% between 2005-06 and 2006-07. Province-wise data (age 11-13) for 2006-07 as against 2004-05 shows Punjab to be on the top (62% Vs 55%) followed by NWFP (60% Vs 56%), Sindh (55% Vs 51%) and Balochistan (43% Vs 36%) to be at the lowest level.

The Net Enrollment Rate (NER) refers to the number of students enrolled in primary school of primary school age divided by the number of children in the age group for that level of education. The NER as a whole in 2006-07 is 56% compared to 53% in 2005-06. All the provinces have shown a rising trend, interestingly, rural areas exhibited higher rates in comparison to urban areas (Table 10.1).

The Gender Parity Index (GPI) is the ratio of females’ enrolment to the males’ enrolment. A GPI of more than one indicates that, in proportion, for every male in the school, there is more than one female. The GPI for Pakistan as a whole in 2006-07, is 0.63 compared to 0.62 in 2004-05. Province-

Education

171

wise GPI is high in Punjab (0.72) followed by Sindh (0.63), NWFP (0.42) and Balochistan (0.38), respectively (Table 10.1). The lower GPI in NWFP

and Balochistan calls for immediate attention by the policy makers at both federal and provincial levels.

TABLE 10.2: POPULATION THAT HAS EVER ATTENDED SCHOOL- BY PROVINCE & REGION

REGION and PROVINCE

Percentage of the Population (10 Years and Older) 2004-05 2005-06 2006-07

Male Female Both Male Female Both Male Female Both URBAN AREAS: 80 63 72 80 64 72 80 66 73PUNJAB 81 67 74 82 67 75 81 69 75SINDH 80 62 72 79 64 72 81 65 74NWFP 80 49 65 78 49 63 78 49 64BALOCHISTAN 74 41 59 73 38 57 75 41 60RURAL AREAS: 62 31 47 61 33 47 63 32 48PUNJAB 64 38 51 63 39 51 66 40 53SINDH 57 18 39 55 19 38 54 17 37NWFP 66 25 45 68 31 48 68 26 47BALOCHISTAN 47 13 32 40 12 27 49 13 33OVERALL: 68 42 55 68 44 56 69 44 57PUNJAB 69 47 58 70 49 59 71 50 60SINDH 69 41 56 68 43 56 68 43 56NWFP 69 29 48 70 33 51 70 30 50BALOCHISTAN 52 18 37 48 18 34 55 20 39

Source: Pakistan Social & Living Standard Measurement Survey2006-07 According to Academy of Educational Planning and Management (AEPAM), 11.23 million females were enrolled at primary schools as compared to 5.8 million males in 2006-07. This shows higher enrollment of females in 2006-07 with GPI Index of value 1.9. However at middle and high class, GPI fell to 0.70 (Figure 10.1). At the national level GPI for youth literacy (15-24 years) is 0.72.

There is an improvement in GPI Index overtime at primary and secondary level, but a sharp increase in GPI for primary enrolment is noted during 2002-03 to 2006-07 periods (Figure 10.2).

10.3: Education Sector in Pakistan: An Overview

According to the Pakistan Education Statistics 2007, a total of 7,242 new institutions were added in a year which has raised the total number to 231,289 in the country (other than technical, professional, vocational, polytechnic institutions, NFBE schools and deeni madaris). Out of total institutions, 164,579 are in public sector and 81,103 in private sector (Table 10.3).

0.8

1.9

0.7 0.71.0

0.7

0.0

0.5

1.0

1.5

2.0

2.5

Pre-

Prim

ary

Prim

ary

Midd

le

High

Inter

Coll

eges

Unive

rsitie

s

Source: Pakistan Education Statistics, 2007

Fig. 10.1: GPI Index (2006-07) 0.00

0.50

1.00

1.50

2.00

1992

1994

1996

1998

2000

2002

2004

2006


Fig. 10.2: GPI Index for Primary and Secondary Enrolment

Primary

High

Pakistan E

172

Table 10.3

Pakistan Punjab Sindh NWFP BalochistanFATA FANA AJK ICT Percentage

When sinstitutionfollowed 4.7% in Bforth of thtrend is se

24%

16.6%

4.7

Fig. 10.3Province

Punja

0

40

80

120

Economic Sur

3: EducationalArea

n

e Share in Pare

segregated ns of all cby 24% in SBalochistan (he institutionseen on a prov

%

% 8%

3: % Distribtuion ofes (2006-07)

ab Sindh

Punja

b

Fig. 10.4: % Di

rvey 2007-08

l Institutions b

entheses

provincially, categories aSindh, 16.6%(Figure 10.3)s are in rural incial basis (F

f Educational Instit

NWFP Baloch

Sind

h

NWFP

istribution of E

8

by Sector andTotal

245,682 115,311 59,312 40,706 11,492 5,344 4,366 7,803 1,348

about 47are in Punj

% in NWFP a). About thrareas and sam

Figure 10.4).

47%

tutions by

istan Others

NWFP

Baloc

histan

ducational Inst

d Provinces (inP

164,5766,77046,73829,4309,742 4,704 1,505 5,092 598

7% ab,

and ree me

The damore compareducatipubliclThe shareas (ProvinccomparPunjabencourThe roprovidischemeencourprivatequality

FATA

titutions by Loc

n 2006) Public 79 (67) 0 (58) 8 (79) 0 (72) (85) (88) (34) (65) (44)

Source;

ata further revdominant i

red to the priional institutly relative to hare of public(79%) with rece-wise distratively high

b, FANA, andrage the privole of private ing incentivees such as edrage healthy ce sector, and y of education

FANA

Source: P

cation and Prov

81,48,512,511,21,756402,862,7750

Pakistan Educ

veals that rolein promotinivate sector. tions in the only 33% in c sector is alemaining in tribution, hoher share of d ICT, while vate sector in

sector shoules and introdducation vouccompetition bthus improve

n.

AJK

ICT

Pakistan Education S

vince (2006)

Private 103 (33) 541 (42) 574 (21) 276 (28) 50 (15)

0 (12) 61 (66) 11 (35)

0 (56) cation Statistics

e of public secng educationAbout 67% o

country arethe private s

lso higher inthe private s

owever, showprivate sectthere is a ne

n other provld be enhancducing innov

chers etc. Thibetween publie the quantity

Statistics, 2007

rural

urban

s 2007

ctor is n as of the e run sector. rural

sector. ws a tor in eed to inces. ed by vative is will ic and y and

Education

173

10.3.1: Education by Level:

Pakistan follows three tier education system which includes Elementary Education (8 years), Secondary Education (4 years) and Higher Education (4 years). According to the Ministry of

Education, the overall enrollment in these institutions is recorded at 34.84 million with teaching staff of 1.307 million. Out of total institutions, there are 50% primary schools, 16% middle, 10% high, 4.95% Deeni Madaris and 1.2% Vocational Institutions (Table 10.4).

Table 10.4: Number of Mainstream Institutions, Enrolment and Teachers by Level

Year Enrollment Institutions Teachers 2005-06 2006-07 P 2005-06 2006-07 P 2005-06 2006-07 P

Pre-Primary 7,135,447 8,322,620 -- -- -- -- Primary+ Mosque 16,834,417 17,043,460 157,526 158,378 443,973 447,890 Middle 5,262,323 5,576,010 39,370 42,918 310,753 334,554 High 2,133,008 2,244,147 22,909 25,177 362,188 390,612 Higher Sec./ Inter 853,535 907,704 2,996 3,332 69,425 73,273 Degree Colleges 325,993 324,988 1,135 1,371 20,568 23,676 Universities. 424,012 424,271 111 113 37,509 37,536 Total 32,968,735 34,843,200 224,047 231,289 1,244,416 1,307,541

Source: Pakistam Education Statistics 2005-06 & 2006-07, EMIS- MoE Islamabad. P: Provisional data by EMIS- MoE, Islamabad. It transpires from above that the access gap between primary and middle schools has declined. In 2005-06, there was one middle school for every 4 primary schools and one higher secondary school / Inter College for every 7.65 high schools. This gap slumped to one middle school for every 3.7 primary schools and one higher secondary school / Inter College for every 7.56 high schools in 2006-07. These new institutions have been instrumental in raising the number of teachers and students. The increase in enrollment has been outstanding i.e. 1.187 million in year 2006-07, with middle and

primary level showing additional enrolments of 313,687 and 209,043 respectively.

The public sector dominates in education sector at primary level. There are 86% primary schools in the public sector as compared to 14 % in the private sector. At the middle level, only 37% schools are in the public sector in comparison to 63% in private sector. Share of private sector is even higher (70%) at Vocational/Polytechnics level as compared to the public sector. In case of Deeni Madaris, almost all (97%) of them are in the private sector (Figure 10.5).

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174

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Education

175

primary, middle and secondary levels, free text books and nutritional support to school girls are also required for enhancing the educational status of women.

According to the Pakistan Education Statistics 2007, out of total institutions, 21% are for girls, 26% for boys, and 53% are mixed institutions. The distribution of institutions by gender is almost

same in Sindh, FANA, AJK, and ICT while in other areas males’ institutions are higher in number than females’ institutions (Figure 10.9). To provide equal opportunities to women, more educational institutions should be established to improve females’ participation and to reduce the gender gap.

The proportion of female teachers at primary and secondary levels is increasing continuously. Currently there are 51 percent female teachers in the education system of Pakistan at national level. Figure 10.10 shows that number of female teachers

in primary schools increases over time but remains almost stagnant during 2004 and 2006, the period when massive enrollment of girls was noted at primary level.

0

20

40

60

80Fig. 10.9: % Distribution of Educational Institutions by Gender and Province (2006)

Male

Female

Mix


100

130

160

190

220

Fig. 10.10: Number of Female Teachers in Primary Schools (000)



176

Pakistan’s overall record in promoting and delivering gender equality is weak. However in the current decade;

• The GPI at all levels of education has improved.

• The ratio of literate female to male has risen.

• The share of women in urban employment has improved marginally.

• The role of women in national decision- making has improved appreciably.

10.3.3. Physical Infrastructure:

National Education Census 2005 has provided the latest state of physical infrastructure of educational institutions. The census has revealed that 83.3% of the public schools are in government buildings followed by 5.7% rent free. The private institutions are predominately housed either in rented (43.1%) or owned (42.8%) buildings followed by 11.6% in rent free accommodations. About 51.6% buildings of all institutions are in satisfactory conditions and 42.7% need major or minor repair. However, 5.7% buildings have been reported in dangerous condition. Province-wise, buildings in Punjab are in a satisfactory position while in Balochistan, most buildings fall in dangerous condition (Figure 10.11).

Out of total institutions, 12,737 (almost all in public sector) have been reported as non-functional. The Sindh province has reported the largest share of non-functional institutions (58%). About 37.8% schools in public sector are without boundary wall, 32.3% without drinking water, 56.4% without electricity, 40.5% without latrine and 6.8% without building. It is to be noted that majority of the institutions are located in rural

areas and with a higher percentage of population residing there, the availability of basic facilities are inadequate (Table 10.5 & Figure 10.12). It is therefore imperative to make educational institutions more functional in rural areas by providing missing facilities. Furthermore, there is a need to reduce the current imbalances of school facilities existing at different levels in different provinces.

58

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0

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40

60

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Fig. 10.11: % Distribution of conditions of Building in Provinces (2005)

Satisfactory Need Repair Dangerous Source: Pakistan Education Statistics, 2007

Education

177

Table 10.5: Educational Institutions by Availability of Building Facilities (2005)

Building Facilities Facilities Available Facilities Not AvailableOverall Rural Urban Overall Rural Urban

Library 30,793 12,004 18,789 163,313 125,880 37,433Computer Lab. 22,474 5,104 17,370 141,924 108,044 33,880Combined Lab. 16,658 6,537 10,121 31,083 20,104 10,979Student Hostel 7,700 3,498 4,202 134,278 94,838 39,440Electricity 138,651 82,676 55,975 89,140 84,770 4,370Boundary wall 152,176 100,495 51,681 60,455 53,539 6,916Drinking Water 174,644 118,285 56,359 53,147 49,161 3,986Latrine 152,464 97,574 54,890 62,356 57,798 4,558Play Ground 76,790 52,977 23,813 133,123 99,117 34,006

Source: National Education Census 2005

10.4. Important Recent Milestone

The government has undertaken a number of reforms to widen access to education and raise its quality in the country. Major reforms and initiatives have been summarized below: -

10.4.1. National Education Assessment System (NEAS)

National Education Assessment System (NEAS) was launched to improve and assess the quality of education at elementary level, with the following main objectives:

i) To measure learning achievements of students in grade IV and VIII with a view to raise the quality of education.

ii) To develop assessment capacity, and

iii) To institutionalize sustainable monitoring system.

National Curriculum Council (NCC) has prepared comprehensive review of school curriculum to make it relevant to student needs. So far, NCC has notified revised curriculum of 23 core subjects (classes I to XII), while work on other 24 subjects is in progress. The government has provided free textbooks in all public schools up to primary level. Furthermore, to promote female’s participation at primary level, the government has endowed incentive to female students in the shape of scholarship (Rs. 200 p.m). Education Management Information System has been launched to strength the informations from national to grassroots level. The government has opened 4,402 new basic schools and trained 2,276 teachers under the project “Establishment and Operation of Basic Education Community Schools”

0102030405060708090

100Fig. 10.12: % Distribution of Facilities not Available in Educational Institutions

Rural Urban Source: National Education Census, 2005


178

10.4.2. Formulation of a National Textbook and Learning Materials Policy

National Textbook and Learning Materials Policy (2007) has been prepared to prop up the quality of education at all levels through better quality textbooks at affordable prices and other learning materials for promoting Pakistan as a knowledge based society. According to this policy, the Examination Boards will not test the students from a particular text book but instead do so from the recommended multiple text books. Ministry of Education is helping in establishing five Resource Centres one in each Textbook Board for up-grading the capacity of small publishers and also of the authors in writing the textbooks and improving quality. Furthermore, controversial materials pertaining to cultural, religious and ethnic practices shall not be included in textbooks.

10.4.3. National Commission for Human Development (NCHD)

NCHD, a public-private partnership, aims to improve public sector delivery mechanisms to achieve the targets of Millennium Development Goals (MDGs). NCHD intends to help the government to achieve Universal Primary Education (UPE) upto 2010 and Education For All (EFA) upto 2015. NCHD also aims to improve quality of education through budgetary measures, and eliminate gender disparity at primary and secondary level by 2015.

10.4.4. Strengthening of Teachers Training

The government has taken several substantial initiatives for teacher’s education and professional development. During fiscal year 2007-08, 20,660 elementary school teachers have been trained in the country costing Rs. 135 million. At higher level, HEC has provided training services to 3,726 faculty members of different universities. Under Canadian International Development Agency (CIDA) Debt- Swap initiative, the Executive Committee of National Economic Council (ECNEC) approved a project, costing Rs. 669.556 million for the promotion of teacher training and capacity building of teacher training institutes in ICT, FATA, FANA and AJK. Similar projects were also approved for the provinces of Punjab, Sindh, NWFP and Balochistan at a capital cost of

Rs. 3,137.752, Rs. 1,261.773, Rs. 1,035.319 and Rs. 588.407 millions respectively. National Institute of Science and Technical Education (NISTE), Islamabad will train teachers in Science and Technical Education throughout the country.

10.4.5. Technical & Vocational Education:

Technical & vocational education (TVE) produces skilled manpower needed in the industry. Unfortunately, little attention has been paid to this type of education in past. The present technical & vocational education is supply-oriented rather than driven by labor market demand. At present, there are only 1,522 TVE institutions in the country; 1,140 under government while 382 are registered as private institutions. The overall enrollment is recorded at 314,188 with teaching staff at 17,409. The quality of output is low due to lack of relevance of curriculum to job market requirement, poorly trained faculty, weak linkages between institutions and industry and lack of coordination at various levels.

Realizing the role of skilled and technically educated manpower for the economy, the government has established the National Vocational & Technical Education Commission (NAVTEC) in November, 2006. The Commission is mandated to facilitate, regulate, and provide policy direction for technical education and vocational training to meet national and international demand for skilled manpower. Similarly Technical Education and Vocational Training Authority (TEVTA) Punjab has chalked out a short term demand driven programme for training 100,000 skilled workers under TEVTA Special Training Programme every year. The government has established four Polytechnics in Balochistan and one in Gilgit at a cost of Rs. 760 million

10.4.6. Reforms in Deeni Madaris:

There is a large number of Deeni Madaris enrolling thousands of students. To bring the formal education and Deeni Madaris close to each other, Madaris reform programme has been initiated with the introduction of formal education in 8,000 Madaris. Madaris will be mainstreamed through provision of grants, salaries to teachers, cost of text

Education

179

books, teacher training and equipment. Recently TEVTA Punjab has planned to train this huge reservoir and has established Government Technical Training Institutes (GTTIs) at 27 Deeni Madaris including 20 for male, 5 for female, and 2 mixed in 13 popular demand driven trades. Such initiatives must be taken in other provinces as well.

10.4.7. Human Resource Development (HRD):

Pakistan has been blessed with highly talented manpower, but due to insufficient research and development (R&D) activities, a large number of highly educated and trained persons leave for better career in developed countries. To address these challenges, the government has taken several steps to improve faculty, promote access/participation and excellence in learning and research at higher level.

Availability of scholarships plays a vital role in promoting Human Capital. Therefore, the government has launched scholarship programs at Federal and Provisional level. Currently, 3,237 scholars are studying (under PhD Scholarship Program) in HEC recognized universities in the past four years.

The foreign scholarship programs have been geared towards improving research in key areas, particularly in areas relating to engineering, applied and pure sciences. HEC has sent 2,600 scholars for studies abroad under PhD scholarship program upto 2007-08. 69 scholars proceeded abroad under Cultural Exchange Programme in year 2007-08. In addition, HEC in collaboration with the Cuban Government, has sent 366 students for undergraduate medical studies (MBBS equivalent) in year 2006-07 with 20% seats allocated to earthquake affected areas. Another group of 644 students will be proceeding to Cuba

in the near future. Foreign Faculty Hiring Program has been launched to reduce faculty deficiencies by recruiting highly-qualified faculty members from abroad. About 364 foreign faculty members have participated in this program since July 2004-05.

In view of spreading higher education to every area of Pakistan, over the past three years, 17 new universities have been granted Charters, with the majority opened in areas where higher education opportunities were previously unavailable. 23 new and advance disciplines were launched. Furthermore, 11 foreign institutions were allowed to operate in Pakistan through franchising/collaborative arrangements with local institutions of higher education.

The government has established four universities of Engineering, Science and Technology in Pakistan (UESTP) with the collaboration of Germany, Austria, France and China at a total cost of Rs. 164.869 Billion. Three additional universities are to be established in other regions of the country.

In order to support the conduct of truly world-class research, more than 20 Central Research Laboratories have been established in major universities. Improved facilities are supported by sophisticated IT-based solutions to cater to the research needs of researchers. The HEC Digital Library now provides access to over 25,000 leading research journals and 50,000 e-books, covering approximately 75% of the world’s peer-reviewed scientific journals; 81,540 books were provided to 52 universities under the Book Bank Scheme; 28 universities have been connected through video conferencing facility in two years to promote interactive distant learning, interactive meeting and interviews, international e-conferences and live events.

TABLE 10.3

Primary Schools Middle Schools High Schools Secondary Voca- Arts and Science Professional Universities(Thousands) (Thousands) (Thousands) tional Institutions Colleges Colleges (Number)

(Number) (Number) (Number)Total Female Total Female Total Female Total Female Total Female Total Female Total Female

1992-93 332.5 122.5 119.0 66.3 165.6 68.1 9,153 2,605 25,485 9,138 8,269 3,058 5,728 7471993-94 359.1 138.6 132.8 78.2 217.4 88.5 7,965 1,603 27,666 9,825 8,754 3,178 5,217 9181994-95 375.2 146.7 144.6 80.9 227.6 102.6 6,949 1,708 29,843 10,515 9,128 3,264 5,316 9391995-96 377.5 145.1 159.1 85.0 217.6 89.8 7,291 1,799 32,898 11,729 9,969 3,657 5,417 9271996-97 374.3 151.7 156.7 91.4 224.7 98.8 7,422 1,845 32,190 11,690 9,950 3,660 5,162 9191997-98 397.0 164.7 168.4 101.0 252.9 112.9 6,923 1,870 39,267 15,767 10,930 4,105 5,515 9761998-99 422.6 173.8 178.5 108.2 231.6 107.5 7,133 1,858 35,187 14,298 10,777 4,139 4,911 8371999-00 402.4 169.8 193.9 117.6 247.8 115.8 9,253 1,959 39,268 15,764 11,065 4,221 5,914 1,1742000-01 408.9 183.6 209.7 127.8 260.3 125.3 9,441 1,959 48,054 21,506 11,019 4,218 5,988 1,3022001-02 413.9 183.5 230.1 139.3 270.2 126.1 7,192 1,863 55,146 23,016 10,598 4,164 5,160 1,2472002-03 433.5 191.7 236.3 145.8 278.0 131.9 7,273 1,623 57,681 24,146 11,164 4,410 6,180 1,3752003-04 432.2 195.3 239.4 146.6 276.9 134.2 8,535 1,957 57,881 24,190 11,245 4,505 37,428 -2004-05* 450.1 206.5 246.7 151.5 282.1 138.6 11,521 4,481 57,661 24,366 12,399 5,192 37,469 -2005-06 444.0 201.0 310.8 201.6 362.2 197.4 14,565 4,658 69,425 33,959 20,568 10,485 37,509 -2006-07(P) 447.9 202.9 334.6 219.9 390.6 218.5 17,364 - 73,273 37,215 23,676 12,478 37,536 -P: Provisional R: RevisedNote 1: All figures includes Public & Private Sector data.Note 2: Mosque Schools are included in primary schoolsSource 2: Figures of Universities data from 1992-93 to 2002-03 is based on Federal Bureau of Statistics.Source 3: Figures of Primary, Middle, High, Arts and Science Colleges, and Professional Colleges data of 1992-93 to 2006-07 is based on

AEPAM, IslamabadSource 4: Figures of Universities data from 2003-04 to 2006-07 is based on Annual Pakistan Education Statistics Reports,AEPAM, Islamabad.Source 5: Figures of Secondary Vocational Institutions data of 2005-06 is based on Annual Pakistan Education Statistics Reports,AEPAM, Islamabad.Source 6: Figures of Secondary Vocational Institutions data of 2006-07 is based on NAVTEC survey (2006)

NUMBER OF TEACHERS IN EDUCATIONAL INSTITUTIONS IN PAKISTAN, BY KIND, LEVEL AND SEX

A: Actual - not available

181

Chapter 11

HEALTH AND NUTRITION Good health defined in terms of state of complete physical, mental and social well being is a prerequisite for a nation to be productive. This is because ill health not only covers disease but also hunger, exclusion, isolation, insecurity and powerlessness which consequently prevent individuals from realizing their full potential. Good health, in contrast is not only valued in its own right, but it also raises the human capital of a country, thereby positively contributing to the economic and social development. Enabling the human beings to realize the true potential they possess and achievement of well being of each and every citizen of a nation is first and foremost requirement of human development. Along side the intrinsic importance of health in social, economic and human development and as a dimension of welfare, poor health can directly influence an individual’s opportunities, his or her earning capacity, participation in community activities, and so on. This important instrumental function of health implies that inequalities in health often translate into inequalities in other dimensions of welfare.

The importance of health is also reflected in specific measurable targets declared at UN Millennium Declaration of September 2000. The Millennium Development Goals (MDGs) represent a vision based on an internationally agreed set of time bound goals for reducing extreme poverty, extending gender equality, and advancing opportunities for health and education. These goals serve as a benchmark of progress toward the vision of Millennium Declaration, guided by basic values of freedom, equality, solidarity, tolerance, and respect for nature and shared responsibilities.

Pakistan is also a signatory to UN Millennium Declaration and is fully committed to extend the agenda of providing basic right of health to all of

its citizens. The Government of Pakistan has taken several policy and program initiatives to fulfill its commitment regarding the MDGs. The Medium Term Development framework (2005-10) is constructed with a view to establish a just and sustainable economic system for reducing poverty and achieving MDGs. The health vision as reflected in the National Health Policy, 2001 envisage health reform as basically a means of poverty reduction.

The Health Policy 2001 identifies ten specific areas for reform ranging from control of communicable diseases especially T.B, Malaria, HIV/AIDS and the EPI cluster. The reforms also address inadequacies in primary and secondary health services and propose improvements in district health system, including removal of professional and managerial gaps and distortions. These elements will continue to be important, but in the context of a paradigmatic shift from healthcare reform to wider health sector linkage with social development. It is now widely recognized that without a strong nexus with social determinants of health and inter-sectoral bridges, it is difficult for the populace to overcome poverty.

Government’s firm stance on health related issues is further reflected in the Poverty Reduction Strategy Paper, which recognizes the need to substantially increase financing and to enhance efficiency of spending through organizational and management reforms. Pakistan Social and Living Standard Measurement Survey (PSLM), an implementation mechanism for PRSP, provides a set of district level representative and population based estimates of social indicators and their progress under the PRSP.

PRSP health expenditure during FY07 increased by 35.6 percent to Rs. 53 billion. Out of this Rs. 53


182

billion, largest increase was observed in Punjab (53.3%), followed by NWFP (49.5%), Federal government (23.4%), and Sindh(18.1%) . Contrary to same period last year when health expenditure in Balochistan declined by 6.6%, health expenditure during FY07 increased by 14%.

PSLM report 2006-07 presents the results pertaining to health indicators during FY07. The report includes sickness/injuries, immunization, diarrhea, and the use of pre and post natal services. The indicator of sickness/injuries with a prevalence rate of 6.27 percent shows an improvement over 7.10 percent during 2004-05. In the category of fully immunized one year old children, the record of immunization given to children shows a slight rise from 49 percent to 50 percent during FY06 and FY07. However, full immunization rates based on recall and record shows significant increase in coverage from 71 to 76 percent. There has been decrease in the proportion of children under five suffering from diarrhea i.e., from 12 percent to 11 percent but Sindh has shown significant increase from 8 percent to 12 percent which may be attributed to shortage of clean water. The use of Oral Re-hydration Solution (ORS) to treat children with diarrhea has increased from 72 percent in 2005-06 to 76 percent in 2006-07. Prenatal consultation has moderately increased compared from 52 percent in 2005-06 to 53 percent in 2006-07. Besides this, 56 percent of pregnant women received Tetanus Toxoid injection in 2006-07 compared to 62 percent in 2005-06.

11.1: A SNAPSHOT OF THE HEALTH STATUS

The demographic and epidemiological transition through which a nation passes also affects the health status of the nation. With reference to demographic transition Pakistan stands in the list of world most populous countries with population of 161 million. Although the annual population growth rate has declined from over 3 percent in 1960s and 1970s to present level of 1.8 percent per annum; it still remains high. As far as epidemiological transition is concerned an equal burden of disease can now be attributable to infectious viz-a-viz non-communicable diseases. (See fig 11.1). A high burden of communicable viz-a viz non-communicable disease is evident

from the fact that current incidence of tuberculosis is 177 per 100,000 populations, prevalence of Hepatitis C in general population is 5.3%; more than 24.3 % of the population over the age of 18 years has high blood pressure, 10 % of the adult population suffers from diabetes; 1 % of population is blind; and 34 % suffers from depressive disorders. The large burden of infectious diseases in Pakistan is known to be closely related to the lack of sanitation facilities and safe sources of potable water. Water –borne diseases constitute nearly 12.5 percent of the diseases burden in Pakistan.

Notwithstanding the health issues discussed above, some of the key health indicators in PSLM 2006-07 present a healthy picture which shows an improvement over the previous fiscal year. But when viewed in a regional context, Pakistan human welfare indicators still lag behind (See table 11.1).

The Government is fully aware of the challenges of communicable vs non-communicable diseases and other structural problem in the health sector. The Ministry of Health and the provincial departments are already engaged in bringing improvements in health sector through better provision of health facilities, improvement in infrastructure and human resource, and implementation of various health programs. Beside this, Service delivery is being organized through preventive, promotive, curative, and rehabilitative services. The Ministry of Health is also planning to conduct second National Health Survey of Pakistan. Due to these concerted efforts, social indicators as reported in Human

Communicable Diseases

38%

Reproductive health12%

Nutritional/ Endocrine

6%

Cardio-Vascular diabetes

11%

Injuries11%

Neuro-Psychatric

3%

Other Non-Communcable

diseases19%

Fig-11.1: Burden of Disease

Health and Nutrition

183

Development Report 2008 and key health indicators (PSLM 2006-07) show some improvement. However, in regional context Pakistan still lags behind other c ountries and a lot

more needs to be done to track the functioning of the health system and to support the existing Health Management and Information system in order to uplift the health status of general public.

11.2- HEALTH EXPENDITURES:

Registering an increase of 20 percent in fiscal year 2007-08, total expenditure on health has increased from Rs. 50 billion to Rs. 60 billion, of which, Rs. 27 billion have been allocated for development expenditure while Rs. 33 billion for current expenditure. Health expenditures in absolute terms

have more than doubled during the last seven years; from Rs. 25 billion in 2001-02 to Rs. 60 billion in 2007-08. However, health expenditure as a percentage of GDP does not present a satisfactory picture as it has remained stagnant at almost 0.6 percent during the entire period of 2001-02 till 2007-08. (see Table 11.2).

Table 11.2: Health & Nutrition Expenditures (2000-01-2007-08) (Rs.billions)

Fiscal Years Public Sector Expenditure (Federal and Provincial) Percentage

Change Health

Expenditure as % of GDP

Total Health Expenditures

Development Expenditure

Current Expenditure

2000-01 24.28 5.94 18.34 9.9 0.58 2001-02 25.41 6.69 18.72 4.7 0.57 2002-03 28.81 6.61 22.21 13.4 0.59 2003-04 32.81 8.50 24.31 13.8 0.58 2004-05 38.00 11.00 27.00 15.8 0.57 2005-06 40.00 16.00 24.00 5.3 0.51 2006-07 50.00 20.00 30.00 25 0.57 2007-08 60.00 27.22 32.67 20 0.57

Source: Planning and Development Division 11.3 - SERVICE DELIVERY

Pakistan has one of the largest Public Sector-owned Service Delivery infrastructure in the world. However, dual jobholding is common due

to the differences in incentives in the public viz—a –viz the private sector. As a result the role of the private sector has been increasing in the provision of services. As opposed to this, there is no

Table–11.1: Social Indicators

Country Life Expectancy

Year 2005**

Infant Mortality Rate per 1000** Year 2005

Mortality Rate under 5 per 1000

Year 2005**

Population Avg. Annual (%)

Growth 2000-06***

F M Pakistan 64.8 64.3 70^ 99 1.8* India 65.3 62.3 56 74 1.5 Sri Lanka 75.6 67.9 12 14 0.4 Bangladesh 64.0 62.3 54 73 1.9 Nepal 62.9 62.1 56 74 2.1 China 74.3 71.0 23 27 0.6 Thailand 74.5 65.0 18 21 0.9 Philippines 73.3 68.9 25 33 1.8 Malaysia 76.1 71.4 10 12 1.9 Indonesia 71.6 67.8 28 36 1.3 ^ Pakistan Social and Living Standard Measurement Survey (PSLM) 2005-06 *Population growth for Pakistan is estimated at 1.8 percent (National Institute of Population Studies).

**Source: Human Development Report 2008 ***Source: World Development Report 2008


184

regulatory framework in place for the private sector. Efforts are underway to address the currently prevailing service delivery challenges by developing alternative service delivery and financing options at the basic health care and hospital levels. Provincial governments have focused on restructuring the mode of primary healthcare delivery by revitalizing BHUs and RHCs. The government of Punjab has taken a lead in this area by developing models of subcontracting and other models where service delivery has been incentivised within the existing system; reform of directly managed services in Punjab is currently operational in 23 districts. The measures introduced included fresh merit- based recruitment of doctors, increase in salary packages by 100 %, the introduction of additional perks such as motorbikes to enhance mobility, increased availability of drugs and equipment and investments to upgrade infrastructure including ambulances. This program is being implemented and financed through Provincial Devolved Social Services Program and Punjab Health Sector Reform Program. Through reform of directly managed services, Minimum Service Standards are also being introduced in Punjab; these are likely to have a major impact on the quality of services.

Efforts are also underway to enhance regulatory capacity within the country. In 2006, approval was given to create a Drug Regulatory Authority, the work on which is currently underway to establish it .The Ministry of Health is also working to develop a framework for the regulation of the private sector healthcare.

11.4- CONFIGURATION OF PAKISTAN’S HEALTH SYSTEM

Constitutionally, health is a provincial subject in Pakistan with clearly demarcated roles, responsibilities and prerogatives at each level of the government. The Federal Government is mandated with policy-making, coordination, technical support, research, training and seeking foreign assistance. The provincial and district departments of health are responsible for the delivery and management of health services. The devolution of administrative powers under the Local Government Ordinance 2001 has devolved service delivery to the district level.

11.4.1- Health Infrastructure:

The state attempts to provide healthcare through a three-tiered healthcare delivery system and a range of public health interventions. The former includes Basic Health Units (BHUs) and Rural Health Centers (RHCs), forming the core of the primary healthcare structure. Secondary care including first and second referral facilities providing acute, ambulatory and inpatient care is provided through Tehsil Headquarter Hospitals (THQs), and District Headquarter Hospitals (DHQs) which are supported by tertiary care from teaching hospitals.

There are seven hospitals under the control of Federal Government located in Islamabad, Rawalpindi and Karachi. There are tertiary care hospitals in all the provinces including those with the status of teaching hospitals, which are under the administrative jurisdiction of provinces. However, recently four hospitals in NWFP and three in Sindh have been granted autonomous status. Throughout the country, the vast network of health care facilities include 945 hospitals, 5349 BHUs and Sub- Health Centers , 562 RHCs, 4755 Dispensaries, 903 MCH Centers and 290 TB Centers. These healthcare facilities show an improvement over the previous year as the total number of healthcare facilities during 2006-07 was 12,726. During 2007-08, these healthcare facilities have increased to a total of 12804. The detail about the human resource available within the country up till 2007 is provided in Table12.4. There has been a gradual improvement in the number of doctors, dentists and nurses over the years. A cursory look at Table 11.3 is sufficient to see that doctors, dentists, nurses and LHVs have doubled in the last one decade and accordingly population per doctor, per dentist, per nurse etc. have all registered a significant improvement.

11.4.2- Physical Targets and Achievements during 2007-08:

The targets for the health sector during 2007-08 included the establishment of 13 Rural Health Centers (RHCs), 43 Basic health Units (BHUs) and upgradation of 65 existing RHCs and 950 BHUs. The manpower target included the addition of 4500 new doctors, 400 dentists, 3350 Nurses, 4900 paramedics and 450 Traditional Birth Attendants.


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Under the preventive program, about 8 million children were targeted to be immunized and 24

million packets of Oral Rehydration Salt (ORS) were to be distributed during 2007-08.

Table 11.3: Human Resource Available from 1995 till 2007Years* 1995 2000 2003 2004 2005 2006 2007 MBBS Doctors 70,692 92,824 108,151 113,295 118,098 123,125 127,859 Dentists 2,747 4,165 5,531 6,128 6,743 7,438 8195 Nurses 22,299 37,528 46,331 48,446 51,270 57,646 62,651 Midwives 20,910 22,525 23,318 23,559 23,897 24,692 25,261 Lady Health Visitors(LHVs) 4,185 5,443 6,599 6,741 7,073 8,405 9,302 Population per doctor 1718 1473 1350 1316 1274 1251 1225 Population per dentist 44223 32819 26389 24320 22306 20702 19121 Population per Nurse 5448 3642 3150 3076 2935 2671 2501 Population per midwife 5810 6068 6260 6326 6297 6235 6203 Population per LHVs 29027 25113 22119 22108 21274 18318 16845

* Year as on Ist January Sources: Pakistan Medical and Dental Council (PMDC) and Pakistan Nursing Council(PNC), Islamabad

The health program during the current fiscal year has realized, on average, 90 percent of its physical targets (up to March 2008). The highest achievement of 94 percent has been obtained in the immunization category followed by the provision of ORS (92 percent) and health human resource

(89 percent). The sub- sector wise achievement of program has been recorded as 84 percent for RHCs and 91 percent for BHUs. It is encouraging to note that the achievements obtained so far are in the close vicinity of the targets.

11.4.3- National Programs

Pakistan has an extensive public health infrastructure, which consist of a network of more than 12,000 first level heath care facilities and a range of disease-specific vertical public health programs. Most of the program based interventions

are led by the federal government with implementation arms at the provincial and district levels. Some of the programs described are disease-specific such as the respective programmes on HIV/AIDS, malaria, tuberculosis, non-communicable diseases and hepatitis. Others are specific to the lifecycle domain which include

Table 11.4: Physical Targets and Achievements During 2007-08

Sub-Sector Targets

(Numbers) Estimated

Achievements (Numbers)

Achievements (%)

A. Rural Health Programme i. New Basic Health Units (BHUs) ii. New Rural Health Centres (RHCs) iii. Upgradation of existing RHCs iv. Upgradation of existing BHUs

B. Beds in Hospitals/RHCs/BHUs C. Health Manpower Development

i. Doctors ii. Dentists iii. Nurses iv. Paramedics v. Training of TBAs vi. Training of LHWs

D. Preventive Programme i. Immunization (Million Nos) ii. Oral Rehyderation Salt (ORS) (Million Packets)

50 15 80

1000 5500

5000 450

3500 5500 500

96000

8 24

43 13 65

950 4300

4500 400 3350 4900 450

80000

7.5 22

86 86 81 95 78

90 89 96 89 90 83

94 92

Source: Planning and Development Division


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maternal and child health, the National program for family planning and primary health care, and

National EPI program. (Table 11.5).

Table 11.5: Various Public Health Programs Federally-led national program The National Program for Family Planning and Primary Health Care

The Expanded Program for Immunization The National HIV/AIDS Control Program The National Tuberculosis Control Program The National Malaria Control Program The National Nutrition Program

Newly launched program in the public sector (2005-08)

The National Program for Prevention and Control of Blindness National Program for the Prevention and Control of Hepatitis National Neonatal, Maternal and Child Health Program

The details about the various national programs regarding health sector are as under:

a. National Program on Family Planning & Primary Health Care

The program was launched in 1994 as the Prime Minister’s Program for Family Planning and Primary Health Care. Its name was changed to the National Program for Family Planning and Primary heath Care (NP-FPPHC) in 2001.Ths Program focuses on delivering essential primary healthcare services to the communities at doorstep through female community health workers, thus creating a link between the health system and the grassroots level, providing services to women who for cultural reasons cannot leave their homes. Currently there are about 93,978 Lady Health Workers and plan is underway to increase their number to 100,000. These LHWs had a significant impact on important outputs such as immunization coverage, prenatal care, attendance at delivery and contraceptive prevalence.

b. Expanded Program on Immunization

The Expanded Programme on Immunization (EPI) was launched in 1978. It aims at protecting children by immunizing them against Childhood Tuberculosis, Poliomyelitis, Diphtheria, Pertussis, Hepatitis B, Measles and also against Neonatal Tetanus by immunizing pregnant women. The Programme has significantly progressed during the period of time in terms of immunization coverage and disease reduction. The objective of the programme is to reduce mortality and morbidity resulting from the seven EPI target diseases by

immunizing children of the age of 0-11 months and women of child bearing age.

