Pakistan National Human Development Report 2020
The three Ps of inequality: Power, People, and Policy Pakistan National Human Development Report 2020
The NHDR 2020 highlights inequality in its various forms. The front cover of this report represents two critical measures of % 49.6 The three Ps of inequality: inequality, that of income and human development. Power, People, and Policy This is done by showing income and human development values for each of Pakistan’s five income quintiles (equal Share of total income population groups categorized from richest to poorest). This 20.7 by quintiles (2018-2019) is because while a country may perform relatively well overall
12.6 in terms of HDI or income equality, it could still be home to 10.1 huge inequalities between its richest and poorest groups. 7
The five lines at the top represent the difference in income across quintiles after adjusting for underreporting of income, from the richest group (dark blue) to the poorest (yellow). This Human Development Index shows that the richest quintile has almost 50 percent of the by quintiles (2019) country’s total income, while the poorest quintile only has seven percent of it.
0.419 0.495 Similarly, the five lines at the bottom represent the difference 0.552 in human development across quintiles, from the poorest 0.617 group (yellow) to the richest (dark blue). While human develop- 0.698 HDI ment for the poorest quintile is as low as 0.419, falling in the low human development category, the corresponding value Q1 Q2 Q3 Q4 Q5 for the country’s richest is 0.698, falling in the high human development category.
Source These stark differences show the huge divisions cleaving the UNDP calculations based on latest data of the Pakistan Economic Survey, 2016- country into two different Pakistans, and highlight the 2017; Labour Force Survey, 2017-2018; and multiple years of the Household Integrated Economic Survey data. urgency of addressing these disparities to create a more equal Pakistan.
Published for the United Nations Development Programme (UNDP) Human Development Reports: In 1990, Dr. Mahbub ul Haq produced the first Human Develop- ment Report, introducing a new concept of human development focusing on expanding people’s opportunities and choices, and measuring a country’s development progress though the richness of human life rather than simply the wealth of its economy. The report featured a Human Devel- opment Index (HDI) created to assess the people’s capabilities. The HDI measures achievements in key dimensions of human development: individuals enabled to live long and healthy lives, to be knowledgeable, and have a decent standard of living. Subsequent Human Development Reports (HDRs) released most years have explored different themes using the human development ap- proach. These Reports, produced by the UNDP’s Human Development Report Office and ensured editorial independence by UNGA, have extensively influenced the development debate worldwide.
National Human Development Reports: Since the first national Human Development Reports (NHDRs) were released in 1992, local editorial teams in 135 countries have produced over 700 NHDRs with UNDP support. These reports bring a human development perspective to national policy concerns through local consultations and research. National HDRs have covered key devel- opment issues ranging from climate change to youth employment, to inequalities driven by gender or ethnicity. Pakistan’s third National Human Development Report is on the topic of inequality. The first, in 2003, was on the topic of Poverty, Growth, and Governance, and the second, in 2018, focused on Unleashing the Potential of a Young Pakistan. Pakistan National Human Development Report 2020 team
Lead author Dr. Hafiz A. Pasha
Research and writing team Umer Akhlaq Malik (coordinator), Sana Ehsan, Meeran Jamal, Aroub Farooq, Hafsa Tanveer (researchers), Momina Sohail (communication), and Muhammad Ali Raza (statistician)
Editorial team Beena Sarwar and Ruya Leghari
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PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 iii socio-economic development. I warmly congratulate UNDP for this Special message The Report is also in line with the glob- incredible effort at deconstructing inequal- al commitments espoused by Sustainable ity and creating evidence-based, contex- Social and economic inequality threatens precedented challenge for the Government Development Goal 10, ‘Reduce inequality tual, and actionable recommendations to the foundations of a just society. It hinders of Pakistan, and one that we are working within and between countries’. The topics improve human development in Pakistan. progress by restricting the opportunities tirelessly to overcome. However, it can also discussed in the following chapters, and I have no doubt that the insights of this re- available to its citizens. Bridging the gap be seen as an opportunity for us to rebuild the recommendations emanating from this port will help many of the country’s most between the two different Pakistans – the better than before, and to alleviate inequal- discussion, chart out a roadmap for address- vulnerable communities, and move us to- country’s richest and poorest people – is ities between the two extremes of Pakistan ing critical human development challenges wards a more equal Pakistan. one of the key priorities of our Govern- – one that caters only to the privileged, and – such as eliminating poverty, mitigating ment. This has always been an important the other that relates to the country’s poor, gender-based discrimination, bridging the element of our manifesto, for which we downtrodden, and vulnerable groups. It is digital divide, and limiting the risks of cli- have been actively advocating. After as- for this reason that the insights of this re- mate change. suming charge, our Government has made port are extremely meaningful to us at this It has been a privilege to be part of the meaningful efforts towards this goal by critical juncture. Advisory Council for the Pakistan NHDR launching initiatives to uplift the poor, Inequality is a complex phenomenon; 2020, and to have benefited from the feed- develop rural areas, empower women, en- it spans diverse groups of people who are back and insight of our fastidious council Asad Umar able our youth to thrive, and ensure the vulnerable because of their income, gen- members. They include some of the coun- Minister, Ministry of Planning, Develop- universal delivery of essential services to der, religion, region of residence, and oth- try’s most celebrated academics, technical ment & Special Initiatives, the public. The Prime Minister’s Ehsaas er characteristics. This report addresses experts, development practitioners, and Pakistan. programme, a multisectoral initiative to the complexity of inequality by unpacking policy makers – both from across and with- Chair, NHDR 2020 Advisory Council provide social services and protection to the nuances and engaging in an insightful in party lines. the most vulnerable groups in Pakistan, is discussion with precision and clarity. Dr. a testament to our commitment and resolve Hafiz A. Pasha’s expertise in translating in this context. Against this backdrop, the Pakistan’s HDI scores into the human im- Pakistan National Human Development pact on the ground is extremely valuable to Report on inequality (NHDR 2020) is a readers looking to understand the current welcome contribution to our work in this situation. The framework of the ‘three Ps’ domain, as it highlights challenges, outlines of inequality – Power, People, and Poli- progress, and identifies high-impact areas. cy – is also a useful tool for deconstruct- Over the years, Pakistan has seen prog- ing challenges and carefully analysing in- ress on its Human Development Index equality in detail. The report is aligned (HDI) value, which increased from 0.400 with Government’s national agenda, which in 1990 to 0.560 in 2018. This means a seeks to reduce inequality in all its forms higher life expectancy at birth for Paki- and manifestations. Prime Minister Imran stani children, more years of schooling, and Khan’s Government is committed to build- higher income for families. However, there ing a ‘welfare state’ where rule of law, meri- remains much to be done, as Pakistan’s tocracy and transparency are guaranteed to HDI value is lower than both the average all citizens and a social safety net is provid- HDI value of countries in the medium hu- ed to the marginalized segments. It is also man development group (0.630), as well as committed to ensure equal opportunities our neighbours in South Asia (0.640). The for all citizens in all fields – from health COVID-19 pandemic has further aggra- to education to security of life and proper- vated this challenge by threatening to undo ty. The Government also seeks to address past progress, and further widen the eco- disparities between different regions of the nomic and social inequalities in the country country, by introducing integrated region- through its disproportionate effect on the al development initiatives for regions and poorest segments of society. This is an un- areas which have lagged behind in terms of
iv PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 Special message v al and provincial levels, while spanning the In handling this crucial issue of inequal- Foreword country’s rural and urban divide. ity, lead author Dr. Hafiz A. Pasha and his The NHDR 2020 adds to the conver- team have crafted a report that is inclusive, sation on inequality with several new mea- collaborative, meticulously researched, and Towards expanding choices sures and indices that are crucial to address- extremely comprehensive. We would like to ing inequality in Pakistan. They include: recognize the efforts of the NHDR team Inequality, in its essence, is about con- poles apart. for their tireless work on the stories of in- strained choices. A low-income young per- In pursuit of this difference, the author • a first-time quantification of privi- equality contained in these pages. son from Sindh may have to choose to earn of the report identifies three primary driv- leges; The report has also benefited from the an income over attending school. A person ers of inequality in Pakistan: Power, People, • a new Macroeconomic Model for skills and expertise of an Advisory Coun- with disabilities may have to choose a job and Policy. Pakistan that focuses on the relation- cil, comprising academics, policy makers, that he or she is overqualified for, over un- The author argues that Power, the first ship between growth and inequality; technical experts, and others. We are grate- employment. A woman may have to choose driver of inequality, relates to groups who ful for their guidance and feedback on the • the Pashum ratio, a new, more nuanced safety over freedom. take advantage of loopholes, networks, and report. measure of inequality; The question that the National Hu- policies. This highlights the need to recog- With the Pakistan NHDR 2020, we man Development Report on inequality nize and account for privileges and redress • a first-time quintile-wise Human De- dare to dream of a world where no one dies (NHDR 2020) attempts to answer is this: the imbalances of power. velopment Index and region-wise In- because they are unable to afford health How do we increase and expand the choic- People, the second driver of inequality, equality-adjusted Human Develop- care, where families educate their daugh- es, avenues, possibilities, and opportunities refers to the deeply embedded belief sys- ment Index; ters because girls’ schools are not an hour’s for Pakistan’s marginalized communities? tems that encourage bias against margin- • three new development and inequality walk away, and where youth are not disen- Focusing on the vulnerable is a core as- alized groups. For the country to be more indices for children, youth, labour, and franchised or radicalized. Mahbub ul Haq pect of this report – that is, on those expe- equal, a culture of empathy wherein people their gender-based indices; and wanted to create a context where people riencing the extremes of inequality. are not discriminated against just for being • an assessment of COVID-19’s econom- could live long, healthy, and creative lives, In 1990, Pakistani economist Mahbub ‘different’ needs to be created. ic impact on growth, employment, in- full of opportunity and potential. The Pa- ul Haq had said, Policy, the third driver of inequality, “People are the real wealth equality, and poverty. kistan NHDR on inequality has similar of a nation”. With these words, he drastical- speaks to the systems and strategies that are goals, with the hope that the people of Pa- ly shifted the axes of global development either ineffective, or at odds with the prin- In keeping with the traditional empha- kistan can live, and choose, as they please. discourse. His Human Development Index ciples of social justice. In addressing this, sis of UNDP’s National Human Develop- (HDI) measures the success of a nation not the report lays out a reform agenda to guide ment Reports on the grassroots level, the in terms of economic growth, but based on Pakistan’s laws and policies towards a more Pakistan NHDR 2020 team held 38 con- social justice, opportunity, and potential. equitable path. sultations around the country with mar- This is extremely relevant to conversations The overwhelming takeaway of this re- ginalized communities. These engaged the on inequality. port is the need to advocate for Pakistan’s transgender community, refugees, persons Traditionally, the development narra- vulnerable communities, and to unravel the with disabilities, religious and ethnic mi- tive has been dominated by income-level Gordian knot of Power, People, and Policy norities, women in marginalized jobs, in- analyses of inequality. However, inequality to alleviate inequality in the country. formal workers, farmers, youth, and many Aliona Niculita is as much a product of access to services, The complexity of this task demands a others. The report, therefore, gives voice Resident Representative a.i., United social capital and inclusion, peace and secu- well-rounded, evidence-based, and contex- to the hopes, perceptions, and lived experi- Nations Development Programme, rity, as it is the result of poverty and a lack tual analysis of the problem of inequality. ences of Pakistan’s vulnerable communities. Pakistan of resources. Therefore, the NHDR 2020 looks at this The NHDR 2020 takes precisely this issue from a multidimensional perspective, approach to deconstructing inequality in examining aspects that run the gamut from Pakistan. It shows, for example, that the wealth and income to education, health, richest 1 percent of Pakistanis have access and social mobility in the context of in- to 9 percent of the country’s income, and equalities across Pakistan. The report also that this inequality goes far beyond income focuses on climate change, technology, tax- and wealth. The poorest and richest Paki- ation, access to – and the quality of – pub- stanis effectively live in completely differ- lic services, and much more, to get a holis- ent countries, with literacy levels, health tic picture of inequality in Pakistan. This outcomes, and living standards that are analysis has been undertaken at the nation-
vi PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 Foreword vii of the Pakistan NHDR Advisory Council, the vibrant photographs contained in this Acknowledgements including Daniel Valenghi, Julien Harneis, report. Sanaullah Baloch, Khawar Mumtaz, Musta- We wish to acknowledge the contribu- This report is the sum of the efforts and ex- report and passionately advocated for Paki- fa Talpur, Dr. Ali Cheema, Kishwer Zehra, tion of government representatives, devel- pertise of hundreds of individuals and insti- stan’s marginalized groups. First, we must Dr. Akmal Hussain, and Luis Gorjon Fer- opment partners, civil society organizations, tutions, and particularly of the insights of thank the Council Chair, Khusro Bakhtiar, nandez. UN agencies, academic institutions and in- Pakistanis who face relentless inequalities former Federal Minister for Planning, De- We are especially grateful to the hun- dividuals who helped us shape the report in in their lives. velopment, Reform & Special Initiatives, dreds of Pakistanis who participated in the meaningful ways. Special thanks are due to It is the product of the United Nations and his successor, Asad Umer, for allowing 38 focus group discussions conducted with everyone who was part of the advocacy and Development Programme (UNDP) in Pa- us access to their time and expertise. The marginalized communities, to those who communication activities related to this re- kistan, with financial contributions from Advisory Council members included Dr. filled out our Inequality Perception Survey, port, including Nadeem Khurshid, urban the Swiss Agency for Development and Fahmida Mirza, Federal Minister for In- and who spoke to us so sincerely about their development specialist; Hasaan Khawar, Cooperation (SDC) and the United Na- ter-Provincial Coordination; Ahsan Iqbal, lives and experiences. Their inputs provide development consultant; Dr. Nausheen H. tions Children’s Fund (UNICEF). I truly Member of the National Assembly of Pa- depth and nuance to our report. These fo- Anwar, Director of the Karachi Urban Lab value UNDP’s support and facilitation, es- kistan; Kishwer Zehra, Member of the Na- cus groups were made possible by the sup- (KUL); Hina Shaikh, development expert; pecially in the selection of the NHDR team tional Assembly of Pakistan; Munir Khan port of UN agencies, civil society, and pri- Maliha Shah and Hamza Swati of UNES- and in setting up processes that allowed the Orakzai (late), Member of the National vate sector organizations. Thanks are due CO Pakistan; Jamshed Kazi, former Coun- in-depth analysis used to craft this report. Assembly of Pakistan; Nafisa Shah, Mem- to the following institutions and individu- try Representative of UN Women Pakistan; I am, therefore, sincerely grateful to all our ber of the National Assembly of Pakistan; als for helping us to organize these consul- and Dr. Nida Kirmani, Associate Professor collaborators and facilitators for this col- Shandana Gulzar Khan, Member of the Na- tations: Qamar Naseem at Blue Veins; Dr. of Sociology at the Mushtaq Ahmad Gur- lective effort. tional Assembly of Pakistan; Sanaullah Ba- Zia Ur Rehman of the National Integrated mani School of Humanities and Social Sci- In particular, I would like to thank loch, Member of the Provincial Assembly Development Association (NIDA-Paki- ences, LUMS. Aliona Niculita, Resident Representative of Balochistan; Daniel Valenghi, Head of stan); Akbar Zeb of the Environmental We would like to express our appreci- a.i. at UNDP Pakistan, as well as Ignacio Cooperation at the Embassy of Switzerland Protection Society (EPS); Ayub Khan of ation to UNDP’s Human Development Artaza, former Resident Representative, in Pakistan; Hamid Raza Afridi, former Khwendo Kor; the UNDP sub-offices in Report Office, especially Admir Jahic, who lent their expertise and guidance to Policy Advisor of the Swiss Agency for De- Peshawar, especially Nadir Khan, Tanya Jonathan Hall, Yumna Rathore, and Anna the project. We also owe a debt of gratitude velopment and Cooperation (SDC) at the Rzehak, and Muhammad Rohail, and in Ortubia for their help with the report. We to Julien Harneis, UN Resident and Hu- Embassy of Switzerland; Luis Gorjon Fer- Quetta, especially Zulfiqar Durrani, Saman must also extend our gratitude to Bishwa manitarian Coordinator, as well as to his nandez, Head of Social Policy at UNICEF Bakhtawar, Tanveer Ahmed, Zahoor Taran, Nath Tiwari at the UNDP Regional Bu- predecessor, Knut Ostby, for their support Pakistan; Khawar Mumtaz, former Chair- Muhammad Marri, Habibullah Nasar, Shu- reau for Asia and the Pacific. In addition, and contributions to the report. Shakeel person of the National Commission on the maila Kamil, Sohail Khan, and Dawood we would like to thank Ayesha Babar of Ahmed, former Assistant Resident Repre- Status of Women; Mustafa Talpur, Asia Nangyal; Islamic Relief; Zehrish Khan of UNDP Pakistan for her editorial oversight. sentative of the Development Policy Unit Regional Lead with Oxfam International; the Gender Interactive Alliance (GIA); Ir- A special note of gratitude is due to Umer at UNDP Pakistan deserves special thanks Dr. Akmal Hussain, Dean of the School of fan Abdullah of Rajby Industries; Naheen Akhlaq Malik, Policy Analyst and Offi- for his useful observations and comments. Social Sciences and Humanities at the In- Syed of HomeNet; Javed Raees of the Dis- cer in Charge (OIC) at the Development We acknowledge the ingenuity of our statis- formation Technology University (ITU); abled Welfare Association; UNICEF Pa- Policy Unit, for his oversight, guidance, tician, Muhammad Ali Raza, in successfully Dr. Ali Cheema, Associate Professor of kistan, especially Muhammad Asim Khan; and focus on the specificities and details. accessing the micro-data of Pakistan’s La- Economics and Political Science at the La- Dr. Ashok Bakhtani of the Thar Founda- Thanks to the dedicated team that worked bour Force Survey, the Pakistan Social and hore University of Management Sciences tion; Zulfiqar Shah of PILER; the SDGs on the report, including Sana Ehsan, Meer- Living Standards Measurement Survey, the (LUMS); and Dr. Faisal Bari, Director and Unit of the Planning & Development De- an Jamal, Aroub Farooq, Momina Sohail, Household Integrated Economic Survey, Senior Research Fellow at the Institute of partment of Azad Jammu and Kashmir, Muhammad Ali Raza, and Hafsa Tanveer. and the Pakistan Demographic and Health Development and Economic Alternatives especially Syed Ali Husnain Gillani. Moin Thanks are also due to the editorial prowess Survey from 2004–2005 onward. We also (IDEAS). Zaidi, Fahad Khan, Amrozia Khan, Usman of Beena Sarwar and Ruya Leghari, and the greatly appreciate the special efforts of our For their special contributions, partic- Manzoor, Shahzad Khalil, and Fahim Raza ingenuity of designer Nida Salman, who Communications Expert, Momina Sohail, ular appreciation is extended to Dr. Sham- also provided invaluable help with the fo- shaped this report into one that is widely to make the contents of the report more shad Akhtar, former Under Secretary-Gen- cus group discussions, as did Alauddin accessible. accessible and publicize its major findings. eral of the United Nations; Shoaib Sultan Maqbool of Sudhaar. We must also thank It has been an honour to work on this Special thanks are due to the Advisory Khan, Chairman of the Rural Support Shuja Hakim for capturing the stories of report with a vibrant and dynamic team of Council, who provided great depth to the Programmes Network; as well as members these communities across Pakistan through young people, and attempt to contribute, in
