Lessons for Pakistan from PRCs Success in poverty Reduction, 1978-2005

Late 1970s: opening of the Chinese market Start of denationalization in Pakistan

Objectives of this study

i. To understand Chinas success in poverty reduction. ii. To analyze poverty reduction strategies in Pakistan and understand why the country could not succeed in poverty reduction. iii. To draw some policy lessons for Pakistan from the success of China against poverty.

Poverty levels in China and Pakistan, 1978-2005 In 1978, rural poverty in both China and Pakistan was around 33 percent. In 2005, it was 28 percent in Pakistan and only 2.5 percent in China. Fluctuations in Poverty in Pakistan during last three decades (1960s, 1980s, 2007/08) Urban poverty in Pakistan has also been higher than China.

Rural Population living below the poverty line (in millions)

40

38
32 29 24 29

250

35

30

25

20

19

18 14

15

10

25

0 1978 1985 1990 1995 1997 2000 2002 2005

China

Pakistan

Poverty reduction strategies in China and Pakistan

Rural Reforms in China (equal distribution of land) and three land reforms in Pakistan
Land Reforms in Pakistan (000 hectares)
Ceiling (acres) Reforms Irrigated Nonirrigated Area resumed Area disposed of Balance Beneficiaries (000)

1959 1972 1977

500 150 100

1000 300 200

1022.9 (5.6%) 481.2 (2.6%) 1578.3 (8%)

955.7 295.9 1290.1

62.3 185.3 288.2

186.6 71.5 272.6

GDP, Population and Agriculture growth and Poverty in Pakistan

9.5 7.5 5.5 3.5 1.5 -0.5 -2.5

GDP

Agriculture

Population

Agricultural growth, poverty and inequality in Pakistan

Factor inequality weights (from Gini-coefficients) of source incomes in overall income inequality Source of income Agriculture Livestock Non-farm Rental Transfer Total 1986/87 0.377 0.065 0.170 0.201 0.187 1.000 1987/88 0.355 0.110 0.172 0.164 0.199 1.000 1988/89 0.387 0.060 0.187 0.238 0.128 1.000

- In 2004-05, medium and large farmers ( 12.5 acres) received 32% of agricultural income. - Beneficiaries of major agricultural policies in the pastlarge farmers

Non-farm sector and rural poverty reduction

Trends in % distribution of rural employed persons by major industry in Pakistan

75 70 65

12

10
8 6

60 4 55 50 1974-75 1982-83 1990-91 2001-02 2007-08 2 0

Agriculture
Wholesale and retail

social and personal services

manufacturing

Sources of income by operated landholdings in Pakistan, 1986-89 and 2002

Size of land Period Wages and salaries Transfer income Crop income Livestock income % households (2002)

No land
Upto 1 acre Upto 5 acres Upto 12.5 acres More than 12.5 acres

1986-89 2002 1986-89 2002 1986-89 2002 1986-89 2002 1986-89 2002

46.5 76.3 54.7 45.5 30.4 23.4 25.6 9.4 17.6 4.5 32.2 35.8

11.3 20.1 21.6 24.1 23.7 10.3 17.3 4.3 10.9 2.1 15.2 11.1

26.6 1.4 4.8 26.7 24.2 61.2 21.7 82.4 29.7 89.1 24.9 49.5

14.4 1.5 16.2 2.7 17.2 2.6 15.5 2.2 11.4 1.3 14.4 1.8 100 6.3 14.0 18.0 5.1 56.6

1986-89 All households 2002

90

80

70

60

50

40

30

20

10 0 Lahore Rawalpindi Gujranwala Faisalabad Multan Shekhupura Sargodha Gujrat Jhelum Hafizabad Bahawalpur Sialkot Khusab Jhang Oakara Kasur Attock Mianwali RY Khan Bhawalnagar TT Singh Khanewal Sahiwal Bhakkar Vehari M. B. Din Rajanpur Nankana Lodhran Pakpattan DG Khan Muzzaffargarh Layyah Narowal Chakwal

Poverty and Urban Population in Province Punjab of Pakistan(%)

Migration, urbanization and poverty

45

40

35

30

25

20

15

10

Urban Poverty
Urban and rural poverty (%)

Rural Poverty

% Urban Population

% urban poppulation

Role of Public spending and poverty reduction in China and Pakistan

Public spending in Pakistan
Rural development (1950s-2010) SAP (1985-2002); expenditure on education and health (<3% of GDP) Safety Nets and Income Transfer Programs (low coverage and inadequate funds)
Public investment in Pakistan, 2001-09 (Rs. billion)
140 120 100 80 60 40 140 120 100 80 60 2 40 3 2.5 3.5

Education and Health Expenditure (% of GNP)

3 2.7

1.6

20
0 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 infrastructure irrigation rural development

20
0

1.5
1 1980s 1990s 2000s

Why Pakistan could not succeed in Poverty Reduction?

Policy gaps or poor implementation Weak institutions, poor governance and deteriorating law and order situation Neglect of the social sector Skewed power Structures in rural areas Lack of geographical targeting High population growth Conflicts, wars and terrorism

Policy Lessons for Pakistan

Asset creation (physical capital vs. human capital) Inclusiveness of growth (agricultural growth, small farmers and landless) Macroeconomic stability Capacity of institutions (local governments in Pakistan) Integration of markets development of non-farm sector (new growth strategy and cities as engine of growth) Public investment (priority for education, health, infrastructure and rural development) Reducing regional disparities Reaping the demographic dividend

Thank You