EPI Programme’s target is to immunize children of 0-11 months against seven EPI target diseases and pregnant mothers with Tetanus Toxiod. During the year 2007, 6.061 million children of 0-11 months, 5.833 million children of 12-23 months and 7.033 million pregnant ladies were targeted for the programme. However, 82% children of 0-11 months, 85% children of 12-23 months and 47% pregnant mothers were immunized during 2007. After inclusion of Hepatitis B Vaccine into the National EPI Vaccination Schedule in 2002 the programme is also introducing a new vaccine Haemophilus Influenzae Type B (Hib) from the July 2008 which will be delivered as a combination of 5 vaccines in one (Pentavalent).

Besides improving the routine immunization coverage, the National EPI Programme has launched measles catch-up campaign in phases, targeting over 64 million children of 9 months to below 13 years of the age. More than 97 % coverage has been achieved after implementation of the campaign during 2007-08. The programme has also planned to launch high risk area approach to immunize child bearing age women (CBAs) with assistance of WHO and UNICEF in two districts as a piloting for the year 2008-09.

c. National AIDS Control Program (NACP)

Pakistan is a signatory to the MDGs; Goal 6 of which states that Pakistan will “Halt and begin to reverse the spread of HIV/AIDS” by the year 2015.The primary objective of National AIDS Control Program (NACP) programme is to seek


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such a halt and reversal. To contextualize the project seeks to contain the epidemic among the most at risk group where it has established and prevent it from establishing among the bridge groups and the general population.

Presently NACP and its provincial counterparts (Provincial AIDS Control Programmes in Punjab, Sindh, Balochistan, NWFP and AJK) are implementing the interventions throughout the country. The principal components of the NACP are: (i) the interventions for target groups; (ii) HIV prevention for general public; (iii) prevention of HIV transmission through blood and blood products and; (iv) capacity building and programme management. In addition, the NACP with Canadian support has established HIV and AIDS Second Generation Surveillance System (SGS) to track HIV epidemic in Pakistan.

The reported cases of HIV are about 4000 HIV, and around 1400 AIDS patients have been registered with AIDS treatment centers across the country since 1987. Out of these AIDS cases, 500 are on Antiretroviral therapy and are also receiving treatment for AIDS related infections i.e. opportunistic infections and Tuberculosis etc. Preventive Measures to Halt the HIV Epidemic are under implementation since 2003 and considerable achievement has been made since the adoption of preventive measures.

d. National Tuberculosis Control Program

The National TB Control Program is responsible for overall TB control activities in the country i.e. policy guideline, technical support, coordination, monitoring and evaluation, and research, where as the Provincial TB Control Programs are responsible for the actual care delivery process including program planning, training of care provides, case detection, case management, monitoring and supervision. The overall objective of NTP is to reduce mortality, morbidity and disease transmission so that TB is no longer a public health problem. The National targets are in line with the Millennium Development Goals (MDGs) i.e. to cure 85% of detected new cases of sputum smear positive pulmonary TB and to detect 70% of estimated cases once 85% cure rate is achieved. A steady progress has been made from

2000 onwards to improve the case detection and treatment success rates. The commitment resulted in rapid expansion of the DOTS strategy from 2000 to 2005, reaching DOTS-all-over in May 2005. Since then free diagnostic and treatment facilities for TB patients are available all over the country within the public sector health care delivery network. Presently, more than 1200 diagnostic facilities and more than 5000 treatment facilities are available throughout the country. NTP has treated more than 800,000 TB patients since 2001 and 234100 TB cases were treated through the DOTS strategy last year. CDR (Case Detection Rate) has increased from 7% in 2001 to 69% in 2007; whereas TSR (Treatment Success rate) has increased from 77% in 2001 to 87%.

e. Malaria Control Program (MCP)

In Pakistan, malaria has been a major public health problem, threatening the health of the people due to prevailing socio-economic conditions and epidemiological situation. The transmission has been described as a combination of stable and unstable malaria with low to moderate endemicity. There is a tendency for epidemic break-outs of Malaria over a large area, particularly in Punjab and Sindh. The disease is now emerging as a prominent health problem in Balochistan and FATA, particularly along the international border. Malaria is the disease that inevitably affects the poor segments of the population living in hot and humid far flung areas. These areas also lack good health care facilities and functioning diseases surveillance system, thus morbidity and mortality in most of the instances go unreported. Each year about half a million people suffer from malaria.

Malaria control was initiated in Pakistan in 1950s and has passed through several evolutionary phases. In 1975, a malaria control strategy was adopted with provincial commitment to implementation and in 1998, Pakistan joined the global Roll Back Malaria (RBM) initiative. This led to the development of a five year RBM project in 2001 as part of which efforts were intensified in the 28 high –risk districts. More recently, a Strategic Plan for 2005-10 based on the RBM strategy has been developed and a number of steps have been taken for its implementation. The program has shown process level success.


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f. National Program for Prevention & Control of Blindness

The National Programme for Prevention & Control of Blindness (NP-PCB) was launched by the Federal Ministry of Health, Government of Pakistan in year 2005. The Programme is in line with “VISION 2020” the global initiative of WHO for elimination of preventable causes of blindness by the year 2020. The total budget for the programme is Rs. 2775 million and it will be completed in year 2010. The key targets of the program include

• Establishment of 07 Centers of Excellence in Ophthalmology.

• Strengthening and up gradation of 20 Tertiary Teaching Hospital (TTH) Eye Departments.

• Strengthening and up gradation of 63 District Eye Units (DHQ Hospitals).

• Strengthening and up gradation of 147 Tehsil Eye Units (THQ Hospitals).

• Training of 50,000 primary health care workers in primary eye care.

Latest data uptill 2007-08 on these key indicators show that an achievement of 100 % in Establishment of 07 Centers of Excellence in Ophthalmology, 65 % in Up Gradation Of Tertiary Teaching Hospitals (TTH), 71 % in Up gradation of District Headquarters Hospitals (DHQ) and zero % in Up gradation of Tehsil Headquarters Hospitals (THQ) has been made so far.

According to the National Blindness Survey (2002 – 2004) the prevalence of blindness was found to be 1%, which means that at least 1.5 million Pakistanis are blind in both eyes. Fortunately, about 80% of the prevalent causes of blindness in Pakistan are either avoidable (i.e. they are either preventable or treatable) or can be helped with optical devices (spectacles or low vision aids). About 0.62 million patients have been treated at the Up graded Eye Departments throughout Pakistan till December31

st 2007:

g. National Program for Prevention and Control of Hepatitis:

Launched in 2005 as the Prime Ministers initiative, the program was a response to the high prevalence of hepatitis B and C (estimated at 3 % in the general population and 5-22 % in the high risk group). The program focuses on mandatory vaccination of all children less than one year of age, vaccination of high-risk groups, promotes safe blood diffusion, disposal of syringes, sterilization of medical devices and availability of safe water and disposal of sewage. Currently the baseline for this program is being established.

h- National Maternal Neonatal and Child Health (MNCH) Program

The National Maternal, Neonatal and Child Health (MNCH) Program aims to improve the Maternal and Child Health indicators in the country in line with our International obligations regarding MDG’s. The Goal of the National MNCH Program is to reduce Maternal, Neonatal & Child deaths and illnesses by improving their health status, particularly of the poor and the marginalized. The key objectives are to improve the accessibility of high quality and effective RH services for all, particularly the poor and the marginalized, through development and implementation of a sustainable MNCH program at all levels of healthcare delivery system. The areas of focus in this program are strengthening the Public Health facilities (DHQ’s, THQ’s RHC’s and in BHU’s residents of LHV,s) with regards to enhanced incentives for Human Resource, Provision of essential equipment, Capacity Building through trainings and availability of essential medicines with regards to providing comprehensive EmONC services. The program has been launched with following objectives in line with our international obligations with regard to the MDGs:

To reduce the Under Five Mortality Rate to less than 65 per 1000 live births by the year 2011 (MDG target for 2015:45/1000)

To reduce the Newborn Mortality Rate to less than 40 per 1000 live births by the year 2011 (Target for 2015: 25/1000)


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To reduce the Infant Mortality Rate to less than 55 per 1000 live births by the year 2011 (Target for 2015:40/1000)

To reduce Maternal Mortality Ratio to 200 per 100,000 live births by the year 2011 (Target for 2015: 140/100,000)

To increase the proportion of deliveries attended by skilled birth attendants at home or in health facilities to 90% (Target for 2015 :> 90%)

Increase in Contraceptive Prevalence Rate from 36% (2005) to 51% in 2010 and 55% in 2015

i- Health Information and Surveillance Systems

1. Health Management Information System:

The Ministry of Health has been implementing a Health Management Information System (HMIS) for first care level facilities (HMIS/FCLF) since 1992. The objectives of the HMIS are to improve coverage and quality of care for priority health interventions, disease surveillance and epidemic control, and monitor availability of essential PHC commodities.

In last seven years, the HMIS has been extended to 116 districts for which approximately 20,000 health workers were trained in data collection procedures. Most districts are now sending monthly reports with regularity around 86%. A number of organizations, both government and international are now using this data for looking at disease trends, resource allocations and planning.

A National Feedback Report – 2007 has been developed. This is the fifth National Report of its kind. The main features of the report include analysis of four years’ HMIS data, reporting from 117 districts and 9, 326 First Level Care Facilities with reporting regularity of 87%.

2. District Health Information System (DHIS)

To improve the functioning, coverage and the scope of the existing HMIS, the Ministry of Health with the technical support of JICA has completed the review of HMIS structure, functions, indicators, data collection tools and the software. The objective was to expand the scope of the

current system from first level care health facilities to secondary care hospitals and the private sector. Based upon comprehensive situation analysis and the information needs a list of revised indicators, data collection tools and mechanisms have been developed in the context of devolution.

This updated system has also been pilot tested in four pilot districts i.e. Swabi, Khanewal, Thatta and Quetta. A National Plan of Action has recently been approved both by the Federal Ministry of Health and the Provincial Health Departments to implement the plan.

3. Disease Surveillance System

Communicable diseases remain the most important health problem in Pakistan. The most common causes of death and illness in the country are acute respiratory tract infections, diarrhoeal diseases, malaria, tuberculosis, and vaccine preventable infections. Epidemic-prone diseases such as meningococcal meningitis, cholera, hepatitis and viral hemorrhagic fevers are also prominent health threats in the country. A functional disease surveillance system is thus needed for priority setting, planning, resource mobilization and allocation, prediction and early detection of epidemics and monitoring and evaluation of intervention programs.

With a view to respond to this need, the Ministry of Health conducted an assessment study in 2004 to explore the existing situation of data collection, analysis, processing, its use and response for supporting both the communicable and non-communicable Disease Surveillance. The study has revealed a number of deficiencies in Public Health Surveillance in the country. Therefore, an inter provincial process was initiated to develop a Disease Surveillance System through which a ten year National Plan has been developed. It covers both communicable and non communicable diseases and is response/ action oriented, which will integrate all existing surveillance activities of the disease control programs.

Together, the state’s healthcare infrastructure and the programs are helping the government to meet Pakistan’s health sector goals – those that are part of the Millennium Development Goals (MDGs)


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and others articulated in the Poverty Reduction Strategy Paper and the Medium Term Development Framework 2005-10 (MTDF).

11.5- STRATEGIC POLICY DIRECTION: ESTABLISHMENT OF NATIONAL HEALTH POLICY UNIT

The National Health Policy Unit (NHPU) was established in end 2005 under National Health Facility (NHF). The mandate of NHPU is to enable the government to respond to evolving health policy challenges. The task of the Policy Unit is to provide policy advice on strategy and resource allocation, monitoring and evaluation of health strategies across the health sector and ensuring that the national policies and strategies are responsive to the emerging needs.

The NHPU has prepared four strategy papers on the following: Health System Strengthening, Human Resources for Health, Performance-based Monitoring and Evaluation of Health Policy Implementation, Financial and Resource Allocation Strategy for Health Sector. These strategy papers have been shared with the provincial health departments to develop consensus and finalization. In addition to that NHPU has also completed studies and reports on the following key aspects during 2007-08.

1 Public Expenditure Review: Understanding the profile of the average users of public ally funded Hospital care System (In collaboration with World Bank).

2 Identification of areas of collaboration and coordination between health and population sectors

3 Comparative analysis of pre- and post-devolution allocation and expenditure on health sector at district level

4 Public Expenditure Review: The role of public investment in increasing the immunization coverage in Pakistan

Furthermore, NHPU has undertaken a unique study for Poverty Reduction Support Credit-III. This is the study on ‘Health System Performance Assessment’ and involves ranking of districts based on their performance for evidence-based

decision making. The report has been published by the Ministry of Health. Another study titled ‘Fact Book on Health and Population’ has also been prepared, which will be very useful for policy and decision-makers, planners, parliamentarians, researchers, donors and partners. An amount of US$ 76.85 million is expected to be made available through GAVI Health System Strengthening (GAVI HSS) over a period of five years and NHPU will be responsible to undertake Health System Strengthening activities throughout the country.

11.6- CANCER DIAGNOSIS AND TREATMENT:

PAEC has been playing a vital role in the health sector since 1960 by using the nuclear and other advanced techniques for diagnosis and treatment of cancerous and allied diseases and is also involved in the national cancer awareness, prevention, and diagnosis and treatment programs.

Presently, 13 Nuclear Medicine & Oncology centres equipped with excellent facilities are working under PEAC and serving as non profit public sector organizations with continuously integrate programs in diagnosis of different kinds of cancer/allied diseases and their treatment has received considerable acclaim in the public.

Six new Nuclear Medicine & Oncology Centres are in different phases of construction at Gilgit, Swat, Bannu, D.I. Khan, Gujranwala and Nawabshah. During the period July to December 2007, utilizing the maximum capacity of the latest and state-of art equipment available at PAEC Nuclear Medicine & Oncology Centres, more than 205,000 patients were attended.

Throughout the country, major disciplines available and operative in different PAEC nuclear medical centers include the disciplines of Nuclear medicine; Clinical Oncology; Surgical Oncology; Clinical Laboratories; Radiology; Medical Physics; Bio Engineering; Research and Development; Teaching and Training ; Cancer Awareness and prevention; Cancer Registry& NCRC. About 11,154 patients in the field of nuclear medicine and 86,119 in the field of clinical oncology have benefited during July- December 2007. Besides


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management of the operations of major disciplines in different PAEC nuclear medical centers, Directorate General of Medical Sciences, PAEC Headquarter is also working on ‘Human Resource Development Programme”. This will provide trained and expert personnel in each field of cancer diagnosis and treatment. Keeping in view the future requirements of the cancer hospitals under PAEC, the development of human resource is mandatory

11.7- DRUG ABUSE IN PAKISTAN

Drug Abuse is widespread in our society and has affected Pakistan in many ways. It contributes to crime, adds to the cost of our already over burdened health care system and to the financially strapped social welfare system. According to National Assessment Study on Drug Abuse – 2006 conducted in Pakistan, there were about 628,000 opioid users which include 484,000 heroin addicts and 125,000 injecting drug users. The most commonly used drug is cannabis or hashish followed by sedatives, opium and heroin.

A new Drug Abuse Control Master Plan (2008-2012) has been prepared to meet the growing challenges. Expenditure under this plan is expected to be Rs.10869.43 million. Objectives have been defined and achievable targets set with emphasis on both supply and demand reduction activities. Lessons learnt from the implementation of the last Master Plan have been addressed. The Master Plan takes into account the impact of the worsening drug situation in Afghanistan during 2006 and 2007 resulting in an unprecedented increase in poppy cultivation/opium production.

11.7.1 Drug Demand Reduction

Under Sections 52 & 53 of Control of Narcotic Substances Act, 1997, Provincial Government have been directed to register drug addicts and establish treatment and rehabilitation centers at provincial levels. However, at Federal level two new Model Addiction Treatment and Rehabilitation Centres (MATRC) have been established at Islamabad and Quetta with the cost of Rs.39.017 million each during the current year. Both are 45 bedded centers providing free treatment, food, boarding and rehabilitation to drug

addicts. Efforts are also being made for their job placement. Additionally, another (100 bedded) MATRC for the treatment and rehabilitation of drug addicts in Karach is being established. This would enhance our capacity in the field of Treatment and Rehabilitation for drug addicts. Besides these Treatment & Rehabilitation Centres another project titled “Treatment Programme for Injecting Drug Users (IDUs) is also being implemented at a Cost of Rs.19.700 million, for providing treatment facilities to the injecting drug users and street children involved in solvent abuse. Two other projects namely “Community Participation in Drug Demand Reduction” and “Creating Mass Awareness against Drug Abuse”’ at a total cost of Rs.71.427 million are also being implemented in Pakistan. These programmes aim to create awareness amongst the masses, particularly high-risk groups and involve the civil society in prevention as well as treatment and rehabilitation drug addicts.

11.7.2 Seizure of Narcotics Drugs

The details about the seizure of narcotic drugs in Pakistan, cases affected and defendants arrested during the fiscal year 2007-08 are given in Table 11.6.

Table 11.6- Seizure of Drugs No. of cases 23436 (Nos) No. of defendants 23256 (Nos) Opium 11483.164 (Kgs) Heroine 2719.854(Kgs) Hashish 43128.27(Kgs) Cocaine 5.929(Kgs) Poppy Straw 6880.00(Nos)

Source: Ministry of Narcotics Control 11.8- FOOD AND NUTRITION

Nutrition is an essential element for development of full physical and mental potential of an individual and an important indicator of development. Lack of balanced food and its unavailability leads to malnutrition, which affects individuals’ health, intellectual maturity, labor productivity and consequently socio-economic development of the country.

In spite of adequate production of food grains during the year the availability and access to


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major food items was disrupted in the country due to international price hike and mis-management in stock maintenance. This resulted in low and erratic food availability and consumption of marginalized groups. However, adequate food availability to meet national requirements was envisaged during 2007-08 by taking some immediate measures. The production of major food items has been

professionally estimated to arrange food deficit in time, to increase food supply and nutritional intake average caloric availability per day form 2466 in 2006-07 to 2529 in 2007-08 per capita/day and protein from 69 to 70 gms per capita/day. The availability of essential items of consumption is briefly given in table 11.7.

Table 11.7: Food Availability Per Capita Items Year/

Units 49-50 79-80 89-90 99-00 03-04 04-05 05-06 06-07 (E) 07-08 (T)

Cereals Kg 139.3 147.1 160.7 165.0 150.7 142.0 150.0 160.0 168.0 Pulses Kg 13.9 6.3 5.4 7.2 6.1 6.8 7.6 7.2 8.4 Sugar Kg 17.1 28.7 27.0 26.4 33.6 27.0 29.8 32.2 28.7 Milk Ltr 107.0 94.8 107.6 148.8 154.0 155.7 162.6 170.1 176.3 Meat Kg 9.8 13.7 17.3 18.76 18.8 19.6 19.1 20.0 20.6 Eggs Dozen 0.2 1.2 2.1 5.1 4.6 4.7 4.6 4.8 4.9 Edible Oil Ltr 2.3 6.3 10.3 11.1 11.3 12.4 12.8 12.9 12.8 Caloric & Protein Availability (Per Capita)Calories per day (Number) 2078 2301 2324 2416 2381 2271 2423 2466 2529 Protein per day (Gms) 62.8 61.5 67.4 67.5 67.8 65.5 69.6 69.5 70.0 E:Estimates, T: Targets Source: Planning & Development Division Nutrition as development concern is multi-sectoral and spread across the sectors. Nutritional interventions in the MTDF envisaged multi-disciplinary approach by coordinating and integrating nutrition activities effectively to achieve the objectives. Therefore, a joint forum, National Nutrition Committee has been established in the Planning Commission to analyze and discuss nutrition concerns across sectors, seek approval of all nutrition interventions before implementation and oversee the preparation of Nutrition Master Plan aligned with MDGSs.

A supporting activity, National School Nutrition Programme, has been formulated as a social safety net and incentive to improve the nutritional status of primary school going children especially girls in rural areas with aims to reduce gender disparity in enrolment and drop-out rates.

Specific interventions in Agriculture and Health sectors have been implemented such as food security & food safety, promotion of iodized salt and breast-feeding, iron supplementation, wheat flour fortification and nutritional awareness.

Nutrition through Primary Health Care (PHC): The Primary Health Care integrated interventions consisting of nutrition activities viz micronutrient supplementation for anemia control, vitamin A supplementation to children under five years of age and micro nutrient to women of child bearing age, growth monitoring, and counseling on breast feeding and weaning practices and awareness through Lady Health Workers (LHWs) were implemented.

Reference Laboratory for Food Quality Control System has been strengthened at Nutrition Division, National Institute of Health, Islamabad.

Micro Nutrient Deficiency Control Programme: The Major Micro Nutrient deficiencies i.e. Iodine, Iron and Vitamin-A., were addressed by Nutrition Wing, Ministry of Health: through donors’ assistance:

a) Iodine Deficiency Disorder Control (IDD): Iodized salt production in private sector was strengthened in 53 districts and supply increased to 65% and awareness material


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distributed among the stakeholders. Legislation for USI has been drafted.

b) Wheat Flour Fortification to control iron deficiency has been started in 50 flour mills and Millers trained to operate the micro-feeders and carry out quality tests. Quality standards for fortified wheat flour have been

notified. The quality assurance and control system has been developed.

c) Policy for Infant Young Child Feeding (IYCF) has been formulated. Health staff on Baby Friendly Hospital Initiative (BFHI), breastfeeding counseling, IYCF and trained in 11 districts.

TABLE 11.2

(Progressive Numbers)Regis- Regis- Regis- Register- Register-tered tered tered ed Mid- ed Lady Expenditure(Mln. Rs)^

Year* Doctors Dentists Nurses wives Health Develop- Non-Deve-** ** ** Visitors Doctor Dentist Nurse ment* lopment

1990 52,884 2,068 16,948 15,009 3,106 1,993 50,967 6,219 2741.00 4997.001991 56,567 2,184 18,150 16,299 3,463 1,910 49,469 5,953 2402.00 6129.651992 61,039 2,269 19,389 17,678 3,796 1,845 49,630 5,808 2152.31 7452.311993 63,998 2,394 20,245 18,641 3,920 1,805 48,262 5,707 2875.00 7680.001994 67,189 2,584 21,419 19,759 4,107 1,763 45,859 5,532 3589.73 8501.001995 70,692 2,747 22,299 20,910 4,185 1,718 44,223 5,448 5741.07 10613.751996 75,222 2,933 24,776 21,662 4,407 1,655 42,445 5,025 6485.40 11857.431997 79,458 3,155 28,661 21,840 4,589 1,605 40,428 4,449 6076.60 13586.911998 83,682 3,434 32,938 22,103 4,959 1,561 38,020 3,964 5491.81 15315.861999 88,102 3,857 35,979 22,401 5,299 1,515 34,607 3,710 5887.00 16190.002000 92,824 4,165 37,528 22,525 5,443 1,473 32,819 3,642 5944.00 18337.002001 97,247 4,612 40,019 22,711 5,669 1,437 30,304 3,492 6688.00 18717.002002 102,632 5,058 44,520 23,084 6,397 1,392 28,244 3,209 6609.00 22205.002003 108,151 5,531 46,331 23,318 6,599 1,350 26,389 3,150 8500.00 24305.002004 113,295 6,128 48,446 23,559 6,741 1,316 24,320 3,076 11000.00 27000.002005 118,098 6,743 51,270 23,897 7,073 1,274 22,306 2,935 16000.00 24000.002006 123,125 7,438 57,646 24,692 8,405 1,251 20,702 2,671 20000.00 30000.002007 127,859 8,195 62,651 25,261 9,302 1,225 19,121 2,501 27228.00 32670.00

Source: (1) Ministry of Health. (2) Planning & Development Division.* Year as on 1st January^ Expenditure figures are on fiscal year basis** Registered with Pakistan Medical & Dental Council and Pakistan Nursing Council.

REGISTERED MEDICAL AND PARAMEDICAL PERSONNELS AND EXPENDITURE ON HEALTH

Population per

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Chapter 12

POPULATION, LABOUR FORCE AND EMPLOYMENT

Introduction

Pakistan, with a population of 160.9 million in mid 2008 is the 6th most populous country in the world. The population of the area now constituting Pakistan has increased ten-fold since 1901; half added during the post independence period. In absolute numbers; almost 128 million persons have been added to the population during the last 58 years (1951-2008). Annual growth rates have risen from 1 percent in the first three decades of the country to around 2 percent in the next three decades after peaking over 3 percent in the 1960s and 1970s and then below 3 percent in the 1990s. The country’s population is estimated to double in the year 2045 if it continues to grow at 1.8 percent. The population density has increased to 203 persons per square kilometer today from 42.5 persons per square kilometer in 1951 which is almost a four time increase. Movement of population to urban areas, attributed to well known “pull” and “push” factors continues and as a result the urban population has increased from 6 million in 1951 to today’s 57 million. Thus, putting an enormous pressure on the available infrastructure like housing, transportation, electricity, water, sewerage, sanitation, health and educational facilities.

Such a rise in the size of population is indeed termed as an important constraining factor for achieving the overall national development goals and sustained economic growth. It is imperative to stabilize population so that the ever-increasing burden on existing infrastructure is minimized and reward of economic growth is not diluted by rapid increase in population.

According to Federal Bureau of Statistics (FBS), the total fertility rate has declined to 3.8 children per women. Contraceptive prevalence rate is around 26 percent but a large unmet need for family planning still exists. It is estimated that about one-fourth women - capable of reproduction and who either want to postpone childbearing for two or more years or want to terminate childbearing altogether - are not using any kind of contraception. The reasons expressed are: social, psychological, accessibility / availability / affordability as well as a weak desire for avoiding pregnancy. Concerted efforts are required to hasten fertility transition and achieving the target of replacement level fertility by 2020. Collaborative efforts involving full potential of the public and corporate sectors and NGOs together with improving the quality of services are crucial.

The consensus reached at the International Conference on Population and Development (ICPD) in Cairo in 1994, stressed that early stabilization of population would make critical contribution towards achievement of sustainable development and poverty reduction. Nevertheless, wide spread poverty remains a major challenge to development efforts. Poverty is often accompanied by unemployment, malnutrition, illiteracy, low status of women, exposure to environmental risks and limited access to social and health services including family planning and reproductive health services. All these factors reinforce the vicious cycle of high levels of fertility, morbidity and mortality, which lead to low economic productivity and consequent poverty.


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12.1 Population Overview

12.1.1 Population Indicators

The Crude Birth Rate (CBR) and Crude Death Rate (CDR) are statistical values that can be utilized to measure the growth or decline of a population. The CBR and CDR are both measured by the rate of births or deaths respectively among a population of 1000. The Crude Birth Rate is called "crude" because it does not take into account age or sex differences among the population. CBR of more than 30 and less than 18 per 1000 population are respectively considered high and low. The global CBR in 2005 was 20.15 per 1000; it was as low as 8.33 in Germany and as high as 51.33 in Niger. The CBR in Pakistan is estimated at 26.1. It is worth mentioning that health statistics in Pakistan are gradually improving; mortality rate is declining and was 7.1 (per thousand) in 2005-06; the decline is attributed to the elimination of epidemic diseases and improvement in medical services. Despite a considerable decline in the total mortality in Pakistan, infant mortality remains high at 76.7 per thousand live births in 2005-06. The major reasons for high mortality rate include diarrhea and pneumonia. While maternal mortality ratio ranges from 350-400 per hundred thousand births per year, the contraceptive prevalence rate (CPR) is estimated at 26 percent and total fertility rate (TFR) has exhibited a decline from 4.5 percent in 2001-02 to 3.8 percent in 2005-06 (see Table -12.1).

12.1.2 Population Welfare Program

The Population Welfare Program aims to bring the country's social and economic development through rational choices about family size and reproductive behavior. The focus of this Program, launched in 1965 through Family Planning Council in the Centre and Family Planning Boards in the provinces, is to consistently improve and enrich the lives of individuals, families and communities in accordance with the Reproductive Health Program. With the commencement of the new millennium, the Population Welfare Program has also taken a turn for the better. This turn in policy is a shift from the focus on fertility towards a more comprehensive approach of integrating family planning with reproductive health and also addressing wider range of concerns, especially economic status, education and gender equality.

The Pakistan Population Policy 2002 calls for a sustained political commitment and the need for mobilization of broader support from all stakeholders in the public and private sectors. The policy aims for a swift demographic transition to achieve population stabilization through declining fertility as its ultimate goal.

Five Year Plan (2003-08)

The current Population Welfare Program is a continuation of the on-going social development endeavor, within the framework of nationally accepted population and development policies. The program during the 9th Five Year Plan (1998-2003) was based on positive elements of the strategies of the previous plans, ensuring continuity and consolidation of gains. The current Program focuses on strengthening outreach through enhanced and improved service delivery strategy with special attention to rural areas. A broad-based reproductive health approach is being pursued in the light of International Conference on Population and Development (ICPD) 1994 with emphasis on family planning, mother care and child care in the social context of the country.

Main activities of the Program during the year (2007-08) covered areas such as: expansion in service delivery; social marketing of contraceptives; contraceptives requirement and

6.36

5.4 5.4

4.5

3.8

3

4

5

6

7

1970-

75

1984-

85

1986-

91

1992-

96

1997-

00

2005-

06Source: FBS

Fig 12.1 : Trend in Total Fertility Rate,1970-2006

Population, Labour Force & Employment

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distribution; advocacy and information, education and communication (IEC); population education; capacity building (technical/non-technical); research; monitoring and evaluation and public-private sector cooperation.

The first and the foremost factor which can catapult any population program to reach its objectives quickly and decisively is if it succeeds in harnessing public support for the policies.

Therefore, public awareness programs form the basis of any progressive population welfare program. In case of Pakistan as well, the Population Welfare Program in keeping with modern times is employing various means of communication to further advance its policies and to raise awareness among the general public. The communication strategy employed towards this end is stated below:

Box-12.1: Time Use Survey

A novel exercise in the guise of Pakistan Time Use Survey has been recently jointly conducted by the United Nations Development Program (UNDP) and the Ministry of Finance (MoF), GoP. The primary focus of the Time Use Survey is to estimate what people do at different times of the day and week, in particular, how much time is spent on gainful employment, unpaid care work, leisure activities, learning and personal activities so as to ensure that Government spending addresses the needs of men and women equitably and attends to the needs of the poor. The Survey aims mainly at:

• Collecting detailed, nationally representative information about how men, women, girls and boys spend their time

• Analyzing information regarding the quantum and distribution of paid and unpaid work as a means to infer policy and program implications from the perceptive of gender equality

• Providing feedback as to what extent standard instruments such as the labour force survey are successfully capturing all forms of economic work

• The Pakistan time use survey utilized a diary-based approach, in which selected respondents were asked as to what activities they performed in each half-hour of the preceding day.

The Survey is currently in the final stages of completion and efforts are underway to make the Survey public by the end of the current fiscal year 2007-08.

Source: UNDP & MoF

Communication Strategy

The crux of this year’s communication strategy focuses on advocacy (especially in rural areas), with the help of local influential, religious and opinion leaders, policy makers and the media. This campaign is relying on the mass media for creating awareness with focus on increasing visibility of service delivery points. People are becoming aware of family planning choices through filed units. Press is playing its part by providing coverage through advertisements, editorials and special articles in order to create awareness in the community about family planning facilities on national occasions in various News Papers. Printed materials such as pamphlets, leaflets, brochures

and posters, forms, reproductive health handbooks for doctors are being distributed to the subordinate units for onward distribution. Colored posters of current population and contraceptive leaflets, family planning in Islam, Family Welfare Center addresses, satellite camps schedule and annual planner are also being produced. To help create awareness, audio-visual shows have been arranged in rural areas at all districts.

12.1.3 Service Delivery Infrastructure

The service delivery comprises program outlets and service units of Provincial Line Departments (PLDs), public corporate sector institutions, private sector undertakings and civil society initiatives.


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The planned program network consist of 2,739 Family Welfare Centres (FWCs), 176 Reproductive Health Services (RHSs) “A” centres and 292 Mobile Service Units (MSUs). Through these service delivery outlets Population Welfare Program offers a wide range of family planning services including motivation, counseling, full choice of contraceptives and contraceptive surgery. The responsibility of providing services at the grass root level is being envisaged to be handled by male workers especially with regard to male involvement in the population welfare program which will be increased to 6,498 by June 2008 (see Table 12.2).

Table-12.1: Selected Demographic Indicators Indicators Latest Available Total Fertility Rate (TFR) 2005-06

3.8

Crude Birth Rate (CBR) 2005-06

26.1

Crude Death Rate (CDR) 2005-06

7.1

Population Growth Rate 1.8 Infant Mortality Rate (IMR) (2005-06)

76.7

Maternal Mortality Rate (MMR) (2004-05)

350-400

Life Expectancy at Birth (2005-06)*

Male: 64 Years Female: 66 Years

Source: Federal Bureau of Statistics *Planning & Development Division The emphasis of the program is to reach the desirous couples for meeting their service needs. The MoPW is collaborating with Ministry of Health (MoH) and provincial Health Departments for functional integration of Health and Population Welfare Services. A forum of Inter-Ministerial meeting co-chaired by Federal Ministers of Health and Population Welfare is in place as a mark of Political Commitment for strengthening coordination between the two Ministries.

12.1.4 Social Marketing of Contraceptives

Population Welfare Program is supplemented by social marketing intervention providing a complete range of contraceptive at subsidized rates with focuses on low and middle income groups of population in the urban and semi-urban areas indicating a reasonable presence involved through

6,000 active private service providers and 110,0000 retailers, etc. The Social Marketing operations are supported through grant assistance provided by the donor community and is making 30 percent contribution to the National Program in terms of couple year protection (CYP). During 2007-08 social marketing intensified with programmatic focus and increased attention on interpersonal communication (IPC).

Table-12.2: Service Delivery Infrastructure Service Delivery Outlets Planed

2007-08 Achieved

as on 31-12-2007

1. Family welfare centres (FWC)

2849 2739

2. Reproductive Health “A” centres

223 176

3. Mobile service units 292 292 4. Male Mobilizers 6498 4071

Source: Ministry of Population Welfare Information and Advocacy

The overall goal for the communication mobilization and advocacy strategy is to ensure delivery of correct cultural and easy to understand massages about family planning and reproductive health in order to encourage informed decision-making about and adoption of positive family planning reproductive health behavior. In this regard the message in the media campaign was blended into educational and recreational programs, such as: drama series, comedy shows, melodies, panel discussions and interviews on TV, radio and FM, as well as seminars and workshops, meet the press sessions, and orientation programs for community, policy makers and youth. In addition ground activities like musical concerts, street theatres, and messages on direction boards have also been launched to have direct contact with the masses.

12.1.5 Directorate of Population Education

Directorate of Population Education has continued its activities in the scenario of its broader role calling a shift in its strategy to bring it inline with the broader MoPW objective of population stabilization under the new holistic approach to Population and Development. The focus of these activities was to sensitize the policy and decision


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makers of the National Building Departments as well as to initiate the public private partnership for the adoption of small family norms and to enhance the quality of life of the employees of their organizations. In this context, the following activities were carries out by the Directorate during the year 2007-08:

Presentations Skill Development The Directorate of Population Education as part of youth sensitization and orientation/education of other categories of the target audience under Population Education Component launched a series of workshops. In this regard, as planned 2 four days workshops on Presentations Skill Development for mid-level program managers were carried out. Clinical Training Component has played an important role in the Population Welfare Program since its inception; it is also recognized as a core ongoing activity. With the introduction of multi-sectoral approach massive training activities are designed and implemented to ensure that program personnel and those connected with it are equipped with the required knowledge and skills to perform their jobs effectively in the delivery of family planning and reproductive health services. Clinical activities include 24 months basic training of 315 Family Welfare Workers, 3-6 months advance training of 35 Field Technical Officers/Assistant Sister Tutors/Family Welfare Counselors, Pre-service training of 35 Family Welfare Assistants (3-months), refresher training of 550 paramedics (1-2 & 4 weeks) and training of 2,500 non- program personnel. Non-Clinical Training activities are conducted through the Population Welfare Training Institute (Lahore and Karachi). These institutes are capacity building machinery and provide in-service, pre-service and refresher training to update knowledge and understanding of population issues and objectives of the Population Welfare Programs and develop skills of the program personnel and service providers at district level. During 2007-08 training for 2,840 program personnel was arranged. Monitoring and Supervision of the implementation of Program activities in the field has been intensified through review sessions, inter-provincial review meetings, desk monitoring and field visits. During April-

December 2007, 23 districts - all four provinces, AJK and Northern Areas - were visited to observe Program implementation in the field.

12.1.6 National Trust for Population Welfare (NATPOW)

The Non-Governmental Organizations (NGOs) are partners in the efforts for community uplift and socio-economic development. Their advantages like, autonomy, flexibility, voluntary contributions and standing in the community are clearly recognized. Community based organizations also have better understanding and enjoy trust of community, which is critical when dealing with difficult and sensitive subjects. The trust (NATPOW) was designed to provide an effective framework to build effective partnership among GoP, NGOs, CBOs, donors and private sector organizations for implementation of national population and development program. Its role is to help NGOs and private sector in the fold of population welfare by activating existing institutions and by bringing into the fold new institutional support, strengthen and increase the contribution of NGOs and CBOs for population welfare and other social sector activities; promote institutional reforms through decentralized programs to serve as a forum for making grants to the beneficiaries; carry out assessment studies, etc. to the extent required for fulfilling the purpose of the Trust. Overall, some 264 NGOs with 479 outlets, operating throughout the country, have been registered with NATPOW till date (see Table -12.3).

The population profile in Pakistan reveals that in order to achieve sustainable development and to control overpopulation, empowerment of women, effective use of resources, efficient family planning and popularization of small family norm are imperative. Furthermore, slowdown in population growth rate, wider coverage of reproductive health services, education of women, and effective steps to eradicate poverty are prerequisites for sustainable development in Pakistan.

1.2 Labour Force and Employment

Growth in national income was once considered as the ultimate standard of development but now the


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issue of poverty has taken the center stage of development agenda across the globe. This concern is well documented in Millennium Development Goals (MDGs), one of which is to reduce poverty by half to 2015. The countries around the world have recognized that the reduction in the poverty has to be the central element of the development agenda. The

experience of the countries closer to achieving this goal shows that sustainable and high economic growth rate play the central role in this process. However, it is also evident that growth alone is not important rather the patterns and sources of growth along with how the benefits are distributed are equally important.

