PAKISTAN PROMOTING RURAL GROWTH & POVERTY REDUCTION WORLD BANK 2007PRESENTED BY:SAQIB RAZA ANEEZA QAISER QURAT UL AINQURATULAIN

INTRODUCTION

In March 2007 Sustainable and Development Unit, South Asia presented a report on “Pakistan Promoted Rural

Growth and Poverty Reduction”

Over the last century, Pakistan has successfully harnessed the Indus River to develop a major irrigated-agriculture sector that remains the backbone of its economy. However, the country is divided by income inequality and geographic disparities These divisions are particularly pronounced in the agriculture sector.

Who are the Rural Poor? Although agriculture is at the heart of the rural economy, the majority of Pakistan’s rural poor are neither tenant farmers nor farm owners rather the people working under those landowners on their farms are the ones.

Rural, as well as total population growth rates are declining, which bodes well for future per capita income growth.

Several factors explain the non-correlation between relatively rapid agricultural growth and rural poverty reduction

CHALLENGEThe challenge now will be to extend the success of recent years to the medium term so as to further reduce still-high rates of rural poverty in Pakistan

Pakistan’s population remains predominantly rural, with half of the urban population concentrated in the six largest cities so the major chunk living in rural areas is to be pay heed

RURAL POVERTY IN PAKISTAN

POVERTY TRENDSRural poverty in Pakistan, which declined sharply in the 1980s, remained stubbornly high in the 1990s. Reasons.Recent household survey results indicate sharp reductions in rural poverty in Pakistan over the 2001-02 to 2004-05 period.Preliminary analysis of the 2004-05 Pakistan Social and Living Standards Measurement Survey (PSLM) data indicates that both rural and urban poverty have declined since 2001-02.

LONG-RUN DETERMINANTS OF POVERTY TRANSITIONS Analysis of a panel data set of rural households from four districts of Pakistan (Attock, Badin, Dir and Faisalabad) covering the periods 1986-87 to 1990-91 and 2001-02 indicates a decline in real incomes over time, though with considerable variation across households and across districts.

Education Electrification

PROMOTING AGRICULTURAL GROWTH

AGRICULTURAL PRODUCTION AND TECHNOLOGY Average growth is 3.7% per year from 1959 to 2002. it was increased in 1970 to 1980 due to green revolution.

Rapid growth in 1970 to 1980 Availability of water by improved irrigation

Livestock and poultryThe livestock sub-sector which is dominated by small holders, accounts for half of agricultural GDP and is the fastest growing component of the agricultural sector.Production technology and constraints vary according to location and herd size.The poultry sector, which accounts for about three percent of the livestock sector is expanding rapidly.Timely information related to diseases can prepare individual to respond.

FACTORS OF PRODUCTION AND AGRICULTURAL INPUTS

Land Distribution and Productivity Unequal land distribution is a major cause of income inequality in rural Pakistan. 2000 Agricultural CensusThe number of small farms is increasing over time but constraints by the access of water.Most empirical evidence indicates that land productivity on large farms in Pakistan is lower than that of small farms, holding other factors constant.Administrative reform of enforcement of existing norms and regulations, including contracts and the rights of tenants, and the lifting of restrictions on rentals would also help improve the functioning of land markets.

Agricultural Credit

Other Agricultural InputsThere have been no direct subsidies on pesticides, seeds and most fertilizers since 1996, but subsidies on surface irrigation water and electricity (in Baluchistan only) remain.The subsidy on locally produced fertilizer was eliminated in 1993; a small subsidy on imported fertilizer was eliminated in 1996. Likewise, a subsidy on tube wells of Rs 16,000 to Rs 20,000 per unit was abolished in 1994-95. Subsidies on canal irrigation.

Wheat PolicyThe government continues to be substantially involved in wheat markets.Large scale government wheat procurement offers little direct benefit to consumers of wheat flour.

POLICY IMPLICATIONSResearch and extensionInvestment in irrigation and drainageDrip irrigationMore resources to be placed to increase the productivity

GROWTH IN THE RURAL NON-FARM ECONOMY

Sources of dataThere are two sources of data used:National household surveysRural investment climate survey of enterprises

ACCESS TO FINANCECumbersome loan procedures as major obstacles.The major source of formal enterprise finance is commercial banks.Overall very few firms appear to deal with the formal banking sector. The primary sources of start-up capital for village and small town non-farm enterprises are funds borrowed from family and friends and income from nonfarm activities.The major source of investment finance was savings and funds from family and friends.