viii PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 Acknowledgements ix small part, to alleviating the disparities and inequalities that are such a distinct feature Contents of Pakistani life today. I hope the insights contained in this report can be used to shape a Pakistan that is more equitable for Special message iv Pakistan’s taxation system 116 all of its people, regardless of their ethnici- Foreword vi The incidence of taxes 117 ty, gender, or social class. Acknowledgements viii Level and composition of public expenditure 118 Access to public services 123 PART I Who benefits from public expenditure? 127 Understanding inequality CHAPTER 6 CHAPTER 1 Governance and institutional capacity 139 Why study inequality in Pakistan? 1 Governance in Pakistan 139 The Constitution of Pakistan: Enshrining the right to equality 2 The institutional process 140 Sustainable Development Goals: A focus on reducing inequalities 3 Performance of state-owned enterprises 140 Pakistan’s performance: More reasons to study inequality 4 Project planning and implementation 141 The three Ps: Drivers of inequality 7 Dr. Hafiz A. Pasha Quality of tax administration 142 Lead author of the Pakistan National CHAPTER 2 Role of regulatory authorities and monopolies 144 Human Development Report 2020 Measuring inequality in Pakistan 11 Transparency and accountability 155 Measuring inequality: Conventional and new measures 11 Public financial management 158 National inequality based on economic outcomes 13 Rule of law 160 Trends in national inequality 18 Managing natural disasters 164 National inequality in human development 24 Comparing South Asian countries 28 PART 3 CHAPTER 3 People Measures of regional inequality 35 CHAPTER 7 Inequality between provinces 35 People’s perception of inequality 175 Inequality within provinces 45 People as drivers of inequality 175 The urban-rural divide 53 The NHDR’s qualitative research 176 Inequality in Pakistan’s special regions 57 The five axes of inequality 176 CHAPTER 4 Social markers and inequality 184 Inequality and cross-cutting themes Special measures of inequality 71 191 People’s perception of inequality: Optimism or fatalism? Child development and inequality 71 193 Youth development and inequality 75 Labour development and inequality 78 PART 4 Gender development and inequality 86 Policy CHAPTER 8 PART 2 Growth and inequality: The impact of COVID-19 201 Power Pakistan’s experience 202 CHAPTER 5 Macroeconomic Model for Pakistan 202 The political economy of inequality 105 Implications for development policy 205 Power as a driver of inequality 105 Macroeconomic impact of COVID-19 205 The powerful and their privileges 105 COVID-19’s impact on inequality 212 The total cost of privileges 115 Impact on education 213
x PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 Contents xi Impact on employment 213 BOXES 2.12 Growth rate of the real per capita income of the middle class over the years, (2006–2019) 49 Impact on poverty 216 and total population (%), (2001–2019) 21 3.16 Khyber Pakhtunkhwa’s richest quintiles enjoy higher human 1.1 SDG 10: Reduce inequality within and among countries 4 Proposed relief, incentive and development package 217 2.13 Property ownership-based inequality shows no significant development compared to the poorest, (2018–2019) 49 2.1 The story behind the Pashum ratio 12 improvement over time, (2001–2019) 22 3.17 Balochistan’s richest quintile has almost 4 times more GDP CHAPTER 9 3.1 7th National Finance Commission Award: Fiscal equalization 36 2.14 The distribution of bank deposits: Increasingly skewed in per capita (PPP $) than the poorest, (2018–2019) 50 Tackling inequality 225 3.2 The buoyancy of Khyber Pakhtunkhwa’s economy 40 favour of the richest, (2001–2018) 23 3.18 Income inequality in Balochistan has seen no substantial Reducing the privileges of the elite 225 3.3 Balochistan falls behind 41 2.15 Inequality in the ownership of farmland measured by the Gini change over the years, (2006–2019) 50 Spending more on human development and social protection 226 3.4 Karachi: Plight of the primate city 54 coefficient, (1972–2010) 23 3.19 Balochistan’s richest quintiles enjoy higher human develop- Improving conditions of work and providing employment 227 3.5 Implications of the merger with Khyber Pakhtunkhwa 63 2.16 Farm area in Pakistan, (1972–2010) 24 ment compared to the poorest, (2018–2019) 50 Moving forward 227 4.1 Inequality in wages in the labour market 82 2.17 Pakistan ranks 2nd last among South Asian countries in its 3.20 Sindh’s initially high income inequality has fallen to Punjab’s HDI value, (2019) 24 income inequality level, (2006–2019) 51 4.2 Marginalization of the female labour force 96 2.18 Loss in human development due to inequality has not 3.21 Khyber Pakhtunkhwa’s income inequality has improved REFERENCES 230 5.1 Social protection: A potential lever for tackling inequality 121 reduced substantially over time, (2006–2019) 26 significantly compared to other provinces, (2006–2019) 52 6.1 Pakistan’s sugar industry: A bitter reality 149 STATISTICAL ANNEX 2.19 Inequality in income distribution between quintiles is the 3.22 Education drives the inequality in human development 6.2 The circular debt monster: A self-inflicted punishment 151 Readers’ guide 239 major contributor to loss in human development, (2018– among the quintiles in all provinces (ratio of top to bottom 6.3 OGRA pricing formula for petroleum products 153 2019) 26 quintile), (2018–2019) 53 Statistical tables 241 8.1 Inequalities and types of government 203 2.20 HDI by quintiles at the national level and by inequality 3.23 The loss of human development due to inequality is highest Technical notes 262 measures, (2006–2019) 27 in Sindh, (2018–2019) 53 Data sources 277 MAPS 2.21 CRI index 2018: South Asia, country rankings out of 157 3.24 Inequality within rural and urban areas both is highest in Regional classification 278 4.1 Pakistan Child Development Index, (2018–2019) 74 countries 30 Punjab followed closely by Khyber Pakhtunkhwa, (2018– Statistical annex references 2019) 279 4.2 Pakistan Youth Development Index, (2017–2018) 77 3.1 Share of provinces in the national GDP, (2018–2019) and 54 total population, (2017) 3.25 Share of provinces in the urban and rural GDP and total 4.3 Pakistan Labour Development Index, (2017–2018) 83 36 ACRONYMS AND ABBREVIATIONS 281 3.2 Growth rates of provincial gross regional product at constant population, (2015–2016) 55 4.4 Pakistan Gender Inequality Index, (2018–2019) 91 2005–2006 prices, (1999–2019) 38 3.26 Both urban and rural GDP per capita (PPP$) is highest in SPECIAL CONTRIBUTIONS FIGURES 3.3 The per capita GRP of all provinces has increased, except for Sindh amongst all provinces, (2018–2019) 55 “Leave no one behind”: How a focus on the SDGs can help alleviate Balochistan, (1999–2019) 39 3.27 Income inequality between urban and rural areas is highest in 1.1 Annual growth rate of real per capita income: Poorest 40 inequality – Daniel Valenghi 3 3.4 The ratio of Sindh’s-to-Balochistan’s per capita income is Balochistan, (2015–2016) 56 percent compared to the total population 5 Why is inequality so central to peace, development, and human increasing, (1999–2018) 39 3.28 The gap between rural and urban HDIs is highest in Sindh and 2.1 Relative shares of income held by the richest and poorest rights? – Julien Harneis 6 3.5 Trend in interprovincial income inequality, (1999–2000 and lowest in Khyber Pakhtunkhwa, (2018–2019) 57 Pakistanis, (2018–2019) 13 How economic equality leads to sustained economic growth 2016–2017) 41 3.29 Key facts: Gilgit-Baltistan 57 2.2 Robin Hood Ratio: Take from the rich, give to the poor 13 – Dr. Akmal Hussain 29 3.6 Provincial Human Development Index, (2018–2019) 43 3.30 Human development trend in Gilgit-Baltistan, (2006–2016) 58 2.3 Comparison of key measures of income inequality, 7th National Finance Commission Award: Fiscal equalization 3.7 The HDI of all provinces improved minimally after 2016, 3.31 Key facts: Azad Jammu and Kashmir (2018–2019) 14 60 – Sanaullah Baloch 37 (2006–2019) 44 2.4 The Pashum ratio indicates that the income distribution gap 3.32 Human development trend in Azad Jammu and Kashmir, The process approach: Use the ‘institutions of the rural poor’ to rises sharply in the two richest quintiles 14 3.8 Punjab’s richest quintile has over 5.2 times more GDP per (2006–2019) 61 alleviate problems – Shoaib Sultan Khan capita (PPP $) than the poorest, (2018–2019) 45 56 2.5 Share of the richest 1 percent of Pakistan’s population 14 3.33 Net enrolment rate, Azad Jammu and Kashmir, (2015) 61 How gender and poverty are intertwined in Pakistan 3.9 Income inequality in Punjab has increased over the years, 2.6 Income inequality in different sources of income (modified 3.34 Key facts: Newly Merged Districts 63 – Khawar Mumtaz 89 (2006–2019) 46 Palma ratio), (2018–2019) 16 3.35 Human Development Index trends in Pakistan, (2006–2016) 66 3.10 Punjab’s richest quintiles enjoy higher human development How power structures affect inequality – Mustafa Talpur 107 2.7 Income share of the quintiles after adjusting for underreport- 3.36 Ranking of human development dimensions across Pakistan, compared to the poorest, (2018–2019) 46 Financial inclusion: Adopting innovative mechanisms geared towards ing, (2018–2019) 17 (2006–2015) 67 3.11 Sindh’s richest quintile has 5.3 times more GDP per capita Pakistan’s poorest – Dr. Shamshad Akhtar 146 2.8 The difference between adjusted and unadjusted measures of 4.1 Trends in the national Youth Development Index and its inequality reflecting underreporting, (2018–2019) 17 (PPP $) than the poorest, (2018–2019) 47 How important is trust in the state when it comes to economic sub-indices*, (2001–2018) 76 3.12 Income inequality in Sindh has decreased over the years, growth? – Dr. Ali Cheema 158 2.9 Income inequality between income quintiles (not adjusted for 4.2 Number of ‘idle’ or unemployed male and female youth in underreporting), (2006–2019) 18 (2006–2019) 47 Creating inclusive policies for students with special education needs millions, (2017–2018) 78 2.10 Long-term trend in income inequality in Pakistan, (1990– 3.13 Sindh’s richest quintiles enjoy higher human development – Kishwer Zehra 186 4.3 Dimensions of the Labour Development Index 79 2019) 19 compared to the poorest, (2018–2019) 48 How COVID-19 is likely to affect life outcomes for Pakistan’s vulnera- 4.4 Over the years labour development is improving with regards 2.11 Change in economic variables in different political epochs, 3.14 Khyber Pakhtunkhwa’s richest quintile has almost 4 times ble children – Luis Gorjon Fernandez 214 to decent working conditions, (2012–2018) 80 (1990–2019) more GDP per capita (PPP $) than the poorest, (2018–2019) 48 20 4.5 Changes in the dimensions of the national Labour Develop- 3.15 Income inequality in Khyber Pakhtunkhwa has decreased ment Index, (2012–2018) 81
xii PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 202 Contents xiii 4.6 Provincial Labour Development Index rankings by indicator and social protection as % of GDP tend have a higher HDI 120 ratio, (2001–2019) 201 4.6 Time use: Numbers of men and women, and mean minutes values, (2017–2018) 84 5.16 Expenditure on social protection, (2017–2018) 121 8.2 Economic growth and change in level of inequality in different per day spent on activities, (2009) 92 4.7 Gender wage ratios, (2012–2018) 85 5.17 Education dominates the total expenditure on social services, epochs, (1958–2019) 202 4.7 Trends in the gender-based Child Development Index, 4.8 Pakistan’s performance on the Global Gender Gap Index, (2001-2002 to 2018-2019). 122 8.3 Modules of the Macroeconomic Model 203 (2007–2019) 93 (2006–2018) 86 5.18 Health facilities and preventive measures have been given 8.4 Impact of change in policy and exogenous variables on GDP 4.8 Gender-based Youth Development Index, (2001–2018) 94 4.9 Pakistan Gender Development Index, (2006–2019) 87 increased priority in health expenditure over the years, growth, inequality and poverty 206 5.1 Pakistan’s tax-to-GDP ratio in percentage, (2012–2019) 117 4.10 Wider gap in female and male earnings, (2006–2019) 88 (2001–2019) 122 8.5 Projected index of quarterly GDP (average quarterly GDP, 5.2 Contribution of different items and services to indirect tax 4.11 Pakistan’s Gender Inequality Index over the years, 5.19 Richest households have higher access to health services as 2019–2021 = 100), (2019–2020 and 2020–2021) 207 revenues (PKR billion), (2017–2018) 117 (2006–2019) 89 compared to poorest (%), (2017–2018) 124 8.6 Projected food and non-food rate of inflation, (2019–2020 5.3 Public expenditure priorities: Federal and provincial govern- 4.12 Gender-based Child Development Index, (2018–2019) 94 5.20 A clear bias towards highways and mass transit has only and 2020–2021) 209 ments combined (PKR billion), (2009–2010 to 2018–2019) 119 recently changed, (2000–2018) 4.13 The male YDI is twice the female YDI, (2018) 95 126 8.7 Projections of the change in corporate profitability over the 5.4 Net enrolment rates at different levels of schooling (%), 5.21 Ownership of mobile phones and access to the internet (% of previous quarter (%), (2019–2020 to 2020–2021) 213 (2013–2014) 123 4.14 Labour Development Index with decent work inclusion, the population), (2018–2019) (2012–2018) 95 126 8.8 Projections of the change in inequality over the previous 5.5 Types of expenditure covered in the NHDR 2020 128 6.1 Completion status of ongoing projects and funding alloca- quarter (%), (2019–2020 to 2020–2021) 213 4.15 Dimensions of the Labour Development Index revealing 96 5.6 Allocators of benefits among quintiles 129 tions for new projects, (2019–2020) 142 gender discrimination in the labour market, (2012–2018) 8.9 Index of National Employment and by sector (employment 5.7 Benefit of public expenditure per capita by quintile (PKR 6.2 Income tax collection as a percentage of value added by base, 2018-2019 = 100), (2019-2020 and 2020-2021) 215 4.16 Marginalization of the female labour force 96 yearly/per capita), (2018–2019) 130 sector, (2018–2019) 143 8.10 Skill distribution of job losses by sector (%), (2019–2020) 216 4.17 Gender-based public education expenditures, (2015–2016 5.8 Percentage share of benefits under different types of expen- 6.3 The average interest earned by big banks is over 10 times and 2017–2018) 97 8.11 Distribution of jobs lost by work location (%), (2019–2020) 216 diture, by income quintile, (2018–2019) 131 higher than small banks, (2018) 145 4.18 Gender-based public health expenditures, (2015–2016 and 8.12 Projections of number of households living below the poverty 6.1 World Bank governance indicators for Pakistan, values and 6.4 Distribution of bank credit by size of borrower, (2019) 145 2017–2018) 98 line (million), (2019–2020 and 2020–2021) 217 ranking, (2006–2019) 139 6.5 Capital market profits accrue to only 0.11 percent of the 5.1 Sources of privileges of different vested interests 106 6.2 Statutory regulatory orders enabling the build-up of the sugar population, (2019) 147 TABLES mafia 149 5.2 Distribution of privileges granted to the feudal class, worth 6.6 Number of times various industries were identified as PKR 370 billion, (2017–2018) 108 6.3 Court cases pile up to more than 1.7 million, (2019) 161 potential cartels, (2007–2018) 148 2.1 Inequality per capita consumption spending among quintiles, 5.3 Distribution of privileges granted to industry, worth PKR 528 (2001–2019) 15 8.1 Inequalities and types of government in Pakistan, (1977– 6.7 Payment flow in the energy sector 151 2018) 203 billion, (2017–2018) 110 2.2 Inequality in different types of consumption spending per 6.8 Tariff components at various stages of power supply chain 152 5.4 Distribution of privileges granted to banks, worth PKR 196 capita by quintiles (Palma ratio), (2001–2019) 15 8.2 Annual simulations of the Macroeconomic Model and predict- 6.9 Losses in the power sector, (2005–2018) 152 ed levels of inequality, (2016–2019) 205 billion, (2017–2018) 110 2.3 Measures of inequality in South Asian countries, (2010– 5.5 Distribution of privileges granted to exporters, worth PKR 248 6.10 Prices of petroleum products, (2018) 154 2016) 28 8.3 Projected magnitude of external and domestic shocks, (2019–2020 and 2020–2021) 206 billion, (2017–2018) 111 6.11 Asia Pacific–South Asia Corruption Perception Index ranking, 3.1 Provincial distribution of population in national income 5.6 Distribution of privileges granted to larger traders, worth PKR (2012–2018) 157 quintiles, (2018–2019) 40 8.4 Projected growth rate in relation to the pre-COVID-19 level in 2019 (%), (in calendar years, 2020 and 2021) 207 348 billion, (2017–2018) 112 6.12 Pakistan’s ranking in dimensions of the Rule of Law Index is 3.2 Share of provinces in annual national income by sources (%), 5.7 Distribution of privileges granted to high net worth individu- low regionally and globally, (2019) 161 (2018–2019) 41 8.5 Projected GDP by expenditure (PKR billion at 2005–2006 prices), (2019–2020 and 2020–2021) 208 als, worth PKR 368 billion, (2017–2018) 113 6.13 No substantial change in Pakistan’s Rule of Law Index over 3.3 Extent of regional inequality, (2018–2019) 43 time, (2015–2019) 161 8.6 Projected sectoral growth rates, (2019–2020 and 2020– 5.8 Distribution of privileges granted to the military establish- 3.4 Difference between provincial HDI values and the national HDI 2021) 209 ment, worth PKR 257 billion, (2017–2018) 114 6.14 Incidence by type of legal problems, (2019) 163 value, (2018–2019) 45 8.7 Projection of the balance of payments (US$ million), 5.9 Distribution of privileges granted to state-owned enterprises, 7.1 The five axes of inequality of NHDR 2020 176 3.5 Pakistan Federal Government financial support to Special (2019–2020 and 2020–2021) 210 worth PKR 345 billion, (2017–2018) 115 7.2 Educational attainment of different social groups, (2020) 178 Regions (PKR billion), (2018–2019 and 2019–2020) 58 8.8 Government budgetary projections (PKR billion) and growth 5.10 Ranking of vested interests in terms of the magnitude of 7.3 Wealth of different social groups, (2020) 179 4.1 Trends in the national Child Development Index and in sub- benefits and privileges enjoyed by each, out of total PKR rate (%), (2019–2020 and 2020–2021) 211 7.4 Car ownership of different social groups, (2020) 180 indices, (2001–2009) 72 2,660 billion, (2017-2018) 115 8.9 Government budgetary projections as % of GDP, (2019–2020 4.2 Magnitude of Child Development Index and sub-indices by 7.5 The perception of inequality of different social groups, (2020) 182 and 2020–2021) 212 5.11 Distribution of privileges granted to vested interests, worth province, (2018–2019) 73 PKR 2,660 billion, (2017–2018) 116 7.6 Access to a laptop or computer among different social 8.10 Trends in employment, end of year figures (000), (2018–2019 4.3 Factors contributing to deviation from the national level of groups, (2020) 185 to 2020–2021) 216 5.12 Incidence of taxes by quintile, (2017–2018) 118 CDI (%) 75 7.7 Monthly income levels of different social groups, (2020) 188 8.11 Fiscal cost of relief, incentive and development package (PKR 5.13 Tax revenues: The richest contribute more than half of 4.4 Impact of different factors on deviation from the national YDI 7.8 Access to mobile banking in different social groups, (2020) 189 billion), (2020–2021) 220 Pakistan’s total tax revenues 118 value 77 7.9 House ownership of different social groups, (2020) 190 5.14 Expenditure on public services, in real per capita and as 4.5 Impact of different dimensions on deviation from the national percentage of GDP, (2001–2019) 120 7.10 Access to the internet in different social groups, (2020) 192 Labour Development Index 86 5.15 Countries with higher investment in education, health 8.1 Growth incidence curves in Pakistan measured by the Palma
xiv PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 Contents xv PART 1 Understanding inequality CHAPTER 1 Why study inequality in Pakistan? CHAPTER 1 Why study inequality in Pakistan?
Eight-year-old Fatima* has tangled hair and a shy smile. She lives with her family in Bin Qasim Town, Karachi. Her father drives a donkey cart for a living and her mother cleans people’s houses in more affluent neighbourhoods. Their locality has no access to clean water. To obtain drinking water, Fatima, her mother and older sister have to walk a long way. Fatima also sells vegetables door-to-door, carrying the produce in a woven basket. Making her way through the neighbourhood in worn-out shoes, she sells what she can to people who, like her family, are very poor. Fatima and other children in the area gather at an NGO-run evening school for a few hours every day to learn basic English, Urdu, and mathematics. The standard of education is low. The students can offer up a few words in broken English, but they do not know the names of Pakistan’s neighbouring countries. Even so, Fatima’s limited exposure to the world of education has had an impact on her. She wants to be a teacher. But will Fatima be able to reach her potential and fulfil her dreams? Or will poverty force her out of school and into an early marriage like so many other girls like her? Fatima is one of 80 million Pakistanis who live in poverty.1 Their lives are characterized by poor access to services, greater vulnerability to disease and climate change, and a low quality of life – factors that are both a consequence of inequality, and a cause of it.