Table 12.3: Progress Report of NATPOW, FY07 & 08 2006-07 2007-08 (Mid-Year)

No Beneficiaries No Beneficiaries Human Resource Development (HRD) Training/ Workshops

Seminar/Conference 06 941 01 125 Training for Service Providers 9 34 02 55 Orientation Workshop for Staff 01 14 - - Mobile Medical Camps 14 6,509 09 3,123 Community Mobilization Workshops 14 558 03 124 Orientation Workshop for Service Providers 1 25 - - Technical Backstopping Visits 70 NGO - - Total 106 8,081 15 3,427

Source: NATPOW The Medium Term Development Framework (MTDF) 2005-10 is the first MTDF prepared in line with the Vision 2030. Laying stress on poverty reduction and the achievement of the MDGs

through sustainable economic growth, the Poverty Reduction Strategy Paper (PRSP) targets, policies and programs, and human developments targets of the MDGs.

Fig-12.2: Skill Development Pyramid

Source: Pakistan Employment Trends, 2007

Advance Skills

General & specific Skills(e,g., computer literacy)

Basic Skills(Analytical Skills)

Foundational Skills (Literacy, Numeracy, Citizenship)


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Generating decent employment and human development are well integrated in the overall economic development framework. Indeed, the Labour Market Indicators receiving increasing attention include: generation of productive and decent employment, improvement in working conditions, strengthening social safety nets, increasing vocational and technical competence of the workforce, and design and implementation of a labour market regulatory framework that ensures safer and remunerative working conditions including decent minimum wages. Fig-12.2 identifies four levels of competencies and suggests that foundational and basic skills are mandatory and should be available to all. They address social rights and are the foundation of a productive work force as they concern primary and secondary education. The more general and specific skills address training to meet occupational standards and are met through vocational and technical schools as well as training institutes and apprenticeships among others. The advanced technical and professional skills involve substantial investment and are often specific to occupations, but can be transferable to a range of jobs.

The labour market in the country is confronted with various challenges, including: unemployment, underemployment, poor working conditions, predominance of informal economy, low literacy, poor level of skills, and mis-match between the demand and supply of educated and trained manpower. Women and youth - comprising half of the population - are at a disadvantaged position as well; they are also vulnerable to the ups and downs of the economy.

Historically the issues of vocational and technical training did not receive adequate attention given its importance to generate decent employment. Attempt has been made recently to provide skills to unskilled workers according to market needs under the auspicious of NAVTEC, TAFTA etc. (details on these issues are discussed in later pages). Additional step taken in this direction is the recent establishment of a Policy Planning Cell (PPC) in the Ministry of Labour, Manpower and Overseas Pakistanis to prepare national policies in the areas of employment, overseas migration and human resource development as well as to launch a project

under the title of “Labour Market Information and Analysis (LMI&A)”. The PPC, has prepared the draft National Employment Policy (NEP) after due consultation with all the stakeholders. The PPC has also published two reports; the first report entitled “Pakistan Employment Trends” analyses the key labour market indicators and the second report focuses on the skill gap issues that exist in the country today and points towards additional reforms in the technical and vocational training system.

According to the Labor Force Survey (LFS) 2006-07, total labor force stood at 50.3 million out of which 47.7 million is employed (see Table 12.4). Of the total employed, 20 percent are females which points towards the serious issue of gender gap prevalent in the labour market. Although the unemployment rate is declining over the years, a careful look at the employment pattern does indicate the widening gap of decent work. As mentioned above, the youth and females are the most under-utilized albeit important segment of the labour market which points to the fact that effort should be made to mainstreaming the gender and youth through targeted programs and government interventions. The draft NEP laying great stress on gender and youth mainstreaming has developed targeted programs and interventions in this regard.

The draft NEP addresses the issue of unemployment keeping in mind the other critical aspects like under-employment, gender gap in the labour market, youth unemployment, etc. Recognizing the fact that education and skill development are the pre-requisites for improving productivity which is vital for sustaining higher economic growth, the draft NEP has indicated numerous skill and HRD gaps. The policy also lays stress on incorporating the concept of skill development in the formal middle and secondary school education system. According to LFS, 2006-07, the illiterate working age population is 50.17 million and out of this, 62.6 percent are females. It should be the endeavor of the government to improve the opportunities for educational attainment and skill development of the work so that they get decent employment.


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12.2.1 Labour Market Trends

According to LFS 2006-07 the estimated population of Pakistan is 158.17 million. The labor force of the country is 50.33 million which has been increasing over the years (see Table-13.4). Along with the increasing participation of the population in the labor market, the employed labour force has also exhibited rising trend. As far as the over all labour market is concerned, several developments may be pointed out over the last couple of years. A significant improvement is evident in terms of employment, unemployment, and labour force participation rate. A significant decline in the unemployment rate over the last decade is also noticeable in the midst of increasing labour force participation rates, which suggests strong absorptive capacity of the economy. The quality of employment nevertheless continues to raise concerns.

Table-12.4: Civilian Labour Force, Employed and Unemployed for Pakistan (in millions)

2001-02

2003-04

2005-06

2006-07

Labour Force 41.83 45.50 50.05 50.33 Employed 38.37 42.00 46.95 47.65 Unemployed 3.46 3.50 3.10 2.68

Source: Labour Force Survey, 2001-02, 2003-04, 2005-06, 2006-07

Although the labour market indicators in general have improved in recent years, much more needs to be done in terms of decent employment, human

resource development, gender gap, creation of opportunities for young people, improvement in the educational attainment of the labour force, etc. This will require the improved linkages between policy objectives and labour market monitoring and assessment. The NEP is indeed targeting the comprehensive Labor Market Information System (LMIS) with a focus on generating detailed and dis-aggregated employment and labor market related information as well as providing services of employment counseling and vocational guidance at the district level.

12.2.2 Labour Force Participation Rate (LFPR)

The labour force participation rate is an important variable which indicates the supply of labour in the economy and the composition of the country’s human resource. Labour force analyses also helps in policy formulation for employment, human resource development, determination of training needs, etc. In addition this indicator of labour force is helpful in assessing the labour market behavior for different segments of population, especially for youth. The working age (10 years & above) population is estimated to be 111.39 million. The labour force participation rate, though demonstrating an increasing trend in recent years, is nevertheless lower than the global or regional rates (see Table-12.5). The increasing trend in labour force participation witnessed in the recent years can be attributed to rising employment opportunities owing to robust growth and lowering of socio-cultural barriers for females to enter the job market.

Table- 12.5: Population, Labour Force and Labour Force Participation (LFP) Rates Year Population Labour Force LFP Rate

(million) (million) (percent) Total Working age * Total Increase Crude Refined

1996-97 126.90 84.65 36.30 -- 28.6 43.0 1997-98 130.58 88.52 38.20 1.90 29.3 43.3 1999-00 136.01 92.05 39.40 1.20 29.4 42.8 2001-02 145.80 99.60 42.39 2.99 29.6 43.3 2003-04 148.72 103.40 45.23 2.84 30.4 43.7 2005-06 155.37 108.79 50.05 4.82 32.2 46.0 2006-07 158.17 111.39 50.33 0.28 31.8 45.2

Source: Labour Force Surveys 2001-02, 2003-04, 2005-06 & 2006-07 * Population 10 years and above is considered as working age population


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Total provincial LFPR (both sex) has however, witnessed a decline in all the four provinces in the year 2006-07(see Table 12.6).

Table-12.6: Provincial Labour Force Participation Rates (%) 2005-06 2006-07 Punjab 48.9 48.5 Sindh 42.9 42.7 NWFP 39.7 36.3 Balochistan 45.2 43.6

Source: Labour Force Survey 2005-06 & 2006-07 The most pronounced reduction has been noted for NWFP (from 39.7% to 36.3%). Province-wise break up of refined participation rates suggest that against the national average of 45.2 percent, the

participation rate in Punjab is 48.5 percent followed by Sindh (42.7%), Balochistan (43.6%) and NWFP (36.3%).

12.2.3 Employment Trends

During the period 1999-2000 to 2005-06, 11.33 million work opportunities were created, due mainly to the strong economic growth. However, in the subsequent year i.e. 2006-07, only 0.70 million employment opportunities, of which the bulk was created in the rural areas (0.62 million) compared to only 0.08 million in the urban areas (see Table 12.7). Thus indicating a weaker labor market situation, especially in the urban areas of Pakistan.

Table-12.7: Employment Trend and Changes 1996-97 and 2006-07 (million) Year Pakistan Rural Urban

Employed Changes Employed Changes Employed Changes 1996-97 34.13 - 23.87 - 10.78 - 1999-00 36.32 2.19 25.55 1.68 10.77 -0.01 2001-02 38.88 2.56 26.66 1.11 12.22 1.45 2003-04 42.00 3.12 28.81 2.15 13.19 0.97 2005-06 46.95 4.95 32.49 3.68 14.46 1.27 2006-07 47.65 0.70 33.11 0.62 14.54 0.08

Source: Labour Force Surveys 2001-02, 2003-04, 2005-06 & 2006-07. 12.2.4 Employment by Sector

Agriculture employs 43.61 percent work force in Pakistan followed by trade (14.43%), services sector (14.41%) and manufacturing (13.54%). In other words, over 86 percent of work force is

employed in these four sectors (see Table-12.8). As against 2005-06 the shares of agriculture and services in employed workforce marginally increased in 2006-07 while those in manufacturing and trade registered a marginal decline.

Table-12.8: Employed Labour Force by Sectors ( % )Sector 2005-06 2006-07

Total Rural Urban Total Rural Urban Agriculture 43.37 59.87 6.32 43.61 59.90 6.52 Manufacturing 13.84 9.00 24.71 13.54 9.22 23.38 Construction 6.13 6.23 5.91 6.56 6.54 6.61 Trade 14.67 9.30 26.71 14.43 8.83 27.16 Transport 5.74 4.64 8.22 5.39 4.25 7.99 Services 14.35 10.06 24.00 14.41 10.16 24.10 Others 1.89 0.89 4.13 2.06 1.10 4.24 Total 100.0 100.0 100.0 100.00 100.00 100.00

Source: Labour Force Survey 2005-06 & 2006-07

There has occurred a shift in employment in major sectors of the economy; however, agriculture still

remains the dominant source of employment in Pakistan. In 1999-00, the share of agriculture in


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employment was 48.42 percent, while in 2006-07 this has reduced to 43.61 percent. Targeting of labor intensive livestock and dairy sectors can be an important strategy for employment augmentation in rural areas. These are complemented by public sector funded small area development schemes. These strategies have successfully expanded rural employment, particularly at the local level. Agriculture is followed by wholesale and retail trade, community and social services and manufacturing sector. These sectors employ 14.43 percent, 14.41 percent and 13.54 percent workforce, respectively (see Table-12.9). An increase in the share of manufacturing sector (2.1%), over the last seven years, is an indication that employment opportunities are being created in both rural and urban regions of the country. Trade (0.9%), construction (0.8%) and transport (0.4%) are supplementing employment generation as well. The policy of deregulation, privatization and liberalization helped in increasing the participation of private sector in the economy. As a result, significant number of work opportunities is being generated in urban areas. The capital intensity of the industrial sector, however, limits its employment generating capacity.

12.2.5 Employment Status

The composition of employment by status undergoes changes with the industrialization process. However, these shifts in the employment status are not as sharp and clear as in case of sectoral employment, especially in countries with a large informal economy, both in industrial and services sector.

Currently, the employees constitute 17.83 million or 37.42 percent of the total employed labor force, followed by self employed with 34.52 percent (see Table-12.10). The unpaid family helpers form quite a significant portion i.e. 12.98 million in 2006-07. This segment of employed work force has registered an increase of 5.84 percentage points of employed work force since 1999-00. However, the largest shift in employment status has taken place for unpaid family workers (12.98 million Vs 7.77 million) (see Fig-12.4, a & b).

Table-12.9: Employment Shifts by Sector and Area (%)

1999-00 2006-07 Change

from 1999-00 to

2006-07 Agriculture 48.4 43.6 -4.8 Urban 5.68 6.52 0.83 Rural 65.85 59.90 -5.95 Mining 0.1 0.1 0.0 Urban 0.07 0.04 -0.02 Rural 0.07 0.14 0.07 Manufacturing 11.5 13.5 2.1 Urban 23.78 23.38 -0.40 Rural 6.46 9.22 2.76 Electricity 0.7 0.8 0.1 Urban 1.32 1.24 -0.08 Rural 0.45 0.54 0.09 Construction 5.8 6.6 0.8 Urban 6.31 6.61 0.30 Rural 5.57 6.54 0.98 Trade 13.5 14.4 0.9 Urban 27.04 27.16 0.12 Rural 7.98 8.83 0.85 Transport 5.0 5.4 0.4 Urban 7.92 7.99 0.08 Rural 3.85 4.25 0.40 Finance 0.8 1.1 0.3 Urban 2.34 2.86 0.51 Rural 0.19 0.39 0.19 Services 14.2 14.4 0.2 Urban 25.53 24.10 -1.42 Rural 9.57 10.16 0.58 Others 0.0 0.1 0.1 Urban 0.01 0.10 0.09 Rural 0.00 0.03 0.03 Total 100.00 100.00 Urban 100.00 100.00 Rural 100.00 100.00

Source: Labour force Survey, 1999-00 &2006-07 Women are less likely to benefit from new opportunities for wage employment. In each of the employment status category except for unpaid family helpers, the female share is quite low as compared to males. Their share in unpaid family helpers is rising even in absolute terms (see Fig-12.3). In 1999-00, the female share in the unpaid family helpers was 32.79 percent while in 2006-07 it has risen to 45.46 percent. No significant change has been observed in other categories. This trend is not quite the same for males whose majority are employers (40.6%) followed by self-employed (39.8%) and then unpaid family helpers (18.6%).


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Only about 1.0 percent of all males represent employees. A higher percentage of male workers are engaged in the categories of self employed and employees, while females are dominant in the unpaid family helpers’ category. An increase in the employees and unpaid family helpers category has been noted for males, while decrease is noted in self-employment category. For females, unpaid family helpers (61.9%) forms the bulk followed by

employers (24.6%), self employed (13.4%) and 0.1 percent of employees. The extremely meager figure of 0.1 percent for female employees shows the still prevalent conservative/traditional norms of the society where women are still discouraged to actively join the work force rather they are heavily involved as family helpers especially in the agri-based rural families.

Table-12.10: Employment Status by Region (Millions)

1999-00 2006-07 Total Urban Rural Total Urban Rural

Employers 0.28 0.24 0.04 0.39 0.27 0.12 Self employed 15.34 3.56 11.77 16.45 4.59 11.86 Unpaid family Helpers 7.77 1.05 6.73 12.98 1.62 11.37 Employees 12.92 5.67 7.25 17.83 8.06 9.77 Total 36.32 10.52 25.80 47.65 14.54 33.11

Source: Labour Force Survey, 1999-00 &2006-07

The increase in unpaid family helper category for both men and women is an indication of the expansion of economic activities within the household, especially in rural areas. The boom in the livestock and dairy sectors has created demand for additional workers in the family that led to the increase in the unpaid family helpers’ category. The targeting of the livestock and dairy as leading employment augmenting sectors in rural areas has been quite rewarding.

12.2.6 Employment by Formal and Informal Sectors

The informal sector retains an important position in employment creation, production and income generation. Presence of a large informal sector is in a way a challenge to policy makers to consider the improved working conditions, legal and social protection of the people employed in the informal economy, implementation of the appropriate regulatory framework, developing training and skills, etc.

37.434.5

27.2

0.8

40.6 39.8

18.6

1

24.6

13.4

61.9

0.10

10

20

30

40

50

60

Employers Self Employed Unpaid Family Helpers Employees

Fig 12.3: Gender-Wise Employment Status (%)

Total

Male

Female

Source: LFS, 2006-07


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Source: LFS 1999-00 & 2006-07

As shown in Table-12.11 and fig 12.5, the share of agriculture in total employed workforce stood at 48.4 percent in 1999-00 but declined to 43.6 percent in 2006-07. The share of non-agricultural, accordingly increased by 5.8 percentage points to

56.4 percent in 2006-07. Within non-agriculture, two-third belonged to informal sector in 1999-00 which increased to almost 72.0 percent in 2006-07. The share of formal sector in non-agriculture registered a decline in the same period.

Table-12.11: Employment by Formal and Informal Sector (%)

Sectors 1999-00 2006-07

Total Urban Rural Total Urban Rural Agriculture 48.4 5.7 65.9 43.6 6.5 59.9 Non-Agriculture 51.6 94.3 34.1 56.4 93.5 40.1 Formal 17.7 34.1 10.9 15.8 27.4 10.8 Informal 33.9 60.2 23.2 40.5 66.1 29.3 100.0 100.0 100.0 100 100 100

Source: Labour Force Survey, 1999-00& 2006-07 12.2.7 Unemployment

Unemployment is defined as all persons ten years of age and above who during the reference period

were: a) without work i.e., were neither in paid or self employment not employed as unpaid family helpers, b) currently available for work i.e., were

Fig 12.4 (b) Distribution of Employed by EmploymentStatus, 2006-07 (Million)

Employers, 0.39 Self

Employed, 16.45

Unpaid Family

Helpers, 12.98

Employees, 17.83

Fig 12.4 (a) Distribution of Employed by EmploymentStatus, 1999-00 (Million)

Employers, 0.28 Self

Employed, 15.34

Unpaid Family

Helpers, 7.77

Employees, 12.92

Fig-12.5: Employment by Formal and Informal Sector (%)

43.61

15.8540.54

Agriculture

Formal

Informal

Source: Labour Force Survey, 2006-07


207

available for paid employment or self-employment, and c) seeking work i.e., had taken specific steps in a specified period to seek paid or self-employment. According to this definition, which is consistent with International Labour Organization’s (ILO) definition of employment/unemployment, about 2.68 million people were unemployed during the fiscal year 2006-07 as compared to 3.10 million in 2005-06.

It is important to highlight that the rising trend of unemployment has not only been arrested but it has also started declining since 2001-02. The unemployment rate in rural areas is lower than that of the urban areas. The urban unemployment rate has decreased by 3.14 percentage points during 2002-07 (Table-12.12).

Table-12.12: Unemployed Labour Force by Areas

Years Unemployed Labour Force Unemployment Rate

(In millions) ( % ) Total Rural Urban Total Rural Urban

1996-97 2.26 1.33 0.94 5.93 5.02 7.98 1999-00 3.08 1.92 1.15 7.82 6.94 9.92 2001-02 3.46 2.15 1.31 8.27 7.55 9.80 2003-04 3.50 2.08 1.41 7.69 6.74 9.70 2005-06 3.10 1.84 1.26 6.20 5.35 8.04 2006-07 2.68 1.64 1.04 5.32 4.72 6.66

Source: Labour Force Surveys 2001-02, 2003-04, 2005-06 & 2006-07.

Female unemployment rate declined in rural as well as urban areas while for males a modest decline was observed in both rural as well as urban areas. The decline in female unemployment in both rural and urban areas can be attributed to two reasons. Females were able to get job opportunities or they withdrew from the labour force mainly

because of "discourage phenomenon". It thus appears that female unemployment reduced primarily due to expansion in job opportunities for females. Micro-finance facilities focusing on women particularly in rural areas may be the major contributing factor in female unemployment rate.

7.8 6.1

17.3

8.3 6.7

16.5

7.7 6.6

12.7

6.2 5.4

9.3

5.3 4.5

8.38

0 2 4 6 8

1012141618

1999-00 2001-02 2003-04 2005-06 2006-07

Fig 12.6 Unemployment Rate by Gender (%)

TotalMaleFemale

Source: Labour Force Surveys 2001-02, 2003-04, 2005-06 & 2006-07.


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12.2.8 Age Specific Unemployment Rate

The age specific unemployment rate shows a typical U shaped pattern (see fig-12.7); higher rate for younger and older groups and lower for the prime age persons (those who fall between 25-49 years) (see Table-12.13). The interesting observation, however, is a visible fall in the unemployment rate in all age-groups in 2006-07 as compared to 2005-06 except for 10-14 and 60+ age bracket. The decline in unemployment in the

younger age groups is the result of aggressive education campaign of the present government. Increasing enrolment in schools is reducing not only the incidence of child labor but their unemployment as well. The goal of universal primary education towards with achieving other Millennium Development Goals (MDGs) is expected to contribute significantly in the withdrawal of working children from the labor market, thus reducing unemployment.

The area of concern, however, remains the incidence of unemployment in the older age groups, where the rates are significantly high. Though, a number of facilities and social services are being extended for senior citizens, absence of an adequate institutional mechanism of social protection is greatly felt.

The age specific unemployment rate shows that unemployment rate starts declining from the age group of 15-19 years till the age group of 55-59 and again start rising from the age group of 60+. The highest unemployment rate is observed in the age group of 10-14 i.e. 9.10 percent mainly due to lack of employment opportunities available to young children.

Table-12.13: Age-Specific Unemployment Rates (%)

Age Group 2005-06 2006-07 Total Total

Ten Years & Above 6.20 5.32 10-14 7.89 9.10 15-19 9.98 8.38 20-24 7.37 6.67 25-29 4.88 4.07 30-34 2.85 1.97 35-39 2.37 1.50 40-44 2.68 1.76 45-49 2.87 2.60 50-54 6.32 4.78 55-59 8.35 7.39 60 yrs & above 11.62 13.71 Source: Labour Force Survey, 2005-06 and 2006-07

0369

121518

10-14

15-19

20-24

25-29

30-34

35-39

40-44

45-49

50-54

55-59

60 yrs & above

Fig-12.7: Age-Specific Unemployment Rate (%)

2005-062006-07


209

12.2.9 Youth Labour Force

Youth are a vital segment of the population especially in developing countries. Despite decreasing fertility rates, almost 89 percent of world’s youth were living in developing countries in 2005. This segment of the labour force is extremely important because it guarantees higher returns on investment in education and training by remaining economically active for a long period of time. On the flip side of the coin, youth also constitute the most vulnerable segment of the society due to limited labour market openings for them and lack of experience.

In recent years, youth unemployment has become a global phenomenon and creating decent employment and sustainable jobs for this particular segment has, therefore, become a challenge worldwide. This is the very reason that youth employment has become a major focus of the Millennium Development Goals (MDGs) which has been reaffirmed by the Economic and Social Council (ECOSOC) in its 2006 session, wherein, it was committed that strategies will be developed and implemented to find full and productive employment and decent work for the youth.

Fig-12.8: Province Wise Youth Labour Force (%)

NWFP, 14%

Balochistan, 4%

Sindh, 24%Punjab, 58%

Source: LFS, 2006-07

In Pakistan, youth aged 15-24 are a growing segment of the labour market. According to LFS 2006-07, the share of youth in working age population is 28.69 percent and in the labour force it is 28.09 percent with 44.2 percent labour force participation rate. The youth labour force participation rate has been on the rise over the years. However, labour force participation rates for young women continues to be lower than that of young men, reflecting cultural barriers and the lack of opportunities for women to combine work and family duties. The gap between the participation of young men and women has decreased from 59.1 to 50.7 percent since 1999-00, but remains far above the regional average gap in South Asia of 34.6

percent in 2006. 1 The youth labour force participation declined by 1.7 percentage points in 2006-07 as compared with 2005-06. Of this, a 0.2 percentage point was observed in young women and 0.3 percentage point in young men. At the provincial level, male participation declined in all the four provinces, however, female participation increased in Balochistan and Sindh (see Table 12.14 & Fig-12.8). On the other hand it has declined more for the rural areas of the country as against the urban parts of Pakistan.

1 Global Employment Trends (Geneva, ILO, January 2008)


210

Table-12.14: Youth Labour Force Participation Rate* (%)

Pakistan 1999-2000 2001-2002 2003-2004 2005-2006 2006-2007 Change 1999-2000 to 2006-2007 (%)

National Both sexes 40.5 43.4 43.6 45.9 44.2 3.7 Male 69.3 70.2 70.5 72.2 69.2 -0.2 Female 10.2 14.8 16.1 18.6 18.4 8.2 Urban Both sexes 36.6 39.2 37.6 39.2 37.6 1.1 Male 60.3 63.3 62.5 64.3 62.8 2.5 Female 10.0 11.1 10.3 11.8 10.0 0.1 Rural Both sexes 42.8 45.9 47.3 49.9 48.2 5.5 Male 74.7 74.5 75.6 77.1 73.2 -1.5 Female 10.3 16.8 19.4 22.6 23.3 12.9 Provincial Punjab 43.9 47.0 47.1 49.1 47.4 3.6 Male 74.4 73.0 72.8 73.1 70.2 -4.2 Female 11.4 20.1 21.6 25.0 25.0 13.6 Sindh 33.8 39.0 39.7 42.8 42.3 8.5 Male 58.2 66.6 68.1 72.0 71.0 12.8 Female 6.8 6.5 7.8 8.1 8.5 1.8 NWFP 36.0 36.1 37.3 38.6 34.6 -1.5 Male 63.5 64.4 66.6 67.9 61.8 -1.7 Female 10.5 7.0 9.2 12.1 8.9 -1.6 Balochistan 37.0 41.7 39.6 47.6 44.9 7.8 Male 66.1 70.3 65.9 74.3 68.0 1.9 Female 7.2 7.3 9.6 11.1 13.9 6.7 *Refined Source: Employment Trend Report, 2007

12.2.10 Employment Promotion Measures:

The Government has taken several measures in order to facilitate and generate employment, directly and indirectly as well as through targeted programs and skill development of labour force in order to enable them to capture decent employment.

Sustaining Growth Momentum--- Higher economic growth on a sustained basis is sine quo non for employment generation. Pakistan has maintained an average growth of 7.0 percent per annum over the last five years to 2006-07 and succeeded in reducing unemployment as discussed earlier. Going forward, a growth of 6-8 percent must be ensured to continue to generate employment opportunities.

Small and Medium Enterprises --- A large number of SMEs are also being financed under “Hunarmand Pakistan Scheme” for promoting self employment. Up to 31st January, 2008 the SME Bank has disbursed loans amounting to Rs.5.16 billion and generated employment for 47,213 persons. The number of SMEs financed during the same period is 6,745 establishments.

Khushhali Bank --- In order to open new avenues of self-employment, the Government is providing micro finance to the people at grass root level through Khushhali Bank. Up to 31st July, 2007 the bank has disbursed loans amounting to Rs. 11.71 billion and generated employment for 1118,502 persons.


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President’s Rozgar Scheme --- The solution of Pakistan’s major socio-economic problems primarily lies in the development and growth of micro businesses. These will not only provide employment opportunities to the ever-growing population but will also become the catalyst for breaking the vicious circle of poverty. In this regard, National Bank of Pakistan has developed a full range of products under the President’s Rozgar Scheme with a brand name of “NBP KAROBAR”. Under this scheme an average loan size of Rs.100,000 is given for a maximum period of five years with a grace period of three months.

National Internship Program ----The National Internship Program (NIP) of one year duration has been launched by the Federal Government for fresh post graduates and graduates who have completed 16 years of education in the year 2005 and 2006. The internees are paid monthly stipend of Rs. 10,000 during the internship period. The main objectives of this Program is to provide financial relief to young degree holders, to improve the public sector performance by providing young, fresh and motivated human resource as well as to enhance the capacity and employability of fresh graduates for their better professional future. During the first phase of the program 20, 000 internees have been inducted in various government departments so far.

Labour Market Information System----A Project “Labour Market Information System and Analysis” has been launched by the Labour and Manpower Division. Its objective is to develop and consolidate the collection and usage of Labour Market Information (LMI) in Pakistan. The system will yield regular statistics and information about employment, under-employment and unemployment and make analysis based on key indicators of the labour market. The policy linkages will be made to cater to the problems of unemployment in the country.

Policy Planning Cell ---Policy Planning Cell has been established in the Labour and Manpower Division. Its tasks include: i) development of national policies in the areas of: employment, overseas migration, and human resource development, ii) rationalization and consolidation

and classification of labour laws as well as fulfillment of international obligations relating to labour issues, iii) development of best practices in the areas of: management of pension/workers’ welfare funds, simplification of procedure in collection of taxes/fees, and iv) formulation of guidelines for development of welfare schemes for workers including development of feedback mechanism.

Technical and Vocational Training --- National Vocational and Technical Education Commission (NAVTEC) has been established at the Federal level with a view to overcoming the problems of lack of standardization, skill gaps, non-availability of proper curricula, poor quality of instructional staff, inadequate accreditation/certification and poor infrastructure. The Commission will encourage private sector to enhance technical education and vocational training capacity in order to bring harmony and develop linkage between technical education and vocational training. Being a regulatory body, the Commission will be responsible for long term planning in this particular field. It will also be responsible for setting standards for formulating the syllabus, accreditation, certification, trade testing, etc. During the year 2007, 23844 trainees were trained under NAVTEC and presently 42923 are under training. The target for the year 2008 has been set at 200,000 trainees.

Skill Development Councils (SDC) --- In order to develop skilled labour force on modern lines and effectively integrate the private sector in design and implementation, the Labour and Manpower Division supported the establishment of five Skill Development Councils (SDCs), one each at Islamabad, Karachi, Lahore, Peshawar and Quetta. The SDCs assess the training needs of their geographical areas, prioritize them on the basis of market demand and facilitate training of workers through training providers in the public and private sectors. These Councils – led by the representatives of the industry - have met the diversified training needs of the industrial and commercial sectors. So far 46,674 workers have been trained.


212

Overseas Employment ---- The Ministry of Labour, Manpower & Overseas Pakistanis is making efforts to boost overseas employment. In this regard, four MoUs with Kuwait, Malaysia, Korea and UAE have been signed while with several other countries are under process. The number of persons going overseas for employment in 2007 was 287,033 persons. In the first quarter of 2008, over 100,000 workers have been sent for overseas employment. The increase in overseas migration is the result of aggressive marketing by the Government for the export of manpower. The under preparation National Migration Policy is expected to provide guidelines for safer and greater migration of Pakistani workforce.

IT Sector --- Information Technology has enormous potential to create jobs for the educated unemployed in the country. The development of IT and Telecom sector has created enormous

employment opportunities, directly or indirectly, for the educated in a wide range of areas like call centers, telecom engineering, telecom sales, customer services, finance, accounting, etc. This is one of the fastest growing sectors of the economy. An allocation of Rs.3.30 billion was made for this sector for the year 2007-08. This would further accelerate its activities in the next couple of years, creating more business and employment opportunities in the country.

As a result of implementation of the above programs and projects, a large number of work opportunities would be created which would help in reducing unemployment in the country, specially the un-employment of educated and trained youth.

TABLE 12.12

(Percentage)Major Industry PAKISTAN BALUCHISTAN NWFP PUNJAB SINDDivision Total Rural Urban Total Rural Urban Total Rural Urban Total Rural Urban Total Rural Urban

Total 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.001) Agriculture Forestry,

Hunting and Fishing 43.61 59.90 6.52 54.41 64.66 11.70 38.86 45.29 5.59 45.28 59.91 7.52 39.39 68.67 4.662) Mining and Quarrying 0.11 0.14 0.04 0.95 1.02 0.66 0.17 0.19 0.07 0.05 0.06 0.03 0.07 0.13 0.013) Manufacturing 13.54 9.22 23.38 2.13 1.16 3.19 7.51 6.46 12.95 15.31 11.75 24.51 13.86 4.77 24.654) Electricity, Gas

and Water 0.75 0.54 1.24 0.67 0.46 1.57 1.27 1.25 1.34 0.59 0.41 1.05 0.96 0.50 1.505) Construction 6.56 6.54 6.61 6.43 6.13 7.67 11.03 11.18 10.27 6.23 6.33 5.98 5.45 4.19 6.936) Wholesale, Retail Trade,

Restaurant and Hotels 14.42 8.83 27.16 14.57 11.27 28.29 14.77 12.49 26.58 13.44 8.17 27.05 16.76 7.86 27.337) Transport, Storage

and Communication 5.39 4.25 7.99 5.63 4.82 9.00 6.87 6.32 9.76 4.87 3.88 7.44 6.01 3.92 8.508) Financing,Insurance,

Real Estate andBusiness Services 1.14 0.39 2.86 0.60 0.31 1.80 1.07 0.73 2.82 0.95 0.35 2.51 1.77 0.31 3.50

9) Community, Social andPersonal Services 14.41 10.16 24.10 14.62 10.18 33.10 18.37 16.00 30.60 13.24 9.12 23.87 15.61 9.63 22.71

10) Activities NotAdequately Defined 0.05 0.03 0.10 - - 0.02 0.07 0.08 0.02 0.04 0.03 0.04 0.10 0.01 0.20

.. not available Source : Labour Force Survey, 2006-2007, Federal Bureau of Statistics* Provisionalc

PERCENTAGE DISTRIBUTION OF EMPLOYED PERSONS OF 10 YEARS AGE AND ABOVE BY MAJOR INDUSTRY 2006-2007

213

Chapter 13

POVERTY Poverty and Income Distribution

Introduction

With a dramatic surge in food prices during the current fiscal year 2007-08, it will be naive for policy-makers and economic managers to ignore or downplay the likely impact of this on Pakistan’s poverty dynamics. According to estimates, a 20 percent increase in food prices would add 100 million people below the absolute poverty line of one dollar a day around the world. With South Asia being home to 30 percent of the world’s poor, the economic managers of the country have to face the challenge of protecting the poor from contagion of the recent spike in the food prices around the world. Poverty alleviation gains made from 2001 to 2006 through sustained higher economic growth and tremendous rise in development expenditure have to be protected.

In the short-run with rising food prices internationally, the policy options remained limited but were fully exploited in the form of a) administrative measures to control and discourage hoarding within the country and smuggling of food grains across the border, b) raising the support price of wheat to Rs.625 per 40 Kg bag, c) allowing import of wheat and other food stuff through public and private channels and d) increasing the supply and access to subsidized food through Utility Stores (urban areas) and food support programs (rural areas).

The double-digit food inflation of more than 15 percent during July-April 2007-08 is likely to be a major contributor to eroding the gains of poverty reduction. Whether the incidence of high inflation and the performance of key macro indicators during the current fiscal year will have any bearing (and to what extent) on the poverty profile in the country in 2007-08 will only be known once the

results of latest round of Pakistan Social and Living Standard Measurement (PSLM) Survey data are available in the last quarter of 2008-09. In case of a negative impact, combined with medium-term persistence and lagged effects of global food and energy price shock, the MTDF target of poverty headcount of 21 percent for 2009-10, believed to be within reach only a year ago, can only be realized with focused and effective interventions, including enhanced allocations for poverty reduction.

In Pakistan, as in few other developing countries, household surveys are conducted at irregular intervals, depending on the availability and approval of funding for statistical agencies. From a poverty assessment angle, there are merits and demerits in following a consistent policy on periodicity of surveys. At times, consecutive surveys and estimates specifically in case of poverty headcount are unlikely to reveal much, with the data showing minor variations and numbers which may not be very different statistically. Still they serve a useful purpose of monitoring and assessing the sensitivity or robustness of estimates to changing economic conditions and over time a long time series helps to build and reveal a more ‘structural’ relationship between poverty and other dimensions of the economy.

Till the first half of 2007-08, the latest estimates available to gauge poverty situation in the country related to the fiscal year 2004-05. Being an exceptionally good year, both in terms of agriculture and manufacturing growth and their contributions to GDP, these estimates indicated an improvement in poverty headcount to 23.9 percent from the previous estimates of 34.5 percent in 2000-01, the latter being the second year of persistent drought in the country. Only recently the


214

estimates calculated from the Household Survey (known as PSLM 2005-06), conducted by the Federal Bureau of Statistics (FBS) in the year 2005-06, have been finalized. They serve as useful guide and benchmark to poverty monitoring. The estimates of poverty from the Household Survey for the period 2005-06 would depict the socio-economic conditions that prevailed during the fiscal year 2005-06. These estimates will have little semblance to the current ground realities which have been impacted by the surge in food and fuel prices, poor agricultural performance and slower economic growth.

The survey on household income provides quality information and closely resembles PIHS of 2000-01 rather than PSLM 2004-05. Thus it is much more amenable to comparison of income inequalities. The information in other modules (consumption, demographics etc) is almost identical to the pattern of earlier surveys. The sample size is about the same as in the last survey, i.e., around 15,000 households covering rural and urban areas of all provinces and based on scientific sampling methodology followed by FBS. The methodology of producing poverty estimates is identical to the methodology adopted in producing previous estimates. The salient features are i) updating the poverty line based on 2350 calories per adult equivalent per day with the consumer price inflation during 2004-05 and 2005-06, ii) constructing spatial price index for all food and energy items (around 89) and adjusting household

expenditures to provide consistent consumption welfare measure across all 1100 primary sampling units in the country and during the year of the survey, iii) following a cleaning protocol consistent with the one adopted for data set of 2004-05 and iv) adopting adult equivalent measures for consumption to adjust for number of children.

Consumption Profiles: 2004-05 and 2005-06

Table-13.1 compares the mean and medium of real monthly consumption expenditure per adult equivalent for the three periods. The last column gives the growth rate in mean consumption expenditure during 2004-05 and 2005-06. At 2001 prices, the average real consumption of the population increased by 3.07 percent, with lowest 20 and top 20 percent quintiles consumption growing at nearly two and half times more than the rest of the 60 percent of the population. Comparing the inter-survey period growth rates, the consumption expenditure of bottom 20 percent increased by 9.25 percent in a four year period during 2000-01 and 2004-05 giving an average annual rate of 2.3 percent, its growth was twice the rate during 2004-05 and 2005-06. The top and bottom 20 percent exhibit greater divergence in consumption expenditures as the mean and median are different for both groups. Had the consumption demand growth of the richest 20 percent been made more in line with the middle income quintiles (3 & 4), the price pressures for essential commodities would have been relatively alleviated.

Comparing the share of major food and non-food items in total expenditure across the three points in time provides another perspective on the stability of consumption behavior and reliability of the data. Table-13.2 gives the percentage expenditure share of major items in the monthly per adult equivalent

expenditure. Notable increase in shares between the two periods is observed in fuel and lighting, transport and medical care. Food records a decline of a full percentage point between 2004-05 and 2005-06, while the share of education also continues to maintain its downward slide. Literacy

QuintileMean Median Mean Median Mean Median

Poorest 20% 508 524 555 557 580 601 4.5Second 690 690 775 775 790 792 1.94Third 845 843 961 959 978 975 1.77Fourth 1070 1060 1238 1227 1255 1237 1.37Richest 20% 1908 1582 2327 1912 2431 1938 4.47All 1004 843 1171 960 1207 975 3.07

Table-13.1: Consumption expenditure b/w PIHS 2000-01, PSLM 2004-05 & PSLM 2005-06(At the prices of 2001)

Growth (Mean exp.)

PIHS 2000-01 PSLM 2004-05 PSLM 2005-06

Poverty

215

In the case of education, this may reflect substitution by households of own expenditure with that provided by the government via increase

and better targeting of expenditures on education at the provincial level.

Table-13.3 compares the growth rate in per adult equivalent monthly consumption expenditure on few commodity groups of bottom 20 percent with the top 20 percent of the population for the years 2004-05 and 2005-06. Expenditure on health, education, house rent and personal transport for the richest 20 percent grew in double-digits during the one year interval. The poorest experienced a

double-digit increase in personal transport and rent. The phenomenal increase of 60 percent in the former category during the two consecutive years is due to greater ownership of personal means of transport by the poor, or increase in fares of public transport, and/or increase in distance traveled by the poor on account of jobs.