INFRASTRUCTUREVillage enterprises are more constrained by poor infrastructure than those located in small towns.Access to electricity remains a major challenge in many rural villages and small towns, and even for enterprises that have access, supply is unreliable.Access to and use of telecommunications among enterprises surveyed is surprisingly limited, particularly considering that close to 60 percent of the enterprises are engaged in trade.

Source: Authors’ Calculations based on PSLM 2004-05 survey and the Pakistan Rural Investment Climate Survey, 2005.

TECHNOLOGY AND BUSINESS SERVICESLack of innovation and poor product quality also limits the access of rural firms to wider markets. Few rural firms in Pakistan reported making improvements and/or technological innovations over time.Few rural and small-town entrepreneurs tap into formal business networks.

SECURITY AND RULE OF LAWCrime appears to be much less of a concern for enterprises located in small towns and villages than for those operating in large cities.Overall about five percent of enterprises in villages and seven percent of those in small towns reported having actually been a victim of robbery or theft

PUBLIC EXPENDITURES AND RURAL SERVICE DELIVERY

BACKGROUND: DEVOLUTION IN PAKISTANDecentralizationDevolution Plan 2001

FISCAL OUTCOMES AND ISSUES

Increases in government revenues since 2001-02 have provided the fiscal space for an expansion of expenditures at both the federal and district levels.

FISCAL OUTCOMES AND ISSUES

Pakistan’s per capita total expenditure on agriculture and irrigation remain far below those of other South Asian countries

ADMINISTRATIVE ISSUES Confusion regarding roles and responsibilities of the various levels of governmentAmbiguity regarding functions assigned to different levels of governmentMismatch between expectations and jurisdictional responsibilityReflection of political priorities in decision makingDependency of tehsil on district government

CAPACITYStaff shortages and lack of appropriate skillsWeak Staff capacity in the finance departmentsConsistent deficiency of TMA staff for proper planningFrequent inconsistencies in LG budgetary practicesProvincial governments hold the Appointment, Promotion and Transfer power over local governmentLack of transparency in the APT process

ACCOUNTABILITY•Beneficiary and stakeholder responses on the council process•Formation of Accounts and works committees•Focus group discussions with citizens, beneficiaries and councilors•Formulation of Mushawarat Committees

POLICY IMPLICATIONSImprove the resource position of the local governmentsAutonomy and flexibility of LGsStrengthening LG capacity for finance and planning on a priority basisGiving APT powers to local governmentsEnhancement of Monitoring and evaluation capabilities to improve quality of development spending.Increased Accountability through increased dissemination of information and greater community involvement.

SOCIAL MOBILIZATION AND ENHANCING

LIVELIHOODS

MAJOR RURAL DEVELOPMENT PROGRAMS IN PAKISTAN

Spending on agricultural and rural development, including both government current and development expenditures on agriculture and irrigation, and major non-government programs, totaled Rs 59 billion in 2004-05, or about 0.9 percent of Pakistan’s GDP.Village Agricultural and Industrial Development Programme (VAID) (1953-1962)Rural Works Programme (1963)Peoples Works Programme (1983)

Five-Point Special Development Programme (1985-88)Tameer-e-Watan Program/People’s Programme (1991-99)Social Action Programmes (SAP) I (1992-93 to 1995-96) and II (1998-99 to 2003-04)Khushal Pakistan Program (January 2000 to June 2002)Tameer-e-Pakistan programme (TPP) (February 2003)

SOCIAL MOBILIZATION AND RURAL LIVELIHOODS DEVELOPMENT

Lack of effective participation and influence by rural poorImplementation of top-down approachAga Khan Foundation (1982) to work in remote northern regions of PakistanAndhra Pradesh Rural Poverty Reduction Project in India

SUMMARYAfter a decade of moderate growth but little or no long term change in rural poverty in Pakistan, agricultural output, rural incomes, rural poverty and social welfare indicators all showed marked improvements between 2001-02 and 2004-05

Data from national household surveys indicate that real expenditures of the poorest 40 percent of households increased and rural poverty decreased between 2001-02 and 2004-05 Analysis of rural household panel data indicates that primary and secondary education, land ownership, village electrification and paved roads are all significant factors that determine changes in household welfare over time.

TOWARDS A STRATEGY FOR RURAL GROWTH AND POVERTY REDUCTION

Overcoming the constraints to rural income growth and poverty reduction in Pakistan will require a strategy that goes beyond agriculture, however, and for several reasons.

Given this context, a comprehensive rural growth and poverty reduction strategy is needed, predicated on four main pillars: Promoting efficient Agricultural Growth Creating an enabling environment for the rural non-farm sector Improving the effectiveness and governance of rural institutions Empowering the poor and protecting the most vulnerable