This is a highly unequal world. More than companied by an equitable distribution of 734 million people around the globe live income as the most effective path towards in extreme poverty, surviving on less than sustained human development. US$1.90 a day, while a handful of billion- This forms the basis of the United Na- aires get richer by the day.2 The wealth of tions Development Programme’s Human global billionaires reached US$8.5 tril- Development Reports. The global Hu- lion by 2018, marking an increase of 34.5 man Development Report (HDR) 2019 percent since 2013.3 Growing awareness focused on inequality, a concept that is of inequality is catalysing resistance, with especially central to Pakistan’s sustainable millions taking to the streets worldwide to development agenda and growth. protest against extreme poverty, the scrap- Realizing the need to address inequal- ping of fuel subsidies, and rising transport ities, the Prime Minister of Pakistan, Im- costs.4 Inequality has, therefore, acquired a ran Khan, launched the Ehsaas strategy in major global focus in recent years. 2019 – an overarching umbrella to create The concept of inequality is based on a welfare state by lifting up marginalized Inequality is based on disparities in assets, income, status, edu- communities and areas that are lagging be- disparities in terms of cation, health, rights, and other opportu- hind. As the COVID-19 pandemic wreaks assets, income, status, nities, either due to discrimination at the a heavy toll on vulnerable groups, the Eh- education, health, and other social level on the basis of gender, religion, saas initiative has become increasingly im- opportunities. caste, or other characteristics, or the ma- portant. nipulation of policies by powerful groups In line with these global and national or individuals. This notion lies at the heart concerns, the Pakistan National Human of the social justice paradigm and the con- Development Report (NHDR) 2020 fo- cept of human development coined by cuses on inequality. A major motivation Pakistani economist Dr. Mahbub ul Haq, behind studying this theme lies in Paki- who advocated for economic growth ac- stan’s Constitution of 1973, which affirms
Why study inequality in Pakistan? 1 the equal rights of all citizens. Another age or sex, and for maternity benefits creased or increased over the years. agenda enshrined in the Millennium De- A major motivation for Sustainable Development Goal motivation is the 2030 Agenda for Sustain- for women in employment. velopment Goals (MDGs). The most rele- studying inequality lies in able Development, which Pakistan has ad- vant goal for this report is SDG 10, which (SDG) 10 aims to ‘Reduce Pakistan’s Constitution of inequality within and among opted, especially Sustainable Development The Constitution also identifies concrete Sustainable Development Goals: aims to ‘Reduce inequality within and 1973, which affirms the Goal (SDG) 10 on reducing inequality. among countries’.6 Its first four targets con- countries’. equal rights of all citizens. steps to prevent high and/or rising inequal- A focus on reducing inequalities ity. Article 38 highlights the need to raise cern reducing inequality within individual standards of living, ensure equitable rights, countries. The next four focus on global in- At the heart of the 2030 Agenda for Sus- equality, especially the greater representa- The Constitution of Pakistan: and reduce income disparities. It commits tainable Development, adopted by all the State to: tion of developing countries in global insti- Enshrining the right to equality Member States of the United Nations in tutions. They also centre on the principle 2015, lie 17 Sustainable Development of the special and differential treatment of [38] (a) secure the well-being of the peo- The vision of a functioning democracy and Goals established by UN General Assem- developing countries, especially the world’s ple, irrespective of sex, cast, creed or a social welfare state is enshrined in the bly Resolution 70/1. The SDGs are: least developed countries, in global trade race, by raising their standard of living by Constitution of Pakistan of 1973. Article agreements (box 1.1). preventing the concentration of wealth 25 is the first section of the Constitution Other SDGs also seek to reduce in- and means of production and distribu- an urgent call for action by all countries which explicitly recognizes the equality of equality in multiple forms, such as ending tion in the hands of a few to the detri- developed and developing – in a global citizens: deprivations caused by poverty (SDG 1) ment of general interest and by ensuring partnership. They recognize that ending and hunger (SDG 2). They seek to advance equitable adjustment of rights between poverty and other deprivations must go [25] (1) All citizens are equal before law equality by ensuring basic opportunities and are entitled to equal protection of employer and employees, and landlords hand-in-hand with strategies that im- prove health and education, reduce in- for all, enabling people to live healthy lives law. and tenants; equality, and spur economic growth – all (SDG 3), enjoy gender equality (SDG 5), attain quality education and lifelong (b) provide for all citizens, within the while tackling climate change and work- Other articles strongly affirm the need to 5 learning opportunities (SDG 4), access available resources of the country, facil- ing to preserve our oceans and forests. reduce inequality by upholding social jus- sustainable water and sanitation facilities tice, eradicating social ills, and promoting ities for work and adequate livelihood (SDG 6), obtain sustainable, reliable ener- people’s social and economic well-being. with reasonable rest and leisure; Reducing inequality is a central, cross-cut- gy (SDG 7), get decent jobs (SDG 8), and Article 37, for instance, asserts that the ting issue for the 2030 Agenda, and one exercise equal access to justice (SDG 16). State must: (c) provide for all persons employed in which was neglected by the previous global the service of Pakistan or otherwise, so- [37] (a) promote, with social care, the cial security by compulsory social insur- SPECIAL CONTRIBUTION Daniel Valenghi educational and economic interests of ance or other means; backward classes or areas; “Leave no one behind”: How a focus on the SDGs can help alleviate inequality (d) provide basic necessities of life, such The 2030 Agenda for Sustainable Development recognizes that The Swiss Agency for Development and Cooperation (SDC) is (b) remove illiteracy and provide free as food, clothing, housing, education and medical relief, for all such citizens, irre- “eradicating poverty in all its forms and dimensions, including ex- committed to paying more attention to the excluded and the poor- and compulsory secondary education treme poverty, is the greatest global challenge and an indispensable est of the poor, and to catalyse social transformation. The aim is to within minimum possible period; spective of sex, cast, creed or race, as are permanently or temporarily unable to requirement for sustainable development.” In adopting the 2030 overcome existing inequalities and contribute to disaggregated data earn their livelihood on account of infir- Agenda, the international community pledged to leave no one behind, production that reveals the challenges faced by those who are left (c) make technical and professional ed- to ensure that all nations meet the goals and targets for all peoples behind. Switzerland has adopted the 2030 Agenda and is commit- mity, sickness or unemployment; [and] ucation generally available and higher and all segments of society, and to endeavour to reach those furthest ted to its 17 Sustainable Development Goals. Achieving these goals education equally accessible on the ba- behind, first. and implementing the ‘leave no one behind’ imperative are tangible sis of merit. (e) reduce disparity in the income and Leaving no one behind is a universal and an aspirational challenge contributions to peace and stability in the world, and critical to Swit- earnings of individuals, including per- that affects every society. It is a new paradigm in development, rec- zerland’s security and prosperity. (d) ensure inexpensive and expeditious sons in the various classes of the service ognizing that trickle-down economics have not kept their promises, “The strength of a people is measured by the well-being of its and that inequalities are increasing instead of decreasing. Concrete weakest members,” the Swiss Constitution declares. Sustainable justice; [and] of Pakistan. measures are needed to ensure that populations who are left behind, and equitable development is not possible if certain communities Clearly, Pakistan’s Constitution espouses a or who are at risk of being left behind, are identified, understood, and are excluded from economic well-being. We will continue to build our (e) make provision for securing just and enabled to fully participate in economic, social, and political activi- engagement on respect for human rights and human dignity, the rule strong commitment to reducing inequality. humane conditions of work, ensuring ties in their societies. of law, justice, equality, and non-discrimination. that children and women are not em- This makes it imperative to study the issue. ployed in vocations unsuited to their In fact, it is high time that we determine Daniel Valenghi is Head of International Cooperation at the Embassy of Switzerland in Islamabad, Pakistan. whether inequality in Pakistan has de-
2 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 Why study inequality in Pakistan? 3 BOX 1.1 experience, and rectify the mistakes of the pacts on their nutrition, as well as FIGURE 1.1 SDG 10: Reduce inequality within and among countries past. their prospects for quality educa- To this end, the NHDR 2020 examines tion and future employment. This Annual growth rate of real Targets Indicators per capita income: Poorest developments in income distribution since also has important implications for 40 percent compared to the 10.1 By 2030, progressively achieve and sustain income growth of the 10.1.1 Growth rates of household expenditure or income per capita the turn of the century, divided into four social protection programmes total population bottom 40 percent of the population at a rate higher than the national among the bottom 40 percent of the population and the total popu- periods: 2001–2008, 2008–2012, 2012– aimed at children. 7 % Bottom 40% population average lation 2016, and 2016–2019. Total population Between 2001 and 2012, the growth (ii) The poorest 20 percent of Pakistan’s 6 10.2 By 2030, empower and promote the social, economic and polit- 10.2.1 Proportion of people living below 50 percent of median in- rate of per capita income of the poorest 40 population includes a relatively 5 ical inclusion of all, irrespective of age, sex, disability, race, ethnicity, come, by sex, age and persons with disabilities percent was lower than that of Pakistan’s low number of employed workers 4 origin, religion or economic or other status total population. The gap was larger during (18 percent). They support house 3 the first part of this period (2001–2008), holds whose earnings are below 2 10.3 Ensure equal opportunity and reduce inequalities of outcome, 10.3.1 Proportion of population reporting having personally felt dis- a time of relatively rapid growth in gross 50 percent of the median income. 1 including by eliminating discriminatory laws, policies and practices criminated against or harassed in the previous 12 months on the basis national product (GDP). Between 2011 This implies that the unemploy- 0 and promoting appropriate legislation, policies and action in this re- of a ground of discrimination prohibited under international human and 2019, the poorest 40 percent saw their ment rate is higher among the gard rights law per capita income grow at a faster rate than country’s poorest families. More the overall population, while the econ- over, more than 32 percent of 10.4 Adopt policies, especially fiscal, wage and social protection poli- 10.4.1 Labour share of GDP, comprising wages and social protection omy witnessed relatively low growth, at women workers live in relatively 2001-02 to 2007-08 2001-02 to 2011-12 2007-08 2011-12 to 2015-16 cies, and progressively achieve greater equality transfers just above 4 percent. From 2015–2016 to poor households, indicating that 2015-16 to 2018-19 Source: UNDP calculations based on HIES, 2018–2019, the incomes of the poorest 40 their labour force participation is multiple years, 2018-2019. 10.5 Improve the regulation and monitoring of global financial mar- 10.5.1 Financial soundness indicators percent of Pakistanis increased, while the primarily motivated by the need to kets and institutions and strengthen the implementation of such reg- annual growth of the total population’s in- supplement household income. ulations come decreased. 10.6 Ensure enhanced representation and voice for developing coun- 10.6.1 Proportion of members and voting rights of developing coun- The NHDR 2020 tentatively draws two (iii) Over one-quarter (27 percent) of tries in decision-making in global international economic and finan- tries in international organizations conclusions from these findings. First, in- Pakistan’s agricultural workers be- cial institutions in order to deliver more effective, credible, account- come distribution may tend to deteriorate long to the poorest 20 percent of able and legitimate institutions during periods of relatively fast economic the population, suggesting that growth. The real test will be if Pakistan there is greater poverty in rural aeas. 10.7 Facilitate orderly, safe, regular and responsible migration and 10.7.1 Recruitment cost borne by employee as a proportion of yearly can simultaneously achieve both higher mobility of people, including through the implementation of planned income earned in country of destination and more inclusive growth. Second, an au- The third target of SDG 10 (10.3) relates and well-managed migration policies 10.7.2 Number of countries that have implemented well-managed thoritarian government may focus more on to providing equal opportunities and re- achieving higher growth, and have less con- ducing income inequalities by eliminating migration policies cern for how the additional income gener- discriminatory laws, policies, and practic- 10.8. Implement the principle of special and differential treatment for 10.8.1 Proportion of tariff lines applied to imports from least devel- ated by this growth is shared. es. Pakistan has three powerful indicators developing countries, in particular least developed countries, in accor- oped countries and developing countries with zero-tariff The second indicator of SDG 10 in this context: dance with World Trade Organization agreements (10.2.1) concerns the characteristics of people living on less than 50 percent of the (i) Among children who are between median income. Analysing data from Pa- 10 and 15 years old, 9.9 percent kistan’s latest Household Integrated Eco- are engaged in labour.8 They of- Pakistan’s performance: More percent of the population – that is, the poorest 40 percent, who are at the bottom nomic Survey (HIES) 2018–2019 enables ten work in difficult conditions, A key target of SDG 10 is to the following observations about this seg- with extremely low remuneration. achieve income growth of reasons to study inequality of the national income distribution – with this rate for the total population (figure ment, which encompasses about 20 percent The existing federal law against the poorest 40 percent of the of the country’s population: child labour is seldom applied. population at a rate higher Analysing trends at the national level, spe- 1.1). than the national average. cifically on the first four indicators of SDG To reduce inequality, the real per capita 10, reinforces the urgent need to study in- income of the poorest 40 percent of Paki- (i) Low-income households have (ii) A high percentage of women, al- equality in Pakistan and to devise solutions stanis must grow at a rate that exceeds the larger families. Over 20 percent most 60 percent, are engaged in to tackle it. For instance, the first indica- income growth rate of the total population. of Pakistan’s children live in house marginal occupations, including as tor on inequality within a country (SDG Achieving this target requires an assess- holds whose earnings are below 50 domestic helpers. Furthermore, 10.1.1) compares the growth rate of real ment of Pakistan’s historical performance percent of the median income. The although the National Assembly per capita income among the ‘bottom’ 40 on this indicator, so that we can learn from concentration of children in rela- has approved a law against sexual tively poor families has adverse im- harassment in the workplace,
4 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 Why study inequality in Pakistan? 5 crimes like sexual harassment, rape, The fourth indicator of inequality within The three Ps: Drivers of inequality full potential, and policies are often unsuc- and torture appear to be increasing a country is the share of labour income as cessful at addressing the resulting inequity. The three primary drivers of exponentially. This may be because a proportion of the total income earned by The overwhelming takeaway of the inequality in Pakistan are such crimes are more frequently re- labour and capital (SDG 10.4.1). Accord- The NHDR 2020 builds on a new frame- NHDR 2020 is that, to alleviate inequality Power, People, and Policy. ported than they were in the past. ing to national estimates, Pakistan’s labour work of analysis that identifies three prima- in Pakistan, especially for vulnerable com- Whether or not this is the reason income share improved from 32 percent to ry drivers of inequality in Pakistan: Power, munities, there is a need to understand and for this increase, it is clear that 42 percent between 2008 and 2018.10 This People, and Policy. unravel the Gordian knot of Power, Peo- gender-based violence is a wide- counters the global trend of a declining la- Power relates to groups who exploit ple, and Policy, before determining ways to spread challenge across Pakistan. bour share, revealing some improvement in loopholes, networks, and policies for their tackle these issues. benefit. As this ensures the accumulation Pakistan’s performance on this indicator. of wealth in fewer hands, it enhances in- (iii) Pakistan’s provincial governments However, its share is still low compared to equality. To redress this imbalance, there is have passed laws on minimum the average of 50 percent for countries in a clear need to recognize and account for wages, which are set annually. At Asia and the Pacific, according to the In- the mechanisms and privileges of Pakistan’s Notes present, workers’ minimum wages ternational Labour Organization (ILO).11 most influential groups. are around US$104 per month Overall, Pakistan’s performance over Pakistan’s performance in People, the second driver of inequal- * Name changed to protect the informant’s identity. This in most parts of Pakistan.9 Despite the past two decades has been mixed in the past two decades has ity, refers to the deeply embedded belief story was shared during the NHDR focus group discus- this relatively low rate, almost 53 terms of the targets of inequality indica- been mixed in terms of systems that encourage bias against social sion in Karachi, Sindh, on 19 June 2019. The language percent of full-time workers are tors. This is another motivation for the inequality indicators. identities like race, gender, religion, or used was primarily Urdu. not even paid the minimum wage. NHDR 2020’s study of the different levels caste, among others. These biases prevent 1 Government of Pakistan 2016. This is yet another manifestation and dimensions of inequality, with a view people who are discriminated against from 2 World Bank 2018b. of the weak implementation of to understanding its depth and determin- 3 UBS and PwC 2019. realizing their full potential or improv- laws against discriminatory labour ing potential solutions. 4 Such protests have been reported over the past years in ing their well-being, thus exacerbating practices. countries including Ecuador, Bolivia, Chile, and Lebanon. inequality. To increase equality in a coun- UN 2016. try, therefore, it is vital to create a culture 5 The Inter-Agency and Expert Group on SDG Indicators de- SPECIAL CONTRIBUTION Julien Harneis of empathy where no one is discriminated veloped the indicator framework for SDG 10 on inequality, Why is inequality so central to peace, development, and human rights? against just for being different. which was adopted at the 47th session of the UN Statisti- Policy, the third driver of inequality, cal Commission in March 2016. When I started working for the UN, much of my motivation was the three pillars of the UN Charter, aptly quoted by Kofi Annan and other speaks to the systems and strategies that are 6 Based on data from Household Integrated Economic Sur- possibility of addressing some of the inequality and unfairness we UN Secretary-Generals, make it very clear that peace, development, either ineffective, or at odds with the prin- veys between 2001–2002 and 2018–2019. See Govern- see around us. Inequality is a backdrop to, and core issue in, many and human rights are the indivisible dimensions of equality. We can- ciples of social justice. In addressing this ment of Pakistan 2003a, 2006a, 2012b, 2016c, and of the world’s problems today: climate change, conflict, migration, not achieve one without the others. Hence, inequality not only holds driver, the NHDR 2020 lays out a reform 2020d. persistent poverty, and many others. The incredible human progress back development, but also triggers and nurtures conflict and migra- agenda to guide Pakistan’s laws and policies 7 Government of Pakistan 2018c. made across the globe, including in Pakistan, is stymied by rising tion. towards more equitable path. 8 Based on the exchange rate at the end of June 2020, of inequality. How can we address inequality? The UN’s global Human Develop- The drivers of Power, People, and Poli- US$1= PKR 167.64, and the minimum wage of PKR The fundamental issue of climate change is that we share global ment Report 2019 and the Pakistan NHDR 2020 address some av- 17,500 per month. cy combine to perpetuate inequality in Pa- resources, such as the atmosphere and the earth, and we all bear enues, and there are many dimensions and options to be pursued. 9 Calculations based on Labour Force Surveys for multiple the consequence of imbalances. A few vested interests profit from But in my view the key dimensions are: (i) making it possible for all kistan. The powerful use their privilege to years. For a detailed explanation of the methodology overexploiting the environment and fossil fuels. These few also ben- people, everywhere, to exercise their human rights, and (ii) creating capture more than their fair share, the mar- used, see technical note 8 on the Labour Development efit from less attention to and less action on the problems of climate a more level playing field – one where all people, everywhere, have ginalized experience structural discrimina- Index. change. similar opportunities. tion that keeps them from reaching their 10 ILO 2018. An old but dramatically faulty theory says that when the rich get But for this to happen, some policy choices need to be made. We richer, their gains will automatically and indirectly ‘trickle-down’ and must make a concerted effort to come up with a fairer economic re- be shared with the poor. This is one of the biggest inequality traps. gime and political system that offers everyone a fair opportunity in As Thomas Piketty argues, this notion has, in fact, led to increased life. inequality and persistent poverty. Together we can achieve equality, if we prioritize the needs of all of Conflict and migration are also strongly driven by inequality. The humanity above the wants of a few privileged people.
Julien Harneis is the United Nations Resident and Humanitarian Coordinator in Pakistan.