National Poverty Status: 2004-05 and 2005-06 Survey Evidence

Poverty estimates are highly sensitive to a variety of factors, like how a poverty line is estimated and

updated; which welfare measure is adopted, household expenditure or income; how the scale of

PIHS PSLM PSLM2000-01 2004-05 2005-06

Food 49.5 49.1 48.1Fuel and lighting 8.1 8.0 8.8Personal care articles/services, laundry cleaning, paper articles 3.9 3.8 3.9Personal transport and traveling expenses (not commercial) 3.7 4.9 5.2Other misc. household exp. on goods and services(e-mail, internet etc) 3.9 5.2 4.4Clothing, clothing material/services 5.7 5.0 5.0Medical care 4.5 4.0 4.5Education 3.5 3.0 2.6House rent 12.0 11.9 12.2Other remaining expenditures 5.1 5.1 5.3Total 100 100 100

Table-13.2: Percentage Share of Per Adult Equivalent Monthly Consumption Expenditure (By Commodity Group)

Commodity Group

Commodity Group2000-01 2004-05 2005-06 Growth 2000-01 2004-05 2005-06 Growth

Food 288.5 322.0 316.6 -1.7 799.8 951.8 866.8 -8.9Fuel and lighting 47.3 50.0 54.1 8.2 140.6 169.9 184.7 8.7Personal care articles/services, laundry cleaning, paper articles

22.6 22.3 23.0 3.1 66.9 82.8 80.5 -2.8

Personal transport and traveling expenses (not commercial)

11.0 16.6 26.9 62.1 92.1 153.4 184.9 20.5

Other misc. household exp. on goods and services(e-mail, internet etc)

14.3 16.4 19.0 15.9 101.0 165.3 180.8 9.4

Clothing, clothing material/services 33.1 32.4 32.6 0.6 93.5 101.4 97.7 -3.6Medical care 19.3 22.1 22.5 1.8 93.4 87.7 116.2 32.5Education 9.0 7.8 7.7 -1.3 96.5 108.0 147.6 36.7House rent 39.3 43.0 48.7 13.3 313.2 365.7 493.1 34.8

Table-13.3: Comparison of Per Adult Equivalent Monthly Consumption Expenditure between PIHS 2000-01, HIES 2004-05 and PSLM 2005-06 at 2001 Prices

(By Commodity Group And Quintile)

Richest 20%Poorest 20%


216

1 A technical exercise carried out by the World Bank supports the accuracy of CPRID/Planning Commission poverty numbers for PIHS 2000-01, PSLM 2004-05, and PSLM 2005-06 using the official methodology and data cleaning protocol. The World Bank also carried out various sensitivity analyses to ensure the reliability of the estimates, and found that the poverty estimate at the national level declined slightly between 2004-05 and 2005-06, but the reduction was not statistically significant. Furthermore, the PSLM 2005-06 data including the Consumption Module are available with the Federal Bureau of Statistics (FBS) for researchers or any body who has interest in poverty estimates.

household is controlled for, per capita or per adult equivalent; and how spatial price differences are controlled, etc. Each methodology or choice has advantages and limitations. Also, poverty estimates and the trend vary substantially depending on what methodology is selected. This very nature of poverty estimation suggests that the validation exercise needs to be designed carefully. For example, it is not constructive to simply point out the difference between the CRPRID/ Planning Commission’s poverty estimates and those based on a conceptually different methodology.

Table-13.4 gives a comparative snapshot of poverty status during 2004-05 and 2005-06. The latest estimate of inflation-adjusted poverty Iine is

Rs.944.47 per adult equivalent per month, up from Rs.878.64 in 2004-05. Headcount ratio, i.e., percentage of population below the poverty line has fallen marginally from 23.94 percent in 2004-05 to 22.32 percent in 2005-06, an improvement of 1.62 percentage points.1 Poverty in rural areas declined from 28.13 percent to 27.0 percent, showing an improvement of 1.13 percentage points between 2004-05 and 2005-06. Poverty in Urban areas also registered a decline from 14.94 percent to 13.1 percent during 2004-05 and 2005-06, thereby, depicting an improvement of 1.84 percentage points in the period. The improvement in poverty headcount in percentage points terms at 1.9 percent in urban areas was nearly twice that of rural areas.

Another observation is that the poverty estimate in urban areas became less than half the rural estimates in 2005-06 for the first time since 1998-99. Statistically speaking, taking into account the margin of error in the estimates, the estimates of the two years are not different from each other. Two observations are in order from even these marginal and statistically insignificant improvements. First, the rate of poverty reduction slowed in 2005-06 and began to taper off to a more long-run level of around one percentage point a year. This is evident while comparing the normal years of 1998-99 with 2005-06. Ignoring the irregular years of 2000-01 and 2004-05, a reduction of 8.3 percentage points in headcount over the period of 8 years, from 30.6 to 22.3 percentage points is observed. Notwithstanding any reversal of observed trends, even if this slower speed of poverty reduction combined by closing the urban-rural poverty difference in a consistent manner for the next nine years, the Millennium Development Goal (MDG-1) and Human Development principle of equitable growth can be within sight. Secondly, the smaller improvement in rural areas can be traced to dismal growth in the

crop sector (-2.9%) in 2005-06 as compared to manufacturing (8.7%) and services (6.5%) sectors, which are mainly urban based. The other two indicators, poverty gap and severity of poverty are aggregate measures of ‘spread’ of the poor below the poverty line, i.e., they aggregate the distance (proximity or remoteness) of all poor individuals from the poverty line. A lower value indicates that most of the poor are bunched around the poverty line. In line with the improvement in headcount, both the poverty gap and severity of poverty were also reduced in the country between the two consecutive years.

The estimation of poverty line enables the policy makers to further identify and group the population

Year Urban Rural Pakistan Urban Rural Pakistan Urban Rural Pakistan

1998-99 20.9 34.7 30.6 4.3 7.6 6.4 1.3 2.4 2.02000-01 22.7 39.3 34.5 4.6 8.0 7.0 1.4 2.4 2.12004-05 14.9 28.1 23.9 2.9 5.6 4.8 0.8 1.8 1.52005-06 13.1 27.0 22.3 2.1 5.0 4.0 0.5 1.4 1.1

Source: PSLM

Table-13.4: Trends in Poverty IndicatorsHeadcount Poverty Gap Severity of Poverty

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into various ‘poverty bands’ such as extremely poor, vulnerable and non-poor etc. Table-13.5 presents a comparative profile of 2000-01, 2004-05 and 2005-06 for the six groups. Notably the percentage of ‘extremely poor’ consuming less than 50% of poverty line expenditures, halved from 1 to 0.5 percent of the population. Similarly there was an improvement of 1 percentage point in the proportion of ultra-poor from 6.5 to 5.4 percent. At the other side of the spectrum, the proportion of ‘Quasi non-poor’ increased from 35

to 36.3.percent. The section of population defined as ‘vulnerable’ at 20.5 percent remains almost the same and any negative macro or personal shock can easily shift these households into the category of ‘poor’. Combining ‘poor’ with ‘vulnerable’ segments of the population, i.e., the poverty status of 36.9 percent (unchanged from 2004-05) of the population is likely to fluctuate with the growth performance of agriculture and food inflation in the country.

Consumption Inequality

The results available from the latest household survey, 2005-06 also provide an opportunity to update the analysis of consumption inequalities in the country. Though a one year interval is too short a period (statistically the difference may be insignificant) to make conclusive judgment on inequalities, trends and changes however small or insignificant act as signal for policy interventions. Inequality based on consumption expenditure is generally lesser than inequality based on income as variations in consumption are less and it is based partly on a subset of homogenous (in terms of quality and price) food items. The consumption inequality is measured by the Gini Coefficient and ratio of highest to the lowest quintile. The Gini

Coefficient takes on a value between 0 and 1. The higher the value of Gini Coefficient, the higher will be the inequality.

Table-13.6 shows the value of Gini for Pakistan and rural-urban divide obtained from the three Surveys, i.e., PIHS 2001, HIES 2004-05 and PSLM 2005-06. Starting from the beginning of the decade, the secular rise in Gini values continues at the national level and urban areas, indicating that consumption inequality continues to increase during the period, particularly for the middle quintiles 3 & 4 in urban areas. Between 2004-05 and 2005-06, consumption inequalities further increased from 0.2976 to 0.3018. This increasing trend in inequality is the opposite of the declining

Extremely Poor 1.10% Extremely Poor 1.00% Extremely Poor 0.50%<50% that is <Rs.361.7 <50% that is <Rs.439.32 <Rs.472.23Ultra Poor 10.80% Ultra Poor 6.50% Ultra Poor 5.40%>50%<75% that is >50%<75% that is is Rs. 361.7 – Rs.542.55 Rs. 439.32 – Rs.658.98 Rs.708.35Poor 22.50% Poor 16.40% Poor 16.40%>75%<100% that is >75%<100% that is is Rs.542.55 – Rs.723.40 Rs.658.98 – Rs.878.64 Rs.944.47Vulnerable 22.50% Vulnerable 20.50% Vulnerable 20.50%>100%<125% that is >100%<125% that is that is Rs.723.40 – Rs.904.25 Rs.878.64 – Rs.1098.30 Rs.1180.59Quasi Non-Poor 30.10% Quasi Non-Poor 35.00% Quasi Non-Poor 36.30%>125%<200% that is >125%<200% that is that is Rs.904.25 – Rs.1446.8 Rs.1098.3 – Rs.1757.28 Rs.1888.94Non-Poor 13.00% Non-Poor 20.50% Non-Poor 20.90%>200% that is over Rs.1446.8 Rs.1757.28 over Rs.1888.94

Table-13.5: Population under various Poverty Bands(% of Population)

2000-01 2004-05 2005-06Poverty Line = Rs. 723.40 Poverty Line = Rs. 878.64 Poverty Line = Rs. 944.47


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trend observed in absolute poverty in the previous sections. One also observes that in a matter of a year the Gini of rural areas declined from 0.2519 in 2004-05 to 0.2462 in 2005-06. The estimates

indicate that consumption inequality in urban Pakistan is higher than in rural Pakistan. Moreover urban inequality increased faster than overall inequality during 2005-06.

The Gini Coefficient is a broad single aggregative measure. It suppresses the profile of the distribution. Table-13.6 also reports the trends of percentage share of consumption expenditure by quintile for overall Pakistan as well as the rural and urban regions for the three time periods under study. Comparing 2004-05 with 2005-06, a miniscule improvement in the share of the lowest quintile is observed at the national level. For this group, the significant improvement in rural areas is offset by a worsening in urban areas. The consumption shares are stable between the two years for the next two quintiles. The decline in the share of quintile group 4, i.e., between 60 and 80 percent is offset by further increase of 1 percentage point in the share of the top quintile. The ratio of the highest to the lowest quintile which measures the gap between the rich and the poor also deteriorated from 4.15 in 2004-05 to 4.2 in 2005-06 at the national level, indicating an increased rich-poor divide over the period. Consistent with increasing share of the poor in rural areas in 2005-06, the rich-poor gap narrowed in 2005-06 as the ratio declined from 2.19 in 2004-05 to 1.97 in 2005-06.

Pro-poor Expenditures

Although the PRSP-I (2003-06) culminated successfully in FY06, and PRSP-II has yet to be officially launched, the on-going pro-poor expenditures retain the flavor, legacy and framework of PRSP-I. Government’s commitment to follow a sustained poverty reduction strategy and adhere to Fiscal Responsibility and Debt

Limitation Act stipulation of allocating a minimum of 4.5 of GDP to social and poverty related expenditures is clearly reflected in the allocations as given in Table-13.7. Expenditures on pro-poor sectors in 2006-07 at 5.7 percent of GDP were well above the requirement under the Law. These expenditures are projected to grow in nominal terms by roughly 20 percent over the 2006-07 levels and be 6.0 percent of GDP in 2007-08. If the entire subsidy of Rs.40 billion on imported wheat during the current year is considered as pro-poor expenditure, and off-setting cuts are not made in education and health, the final figure is expected to be even higher than the projected one.

Ignoring the unanticipated wheat subsidy expenditure, and its impact on other line items, a comparison of actual 2006-07 expenditure and projected expenditure for 2007-08 indicates the following: - a) expenditures on human development (education, health, population planning, social security & welfare) are expected to increase by over 36 percent, with doubling in Population Planning and Social Security and Welfare, albeit from a small base. b) expenditures under safety nets are set to increase by 32 percent even under a ‘business-as-usual’ scenario. c) The growth in expenditure on community services, rural development and governance show only a modest and routine increase, partly due to consolidation and throw-forward effect of rapid investments made in earlier years. Assuming a permanent regime shift to higher food and fuel prices, the expenditures on safety nets need to be scaled-up significantly in order to facilitate the

Urban Rural Pakistan Urban Rural Pakistan Urban Rural PakistanGini Coefficient 0.3227 0.2367 0.2752 0.3388 0.2519 0.2976 0.349 0.2462 0.3018

Quintile 1 5.3 12.8 10.1 4.8 12.6 9.5 4.5 13.5 9.6Quintile 2 8.1 16.9 13.7 7.6 17.1 13.2 8.2 16.8 13.1Quintile 3 12.1 19.5 16.8 11.6 19.7 16.4 11.1 20.1 16.2Quintile 4 19.4 22.4 21.3 18.3 23 21.4 17.8 23 20.8Quintile 5 55.1 28.4 38 57.7 27.6 39.4 58.4 26.6 40.3Ratio of Highest to lowest 10.4 2.22 3.76 12.02 2.19 4.15 12.98 1.97 4.2

Consumption share by Quintile

PIHS 2000-01 HIES 2004-05 PSLM 2005-06Table-13.6: Gini Coefficient and Consumption Shares by quintiles

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poor in gradual adjustment to this new era of higher food and fuel prices. From a policy perspective, as we head into PRSP-II phase,

expenditure heads need to be re-defined and more closely aligned with direct impacts on the poorer sections of society.

An Update on Social Indicators from PSLM 2006-07 Survey

Since the late nineties and early part of this Millennium, Pakistan followed a two-pronged strategy: - a) reduce income and consumption poverty and b) to increase access to education, health and better quality of living. The second part of PSLM surveys, i.e., CWIQ (Core Welfare Indicator Questionnaire) surveys are specifically designed to monitor the progress of social indicators at the district level. The first large scale survey of 77,000 households was conducted in 2004-05. Its findings were reported in the Economic Survey 2004-05. The results from the second survey of its kind based on approximately 74,000 households and conducted in 2006-07 are compared with its exact earlier counterpart to provide short-term assessment of government’s success in improving population’s access to social

services and living standard indicators. Although PIHS 2001-02 results are based on sample size of only 14,000 households, it provides a reasonable interval to assess improvements since the beginning of the twenty-first century. In interpreting the results one needs to be aware that in contrast to macroeconomic indicators that vary within intervals of month/quarter/year, social indicators may not exhibit similar changes even with a gap of two years. In many cases the ratios may remain stable. However, over the medium to longer-run the success of any intervention/investments should translate into discernible improvements.

Table-13.8 compares the living conditions in 2004-05 and 2006-07. Broadly speaking they have remained unchanged, except in case of large households. Population living in houses with 5 and more rooms has declined from 7.1 to 6.6 percent.

2001-02 2002-03 2003-04 2004-05 2005-06Actual Actual Actual Actual Actual

Community Services 11.0 16.6 28.5 41.7 63.6 76.6 82.5i. Roads, Highways & Buildings 6.3 13.2 22.8 35.2 53.3 60.0 69.1ii. Water Supply and Sanitation 4.6 3.4 5.8 6.5 10.3 16.6 13.4Human Development 90.7 105.8 134.1 155.8 217.9 231.8 316.3i. Education 66.3 78.6 97.7 116.9 141.7 162.1 224.7ii. Health 19.2 22.4 27.0 31.4 39.2 53.2 62.3iii. Population Planning 1.3 3.1 4.7 4.6 10.2 7.0 13.3iv. Social Security & welfare 3.7 1.3 4.1 2.0 7.6 4.5 9.8v. Natural Calamities 0.2 0.4 0.5 0.9 19.2 5.0 6.2Rural Development 24.3 34.2 44.5 59.7 78.5 101.8 101.9i. Irrigation 10.1 15.5 22.5 37.9 59.8 74.8 77.6ii. Land Reclamation 1.8 1.8 2.0 2.1 2.7 2.3 3.5iii. Rural Development 12.3 16.9 18.6 15.4 15.0 22.2 19.5iv. Rural Electrification 1.4 4.4 1.0 2.5 1.3Safety Nets 8.3 13.8 12.3 8.4 9.4 9.2 12.2i. Food Subsidies 5.5 10.9 8.5 5.4 6.0 5.5 7.8ii. Food Support Program 2.0 2.2 2.8 2.7 3.1 3.5 4.0iii. Tawwana Pakistan 0.8 0.6 0.6 0.1 0.0 0.0 0.0iv. Low Cost Housing 0.1 0.4 0.3 0.3 0.3 0.4Governance 33.0 38.5 41.8 50.5 65.2 78.1 84.6i. Administration of Justice 2.0 2.3 2.4 3.1 5.6 5.1 7.3ii. Law and order 31.0 36.3 39.4 47.4 59.6 73.0 77.3Total 167.3 208.8 261.3 316.2 434.6 497.5 597.5As % of GDP 3.8 4.32 4.6 4.8 5.6 5.7 6.0

Source: Finance Division

Table-13.7: Social Sector and Poverty Related Expenditures (Rs. in Billion)2006-07 Actual

2007-08 Projected


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In interpreting these numbers we need to be aware that housing standards of a population change very slowly, as they are guided by demographics, migration and internal working of housing markets in cities, towns and villages. On average, the livings conditions are marginally better as the share of population living in households with 2-4 rooms inched up from 68.7 to 69.1 percent in two years; however, population living in houses with five and more rooms has declined from 7.1 to 6.6 percent. The population’s access to electricity also improved significantly from 83.9 in 2004-05 to 86.6 percent in 2005-06. Due to higher

consumption, investment in immovable assets might also have declined as population owning housing units has declined from 86.6 to 85.9 percent.

In Table-13.9 trends of selected social indicators at three points in time, i.e., 2000-01, 2004-05 and 2006-07 are compared. In a longer term perspective, comparing 2001 and 2007, most of the indicators show discernible improvement, e.g., access to drinking water through taps, use of flush and gross enrolments for most levels of schooling. However, the rate of improvements has slowed down in the last two years as compared to speed of improvements achieved during 2001-2005. In case of net enrolment in middle schools and at matric level, there has been no improvement in the last two years. The trend of rising gross enrolments with almost very marginal improvements in net enrolment indicate rising tendencies in dropout rate at least at the middle and matric level. This reinforces the need for improving targeting of and expending the size of pro-poor expenditures.

Table-13.10 profiles the trends in literacy rates of population 10 years and above and 15 years and above. Over the longer period 2001-2007,

significant improvements took place in literacy across gender and regions. However as in the case of enrolment, the pace of improvement considerably slowed during last two years as compared to previous four years, even on an average annual basis. The gender and urban-rural divide also failed to close if one compares 2001 with 2007.

Major IndicatorsPSLM

2004-05PSLM

2006-07

Housing Units with one room (%) 24.2 24.3Housing Units with 2-4 rooms (%) 68.7 69.1Housing Units with 5 & more rooms (%) 7.1 6.6Owned Housing Units 86.6 85.9Electricity (as source of lighting) (%) 83.9 86.6Gas (as cooking fuel) (%) 29.5 30

Table-13.8: Comparison of Living Conditions PSLM2004-05 & 2006-07

2000-01 2004-05 2006-07Indicators PIHS PSLM PSLMMajor Source of Drinking Water (Tap Water) 25 34 36Types of Flush used by households- Flush 45 54 58- Non- Flush 12 20 15- No Toilet 43 26 27Population Ever Attended school 51 55 57Gross Enrolment at Primary level (5-9 Years) 72 86 91Net Enrolment at Primary level ( 5-9 Years) 42 52 56Gross Enrolment at Middle level(10-12 years) 41 46 51Net Enrolment at Middle level(10-12 years) 16 18 18Gross Enrolment at Matric level(13-14 years) 42 44 48Net Enrolment at Matric level(13-14 years) 9 11 10

Table 13.9: Comparison of Selected Social Indicators (%)

PIHS 00-01 PSLM 2004-05 PSLM 2006-07

Overall 45 53 55Male 58 65 67Female 32 40 42Urban Areas 64 71 72Male 72 78 79Female 56 62 65Rural Areas 36 44 45Male 51 58 60Female 21 29 30

Overall 43 50 52Urban Areas 63 69 70Rural Areas 34 40 41

Table-13.10: Literacy and Adult Literacy

i) Literacy Rate(Aged 10 years and older)

ii) Adult Literacy (15 years and older)

Source: Federal Bureau of Statistics

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Since 2001, health indicators, specifically in the area of child health and in rural areas, have improved significantly as indicated by estimates from various surveys given in Table-13.11. Significant improvements in immunization, and treatment by ORS took place during the period 2001-2007. At the national level immunization coverage went up from 53 percent in 2001 to 76 percent in 2007. In rural areas it improved faster, thus reducing the urban-rural gap from 24 to 12 percentage points during the period. Similarly in the percentage of cases where a Practitioner was consulted went up from 81 to 93 percent in rural areas, closing the urban-rural gap from 6.5 to 1.2 percentage points.

A common thread that runs in the short-term assessment of social indicators is the slow down in the rate of improvement. This phenomenon suggests that at higher levels of indicators, greater

investments are needed for per unit improvement in indicators along with more effective governance and implementation.

PSLM PSLM PSLM 2000-01 2004-05 2006-07

Overall 53 77 76Urban Areas 70 87 85Rural Areas 46 72 73

Overall 82.4 90.9 93.7Urban Areas 87.3 92.2 94.5Rural Areas 80.7 90.1 93.3

Overall 53.6 77.8 76.4Urban Areas 57.0 78.2 80.0Rural Areas 52.4 77.5 75.0

Cases where a Practitioner was consulted

Cases where ORS was given to Child

Table-13.11: Health Indicators

i) Children Aged 12-23 Months Immunized.

ii) Treatment of Diarrhea in Children 5 years and Under

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Chapter 14

TRANSPORT AND COMMUNICATIONS

Infrastructure is both a cause and a consequence of economic growth. The role of infrastructure in integrating countries into the global economy by providing transport and telecommunication services is well known. Infrastructure can also raise the quality of human capital, which is a key factor in achieving high and sustainable levels of growth. Improvements in the quality and quantity of infrastructure have a disproportionately positive impact on the poor, and thus play a vital role in reducing income inequality.

A well performing Transport and communication structure is vital for a country’s development. Investment in a country’s infrastructure directly affects economic growth as producers find the best markets for their goods, reducing transportation time and cost, and generating employment opportunities.

Pakistan, with 161 million people, has a reasonably developed transport infrastructure. The country generates a total domestic transport load of around 239 billion passenger kilometers and 153 billion tonne kilometers annually. The growth in demand for transportation services is considerably higher than the growth in GDP. Road transport is the backbone of Pakistan's transport system. The 9,574 km long National Highway and Motorway network - which is 3.65 percent of the total road network - carries 80 percent of Pakistan's total traffic. Over the past ten years, road traffic – both passenger and freight - has grown significantly faster than the national economy. Currently, it is accounting for 91 percent of national passenger traffic and 96 percent of freight. However, neglect of other modes of transportation in favor of improvement

of the road infrastructure has been a prevalent problem in the country’s transportation sector. Recent initiatives and developments in sectors such as shipping, railways, and aviation are a welcomed step towards mending this bias.

Port traffic in Pakistan has been growing at 8 percent annually in recent years. Two major ports, Karachi Port and Port Qasim, handle 95 percent of all international trade. Gwadar Port, which was inaugurated in March 2007 and is being operated by Singapore Port Authority, is aiming to develop into a central energy port in the region. In addition, 14 dry ports cater to high value external trade.

Pakistan Railways (PR) has a broad gauge system (with a small network of meter gauge in the South East). The network consists of the main North – South corridor, connecting the Karachi ports to the primary production and population centers in Pakistan. The track is in good condition with an axle-load of 23 tons and maximum permitted speeds of 100/110 Kilometers per hour.

There are 36 operational airports. Karachi is Pakistan's main airport but significant levels of both domestic and international cargo are also handled at Islamabad and Lahore. Pakistan International Airlines (PIA), the major public sector airline, though facing the competition from a few private airlines, carries approximately 70 percent of domestic passengers and almost all domestic freight traffic.

The transport and communications sector accounts for about 10.0 percent of the country’s GDP, and 22.0 percent of Gross Fixed Capital Formation in


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FY07/08. It provides over 2.3 million jobs in the country (6% of all employment) and receives 12 to 15 percent of funds from the annual Federal Public Sector Development Program (PSDP). Apart from being a significantly large source of budgetary expenditure, the transportation sector imposes huge demand on Pakistan’s energy supply, absorbing approximately 35% of total energy annually.

Infrastructure development has been a priority area for Pakistan as evident from a number of projects completed or in progress. In the long term, the transport system is likely to experience tremendous improvement with the implementation of the National Trade Corridor (NTC) program.

The telecommunication sector of Pakistan witnessed a robust growth over the last few years with its share in total GDP increasing every year. Teledensity of the country has crossed 57% which has placed Pakistan’s telecom sector among those of the rising East Asian economies.

I. TRANSPORT

Pakistan’s transportation network, albeit not as modern and efficient as that of developed countries, is considerably more efficient than it was a decade ago. Users of the network have a wider range of modes to choose from. Pakistan Railway is still the only enterprise providing rail service in the country, but the Airline industry has greatly benefited from the competition provided by private sector players such as Air Blue, Shaheen Air and Aero Asia. The road network has been expanding constantly. New motorways and expressways made throughout the country have significantly reduced the time it takes for goods and people to reach their destinations. The successes of service providers such as Daewoo have provided consumers with benefits of choice and affordability. New initiatives like the establishment of Gwadar Port and the construction and upgradation of new airports around the country and a further expansion of the highway network hold promises of a brighter future.

While visible progress has been made in the transportation sector, key issues and challenges

remain. A comprehensive and holistic National Transportation Policy that covers all modes of transportation for both Urban and Rural transport is yet to be implemented. Urban traffic congestion, lack of quality public transport, environmental pollution and other negative spill-overs from the transportation sector, along with safety (especially road safety) are all matters that need to be addressed if Pakistan’s transportation is expected to perform efficiently and provide the benefits of a modern, well functioning and fully equipped transportation network.

i. Road Transport

Pakistan’s transport system is primarily dependent on road transport, which makes up 90 percent of national passenger traffic and around 96 percent of freight movement. Over the past several years, road traffic – both passenger and freight – has grown much faster than the country’s overall economic growth. The National Highway and Motorway network, which stretches an impressive 10,849 km, contributes 4.2 percent of the total road network and carries 90 percent of Pakistan’s total traffic.

Road density (Total length of road/ Total area), is a common indicator for the development of a country’s road system and concurrently used as an index for prosperity, economic activity and development. It is unfortunately low in Pakistan, especially when compared to other developed and developing countries. This fact is revealed in Fig-14.1. Pakistan, with a population of 161 million people, has a reasonably developed transport system, but still intends to double its current road density of 0.32-km/sq. km to 0.64-km/sq. km gradually over the next 10 years.

a) Road Network

Pakistan is gifted with a naturally geo-strategic location. It is at the peripheral of South Asia on one side, and Central Asia on the other. In the south, the Arabian Sea forms a gateway to the vast Eurasian hinterland. It is here that cultures of Central, West and South Asia crisscross. This ideal location makes Pakistan one of the most attractive

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and shortest routes for transit to the Central Asian Republics (CARs). Indian trade to that region, in an economical/convenient manner, is also dependent on the availability of passage through Pakistan. The rapid development of Asian

economies in the recent past has also necessitated the establishment/effectiveness of operations regarding the transcontinental transport links, warranting the development of land transport corridors to facilitate trade flows.

This fact has been recognized by the United Nations Economic & Social Commission for Asia & Pacific (UNESCAP) by designating different routes passing through various Asian countries as the Asian Highway Network (AHN). A number of inter-provincial national highways of Pakistan are a component of AHN.

Pakistan’s road network is vital for the movement of people and goods and plays an important role in integrating the country, facilitating economic growth and reducing poverty. The total road network is about 260,000 km of which around 60% is paved. Road density is 0.32 km/km2 which is low and compares unfavorably with other South Asian countries (Bangladesh-1.7 km/km2, Sri Lanka-1.5 km/km2 and India-1.0 km/km2). The Government intends to generate/ mobilize all possible resources to double road density to 0.64 km/km2. Total roads, which were 229,595 KM in 1996-97, increased to 264,853 KM by 2007-08 ― an increase of 15.4 percent. During the out-going fiscal year, the length of the high typed road network increased by 3.2 percent but the length of the low type road network declined by 2.8 percent. Extent of high type roads have increased by 41.5

percent since 1996-97. A sizable and continuous improvement of the high type road network can be observed from 2001 to 2007, where the network grew at an average rate of above 3 percent. The continuous improvement and rehabilitation of the existing roads reflects the government’s enhanced focus on infrastructure. As a result of an emphasis on high type roads, many low typed roads were converted to high typed roads during this period. There are many ways by which availability of improved and wide spread modern road networks can facilitate economic activity. For example, they could help alleviate poverty by providing access to far flung rural areas, create more jobs by supporting economic activity along the network and provide numerous small-scale investment opportunities. In addition, introduction of Khushal Pakistan Programme, has helped to rehabilitate and modernise rural road network along with implementation of wide ranging development activities through various district governments under the devolution programme. The annual growth of roads in Pakistan between 1996-97 and 2007-08 is given in Table-14.1 and Fig-14.2

Fig-14.1 Road Density Comparisons

0

0.5

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Japan

France

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UK Italy

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Source: National Highway Authority

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Table 14.1: Length of Roads (Kilometres)Fiscal Year High Type Low Type # Total

Length %Change Length %Change Length % Change 1996-97 126,117 6.5 103,478 3.6 229,595 5.2 1997-98 133,462 5.8 107,423 3.8 240,885 4.9 1998-99 137,352 2.9 110,132 2.5 247,484 2.7 1999-2000 138,200 0.6 110,140 0 248,340 0.3 2000-01 144,652 4.7 105,320 -4.4 249,972 0.7 2001-02 148,877 2.9 102,784 -2.4 251,661 0.7 2002-03 153,225 2.9 98,943 -3.7 252,168 0.2 2003-04 158,543 3.5 97,527 -1.4 256,070 1.5 2004-05 162,841 2.7 95,373 -2.2 258,214 0.8 2005-06 167,530 2.9 91,491 -4.1 259,021 0.3 2006-07 172,891 3.2 88,930 -5.6 261,821 0.1 2007-08 178,423 3.2 86,430 -2.8 264,853 1.2 * Estimated Source: Ministry of Communications # : The percentage change in low type roads can be negative as many of these roads are being converted to high type roads.

b) National Highway Authority (NHA)

The responsibility for development, operation, maintenance and preservation of the national highway network has been assigned to the National Highway Authority. Its objective is to secure the delivery of an efficient, reliable, safe and environment-friendly national highway network with a view to improving the quality of life in Pakistan.

The Authority plays a major role in all-weather reliability, reduced transportation costs and increased access to markets for local produce and products, access to new employment centres,

employment of local workers on various projects, better access to health care and other social services, as well as strengthening of local economies.

The NHA is currently the custodian of nearly all of Pakistan's major inter-provincial road links called the national highways, including the motorways and strategic roads. This network represents the main transport corridors linking ports to population centers and providing linkages to Afghanistan, the Central Asian Republics, China, Iran and India. These roads comprise of only around 4 percent of Pakistan's total road network but carry 80 percent

Fig-14.2: Length of Roads

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of the country’s commercial traffic. Consequently, the network is under pressure and its importance from a development perspective cannot be over emphasized. The province wise breakup of NHA network is given in Table.14.2.

Table:14.2 Province Wise Break-up Province Km % Share Punjab 2659 23.16 Sindh 1604 13.96 NWFP 1651 14.38 Balochistan 4629 40.30 NA/AJK 942 08.20 Total 11485 100%

Source: NHA The total NHA network of 11,485 km primarily consists of “low capacity” roads. About 75 percent are 2-lane (6.1m single carriageway), 20 percent are 4-lane divided highways (7.3m dual carriageways) and only 5 percent 6-lane highways (11m dual carriageways). Approximately 25 percent (or 2500 km) of the NHA network is in need of rehabilitation. This results in very low number of travel trips, slow speeds and an un-safe driving environment. Commercial traffic running speeds are between 35-45 kph, and average trip speeds are around 25kph; 1/3rd of the average trip speeds in developed countries.

The present highway network is under strain because of rising traffic flow and a slow pace of increase in capacity. Consolidation, preservation and improvement of the existing highways are needed on an urgent basis. A Gradual extension of the network is also equally important to develop remote areas and to better connect major economic and social centers of Pakistan. The details of some selected major projects for the next five years are shown in Table.14.3.

Operation & Maintenance: The NHA is giving special emphasis to the preservation of the existing highway infrastructure and on highway safety. Its endeavors to operate and maintain the network in a safe condition at an optimum cost while ensuring user satisfaction is limited by immense traffic and insufficient resources to meet the growing needs of the sector. Since O&M activities are dependent on toll, special attention is being accorded to enhance the efficiency of tolling systems and revenue

management through installation of Electronic Toll and Traffic Management Systems (ETTMS) under a phased program. Under the Annual Maintenance Plan 2007-08, NHA incurred an expenditure of Rs 5951 million for operation & maintenance of 9098 km of its network. The breakdown of this expenditure is given below:

Description Km Rs in Millions Rehabilitation 114 1417

Structural Overlay 287 1638 Functional Overlay 514 1676

Routine Maintenance 8183 810 Highway Safety N/A 410

Total 9098 5951 Providing adequate capacity is one of the key aims of the NHA presently. Pakistan’s primary traffic movements are concentrated along the Karachi-Lahore-Islamabad-Peshawar links which serves domestic needs. This also links Punjab and the northern parts of the country with ports and commercial hubs in the south. The main artery along this corridor is the 1819 km long N-5 which serves 80% of Pakistan’s urban population and carries over 65% of intercity traffic. The other main corridor is the Indus Highway (N-55). N-5 is an access-free, 4-lane divided facility with a capacity of 66,000 Passenger Car Units (PCUs). The current traffic volumes range from 7,000 to 40,000 vehicles per day which is 35% to 93% of existing capacity. Presently, 50% length of N-5 is in poor condition. Karachi - Lahore (1260 km) travel time is 48 hours and Karachi - Peshawar (1700 km) is 72 hours. Moreover, the average commercial operating speed is only 23 to 26 kph. The Government’s goal of sustaining 7-8% economic growth would double traffic demand by 2017 but the N-5 will not be able to support this projected transport demand.

The NHA’s portfolio cost is Rs 705.48 billion with a “throw-forward” of Rs 570.84 billion. The ratio of throw-forward to annual allocation is 31, meaning that at current funding level of Rs 29 billion; approximately three years are needed to complete the ongoing portfolio. Due to limited fiscal space and an increase in yearly allocation being rather unlikely, NHA is looking towards new and innovative methods of financing. A new


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business plan is currently under finalization for approval by the Government.

Initiatives and Future Outlook: The Government of Pakistan has planned 50 mega projects for provision of better quality highways, expressways & motorways throughout the country during the next few years. Some of the planned initiatives include: construction of major new motorways, modernization of trucking fleet with newer, more efficient, and environment friendly vehicles; promotion of industrial clusters along highways/ motorways, establishment of warehouses by the private sector along the network. NHA is also implementing a major National Highway Improvement Program (NHIP) in phases at a cost of Rs 20.25 billion. Out of a total length of 836 km to be reconstructed / rehabilitated, work on 380 km has been completed. Out of the balance, 268 km

shall be completed by Dec 2008 & the remaining 188 km by Jun 2009. Program includes reconstruction and upgradation of Lahore - Gujranwala Section from 4 to 6 lanes. A complete list of on-going and future projects is given in the tables below.

The National Highway Authority plays a vital role in the efficiency and productivity of Pakistan’s transportation sector. In order for the country to reap the benefits of a truly efficient road network, efforts must be made to maintain the existing network in optimal condition. An increase in the network is required to facilitate the increase in traffic and movement of goods in the future. Innovative methods of financing, private sector participation, and environmental aspects must be taken into consideration while adding to the existing network.

Table:14.3 Selected Major Planned Projects for the Next Five Years S.No. Project Length (KM)

1. Improvement/Widening of KKH (Khunjerab-Raikot Section) 335 2. Realignment of KKH (Raikot-Sazin Section) 120 3. Improvement/Widening of KKH (Sazin-Manshera Section) 258 4. Manshera-Abbottabad-Hasanabdal Expressway 97 5. Peshawar-Torkhum 51 6. Peshawar Northern Bypass 34 7. Underpass at Wah Gate No.1, Taxila-Hasanabdal Section - 8. Wazirabad-Pindi Bhattian Expressway (E-3) 100 9. Hiran Minar Interchange (M-2) with link road - 10. Faisalabad-Khanewal Expressway (E-4) 184 11. Khanewal-Lodhran Expressway 100 12. Lodhran-Sukkur Expressway 385 13. Ratodera-Sehwan (N-55), ACW 200 14. Karachi-Hub-Dureji-Dadu Motorway (M-7) 270 15. Karachi-Hyderabad Motorway (M-9) 136 16. Jand-Kohat Notional Highway (N-80) 46 17. Noshki-Dalbadin Section (N-40), Balochistan 165 18. Gujranwala-Dina Expressway 100 19. Chakdara-Dir, Kalkatak-Chitral (N-45) 120 20. 4 Bridges over River Indus in Punjab & Sindh -

Source: NHA ii. Pakistan Railways

An efficient transportation system plays a vital role in the economic development of a country. The government vision for economic growth and poverty reduction requires massive investment and development of infrastructure for sustainable economic growth. Pakistan Railways has a definite edge over roads for long haul and mass scale

traffic movement both for passengers and freight in addition to providing a safe, economical, and environment friendly mode of transport.

Throughout world history, rail traffic has played an important part in the development and economic prosperity of nations. Railways are a valuable source of employment while generating large


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amounts of revenue to the benefit of the economy. An effective railway system facilitates commerce and trade, reduces transportation costs (monetary and non-monetary), and promotes rural development and national integration while reducing the burden on commuters. Pakistan Railways was the primary mode of transportation in the country till the seventies. However, owing primarily to a diversion of already scarce resources towards the expansion of the road network, the performance and condition of Pakistan Railway declined and it’s share of inland traffic reduced from 41 percent to 10 percent for passenger and 73 percent to 4 percent for freight traffic.

During the last seven years (2000-2007), Pakistan Railways has shown improving trend in both passenger and freight traffic, registering an average increase of 5.2 percent and 5.8 percent per annum, respectively. A reduction in passenger traffic has been seen for this year with a negative growth rate of -12.5 percent whereas freight traffic has grown by 18 percent over the same period last year. The

positive growth trend for the past seven consecutive years can be attributed to the wide range of improvements made by the Pakistan Railways through completion of a number of development projects and better policies aimed at modernization of PR. The fall in growth rates for passenger traffic this year can be attributed to the chaos, political strife, and rioting that the year 2007-08 has seen. Many parts of the railway track have been destroyed with immense damage being caused to the property of Pakistan Railways. The service remained closed for a substantial amount of time following the violence witnessed in the country in December 2007 after the assassination of one of its political leaders. Some estimates put the loss suffered by Pakistan Railways at the expense of this year’s disturbance at Rs 10 billion.