6 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 Why study inequality in Pakistan? 7 CHAPTER 2 Measuring inequality in Pakistan CHAPTER 2 Measuring inequality in Pakistan
Padma* was engaged by the time she was six years old. Married off just ten years later, she had children of her own while still in her teens. This is how things are for girls where she lives, in Mithi, in Sindh’s district of Tharparkar. As in most parts of Pakistan, women here are responsible for domestic chores, looking after children, cooking, cleaning, doing the laundry, and catering to their in-laws. Living in seclusion, the only domestic chore Padma doesn’t do is grocery shopping. Her husband, the family’s main breadwinner, takes care of this. To make extra money, Padma embroiders sleeves and neckpieces to be sewed on to kur- tas worn by both men and women. She stitches clothes incessantly; sometimes she embroi- ders for up to five hours a day. Since many other women in Mithi also do this, competition keeps the profits low. Padma may spend days making an embroidered neckpiece that sells for just PKR 300 (US$1.79). “Our hands often hurt, but we need the extra income,” she says, speaking for women like herself. Padma went to primary school but, like most girls in Mithi, she was not allowed to study further. This is something she still regrets. Now, both of her daughters attend primary school. Padma wants them to be able to study as long as they choose. Eleven million women like Padma work in Pakistan’s informal sector. They have low in- comes, limited access to labour welfare services, and poor prospects for the future. All this, combined with the fact that around 60 percent of women in Pakistan are in marginalized jobs, contributes even further to gender inequality in the country.1
This chapter begins by highlighting dif- The NHDR 2020 uses several methods to ferent measures of inequality, including a measure inequality in the distribution of new approach to quantifying inequality income, wealth, and public resources (ed- developed by the Pakistan NHDR 2020. ucation and health). One of the simplest, It also uses various conventional measures most revealing measures of income and to determine levels and trends in income wealth inequality is to calculate the share and wealth inequality, before estimating of national income, or wealth, held by the Human Development Index (HDI) levels ‘top’ – that is, the richest – 1 percent of the for different income quintiles, and the im- population. pact of inequality on the national HDI, es- Another common measure compares timated as the Inequality-adjusted Human the different shares of income or wealth Development Index. The chapter then ex- owned by a country’s poorest (quintile amines the relationship between inequali- 1) and richest (quintile 5) groups. This is ty and poverty in Pakistan. an extension of the original Palma ratio, which focuses on the share of income or wealth held by the richest 10 percent and Measuring inequality: the poorest 40 percent of a population.2 Another version of the Palma ratio is the Conventional and new measures 10/10 ratio, which focuses on the extreme ends of income distribution to calculate Conventional methods the share of income or wealth of the rich- est 10 percent compared to the poorest 10
Measuring inequality in Pakistan 11 percent of the population. An intermedi- The Pashum ratio: A new measure of it is more sensitive to distributional chang- FIGURE 2.1 ate measure is the modified Palma ratio, inequality es in income. The richest 20 percent of Relative shares of income held by the richest Pakistanis have almost five which measures the ratio between the rich- and poorest Pakistanis, (2018-2019) est 20 percent and the poorest 20 percent In the process of quantifying inequality in times the income of the poorest 20 percent. of the population. These ratios are sensi- Pakistan, the NHDR 2020 team identified Richest Poorest National inequality based on Original Palma ratio tive to the extreme ends of income distri- two problems with the two most common- Ratio, richest 10% Equality bution. ly used measures of inequality, the Palma economic outcomes to poorest 40% The Gini coefficient, another com- ratio and the Gini coefficient. The Gini 1.31:1 monly used method to measure inequali- coefficient is a less sensitive measure, with Using multiple methods to measure in- ty, compares the cumulative proportions a maximum value of 1, while the Palma equality based on economic outcomes, the Ratio, richest 10% to poorest 10% of the population with their cumulative ratio completely ignores developments in NHDR 2020 examines trends in inequali- proportions of income or wealth. It ranges the middle class. Moreover, the Palma ra- ty levels in Pakistan over the years. 9.42:1 from 0 to 1. A Gini coefficient of 0 means tio can only be quantified if information is Equality perfect equality, where each person re- available by deciles (10 equal population Income inequality ceives the same share of national income. groups) or quintiles (five equal population Source: UNDP calculations based on HIES, 2018-2019. At the other extreme, a Gini coefficient of groups). The stark reality of inequality in Pakistan 1 represents maximum inequality – a sce- To bridge this gap, the NHDR 2020 is revealed when you look at the poorest 1 The NHDR 2020 develops a similar to the 2016 World Development nario where only one person takes home team has developed a new measure of in- percent of the population, who hold only new measure of inequality: Indicators’ (WDI) calculation of 4.78. the entire national income, while the rest equality: the Pashum ratio. Its underlying 0.15 percent of the national income, com- the Pashum ratio. It also looks The Gini coefficient estimates the level of have nothing. It can be calculated for any concept is that what happens in the mid- pared to the richest 1 percent, whose share at the middle of the income income inequality at 30 percent, varying distribution of the population if data is dle part of the population distribution also of national income exceeded 9 percent in distribution, and not just slightly from the WDI database for 2016 available on the shares of each population plays a role in determining the extent of 2018–2019.4 the extremes. group. inequality (box 2.1). The Pashum ratio is a Figure 2.1 illustrates the depth of in- FIGURE 2.2 The Robin Hood ratio is a fourth mea- more inclusive measure, as it also considers equality at either end of the income dis- sure of inequality. As the name suggests, distributional changes in middle-income tribution. The original Palma ratio of 1.31 Robin Hood Ratio: Take from the rich, give to the poor its catchy title is inspired by the English reveals that the income of the richest 10 groups, including values like income or Take away from the rich Redistribute to the poor folktale about redistributing income from wealth between each successive part of the percent of Pakistan’s population is over 30 50 the haves to the have-nots. This measure distribution, and not necessarily only in percent more than that of the total income attempts to quantify the proportion of in- the form of quintiles or deciles. Therefore, of the poorest 40 percent of the popula- come in the richest quintiles that must be it captures the extent of inequality across tion. The 10/10 ratio of 9.42 shows com- Current 40 income redistributed and transferred to poor quin- the entire population distribution, includ- paratively higher levels of inequality at inequality tiles to ensure perfectly egalitarian income ing middle-income groups.3 the extreme ends of this distribution. This distribution between all five wealth quin- Unlike the Palma ratio, the Pashum ra- indicates that the richest 10 percent have tiles. This is, of course, an utopian ideal. tio has a range from 0 to infinity. However, 9.42 times the income of the poorest 10 30 percent. 23.0 22.5
BOX 2.1 The Robin Hood ratio reveals that Pa- 0.5 The story behind the Pashum ratio kistan would need to transfer 23 percent 20 Perfect of the income of the richest two quintiles income equality The NHDR 2020 team was excited to have formulated a new mea- lead author, uncomfortable with having a new measure named solely to the poorer three quintiles to ensure the sure of inequality which also captures middle-income groups. But after himself, wanted a name that would reflect this team effort. equal distribution of income across all 10 they faced a dilemma: what should they call this new measure, devel- The idea of using the research team’s initials found favour. After quintiles (figure 2.2). While this utopian oped by the report’s lead author? trying out different arrangements with their names, the team agreed ideal is impossible in the real world, the 9.0 12.6 15.4 20.5 42.5 New measures of inequality are traditionally named after the per- on a name for the new method: Pashum. Starting with the last name ratio can provide useful guidance about son who developed them. The method developed for this report was of the lead author, Pasha, it incorporates the first initials of the re- redistributive taxation and public expendi- 0 motivated by team discussions and the frustration of not being able search team members: Aroub, Ali, Sana, Hafsa, Umer, Momina, and ture policies. Quintile 1 Quintile 2 Quintile 3 Quintile 4 Quintile 5 to capture the experiences of middle-income groups. The NHDR’s Meeran, without duplicating names starting with the same letter. Poorest Richest The modified Palma ratio (20/20) of 4.7 indicates that the richest 20 percent Note: To have an equal level of income in all quintiles, need to take additional income above 20% from Q5 and Q4 Note: The acronym uses an initial capital followed by lower case letters so that it can be pronounced as a word, while avoiding the cluttered look of to transfer to Q1, Q2, and Q3. of Pakistanis have 4.7 times the income of In this case Transfer (42.5-20) (20.5-20) 23.0 of the income The Robin Hood Ratio abbreviations written out entirely in capital letters. the poorest 20 percent (figure 2.3). This is Source: UNDP calculations based on HIES, 2018-2019.
12 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 Measuring inequality in Pakistan 13 FIGURE 2.3 FIGURE 2.4 Q4 (the upper middle class) and Q5 (the goods and services. The Palma ratio is cal- upper class) than there is between poorer culated for different categories, including The Pashum ratio indicates that the income Comparison of key measures of income quintiles (Q1 to Q3). food, clothing and footwear, housing-re- inequality, (2018-2019) distribution gap rises sharply in the two richest quintiles lated utilities, and ‘other’ types of good Inequality in consumption spending and services. The last category consists of 20% 20% % Modified Palma ratio Richest Poorest 140 a household’s combined expenditure on Upper middle class 4.7:1 Inequality in per capita consumption health, transport, communication, recre- and beyond spending among income quintiles is a re- ation, culture, and education. Table 2.2 Equality 120 vealing indicator from two viewpoints. presents these inequality estimates. First, consumption expenditure is a proxy As the table shows, inequality in con- 100 Gini coefficient for permanent income expectations. sumption expenditure on food, and on 2018-2019 30 Therefore, it adjusts inequality for fluc- clothing and footwear has decreased, while 80 % 0 20 40 60 80 100 2012-2013 tuations in income. Second, households, simultaneously increasing in terms of Equality Inequality especially those with relatively high and housing rent, the cost of utilities, and ‘oth- 60 taxable income, are less likely to understate er’ expenditures. Pashum ratio 2001-2002 their consumption expenditure than their 40 Wealth inequality 0.50 income. ∞ The NHDR 2020 computes the three 0 0.5 1 1.5 Equality Inequality 20 measures of inequality at the national level Measuring wealth inequality based on the for the earliest year, 2001–2002, and the magnitude of cash, assets, farmland, and Source: UNDP calculations based on HIES, 2018-2019. 0 latest year, 2018–2019, using data from other property reveals an even greater di- Q2/Q1 Q3/Q2 Q4/Q3 Q5/Q4 Pakistan’s Household Integrated Econom- vide between Pakistan’s rich and poor than (33.5 percent). Pakistan’s relatively low ic Surveys. Estimates are also calculated for Note: The percentage difference between successive quintiles is income inequality alone. Thus, the NHDR Gini coefficient – indicating low levels of plotted to represent the extent of disparity between them. an intermediate year, 2010–2011. The re- 2020 also incorporates these sources to as- inequality – contradicts the finding about Source: UNDP calculations based on multiple years of HIES data. sulting magnitudes are presented in table sess wealth-based inequality. the share of wealth of the richest 1 percent 2.1. Figure 2.5 presents estimates of the high of the population (figure 2.5). This is due FIGURE 2.5 There appears to be a long-term trend level of wealth inequality in Pakistan. Few- to considerable underreporting of income of increasing inequality in per capita con- Share of the richest 1 percent of Pakistan’s er than half a million (about 0.460 mil- by the richest households in Pakistan in population sumption spending. This is in contrast to lion) of Pakistan’s richest households own the Household Integrated Economic Sur- the inverted U-shaped trend in income in- almost 16 percent of the country’s residen- vey, an issue examined below. equality. A likely explanation is that the ex- tial property. The average value of prop- The new inequality measure, the tent of income underreporting by the rich- erty owned by each household is almost Pashum ratio, indicates that inequality in est quintiles has been rising, or that their PKR 25 million (about US$149,000). Pakistan stands at 0.50, given the overall savings rate has been falling proportionate- income distribution between each succes- 9.0 37.5 ly more than that of poorer quintiles. TABLE 2.2 sive income quintile. It reveals that the National income Bank advanvces (Personal) The NHDR 2020 attempts to decom- disparity in income distribution increases pose consumption inequality by types of Inequality in different types of consumption drastically after the middle-income group spending per capita by quintiles (Palma (Q3), a finding that other inequality mea- ratio), (2001-2019) sures leave out. This is evident in figure TABLE 2.1 2.4, which shows a sharp increase in the 29.8 26.4 2001-02 2007-08 2018-19 Income tax payments Bank deposits (Personal) Inequality in per capita consumption Food 2.88 2.83 2.71 income gap between the upper middle-in- spending among quintiles, (2001-2019) come group and the richest 20 percent of Clothing and footwear 3.20 3.41 3.18 Pakistan’s population. This difference has Housing and utilities 6.23 6.54 7.21 only increased over the years. The figure 2001-02 2010-11 2018-19 also reveals comparatively little difference Palma Ratio 3.701 4.252 4.610 Other* 4.77 7.03 7.37 20.3 15.8 Total 3.70 4.25 4.61 in income distribution between successive Farm area Property Gini Coefficient 0.252 0.279 0.294 quintiles at the lower income levels, com- Pashum Ratio 0.401 0.458 0.489 Note: *Includes expenditure on health, transport, communication, pared to higher income levels. Thus, there Source: UNDP calculation based on HIES, 2018-2019; Agricultural recreation and culture and education. Census, 2010; FBR Tax Directory, 2018; and SBP, 2018. Source: UNDP calculations based on multiple years of HIES data. Source: UNDP calculations based on multiple years of HIES data. is a far more drastic gap in income between
14 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 Measuring inequality in Pakistan 15 This is particularly alarming for a country from a high Gini coefficient of 91.9 per- the richest 20 percent of the population FIGURE 2.7 with an average annual per capita income cent and a Pashum ratio of 2.2. compared to the poorest 20 percent. The of US$1,355. results reveal that the most skewed distri- Income share of the quintiles after adjusting for underreporting, (2018-2019) The unequal distribution in the owner- Major sources of income and wealth bution is in foreign remittances, where the ship of agricultural land is also evident in inequality in Pakistan ratio approaches 15.6. As per HIES Adjusted figure 2.5. Just 1 percent of Pakistan’s pop- This means that foreign remittances Q5 ulation owns over 20 percent of its farm- The NHDR 2020 reviews the sources of contribute 15.6 times more to the house- Richest land; each of these farmland owners owns income and wealth together. Sources of hold income of the richest 20 percent of Q4 more than 400 acres of agricultural land. income include income earned through ag- the population than to the income of the This leads, first and foremost, to the accu- riculture, livestock, self-employment, wag- poorest 20 percent. As expected, the ra- Q3 mulation of farmland in very few hands. es and salaries, the transfer of remittances tio is also high for income from property, Q2 Second, this unequal distribution of land (internal and external), and rental income. which contributes 11.2 times more to the ownership leads to an uneven distribution Given the unequal distribution of wealth household income of the richest 20 per- Q1 of agricultural income, which, in turn, ad- in Pakistan, any income generated through cent compared to the poorest 20 percent. Poorest versely impacts inequality and poverty.5 wealth can also affect income inequality. Inequality in social protection transfers, % 0 10 20 30 40 50 60 After initial attempts towards land reform Among the sources of income in 2018– domestic remittances, and agricultural in- Source: UNDP calculations based on latest data of PES, 2018-2019; LFS, 2017-2018; and HIES, 2018-2019. in the 1970s fizzled out, there has been no 2019, social protection contributed more come are characterized by the lowest ratios attempt to redistribute land or to intro- to the national household income of the and, therefore, the lowest levels of inequal- duce a progressive system for taxing agri- poorest income quintiles, while foreign re- ity. rises from 30 percent to 38 percent, while cultural incomes. mittances and income from property con- the Pashum ratio rises from 0.50 to 0.68. The greatest inequality is visible in tributed most to the national household Adjusting for the underreporting of in- the distribution of personal bank advanc- income of the richest quintile.6 The Palma come Inequality and poverty es. Just 1 percent of individual borrowers ratio by source of income is presented in The Macroeconomic Model built by the obtain almost 37.5 percent of the total figure 2.6. It is the highest, at almost 16, The Household Integrated Economic Sur- NHDR 2020, described in chapter 8, re- credit, while 1 percent of those with bank in the case of foreign remittances, followed vey tends to underreport data related to veals that between 2001–2002 and 2015– accounts hold 26.4 percent of the total de- by over 11 for property income. The ratio inequality in incomes among population 2016, changes in income inequality strong- posits. is lowest for social protection. It is also rel- quintiles. In 2018–2019, the HIES only ly impacted poverty levels. Other variables Income tax payments also imply high atively low for crop production, livestock, captured 41 percent of household income levels of wealth inequality, with 1 per- and domestic remittances. estimated from Pakistan’s GDP. Labour cent of the population possessing enough These sources of income impact in- income is underreported by 12 percent, FIGURE 2.8 wealth and income to pay 29.8 percent of equality differently, depending on the while foreign remittances are underreport- the total personal income tax collected in household they accrue to. For instance, The difference between adjusted and ed by almost 67 percent. While property unadjusted measures of inequality reflecting Pakistan. The extent of wealth inequality, figure 2.6 shows how different sources of income is, more or less, fully reported, the underreporting, (2018-2019) based on income tax payments, is evident income contribute to the total income of HIES does not report the large component of capital income at all. 10% : 40% % 50% FIGURE 2.6 Richest Poorest Adjusting for the underreporting of in- Palma ratio Income inequality in different sources of income (modified Palma ratio), (2018-2019) come reveals a significantly different pic- Unadjusted 4.7:1 Adjusting for the underreporting ture of the distribution of income (figure Adjusted 7.08:1 7 of income raises the ratio of the Modified Palma ratio Ratio, richest 20% to poorest 20% 2.7). 0 1 2 3 4 5 6 7 8 richest quintile’s income share Wages and salaries 4.2 Consequently, the measures of income Gini coefficient % 28% to the poorest quintile’s to Crop production and livestock 2.9 inequality adjusted for underreporting 30 Unadjusted over seven-to-one. 38 Self-employment 7.0 in 2018–2019 have higher values (figure Adjusted 2.8). The adjustment for other years, by % 0 20 40 60 80 100 Income from property 11.2 Equality Inequality and large, mirrors this trend. In 2015– Foreign remittances 15.6 2016, the adjustment for underreporting Pashum ratio % 33% Domestic remittances 2.4 revealed an even higher level of inequality 0.50 Unadjusted Social protection 0.8 0.68 Adjusted ∞ than in 2018–2019. The modified Palma 0 0.5 1 1.5 Ratio 0 2 4 6 8 10 12 14 16 ratio based on unadjusted income is esti- Equality Inequality Source: UNDP calculations based on HIES, 2018-2019. mated at 4.7, compared to 7.08 for adjust- Source: UNDP calculations based on latest data of PES, 2018-2019; ed income. Similarly, the Gini coefficient LFS, 2017-2018; and HIES, 2018-2019.
16 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 Measuring inequality in Pakistan 17 that affected poverty were the growth rate Trends in national inequality From 2006 to 2008, income inequality Between 1990 and 2019, income inequal- of real per capita income, changes in rel- increased. This was caused, in part, by the ity changed significantly. It decreased in Income inequality rose sharply ative food prices, and the growth of real boom in property values and an ensuing the 1990s, rose until the mid-2000s, then from 2001–2002 to 2007–2008, Alongside the magnitude of inequality pro-poor expenditure. Poverty estimates rise in rental income in a buoyant econo- fell again until the middle of the next de- before falling up to 2018–2019. discussed above, it is equally important to for 2018–2019 are not available. my. The period also saw a major increase cade. To understand this long-term trend, understand long-term trends in inequality Between 2001–2002 and 2007–2008, in foreign remittances, which increase in- the NHDR 2020 reviews changes in mac- to inform meaningful policy recommenda- Pakistan experienced relatively high, rap- equality. Meanwhile, agricultural income roeconomic variables in different politi- tions. id annual growth in real per capita income – with its dual effect on income inequality cal eras. The analysis reveals that changes (4 percent). Nevertheless, the incidence Trends in income inequality – could not play an equalizing role because in inequality correspond with Pakistan’s of poverty remained virtually unchanged of its relatively slow growth and the highly according to a study on sporadic poverty unequal nature of land ownership. FIGURE 2.10 Overall, income inequality in Pakistan and inequality in Pakistan between 1985 The second period, 2012–2016, saw Long-term trend in income inequality in Pakistan, (1990-2019) and 2016.8 The impact of rising income decreased between 2007 and 2019 (figure declining inequality due to the reduction was neutralized by an increase of over 4 2.9). However, considerable variations are in the share of income generated from evident in this period and it is important percent in the extent of income inequality, property (rental income). Rising income Ratio to explore the reasons underlying these measured by the original Palma ratio, cou- from wages and salaries, along with the 7 pled with a 10 percent rise in food prices trends. falling share in income from self-employ- relative to overall price levels, and limited ment, played an important equalizing role. Palma ratio (modified) FIGURE 2.9 growth in real pro-poor expenditure. Since social protection has an equalizing 6 5.93 The incidence of poverty increased effect, the increased scope of the Benazir Income inequality between income quintiles 5.41 5.39 from 33.2 percent in 2007–2008 to 37.9 (not adjusted for underreporting), (2006- Income Support Programme during these 5 5.10 percent in 2011–2012. This was due to 2019) years helped to decrease inequality. Never- 4.80 4.68 4.70 extremely limited annual growth (1.2 per- theless, foreign remittances still favoured 4.42 4.32 Modified Palma ratio cent) in real per capita income. Simulta- 6 the richest quintile. 4 HIES neously, inequality increased somewhat, 5.6 The third period, between 2016 and 3.65 5.2 while food prices rose relatively quickly. In 5 5.1 2019, saw a minimal decrease in the Pashum 4.7 this context, increased expenditure on pov- ratio and the Gini coefficient, reflecting a 3 erty alleviation in the form of the Benazir 4 decrease in inequality between income Income Support Programme (BISP) was quintiles, as well as in overall inequali- 0 0 not adequate. 2006-07 2012-13 2015-16 2018-19 ty. The modified Palma ratio decreased, Trends between 2011–2012 and 2017– indicating a reduction in the difference 2018 are also revealing. The incidence of Gini coefficient between the incomes of the poorest 20 poverty declined to 31 percent during this 40 percent and the richest 20 percent of the 2001-02 2004-05 2007-08 2010-11 2013-14 2015-16 2018-19 1990-91 period, while per capita income increased population. The decline in the modified 1996-97 1998-99 32 33 32 at the fairly high rate of 2.9 percent. In- 30 30 Palma ratio may be explained by the fact equality declined during these years, and that income from foreign remittances and % food prices rose less rapidly. 0 property increased for the poorest quintile, 40 This analysis lends itself to the conclu- 2006-07 2012-13 2015-16 2018-19 while income from these sources decreased Gini coefficient 9 35 33 sion that the rapid growth of incomes is for all other quintiles (Q2 to Q5). 34 34 1 33 World Bank 33 33 33 33 33 not always enough to reduce poverty. Ef- For a longer-term analysis of income 31 32 34 31 31 31 forts must be made to ensure that inequali- inequality, the NHDR 2020 only used the 30 30 30 Pashum ratio 29 28 ty does not rise at the same time as incomes modified Palma ratio (20/20) and the Gini HIES 0.55 0.57 increase. It may be a more effective strategy 0.5 0.54 0.50 coefficient between 1990 and 2019 (figure 25 to aim for moderate growth which is inclu- 2.10). This is because data for computing 23 sive in character. the Pashum ratio for earlier years are not 20 available. The modified Palma ratio has a 0 2006-07 2012-13 2015-16 2018-19 downward bias, but is more sensitive than 0 the Gini coefficient in revealing long- Source: UNDP calculations based on multiple years of HIES. term trends in inequality. Even so, the two Source: World Bank 2019C and UNDP’s own calculations using multiple years of HIES data. sources reveal broadly similar trends.
18 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 Measuring inequality in Pakistan 19 tributed to reducing income inequality be- dards of the middle class. A large and ex- FIGURE 2.12 91 to 1998 00 to 200 09 to 201 19 -1 20 7-2 20 8-2 - 9 9- 0 8- 0 cause more workers were employed. With panding middle class is a key sign of a rap- 90 9 9 0 0 1 9 9 9 8 0 9 Growth rate of the real per 1 1 2 higher industrial growth in the second ep- idly growing economy. The middle class capita income of the middle och, inequality increased as industry flour- also plays an effective role in promoting so- class* and total population Democratically elected Authoritarian Democratically elected ished, employing fewer workers, but more cial and political change. Moreover, it can (%), (2001-2019) governments, PML-N government, General governments, PPP, skilled professionals at comparatively high- act as a force to counter the elite capture of and PPP Pervez Musharraf PML-N and PTI Total population er wages. state resources. Middle class The middle class has frequently been Hypothesis 3: The redistributive role of considered the population group in the 5.5 the taxation system is important in terms third (Q3) and fourth (Q4) income quin-
of containing an increase in inequality. Di- tiles. Based on this definition, figure 2.12 4.9 three distinct political epochs during these Hypothesis 2: A higher growth rate in the rect taxes in the first epoch redistributed illustrates the trend in real per capita in- A higher growth rate in the decades. agricultural sector promotes employment resources more aggressively. come among these quintiles, compared agriculture sector tends to Figure 2.11 presents the magnitude of that is less skill-intensive and is charac- with that of the overall population. 2001-02 to 2007-08 reduce inequality. key economic variables in these three polit- terized by low wages. This leads to work- Hypothesis 4: The corporate sector’s per- In the Musharraf era, the middle class’ 2.9 ical epochs. Four hypotheses can be drawn ers with lower levels of education being formance is important for determining real per capita income grew at a relatively from the direction of change in inequality absorbed into the labour force in larger the growth of capital owners’ incomes. A high rate, at almost 5 percent per annum. 2.6 and in these key variables. These hypothe- numbers, which reduces income inequality rise in corporate income increases income Thereafter, the growth rate has been far ses offer plausible explanations for trends overall. By contrast, industrial growth, es- inequality. Pakistan’s corporate sector pri- lower, falling to just 1.2 percent between 2007-08 to 2013-14
in inequality between 1990 and 2019. pecially in large units, is likely to increase marily comprises companies quoted in the 2013–2014 and 2018–2019. 1.8 the demand for more educated and skilled country’s stock exchanges. These compa- The principal reason for this decline 1.2
Hypothesis 1: The higher the GDP growth workers, who command higher wages. This nies represent 60 percent of value added in the buoyancy of middle class income is 2013-14 to 2018-19 rate, the greater the likelihood of an in- increases income inequality. The first ep- in the industrial sector, and all of the val- the rising unemployment rate of educated crease in income inequality. och was characterized by the former trend ue added in the banking sector. The own- workers, who form a key part of the mid- Note: *Third and fourth income quintiles of the population. of higher agricultural growth, which con- ership of shares is highly skewed; barely dle class. While in 2007–2008 the unem- Source: UNDP calculations based on 0.11 percent of Pakistanis are shareholders. ployment rate for workers with a degree multiple years of HIES data. FIGURE 2.11 Most capital gains and the dividends of or post-graduate qualifications was below Change in economic variables in different epochs, (1990-2019) the corporate sector are in the hands of big 5 percent, it rose to over 16 percent by corporations.10 During the second epoch, 2018–2019.
Epoch 1: 1990-1991 to 1998-1999 Epoch 2: 1999-2000 to 2007-2008 Epoch 3: 2008-2009 to 2018-2019 between 1998 and 2008, market capitaliza- In recent years, employment opportuni- tion ballooned by over 32 percent per year, ties for middle class workers in the formal Change in income inequality Decline Rise Decline The middle class has been % leading to a ‘boom’ period for the stock sector – including in large-scale manufac- 32.3 35 market. A new class of capitalists emerged turing, banking and finance, electricity and ‘squeezed’ due to the lack from a relatively small group of stockbro- gas, and public administration – grew far of adequate employment 21.4 kers. Unsurprisingly, income inequality more modestly than in the informal sector. opportunities for highly- 15 increased sharply between 1999 and 2008. The middle class has sometimes been educated workers. characterized as the group whose per cap-
10 Squeezing the middle class ita expenditure is in the range of 25 per- cent more or less than (plus or minus) the Most studies on inequality focus on the median per capita expenditure. In line with 5 richest and poorest income quintiles. But this definition, in 2007–2008, 42 percent what about those in the middle? Their ex- of Pakistan’s population was middle class. periences of inequality are important to By 2018–2019, this share declined to 36 0 Growth rate Growth rate Growth rate Growth rate Growth rate Rate of Change in Growth rate in Growth rate Average consider, yet all too often, these are over- percent, implying that the middle class is of GDP of agriculture of industry of services of employment inflation unemployment direct tax of market yield on looked. This is the reason why the NHDR increasingly being ‘squeezed’. rate revenues capitalization equity -5 2020 has developed the Pashum ratio, The most persuasive evidence of this Corporate sector which looks at inequality between succes- squeeze is the considerable decline in the developments sive income quintiles. middle class’ savings rates. In 2001–2002, Note: Adjusted for some overreporting of the number of unpaid family workers. There are several reasons for studying these were close to 3 percent, before ris- Source: UNDP calculations based on multiple years of PES, SBP and Handbook of Statistics on Pakistan’s Economy. developments in the size and living stan- ing to over 7 percent in 2007–2008. After
20 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 Measuring inequality in Pakistan 21 2008, their savings rates fell sharply, back households are finding it difficult to make property. This shows that property owner- FIGURE 2.14 to below 3 percent. ends meet. As COVID-19 prompts large- ship-based inequality shows no significant The regional distribution of the mid- scale layoffs and salary cuts, it is becoming improvement over time. The distribution of bank deposits: Increasingly skewed in favour of the richest, (2001-2018) dle class, if defined as the third and fourth increasingly hard for the middle class to Figure 2.14 presents long-term trends
income quintiles, is concentrated in Pa- sustain themselves. in wealth inequality measured by the dis- Gini coefficient kistan’s two largest provinces and in the Despite the pressure of inflation, un- tribution of bank deposits. Between 2001 100 92 92 country’s urban areas. Almost 80 percent employment, and decreasing purchasing and 2016, the unequal distribution of bank 87 89 91 of Pakistan’s middle class live in Punjab power parity (PPP $), the middle class do deposits became even more skewed in the 80 and Sindh, while urban centres are home not fall into the category of those eligible favour of Q5, that is, the richest quintile of to nearly 48 percent of middle class house- for social protection or most forms of so- Pakistan’s population. 0 2001-02 2007-08 2011-12 2015-16 2018 holds. cial assistance, unlike the poorest income This is evident in the Gini coefficient, The middle class has been squeezed group. As their means become more lim- which rose from 87 to 89 between 2001 Pashum ratio more intensely in recent years due to rel- ited, the middle class is largely on its own and 2008, and on to 92 between 2008 and 4.5 4.43 atively higher inflation in housing rents, while it is pushed to the bottom of pyra- 2016. By 2018, it decreased very mini- 4.21 and the unprecedented hike in domestic mid over time. mally, to 91. The weighted Pashum ratio, 4 4.02 tariffs on electricity and gas. Since 2013– a measure more sensitive to distributional 3.5 2014, rents cumulatively increased by 44 Trends in wealth inequality changes, shot up between 2001 and 2016, 3.21 percent, compared to an overall rise in the reflecting a sharp rise in wealth inequality 3 2.99 consumer price index of 38 percent. Simul- There is a critical lack of data to measure measured by the distribution of bank de- 2.5 taneously, the power tariff rose by over 60 wealth inequality in Pakistan. As such, posits. percent, while the gas tariff jumped up by the NHDR 2020 uses available data – on Another key measure of wealth inequal- 0.5 as much as 167 percent. property, bank deposits, and land owner- ity, the Gini coefficient, is calculated with 0 Today, Pakistan’s middle class is in dire ship – to assess long-term trends. Figure regard to the distribution of farmland own- 2001-02 2007-08 2011-12 2015-16 2018 straits. Like much of the rest of the pop- 2.13 illustrates the distributional disparity ership distribution. Inequality in farm- of income imputed and earned from rental Note: The Palma ratios for bank deposits could not be calculated due to unavailability of data. ulation, a large proportion of middle class land ownership increased between 1990 Source: UNDP calculations based on multiple years of PES, MOFA, SBP, Handbook of Statistics on Pakistan’s and 2010, with the Gini coefficient rising Economy. from 57 in 1990 to 62 in 2010. Figure 2.15 FIGURE 2.13 shows how the distribution of farmland FIGURE 2.15 Property ownership-based inequality shows no significant improvement over time, (2001- ownership has worsened over time. In the 2019) past 40 years, the total farm area in Paki- Inequality in the ownership of farmland Inequality in farmland ownership stan has not increased significantly, but measured by the Gini coefficient, (1972- Palma ratio has increased sharply since 20 more farm area has been accumulated in 2010) 1990. 13.3 14.4 fewer hands. Over the generations, it may 10.8 11.0 11.2 10 be expected that large landholdings would % Gini coefficient 70 0 be divided among inheritors, causing land 2001-02 2006-07 2012-13 2015-16 2018-19 62 fragmentation and the automatic redistri- 60 61 57 bution of ownership. This has not hap- 50 49 50 48 49 pened in Pakistan. 46 46 40 Increasing inequality in farmland own- 0 Gini coefficient ership is evident both overall, as well as in 1990 2000 2010 0 2001-02 2006-07 2012-13 2015-16 2018-19 the middle of the distribution of farmland. 1.5 1.50 1.5 This is illustrated by the weighted Pashum 1.27 Pashum ratio ratio, which rose from 0.412 in 1990 to 0 1 1 1.05 1.07 0.94 0.93 0.91 1.504 in 2010 (see Technical note 2 and Weighted Pashum ratio figure 2.15). The reason that the weight- 0.5 0.5 0.41 ed Pashum ratio is used here is because in- 0 formation on the distribution of farmland 0 2001-02 2006-07 2012-13 2015-16 2018-19 1990 2000 2010 ownership is not available by quintiles. Note: These values are based on imputed income from owner-occupied property and rental income. In 1972, 0.5 percent of the farms in Source: UNDP calculations based on multiple years of Agricultural Source: UNDP calculations based on multiple years of HIES data. Census of Pakistan. Pakistan accounted for 9 percent of its
22 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 Measuring inequality in Pakistan 23 total farm area. By 2010, this rose to 11 and health), and the education and em- particular group, in order to improve their for inequality, human development falls Just 1 percent of Pakistan’s percent.11 Instead of being redistributed, ployment of one’s parents, among others. well-being in terms of education, health, to 0.534, registering a 6.26 percent loss farms account for 20 percent farm areas have increased in size. Today, The Human Development Index (HDI), and income. Although inequality does caused by inequality in the distribution of of its farm area. the extent of inequality is such that just which goes beyond economic outcomes, matter to human development, the Hu- HDI dimensions (figure 2.18). The loss in 1 percent of farms account for 20 percent captures some of these factors.13 man Development Index does not capture human development is the difference be- of Pakistan’s farm area.12 This reflects the Pakistan’s performance on the Human inequality or unequal distribution across tween potential HDI – that is, equal dis- disenfranchisement and marginalization Development Index has improved some- entire populations. tribution across all human development of small-scale farmers, whose land is being what over the years, raising it to the medi- Using the human development ap- dimensions – and the actual HDI – that Pakistan lags behind all bought up by, and converted into part of, um human development category. Yet, Pa- proach to assess multidimensional inequal- is, the IHDI, which reflects the reality of South Asian countries, except large farms. Many small-scale farmers are kistan lags far behind all other South Asian ity that goes beyond economic outcomes, unequal distribution.15 Afghanistan, in terms of now tenants on the land they once owned, countries except Afghanistan in this be- income, and wealth, the NHDR 2020 has The IHDI values computed by the human development. effectively pushing them into servitude yond-income measure (figure 2.17). Over developed measures that calculate new NHDR 2020 differ from Pakistan’s IHDI (figure 2.16). the past 27 years, Pakistan’s HDI value indices for the first time in Pakistan. The value calculated by the global Human De- increased by 39 percent, considerably less Inequality-adjusted Human Development velopment Report 2019. This is because FIGURE 2.16 than the increases achieved by Bangladesh Index and a quintile-level Human Devel- these reports use a slightly different distri- Farm area in Pakistan, (1972-2010) (59 percent) and India (52 percent). opment Index enable us to understand the bution of indicators, while employing the A commitment to improving human depth of inequality across other dimen- same methodology. The NHDR 2020 as- % of farm development means a commitment to en- sions, including education and health. sesses the distribution of the education di- area 1972 hancing the choices of all people, not just a mension (measured by net enrolment and 100 National Inequality-adjusted Human adult literacy) and the health dimension 80 Development Index (measured by life expectancy) by income FIGURE 2.17 60 groups, unlike the HDR 2019. The lat- 40 Pakistan ranks 2nd last among South Asian The Inequality-adjusted Human Develop- ter analyses the distribution of education 20 countries in its HDI value, (2019) ment Index (IHDI) compensates for the (mean years of schooling) and health (life % gap in the human development approach, expectancy) by age intervals (0–1, 1–5, 0 20 40 60 80 100 of farms HDI which does not consider inequality in the 5–10, ..., and 100+ years), instead of by 1.000 % distribution of human development di- income groups. Second, the NHDR 2020 of farm 14 area 2010 mensions. The IHDI adjusts the HDI uses the living standard indicator, income 100 value for inequality in each component: per capita, based on data on income quin- 80 VERY HIGH health, education, and income. Although tiles from the Household Integrated Eco- 0.800 60 Sri Lanka the NHDR 2020 takes its IHDI meth- nomic Survey, while the global HDR 2019 40 HIGH odology from the global Human Devel- uses income per capita calculations based 0.700 Maldives on an asset index derived from the Pakistan 20 opment Report 2019, these values are not India comparable. Demographic and Health Survey (PDHS). % 0 20 40 60 80 100 of farms Bhuttan The IHDI takes inequality into account The global HDR 2019 reports 31 percent MEDIUM Bangladesh Source: UNDP calculations based on multiple years of Agricultural 0.550 Nepal when capturing a country’s achievements inequality in human development, whereas Census of Pakistan. LOW PAKISTAN in education, health, and income by con- the NHDR 2020 reports 7 percent. This Below Afghanistan 0.550 sidering how those achievements are dis- difference is largely explained by the re- tributed among the population. In other ports’ choice to use a different distribution National inequality in human words, the HDI measures ‘potential human of indicators. development development’ if there is equal distribution Pakistan’s IHDI value has improved in all these dimensions, while the IHDI very minimally over the years. The loss Inequality is popularly associated with in- measures ‘actual human development’. It incurred in human development due to in- come and wealth. Inequality of opportu- reflects the loss in well-being caused by the equality also improved minimally, falling nity is less often discussed, including the unequal distribution of attainments in dif- from 7.1 percent in 2006 to 7 percent in effects of factors beyond a person’s con- ferent dimensions of human development. 2016. Between 2006 and 2013, an increase trol: identity markers like gender, religion, The NHDR 2020’s calculations, in income and health inequality prompt- caste, race, and ethnicity, region of resi- 0 based on the latest available data, reveal ed a slight rise in losses in human devel- dence, access to public services (education that Pakistan’s HDI value was 0.570 in opment, from 7.1 to 7.2 percent. Between Source: UNDP 2019. 2018–2019. When this value is adjusted 2016 and 2019, losses in human develop-
24 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 Measuring inequality in Pakistan 25 FIGURE 2.18 ment caused by inequality declined to 6.3 for the IHDI’s limitations by looking at FIGURE 2.20 percent due to a minimal improvement in quintile-level data and constructing HDI Loss in human development due to inequality distribution in all three dimensions. values by quintiles. HDI by quintiles at the national level and by inequality measures, (2006- has not reduced substantially over time, 2019) (2006-2019) The consistent loss in human devel- opment can be explained by losses caused National Human Development Index HDI HDI/IHDI by inequality in education, health, and by quintiles 0.7 0.693 0.697 0.698 Quintile 5 0.600 income across different quintiles. The un- equal distribution of income remains the There is a need to understand the dif- 0.663 HDI greatest contributor to this decline (figure ference in human development among 0.617 Quintile 4 IHDI 0.6 0.500 2.19). In 2018–2019, income contributed different income groups. A country may 0.596 0.597 75 percent to the loss in human develop- perform relatively well in terms of its ag- 0.571 0.570 Pakistan 0.557 0.558 ment, while education contributed 24 per- gregate HDI value, but disaggregating 0.552 Quintile 3 0.529 0.534 0.535 cent. Health contributed least to the loss its performance by income quintiles may 0.506 0.400 0.5 0.495 Quintile 2 in human development. This implies that yield different results. The NHDR 2020 0.478 0.480 different income quintiles vary most in attempts, for the first time ever, to derive 0.453 terms of income per capita, followed by ed- the Human Development Index by income 0.413 0.419 Quintile 1 0.300 ucation, and then health indicators. This quintiles in Pakistan. The calculations for 0.4 0.405 trend has remained stable over the years. the country’s HDI value by quintile use the 0.383 Although health and education con- standard indicators used to construct the tribute comparatively less to the loss in hu- HDI.16 0.200 man development than income, this does Pakistan is a key example of a country 0.3 not mean that these sectors are doing well. where the benefits of development are un- Instead, it means that Pakistan performs evenly distributed, highly skewed in favour 0.100 comparatively poorly in the education and of a small segment of the population: the 0 health dimensions of human development richest. For instance, the HDI value of the 2006-07 2012-13 2015-16 2018-19 across all income groups; as such, their con- richest 20 percent of Pakistanis is 0.698,
0 tribution to inequality is low. The IHDI, indicating almost the same level of human Modified Palma ratio with its added advantage of accounting development as the average of countries 1.8
2006-07 2012-13 2015-16 2018-19 for inequality in human development, also like Egypt and China, both of which are 1.73 1.68 1.72 1.67 comes with certain limitations in its inter- in the high human development catego- 1.6 % pretation. The NHDR 2020 compensates ry. By contrast, the poorest 20 percent of 8 Pakistanis fall in the low human develop- 0 2006-07 2012-13 2015-16 2018-19 FIGURE 2.19 ment category, with an HDI value of just Loss in Human Development 0.419. This is below Ethiopia’s HDI value Inequality in income distribution between Pashum ratio 7.2 quintiles is the major contributor to loss in and comparable to that of Chad, which 7.1 0.2 7.0 7 human development, (2018-2019) ranks 186th of 189 countries in the global 0.15 0.14 0.15 0.14 HDI ranking.17 This reflects the extreme inequality in human development between Income Education 0 6.3 the richest and poorest Pakistanis. 75 24 The modified Palma ratio shows that 2006-07 2012-13 2015-16 2018-19 6 inequality between the richest and poorest Note: The inequality measures for HDI are approximate in character. Health quintiles decreased between 2006–2007 Source: UNDP calculations based on Pasha 2019 and multiple years of HIES and PDHS data. 1 and 2012–2013, falling from 1.73 to 1.68. It rose to 1.72 between 2012–2013 and mance across all dimensions of human de- The richest 20 percent of 0 2015–2016, before declining again to 1.67 velopment has improved. The dimension Pakistanis have an HDI value by 2018–2019. This minimal decline over of income registered the greatest improve- of 0.698, equal to the average 2006-07 2012-13 2015-16 2018-19 the past 10 years (figure 2.20) means that ment, while health experienced the least for China, but the poorest 20 the gap between rich and poor has de- improvement. Despite this, inequality has percent have an HDI value of Source: UNDP calculations based on Pasha 2019 and multiple years Source: UNDP calculations based on Pasha 2019 and multiple years creased insignificantly. remained fairly stagnant. The richest quin- of HIES and PDHS data. of HIES and PDHS data. 0.419, comparable to Sub- In the last decade, Pakistan’s perfor- tile’s performance on the health dimension Saharan African countries.