Pakistan Railways has introduced 9 new train services in order to facilitate passengers as well as freight customers. (See Table.14.5). PR has also improved the quality of its services, timeliness and cleanliness. This trend is reported in Table.14.4.

Table 14.4 Trend of Passengers Traffic and Freight Traffic (Road vs Rail)

Fiscal Year Passenger Traffic (Million passenger Km) Freight (Million Ton KM) Road %Change Rail %Change Road %Change Rail %Change

1996-97 163,751 5.9 19,114 1.1 84,345 5.6 4,607 -9.3 1997-98 173,857 6.2 18,774 -1.8 89,527 6.1 4,447 -3.5 1998-99 185,236 6.5 18,980 1.1 95,246 6.4 3,967 -10.8 1999-00 196,692 6.2 18,495 -2.6 101,261 6.3 3,753 -5.4 2000-01 208,370 5.9 19,590 5.9 107,085 5.7 4,520 20.4 2001-02 209,381 0.5 20,783 6.1 108,818 0.2 4,573 1.2 2002-03 215,872 3.1 22,306 7.3 110,172 1.2 4,820 5.4 2003-04 222,779 3.2 23,045 3.3 114,244 3.7 5,336 10.7 2004-05 232,191 4.2 24,238 5.2 116,327 1.8 5,532 3.6 2005-06 238,077 2.5 25,621 5.7 117,035 0.6 5,916 6.9 2006-07

26,446 3.2

5,453 -7.8

Jul-Mar 2006-07 2007-08*

191,057 --

--

20,921 18,296

-12.5

88,032 ----

--

3,786 4,488

18.5 * Estimated Source: Ministry of Railways & Ministry of Communications In order to continue improvements and to consolidate reforms, Pakistan Railways has prepared a business plan for 2005-11. The plan places emphasis on encouraging private sector participation in order to increase its competitiveness, responsiveness and efficiency. Pakistan Railway is planning to take a series of interlinked initiatives, which will enable it to

compete efficiently in the fast growing transport sector in Pakistan.

Pakistan has awarded a contract to an international consortium to carry out a feasibility study for establishing a rail link with China. A rail link could further boost trade relations between the two countries by facilitating the already growing trade with China and operations of Gwadar Sea Port.


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The PDSP allocations for the Railway sector were increased from Rs 3. billion during 2000-01 to Rs 11.642 billion in 2007-08. Major development schemes include track renewal of 240 KM of rails and 220 KMs of sleepers planned for main line from Karachi- Khanpur. Additionally, 20 units of locomotives in CKD condition received from China will be manufactured at the Pakistan Locomotive Factory in Risalpur. This will complete the scheme for Procurement. Manufacture of 69 DE locomotives. The scheme for recomissioning of 55 DE locomotives will be completed in the year 2007-08 as well. 655 CKD wagons received from China will be manufactured at Pakistan Railway Workshop in Moghalpura thus completing the scheme for Procurement/Manufacture of 1300 high capacity wagons. Rehabilitation of 400 old coaches is underway with 130 coaches expected to be rehabilitated in this fiscal year. Another on-going development project is the next phase in the doubling of tracks from Khanewal- Lahore (246 KM).

In addition to these development projects, the following feasibility studies have also been sanctioned to explore future prospects and initiatives:

• High Speed Double Track between Lahore and Rawalpindi.

• Rail link from Havelian to Pak-China Border.

• Doubling of track and realignment between Shahdara-Rawalpindi.

• Doubling and Realignment of track between Golra Sharif-Peshawar.

The earning of Pakistan Railways since 1998-99 are given in Table.14.6.

Table-14.6 : Earnings of Pakistan Railways (Rs. Million)

Year Earnings % Change 1998-99 9,310 -- 1999-2000 9,889 6.2 2000-01 11,938 20.7 2001-02 13,046 9.3 2002-03 14,812 13.5 2003-04 14,636 -1.2 2004-05 18,027 23.2 2005-06 18,184 0.9 2006-07 July-Mar

19,194 5.5

2007-08 13,954 Source: Ministry of Railways

iii) Civil Aviation Authority (CAA)

Civil aviation plays an important role in the development of a country’s economy by providing fast and efficient access between different parts of the country as well as different destinations around the world. Private participation on this front has been encouraged through concessions and incentives for development of airports and airlines to increase the availability of air transport services both domestically and internationally. It is important to construct and maintain airports in the country to facilitate economic activity in an increasingly globalized world. The construction of the new Islamabad international airport (NIIA) is expected to play a major role in the national

Table: 14.5 New Trains S.No Trains Section Date of Commencement

i) Thar Express Karachi-Zero Point 18-02-2006 ii) Margala Express Lahore-Rawalpindi 22-05-2006 iii) Marvi Express Mirpurkhas-Khokhropar 07-06-2006 iv) Sindh Express Lahore-Karachi 24-07-2006 v) Buraq Express Rawalpindi-Karachi 14-08-2006 vi) Peshawar Express Peshawar-Rawalpindi 15-12-2006 vii) Pakistan Express Rawalpindi-Karachi

(Via Hafizabad, Faisalabad And Multan) 16-12-2006 viii) Jinnah Express Karachi-Rawalpindi. 08-01-2007 ix) Sir Syed Express Rawalpindi-Karachi 08-03-2007

Source: M/O Railways


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aviation sector. The airport will be developed by the Civil Aviation Authority (CAA) on a self-finance basis with an estimated cost of Rs. 30 billion on 3200 acres of land, and is expected to be completed by December 2010. The project has been designed with all the essential facilities to handle an annual traffic of 9 million passengers as well as 100,000 metric tons of cargo.

To supplement the growth and development of Balochistan, the CAA is going to construct the New Gwadar International Airport (NGIA) through the Public Sector Development Programme (PSDP), at a total estimated cost of Rs. 3.6 billion. The airport will be developed as a major hub for all aviation activities in the region, and it is expected to be completed by November 2010. The upgrading of Multan and Peshawar International Airports have also been initiated with estimated costs of Rs. 2.6 billion and Rs. 0.6 billion respectively.

a) Pakistan International Airlines (PIA)

The year 2007 turned out to be an exceptionally difficult year for PIA. The Airline experienced a series of financial, operational and marketing problems during the past year that severely hampered its performance. In the early part of the year, an operating restriction was placed on PIA flights by the European Union. Apart from providing a negative image for the Corporation, this translated to a loss in market share as well as growth in business which made the situation exceptionally difficult. An unprecedented increase in oil prices adversely impacted PIA’s bottom line and neutralized recovery efforts. Attempts were made to contain the impact of a rising fuel bill by reducing the utilization of older and fuel in-efficient planes. The airline was also mired by increases in pay to certain categories of personnel and a depreciation of the Rupee against the Dollar.

Ever increasing competition and entry of new operators in certain key markets reduced the level of traffic for PIA. Yields were increased despite the added competition but revenues remained static for the year. The financial position of the company remains under strain as financial costs increased by almost 50 percent, negating a reduction in operating expenses of Rs 2.6 billion.

The restrictions imposed by the EU were lifted near the end of 2007 as PIA was able to satisfactorily address the issues highlighted by the Air Safety Committee. A route rationalization plan was implemented whereby services to some non-performing sectors were discontinued while capacity on other routes were realigned with available traffic. These and various cost reducing measures taken by the management did not result in profits for the airline, but was effective in reducing the magnitude of the losses suffered.

Despite these financial difficulties, the airline remained on track on its fleet modernization plan and by December 2007, the average age of PIA;s fleet was reduced to 13 years.

The total international passenger traffic to and from Pakistan increased by 5.7 percent over the last year, but due to EU restrictions on PIA flights and the damage to its image, PIA’s international passengers declined by 4.2 percent. Thus against an international market share of 48 percent in 2006, PIA’s market share dropped to 43.5 percent. In the domestic market, despite an overall traffic decline of 6.4percent, PIA was able to retain its market share at 69.4 percent. On a system-wide basis, PIA’s market share was 51.2 percent against 54.9 percent last year. In terms of capacity utilization, the System Passenger Seat Factor (excluding Haj) was 69 percent against 70 percent last year while with the Haj inclusion, the System Seat Factor was 67.4 percent against 68.5 percent last year. Though the airline faced shortfall in ASKs (Available Seat kilometres) by 8 percent in 2007 as against 2006, it registered an increase of Rs 1.1 billion in passenger revenue as compared to 2006. PIA’s cargo traffic in terms of RFTKs (Revenue Freight Tonne Kilometers) was significantly down by 17.9% over last year

Pakistan International Airlines’ revenue passengers carried for the year 2007 was 5.415 million as compared to 5.732 million passengers in the same period of last year, showing a decline of 5.5 percent. The airline’s revenue was Rs. 70,480.73 million in 2007 as against Rs. 70,587.15 million generated in the corresponding period of 2006, registering a marginal decrease of 0.2 percent. During 2007, cargo traffic was 350.76 million


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Revenue Freight Tonne Kilometre (RFTKS) as against 427.01 RFTKS in the same period last year thus registering a decline of 17.9 percent. The unprecedented hike in oil prices over the course of the year adversely impacted PIA’s bottom line and neutralized the efforts for recovery. PIA, however, made efforts for containing the fuel bill by reducing utilization of older fuel-inefficient fleet. The total number of aircrafts in PIA’s fleet to stood at 42.

iv) Ports & Shipping

a) Karachi Port Trust (KPT)

The steady and continuous progress made by KPT has helped boost the national economy over the

years with international trade ever-increasing in a globalized world. The KPT had an annual cargo handling size of 30.8 million tons during 2006-07, showing a slight decrease of 4.4 percent over last years record cargo handling of 32.3 million tons. However, there has been a rise in activity during the first seven months of the current fiscal year, showing remarkable increase in all types of cargo handling including bulk, Break bulk and containers. Figures show that during the first seven months of the current fiscal year, already 20.5 million tonnes of cargo has been handled. Statistics of cargo handled during the last ten years are given in Table 14.7

Table 14.7 : Cargo Handled at Karachi Port (000 Ton) Year Imports %Change Exports %Change Total % Change 1996-97 18,362 -1.9 5,113 5.2 23,457 -0.4 1997-98 17,114 -6.8 5,570 8.9 22,684 -3.4 1998-99 18,318 7 5,735 3 24,053 6 1999-2000 17,149 -0.9 5,613 -2.1 23,762 -1.2 2000-01 20,064 10.5 5,918 5.4 25,98 9.3 2001-02 20,330 1.3 6,362 7.5 26,692 2.7 2002-03 19,609 -3.5 6,273 -1.4 25,852 -3.1 2003-04 21,732 10.8 6,081 -3.1 27,813 7.6 2004-05 22,100 1.7 6,515 7.1 28,615 2.9 2005-06 25,573 15.7 6,697 2.8 32,270 12.8 2006-07 (July-Jan)

23,329 -8.77 7,517 12.24 30,846 -4.41

2007-08 15,090 - 5,455 - 20,545 - Source: KPT

The existing port facilities appear to be inadequate to handle the growing cargo at the port. In order to address these constraints, the KPT has launched a number of projects that are at different stages of execution. A number of these projects have been formulated for phased implementation on a BOT basis, covering various activities in port operations. The KPT has commissioned the project titled “Karachi Interval Container Terminal (KICT)”. The project is already operational at the west wharf and it has annual capacity of 350,000 twenty equal units (TEU). An additional $ 65 million was invested to enhance its capacity upto 525,000 TEU. The 3rd phase of the project was launched on March 7, 2005, with an investment of US$ 55 million to extend the capacity up to 700,000 TEU. In addition, KPT has awarded a contract for a second container terminal on BOT basis with

estimated cost of US$ 75 million. To ease transportation problem between the port and the factory, the KPT has pledged to contribute over Rs.2.8 billion for reconstruction of roads. As the new generation of container ships come on board, KPT is taking initiatives to be able to cater to the even higher capacity fifth and sixth generation ships. This involves the development of 10 deep draught berths with the total cost of US $ 1,087 million. Furthermore, a Cargo Village and Industrial Park in the Western backwaters of Karachi Port has also been proposed. Finally, to provide connectivity between the Pakistan Deep Water Container Port and the Cargo Village, KPT is planning to construct a Cable Stayed Bridge across the channel, which will also connect Clifton with Manora and Hawksbay.


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b) Port Qasim

Port Qasim is the first industrial and commercial port of Pakistan operating under landlord concept. Today it caters for around 40% of shipping requirements of the national economy. During the last financial year 2006-07, PQA handled a record volume of 24.3 million tonnes cargo showing an impressive growth of around 13% over corresponding period. However, from July to March of the current financial year, 2007-08, PQA handled 19.76 million tonnes of cargo depicting a growth rate of 10% over the same period last year. Cargo volume also surpassed the budget targets by 3% during the same period under review.

There has been a vast improvement in cargo handling over last five years. Average annual growth has been around 13.5% over the last five years which calls for development of new berths/terminals for capacity enhancement. The current handling capacity of the port, with ten berths, is 34 million tonnes per annum. To meet the ever growing requirement of capacity enhancement, PQA has chalked out an ambitious development plan. As against 3 private sector projects, 9 private sector projects which include Liquid Cargo Terminal, 2nd Container Terminal. Grain & Fertilizer Terminal, Coal & Cement/clinker Terminal, Gasport LNG Floating terminal, Granada LNG Terminal, 2nd IOCB, 2ND Oil Jetty and Mashal project by Sui Southern Gas Company are being implemented by the private sector with the completion of these terminals expected by 2010. With the projects in the pipelines, the PQA aims to increase its handling capacity to 85 million tonnes per annum, an increase of 150%.

PQA is committed to the objectives laid out under the National Trade Corridor, i.e. capacity enhancement, deeper draught berths, competitive tariffs and uninterrupted flow of cargo. PQA plans to deepen its navigation channel at a cost of US$ 100 million.

The Port Authority is also pursuing the development of industrial zones. Plans are in the pipelines to spend more than Rs. 13 billion on infrastructure facilities in various industrial zones.

Currently 104 projects are already operational while 179 are in construction phase. The completion of these will not only accelerate industrialisation in the country, but will also be a valuable source of employment generation.

During the last 3 years a marked improvement has also been witnessed in revenue growth. The revenue generation over the last five years was increased from Rs. 2 billion to Rs.3.4 billion. The PQA is currently pursuing a large number of projects for capacity enhancement and industrialization, attracting foreign direct investment (FDI) and simultaneously undertaking major infrastructure development to enhance its efficiency. The port has already attracted US $ 1.5 billion of FDI.

c) Pakistan National Shipping Corporation (PNSC)

PNSC fleet comprises of 14 vessels with a total capacity of 536,821 dwt. The fleet consists of 10 multi-purpose cargo vessels, 3 Aframax crude oil tankers and one Panamax bulk carrier vessel which were acquired through PNSC’s own resources. The three Aframax oil tankers are participating in national and regional crude oil trade. PNSC has carried crude oil cargoes for India, Bangladesh and Sri Lanka. During fist six months of the current fiscal year, the PNSC has lifted 5.87 million tonne of liquid cargo and 1.3 million tonne of dry cargo. The Corporation is continuing with its efforts to add more vessels. The share of lifting cargo has increased from 10.55% in 2001 to 17.47% in 2007. PNSC is expected to increase its fleet in 2007-08 by acquiring 3 new ships. A loan agreement has been signed with a foreign bank for this very purpose for an amount of US$ 135 million. For the first six months of the current fiscal year, the PNSC group has generated Rs 7,471 million in revenue, a 11 percent increase from the revenue earned during the same period last year. For FY 2007-08, PNSC has posted a before tax profit of 1,957 Rs million, an increase of Rs 100 million from profits in the same period last year. The Corporation also witnessed a healthy increase of 9.1 percent in earnings per share.


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d) Gwadar Port

Gwadar, a district of Balochistan enjoys a strategic position on the coastline with immense trade potential for not only Pakistan, but also for the region in general. The purpose of developing a port at Gwadar is to stimulate economic growth in the western and northern parts of Pakistan, utilizing the available coastline resources of the country and also providing and outlet for land-locked Central Asian Countries and Afghanistan through transit trade and offering trans-shipment facilities. With a fully equipped and well-functioning port at Gwadar, Pakistan will be able to promote trade and transport with Gulf States, China, Europe, Africa and Central Asian Countries; unlock the development potential of hinterland; divert the influx of human resources from upcountry to Gwadar instead of Karachi; provide a socio-economic uplift of Gwadar, the province of Balochistan and the country in general; establish shipping related industries; reduce the congestion and dependency on existing ports; and serve as a regional hub for major trade and commercial activities.

Work on Gwadar Port started in 2002 with major construction having been completed in early 2007 and the official inauguration on 20th March 2007. The total cost of Phase I of the Gwadar Deep Water Port Project was Rs. 17.3 billion with generous support from the Chinese Government, who not only provided financial support but also technical expertise.

To facilitate the growth and development of Gwadar Port, the Government of Pakistan has granted special waivers and tax exemptions on construction equipment, machinery, corporate income and provisional and local taxes.

A deep sea port like Gwadar is already attracting global attention, and once it is fully developed with all supporting facilities required to handle trans-shipment and trade, Gwadar will become one of the important gateways to the region. In order to achieve the objectives of the Gwadar Deep Water Project and enhance the economic development of Pakistan, the operations and management of the port was handed over to the Port of Singapore Authority (PSA) under a 40 year agreement. PSA

is a global leader in port operations, and is already operating 19 ports in 11 different countries. They have the plans and capacity to turn Gwadar into a regional hub through their strong links in the Maritime world and their contacts with various shipping lines.

e) Future Outlook

National Trade Corridor

In 2005, the Government of Pakistan launched major initiatives around the National Trade Corridor Improvement Program (NTCIP) to reduce the cost of trade and transport logistics and bring the quality of services offered to international standards. The aim being a reduction in the cost of doing business and ultimately enhance industrialization and the competitiveness of the Pakistani economy

The word “corridor” is a vestige of the initial Peshawar-Karachi (North-South) focus of this initiative, but at present NTCIP has evolved into a national program to improve the overall cost and efficiency of all links in the chain (infrastructure and services) that support trade logistics. The NTCIP also aims to meet increased demand through both improved infrastructure and more efficient services, while keeping costs under control. It is a medium term program that eventually links to the Government’s Vision 2030.

With a reform agenda supplemented by a strong investment program, NTCIP has become, essentially, the medium term development framework for the transport sector. Policies have been developed to meet NTCIP’s challenges: (a) modernize and streamline trade and transport logistics practices and customs; (b)improve port efficiency, reduce the costs for port users and enhance port management accountability; (c) create a commercial and accountable environment in Pakistan Railways and increase private sector participation in operation of rail services; (d) modernize the trucking industry and reduce the cost of externalities for the country; (e)sustain delivery of an efficient, safe and reliable National Highways system; and (f) promote and ensure safe, secure, economical and efficient civil aviation operations and boost air trade.


235

Since the launch of the NTCIP, some early gains of the program have already been achieved: (i) reduction of port entry charges by 15 percent at Karachi and Port Qasim; (ii) reduction of port transit times from nine to four days and reductions of customs clearance times from four to less than one day for containers; (iii) increase in daily freight express trains on the main north-south corridor from 1 to 5, reducing up-country container travel times by 10-20 percent; (iv) reduction of import tariffs on new trucks; (v) the approval of the first Trucking Policy (covering the overall road freight industry) followed by an organized effort to start preparation and implementation of this policy; (vi) the approval of the new civil aviation policy after a long series of consultations (including the Government seeking public comments for the first time in the history of civil aviation in Pakistan); (vii) the approval of the trade facilitation policy for Pakistan;(viii) Pakistan Railways preparing the very first draft “Network Statement” which is a key step towards movement on track access; (ix) main-streaming of Public Private Partnership in the NTCIP effort by the setting up of a specific sub-

committee under the NTCIP task force led by the Infrastructure Projects Development Facility; (x) finalizing the overall transport policy document for Pakistan with ADB and World Bank collaborating on its development and a road map being laid down by the Planning Commission for its finalization; (xii) Port Qasim Authority preparing its first Business Plan which is now in the system for approval; (xiii) the discussion of the first draft of the revised Afghanistan- Pakistan Transit Trade Agreement; (xiv) the procurement of Pakistan Automated Customs Community System.

Telecom Sector

Telecom sector continued to show stellar growth in last few years. Tele-density in the country has jumped from a mere 6% to 57% (Mar- 08) in few years. Pakistan was far behind in terms of telecom penetration few years back compare to its peer countries like India and Sri Lank however; its tele-density crossed both of these countries in last two years. Prudent policies of the government and concrete steps by the regulator have placed Pakistan telecom sector among rising economies like Malaysia and Singapore. Pakistan telecom sector has emerged as the fastest growing sector in the world where the infrastructure and subscriber growth patterns are unmatched all across the region. On average, more than 2 million subscribers are being added on cellular mobile networks per month which is an exemplary growth in the region. Currently, the total subscription base of cellular mobile companies is about 80 million while the WLL subscribers are 2.2 million. WLL is a latest technology introduced in Pakistan especially to cover the digital divide between rural and urban areas.

Telecom Sector Overview

Fixed Tele-density has slightly declined from 3.1% in 2006-07 to 2.9% in 2007-08 (Mar-08). Major reason behind this decline is the churn of subscribers from fixed line to wireless based services like WLL and mobile services. WLL sector is performing well and its tele-density has reached to 1.48% in 2007-08 (Mar-08). Total subscribers of WLL in Pakistan crossed 2.3 million in March 2008 which has boosted tele-density in the country.

Tele-densities of Regional Countries (%)

46

12

26

45

12

17

23

29

37

79

1213

20

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9

15

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57

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Bangladesh

Nepal

• Teledensity includes fixed, WLL and mobile • Bangladesh 2007-08 (Estimated) • As of Dec 2007 execpt Pakistan Mar 08

Source: Websites of Telecom Regulatory Authorities

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236

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k%


237

Fixed Local Loop Services

Fixed-line telephony in Pakistan is one of the difficult areas where the incumbent operator, PTCL, holds monopoly with share of more than 98% of the total Fixed-line subscribers. Fixed Local Loop (FLL) growth remained about half percent during the previous year, slow growth is due to the cumbersome activity of laying cables. However, new operators are gaining momentum in fixed-line telephony though their services remained localized in main cities by targeting businesses in the first place. FLL subscribers reported 4.6 million and tele-density is 2.9% at the end of March 2008.

Wireless Local Loop

Wireless Local Loop services were introduced in Pakistan after deregulation of local loop sector in 2004. The Authority auctioned frequency for commercial operations of WLL services. A total of 17 companies won WLL licenses, out of which six operators obtained WLL license in all 14 telecom regions after winning the frequency. Out of these 17 WLL companies 7 (PTCL, Worldcall, Telecard, Great Bear, Burraq, Wateen and Mytel) are fully operational. The recent development is the introduction of WiMax technology by WLL operators, which will make available high quality broadband data/ Internet services. Total WLL subscribers have reached 2.3 million and the tele-density is 1.48. The sector has witnessed 65% growth in subscribers during 2006-07. PTCL is currently leading the WLL market as well with maximum share of 53% followed by

26% share of Telecard. In addition, the WLL operators are also providing Payphone facilities to the general public. There are a total of 225,980 wireless PCOs in Pakistan.

Value Added Services

Value added Services have been deregulated since 1990 in Pakistan and private operators are providing these services to consumers. In 2005 PTA introduced Class Value Added Service (CVAS ) regime where most of the CVAS licenses have been merged into one single license. Some of the services have been exempted by the Authority from obtaining license and the process of simple registration has been established for convenience of operators and telecommunication services users.

Since the introduction of CVAS licensing regime in October 2005, PTA has issued 224 CVAS licenses and 4 Class Value Added Registrations (161-Voice Class Value Added Services licenses, 67-Data Class Value added services Licenses). Out of 161 “Voice TYPE” CVAS licenses, 153 Licenses have been issued to CPP operators

Payphones

All over the world, payphones are regarded as the poor man’s telephony. They provide easy access to people who can not afford to have telephone access at home. It is also a source of self employment in developing countries. Card payphone service in Pakistan was deregulated in 1990s.

17,3

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2006

2007

'Mar

- 08

Fixed Line Connections (2004-2007)


238

During the last one and a half year a number of new companies have applied for Voice Class Value Added services license. Now, these companies are joining hands with mobile Companies to establish Mobile PCOs rather than fixed line PCO. Mobilink, Telenor and CMPak (Paktel) have started providing Mobile PCOs after obtaining the permission from PTA. Similarly, some old players of CPP industry themselves got licenses for WLL and now they are offering services on their WLL networks.

Total payphones reached to 471,410 at the end of December 2007. Currently, more than 121,358 Fixedline, 262,116 WLL and 57,939 Mobile PCOs are working all across the country.

Broadband Services

Pakistan's broadband market has been slow despite the fact that services have been available since almost five years. Currently there are a total of almost 12,689 Broadband subscribers which provide dismal picture when compared with other similar economies. Telecom regulator is trying hard to improve broadband penetration in Pakistan; however, factors like lack of education, IT equipments are main hurdles in the way of its growth. To make the service affordable for common man, PTA has already reduced Bandwidth charges tremendously.

Internet Services

Internet service is becoming an integral part of life in Pakistan particularly in urban areas where large portion of populace using it for different purposes. Most Airlines including PIA and Air Blue have started e-ticketing through Internet to provide better and efficient services to its customers. Internet is also being used for educational and entertainment purposes and its use is increasing very fast. Major reason for rapid growth of the service is low cost of the service which make service affordable to poor strata of the population. Almost 70 companies are providing Internet service all across the country.

According to estimates by the Internet Service Providers Association of Pakistan (ISPAK), currently there are about 3.5 million internet subscribers all across in Pakistan where total users crossed 17 million marks. Currently around 3,008 cities are connected to internet cities.

Telecom Economy

Foreign Direct Investment (FDI)

Government has created a conducive and investor friendly environment in the telecom sector by awarding licenses in a fair and transparent manner. Award of cellular mobile licenses increased Foreign Direct Investment considerably.

127,910

184,920

279,320

353,194387,490

471,410

050,000

100,000150,000200,000250,000300,000350,000400,000450,000500,000

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Payphones in Pakistan

*Including Payphones of FLL, WLL and Mobile companies

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2002

2003

2004

2005

2006

2007

Internet Subscribers (Millions)


239

During 2007-08 (July-March), an FDI inflow of US$ 811.6 million has come in the telecom sector which is almost one third of the total FDI in the country during the period. This trend has continued and during Jul 07-Dec 07, US$ 653.4 million FDI inflows came in the telecom sector and it is expected that during 2007-08 this will be increase further.

Contribution to Government Revenues

Telecom sector is a major contributor in generating revenues for the Government. During 2006-07 total revenue collected by the Government in the form of taxes, duties and regulatory charges was more than Rs. 100.5 billion. The government collected total of Rs. 36.6 billion against GST/CED, it is expected that this collection would grow exponentially in the coming years. The government also collects activation tax on new mobile connections @ Rs.500. During 2006-07 total amount collected in the form of activation tax was Rs. 17.6 billion. Similarly PTA also deposited Rs. 7 billion to the national exchequer [Table 14.8].

Employment

The telecommunications sector liberalization in Pakistan has created huge employment opportunities (direct and indirect) in the country. It is estimated that over one million job opportunities have been created since the liberalization of the sector in 2003.

Table-14.8: Telecom Contribution to Exchequer (2007) (Rs. in Billions ) Period GST Activation Tax PTA Deposits Others Total

2001-02 8.9 0.12 0.04 0.99 10.05 2002-03 11.5 1.91 0.47 15.75 29.63 2003-04 12.1 4.02 0.69 21.59 38.40 2004-05 20.5 7.53 17.72 21.38 67.13 2005-06 26.8 11.40 17.38 21.55 77.10 2006-07 36.28 17.58 9.72 36.95 100.55 Source: Central Board of Revenue and Pakistan Telecommunication Authority. Others include custom duties, WH Tax and other taxes. Regulatory Steps for Promoting Telecom in Pakistan

Rural Telephony

PTA Launched a project of Tele-centres (Rabta Ghar) across Pakistan to provide basic telecom facilities to the people who cannot afford such telecom facilities at their own. PTA planned to set up 400 Tele-centres (Rabta Ghars) free of cost. The first phase of Rabta Ghar scheme has been launched during the year where 353 Rabta Ghar are being established. Each Rabta Ghar is being equipped with a PC, one Wireless PCO, One Internet enabled Wireless set, Printer, scanner, copier and fax (4 in 1 machine). In addition to that

each Rabta Ghar owner is being provided with a comprehensive training from the GID.

Technical Solution to Counter Illegal Telecom Traffic

PTA had taken several regulatory measures to counter the grey (Illegal) traffic in the country which is causing huge losses to the national exchequer and to the operators in Pakistan who have invested heavily in telecommunications infrastructure. PTA has estimated that approximately US$ 50 million (Rs 3 billion approx) loss accrued per annum to national exchequer due to international traffic leakage. To

FDI in Telecom Sector

1905.1 1,824.20

653.4

0

500

1000

1500

2000

2005-06 2006-07 Jul-Dec 07

US$

Milli

on


240

control this leakage, PTA has acquired technical solution to detect/block all illegal traffic bypassing legitimate gateway exchanges in Pakistan. To overcome this menace, Pakistan Telecommunication Authority (PTA) has signed an agreement with “Inbox Business Technologies” to acquire and deploy Technical Solution [See Table-14.9].

The Technical Solution has been developed by NARUS, Inc, a US based company which is also the leader in carrier-class security for the world's largest Internet Protocol (IP) networks. It is a production proven solution which is currently being used by various telecom operators across the globe. The list includes AT&T, Telecom Egypt, Saudi Telecom and Brazil Telecom, to name a few.

Table-14.9: Direct and Indirect Employment in Telecom Sector of Pakistan Sector 2003-04 2004-05 2005-06 2006-07 Cellular Mobile 130,770 242,026 516,760 743,025 Direct 6,000 9,000 10,000 12,000 Indirect 44,296 84,087 188,754 273,779 Induced 80,474 148,939 318,006 457,246 Local Loop 12,898 WLL 1,318 2,303 2,917 2,500 LDI 99,231 106,942 112,943 117,666 Broadabnd 345 462 623 746 Payphones 231,150 349,150 441,493 484,363 Equipment vendors/suppliers 3,254 4,485 4,996 5,500 TOTAL 466,068 705,368 1,079,732 1,366,698

Source: Telecom Engineering Consulting House and PTA estimates PTA check on Unauthorized Sale of SIMS

Pakistan Telecommunication Authority (PTA) has started checking the unauthorized sale of new SIMs for the last few years to ensure that new mobile connections are issued after proper scrutiny of documents. PTA had earlier directed that franchisees must acquire the copy of the Computerized National Identity Card (CNIC) of the customer while issuing mobile telephone numbers. Various teams of PTA Zonal offices at Karachi, Lahore, Muzaffarabad, Peshawar, Quetta and Rawalpindi carried out surprise checks and recommended sealing the franchisees found selling cell phone SIMs without appropriate procedures and records. PTA has taken number of steps to deal with this issue and has directed cellular mobile companies to ensure that new SIMs are sold only through its franchisees or their authorized sale points. PTA and cellular service providers have simultaneously embarked on an awareness raising campaign employing the media to encourage the general public to get their connections transferred in their names if they have not done so already.

Quality of Service Survey of Mobile Companies

Services of the operators are continuously monitored in order to ensure quality as per the license conditions. Previously, PTA conducted four manual comprehensive Quality of Service (QoS) surveys of Mobile Operators. Fifth QoS survey of mobile operators was conducted by PTA Zonal Offices located at Peshawar, Rawalpindi, Lahore, Karachi and Quetta from September to November 2007, using recently procured state of the art monitoring equipment. The services of five GSM operators i.e. Ufone, Mobilink, Telenor, Warid, and CMPak were checked in selected major and small cities. Service parameters including Network Accessibility, Service Accessibility, Access Delay, Voice Quality and SMS were checked with the automated monitoring tool.

3 G Licensing

The Mobile Cellular Policy 2004 provides framework for the award of 3rd Generation (3G) Mobile Licensing/spectrum auction. Similarly, Cabinet Committee on Regulatory Bodies decided that three 3G mobile licenses/spectrum shall be auctioned amongst existing mobile operators in Pakistan. PTA therefore was required to award 3G


241

licenses after vacation of the 3G bands by FAB. Consequently Frequency Allocation Board was tasked to vacate frequency spectrum identified for the 3G auction and the Authority prepared Information Memorandum for 3G spectrum auction/licensing The draft IM was circulated to all stake holders including mobile operators for their opinion and input. The industry strongly recommended delay in the licensing of 3G services. The industry is of the view that the mobile data market in Pakistan is insignificant, the base price is very high and the local market is not ready for it. The Authority therefore considering operators (who are the main stake holders) viewpoint, has forwarded industry’s concern and its own viewpoint to the government of Pakistan. The industries is worried about the cost of the spectrum and are interested that instead of auction the spectrum should be given to all of the operators at reasonable price. FAB is still working on the vacation of the band and as soon the same is cleared, PTA would issue IM and initiate process for 3G spectrum auctions.

III. Electronic Media

a) Pakistan Electronic Media Regulatory Authority (PEMRA)

PEMRA was setup under an Ordinance in March 2002 to oversee and regulate private broadcast media affairs in the country. For more than five decades since independence, people have had very limited access to information, education and entertainment. The environment was never as conducive for the private media to flourish. It was for the first time that electronic media was opened up to the private sector in 2002. Complete freedom and facilitation served as a catalyst for the unprecedented growth of electronic media in a short span. Today there are nearly 50 private TV channels transmitting information, entertainment and education to all nooks and corners of the country against none, five to six years ago. This has also opened new vistas for investment and employment.

Within a few years, Pakistan has developed a modern media network encompassing all mediums such as Satellite TV, Mobile TV, IPTV, FM Radio

Stations, MMDS, and Cable networks etc etc. free and widespread access to media has kept large portions of the nation up to-date with national and international developments, and disseminated information and education at an unprecedented level.

PEMRA has issued IPTV licences to two mainstream companies making Pakistan the sixth country in the region to adopt such technology. This service is due to be rolled out in the fiscal year 2008-09. Telenor and Mobilink have also attained Mobile Tv licenses from PEMRA.

During the last three years, PEMRA has issued 33 new licenses for Satellite TV stations with the total reaching 36 by December 2007. 24 new satellite TV licences have been issued in the year 2007-08. The introduction of “Landing Rights” has brought foreign channels under the regulatory province of PEMRA. To date, 33 foreign channels have been granted Landing Right permissions, including 8 new channels in the fiscal year 2007-08.

PEMRA has maintained its efforts to reach the milestone of having at least one FM radio station in each district of the country. 51 new FM radio licences have been issued so far through an open and transparent bidding process. Total number of FM radio licenses issued to date is now 106, with 14 for Universities teaching Mass Communications. Of these 82 FM stations are already on air. 6 FM licenses have also been granted for the AJK, a first for the area. Radio licenses have been awarded to 3 new stations during July 2007- March 2008.

State of the art broadband wireless point-to-multipoint technology is also being encouraged by PEMRA, with a total of 6 MMDS licenses having been issued throughout the country.

Cable TV remained the fastest growing sector in the national electronic media area. To date, PEMRA has issued 1874 licenses to cable operators.


242

b) Pakistan Television Corporation Limited (PTV)

This year, PTV played a significant role in covering and conducting the Elections of 2008 for the National Assembly as well as the Provincial Assemblies. In this regard, PTV had made extra ordinary arrangements by providing a live telecast all over the world, with a marathon transmission that lasted 72 hours. PTV was also efficient in providing the latest positions of the Election 2008 results for the public as soon as they received the information from their correspondents that were placed across the different constituencies of the country.

PTV also imported four Drive Away Digital Satellites News Gathering (DSNG) units that are installed in the vans and also handed to the respective centres for live coverage of news, current affairs and sports. Besides this, PTV procured a number of electronic equipment for their TV centres as well as Satellite Video phones and BGAN equipment for efficient news reporting.

PTV is now operating five channels in the country, namely: PTV Home; PTV News; PTV Bolan; PTV National; and PTV Global (for UK, USA). For this, it installed Satellite Earth Stations for all five channels, digitalization of two studios at all five TV centres and the provision of one main OB Van each for the five TV centres.

c) Pakistan Broadcasting Corporation (PBC)

Radio is the fastest, mobile and cheapest electronic media which is capable of reaching the masses far and near. With its varied and wide ranging programmes, PBC is catering to all segments of society. PBC has 31 Broadcasting Houses, 33 medium wave transmitters, 8 short wave transmitters and 21 FM transmitters which transmitted programmes for listeners at home and abroad. Programmes in 21 national and regional languages are broadcast on the medium wave in Home Service and 16 foreign languages in the External Service for foreigners and in national language in the World Service for Pakistanis living abroad. The network of Radio Pakistan covers 98 percent of the population and 80 percent of the total area of the country.

Presently 8 FM Stations are broadcasting FM 101 Service. In addition to FM-101 and 93, other FM stations have also been established in 12 important cities of Pakistan which besides National circuit programs radiate regional services emphasizing on community issues and matters related to local populations.

PBC News is the biggest source of dissemination of news in the country. Its General News room in Islamabad and attached units are presently putting on air 136 news bulletins daily. PBC is now accessible to audiences around the world through Internet and Asia SAT-3.

PBC took an active role in fostering motivation and awareness about the local elections held this year among the general population. Equitable and equal opportunities were provided to all political parties to air their point of view.

An amount of Rs. 483,953 million has been allocated in the PSDP of current fiscal year, for the implementation of 10 on-going/ new development projects. An additional amount to the tune of Rs 50 million has been sanctioned by the Planning Commission for establishment of 15 FM Radio Stations. Out of the allocated amount, a sum of Rs 120.988 million was released in November, 2007 for the first quarter, and has been fully utilized. A sum of Rs 76.2 million was released in April 2008 for the second quarter. The following development projects are under way:

• Completion of 100 KW MW Transmitting Station and Broadcasting house at Turbat.

• Balancing & Modernization of Equipment Phase-V

• Commissioning of 100KW SW Transmitter installed at HPT-COMPLEX, Rawat.

• 8 FM transmitters for the radio coverage of G.T Road between Rawalpindi and Lahore.

• 10 FM transmitters for coverage of M-1 and M2 motorways.

• Establishment of 47 FM radio stations


243

• Establishment of satellite up-linking stations at PBC Islamabad, Lahore, Karachi, Peshawar, and Quetta.

Pakistan Post Office

Pakistan Post Office is a dedicated state enterprise that provides a wide range of postal services and products. For a vast country like Pakistan, an efficient postal system is essential for cohesiveness of a large population. Its commitment is for serving every one, every day and every where. It provides postal facilities through a network of over 12, 343 post offices strategically placed across the country. In compliance with Government welfare policies, the Pakistan Post Office is providing a variety of services on behalf of both Federal and Provincial Governments and autonomous/corporate entities.

Pakistan Post has also taken various measures to streamline the post office system on more modern lines. One major area of improvement is the introduction of information technology, where a number of projects have already been completed and a few more in the pipeline. These projects include: Counter Automation; Express Mail Track

& Trace System (EMTTS); Electronic Money Transfer; Computerized Military Pension Payment System; Computerization of Postal Life Insurance; and Computerization of the office of the Chief Controller Stamps (CCS).

Pakistan Post is also involved in international postal services and has mail links with all countries except Israel. The mail exchange with these countries takes places under the Universal Union Rules & Regulations. Accounts with foreign postal administrations are settled under these regulations. The net earnings of the Pakistan Post Office in foreign exchange services during July-March 2008 stood at Rs. 81.6 million. Foreign remittances in the form of money orders totalled Rs. 8.22 million during the same period. Furthermore, keeping in view the difficulties faced by the general public for depositing their utility bills, Pakistan Post has started collecting PTCL, Electricity and Gas bills throughout the country while WASA bills are collected in Hyderabad, Faisalabad, Karachi, Lahore, Multan, Quetta and Sialkot. It earned a healthy Rs. 483.47 million from these utility bills collection in the shape of commission for the period of July-March 2008.

TABLE 13.1

(Contd.)Gross Earnings (Million Rs)

Shipping Pakistan PakistanFiscal Cargo Handled at No. of Dead Railways NationalYear Karachi Port (000 tonnes) Vessels Weight Shipping

Total Imports Exports Tonnes Corp.1990-91 18,709 14,714 3,995 28 494,956 6696 3,865.01991-92 20,453 15,267 5,186 28 494,956 8236 4,063.01992-93 22,170 17,256 4,914 29 518,953 9031 3,137.01993-94 22,569 17,610 4,959 27 595,836 9134 3,302.01994-95 23,098 17,526 5,572 15 264,410 9224 4,311.01995-96 23,581 18,719 4,862 17 290,353 8365 6,962.01996-97 23,475 18,362 5,113 15 261,817 9394 7,761.51997-98 22,684 17,114 5,570 15 261,836 9805 4,597.01998-99 24,053 18,318 5,735 15 261,836 9310 3,707.01999-00 23,761 18,149 5,612 15 261,836 9572 3,483.02000-01 25,981 20,063 5,918 14 243,802 11938 5,458.72001-02 26,692 20,330 6,362 14 243,749 13346 4,555.52002-03 25,852 19,609 6,273 13 229,579 14810 5,405.02003-04 27,813 21,732 6,081 14 469,931 14635 6,881.92004-05 28,615 22,100 6,515 14 570,466 18027 7,860.02005-06 32,270 25,573 6,697 15 636,182 18184 7,924.62006-07 30,846 23,329 7,517 15 636,182 19195 ..(Jul-Mar)2007-08 20,545 * 15,090 * 5,455 * 14 636,182 13954 # 7,471.0

Source: (i): Ministry of Railways.. Not available (ii): National Transport Research Center* Till Jan-08 (iii): Karachi Port Trust# Estimated (iv): Pakistan National Shipping Corporation

TRANSPORT

245

Chapter 15

ENERGY Energy is essential for the maintenance and development of the quality of human life as well as for economic activities. To maintain accelerated growth momentum, the economy needs reliable, uninterrupted and affordable supply of energy. The per-capita consumption of energy is viewed as an important indicator of economic development of any country. Countries with higher Human Development Index (HDI) have higher per capita energy consumption.

The world is facing a daunting task to meet the growing energy demand that is likely to double in the next twenty years. Pakistan is among those developing countries where the need to tackle the challenge is greatest. Its energy demand is projected to reach 129 million tones of oil equivalent (MTOE) in the next 15 years. Ensuring availability of usable and affordable energy is therefore, the bedrock of Pakistan’s current and future developments. In recent years, the energy demand has increased sharply in Pakistan owing mainly to strong economic growth and the attendant rise in per capita income. The supply of energy, on the other hand, has remained far too short to match growing demand because the existing energy resources could not be sufficiently explored and exploited. Consequently, the energy supplies remained deficient to offset the growing demand of domestic, industrial, commercial and power generation needs. Despite being a high priority item on the economic agenda of the government, the growth of the energy sector remained slow due to a host of factors such as

inadequate institutional framework, financial constraints, sky-rocketing oil prices, high risks, low interest of private sector, heavy costs and complex character of hydrocarbon development. To address the issue of demand-supply gap, the government is working on many fronts, including the import of electricity and gas from Iran, utilization of 185 billion reserves of coal, development of small hydro projects, promotion of efficient use of energy, and acceleration of current programmes of alternative energy development.

Energy Consumption Mix:

a. Global

Total energy consumption mix is changing globally over the years. Oil has been losing its share; gas and coal has been gaining importance; while the share of nuclear energy has remained stagnant (See Figure 15.1). The International Energy Outlook (IEO) has projected a 50 percent increase in the demand for oil by 2030. Although growth in the energy consumption was 3 percent in 2004, the annual increase of only 1.6 percent would lead to a 50 percent growth in consumption by 2030. There is a growing demand for oil in Asia due to higher economic growth and it is expected that the oil consumption of the Asian region will exceed the North America by 2010; and by 2020 its demand will become nearly half of the world’s total demand for oil. The rising demand for oil and its limited supply has created deep concern throughout the world as it is believed that nearly all the largest oil fields have already been discovered and are being exploited.

Pakistan E

246

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Energy

247

The consumption of petroleum products, gas, electricity and coal during the first nine months (July-March 2007-08) of the current fiscal year

increased by 10.1 percent, 2.8 percent, 5.7 percent and 11.9 percent, respectively over the corresponding period of last year (See Table 15.1).

Table 15.1: Annual Energy Consumption

Fiscal Year Petroleum Products Gas Electricity Coal Tones (000)

Change (%)

(mmcft) Change (%)

(Gwh) Change (%)

M.T* (000)

Change (%)

1997-98 16,624 607,890 44,572 3,158.7 1998-99 16,647 0.1 635,891 4.6 43,296 -2.9 3,461.4 9.6 1999-00 17,768 6.7 712,101 12.0 45,586 5.3 3,167.9 -8.5 2000-01 17,648 -0.7 768,068 7.9 48,584 6.6 4,044.7 27.7 2001-02 16,960 -3.9 824,604 7.4 50,622 4.2 4,408.6 9.0 2002-03 16,452 -3.0 872,264 5.8 52,656 4.0 4,889.9 10.9 2003-04 13,421 -18.4 1,051,418 20.5 57,491 9.2 6,064.5 24.0 2004-05 14,671 9.3 1,161,043 10.4 61,327 6.7 7,893.8 30.2 2005-06 14,627 -0.3 1,223,385 5.4 67,603 10.2 7,714.0 -2.3 2006-07 16,847 15.2 1,221,994 -0.1 72,712 7.6 7,894.1 2.3 Avg. 10 years 1.2 7.6 5.5 9.2 July-March 2006-07 12,114 929,516 52,246 5,414 2007-08 (e) 13,342 10.1 955,625 2.8 55,208 5.7 6,059 11.9 e: estimated for coal Source: Hydrocarbon Development Institute of Pakistan *Million Ton a). Petroleum Products

During the first nine months of the outgoing fiscal year 2007-08, the consumption of petroleum products increased by 10.1 percent. The consumption of petroleum products declined by 29.7 percent in industry, but registered an increase in household, agriculture, transport, and power sector by 2.5 percent, 29.9 percent, 19 percent and 10.4 percent, respectively (See Table-15.2). Overall, the consumption of petroleum products has been declining in the household sector for two decades, mainly due to accessibility of alternative

cheaper fuels such as coal, natural gas and LPG as well as surge in their prices. On the other hand, consumption in the agriculture sector shows a massive increase due to higher demand in this sector and less availability of electricity in the last two years in particular. Similarly, consumption in the power sector increased due to non-availability of alternative sources of energy. The annual growth in the consumption of petroleum products by major sectors and their relative shares during 1997-98 to 2007-08 are provided in Tables 15.2 & 15.3, respectively.

Table 15. 2: Consumption of Petroleum Products (000 tones) (Percentage Change)

Year House holds

Change (%)

Industry Change (%)

Agriculture Change (%)

Trans-port

Change (%)

Power Change (%)

Other Govt.

Change (%)

Total

1997-98 499 2,081 245 7,364 6,054 381 16,624 1998-99 493 -1.2 2,140 2.8 249 1.6 7,864 6.8 5,526 -8.7 376 -1.3 16,648 1999-00 477 -3.2 2,116 -1.1 293 17.7 8,308 5.6 6,228 12.7 346 -8.0 17,768 2000-01 451 -5.5 1,924 -9.1 255 -13.0 8,158 -1.8 6,488 4.2 372 7.5 17,648 2001-02 335 -25.7 1,612 -16.2 226 -11.4 8,019 -1.7 6,305 -2.8 464 24.7 16,960 2002-03 283 -15.5 1,604 -0.5 197 -12.8 8,082 0.8 6,020 -4.5 266 -42.7 16,452 2003-04 231 -18.4 1,493 -6.9 184 -6.6 8,464 4.7 2,740 -54.5 309 16.2 13,421 2004-05 193 -16.5 1,542 3.3 142 -22.8 9,025 6.6 3,452 26.0 317 2.6 14,671 2005-06 129 -33.2 1,682 9.1 82 -42.3 8,157 -9.6 4,219 22.2 359 13.2 14,627 2006-07 106 -17.7 1,596 -5.1 97 18.3 7,982 -2.1 6,741 59.8 325 -9.1 16,847

July-March.

2006-07 80 1,224 67 5,730 4,762 252 12,114 2007-08 82 2.5 861 -29.7 87 29.9 6,816 19 5,255 10.4 243 -3.6 13,342

Source: Hydrocarbon Development Institute of Pakistan


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The transport sector is the largest user of petroleum products accounting for 51.1 percent of consumption, on average, followed by power

sector (39.4 percent), industry (6.5 percent), agriculture (0.7 percent) and household (0.6 percent).

Table 15.3: Consumption of Petroleum Products (Percentage Share) Year Households Industry Agriculture Transport Power Other Govt. 1997-98 3.0 12.5 1.5 44.3 36.4 2.3 1998-99 3.0 12.9 1.5 47.2 33.2 2.3 1999-00 2.7 11.9 1.6 46.8 35.1 1.9 2000-01 2.6 10.9 1.4 46.2 36.8 2.1 2001-02 2.0 9.5 1.3 47.3 37.2 2.7 2002-03 1.7 9.7 1.2 49.1 36.6 1.6 2003-04 1.7 11.1 1.4 63.1 20.4 2.3 2004-05 1.3 10.5 1.0 61.5 23.5 2.2 2005-06 0.9 11.5 0.6 55.8 28.8 2.4 2006-07 0.6 9.5 0.6 47.4 40.0 1.9 Avg. 10 years 1.9 11.0 1.2 50.9 32.8 2.2 July-March 2006-07 0.7 10.1 0.6 47.3 39.3 2.1 2007-08 0.6 6.5 0.7 51.1 39.4 1.8

Source: Hydrocarbon Development Institute of Pakistan b). Natural Gas

Natural gas has been gaining immense substance around the world due to its quality of being a cleaner fuel compared to coal and oil. Pakistan depends heavily on its natural gas reserves for different sectors of the economy. Because of its importance as an alternative and relatively cheaper fuel, the share of gas in total energy is on the rise.

Table 15.4 depicts the annual change in the consumption of gas by various users during 1997-98 to 2007-08. During July-March 2007-08, the consumption of gas in transport sector increased by 27.8 percent, while household consumption grew by 11.6 percent followed by fertilizer (3.5 percent). However, the consumption of gas declined in commercial sector (-7.1 percent), cement (-5.1 percent) and power sectors (-1.2 percent).

Table 15.4: Consumption of Gas (Billion cft) ( Percent change)

Year House hold

Change (%)

Comm- ercial

Change (%) Cement Change

(%) Ferti- lizer

Change (%) Power Change

(%) Indus- trial Change (%)

Transport (CNG)P

mmcft Change (%)

1997-98 134 19 12 148 179 115 490 1998-99 131 -2.2 21 10.5 8 -33.3 167 12.8 184 2.8 121 5.2 2,182 345.3 1999-00 139 6.1 22 4.8 9 12.5 177 6.0 227 23.4 135 11.6 2,426 11.2 2000-01 141 1.4 21 -4.5 7 -22.2 175 -1.1 281 23.8 139 3.0 4,423 82.3 2001-02 144 2.1 22 4.8 7 0.0 178 1.7 315 12.1 151 8.6 7,369 66.6 2002-03 154 6.9 23 4.5 3 -57.1 181 1.7 336 6.7 165 9.3 11,320 53.6 2003-04 155 0.6 24 4.3 8 166.7 185 2.2 470 39.9 193 17.0 15,858 40.1 2004-05 172 11.0 27 12.5 13 62.5 190 2.7 507 7.9 226 17.1 24,443 54.1 2005-06 171 -0.6 29 7.4 15 15.4 198 4.2 492 -3.0 279 23.5 38,885 59.1 2006-07 186 8.8 31 6.9 15 0.0 194 -2.0 434 -11.8 307 9.9 56,446 45.2 July-March

2006-07 155 28 9 144 324 229 40,459 2007-08 173 11.6 26 -7.1 9 -5.1 149 3.5 320 -1.2 227 -0.9 51,700 27.8 P: Provisional Source: Hydrocarbon Development Institute of Pakistan

The relative share of gas consumption by end users during the last ten years is documented in Table 15.5. At present, the power sector is the largest user of gas accounting for 33.5 percent share

followed by the industrial sector (23.8 percent), household (18.1 percent), fertilizer (15.6 percent), transport (5.4 percent) and cement (0.9 percent).

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Table 15.5: Consumption of Gas (Percentage Share)

Year Households Commercial Cement Fertilizer Power Industrial Transport/ CNG

1997-98 22.0 3.1 2.0 24.3 29.4 18.9 0.1 1998-99 20.6 3.3 1.3 26.3 28.9 19.0 0.3 1999-00 19.5 3.1 1.3 24.9 31.9 19.0 0.3 2000-01 18.4 2.7 0.9 22.8 36.6 18.1 0.6 2001-02 17.5 2.7 0.8 21.6 38.2 18.3 0.9 2002-03 17.7 2.6 0.3 20.8 38.5 18.9 1.3 2003-04 14.7 2.3 0.8 17.6 44.7 18.4 1.5 2004-05 14.8 2.3 1.1 16.4 43.7 19.5 2.1 2005-06 14.0 2.4 1.2 16.2 40.2 22.8 3.2 2006-07 15.2 2.5 1.2 15.9 35.5 25.1 4.6 Avg 10 Year 17.4 2.7 1.1 20.7 36.8 19.8 1.5 July-March 2006-07 16.7 3.0 1.0 15.5 34.9 24.6 4.4 2007-08 18.1 2.7 0.9 15.6 33.5 23.8 5.4

Source: Hydrocarbon Development Institute of Pakistan.

c). Electricity

Table 15.6 and Table 15.7 exhibit the consumption of electricity during the last ten years. The consumption of electricity during 1997-98 to 2006-

07 has increased by an average rate of 5.5 percent per annum and 5.7 percent during the first nine months of the fiscal year 2007-08. Electricity consumption grew in all economic sectors during the last five years.

Table 15.6: Consumption of Electricity by Sectors ( (Percentage Change)

Year House hold Commercial Industrial Agriculture Street Light Other Govt.

Total GWH (000)

Change (%)

GWH (000)

Change (%)

GWH (000)

Change (%)

GWH (000)

Change (%) Gwh Change

(%) GWH (000)

Change (%)

1997-98 18.8 2.3 12.3 6.9 387 3.9 44,572 1998-99 19.4 3.2 2.4 4.3 12 -2.4 5.6 -18.8 224 -42.1 3.6 -7.7 43,296 1999-00 21.4 10.3 2.5 4.2 13.2 10.0 4.5 -19.6 239 6.7 3.6 0.0 45,586 2000-01 22.8 6.5 2.8 12.0 14.3 8.3 4.9 8.9 213 -10.9 3.5 -2.8 48,584 2001-02 23.2 1.8 3 7.1 15.1 5.6 5.6 14.3 212 -0.5 3.5 0.0 50,622 2002-03 23.7 2.2 3.2 6.7 16.2 7.3 6 7.1 244 15.1 3.4 -2.9 52,656 2003-04 25.8 8.9 3.7 15.6 17.4 7.4 6.7 11.7 262 7.4 3.7 8.8 57,491 2004-05 27.6 7.0 4.1 10.8 18.6 6.9 7 4.5 305 16.4 3.8 2.7 61,327 2005-06 30.7 11.2 4.7 14.6 19.8 6.5 7.9 12.9 353 15.7 4 5.3 67,603 2006-07 33.3 8.5 5.4 14.9 21.1 6.6 8.2 3.8 387 9.6 4.4 10.0 72,712 July-March 2006-07 23.5 3.8 15.5 6 284 3.1 52,246 2007-08 25.2 7.2 4.1 7.9 15.7 1.3 6.5 8.3 321 13 3.4 9.7 55,208


A study of the sectoral consumption of electricity by economic groups identifies domestic sector as the largest consumer of electricity for the past many years. During the current fiscal year (July-March 2007-08), the consumption pattern remained more or less the same with the share of domestic consumption at 45.6 percent, industrial at 28.4 percent, agriculture at 11.8 percent, and commercial at 7.4 percent (See Table 15.7).

15.2. Supply of Energy

Primary energy refers to energy sources at the beginning of energy conversion chains. During the last ten years (1997-98 to 2006-07), the supply of crude oil has increased by an average rate of 6.9 percent per annum, while the supply of gas, petroleum products, coal and electricity has increased at an average rate of 10.2 percent, 1.4 percent, 9.3 percent and 5.8 percent per annum, respectively. The supply of crude oil, gas,


250

petroleum products, coal, and electricity during the first nine months (July-March 2007-08) of the current fiscal year increased by 6.5 percent, 2.7

percent, 7.4 percent, 13 percent and 4.4 percent, respectively over the corresponding period of last year (Table 15.8).

Table 15.7: The Share of Consumption of Electricity by End-Users Year Households Commercial Industrial Agriculture Street Light Other Govt. 1997-98 42.2 5.2 27.6 15.5 0.9 8.7 1998-99 44.8 5.5 27.7 12.9 0.5 8.3 1999-00 46.9 5.5 29.0 9.9 0.5 7.9 2000-01 46.9 5.8 29.4 10.1 0.4 7.2 2001-02 45.8 5.9 29.8 11.1 0.4 6.9 2002-03 45.0 6.1 30.8 11.4 0.5 6.5 2003-04 44.9 6.4 30.3 11.7 0.5 6.4 2004-05 45.0 6.7 30.3 11.4 0.5 6.2 2005-06 45.4 7.0 29.3 11.7 0.5 5.9 2006-07 45.8 7.4 29.0 11.3 0.5 6.1 Avg 10 Year 45.3 6.1 29.3 11.7 0.5 7.0 July-March 2006-07 45.0 7.3 29.7 11.5 0.5 5.9 2007-08 45.6 7.4 28.4 11.8 0.6 6.2


Table 15.8: Composition of Energy Supplies

Year Crude Oil Gas Petroleum

Products Coal Electricity Million Barrels

Change (%) (bcf)* Change

(%) (Mln.

T.) Change

(%) Mln.T) Change (%) (000Gwh)(a) Change

(%) 1997-98 50.4 700.0 17.0 4.1 62.1 1998-99 52.6 4.4 744.9 6.4 17.2 1.2 4.4 7.3 65.4 5.3 1999-00 53.3 1.3 818.3 9.9 18.5 7.6 4.1 -6.8 65.7 0.5 2000-01 73.6 38.1 857.4 4.8 18.9 2.2 4 -2.4 68.1 3.7 2001-02 75.1 2.0 923.8 7.7 18.7 -1.1 4.4 10.0 72.4 6.3 2002-03 76.0 1.2 992.6 7.4 18.0 -3.7 4.9 11.4 75.7 4.6 2003-04 80.3 5.7 1,202.7 21.2 15.4 -14.4 6 22.4 80.9 6.9 2004-05 85.3 6.2 1,344.9 11.8 16.8 9.1 7.9 31.7 85.7 5.9 2005-06 87.5 2.6 1,400.0 4.1 17.0 1.2 7.7 -2.5 93.8 9.5 2006-07 85.4 -2.4 1,413.6 1.0 19.4 14.1 7.9 2.6 98.4 4.9 Avg. 10 Year 6.9 10.2 1.4 9.3 5.8 Jul-March 2006-07(e) 62.0 1,062.1 13.6 5.4 71.0 2007-08(e) 66.0 6.5 1,090.6 2.7 14.6 7.4 6.1 13.0 74.1 4.2 *: Billion cubic feet Source: Hydrocarbon Development Institute of Pakistan. a: Giga Watt hour e: Estimated for coal and electricity

The supply of primary energy has increased by 49.5 percent in the last 10 years. The primary commercial energy supplies increased by 4.3 percent during 2006-07 to 60.4 million tones of oil equivalent (MTOE) from 57.9 MTOE in 2005-06. The slower growth during 2006-07 can be attributed to (i) lower consumption of oil

(HOBC, Kerosene, LDO and Furnace Oil) (ii) negative growth (-2 percent and -21.3 percent) in the import of High Speed Diesel (HSD) and Low Sulphur Furnace Oil, respectively, a marginal increase (0.7 percent) in the import of High Sulphur Furnace Oil. The per capita availability of energy grew by 2.61 percent in

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2006-07. The supply of energy however, grew strongly by 10.03 percent in the first nine months (July-March) of the current fiscal year and consequently, the per capita availability registered an increase of 7.7 percent -- the highest in the last

ten years. The annual trends of primary energy supplies and their per capita availability; measured in TOE from 1997-98 to 2007-08 are given in Table 15.9 and Figs. 15.4 & 15.5.

Table 15.9: Primary Energy Supply and Per Capita Availability Year Energy Supply Per Capita

Million TOE Change (%) Availability (TOE) Change (%) 1997-98 40.40 0.31 1998-99 41.72 3.26 0.31 2.62 1999-00 43.19 3.51 0.32 1.28 2000-01 44.40 2.82 0.32 0.63 2001-02 45.07 1.50 0.32 -1.25 2002-03 47.06 4.41 0.32 2.86 2003-04 50.85 8.06 0.34 5.25 2004-05 55.56 9.26 0.36 6.45 2005-06 57.88 4.18 0.37 2.48 2006-07 60.39 4.33 0.38 2.61 Jul-Mar 2006-07 45.35 0.29 2007-08 49.90 10.03 0.31 7.68 TOE- Tons of Oil Equivalent Source: Hydrocarbon Development Institute of Pakistan.

a). Crude Oil:

The balance recoverable reserves of crude oil in the country as on January 1st 2008 have been estimated at 339 million barrels. The average crude oil production during July- March 2007-08 was 70,166 barrels per day as against 66,485 barrels per day during the corresponding period of last year, showing an increase of 5.54 percent. During the

period under review, 31,378 (44.72 percent) barrels per day were produced in Northern region and 38,787 (55.28 percent) barrels per day in Southern region, as against 28,507 (42.87 percent) barrels and 37,978 (57.12 percent) barrels produced per day, respectively in the same period last year. During July-March 2007-08, production of crude oil has increased by 10.1 percent from

35.00

40.00

45.00

50.00

55.00

60.00

65.00

Figure 15.4: Energy Supply (Million TOE)

Source: Hydrocarbon, Development Institute of Pakistan


252

Northern region whereas production increased in Southern region by 2.1 percent, in comparison to the production in the same period of last year, resulting in an increase of 5.54 percent oil

production in the country. The company wise details of production of crude oil during July-March 2007-08 and corresponding period of the last fiscal year is given in Table 15.10.

Table 15.10: Production of Crude Oil

Region 2006-07 July-March 2006-07

July-March 2007-08 Change (%)

Northern Region 29,361.6 28,507.3 31,378.3 10.07 Dewan - - 89.9 - OGDCL 13,250.8 12,273.5 16,556.5 34.9 OPI 544.6 550.2 458.8 -16.6 POL 8,852.3 9,111.6 6,713.7 -26.3 PPL 4,865.9 4,892.2 5,071.4 3.66 MOL 1,848.0 1,679.9 2,487.9 48.1 Southern Region 38,076.0 37,977.8 38,787.2 2.13 OGDCL 23,081.3 22,623.8 24,571.5 8.6 BP (Pakistan) 11,028.7 11,377.1 9,558.3 -16.0 PPL 130.0 138.9 137.8 -0.77 BHP 2,005.6 2,039.2 2,537.3 24.43 OMV 84.2 91.9 90.8 -1.23 OPII 1,320.6 1,276.9 1,490.5 16.73 ENI 342.5 343.2 334.2 -2.6 Petronas 82.9 86.9 66.9 -23.0 Total: 67,437.6 66,485.1 70,165.5 5.54

Source: Ministry of Petroleum & Natural Resources b) Drilling Activities

During July-March 2007-08, a total of 52 wells have been drilled, including 14 wells in the public sector and 38 in the private sector as against 45 in the same period last year, registering an increase of 15.6 percent. Total investment of US$ 836 million

has been made in the outgoing fiscal year in the upstream sector. Table 15.11 provide the details of drilling activities of the public and private sector, engaged in the exploration and development of wells, with achievements during July-March 2007-08 and 2006-07.

0.30

0.32

0.34

0.36

0.38

0.40

Figure 15.5: Per Capita Availibility (TOE)

Source: Hydrocarbon, Development Institute of Pakistan

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Table 15.11: Drilling Activities (Achievements) (No. of Wells)

Sector 2006-07 July-March July-March Change (%) 2006-07 2007-08 Public Sector (OGDCL) 41 18 14 -22.22 i) Exploratory 19 9 5 -44.44 ii)Appraisal/Dev 22 9 9 0.00 Private Sector 36 27 38 40.74 iii) Exploratory 17 13 15 15.38 iv) Appraisal/Dev. 19 14 23 64.29 Total: 77 45 52 15.60

Source: Ministry of Petroleum & Natural Resources

c). Natural Gas:

Natural gas is a clean, safe, efficient and environment-friendly fuel. The Energy Security Action Plan of the Planning Commission estimated that Pakistan will be facing a shortfall in gas supplies rising from 1.4 Billion Cubic Feet (BCF) per day in 2012 to 2.7 BCF in 2015 and escalating to 10.3 BCF per day by the year 2025 (Figure

15.6). This forecast is based on expected annual GDP growth rate of 6.5 percent and average annual gas price delivered to the consumers at US$ 4 /Million British Thermal Units (MMBtu). In order to bridge the demand-supply gap, the government is working on many fronts, which includes Iran-Pakistan-India (IPI) gas pipeline project which has reached at fairly advanced stage.

As on January 1st 2008, the balance recoverable natural gas reserves have been estimated at 31.266 trillion cubic feet. Consumption of natural gas from July 2007- March 2008 is anticipated to increase from 3,352 million cubic feet per day (mmcfd) (2006-07) to 3,474 mmcfd, while the average production of natural gas during July-March 2007-08 was 3,965.9 mmcfd as against 3,876.4 mmcfd during the corresponding period of last year, showing an increase of 2.31 percent.

Natural gas is used in general industry to prepare consumer items, produce cement, fertilizer and generate electricity. Additionally, it is used in the transport sector in the form of CNG. Currently 27 private and public sector companies are engaged in oil and gas exploration & production activities. The company wise position reveals that the production of gas increased by 15.79 percent by BHP followed by 9 percent increase by OGDCL (See Table 15.12).

Figure 15.6: Pakistan Natural Gas Supply- Demand Balance (MMcfd)

0

2,000

4,000

6,000

8,000

10,000 12,000

14,000

FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY20 FY25

Indigenous Supply

Demand

5.8 Bcfd

10.3 Bcfd

2.7 Bcfd


254

Table- 15.12: Production of Natural Gas (mmcfd)

Company 2006-07 July-March (2006-07)

July-March (2007-08) Change (%)

BHP 305.3 310.8 359.9 15.79 ENI 384.9 389.1 378.7 -2.69 Dewan - - 19.2 - MGCL 472.5 473.4 468.2 -1.10 OGDCL 849.8 834.1 909.4 9.03 OMV 535.0 539.7 520.8 -3.51 OPI 100.5 103.7 81.6 -21.27 POL 42.2 43.6 36.0 -17.34 PPL 830.3 828.6 832.8 0.5 Tullow 3.0 2.5 17.8 617.97 PEL 31.4 31.8 30.9 -2.84 BP 229.1 229.3 224.0 -2.28 Petronas 26.6 27.1 23.5 -13.11 MOL 62.4 62.9 63.2 0.53 Total: 3,872.8 3,876.4 3,965.9 2.31

Source: Ministry of Petroleum & Natural Resources

(i) Liquefied Petroleum Gas (LPG)

Liquefied Petroleum Gas (LPG) is a colourless, odourless and environment friendly mixture of inflammable hydrocarbons. Its contribution is about 0.5% of country’s total energy supply mix. The use of LPG as a domestic fuel is being encouraged to slow the on-going deforestation in the areas where supply of natural gas is technically not viable. As a result of the government’s investment-friendly policies, LPG supplies have been increasing at annual rate of 12.6 percent during the last few years with supply of 648,572 Metric Ton in 2006-07. Government has allowed the use of LPG in automotives under the safety framework being regulated by Oil & Gas Regulatory Authority (OGRA). The primary aim of the LPG Policy is to ensure enhanced availability of the product at competitive price. The LPG marketing companies have imported around 23,362 MT during July 2007-08.

(ii) Compressed Natural Gas (CNG)

The Government is promoting the use of Compressed Natural Gas (CNG) to reduce

pollution caused by vehicles using motor gasoline and to improve the ambient air quality. A large number of vehicles have been and are still being converted to CNG mainly due to the fact that price of CNG is just 40 percent of the petrol price. There are about 2,068 established CNG stations in the country and approximately 1.7 million vehicles are using CNG. Pakistan has become the largest CNG consuming country among Natural Gas Vehicle (NGV) countries.

The government’s policy of de-dieselization is in place to switch vehicles currently running on diesel to CNG by providing adequate incentives. The provincial governments are working on this policy to encourage the use of CNG, which will ultimately cut down the cost of diesel oil import. In its first phase the diesel engine in intra-city urban public transport is being phased out (which include buses, mini-buses and wagons) in Karachi, Hyderabad, Lahore, Faisalabad, Peshawar, Quetta and Islamabad/Rawalpindi. This program will have a major impact on air quality of urban areas and will improve health standards as well.

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Salient Features of CNG Policy 2007

The main objectives of the CNG Policy 2007 are;

• To encourage CNG as a substitute of liquid fuel to reduce import bill.

• To provide cheaper and environmental friendly fuel.

• To discourage mushrooming growth of CNG outlets, with the announcement that there should be at least one km distance between two CNG stations.

• Enforcing better industry discipline & safety culture in the CNG sector.

• Introducing CNG technology for import of natural gas.

• Using CNG for town gasification where supply of pipeline gas is not viable.

(iii) Liquefied Natural Gas (LNG)

Augmenting gas supply through LNG import is an important element of the government’s energy security strategy. The government is encouraging LNG import by the Private sector and announced

its first-ever LNG policy in 2006. The Sui Southern Gas Company Limited (SSGC) has been mandated to facilitate the “Pakistan Mashal LNG Project” and will act as a project vehicle company for implementation of the project through private sector in the following two phases:

Phase I 3.5 Million Ton per annum 500 MMCFD 2010-11

Phase II 3.5 Million Ton per annum 500 MMCFD 2012-13

Besides Pakistan Mashal LNG Project, Pakistan Gas Port Limited (PGPL) is pursuing their LNG import project at their own cost and risk without any off-take commitment from the government. The PGPL has signed an Implementation Agreement with Port Qasim Authority for establishment of an off-shore LNG Import Terminal at Port Qasim, Karachi having a capacity of 3 million tones/annum (400 mmcfd).

15.3. Performance of Major Oil and Gas Companies

The operational performance of the three major oil and gas companies in the public sector is reviewed as follows;

a). Oil and Gas Development Company Limited (OGDCL):

During current fiscal year upto March 2008, the company’s average oil and gas production remained at 41,128 barrels per day and 909 MMcft per day, respectively. This reflects an increase of 18 percent in oil and 10 percent in natural gas over

the same period of last year. LPG production during July-March 2007-08 was 285 metric tones, showing a decline of 8 percent, while Sulphur production was 71 metric tones per day, showing an increase of 9 percent over the same period last year (See Table 15.13)

OGDCL had drilled 94,426 meters upto July-March, 2007-08 as compared to 79,412 meters in the same period last year. During the period under review, two gas and condensate fields named Moolan Exploratory Well No. 1 and Pasakhi East Well No.1 were discovered. Both wells are located in Hyderabad, Sindh. Moolan Well produced 64 BPD of condensate and 4.44 MMscfd of gas at Well head flowing pressure of 900 Psi at 32/64” choke size. Pasakhi East well produced 155 BPD of condensate and 10.7 MMscfd of gas at Well head flowing pressure of 2140 Psi at 32/64” choke size. OGDCL has drilled 14 wells (5 exploratory and 9 development) during July-March 2007-08, as against 18 wells (9 exploratory and 9 development) in the same period last year.


256

TABLE 15.13: Physical Performance of OGDCL S. # Name of Activity July-March July-March Change

(%) 2006-07 2007-08 1 i Exploratory Wells 9 5 -44.4

ii Development/Appraisal Wells 9 9 0.0 2 Production i Oil (US Barrels) 9,559,822 11,310,177 18

(34,763) (41,128) ii Gas (MMcft) 227,367 250,070 10

(827) (909) iii LPG (Tonnes) 85,011 78,476 -8

(309) (285) iv Sulphur (Tonnes) 17,886 19,543 9

(65) (71) 3 Drilling Meterage (Meter) 79,412 94,426 19

(Figures in bracket show daily average production) Source: OGDCL

b). Sui Northern Gas Pipelines Limited (SNGPL):

By end March, 2008, SNGPL, was supplying gas to 1,060 towns/villages of Punjab, NWFP and AJK/Federal areas. During the period under review, the Company connected 642 industrial, 2,817 commercial and 161,490 domestic consumers bringing the total number of consumers to 3,121,273 (5,126 industrial, 48,084 commercial and 3,068,063 domestic consumers). During July-March 2007-08, the Company carried out development work for extension of gas network to the tune of Rs. 1,552 million on transmission project, Rs. 3,357 million on distribution projects and Rs. 487 million on other projects (See Table 15.14). During next fiscal year 2008-09, the Company plans to invest Rs. 13,514 million on transmission, distribution and other projects.

c). Sui Southern Gas Company Limited: (SSGC)

By end March 2008, Sui Southern Gas Company Limited was supplying gas to 1,615 towns/villages of Sindh and Balochistan. During the period under review, SSGC provided new connections to 275 Industrial, 1,263 Commercial and 70,427 Domestic consumers bringing the total number of consumers to 2,011,106 (3,448 industrial, 22,192 commercial and 1,985,466 domestic consumers). During July-March 2007-08, the Company carried out development work for extension of gas net work to the tune of Rs. 435 million on transmission project, Rs. 2,230 million on distribution projects and Rs. 25 million on other projects under Khushal Pakistan programme with the collaboration of District Governments (See Table 15.14). During the next fiscal year the company plans to invest Rs. 7,500 million on transmission and distribution projects.

Table 15.14: Physical Performance of SNGPL & SSGPL

S. No Name of Activity July-March

2007-08 July-March

2007-08 SNGPL SSGPL

1 Sector-Wise Gas Consumption (mmcf) Power 103,293 88,614 Fertilizer 33,531 19,589 Cement 7,631 1,986 CNG/Transport 39,380 12,229 General Industry 133,095 93,904 Commercial 17,838 7,541 Domestic 119,743 53,090 Total 454,511 276,953

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Table 15.14: Physical Performance of SNGPL & SSGPL

S. No Name of Activity July-March

2007-08 July-March

2007-08 SNGPL SSGPL

2 New Connections Domestic 161,490 70,427 Industrial 642 275 Commercial 2,817 1,263 Total 164,949 71,965

3 Addition in Distribution Network (KMs) Mains 3,514 1,327 Services 720 265 Total 4,234 1,593

4 Investment in Gas Sector (Rs. Million) Transmission Projects 1,552 435 Distribution Projects 3,357 2,230 Others 487 25 Total 5,396 2,690

Source: SNGPL, SSGPL

15.4. Power Sector:

Pakistan’s power generation capacity stood at 60MW at the time of independence with a per capita consumption of 4.5 units for its 31.5 million population. Power infrastructure development gained momentum in 1970 and within five years, the installed capacity rose from 636 MW in 1970 to 1,331 MW in 1975. In the year 1980, the system capacity touched 3,000 MW and thereafter it rapidly grew to over 8,000 MW in 1990-91.

At present, Pakistan’s total installed generation capacity from Hydroelectric, Thermal, Independent Power Producers (IPPs), and Nuclear sources stands at 19,566 MW. The existing capacity of thermal power generation in Pakistan stands at 12,630 MW, which is almost two-third (64.6 percent) of country’s total generation capacity. Although, the thermal power plants are relatively quicker to set up, they are relatively most expensive due to sky-rocketing oil prices. Hydel energy is the second largest source of electricity and accounts for 33.1 percent of total power generation in the country. Hydel power is both cheap and environment-friendly. Pakistan’s total identified hydel generation potential is 46,000 MW

(MTDF-2005-10), out of which only 14 percent (6,474 MW) has been exploited so far. In the long run, Hydel is one of the major economic energy supply options in Pakistan for increasing the energy security of the country.

Electricity consumption in Pakistan has been growing at an elevated pace due to higher economic growth, increasing urbanization, industrialization and rural electrification over the past few years. The demand for electricity is growing at an average rate of 9.5 percent per annum over the past four years. A stagnant power supply and growing demand has created severe power shortage in the country, ranging between 4,000 to 5,000 MW.

Going forward, the demand for electricity is projected to grow by 8.7 percent per annum (on the basis of average growth for the period 2003-07) while the supply of electricity, as envisaged by the Pakistan Electric Power Company (Pvt.) Limited (PEPCO), and assuming 75 utilization of installed capacity, still forecast demand surpassing the supply in the range of 2,000 MW to 3,000 MW (See Figure 15.7).


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To overcome the growing shortage of electricity; gas, oil and coal-based power generation can help Pakistan to meet its requirements in the short-to-medium-term. Because of escalating oil prices and shortage of gas supply, coal-based electricity generation is the best option as Pakistan possesses 185 billion tones of coal reserves. The government has signed an agreement with Iran to import 1,100 MW electricity which would help partly in bridging the gap. The government has planned for transmission of an additional 2,200 MW within a period of 12 months by April 2009. These projects comprise 81 MW of hydel and 1,427 MW of thermal power in the public sector and 1,020 MW in the private sector. The government has also

launched effective conservation measures which include distribution of 10 million energy saver bulbs to consumers. These measures are expected to save about 1,000 MW at peak hours. In the medium term, small hydro dam projects can make significant contribution to the national energy supply, while in the long run, hydel power generation and alternative renewable energy can solve these problems. As a first step, Alternative Energy Development Board (AEDB) has been established to facilitate development of renewable energy i.e. solar energy, wind energy, and bio-fuels. Table 15.15 shows the future power generation plan in Pakistan.