26 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 Measuring inequality in Pakistan 27 remained 1.3 times higher than that of the HDI indicators sheds further light on SPECIAL CONTRIBUTION Dr. Akmal Hussain poorest between 2007 and 2019. It was 2.4 inequality in Pakistan. This section first times higher for the dimension of educa- assesses the World Bank’s World Develop- How economic equality leads to sustained economic growth tion at the beginning of this period, before ment Indicators database to determine the Persistent inequality means that the actualization of a society’s hu- underlie the elite-based economic growth process. falling slightly to 2.3 times higher for the level of, and trends in, income inequality man potential is being systematically constrained. In this sense, an New research challenges the earlier view that inequality is good richest Pakistanis, compared to the poor- in these countries. Second, it discusses the unequal economy remains underdeveloped. Here, the opportunities for growth. It suggests that inequality, in fact, holds back long- est. As above, this persistent difference in Commitment to Reducing Inequality In- for high quality education, health care, access to productive assets term growth. For example, Galor and Ziera (1993), on the basis of performance on HDI dimensions between dex, a direct measure of steps taken in each and capital markets are restricted to a few, thereby narrowing the cross-country data, show that the narrow base of investment in hu- the richest and poorest reflects negligible country to contain inequality. base of savings, investment, and innovation. In such an economy, man and physical capital in unequal societies has a negative effect changes in inequality. growth is not only unequal, it is also unsustainable. on long-term growth. Berg and others (2012) show that inequality Overall, income inequality in Pakistan Levels of inequality in South Asia During the 1960s, when the mould of Pakistan’s economy was in low-income countries is a key constraint to long-term economic is moderately high, but has lessened be- fashioned, policy makers propounded the doctrine of ‘functional in- growth. The negative effect of inequality has been shown to be ac- equality’ – the belief that inequality initially could enable high rates of centuated by the socio-political instability it can induce (see for ex- tween 2007 and 2019. Wealth inequality, According to the latest available Gini co- GDP growth. This was in accordance with the work of Nobel Laureate ample: Alesina and Rodrik 1994, Perotti 1996, and Keefer and Knack by contrast, is even greater and has wors- efficient estimates (table 2.3), inequality is Simon Kuznets (1955), who argued that while inequality increases 2002). ened over the years. Inequality beyond eco- most pronounced in Sri Lanka, followed in the early stages, it would, in time, be reduced as growth proceeds So now we can turn the conventional wisdom on its head to sug- nomic outcomes – measured by the IHDI by India, while Nepal and Bangladesh have apace. Thomas Piketty, with work based on 140 years of growth data gest that, in fact, equality is good for economic growth. When there and the HDI by quintiles – is not very the lowest levels of inequality. The World from Europe and the United States of America, proved this view to be is equality of opportunity for all citizens to develop their human ca- high, although it is characterized by insig- Development Indicators database places invalid. Piketty (2014) shows that, far from decreasing as predicted pabilities, and individuals can attain forms of livelihood consistent nificant improvements in recent years. Pakistan in an intermediate position, with by Kuznets, inequality has in fact been increasing. with their capabilities, then sustained economic growth will be an a Gini coefficient of 34. However, when In Pakistan too, acute interpersonal and interregional econom- outcome. Indeed, when the development of society is based on the measured using data from the Household ic disparities have persisted over the last six decades. No serious talent and creativity of its people, it will lead to not just to economic Comparing South Asian Integrated Economic Survey, this works attempt has been made to substantially reduce the unequal distri- prosperity, but to the enrichment of human civilization. bution of productive assets and the inequality of opportunities that countries out as a coefficient of 30, as noted above. The WDI database’s Palma ratio of 4.8 and Dr. Akmal Hussain is a Distinguished Professor and Dean of the School of Humanities and Social Sciences at the Information Technology University 4.7, respectively, suggests that Pakistan has Comparing the performance of South (ITU) in Lahore, Punjab. the lowest level of inequality among South Notes: Alesina and Rodrick 1994; Berg and others 2012; Galor and Zeira 1993; Hussain 2019; Keefer and Knack 2002; Kuznets 1955; Perotti 1996; Asian countries – Bangladesh, India, Ne- Asian countries. Piketty 2014. pal, Pakistan, and Sri Lanka – on relevant According to the WDI database, trends TABLE 2.3 in inequality vary among South Asian their efforts across three key pillars: social Measures of inequality in South Asian countries, (2010-2016) countries. Bangladesh, Sri Lanka, and Labour: This is measured by three indi- Nepal appear to have reduced inequali- spending, taxation, and labour. cators of inequality, namely the rights of ty according to both measures. India and workers and labour unions, women’s legal Year Gini Year Gini Indicators Pakistan have witnessed some increase in rights to work, and the level of the min- Bangladesh 2000 33.4 2016 32.4 inequality. Examining time series data for imum wage as a percentage of per capita Social spending: This is measured on the India 2004 36.8 2011 37.8 Pakistan reveals that inequality started GDP. basis of public spending on education, Nepal 2003 43.8 2010 32.8 rising from 2001 onward, and peaked in 2005. Thereafter, it has declined. This is health, and social protection as a percent- Findings Pakistan 2001 30.4 2015 33.5 consistent with the HIES calculations pre- age of total government expenditure and Sri Lanka 2002 41.0 2016 39.8 sented above. of GDP, respectively. The CRI Index ranking, first prepared in The Commitment to Reducing Year Palma ratio Year Palma ratio 2017 and updated for 2018, covers 157 Taxation: This is measured by the progres- countries. Denmark ranks first, followed Inequality Index places Pakistan Bangladesh 2000 5.0 2016 4.8 Commitment to Reducing Inequality Index sivity of taxation systems, starting with by Finland and Austria. Among developing second to Sri Lanka in South India 2004 5.7 2011 6.0 the threshold level in personal income tax, countries, South Africa fares best, ranking Asia, but 137th of 157 countries Nepal 2003 7.9 2010 5.0 The Commitment to Reducing Inequality and the minimum and maximum tax rates. 31st. Among Asian countries, Turkey is at globally. Other indicators are the corporate income Pakistan 2001 4.3 2015 4.8 (CRI) Index, developed in 2017 by Oxfam the top, ranking 53rd. tax rate, the value added tax rate, exemp- Sri Lanka 2002 7.1 2016 6.8 and Development Finance International, Figure 2.21 presents the ranking in each is a global ranking of what governments tions, thresholds, and revenue generated pillar, and overall, of selected countries in Note: Data presented is for the earliest and latest year for which the measure of inequality is available in the last as a percentage of GDP. The index fur- twenty years for a particular country. in different countries are doing to tackle South Asia. Among South Asian countries, Source: World Development Indicators, World Bank. the gap between rich and poor. It measures ther identifies the existence of harmful tax Sri Lanka performs best, ranking 102nd. practices and anti-tax avoidance laws. Thailand performs relatively better among
28 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 Measuring inequality in Pakistan 29 FIGURE 2.21 East Asian countries, ranking 74th. Gen- Notes 8 Jamal 2018. erally, East Asian countries perform better 9 Data based on table 11 of multiple rounds of the Pa- CRI index 2018: South Asia, country rankings out of 157 countries on the CRI Index than South Asian na- kistan Social and Living Standards Measurement Survey tions. * Name changed to protect the informant’s identity. This between 2006 and 2019. Government of Pakistan 2006b, Country name / Change in Gini-coefficient Nepal / N.A. Bangladesh / 0.15 Sri Lanka / 0.38 Pakistan is near the bottom, ranking story was shared during the NHDR focus group discus- 2010g, 2012c, 2013d, 2015c, and 2020f. Pakistan / -0.32 India / 0.42 Bhutan / 0.73 sion in Tharparkar, Sindh, on 20 June 2019. The language 137th out of 157 countries, placing it sec- 10 CDC 2019. used was primarily Urdu. The quotes used in the story are 11 Government of Pakistan 1972 and 2010b. CRI Social Taxation Labour rights ond in South Asia after Sri Lanka. How- ranking spending policies and wages approximate translations. 12 Ibid. ever, in social spending its ranking (154th) Rank Rank Rank Rank 1 Government of Pakistan 2018c. 13 UNDP 2019. 1 1 1 1 is even lower. The overall position im- 2 Cobham and Sumner 2013. 14 The IHDI was developed in 2010, based on measures ex- proves because of its high ranking (61st) 3 For the methodology used to compute this ratio, see amined by Foster and others 2005. in terms of taxation policies. This is per- Technical note 2 on the Pashum ratio. 15 See the standard methodology for IHDI quantification de- 10 10 10 10 haps surprising given Pakistan’s relatively 4 Government of Pakistan 2020d. velopment in the global Human Development Reports. low tax-to-GDP ratio and its high share of 5 Anwar and others 2004; Anwer and Sampath 1996. 16 Refer to the standard methodology for HDI quantification 20 20 20 20 revenues from indirect taxes. Pakistan also 6 Government of Pakistan 2020d. in the global Human Development Reports. performs relatively well in terms of labour 7 See Technical note 1 on the underreporting of income. 17 UNDP 2019. 30 30 30 30 rights and wages, ranking 119th. A key issue is whether the ranking of
40 40 40 40 countries is consistent with the extent of change in inequality as measured by the Gini coefficient or the modified Palma ra- 50 50 50 50 tio. There appears to be a great deal of in- 60 60 60 60 consistency between CRI Index rankings and the rate of change in the Gini coeffi- 70 70 70 70 cient in recent years. Among the countries presented in figure 2.21, the fact that Sri
80 80 80 80 Lanka ranks highest in South Asia is con- tradicted by the rise in inequality in the country in recent years. 90 90 90 90 There is, therefore, a need to refine the CRI Index, and add an additional pillar 100 100 100 100 that focuses on the nature and outcome of economic policies that impact inequality. 110 110 110 110 Some suggested indicators include:
120 120 120 120 1. the rate of effective currency devalu- ation; 2. the level of nominal interest rates; 130 130 130 130 3. the rate of inflation in food prices rel- ative to the overall rate of inflation; 140 140 140 140 and 4. the rate of change in the level of em- 150 150 150 150 ployment as a ratio of the GDP growth rate. 157 157 157 157 The higher the magnitude of these in- Source: Transparency International 2018a. dicators, the likelier it is that a country’s government has a weak commitment to re- ducing inequality.
30 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 CHAPTER 3 Measures of regional inequality
32 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 Measures of regional inequality 33 CHAPTER 3 Measures of regional inequality
Now in her early 30s, Zafra* has worked at a brick kiln in Umerkot, Sindh, all her life. Her family is ‘bonded’ to the kiln’s owner by intergenerational debt – loans taken by her forefa- thers decades ago. As in most underdeveloped areas, life in Umerkot is difficult. Most days, Zafra and her family wake up at 5 a.m. and engage in manual labour until 6 p.m., working through the heat and smoke. She and her husband earn PKR 600 (US$3.6) for every thousand bricks they pro- duce, a target they aim to meet together daily. They can’t even afford to eat daal (lentils) on a daily basis. The family’s regular diet consists of red chillies ground into a paste and boiled in water, eaten with roti. As for meat, that is something they only get “Eid kay Eid’’ – once a year, at Eid. Here, children have no means of going to school. They work alongside their parents making bricks. The harsh working conditions often cause skin diseases, eye infections, and asthma, but these families can’t afford health care. Things are especially difficult for women. Sexual exploitation is common, sometimes at the hands of their landlords, says Zafra. Their husbands also often abuse them. Talking about domestic violence, one man says, “Sometimes, our women deserve it.” Most of the women, including Zafra, laugh. A lack of access to health care and education, food insecurity, and sexual exploitation are common in Pakistan’s underdeveloped districts. As many as 37.5 million people live in such districts today. Unless the pace of development is accelerated and oriented towards these communities, their situation will not improve. In fact, it may worsen.
Increasing differences in human develop- Inequality between ment and economic growth between Pa- provinces kistan’s regions make spatial inequality an extremely relevant issue for the country. The geographical boundaries of districts Disparity in per capita income among Pa- and provinces have come to define inequal- kistan’s four federating units – Punjab, ity, both in terms of income and opportu- Sindh, Khyber Pakhtunkhwa, and Baloch- 1 nity. Research shows that an individual’s or istan – is an important dimension of in- equality. Article 160 of Pakistan’s Consti- community’s region of residence has a pro- The 7th NFC Award, under tution provides the framework to set up found impact on their economic and so- Article 160 of Pakistan’s a National Finance Commission (NFC) cial development opportunities, enabling Constitution, calls for fiscal to decide on the nature of fiscal relations varying levels of growth, social mobility, redistribution among the between the federal and provincial govern- and access to public services, markets, and provinces to reduce regional ments, and address regional disparities. infrastructure. This chapter explores re- disparities. gional inequality from the perspective of The NFC is expected to bestow an award income and human development at various every five years, which lays out the share of levels – provincial, district, rural and ur- federal tax revenue to be transferred to the ban areas, and in terms of Pakistan’s special provinces, as well as a ‘horizontal sharing’ regions. formula among the provinces for these transfers (box 3.1). The 6th and 7th NFC Awards were mechanisms consciously built to foster a process of fiscal equalization.