Table 15.15: Power Generation Plan

Nuclear Hydel Coal Renewable Oil Gas Total Cumulative Existing (2005)

400 6,460 160 180 6,400 5,940 19,540

Addition 2010 - 1,260 900 700 160 4,860 7,880 27,420 2015 900 7,570 3,000 800 300 7,550 20,120 47,540 2020 1,500 4,700 4,200 1,470 300 12,560 24,730 72,270 2025 2,000 5,600 5,400 2,700 300 22,490 38,490 110,760 2030 4,000 7,070 6,250 3,850 300 30,360 51,830 162,590 Total 8,800 32,660 19,910 9,700 7,760 83,760 162,590

Sources: Planning Commission of Pakistan

The total installed capacity of WAPDA stood at 11,363 MW during July-March 2007-08 which accounts for 59.6 percent of total capacity (See

Table 15.16). Of this, hydel power accounts for 55.6 percent and thermal accounts for 44.4 percent. The total installed capacity of IPPs is 5,760 MW

70009000

11000130001500017000190002100023000

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Fig. 15.7: Available Capacity and Computed Demand (in MW)

Available Demand

Source: PEPCO

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(29.4 percent) followed by KESC’s (1,690 MW) and nuclear power (462 MW). Of the total installed capacity, the share of public sector is about 70.6

percent while private sector accounts for 29.4 percent.

Table 15.16: Total Installed Generation Capacity (MW)

S.No Power Company

Installed Capacity 2006-07

Share (%) Installed Capacity 2007-08

Share (%)

Change

1 WAPDA 11,363 58.5 11,654 59.6 2.6 Hydel 6,463 56.9* 6,474 55.6* 0.2 Thermal 4,900 43.1* 5,180 44.4* 5.7 2 IPPs 5,859 30.1 5,760 29.4 -1.7 3 Nuclear 462 2.4 462 2.4 0 4 KESC 1,756 9 1,690 8.6 -3.8

Total 19,440 100 19,566 100 0.65 * Share in WAPDA system Source: Hydrocarbon Development Institute of Pakistan Supply Sources of Electricity:

15.4.1. WAPDA

WAPDA owns about 59.6 percent of the country’s total power generation capacity and serves about 88 percent of all the electricity customers in the country, which amounts to 17.7 million customers. Out of total WAPDA capacity, the hydro power capacity accounts for 55.6 percent and thermal accounts for 44.4 percent.

a). Electricity Generation

The electricity generated by WAPDA during July-March 2007-08 was 64,569 Gwh, as against 63,020 Gwh during the corresponding period last year, thus registering an increase of 2.5 percent due to higher generation through thermal (7 percent). The composition of electricity generation shows that hydro potential has not been fully utilized. During fiscal year 2007-08, the hydro generation accounted for 33.5 percent of the total generation. The trend of hydro-thermal electricity generation for the last 10 years is given in Table 15.17.

Table 15.17: Electricity Generation by WAPDA (GWh) Year Hydro Share (%) Thermal Share (%) Total 1997-98 22,060 41.4 31,199 58.6 53,259 1998-99 22,448 41.8 31,235 58.2 53,683 1999-00 19,288 34.3 36,585 65.5 55,873 2000-01 17,259 29.5 41,196 70.5 58,455 2001-02 19,056 31.3 41,804 68.7 60,860 2002-03 22,350 34.9 41,690 65.1 64,040 2003-04 27,477 39.8 41,617 60.2 69,094 2004-05 25,671 34.9 47,849 65.0 73,520 2005-06 30,855 37.5 51,370 62.5 82,225 2006-07 31,942 36.4 55,895 63.6 87,837 July-March 2006-07 22,863 36.3 40,157 63.7 63,020 2007-08 21,606 33.5 42,963 66.5 64,569 Includes purchase from IPPs and imports Source: PEPCO

b) Growth in Electricity Consumers

The number of consumers has increased due to rapid extension of electricity network to villages

and other areas. As of March 2008, the number of consumers has increased to 17.73 million. See Table 15.18 for a snapshot of the rising trend in the number of consumers over the last ten years.


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Table 15.18: Consumers by Economic Groups (Thousands) Year Domestic Commercial Industrial Agriculture Others Total 1997-98 8,455 1,397 187 171 8 10,218 1998-99 8,912 1,517 190 173 8 10,800 1999-00 9,554 1,654 195 175 8 11,586 2000-01 10,045 1,737 196 180 8 12,166 2001-02 10,483 1,803 200 184 8 12,678 2002-03 11,044 1,867 206 192 9 13,318 2003-04 11,737 1,935 210 199 10 14,092 2004-05 12,490 1,983 212 201 10 14,896 2005-06 13,390 2,068 222 220 10 15,911 2006-07 14,354 2,152 233 236 11 16,987 July-March 2006-07 14,069 2,132 230 233 11 16,675 2007-08 15,026 2,214 240 243 11 17,734

Source: Water and Power Development Authority

c) Power Transmission

The total length of transmission lines has increased to 49,676 circuit KMs by the end of June 2007. In order to ensure uninterrupted and stable power supply to the consumers as well as integrity of the grid supply system, the augmentation of the transmission network is a continuous process. In addition to the various on-going secondary transmission lines and grid-stations programme, new transmission lines/substations are being envisaged.

d) Village Electrification

The village electrification programme is an integral part of improving the lives of the people of Pakistan, particularly in rural areas. The number of electrified villages has increased from 117,456 on 30th June 2007 to 126,296 by the end of March 2008. The trend of village electrification during past 10 years is provided in Table 15.19.

Table 15.19: Village Electrification (In Number) Year Addition During the Year Progressive Total Growth (%) 1997 1,383 65,951 1998 1,232 67,183 1.9 1999 1,109 68,292 1.7 2000 1,595 69,887 2.3 2001 1,674 71,561 2.4 2002 2,246 73,807 3.1 2003 7,193 81,000 9.7 2004 9,467 90,467 11.7 2005 12,764 103,231 14.1 2006 14,203 117,456 13.8 July-March 2006-07 10,374 113,605 2007-08 8,840 126,296 11.2 *Including FATA Source: Water and Power Development Authority e) Electricity Consumption by Economic Groups

The sectoral consumption of electricity by economic groups identifies the domestic sector as the largest consumer of electricity for the past

many years. Even during July- March 2007-08, the consumption pattern almost remained the same with the share of domestic consumption at 43 percent, industrial at 26.1 percent and agricultural at 12.7 percent (See Table 15.20).

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Table 15. 20: Electricity Consumption by Economic Groups (% Share)

Year Domestic Commercial Industrial Agriculture Public Lighting

Bulk Supply Traction Supply to

KESC 1997-98 41.5 4.5 26.0 17.5 1.37 6.07 0.04 2.9 1998-99 43.6 4.7 25.6 14.3 0.41 6.72 0.04 4.65 1999-00 46.3 4.9 26.3 11.0 0.37 6.54 0.04 4.5 2000-01 46.1 4.9 27.1 11.3 0.34 6.07 0.03 4.17 2001-02 45.5 5.1 28 12.3 0.33 5.89 0.03 2.94 2002-03 44.0 5.3 28.4 12.6 0.35 5.54 0.02 3.8 2003-04 44.0 5.6 28.1 12.9 0.37 5.43 0.02 3.58 2004-05 43.5 5.8 28.1 12.5 0.41 5.17 0.02 4.54 2005-06 43.3 6.0 26.6 12.6 0.45 4.86 0.02 6.15 2006-07 43.0 6.4 26.09 12 0.47 4.84 0.02 7.27

July-March

2006-07 42.4 6.2 26.5 12.1 - - 0.02 - 2007-08 43.0 6.5 26.1 12.7 0.5 5.1 0.02 6.0

Source: Water and Power Development Authority f) Power Losses

The National Transmission & Dispatch Company (NTDC) and DISCOs (Distribution Companies) have invoked various technical and administrative measures to improve operational and managerial efficiency to reduce power losses. These measures have given positive signs resulting in reduction of

power losses and increase in revenue. Other measures such as renovation, rehabilitation, capacitor installation and strengthening the consumer-end distribution supply network are part of a continuous process for controlling/reducing wastage power/energy. The transmission and distribution losses for the last ten years are given in Table 15.21.

TABLE 15.21: WAPDA Power Losses (In Percent) Year Auxiliary Consumption T&D Losses* Total 1997-98 2.0 24.0 26.0 1998-99 1.7 25.8 27.5 1999-00 2.2 24.6 26.8 2000-01 2.0 23.8 25.8 2001-02 2.2 23.6 25.8 2002-03 2.1 23.9 26.0 2003-04 2.0 23.5 25.5 2004-05 2.5 22.3 24.8 2005-06 2.2 21.9 24.1 2006-07 2.1 21.1 23.2 July-March 2006-07 2.1 20.0 22.1 2007-08(e) 2.0 20.3 22.3 * T&D = Transmission and Distribution Source: Water and Power Development Authority (e): Auxiliary consumption estimated

15.4.2. Karachi Electric Supply Corporation Ltd (KESC)

During the current fiscal year upto March 2008, the installed capacity of KESC’s various generating stations remained at 1,690 MW, against the maximum demand of 2,365 MW. KESC’s own

generation has increased by 5.1 percent from 5,867 Million Units (kWh) in July-March 2006-07 to 6,164 Million kWh in July-March 2007-08. This increase in generation is due to the better “Planned Maintenance Outages” undertaken in the winter of 2006-07. The maximum Supply-Demand gap of


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675 MW was bridged by different sources including purchase of 1,315 Million KWh from “Independent Power Producers” and 3,415 Million kWh from WAPDA, KANUPP & PASMIC. Table

15.22 shows the details of KESC’s operating results including purchase of electricity from different sources.

Table 15.22: KESC Operating Results (Units in Million kWh)

S. No Description July-March (2006-07)

July-March (2007-08)

Change (%)

1 POWER PURCHASE KANUPP 75.0 303.9 305.0 PASMIC 32.4 75.5 133.5 TAPAL 514.4 604.0 17.4 GULAHMED 578.5 660.5 14.2 WAPDA 3,605.6 3,035.6 -15.8 ANOUD POWER 40.5 18.7 -53.8 DHA COGEN - 33.3 - INTL. INDUS. LTD - 21.0 - Total 4,846.3 4,752.4 -1.9

2 Units Available for Distribution 10,246.3 10,437.2 1.9 3 Unit Sold 6,079.7 7,221.1 18.8 4 Trans. & Dist. Losses 4,166.6 3,216.1 -22.8 5 Installed Capacity (MW) 1,756.0 1,690.0 -3.8 6 Peak Demand (MW) 2,222.0 2,365.0 6.4

Source: KESC The total energy made available to KESC system, after taking into account the imports from various agencies, stood at 10,437 million kWh during July-March 2007-08 as against 10,246 Million kWh in the same period last year, thus registering a growth of 1.9 percent. The T&D losses have decreased from 41 percent to 31 percent during the same period. KESC has made considerable progress on its comprehensive rehabilitation programme for the restoration of its generating capacity. Besides “Annual Maintenance” of all the six units at Bin Qasim Power Station, critical equipment related to the improvement of “Condenser Performance” was installed at units 1 and 5. High Pressure Feed Water Heaters were restored/ replaced at units 3, 4, and 5. These measures will improve overall efficiency of the units and stations output. The increase of 5.1 percent overall generation of KESC was the result of the 11.5 percent rise in the generation of Bin Qasim Power Station.

KESC plans to bring two new generating plants as part of its capacity enhancement program. The first one is a Combined Cycle Power Plant at Korangi which is in the erection/commissioning phase, and would result in adding up of 220 MW of installed capacity to the existing generation. The second

planned generation expansion is a 560 MW Combined Cycle Power Station at the existing Bin Qasim Power Station Site. Technical & Commercial evaluation of the project has been completed and the contract to the selected bidder will shortly be awarded.

15.4.3. Nuclear Power Energy

Pakistan Atomic Energy Commission (PAEC) is responsible for planning, construction and operation of nuclear power plants. Presently, two nuclear power plants; Karachi Nuclear Power Plant (K-1) and Chashma Nuclear Power Plant unit-1 (C-1) are in operation, while construction of a third plant, Chashma Nuclear Power Plant unit-2 (C-2), is in progress. K-1, a CANDU type plant, after completing its designed life of 30 years is operating at 90 MWe. K-1 generated 342 million kWh of electricity, while C-1, a PWR type plant with a gross capacity of 325 MWe, has generated 1,977 million kWh of electricity during July-March 2007-08. The construction of C-2 is progressing well and its commercial operation is planned in 2011.

The Government has chalked out a comprehensive plan to expand nuclear power generation capacity

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to 8,800 MW by the year 2030. Studies are in progress at six new sites for installation of additional nuclear power plants. To minimize capital costs, PAEC is planning to build multiple units on the same site. For manufacturing of nuclear fuel of PWR type nuclear power plants, PAEC is establishing Pakistan Nuclear Power Fuel Complex (PNPFC). Negotiations are in progress with China National Nuclear Corporation (CNNC) for setting up two additional 325 MWe units at Chashma and for starting design studies of 1,000 MWe units at Karchi.

15.4.4. Coal

Pakistan has emerged as seventh in the list of top 20 countries of the world after the discovery of huge lignite coal resources in Sindh. Pakistan has been blessed with huge coal resources amounting to 185 billion tones which include 175 billion tones of Thar coal. At the time of Pakistan’s

independence, the share of coal in overall commercial energy consumption was about 60 percent, but this utilization gradually trimmed with the discovery of gas in 1952. Currently the share of coal in the overall energy mix is only 7.4 percent while in India, the share of coal is more than 50 percent in the total energy mix. Presently, about 53 percent of total coal production in the country is being utilized in brick kilns industry and the second major coal consumption industry is cement. Due to high furnace oil prices, about 80 percent of cement industry has switched over to coal from furnace oil, which has generated a demand for 2.5 - 3.0 million tones coal per annum.

A brief review about the consumption of coal in different sectors is given in the Table 15.23. The production of coal has remained stagnant (See Table 15.24) with no significant market demand has been created.

Table 15.23: Consumption of Coal (Percentage Share) Year Household Power Brick Kilns Cement 1997-98 0.1 11.0 89.0 - 1998-99 0.0 12.0 88.0 - 1999-00 0.0 11.0 89.0 - 2000-01 0.0 5.1 70.2 24.7 2001-02 0.0 5.7 58.5 35.9 2002-03 0.0 4.2 53.3 42.5 2003-04 0.0 3.0 42.7 54.2 2004-05 - 2.3 49.5 48.2 2005-06 - 1.9 54.7 43.3 2006-07 0.0 2.1 41.5 56.4 Jul-March 2006-07 (e) 0.0 1.8 55.7 42.5 2007-08 (e) 0.0 2.2 53.2 44.6 - not available Source: Ministry of Petroleum Natural Resource e: Estimated Hydrocarbon Development Institute of Pakistan Table 15.24: Production of Coal (000 tones) Year Imports Production Total 1997-98 960 3,159 4,119 1998-99 910 3,461 4,371 1999-00 957 3,168 4,125 2000-01 950 3,095 4,045 2001-02 1,081 3,328 4,409 2002-03 1,578 3,312 4,890 2003-04 2,789 3,275 6,064 2004-05 3,307 4,587 7,894 2005-06 2,843 4,871 7,714 2006-07 4,251 3,643 7,894 Jul-March 2006-07 (e) 2,825 2,589 5,414 2007-08 (e) 3,500 2,559 6,059 e: Estimated Source: Ministry of Petroleum Natural Resource Hydrocarbon Development Institute of Pakistan


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15.4.5. Private Power and Infrastructure Board (PPIB)

PPIB acts as a window facilitator to the private investors in the field of power generation. PPIB is currently processing 51 multiple fuel (oil, coal, gas and hydel) power projects having a cumulative capacity of 13,335 MW which are expected to be commissioned during 2008 to 2016. These include 20 hydel projects of 4,478 MW, 14 oil based projects of 2,919 MW capacity, 5 pipeline quality dual fuel/LNG projects of 1,050 MW capacity, 6 dedicated gas projects of 1,338 MW capacity and 6 coal based power projects having cumulative capacity of 3,550 MW. Out of these, Letters of Intent (LOIs) have been issued to 38 projects with a cumulative capacity of 10,433 MW; Letters of Support (LOSs) have been issued to 14 projects totaling 2,590 MW, while Implementation Agreements (IAs) have been signed with 12 projects of 2,337 MW. Besides these, two more projects based on imported coal of 2,000 MW are also being processed.

15.4.6. Alternative sources of Energy

To resolve the energy challenges, renewable energy resources can play an important role. More importantly, renewable energy can take electricity to remote rural areas, where power transmission becomes too expensive. The importance of alternative sources of energy e.g. wind, solar and bio-fuels, has risen due to rocketing oil prices, fast energy demand and geographic location of Pakistan. The coastline of 1,046 km provides ample opportunity for the installation of wind turbines. Similarly, two-third of Pakistan’s area receives sufficient sunlight which provide incredible opportunity for solar power generation. Despite this bestowed potential, Pakistan’s renewable generation capacity stands only at 180 MW.

The government has established the Alternative Energy Development Board (AEDB) to foster the development of renewable energy sources and has set a target of at least 5 percent renewable energy of the total electricity generating capacity of the country (9,700 MW) by the year 2030.

(i) Wind Energy

Wind energy is environment-friendly and cheaper than natural gas even. Pakistan has been blessed with an enormous potential of Wind Energy. The 1,046 Km coastline of Sindh has been identified as having wind power potential of 50,000 MW. The government has assigned AEDB to ensure installation of 700 MW wind power in coastal areas of Pakistan by the year 2010. AEDB has issued LOIs to 93 national and international investors for 50 MW wind power projects each and one LOI for 5 MW wind project. 33,976 acres of land (19,807 aces in Gharo and 14,169 acres in Jhimpir) has so far been provisionally allocated to 21 investors.

(ii) Solar Energy

Pakistan has so far not used its solar potential to save on conventional energy sources. The solar potential exists in central and southern parts of the country where it receives 2,142 kWh of solar irradiation/m²/year. The government has assigned AEDB to electrify 7,874 remote off-grid villages in Sindh and Balochistan using alternative technologies particularly solar energy under ‘Roshan Pakistan Programme’. AEDB has electrified 1,762 remote off-grid homes in 31 villages in all the four provinces. Another 3,000 remote off-grid homes in District Tharparker, Sindh are in process of electrification using solar energy, out of which 700 homes have already been electrified. The entire 100 villages are expected be electrified by June 2008.

(iii) Bio-fuels

Bio-fuels (ethanol and bio diesel) are strong contenders for provision of efficient and sustainable energy. Pakistan has started work on both the bio-ethanol (sugar-ethanol) and the cellulose biomass- bacteria route. AEDB has initiated the projects for bio-fuels in Pakistan. A pilot project of using Ethanol as an alternative fuel for vehicles has been launched in cooperation with HDIP and PSO. Furthermore, pilot project for production of bio-diesel has been successfully implemented and using local agriculture bio-diesel has been produced and used for village electrification.

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Government has also introduced “The National Policy for Power Co-Generation by sugar industries (the Co-Gen Policy). Co-Generation is a highly-efficiency energy system that produces both electricity (mechanical Power) and valuable heat

from a single fuel source. Pakistan has a potential of generating more than 3,000 MW of electricity through co-generation from its existing sugar industry.

TABLE 14.6

(Rs/mcft) / Category 1.12.2004 2-2-2005 1-7-2005 1-1-2006 1-7-2006 1-2-2007 1-1-2008

DOMESTIC (Slab)i Upto 1.77 MCUFT / Month 73.95 73.95 73.95 80.98 85.03 78.38 78.38ii 1.77 to 3.55 111.42 120.61 127.62 147.41 89.03 82.07 82.07iii 3.55 to 7.1 178.25 192.96 204.17 235.84 162.07 149.4 149.4iv 7.1 to 10.64 231.88 251.01 265.59 306.79 259.29 239.01 239.01v 10.64 to 14.20 (MCFT/M) 337.30 310.92 310.92vi All over 14.20

COMMERCIAL 204.88 221.78 234.67 271.07 298.03 268.23 283.05General Industry 182.09 197.11 208.56 240.91 264.87 238.38 251.55Cement 209.78 227.09 240.28 277.55 305.15 305.15 335.67CNG Station 182.09 197.11 208.56 240.91 264.87 238.38 291.36Pakistan Steel 182.09 208.56Captive Power 208.56 240.91 264.87 238.38 251.55FERTILIZER

SNGPL'S SYSTEM(i)For Feed StockPak.Americal Fertilizer Ltd.PAFL 36.77 36.77 36.77 36.77 36.77 36.77 36.77F.F.C Jorden 36.77 36.77 36.77 36.77 36.77 36.77 36.77Dawood Hercules/ Pak Arab 73.99 73.99 83.24 83.24 91.52 91.52 91.52Pak china/ Hazara 78.52 78.52 88.34 88.34 97.11 97.11 97.11(ii)For Fuel Generation 182.09 197.11 208.56 240.91 264.87 238.38 251.55Dawood and Pak Arab

FOR MARI GAS CO. SYSTEM(i)For Feed Stock (a) Engro Chemical 72.94 72.94 82.06 82.06 90.22 90.22 90.22FFC 72.94 72.94 82.06 82.06 90.22 90.22 90.22(b) Pak Saudi 72.94 82.06(ii)For Power Generation 182.09 182.09 208.56 264.87 238.38 251.55

POWER StationsSNGPL & SSGCL'S SYSTEM 182.09 197.11 208.56 264.87 238.88

Liberty Power Ltd. 235.76 262.03 303.25 303.25 467.52 445.98 443.06GAS DIRECTLY SOLD TOWAPDA'S GUDDU POWER STATIONSUI FIELD (917 BTU)KANDHKOT FIELD (866 BTU) 175.90 190.41 201.47 232.72 255.86 230.28 243.00 MARI FIELD (754 BTU) 171.08 185.19 195.95 226.34 248.85 223.96 236.34SARA/SURI FIELD 171.08 185.19 195.95 248.85 223.96 236.34

Source : Hydrocabon Development Institute of Pakistan Billing/pricing system changed from Rs. Per thousand cubic feet to Rs. Per million btu w.e.f.1-1-2002

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Chapter 16

ENVIRONMENT I. Introduction

Pakistan and other developing countries around the world are increasingly becoming conscious of the fact that, the pursuit of growth and development places a heavy burden on sustainability for now and for the foreseeable future. Development, sans environmental aspects is counter productive in sustaining the pace of progress. The Government of Pakistan believes in the creation of opportunities for the present generation without compromising on the potential of future generations to meet their developmental needs. This notion is easy to define but difficult to implement.

Environmental degradation is fundamentally linked to poverty in Pakistan. Approximately less than one-fourth of the country’s population, like in most developing countries, is poor and directly dependent on natural resources for their livelihoods—whether agriculture, hunting, forestry, fisheries, etc. Poverty combined with a rapidly increasing population and growing urbanization, is leading to intense pressures on the environment. This environment-poverty nexus cannot be ignored if effective and practical solutions to remedy environmental hazards are to be taken. In Pakistan, the deterioration of environment continues to affect livelihoods and health thus increasing the vulnerability of the poor to disasters and environment-related conflicts. The current cost of environmental degradation is considerably high. According to a recent assessment made by the World Bank (WB)1, the cost of environmental neglect and degradation to the economy has amounted to Rs. 365 billion during the current year.

Biodiversity in Pakistan is also under serious threat due to excessive depletion of natural resources.

1 Pakistan: Strategic Country Environment Assessment by WB (Sep, 2007)

The latest red-list of endangered species in Pakistan, released by the World Conservation Union (IUCN), includes the Blue Whale, Fin Whale, Hotson's Mouse-like Hamster, Indus River Dolphin, Markhor, Urial, Snow Leopard, Woolly Flying Squirrel, Brown Grizzly Bear, Western tragopan, Hobara Bustard, Siberian White Crane, Olive ridly turtle, Green turtle, Marmot, Blackbuck and Sand Cat. The Government of Pakistan has recognized the need to conserve biodiversity by taking several tangible steps including the fulfillment of its commitment to international protocols and conventions. Pakistan became a signatory of National Conservation Strategy and Convention on Biodiversity (CBD) in 1994. Developing the Biodiversity Action Plan for Pakistan, 2000 has been the most significant step in addressing the biodiversity loss in the country. The National Council for Conservation of Wildlife (NCCW) has played a significant role in encouraging the Provincial Wildlife Departments for better management of protected areas particularly national parks of the country.

Critical issues including air and water pollution, ozone depletion, deforestation, land degradation, lack of waste management, desertification and vanishing biodiversity, have resulted in life threatening ecological imbalances all over the world. There is an increasing realization that many of these issues are further compounded by climate change. In line with the increasing global commitments towards environment protection, Pakistan has promptly demonstrated a great deal of resilience and seriousness not only in ratifying almost a dozen of Multilateral Environmental Agreements (MEAs) but has also initiated various national environment programmes aiming at protection of environment. During the last decade, Pakistan has made diligent progress in strengthening the institutions responsible for


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environmental management at the national level such as:

• Pakistan Environment Protection Agency, and Provincial Environment Protection Agencies/Departments

• Environment Section of Planning & Development Division as well as civil society organizations

• The promulgation of Environmental Legislation

• Establishment of policy framework including formulation of conservation strategies for NWFP, Balochistan and Northern Areas as well as for a few districts

• Establishment of Environmental Tribunals

• Formulation of Sanitation Policy and Energy Conservation Policy

The realization that environmental concerns required urgent attention and needed to be addressed in a focused and effective manner at the national level prompted the Government to adopt a comprehensive initiative in the form of The National Environment Action Plan (NEAP). This multifaceted programme was launched in 2001, and mainly aimed to achieve environmental sustainability and poverty reduction in the context of economic growth. The key policies and programmes that have stemmed from NEAP are; Air and Water Quality Monitoring, Clean Drinking Water for All, Pakistan Wetlands Programme, National Sanitation Policy, Sustainable Land Management to Combat Desertification in Pakistan, Environmental Rehabilitation and Poverty Reduction through Participatory Watershed Management in Tarbela Reservoir etc.

The United Nations Development Programme has been supporting the implementation of this initiative though the NEAP Support Programme (NEAP-SP). In March 2007, NEAP-SP programme entered its second phase. NEAP Phase-I successfully achieved the following four targets:

1. National Environmental Policy

2. National Sanitation Policy

3. Clean Development Mechanism Strategy

4. National Forest Policy and Energy Conservation Policy

The Programme appraised more than 300 project proposals submitted by various stakeholders, while the core team of NEAP-SP prepared more than 60 project concepts. This also included preparation of projects for Public Sector Development Programme (PSDP) e.g. Clean Drinking Water Initiatives, Clean Drinking Water for All, Activity-based Capacity Development, National Bio-Safety Center and Rehabilitation of Rangelands of Potohar Tract of Punjab through participation of local communities.

A wide range of technical, institutional and economic interventions in terms of different projects were grouped under NEAP-SP Phase II that mainly proposed the following three initiatives:

1. Pollution Prevention and Control

2. Climate Change; Ecosystem and Natural Resources Management

3. Environmental Governance, Advocacy, and Partnership

These programmes, in addition to pursuing their technical objectives, will strengthen the institutional capacities of relevant Government institutions. Moreover, the proposed programme will promote equal participation of women and sustainable grassroots projects through its Grassroots Initiatives Programme for Local Environmental Management (GRIP).

With a view to combating environmental pollution in various sectors and at various levels on the national front, the Government of Pakistan has already enhanced allocation for the Environmental projects in PSDP. Overall, an allocation of Rs. 8.0 billion has been made for the environment sector projects in the federal PSDP 2007-08. There are about 52 projects under implementation, which fall in the brown, green and capacity building

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components/sub-sectors of environment such as: mass awareness, environmental education and environment protection; preparation of land use plan; fuel efficiency in road transport sector; protected areas management; forestry; biodiversity; watershed management; hospital waste management; environmental monitoring; capacity building of environmental institutions; natural disaster early warning and mitigation; improvement of urban environment; etc. Utilization of funds till January 2008 is less than 25% of allocation; however, the same may considerably improve during the remaining period of the fiscal year. Awareness, knowledge dissemination, adaptation and research on climate change issues are underway in Pakistan through different collaborating agencies i.e. government and non-government. Data collection on environment and environmental economics has also been initiated for sound planning.

Realizing the importance of environmental protection, the Government of Pakistan has substantially increased the Medium Term Development Framework (MTDF) for environment (2005-10) compared to the past. Working group on Environment has been notified to operationalize Vision 2030 in Pakistan. Capacity building of environmental institutions at federal, provincial and local levels and mass awareness would be given high priority to realize implementation of Vision 2030 on sustainable basis. Project Advisory Committee (PAC) of Environmental Fiscal Reforms (EFR) at the Federal Government level has also been established.

At the international level, Pakistan has also shown its commitment to numerous non-legally binding instruments and MEAs such as; The United Nations Convention on Biological Diversity (CBD), Convention on International Trade in Endangered Species of wild flora and fauna (CITES), United Nations Convention to Combat Desertification (UNCCD), United Nations Framework Convention on Climate Change (UNFCCC), Convention on Migratory Species (CMS), Ramsar Convention on Wetlands, Basel Convention on the Control of Trans-boundary Movement of Hazardous Wastes and their

Disposal, Rotterdam Convention on the Prior Informed Consent for Certain Hazardous Chemicals, Pesticides in International Trade and the Montreal Protocol, Kyoto Protocol on controlling Green House Gas (GHG) Emissions.

Pakistan has also prepared the National Implementation Plan for Persistent Organic Pollutants (POPs) to ratify the Stockholm Convention. Necessary measures for accession to the Kyoto Protocol regarding the Green House Gas (GHG) emissions have been effectively taken by the Government.

II. Millennium Development Goals (MDG) and Medium-Term Development Framework (MTDF) Targets

Pakistan has effectively dedicated itself to achieving the Millennium Development Goals (MDGs) as adopted by the UN member states in the year 2000. Goal number 7 of MDG aims at ensuring environmental sustainability. The environmental targets (MTDF 2005-10) and MDG targets 2015 have been listed in Table 16.1.

The specified figures give a comprehensive picture regarding the extent to which Pakistan has achieved MDG and MTDF Targets so far. The Forest Cover including state and private forests/farmlands (%age of total land area) stood at 5.2% during the current fiscal year. The targeted area was 5.2% for MTDF 2009-10 and 6% for MDGs 2015 confirming that the country is doing well in terms of achieving the signified target. It is disquieting to know however that according to international organizations such as IUCN and the World Wide Fund for Nature (WWF) it is feared that Pakistan is experiencing the world’s second highest rate of deforestation. This destruction is leading to the wholesale disappearance of trees, shrubs and ground flora, together with the vertebrate and invertebrate fauna they normally support. The loss of forest habitat has had a severe impact on Pakistan’s biodiversity, and has serious implications for the nation’s natural and agro-ecosystems. The protected area for conservation of wildlife (%age of total area) was estimated at 11.3% while the targeted levels were 11.6% and


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12.0% according to MTFD and MDG targets, respectively. The given figures indicate that efforts

to conserve wild life have been very effective so far.

The number of petrol & diesel vehicles using CNG fuel stood at 1,700,000 for the current fiscal year whereas the targeted levels were estimated at 800,000 in case of MTDF and 920,000 in case of MDGs. The actual number of vehicles is therefore almost double the number of what was targeted. Therefore, Pakistan has already met its MDG target well in advance. This achievement has been made possible because of the tremendous growth in the number of vehicles that are converting to CNG due to the Government’s resolve regarding the development of the CNG sector as a cleaner and economical energy alternative.

Access to sanitation (national) was calculated to be 44% for the current fiscal year. Its targeted levels were set at 50% for MTDF 2009-10 and 90% for MDG 2015. The Government therefore needs to accelerate its efforts in this regard. Access to clean water (national) stood at 65% in 2007-08, while

the targeted level was 76% in case of MTDF and 93% in case of MDG, implying that the targets will be achieved in due course if the current trend continues.

The number of continuous air pollution monitoring stations and regional offices of Environmental Protection Agencies stood at 6 and 4 respectively for the current year which implies that the targeted levels might be achieved if consistent efforts are made. In addition to this the number of functional environmental tribunals was 4 which already meets the targeted level for MTDF 2009-10.

According to MDG Target 10 of environmental sustainability : “the proportion of people who are deprived of sustainable access to safe drinking water and basic sanitation, must be halved by 2015” whereas target 11 is concerned with improvement of the lives of slum dwellers. In

Table 16.1: The Environmental Targets: Medium-Term Development Framework (MTDF) 2005-10 and Millennium Development Goals (MDG) 2015 Targets

Name of Sector/Sub-Sector MTDF 2004-05 Targets

MTDF 2009-10 Targets

MDG Targets

2015

Achievement of Targets

July-Mar 08 Forest cover including State and private forests/farmlands (%age of total land area)

4.9% 5.2% 6.0% 5.2%

Protected Area for conservation of wildlife (%age of total area)

11.3% 11.6% 12.0% 11.3%

GDP (at constant factor cost) per unit of energy as a proxy for energy efficiency

27,000 27,600 28,000 N.A

No. of petrol & diesel vehicles using CNG fuel 380,000 800,000 920,000 1,700,000 Access to sanitation (national)% 42 50 90 44 Access to clean water (national)% 65 76 93 65 Number of continuous air pollution monitoring stations

0 4 -- 7

Number of regional offices of Environmental Protection Agencies

0 8 16 6

Functional Environmental Tribunals 2 4 -- 4

Source: Planning Commission of Pakistan (Planning and Development Division)

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Pakistan, this target has been adapted to mean proportion of katchi abadis that have been regularized. Target 11 poses a challenge to the Government, as the current proportion of regularized slum settlements is 60 percent, which has to be increased to 95 percent by 2015 according to MTDF target.

III. State of the Environment

III.1. Air

The key factors responsible for air pollution in Pakistan include:

Rapidly growing energy demand due to relatively higher population growth rates

A fast growing transport sector and unplanned infrastructure creating hazardous atmosphere in cities

Widespread use of low-quality fuel, combined with a dramatic expansion in the number of vehicles on roads

Alarming levels of nitrous oxide and sulphur combined with increasing proportion of dust have further aggravated the situation.

Air pollution levels in Pakistan's most populated cities are among the highest in the world and are likely to still climb further, causing serious health issues. The levels of ambient particulates - smoke particles and dust, which cause respiratory diseases - are generally twice the world average and more than five times as high as in industrial countries and Latin America (Energy Information Administration, 2004). Although Pakistan's energy consumption is still low by world standards, lead and carbon emissions are increasingly becoming major air pollutants in urban centers such as Karachi, Lahore, Rawalpindi and Peshawar.

The country has been benefiting from steady economic growth over the last few years. This has been accompanied by rising urbanization, higher income and affluence, and an increase in the private ownership of motor vehicles. In the absence of any urban transport policies and sustained investments in public transport, most urban citizens rely either on their private motor vehicles or the informal transport sector for urban

transport. The resulting urban congestion is straining the capacity of the Government to resolve the urban transport and as a consequence, urban areas of Pakistan are experiencing deterioration in air quality.

In addition to this new passenger car registrations, which have soared since 2001, are expected to continue to rise further. The surge in the demand for cars originated from the increasing affordability of cars on the one hand and availability of car financing from the banking system on the other. Amongst these vehicles, those of serious concern are diesel vehicles using crude diesel oil and motorcycles and rickshaws. Due to overloading, faulty injection nozzles and weak engines, diesel vehicles emit excessive graphitic carbon (visible smoke). Furthermore, motorcycles and rickshaws, due to their two-stroke engines, are the most inefficient in burning fuel and thus, contribute most to lethal emissions.

Replacement of liquid petroleum fuels with CNG is a major step towards protecting environment especially in urban areas where air pollution is fast becoming a menace. Environmentalists recommended fuel switching from liquid fuels to natural gas as a strong measure to protect environment. CNG is a lead-free fuel with no sulphur and particulate emissions and releases 1/10th level of carbon monoxide emissions as compared to petrol. It also produces much lower carbon dioxide emissions as compared to petrol and diesel oil thereby helping in mitigating warming effect caused due to greenhouse gas emissions of carbon dioxide.

Table 16.2: Growth in CNG Sector

As on CNG Station

Converted Vehicles*

December, 1999. 62 60,000 December, 2000, 150 120,000 December, 2001. 218 210,000 December, 2002. 360 330,000 December, 2003. 475 450,000 December, 2004. 633 660,000 December, 2005. 835 1,050,000 December, 2006. 1190 1,300,000 16th May, 2007 1450 1,400,000 February, 2008. 2063 > 1,700,000 * Estimated figures Source: HDIP


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The Government of Pakistan has offered a number of incentives for encouraging the use of CNG in the country. This has on one hand considerably boosted industrial growth while on the other has posed harmful consequences for the environment, although less lethal than petroleum emissions. The government of Pakistan has promoted the use of CNG in a big way. This has led to an unprecedented growth of around 60% per annum in the CNG industry during the last few years. Pakistan is the largest user of CNG in Asia and has become the third-leading country in the world to use CNG to fuel vehicles after Argentina and Brazil. Presently, more than 1.7 million vehicles are using CNG as fuel and 2063 CNG stations are operational in different parts of the country2 (see, Table 16.2). Use of CNG as fuel in transport sector has observed a quantum leap, replacing traditional fuels. This has consequently helped a lot in lowering the pollution load in many urban centers. An investment of around Rs.90 billion has so far been made in this sector while Rs.20 billion is in pipeline. The CNG industry has created an estimated 85,000 new jobs.

The government has planned to offer incentives to investors to introduce CNG buses in the major cities of the country. In line with a Cabinet directive, the Federal Government is providing incentives in the form of payment of the markup (either complete or partial) of the loans required to purchase new CNG vehicles. In this regard, the cities of Karachi, Hyderabad, Lahore, Rawalpindi, Islamabad, Peshawar and Quetta are phasing out diesel vehicles in favor of CNG buses for intra-city transportation. All new buses, mini buses and wagons will be CNG based or dual fuel vehicles. Provincial governments are also taking initiatives to promote CNG conversions. For example, the Punjab Government is giving 20 percent of the capital cost for purchasing new CNG vehicles. For the last five years, the use of coal in the power sector has been decreasing mainly because a large number of plants have been converted to natural gas. Likewise, there has been a considerable reduction in coal usage for domestic purposes. After the successful CNG programme for petrol replacement, the government is now embarking

2 as on February, 2008

upon a programme to replace the more polluting diesel fuel used in road transport.

Policies and Programmes

To address the various challenges mentioned above, the Government is implementing various policies and programmes; many of which have come out of the National Environment Action Programme of the Ministry of Environment.