34 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 Measures of regional inequality 35 BOX 3.1 SPECIAL CONTRIBUTION Sanaullah Baloch Seventh NFC Award: Fiscal equalization 7th National Finance Commission Award: Fiscal equalization
Earlier NFC awards made fiscal transfers to the provinces from the the rest is divided as follows: Federal Divisible Pool on the basis of each province’s share of the The human development landscape of Pakistan’s four federating Balochistan has not benefitted much from the 7th NFC scheme. national population. Balochistan 9.00 percent units is shockingly unequal. Since the country was founded, inequi- The stark socio-economic differences between the country’s prov- The 7th NFC Award fundamentally changed the sharing formula by Khyber Pakhtunkhwa 15.47 percent table resource distribution has created massive regional disparities inces are evident in Pakistan’s first ever Multidimensional Poverty introducing multiple criteria, namely: Punjab 51.22 percent and political turmoil, including the country’s break-up in 1971. Index (MPI), launched in June 2016. Punjab’s central and northern Sindh 24.31 percent The Constitution of 1973 attempted to redress fiscal imbalances districts recorded poverty rates of less than 10 percent, compared Population 82 percent through Article 160, setting up the National Finance Commission that to the alarming rate of over 70 percent in Balochistan and the New- aims to equally distribute financial resources to the four provinces to ly Merged Districts of Khyber Pakhtunkhwa (formerly known as the Poverty backwardness 10.3 percent The 7th NFC Award also increased the combined provincial share meet their expenditure liabilities and alleviate horizontal fiscal im- Federally Administered Tribal Areas). Revenue collection or generation 5.0 percent from the Divisible Pool from 46 to 57.5 percent. balances. The 7th NFC Award did lead to increased spending in social sec- Inverse population density 2.7 percent Thus, Pakistan’s two relatively more underdeveloped provinces, However, undemocratic regimes have often sabotaged the dem- tors, such as education and health, but there is growing concern that Balochistan and Khyber Pakhtunkhwa, receive a fiscal share that is ocratic idea of fair and equal resource distribution. This has led to this has not led to qualitative changes. In Balochistan, recent data Prior to the distribution to the provinces, a 1 percent share from the larger in proportion to their population. The 7th NFC Award remains immense, unconstitutional delays in terms of announcing and imple- indicate a rise in infant mortality, a decrease in primary education Divisible Pool goes to Khyber Pakhtunkhwa to help finance the war on in place and its aspirations of distributing more funding to underde- menting the NFC Awards in a timely manner. enrolment, and a downward trend in the overall literacy rate. terror. After the allocation of this 1 percent to Khyber Pakhtunkhwa, veloped provinces remains valid. The 7th NFC Award, effective since 10 July 2010, addressed a These challenges are largely related to governance and public longstanding demand of Pakistan’s more underdeveloped provinces. expenditure management. Most spending goes to non-development To this end, they increased the per capita in economic growth.3 Previously based on the single criterion of population, the 7th NFC sectors, such as increased salaries and overhead costs. In order to achieve fiscal equalization, Pakistan’s provinces are transfer of revenue to the two provinces Figure 3.1 presents the provincial shares Award introduced, for the first time, multiple indicator criteria for distributing resources. To this end, it introduced two major changes. also demanding the inclusion of more relevant and fair multiple indi- that lag behind financially: Balochistan of the national economy, and of the pop- One was a sizable reduction, of 10 percent, in the share of the Fed- cator criteria, so that resource distribution is based on actual dispar- and Khyber Pakhtunkhwa. FIGURE 3.1 eral Government and the introduction of multiple indicator criteria ities and realities. For example, in 2018, the Balochistan Assembly (MIC) such as poverty (10.3 percent), revenue generation (5 percent), unanimously adopted my resolution to include further benchmarks, Inequality in income Share of provinces in the national GDP, and inverse population density (2.7 percent), including a minimal like the inclusion of criteria such as geographical area, coastline, in- The fundamental question is: Have fiscal (2018-2019) and total population, (2017) change in the weight of the population share (82 percent, down from ternational borders, economic potential (natural and marine resourc- 100 percent), among other measures. es), and poverty. The upcoming NFC Award needs to give justified transfers and broader regional develop- Balochistan Khyber Pakhtunkhwa Sindh Punjab These changes in the 7th NFC Award did not take place overnight. weightage to these areas. ments helped to reduce regional inequality They are the result of a long and consistent struggle by Pakistan’s Finally, to achieve fiscal equalization, the Federal Government in Pakistan? This section attempts to an- three smaller provinces for equitable resource distribution. must introduce conditional transfers and matching grants linked es- swer the question by quantifying the extent 4.5% 12.0% Yet after all these years of struggle, the achievement of fiscal pecially with social needs like health care and education. This will of regional income inequality in Pakistan, equality in Pakistan seems a distant dream. Due to persistent under- ensure that essential services are provided at the required minimum and determining whether it has increased development and weakened institutional structures, a province like levels. or decreased since 1999–2000. GDP share In countries like Malaysia, Thailand, 29.2% Sanaullah Baloch is a Member of the Provincial Assembly of Balochistan. He has served as a Senator, as a Member of the National Assembly of Paki- and India, national statistical agencies 54.3% stan, and as UNDP Senior Constitutional Adviser in Somalia and Sierra Leone. provide GDP estimates for each state. In Notes: Government of Pakistan 2010a; Government of Pakistan 2016. Pakistan, however, there are no official es- timates of gross regional product (GRP), ulation. Punjab has the largest regional largest share of Pakistan’s national econo- 6.1% including the inflow of home remittances economy, accounting for 54.3 percent of my, is close to the country’s overall growth Punjab has the largest regional for each province. Such information comes 15.0% Pakistan’s GDP. The other three provinces, rate. Sindh showed exceptional growth in economy and the highest share from independent academic studies by Sindh, Khyber Pakhtunkhwa, and Baloch- the early 2000s when modern sectors like in GDP, followed by Sindh, various economists that seek to estimate Population share istan have shares of 29.2 percent, 12.0 per- large-scale manufacturing, banking, and Khyber Pakhtunkhwa, and provincial GRPs. The most recent book cent, and 4.5 percent, respectively. telecommunications demonstrated con- Balochistan. on growth and inequality in Pakistan2 23.6% 55.3% The gap between Pakistan’s provinc- siderable buoyancy. Khyber Pakhtunkhwa provides provincial GRPs, estimated from es has also varied because of fluctuating maintained a GRP growth rate consistently 1999–2000 to 2017–2018. These esti- growth rates in each province’s gross re- above the national average, despite large- mates are based on the distribution of each Note: Islamabad Capital Territory is included in Punjab, FATA is gional product. Figure 3.2 presents the an- scale migration from Afghanistan and fre- sector’s value addition among the four pro- excluded. Gross Regional Product (provincial GDP) does not include nual growth rates of each province’s GRP quent acts of terrorism since 11 September vincial economies. The NHDR 2020 uses foreign income (remittances). Source: Government of Pakistan 2018g; Pasha 2019. in different periods. 2001. these results to assess provincial disparities Punjab’s growth rate, accounting for the The dynamism in Khyber Pakhtunkhwa
36 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 Measures of regional inequality 37 FIGURE 3.2 cators has consistently lagged behind, even capita income, Sindh, and the one with the FIGURE 3.3 in sectors where it has a comparative ad- lowest, Balochistan (figure 3.4 and box 3.3, Growth rates of provincial gross regional product at constant 2005-2006 The per capita GRP of all provinces has increased, except for Balochistan, prices, (1999-2019) vantage, such as natural gas reserves – once p. 41). (1999-2019) a major source of provincial income. Over Table 3.1 presents the provincial dis- % the years, the annual production of natural tribution of Pakistan’s population across 80,000 7 gas has fallen rapidly, worsening with pow- different national income quintiles. Some Sindh er load-shedding. Severe water constraints clear patterns are visible. The poorest na- 6 have restricted agricultural growth, while tional income quintile (Q1) includes the 70,000 a steady influx of migrants from northern segment of the population living in ex- Khyber Pakhtunkhwa Punjab 5 Pakistan have further strained Baloch- treme poverty. Balochistan’s and Sindh’s 60,000 istan’s resources. shares in this quintile are high compared Pakistan Surprisingly, Balochistan had a relative- to their share in the overall national pop- 4 Punjab ly high level of per capita income in 1999– ulation distribution. Khyber Pakhtunkhwa 50,000 Khyber 2000, second only to Sindh (figure 3.3). has a higher share of Pakistan’s lower mid- Pakhtunkhwa 3 Gas production at the Sui Gas Field was at dle class, represented by the second quin- Balochistan Pakistan Sindh its peak, and the Hub Industrial Estate was tile (Q2), compared to its overall share in 40,000 Balochistan 2 set up in Balochistan, located strategically the country’s population (box 3.2). Punjab near Karachi. Fiscal incentives led to Hub has a larger share of the two richest quin- becoming a popular site for industrial re- tiles (Q4 and Q5). 30,000 1 location. The supply of water from the Pat There have been major changes in pro-
Feeder Canal started up in northern Ba- vincial rankings in terms of GRP per cap- 0 0 lochistan, enabling a quantum jump in ag- ita between 1999–2000 and 2016–2017. 1999-2000 2007-08 2012-13 2018-19 1999-2000 2007-08 2012-13 ricultural production, especially of vegeta- As noted above, Balochistan fell from 1999-2000 to 2018-2019 to to to bles. But the province’s per capita income second to fourth place, while Khyber 2007-08 2012-13 2018-19 in real terms has fallen ever since. Today, Pakhtunkhwa ascended from fourth to Growth -1 -0.5 0 0.5 1 1.5 2 2.5 1999-2000 to 2018-2019 18 years later, it is 7 percent lower, despite third place. In tandem, Punjab improved rate a slight improvement from 2012–2013 to its ranking, moving from third to second
0 1 2 3 4 5 6 2017–2018. Rapid population growth of place. Sindh is the only province with no over 3.4 percent per annum has also con- change in its ranking, remaining ahead of tributed to Balochistan’s decline. all other provinces in terms of GRP per Khyber Pakhtunkhwa is at the opposite capita. 4.2 end of the spectrum, as the trade devel- Overall, these changes in the relative Balochistan Khyber Pakhtunkhwa Punjab Sindh Pakistan opments and remittances discussed above position of Pakistan’s provinces imply an Note: GRP is calcuated at constant prices of 2005-2006, in PKR. have spurred growth. In 1999–2000, the increase in interprovincial income inequal- Source: Pasha 2019. Balochistan Khyber Pakhtunkhwa Punjab Sindh Pakistan province’s per capita income was almost ity (figure 3.5, pg 41). It appears that the 26.9 percent below the national average. process of fiscal equalization initiated by FIGURE 3.4 Source: Pasha 2019. By 2017–2018, it was 21.3 percent below the 7th NFC Award has failed to bridge The ratio of Sindh's-to-Balochistan’s per Pakistan’s average, despite the provinces the gaps in per capita income across the capita income is increasing, (1999-2018) stems from rapid growth in both inter- fast population growth rate of 2.8 percent country’s provinces. national and domestic remittances – the per annum. 0 1 2 3 province accounts for over one-third of Sindh’s per capita income, which was 21 Inequality in different sources Balochistan Sindh Pakistan’s home remittances. This has led percent higher than the national average of income 1999-2000 1:1.08 to a boom in construction and the demand in 1999–2000, has risen to 22.2 percent. The gap between the provinces for various services in the province. The Punjab, meanwhile, has consistently re- 2007-2008 1:1.48 with the highest and lowest It may be worthwhile to go a step further flow of North Atlantic Treaty Organiza- mained close to the national average. Con- 2012-2013 1:1.52 per capita income, Sindh and to understand the potential reasons for tion (NATO) supply traffic and the transit sequently, widening regional disparities Balochistan, has increased over regional disparities in income. In 2018– 2017-2018 1:1.65 trade to Afghanistan have also stimulated are evident when we only consider Sindh’s the years. 2019, Punjab still accounted for 60.7 per- the province’s informal sector. and Balochistan’s per capita income. Since cent of Pakistan’s total household income, Balochistan is the only province whose 1999, the gap has constantly increased be- while Sindh accounted for 22.4 percent, Source: UNDP calculations based on Pasha, 2019. performance on crucial development indi- tween the province with the highest per Khyber Pakhtunkhwa for 12.7 percent,
38 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 Measures of regional inequality 39 BOX 3.2 FIGURE 3.5 TABLE 3.2
The buoyancy of Khyber Pakhtunkhwa’s economy Trend in interprovincial income inequality, Share of provinces in annual national income by sources (%), (2018-2019) (1999-2000 and 2016-2017) Khyber Pakhtunkhwa’s economy has shown exceptional buoyancy fostered a buoyant informal economy, including illicit trade. and resilience over the last two decades. Since 1999–2000, when it Khyber Pakhtunkhwa’s economy now accounts for a higher share Gini coefficient Khyber had the lowest per capita income among Pakistan’s provinces, it has of national value added in key sectors – such as construction, trans- Punjab Sindh Pakhtunkhwa Balochistan Pakistan 10 10 overtaken Balochistan and come close to the per capita income of port, communications, housing services, and social and community Population 54.7 23.8 15.3 6.2 100.0 Punjab. services – compared to its overall share in Pakistan’s GDP. Household income 60.7 22.4 12.7 4.2 100.0 The average annual growth rate of Khyber Pakhtunkhwa’s gross The 7th NFC Award increased the province’s share of federal trans- 9 regional product has been 5.2 percent since 1999–2000, compared fers from 13.5 percent to 17.2 percent, inclusive of straight transfers Wages and salaries 54.4 28.9 10.7 6.0 100.0 8 8 to 4.2 percent for the country as a whole. With a population growth like hydro-electricity profits. This includes an additional 1 percent Crop production 67.4 21.5 6.0 5.1 100.0 rate of 2.8 percent, this has implied an annual average growth rate in share for financing efforts to counter terrorism. Livestock 75.7 9.5 13.3 1.5 100.0 real per capita income of 2.4 percent. Khyber Pakhtunkhwa’s different provincial governments have all 7 Two primary sources underlie this growth. First, growth is stimu- placed particular emphasis on using these larger transfers to achieve Other non-agri activities 64.5 19.0 13.5 3.0 100.0 lated by the inflow of home remittances, both foreign and domestic. a higher level of human development. Consequently, the rates at 1 Property income 57.9 28.5 10.0 3.6 100.0 The former are currently estimated at over US$6 billion. These in- which school enrolment and literacy have increased have been the Social Protection 63.8 17.2 16.9 2.1 100.0 flows have added both to the province’s overall income by almost fastest in the country. 0 18 percent, while simultaneously acting as a major stimulus for the A word of caution is needed here. Khyber Pakhtunkhwa has pri- 1999-2000 2016-2017 Foreign remittances 66.5 3.0 29.8 0.7 100.0 domestic economy. marily relied on external factors to achieve higher growth, with a Domestic remittances 71.9 0.7 26.4 1.0 100.0 Remittances have financed a housing construction boom in Khy- limited focus on domestic stimulants. Consequently, the primary and Pashum ratio ber Pakhtunkhwa. Housing units with two or more rooms account secondary sectors – especially the major crop and large-scale manu- 0.4 Source: UNDP calculations based on HIES, 2018-2019 for 80 percent of its total number of housing units, compared to 68 facturing sectors – have not been adequately focused on. Private in- percent in other provinces. Demand for better services, like educa- vestment’s role in productive sectors remains extremely limited. This 0.28 er share of national income derived from tion and health care, has soared. Domestic remittances have had an is reflected in the fact that, although bank deposits exceed PKR 1.1 0.25 0.2 crop production and livestock, other equalizing impact and reduced the income differential between urban trillion, the volume of advances in the province is only PKR 87 billion. non-agricultural activities, social protec- and rural areas, as well as between households. Emerging developments may negatively affect Khyber Pakh- tion, foreign remittances, and domestic Second, growth has been stimulated by developments in the Af- tunkhwa’s prospects for growth. First, the inflow of remittances could remittances. By contrast, the lowest share ghan War after 2001. The transport sector and associated services decline significantly in the wake of the COVID-19 pandemic and the 0 have witnessed greatly expanded activity due to the movement of sharp fall in oil income among countries in the Middle East. Second, 1999-2000 2016-2017 of its income is derived from wages and NATO supplies to bordering Afghanistan, and the growth in transit if the United States of America withdraws from Afghanistan, traffic salaries, and property. The fact that Punjab traffic of goods exported by various countries, including India. Paki- flows could be badly affected. Third, the Newly Merged Districts will Source: UNDP calculations based on HIES, 2005-2006, 2011-2012, is largely an agrarian economy may explain 2015-2016, and 2018-2019. stan’s exports to Afghanistan have also increased. require special development allocations, partly financed by federal the high share of income derived from crop The surge in economic activity promoted by both factors has grants, to tackle their relative underdevelopment. This makes it es- more than compensated for the relatively high incidence of terrorist sential that Khyber Pakhtunkhwa’s provincial authorities devise a BOX 3.3 attacks and power outages in the province. They have particularly growth strategy that is more reliant on domestic factors. Balochistan falls behind
Balochistan has fallen behind in development in the last two de- Today, Balochistan is home to 6 percent of Pakistan’s population, TABLE 3.1 and Balochistan for just 4.2 percent. cades. At the turn of the present century, its per capita income was represents the largest provincial share of its land area (44 percent), This section explores regional dispari- second only to Sindh, and higher than that of Punjab and Khyber Pa- and accounts for only 4.5 percent of national GDP. Balochistan has a Provincial distribution of population in national income quintiles, ties in income by analysing income sourc- khtunkhwa. Now, it is the province with the lowest per capita income, comparative advantage in economic sub-sectors in which it accounts (2018-2019) es that make up total household income almost 24 percent below the national average. for a higher share of national output than its overall share in the na- in each province. These, as measured by What happened in the intervening years? In part, its slow growth is tional economy. These sub-sectors are minor crops, forestry, fishing, due to a high population growth rate. Provincial growth began to slow mining and quarrying, electricity and gas, and government services, Quintile Quintile Quintile Quintile Quintile Share in the Pakistan Bureau of Statistics (PBS), 1 2 3 4 5 national include income from wages and salaries, in the Musharraf era. While the national economy grew relatively fast, with shares of 23 percent, 8 percent, 11 percent, 21 percent, 6 per- ( ) ( ) ( ) ( ) ( ) population crop production and livestock, self-em- at a rate of 5.2 percent, Balochistan’s growth rate languished at only cent, and 7 percent, respectively. 3.1 percent. Since 2008, the difference in the national and provincial The unit costs of development and the maintenance of services Punjab 44.7 49.1 52.7 58.1 64.7 53.9 ployment, property, foreign remittances, GDP growth rates has fallen to 1 percentage point. are higher in Balochistan because of its low population density and Sindh 26.9 21.7 22.5 22.2 21.7 23.0 domestic remittances, social protection, Initially, Balochistan had a dominant share of natural gas produc- relatively low urban population share (28 percent). The dominance of and other sources. Khyber Pakhtunkhwa 18.9 20.1 18.9 16.0 11.4 17.1 tion in Pakistan from the Sui Natural Gas Field. The Hub Industrial Es- the capital city, Quetta, is pronounced. Its share of the urban popu- Given the different resources and pop- tate in Balochistan, located strategically close to Karachi, witnessed lation is 32 percent. There is a clear need for the development of a Balochistan 9.3 9.0 5.8 3.4 2.08 5.9 ulation sizes of each province, varied pro- substantial investment. In tandem, the production of fruits and veg- network of secondary cities and towns across the province. Pakistan 100 100 100 100 100 100 portions of these income sources contrib- etables took off. The sub-sectors which lag behind in Balochistan, compared to the
Source: UNDP calculations based on HIES, 2018-2019. ute to household income (table 3.2). Punjab accounts for a relatively high-