With increasing industrialization taking place in Pakistan, there is an urgent need to ensure that its harmful impact on the environment be minimized. Realizing the issue, Pakistan Environmental Protection Council (PEPC), an apex body for setting up environmental policies in the country, established National Environmental Quality Standards (NEQS) which prescribes the maximum discharging limits of emissions and effluents. Pakistan Environmental Protection Agency (Pak-EPA) is the designated authority to implement NEQS in an effective manner without compromising the interests and profits of the industrialists. Section 11 of Pakistan Environmental Protection (PEPA, 1997) provides “no person shall discharge or emit or allow the discharge or emission of any effluent or waste or air pollutant or noise in an amount, concentration or level which is in excess of the National Environmental Quality Standards or, where applicable the standards established under sub-clause (i) of clause (g) of sub-section (1) of section 6.

a) To achieve this goal, a Self Monitoring and Reporting tool (SMART) was developed in consultation with the stakeholders to conduct the analysis of industrial emissions/effluents on their own and provide the same to the concerned Environment Protection Agency (EPA). Reliable self-monitoring is essential to ensure the integrity of data for decision-making. Besides, this policy instrument fosters transparency and easy access to monitoring data of different industries; and it can help demonstrate the existence of ‘Eco-Friendly Industrial Units’. This information is required to assess the compliance of the industry with the NEQS. The nationwide launching of SMART was held on 8th March, 2006.

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The benefits of SMART are multifaceted and extremely important for maintaining the Air quality. Compliance is of tremendous value both from an environmental standpoint and health & safety perspective. Secondly, self-audits can identify where additional pollution mitigation measures are required. Implementation of appropriate pollution prevention measures results in waste minimization, which can provide significant cost savings associated with waste management. Thirdly, industries that are proactive in ensuring compliance with regulations may develop a competitive advantage, as consumers, customers and investors today look for products from companies that have clearly demonstrated a commitment to minimizing their impact on the environment.

b) Under the NEAP-SP, Green Industry Programme was launched in the year 2006 by the Pakistan Environmental Protection Agency (EPA) for the promotion of SMART program, with the support of the UNDP, to make the industries responsible for systematic monitoring and reporting of their environmental performance. The key attribute of this programme is the “nation wide reductions in the pollution levels” by providing the flexibility to the industries to choose cost-effective environmental solutions and by promoting pollution control measures and assisting in the identification of regulatory and non regulatory impediments.

III.2. Water and Sanitation

Per capita water availability in Pakistan has been decreasing at an alarming rate due to increase in population that puts Pakistan in the category of ‘high stress’ countries in terms of limited water resources. In 1951, per capita availability was 5300 cubic meters, which has now decreased to 1090 cubic meter just touching water scarcity level of 1000 cubic meter. In addition to this the fact that Pakistan is an agrarian economy accentuates its dependence on water from its rivers for various purposes ranging from agriculture to power generation. According to an estimate, the Indus River irrigates 80 percent of the 21.5 million ha of agricultural land. Over the years, various pressures on the River Indus, the most important being water extraction for irrigation purposes, has led to

substantial pressures on Pakistan’s water resources. The increased groundwater utilization for domestic and agricultural use has adversely affected groundwater quality particularly in the irrigated areas with almost 70 percent tube wells now pumping hazardous sodic water.

In light of growing population pressures, rapid urbanization and increased industrialization and extended periods of drought, it has been estimated that an additional 48 Billion m3 water would be required to meet the growing demands of agriculture and the country’s economy by the year 2011. This will likely have a profound impact on the generally arid nature of Pakistan's climate, 10 percent (780,000 ha) of the total surface area of the country is covered by wetlands which are of global importance. There are about 225 significant wetlands in Pakistan identified to date, out of which 19 have been recognized as being of international importance by the Ramsar Convention. The diverse assortment of natural freshwater and marine wetlands that occur within Pakistan support many unique combinations of biodiversity. Due to growing population pressures and habitat loss induced by climate change, the wetlands are facing increasing pressures. It is feared that these wetlands may not be able to take on much additional pressure and their productivity needs to be preserved, enhanced and sustained.

The quality of freshwater is also deteriorating due to losses in the movement of the water from the canal heads to the croplands. The existing water resources are under threat due to rapid degradation, soil erosion deforestation and untreated discharge of municipal and industrial wastes to rivers and other water bodies. Municipal water is treated only in two cities viz. Karachi and Islamabad though the capacity of these treatment plants is much less than the actual quantum of wastewater. Over-fishing and polluted water are reducing the productivity of the marine and inshore fisheries. This situation is precarious, in particular, for mangroves in the coastal zone and certain aquatic wildlife, such as the Indus freshwater dolphin. All of these activities are contributing to the destruction of habitats and, more specifically, to a loss of biodiversity.


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The Human Development Report 2006 points out, “the scarcity at the heart of the global water crisis is rooted in power, poverty and inequality”. Target 10 of MDG 7 deals with sustainable access to safe drinking water and basic sanitation. Even though there has been an improvement in water supply coverage from 53 percent in 1990 to 66 percent in 2005, however, the MDG target of 93 percent poses a considerable challenge. The National Sanitation Policy resolves to meet the MDG targets whereby the proportion of people without sustainable access to improved sanitation will be reduced by half, by the year 2015 and 100 percent population will be served with improved sanitation by 2025. Currently, only 44 percent of the population of Pakistan has access to safe sanitation and 65 percent to safe drinking water, whereas the targets for 2015 are 90 percent and 93 percent, respectively.


a) Realizing the importance and role of sanitation in the improvement of environment as well as the commitment to achieving the MDG sanitation goals, the Ministry of Environment undertook preparation of the National Sanitation Policy in collaboration with major stakeholders. It involved extensive consultations with communities and other stakeholders at the provincial, district and local levels. The National Sanitation Policy of Pakistan was placed before the Cabinet soon after the Second South Asian Conference on Sanitation held in Islamabad on 20-21 September 2006 and it was approved on 4th October 2006.

The primary focus of sanitation for the purpose of this Policy is on the safe disposal of excreta away from the dwelling units and work places by using a sanitary latrine and includes creation of an open defecation free environment along with the safe disposal of liquid and solid wastes; and the promotion of health and hygiene practices in the country. The Policy resolves to meet the Millennium Development Goals (MDGs) and targets whereby the proportion of people without sustainable access to improved sanitation will be reduced by half, by the year 2015 and 100 per cent population will be served by 2025 with improved sanitation.

The provincial governments, AJK, Northern Areas and FATA shall formulate their own strategies, plans and programmes in line with the National Sanitation Policy. It will also be the responsibility of the provincial governments to ensure that city governments and Tehsil Management Administrations (TMAs) follow the Hospital Waste Management Rules 2005 of the Ministry of Environment and the provisions of the Basel Convention on Management of Hazardous Wastes and their disposal.

b) In addition to these developments the Ministry of Environment has also prepared a Draft on National Drinking Water Policy in collaboration with UNICEF through an extensive stakeholder consultation process both at the federal and provincial levels. The final draft has been circulated to the concerned Ministries/Divisions and provincial local government and public health engineering departments for their views and comments. The Draft of National Drinking Water Policy would be finalized and submitted to the Cabinet for approval in the near future.

A major MTDF initiative taken in this regard by the Government is the provision of clean drinking water to almost entire population of the country. Government of Pakistan is committed to supply safe drinking water to its people and many emptive as well as preemptive measures have been proposed in the MTDF 2005-10 and national environmental policy to ensure supply of safe drinking water. In this regard Clean Drinking Water for All Programme has been launched, whereby; water filtration plants are being established and operationalised in all the Union Councils of Pakistan to provide clean drinking water to people costing around Rs. 15 billion by the end of 2009. This programme is one of the biggest initiatives related to water to come out of the NEAP. The Clean Drinking Water Programme was initiated in two parallel phases. The first is the “Clean Drinking Water Initiative” (CDWI) project whereby 544 plants are being installed one in each district and tehsil; and ii) Clean Drinking Water for All (CDWA) project whereby filtration plants shall be installed one in each union council and villages. The programme was approved by the Central Development Working Party (CDWP) at a

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cost of Rs. 115.09 Million in July 2004 and was included in the Medium Term Development Framework 2005-10. The Clean Drinking Water for All is now a Sub-Programme of Khushal Pakistan Programme and a high level task force has been notified for overall supervision and monitoring of the programme.

c) Various bilateral and multilateral donors/aid/lending agencies have shown their willingness to support government's endeavor in facilitating the accessibility of public to clean drinking water. MTDF 2005-10 is underway to extend the coverage of clean drinking water through water supply schemes to 75 percent by 2010 and sanitation to 45 percent in the same period. It is targeted to provide 93 percent of population with access to clean drinking water by 2015 and 90 percent of the population with access to sanitation. The United Nations officially declared 2008 as the International Year of Sanitation (IYS) to accelerate progress for 2.6 billion people world wide who are without proper sanitation facilities. The launch of IYS, which runs through 2008, was organized by the UN Department of Economic and Social Affairs (UNDESA) in collaboration with the UN-Water Task Force on Sanitation.

d) Pakistan formulated a draft Wetlands Action Plan that was formally adopted by the Government of Pakistan (GoP) in 2000. In providing an overview of the scope and condition of Pakistan’s wetlands, this document highlighted poverty and ignorance as the prime factors contributing to the degradation of wetland resources. The plan presented a list of recommendations for action to be taken by key stakeholders. Through its support for international conventions, Pakistan has demonstrated its commitment to biodiversity conservation in general and wetlands conservation in particular. The adoption of a Wetlands Action Plan recently has further demonstrated the GoP’s recognition of the importance of wetlands and the need to find sustainable solutions for their conservation.

The Pakistan Wetlands Programme (PWP) funded by the UNDP and the Global Environment Facility (GEF) aims to promote the sustainable conservation of freshwater and marine wetlands and their associated globally important biodiversity in Pakistan. This initiative was taken by the Ministry of Environment and is being implemented by the World Wide Fund for Nature, Pakistan since July, 2005, for seven years. For this purpose a two pronged strategy was devised:

1. The first will provide the required policy, institutional, technical and financial framework and generate positive public support essential for the mainstreaming of wetlands conservation.

2. The second involves the design and implementation of sustainable, participatory management plans for four independent Demonstration Sites, each chosen to be representative of a broad eco-region in Pakistan. It includes specific mechanisms to secure financial sustainability and enhanced replication and proliferation of viable wetlands management interventions in a nation-wide, on-going wetlands conservation initiative.

The general objective is to conserve the globally important wetlands biodiversity in Pakistan while alleviating poverty. It is a US$11.792 million programme funded by a consortium of national and international donors.

A key component of the PWP is to create awareness on all issues related to wetlands conservation. In this regard, the Programme has reached out to all sections of the Pakistani community through trainings, educational activities, conferences, carnivals, school-events and other conscious raising activities. The traveling wetlands carnival toured four of the country’s major cities. It is a means of reaching out to the public to raise their understanding for the need to conserve, protect and manage Pakistan’s wetlands resources. It stressed the valuable scientific and social roles they occupy within the country and region.


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The PWP has conducted a number of surveys for creating awareness regarding the significance of wetlands in the country. In the Salt Range Wetlands Complex (SRWC) a Baseline Ornithological Survey of the Salt Range took place in December 2006. The assessments of five lakes yielded significant populations of terrestrial and wetland birds and it was estimated that more than 40,000 birds were present. Along the Indus Rivers a Flood Season investigation was carried out to establish that, in the majority of cases, the Indus Dolphin could only pass downstream during periods of flooding. This observation has provided useful insight into the realities underlying the current distribution of dolphin in the mainstream of the Indus River and will aid in understanding genetic distributions within the species. Recently, under the PWP, an environmentally significant coral reef thought not to exist in Pakistani marine waters has been discovered. The coral reef is situated on the northern side of Astola Island along the Makran coastline. Coral reefs among other precious assets are deteriorating due to anthropogenic threats, most of which are a direct product of poverty, but many of which are exacerbated by ignorance and negligence of people who need to be guided and trained.

III.3. Land

One of the principal natural resources that Pakistan is endowed with is ‘arable land’. About 28% of Pakistan's total land area is under cultivation and is watered by one of the largest irrigation systems in the world. In addition to this, out of a total land area of 79.6 million hectares, only 16 million hectares are suitable for irrigated farming in Pakistan. Hence, majority of the people depend on arid and semi-arid areas to support their livelihoods through agro-pastoral activities.

Persistent Water logging, Salinization and Sodicity is continuously reducing the productivity of fertile soil in the country. It is estimated that about 38 percent of Pakistan's irrigated land is water logged, 14 percent is saline and the application of agricultural chemicals has increased by a factor of almost 10 since 1980.

Land degradation is mainly due to four major causes: water erosion, wind erosion, salinity/sodicity and water logging. Pakistan like most of the developing world, is faced with the challenges of being affected by land degradation and desertification, which are causing environmental problems, including soil erosion, loss of soil fertility, flash floods, salinity, deforestation and associated loss of biodiversity and carbon sequestration.

As mentioned earlier the Forest Cover including state and private forests/farmlands (%age of total land area) stood at 5.2% during the current fiscal year, whereas both environmental and economic standards necessitate that the country should have at least 20-25 percent area under forests. The MDGs however, are not so ambitious and suggest forest cover of 6 percent. About 11.2 million hectares, mostly northern mountain regions, are affected by water erosion. According to an estimate, about 2 million hectares are affected by water logging and around 6 million hectares by salinity and sodicity. Wind erosion is another issue concerning land degradation in Pakistan. About 3-5 million hectares of land is affected by wind erosion in arid regions of Punjab (Cholistan), Sindh (Tharparkar), and Balochistan (Chagai Desert and sand areas along the coast).


Despite the generally arid nature of Pakistan's climate, the region supports an estimated 780,000 ha of wetlands that cover 9.7% of the total surface area of the country. The diverse assortment of natural freshwater and marine wetlands, that exists within Pakistan, support unique combinations of biodiversity. The same resource, however, also sustains an estimated 144 million permanent human residents and 3-4 million displaced persons from adjacent countries. The wetlands of the region are, therefore, generally degrading under a broad spectrum of anthropogenic threats that are mainly rooted in poverty but exacerbated by lack of knowledge and mismanagement.

The Ministry of Environment with the financial support of the GEF-UNDP has launched a full-scale project on Sustainable Land Management

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(SLM) to Combat Desertification in Pakistan. The programme is to be implemented for a period of two years from 2008-2009. The overall goal of the project is to combat land degradation and desertification in Pakistan in order to protect and restore ecosystem and essential ecosystem services that are key to reducing poverty. The project will depend upon strong commitment of the Government of Pakistan and the involvement of key stakeholders, in particular those at the community level. The project will be implemented in two phases, with the first phase focused on creating an enabling environment for SLM and piloting innovation, and the second phase drawing lessons learned to deepen the policy and institutional commitment to SLM and completing demonstration projects that can later be scaled up and replicated.

III.4. Forestry

Relatively high population growth contributed to the depletion of forestland from 9.8% of Pakistan's total area in 1947 to 4.5% by 1986, despite the forest conservation measures mandated by the Forest Act of 1927. Pakistan lost 14.5% of its remaining forest and woodland between 1983 and 1993. Deforestation has contributed to increased soil erosion, declining soil fertility, and severe flooding.

Currently Pakistan has only 5.2 percent of total land area covered with forest which amounts to 0.03 ha of forest per capita, placing Pakistan among countries with Low Forest Cover. Of the total forest area, commercial forest is just one-third (32.8%) while the rest (67.2%) is utilized for the purpose of soil conservation, watershed protection and climatic functions. The country’s forest area is divided into State-owned forests, Communal forests and Privately owned forests. Major forest types existing in Pakistan are Temperate and Subtropical Conifer Forests, Scrub Forests, Riverine Forests 3 (irrigated plantations), Liner Plantations (roadside, canal-side), and Mangrove

3 Riverine forests are disappearing rapidly because of reduced flow of water, unchecked practice of illegally cutting down trees and encroachment upon forest lands in Hyderabad.

Forests. Besides these categories, a significant proportion of private farmlands are abundantly covered with trees.

The existing forest resources in the country are under severe pressure to meet the fuel-wood and timber needs of a rapidly growing population. In addition to this the wood-based industries including housing, sports, matches, boat making and furniture are continuously growing in number and capacity.

The MTDF (2005-10) has given significant priority to expand forest covered areas in Pakistan, for which the Government has allocated ample financial resources. Pakistan is committed to increasing forest cover to 5.7 percent by 2011 and to 6 percent by the year 2015 (see table 16.3). An increase of 1.2 percent implies that an additional 1.051 m.ha area has to be brought under forest cover within the next ten years. This will include all state lands, communal lands, farmlands, private lands and municipal lands. In 2001, out of a total of 86.7 m.ha land area of Pakistan including Azad Jammu Kashmir (AJK), 3.317 m.ha was under contiguous forest cover and 0.781 m. ha farmland area was under tree cover which was taken as a baseline for fixing the Millennium Development Goals.

The area protected for conservation of wildlife (%age of total area) was estimated at 11.3% while the targeted levels were 11.6% and 12.0% according to MTFD (2005-10) and MDG (2015) targets respectively. Pakistan is therefore making committed efforts to improve protected areas established to conserve rapidly declining wildlife species in their natural environment, and enhance its existing network of protected areas in terms of quality and quantity.


a) Forest covered area is being lost every year, and Balochistan's Juniper forests, unique in the world, continue to be cut beyond their capacity to regenerate. A project on ‘mainstreaming biodiversity in Juniper forest ecosystem’ has been jointly launched by the UNDP and the IUCN.


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The total funding allocated for the project is USD 2.51 million.

b) Forestry, watershed management and biodiversity projects in Mangla and Tarbela Watersheds have been initiated to reduce sediment load, create employment opportunities, alleviate poverty, conserve the natural resources and rehabilitate the degraded land resources - through nurseries and plantations, construction of check dams, soil conservation, establishment of community organizations and terracing, etc. In this regard a five year project of Management in Tarbela Reservoir is being undertaken by the Ministry of Environment and being implemented by the Forest Department, Government of NWFP at a cost of Rs. 532.457 million. The project aims to contribute to sustainable resource management in the Tarbela reservoir catchments through consolidating and expanding the social forestry activities in the programme area. Besides replanting over 10,000 acres, the project envisages afforestation over an additional area of 70,000 acres of privately and community owned denuded marginal lands.

The recently initiated mega forestry projects amounting to approximately Rs. 12 billion have been approved by the Executive Committee of the National Economic Council (ECNEC) and will be implemented by all the Provincial Governments including AJK and Northern Areas. The Provincial Governments are implementing these projects with the involvement of all stakeholders including farmers, local communities, forest owners and right holders, civil society organizations & private sector companies.

To achieve the MDGs targets of vegetation cover of 6% by 2015, Planning Commission proactively interacted with the Ministry of Environment and the Provincial Forest Departments to come-up with project for afforestation/reforestation to meet the MTDF and MDGs targets. As a result of timely and effective measures, 5 projects of forestry resource development costing Rs. 11.5 billion have been approved by Executive Committee of the National Economic Council (ECNEC), after more than a year’s efforts. Once implemented, these will contribute greatly towards achievements of 6%

vegetative cover target. In addition to this various tree planting projects are under implementation as a result of which the tree cover in the country (state and privately owned) has increased to 5.17%.

The Ministry of Environment’s Forestry Wing has devised a strategy in accordance with targeted MDG goals for the next 10 years starting from 2005. The Forestry Wing is responsible for coordination and monitoring of forestry sector developments in the country through the office of the Inspector General Forests. It deals with the formulation of forest policy, planning, international coordination, education, training and research in the field of forestry. On the other hand, the implementation of forestry projects comes under the purview of the provincial governments. At the institutional level, the linkages of the Federal Forestry Wing and Provincial Forest Departments will be strengthened with Highway Departments, Irrigation Departments and Pakistan Railways for establishing linear plantations. Further, District Governments and Municipal Administrations will be encouraged with incentives to bring maximum lands under forest cover. Measures adopted for this purpose have been listed below;

Measures to Enhance Forest Cover:

Mass Tree Plantation Campaigns: In order to enhance tree cover in the country, tree planting campaigns are held each year. During the tree planting campaign all the government departments, private organizations, defense organizations and NGOs were involved in planting activities.

Federal Forestry Board: The central Forestry Board was constituted in 1954 to provide a platform for the improvement of Forest Policy, but remained dormant for the most part. The board was therefore reconstituted and renamed as “Federal Forestry Board”. The purpose of the board was to develop policies and strategies related to the Forestry Sector and also to monitor the activities of the Provincial Forest Departments including the forest cover changes.

c) Pakistan Mountain Area Conservation Project (PMACP), funded by the Global Environment Facility (GEF) in collaboration with

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the Balochistan Forest Department, NWFP and Azad Jammu and Kashmir (AJK) Wildlife Departments, aims to introduce sustainable park management with improvement in park operations, park habitat, wildlife survival and park infrastructure. World Wide Fund (WWF) for Nature, - Pakistan is providing technical assistance in Machiara and Chitral Gol National Parks. The programme is a successor of the earlier 7-year project titled “Mountain Areas Conservancy Project (MACP)” and would build on its achievements. Its primary objective is the conservation of the unique and rare biodiversity species of global significance and would cater for the conversion of MACP into a programme by furthering its successful interventions. This will be crucial in reaching the MDG target of 12 percent protected land areas. The programme is in line with the overall objectives of biodiversity conservation as envisaged in the Medium Term Development Framework 2005-2010 for addressing the green environment issues in Pakistan.

d) Presently, three research and development projects sponsored by the Government of Pakistan are being executed by the Institute namely, Forestry Sector Research and Development Project (FSR&DP) and Strengthening of Forest Products Research (SFPR) and Upgrading and Reconstruction of Pakistan Forest Institute (PFI) Field Station, Shinkiari for Forestry Research, Education and Training. Forestry Sector Research and Development Project has been initiated for a period of seven years, having a total cost of Rs. 193.5 million. The main objectives of the project include assessment of existing forest type cover by using Geographic Information System and Remote Sensing techniques and to monitor the changes for subsequent management plans; determination of optimum water requirements of important tree species to enhance wood production; identification, testing and preservation of forest insects, pathogens and their natural enemies for optimum pest management; human resource development and dissemination of research findings to field foresters and communities through electronic and print media, publications, brochures and pamphlets etc.

IV. Climate Change

Since the industrial revolution (about 150 years ago) the increasing anthropogenic (human induced) Greenhouse Gas (GHG) 4 emission is having a noticeable effect on the earth's climate, through the burning of ever greater quantities of fossil fuel in industrial processes and various other means to meet growing demands of people and their energy intensive lifestyles. In addition to high rate of industrial revolution that occurred in the past century, the problem is also inextricably linked to world’s population which is growing exponentially. The increasing concentration of GHGs is warming the earth’s atmosphere and changing the climate of the planet. This phenomenon is called “Climate Change” or “Global Warming”. No issue merits more urgent attention or more immediate action than this challenge because it is directly a quest for future survival.

The phenomenal changes in weather and climate are already evident in the form of increase in extreme weather events, more frequent and powerful cyclones and hurricanes, more frequent and floods, droughts, powerful storms, hotter and longer dry periods, reduced winter season, early spring and rapidly increasing desertification. Climate change is also obvious from the fact that the ten hottest years on record have all occurred since the beginning of the 1990s. How the world deals with climate change today will have direct bearing on the human development prospects of a large section of humanity. Failure will consign the poorest 40 percent of the world’s population some 2.6 billion people to a future of diminished opportunities. It will also exacerbate deep inequalities within countries which might be a potential cause for future conflict. Climate change is different from other problems facing humanity and it challenges us to think differently at many

4 Gases like carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydro- fluorocarbons (HFCs), per- fluorocarbons (PFCs) and sulphur hexafluoride (SF6) etc. are called Greenhouse Gases. These gases surround the atmosphere and function like a blanket around the earth by capturing the infra-red solar radiations and consequently making the earth warmer than it would otherwise be.


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levels. Above all, it challenges us to think about what it means to live as part of an ecologically interdependent human community.

The work of Intergovernmental Panel on Climate Change (IPCC) over the last decade has confirmed that average global temperatures are increasing since the industrial revolution, mainly as a result of an increase in concentration of GHGs in the atmosphere and that future global temperature rises of 2.0– 4.50C are almost inevitable in the 21st Century. According to the IPCC, the global world temperature has increased by 0.60C over the last 100 years and is expected to rise further by 1.4 to 5.80C before the end of the present century. Last’s year IPCC report highlighted the construction sector as that with the most potential to reduce GHG emissions, and in the most cost effective way. The increases in global temperatures and the associated changes in precipitation, glacier melt and sea level rise is expected to have considerable direct and indirect impacts (both positive and negative) on various socio-economic sectors, such as water, agriculture, health, forestry, and biodiversity. Global warming is evidence that we are overloading the carrying capacity of the Earth’s atmosphere. Stocks of GHGs that trap heat in the atmosphere are accumulating at an unprecedented rate.

The regions that are likely to be hurt the most by climate change include Africa, South and Southeast Asia, and Latin America. India and Europe are exposed to catastrophic risk from a change in monsoon patterns and the reversal of the Atlantic Thermohaline Circulation5 respectively. In contrast, China, North America, advanced Asian countries, and transition economies (especially Russia) are less vulnerable and may even benefit at low degrees of warming (for example, from better crop yield). A Greenpeace report confirms that if the current trend of rise in temperatures continues it might lead to mass migration from India, Pakistan and Bangladesh.

5 The term Thermohaline circulation (THC) refers to the theoretical hypothesis of global density-driven circulation of the oceans. Derivation is from thermo- for temperature and -haline for salt, which together determine the density of sea water.

IV.1. Impact of Climate Change in Pakistan

Climate change raises serious concerns for developing countries like Pakistan, with its tremendous social, environmental and economic impacts. The richer industrialized countries are primarily responsible for GHG emissions, but it is the poorer developing countries who would most heavily bear the costs of climate change due to their increased ‘adaptation vulnerability’. Developing nations are more at risk mainly due to weak governance, lack of required infrastructure and technology, prevailing scale of poverty and most importantly, the lack of vision and commitment to address this mounting threat.

The agricultural productivity in Pakistan will be affected due to changes in land and water resources. Dry land areas, including arid and semi- arid regions are most vulnerable to these changes, as these regions are already facing significant water shortages and high temperatures. The bio-physical relationships could also be altered due to seasonal changes in cultivating crops which will consequently lead to changing irrigation requirements, altering soil characteristics, and increasing the risk of pests and diseases, thereby negatively affecting agricultural productivity. In the Pakistani context, this vulnerability is particularly high because of its large population and economic dependence on primary natural resources, being basically an agrarian economy.

Water demands of Pakistan mainly depends upon a single river system of Indus, that is fed by glacier systems in Hindukush and Himalayas, which are believed to be receding over the last few decades as a result of Global Warming. This has had a profound impact on the composition of the upper Indus Basin, effecting people living not only in nearby areas but in all areas of Sindh and will result in water shortages for millions of people in the country. Sindh coast had an average of four cyclones in a century however the frequency and intensity has increased manifold and the period between 1971-2001 records 14 cyclones 6 . The recent decades have witnessed a massive decline in mangroves forest in Sindh due to shortage of water

6 (A Review of Disaster Management Policies and Systems in Pakistan for WCDR, 2005)

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flows to Indus Delta. Till 19th Century the delta would receive annually some 150 MAF water from the river system. This amount has gradually been reduced due to a series of upstream dams and barrages.

The aquatic life existing in River Indus will also be adversely subjected to the far reaching effects of climate change. One of the world’s rarest mammals which happen to be an indigenous inhabitant of River Indus is the blind Indus River Dolphin. The construction of Pakistan’s extensive irrigation system has led to a significant loss in the number of this specie and its population has shrunk in size to the extent that it is now considered one of the world’s most endangered mammals. If the current trend continues and no substantial measures are taken to preserve the Indus River Dolphin, then the coming years might have to witness its extinction.

Studies suggest that climate change has adverse impacts on forest resources and natural ecosystems of the country. Forest lands in the northern mountainous areas of Pakistan would shift from one biome to another, which would also result in an increase in the total potential Coniferous Forest area decreasing the productivity of this precious resource.

Scientific evidence of human interference with the climate first emerged in the international public arena in 1979 at the First World Climate Conference. In 1988 the United Nations General Assembly adopted a resolution proposed by the Government of Malta, urging: “… protection of global climate for present and future generations of mankind.” In the same year, the governing bodies of the World Meteorological Organization (WMO) and of the United Nations Environment Programme (UNEP) created a new body, the Intergovernmental Panel on Climate Change (IPCC), to marshal and assess scientific information on the subject. In 1990 the IPCC issued its First Assessment Report, which confirmed that the threat of climate change was real. The Second World Climate Conference, held in Geneva called for the creation of a global treaty. The General Assembly responded by passing

resolution and formally launching negotiations on a Convention on Climate Change.

Pakistan has actively participated in the following Climate Change related initiatives:

• United Nations Framework Convention on Climate Change (UNFCCC) was adopted in 1992 at Earth Summit at Rio de Janeiro to meet the challenge of climate change. UNFCCC aims at stabilization of Greenhouse Gas (GHG) concentrations in the atmosphere. The convention was signed by 154 states. Pakistan signed the UNFCCC as Non Annex- I Party in June 1994 and it became effective for Pakistan, as Party, on 30th August 1994.

• The Kyoto Protocol was adopted under the UNFCCC at the 3rd Meeting of the Parties held in Kyoto, Japan, which entered into force on 16th February 2005. Under the Protocol, developed countries (Annex-1 parties), agreed to reduce their combined Greenhouse Gas emissions by 5.2% below the 1990 level during the period 2008-2012. Pakistan adopted the Kyoto Protocol in 1997 and acceded to it on 11th January 2005. The Protocol introduced Clean Development Mechanism (CDM) in order to achieve sustainable development goals in developing countries of the World.

• Pakistan has submitted to the Initial National Communication to UNFCCC in which national GHG inventory was updated and strategy for addressing climate change was defined.

• A high level National Committee on Climate Change, chaired by the Prime Minister of Pakistan has been formed to review policies and monitor progress on climate change initiatives in the country.

• An autonomous Global Change Impact Studies Centre has been established that is engaged in research on impacts and adaptation to climate change in the country.

• Clean Development Mechanism in Pakistan:

The Government of Pakistan after its accession to the Kyoto Protocol of the United Nations Framework Convention on Climate Change (UNFCCC) in January 2005 has declared the


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Ministry of Environment as the Designated National Authority for Clean Development Mechanism under the Protocol. A Clean Development Mechanism (CDM) Cell in the Ministry of Environment was established in August 2005 to promote CDM in Pakistan. A National Operation Strategy for CDM was approved by the Prime Minister in February 2006. Several awareness raising workshops were conducted with public and private sectors to enhance understanding about CDM in the country. The CDM Cell has now been strengthened to ensure institutional sustainability of the Cell in the Ministry through the Public Sector Development Programme (PSDP) Fund with a total cost of Rs. 38.93 million for a period of three years (July 2006- June 2009). The project aims at strengthening of the CDM Secretariat and enhancing the capacity of CDM staff and project proponents in developing, managing and approval of the CDM projects.

To further promote the development of CDM projects in Pakistan, the Ministry of Environment has received a Japanese Policy and Human Resource Development (PHRD) Grant of US$ 0.57 million though The World Bank. The project will further strengthen the institutional framework for CDM in the country by creating an enabling environment and promoting public and private participation in the fast emerging carbon market in Pakistan. These efforts will bring foreign investment in sustainable development projects in the area of alternate/renewable energy production, waste management, industrial pollution/effluent management, agriculture and forestry which at the same will help in effectively participating in global efforts to reduce greenhouse gas emissions to mitigate climate change.

The Designated National Authority (DNA) has so far approved the following four CDM projects:

1. Catalytic Nitrous oxide Abatement and Tail Gas End of Pakarab Fertilizers Multan: The projects aim at catalytic break down of Nitrous Oxide gas equivalent to 1.3 million tones of CO2 per year. This project will bring

investment of US$ 15 million and will earn Certified Emission Reductions/ Carbon Credits worth millions of dollars. The project has been registered with CDM Executive Board and its implementation is already underway.

2. Management of Cattle Waste in Landhi Cattle Colony, Karachi was granted approval on 2nd April 2007. The project will bring foreign investment of US$ 102.15 million. Under this project cattle waste of about 4 million tonnes will be converted into valuable organic fertilizer along with generation of 25 MW of clean electricity to be connected to the KESC main grid. Additionally the project will reduce around 1.53 million tones of CO2 emissions per year which will bring additional income of US$ 15 million from the sale of carbon credits every year.

3. The 84 MW New Bong Escape Hydropower Project, AJK was granted approval on 3rd May 2007. The project will bring foreign investment of US$ 148.55 million and aims to generate 84 MW electricity, in order to sufficiently supply the national grid using clean, renewable and sustainable hydropower. Additionally, the project will reduce 0.22 million tones of CO2 emissions per year which will bring additional income of US$ 3.3 million from the sale of carbon credits every year.

4. Pakarab Fertilizer Cogeneration Power Project, Multan was granted approval on 28th January 2008. The project will bring foreign investment of US $35 million. The project aims to generate power through gas turbines with upstream Heat Recovery Steam Generators (HRSG) for supply to fertilizer complex using clean, renewable and sustainable cogeneration technology. Additionally the project will reduce around 0.11 million tones of CO2 emissions per year which will bring additional income of US$ 1.61 million from the sale of carbon credits every year and will improve local environmental conditions and sustainable development in the area. A number of other projects for preserving renewable energy, waste management and improving industrial process are in the pipeline.

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Apart from the above mentioned initiatives, a number of CDM projects are in the pipeline at various stages of development in sectors like waste heat recovery, co-generation, waste management, forestry and alternate energy (wind and hydropower).

• Technical Advisory Panel (TAP) on Climate Change:

The lack of an enabling policy, regulatory framework and vulnerability assessments plus inadequate capacity to reduce impact and risks of Climate Change, particularly to livelihoods of the poor, are some of the challenges that need to be urgently addressed in Pakistan. To achieve the above mentioned goals the Government in collaboration with various concerned organizations has recently initiated the Technical Advisory Panel (TAP) on Climate Change. TAP is expected to provide the requisite input to the government to combat the threat of climate change.

The official launch of the TAP was held on February 15, 2008, Funded by the Royal Norwegian Embassy and the Department for International Development, U.K., and TAP is a joint initiative of the Ministry of Environment, Government of Pakistan, and The World Conservation Union (IUCN). The panel brings together different organizations working on climate change on a single platform to provide active support to government in addressing climate change challenges. The panel is also mandated to undertake capacity building and awareness raising activities among stakeholders and the general public. Currently, TAP comprises six organizations: Ministry of Environment, Global Change Impact Studies Centre, Pakistan Agriculture Research Council, Pakistan Meteorological Department, Asia Pacific Network and IUCN, the last also serving as the TAP secretariat.

IV.2. Economic Initiatives to Cope with Climate Change

Addressing Climate Change and the economic challenge it will likely bring presents policy makers with a dilemma. The benefits of policy

action are uncertain and would accrue largely to future generations, whereas the costs of policies run the risk of being more immediate and extensive. To shed light on how mitigation policies would affect the countries’ economies, the IMF recently undertook a study comparing alternative policy designs---taxes on GHG emissions, emissions permit trading, and hybrid schemes combining elements of both policies. The analysis shows that climate change can be addressed without either hurting the macroeconomic stability and growth or putting an undue burden on the countries least able to bear the costs of policies. In other words if policies are well designed their economic costs could be manageable.

The economy of a country will, to a large extent, determine the ability to adapt and resist the various effects of Climate Change. The adaptation measures that can be taken in this regard are as follows:

Economic and Institutional Development: Development helps countries diversify away from heavily exposed sectors; improves access to health, education, and water; and reduces poverty. High-quality institutions also strengthen countries’ abilities to adapt to climate change.

Fiscal self-insurance: Government budgets must allow for adaptation expenditures, and social safety nets must be strengthened, especially in countries whose domestic resources are far short of what are needed---- on this front, the UN has just launched an effort to provide financing, a step in the right direction. The world needs public finance economists to consider what role fiscal instruments---- notably, taxation and public spending--- have to play in dealing with climate change. Environmentally related taxes, more commonly known as green taxes7, are also levied in some parts of Asia. In China a tax on wooden chop sticks is charged in order to protect forests. The

7 The Green Tax Commission was appointed in Norway in the year 1994, and assessed how to change the tax system away from taxation on labor and towards activities that imply increased use of resources and harmful emissions in a long term perspective.


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possibility of whether such taxes can be implemented in Pakistan needs to be meticulously looked into. Apart from raising the cost of production the green taxes not only generate additional revenue but also protect the environment. The developed countries are increasingly adopting this trend.

The choice of the Exchange Rate Regime, Labor Market and Financial Sector Policies: These choices can encourage firms to adjust to the abrupt shocks (such as extreme whether events) that are likely to accompany Climate Change. A flexible exchange rate regime and financial and labor market reforms that make capital and labor more adaptable may help reduce the macroeconomic cost of extreme weather shocks. Such shocks typically destroy capital investment and disrupt production and adjusting to them requires moving people and capital across and within sectors.

Financial Markets: These markets can reduce the macroeconomic costs of adapting to Climate Change by generating price signals that create incentives for people to move to lower-risk areas and reallocating capital to newly productive sectors and regions. The financial markets’ capacity to diversify costs and spread the risks to those most willing and able to bear them will also help to reduce the social cost of adaptation.

V. Concluding Remarks

According to various classification systems, Pakistan is divided into 9 major ecological zones which are very divergent in nature, ranging from the depths of Arabian Sea to the towering mountains of the western Himalayas, Hindukush and Karakoram. Dramatic geological history

combined with a significantly advantageous location, has blessed Pakistan with a remarkable number of the world’s beneficial ecological regions.

Human interference has led to increased ecological imbalances causing significant damage to natural resources all over the world. Like most developing countries, Pakistan faces critical challenges in conservation of existing natural resources and their further enhancement to meet the demands of an ever increasing population. The rapidly shrinking wetlands, some of which are of international significance, the wondrous juniper forests inhabited by numerous forms of fauna and flora are in danger of extinction due to rapid deforestation, discharge of sewage and industrial effluents into marine and aquatic ecosystems, increase in both wind and water erosion due to reduction in vegetation cover etc. are only some of the crucial challenges facing the country.

The Government of Pakistan is fully aware that these natural resources need to be protected at all costs to ensure future survival at the global as well as the local level. For this purpose numerous international and national projects are in the process of execution and various innovative initiatives have been planned for future implementation. The key policies and programmes that have stemmed from NEAP overlook almost all areas of environmental conservation including Air, Water and Sanitation, Land, Forests and Biodiversity. In addition to this, the worldwide phenomenon of Climate Change has further compounded the overall situation and needs to be addressed at the international level. Pakistan has taken significant initiatives in collaboration with international agencies to counter all complex issues responsible for environmental degradation. It is hoped that these measures will be able to yield timely and desired results in the years to come.

Economic Survey Pakistan 2007 2008

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Transcript of Economic Survey Pakistan 2007 2008