40 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 Measures of regional inequality 41 BOX 3.3 (CONTINUED) TABLE 3.3 tively better progress on life expectancy. Balochistan falls behind Punjab follows close behind with the sec- Extent of regional inequality, (2018-2019) ond highest provincial HDI value. It also rest of Pakistan, are major crops, manufacturing, transport and com- leads on education, with the highest net munications, finance, insurance, and private services. Their shares in (i) enhancing the role of the private sector in industry, housing Weighted Pashum ratio Rank enrolment ratio and literacy rate. Khyber national value added range from only 2 to 3 percent. The province has and services. This will require greater access to credit. A Wages and salaries 0.11 8 Pakhtunkhwa places third, while Baloch- largely been excluded from the process of financial intermediation. scheme for financing at lower interest rates by the State Bank Crop production 0.34 7 istan has the lowest provincial HDI value Today, the size of Balochistan’s banking sector is only 1 percent of of Pakistan is needed in relatively less developed parts of Pa- (figure 3.6). the sector’s value added in Pakistan. While its share of deposits is 2.2 kistan. There must be a continued focus on sub-sectors in Livestock 0.70 3 If we apply the global categories of the If we apply global HDI categories percent, its share of advances is only 0.3 percent. There is, therefore, which, as highlighted above, Balochistan has a comparative Other non-agri activities 0.43 4 Human Development Index to Pakistan’s a net transfer of resources from Balochistan to the rest of the coun- advantage. to the provinces, Punjab and Property income 0.37 6 provinces, Punjab and Sindh fall in the me- try. Private sector development in the province has been frustrated by (ii) filling gaps in physical infrastructure at a more rapid pace. Sindh have medium human a lack of access to credit. This will also facilitate the development of the province’s Social protection 0.41 5 dium human development category, while development, whereas Khyber Khyber Pakhtunkhwa and Balochistan fall The absence of physical infrastructure is the other major con- mineral resources. Partnerships should be sought with multi- Foreign remittances 5.17 2 Pakhtunkhwa and Balochistan straint in Balochistan. Water is a basic limiting factor to the devel- lateral development agencies. The institutional capacity of in the category of low human development. have low human development. Domestic remittances 5.57 1 opment of its agricultural sector. Roads in the province account for provincial line departments will need to be strengthened to Despite ranking third, Khyber Pakh- just 14 percent of the national road network, even though its share of ensure the timely, cost-effective implementation of projects. Source: UNDP calculations based on HIES, 2018-2019 land area is over three times larger. Balochistan’s share of electricity (iii) harnessing the promise of the China-Pakistan Economic Cor- FIGURE 3.6 consumption is only 4 percent, a large part of which (75 percent) is ridor (CPEC) of providing a big push to Balochistan’s devel- between provinces. The results reveal that used for agricultural tube-wells. opment. The Gwadar port project is near completion, and the the greatest inequality exists in domestic Provincial Human Development Index, The 7th NFC Award has given new impetus to Balochistan’s devel- first phase of the free industrial zone has been finalized. The remittances, followed by foreign remit- (2018-2019) opment. Today, the per capita transfer to the province is almost twice early completion of CPEC’s eastern corridor to Gwadar is ur- tances. Punjab and Khyber Pakhtunkhwa HDI the national average. Consequently, the latest figures for 2019–2020 gently needed. Special incentives should be granted for the account for a much higher share of these 1.000 indicate that Balochistan’s current and development expenditures location of industrial units and housing in Gwadar. Moreover, income sources than Pakistan’s two other were 9 percent and 15 percent, respectively, of total spending by the development of Balochistan’s coastal belt should pro- provinces. Pakistan’s provinces. The greatest shares in development spending mote fishing and the offshore exploration of oil and gas. 0.900 are allocated to augmenting water resources, communications, and The third greatest level of inequality is social sectors. It is hoped that, in the years to come, the growth rate of Balochistan’s evident in income from livestock, followed Balochistan’s future development strategy will need to focus on: economy will catch up with that of the rest of Pakistan. by other non-agriculture activities. Pun- 0.800 jab’s agrarian economy earns almost eight times more income from livestock than 0.700 production and livestock. es rice, fruit, and vegetables. Sindh, six times more than Khyber Pakh- Khyber Pakhtunkhwa accounts for a Balochistan, with the lowest popu- tunkhwa, and 52 times more than Baloch- 0.600 relatively large share of national income lation density in Pakistan – that is, the istan. 0.572 0.574 0.546 accruing from remittances, both foreign largest area and smallest population – ac- Inequality is least pronounced in in- 0.500 and domestic. However, it has a low share counts for a relatively high share of nation- come derived from wages and salaries, 0.473 of income derived from wages and salaries, al income derived from wages and salaries, followed by property. However, regional crop production, and property. This dif- and crop production. All other sources of differences also exist in these sources of in- 0.400 ference in income sources can be partially income continue to be small. Formal sector come, which remain low compared to oth- explained by the province’s terrain, which employees in Balochistan have relatively er income sources. 0.300 is mostly mountainous. Thus, only 30 per- higher pay compared to those engaged in cent of its land is cultivable.4 all other sources of livelihood. Moreover, Inequality in human development 0.200 Sindh, with Karachi – Pakistan’s finan- the size of Balochistan’s provincial govern- cial hub – at its core, boasts a large formal ment is relatively large. Analysing regional inequality through the sector. This explains why Sindh is a major Table 3.3 presents the extent of in- lens of the Human Development Index 0.100 source of national income derived from terprovincial inequality across different involves a multifaceted approach that cap- wages and salaries, followed by the second sources of income. It uses the weighted tures access to education and health care, 0 highest share of income earned from prop- Pashum ratio, instead of the simple ratio alongside trends in income. At present, Balochistan Khyber Punjab Sindh erty. Its third greatest source of national in- (see Technical note 2 for details). The Sindh is ahead of Pakistan’s other provinc- Pakhtunkhwa come is crop production, largely because, weighted Pashum ratio is used when the es, with the highest provincial HDI val- apart from Karachi, most of Sindh has an distribution of income is not in quintile ue. This is because of its leading position Source: UNDP calculations based on HIES, 2018-2019; PDHS, 2017- 2018; and Pasha, 2019. agriculture-based economy which produc- form; in this case, the distribution is only in terms of GDP per capita, and its rela-
42 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 Measures of regional inequality 43 tunkhwa stands out as the province with FIGURE 3.7 derailed, implying the deceleration of so- Punjab the most rapid and substantial improve- cial development. Despite an insignificant change The HDI of all provinces improved minimally in provincial HDI values initially, ment in human development over the after 2016, (2006-2019) Between 2016 and 2019, all of Paki- Pakistan’s most populous province, Pun- years. Balochistan fares worst, as the only stan’s provinces managed to improve their jab, is home to some of the country’s best all four provinces improved 6 these values between 2016 and province that has experienced deteriora- HDI HDI values (figure 3.7). This improve- education and health facilities. With its tion rather than improvements, with its 1.000 ment can be attributed to smooth shift to large population, productive agriculture 2019. HDI value decreasing in the past decade. a third democratic government, political and livestock sector, and large concentra- Khyber Pakhtunkhwa The provinces have maintained these 0.900 stability, and increased income per capita. tion of small and medium-sized enterprises experienced the highest growth ranks since 2006–2007, although Khy- Chapter 5 provides a detailed analysis on (SMEs), Punjab is a major driver of, and in its HDI value from 2007 to ber Pakhtunkhwa experienced the highest the lack of progress on social indicators. contributor to, Pakistan’s economy. 2019. growth in its HDI value between 2007 and 0.800 Table 3.4 presents the regional differ- 2019 (figure 3.7). This underscores its rap- ences in HDI values compared to the aver- Vertical inequality in income Punjab and Sindh have 5 id social and economic progress, despite 0.700 age national HDI magnitude. This reveals higher HDI values than the conflict and instability. From 2006–2007 which dimension of the HDI contributes GDP per capita is a useful measure for an- national average, while Khyber to 2012–2013, the HDI values of both most to each province’s HDI value. Pun- alysing the distribution of income across Pakhtunkhwa and Balochistan 0.600 Sindh Punjab and Sindh markedly improved, Punjab jab’s HDI value is higher than the nation- different groups. In Punjab, the provin- have HDI values that fall below followed by a decline. The size of this de- Pakistan al value principally because of the higher cial GDP per capita of the richest quintile the national average. Khyber crease was more pronounced in Sindh than 0.500 Pakhtunkhwa contribution of, and better performance (Q5) is 5.2 times higher than that of the in Punjab. Even so, the HDI values of both Balochistan on, education. In Sindh, the difference is poorest quintile (Q1) (figure 3.8). There is provinces have improved in the long-term due to the province’s better performance in also a sharp difference between the GDP from 2006–2007 to 2018–2019. 0.400 terms of the HDI’s health and income di- per capita of the fourth and fifth quintiles. Balochistan’s HDI value improved least mensions. The HDI values of both Khyber Figure 3.9 shows that the gap between
between 2006–2007 and 2018–2019. 0.300 Pakhtunkhwa and Balochistan are below rich and poor increased slightly in Punjab Like Pakistan’s other provinces, its HDI the national HDI value largely due to poor in terms of GDP per capita between 2006 value improved slightly from 2006–2007 performance on education. and 2019. The values of three of the mea- 0.200 to 2012–2013 and, after a slight dip in TABLE 3.4 sures of inequality used in this report – 2015–2016, it rose back to its previous lev- the Gini coefficient, the Palma ratio, and
el of 0.473 by 2018–2019. The ratio of the 0.100 Difference between provincial HDI values the Pashum ratio – increased for Punjab HDI value of the province that performs and the national HDI value, (2018-2019) during this period. From 2012 to 2016, best (Sindh) to the province that performs 0 FIGURE 3.8 worst (Balochistan) increased from 1.12 Education Health Income HDI in 2006–2007 to 1.21 in 2018–2019. Punjab 1.03 0.97 1.00 0.99 Punjab’s richest quintile has over 5.2 times 2006-07 This highlights the growing inequality 2012-13 2015-16 2018-19 more GDP per capita (PPP $) than the Sindh 0.99 1.01 1.02 1.02 between these provinces. By contrast, the poorest, (2018-2019) ratio of Sindh’s HDI value to Khyber Pa- Source: UNDP calculations based on multiple years of HIES, 2005- Khyber Pakhtunkhwa 0.95 1.03 0.98 0.96 2006, 2011-2012, 2015-2016, and 2018-2019; PDHS, 2006-2007, khtunkhwa’s gradually declined, from 1.08 2012-2013, and 2017-2018; Pasha, 2019. Balochistan 0.86 0.99 0.97 0.82 Q5 in 2006 to 1.05 in 2019, reflecting the pace Richest 10,617 Source: UNDP calculations based on provincial HDI data of NHDR at which Khyber Pakhtunkhwa is catching First, the initial years between 2006 and 2020. Q4 up. 2012 were marked by a relatively high 5,065 Overall, as noted above, the HDI values GDP growth rate which potentially al- Q3 3,865 of all four provinces improved from 2006– lowed greater investment in social ser- Inequality within provinces 2007 to 2012–2013 before either declini- vices, such as education and health care. Q2 2,886 ing or remaining constant until 2016. The This investment gradually declined after Moving on from the discussion of inter- decrease in Sindh’s and Balochistan’s HDI Q1 2012–2013. Second, the strong local gov- provincial inequality, this section explores 2,016 values, and the lack of progress in Punjab’s ernment system established by the military inequality within each province in terms Poorest and Khyber Pakhtunkhwa’s values after government in the Musharraf era, through of both income and human development. 2013, is largely due to the stagnation or the Local Government Ordinance of 2001, This is known as ‘vertical inequality’ as it GDP per capita deceleration of social development from also helped to improve the decentralized measures differences in human develop- 2013 to 2016 (figure 3.7). delivery of public services. However, after ment and income between different in- Source: UNDP calculations based on Pasha, 2019 and HIES, 2018- 2019. Two key factors explain this trend. 2012–2013, progress on local governance come classes, that is, by quintiles.
44 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 Measures of regional inequality 45 FIGURE 3.9 in HDI values between income quintiles. Sindh quintile also decreased slightly between In Punjab, income inequality The HDI value of the richest 20 percent 2016 and 2019. increased from 2006 to 2019. Income inequality in Punjab has increased of Punjab’s population is 1.63 times higher over the years, (2006-2019) Sindh is Pakistan’s third largest province in than that of the poorest 20 percent (figure terms of land area, and the second largest Vertical inequality in human develop- Modified Palma ratio 3.10). Applying the HDI’s global catego- with respect to its share of the total pop- ment 6 rization of countries – into high, medium, ulation.8 It is a major centre of economic 5.37 5.27 5.18 and low human development – reveals that The HDI value of Sindh’s richest quintile 5 activity; with its coastline and seaports, it 4.87 the two poorest quintiles in Punjab have has traditionally been a trading hub. (Q5) is 1.79 times more than that of its 4 HDI values in the range of low human de- poorest quintile (figure 3.13). The HDI velopment countries. By contrast, the HDI Vertical inequality in income value of the richest 20 percent of Sindhis 0 values of Punjab’s middle and upper quin- places them in the high human develop- 2006-07 2012-13 2015-16 2018-19 tiles (Q3, Q4, and Q5) falls in the range of Analysing Sindh’s GDP per capita in terms ment category. The four other quintiles Gini coefficient middle human development countries. of purchasing power parity (PPP $) reveals fall in the range of low to medium human 40 In comparative terms, income inequal- stark inequality between rich and poor development. ity in Punjab has always been greater Excluding the dimension of income in- 33 (figure 3.11). The GDP per capita of the 32 32 than inequality in education and health. equality reveals that there is comparatively 30 31 richest 20 percent of Sindh’s population In Sindh, income inequality Among these two dimensions, inequality more inequality in Sindh’s education in- (Q5) is 5.3 times more than that of the decreased from 2006 to 2019. 0 is more pronounced in terms of access to poorest 20 percent (Q1). 2006-07 2012-13 2015-16 2018-19 education, and adult literacy in particular. Economic progress for the richest quin- FIGURE 3.12 Factors that contribute to this situation tile between 2006 and 2016 led to high Income inequality in Sindh has decreased 1 include the limited devolution of deci- income inequality until 2016. As a result, Pashum ratio over the years, (2006-2019) sion-making powers to district education during these 10 years, all three measures of authorities, a lack of capacity, and issues 0.5 0.53 0.54 0.50 0.54 inequality spiked (figure 3.12). From 2016 Modified Palma ratio surrounding public finance management. to 2019, the modified Palma ratio, the 7 6.40 While Punjab’s education budget has in- Gini coefficient, and the Pashum ratio all 6.31 0 creased, progress is blocked by the low uti- 6 2006-07 2012-13 2015-16 2018-19 decreased, showing that the gap between 5.57 lization of the development budget, and 5.33 the richest and the poorest 20 percent of 5 Source: UNDP calculations based on HIES, 2005-2006, 2011-2012, the mismatch between the budget and the 2015-2016, and 2018-2019. 7 Sindh’s population decreased. On average, targets of reform agendas. the difference between each successive 0 2006-07 2012-13 2015-16 2018-19 FIGURE 3.10 GDP per capita increased for all quintiles, FIGURE 3.11 Gini coefficient as the economy gradually emerged from Punjab’s richest quintiles enjoy higher 40 human development compared to the recession. As a result, inequality declined Sindh’s richest quintile has 5.3 times more 36 36 during these years. After 2016, alongside poorest, (2018-2019) 33 GDP per capita (PPP $) than the poorest, 30 31 improvements in the overall economy, (2018-2019) Q1 Q2 Q3 Q4 Q5 the formal sector – which employs high- Poorest Richest ly-qualified individuals, most of whom 0 Q5 2006-07 2012-13 2015-16 2018-19 are from households in the richest quin- Richest 12,799 tile (Q5) – showed the highest growth in employment. This increased the GDP per Q4 6,308 1 capita of Punjab’s richer quintiles com- Pashum ratio Q3 4,884 0.504 pared to its poorer quintiles, thereby wid- 0.559 0.617 0.64 0.63 0.57 0.55 ening the disparity between them. 0.7 0.692 0.5 0.6 0.424 0.5 Q2 3,692 0.4
0.3 Vertical inequality in human develop- HDI Q1 2,401 ment Poorest 0 GDP per capita 2006-07 2012-13 2015-16 2018-19 Dividing Punjab’s total population into five Source: UNDP calculations based on Pasha, 2019; HIES, 2018-2019; equal groups reveals a significant difference and PDHS, 2017-2018. Source: UNDP calculations based on Pasha, 2019 and HIES, 2018- Source: UNDP calculations based on HIES, 2005-2006, 2011-2012, 2019. 2015-2016, and 2018-2019.
46 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 Measures of regional inequality 47 FIGURE 3.13 VerticalFIGURE 3.14 inequality in income FIGURE 3.15 FIGURE 3.16 Sindh’s richest quintiles enjoy higher human Income inequality in Khyber Pakhtunkhwa Khyber Pakhtunkhwa’s richest quintiles enjoy ThereKhyber is somewhatPakhtunkhwa’s less difference richest quintile between has development compared to the poorest, almost 4 times more GDP per capita (PPP $) has decreased over the years, (2006-2019) higher human development compared to the (2018-2019) thethan GDP the per poorest, capita (2018-2019) (in PPP $) of the rich- poorest, (2018-2019) est and poorest quintiles in Khyber Pakh- Modified Palma ratio Q1 Q2 Q3 Q4 Q5 6 Q1 Q2 Q3 Q4 Q5 Poorest Richest tunkhwa. In 2018–2019, the richest quin- Poorest Richest Q5 5.04 tile’s RichestGDP per capita was 7,320 almost four times 5 that of the poorest quintile (figure 3.14). 4.49 In Khyber Pakhtunkhwa, income Q4 4,157 4 A steep increment in GDP per capita be- 3.98 3.94 inequality decreased substantially tween the fourth and fifth quintiles is also 0.484 3 0.524 0.576 from 2006 to 2019. 0.8 Q3 3,187 0.470 0.7 0.550 notable. 0.629 0.7 0.6 0.650 0.6 0.449 0.5 0.5 Between 2006 and 2019, the GDP per 0.4 0.4 0.729 0 0.406 0.3 Q2 2,857 2006-07 2012-13 2015-16 2018-19 capita of each quintile in Khyber Pakh- HDI HDI tunkhwaQ1 increased substantially. Income 1,860 Gini coefficient Source: UNDP calculations based on Pasha, 2019; HIES, 2018-2019; inequalityPoorest measured by all three metrics – 40 Source: UNDP calculations based on Pasha, 2019; HIES, 2018-2019; and PDHS, 2017-2018. and PDHS, 2017-2018. the Gini coefficient, the Palma ratio, and GDP per capita 32 the Pashum ratio – decreased (figure 3.15). 30 29 are in the low human development range. dicators, especially its adult literacy ratio. The GDP per capita of all quintiles in 27 Source: UNDP calculations based on Pasha, 2019 and HIES, 2018- 25 Inequality in human development between In terms of life expectancy, the variation is Khyber2019. Pakhtunkhwa decreased from 2006 20 the quintiles is largely due to inequality in much lower. to 2012, except for that of the richest (Q5), which increased by 10 percent. However, access to education, followed by inequality from 2012 to 2019, as the security situa- in income. Khyber Pakhtunkhwa 2006-07 2012-13 2015-16 2018-19 tion improved and the provincial economy Balochistan Pakistan’s third largest province in terms picked up, GDP per capita increased for 1 of population, Khyber Pakhtunkhwa has all five quintiles. The highest growth rate Pashum ratio Pakistan’s largest province in terms of land experienced substantial human develop- is evident in the middle-income quintile 0.5 0.54 0.48 0.43 0.43 mass, Balochistan has the lowest share of ment in recent years. The merger of the (Q3), followed by Q2 and Q4. The GDP the country’s population10 and the poorest former Federally Administered Tribal Ar- of the richest 20 percent of the population 0 performance on human development indi- eas (FATA), now called the Newly Merged experienced very little growth. Overall, in- 2006-07 2012-13 2015-16 2018-19 cators. Applying the categorization used by Districts, with Khyber Pakhtunkhwa in come inequality consistently declined in Source: UNDP calculations based on multiple years of HIES data. UNDP’s global HDI would place Baloch- May 2018 added another 5 million people FIGURE 3.14 istan’s HDI value at par with Sierra Leone to its population of 30.5 million.9 Khyber Pakhtunkhwa between 2006 and in West Africa, which ranked 181st of 189 Khyber Pakhtunkhwa’s considerable Khyber Pakhtunkhwa’s richest quintile has 2019. countries on the global index in 2019. development in the last 15 years belies the almost 4 times more GDP per capita (PPP $) conflict and turmoil it has faced, includ- than the poorest, (2018-2019) Vertical inequality in human Vertical inequality in income ing the spillover of the decades-long war development in Afghanistan and the military operation Q5 7,320 Balochistan’s average GDP per capita in- against insurgency in Swat and the Newly Richest Some disparities in human development are come for each of the five quintiles reflects Merged Districts. Natural disasters, espe- Q4 4,157 evident between different groups in Khy- the inequalities inherent in the province’s cially the 2005 earthquake and the 2010 ber Pakhtunkhwa. The HDI value of the economic system, indicating the vast dif- floods, also wrought heavy damage on life, Q3 3,187 richest quintile (Q5), who earn the most ferences in its people’s standard of living. property, and infrastructure. Despite these income, is 1.4 times more than the HDI In 2018–2019, the GDP per capita (PPP challenges, the province has been able to 2,857 Q2 value of the poorest quintile (figure 3.16). $) of the richest 20 percent of Balochistan’s prosper and grow in recent years – a tes- Q1 Applying UNDP’s global categorization population was, on average, 3.66 times tament to the resilience of its people and 1,860 Poorest of HDI values to the province reveals that higher than that of the poorest 20 percent effective governance. This section explores the HDI value of Khyber Pakhtunkhwa’s (figure 3.17). the extent of inequality in the province be- GDP per capita richest two quintiles (Q4 and Q5) falls in Income inequality in Balochistan in- fore the merger of the Newly Merged Dis- the range of middle human development creased between 2006 and 2012, before tricts in 2018. Source: UNDP calculations based on Pasha, 2019 and HIES, 2018- 2019. countries, while the other three quintiles decreasing. From 2012 to 2016, GDP per
48 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 Measures of regional inequality 49 FIGURE 3.17 FIGURE 3.18 greatest inequality in education (literacy ondary schools also face an acute shortage rates and net enrolment), followed by liv- of teachers in general, and qualified teach- Balochistan’s richest quintile has almost 4 Income inequality in Balochistan has seen no ing standards (GDP per capita), and then ers in particular. times more GDP per capita (PPP $) than the substantial change over the years, poorest, (2018-2019) (2006-2019) health (life expectancy). Comparatively lower disparities in health do not mean Comparing interprovincial inequalities Modified Palma ratio that everyone in the province has good ac- Q5 5 Richest 6,469 cess to health care. In fact, the reality on Income-based inequality 4.24 the ground is that Balochistan suffers from 4 Q4 3,987 3.52 3.55 3.67 an overall scarcity in the provision of edu- All three measures of income inequali- 3 cation and health facilities. Limited or no ty used in this report reveal that income Q3 3,289 public transport means that it is difficult inequality has been, and continues to be, 0 to access functional hospitals or health most pronounced in Sindh, followed by Q2 2,371 2006-07 2012-13 2015-16 2018-19 units, most of which are located in district Punjab, Khyber Pakhtunkhwa, and Ba-
Q1 Gini coefficient headquarters. Existing primary and sec- lochistan (figure 3.20). The good news is 1,764 40 Poorest FIGURE 3.20 GDP per capita 30 26 24 24 Sindh’s initially high income inequality has fallen to Punjab’s income inequality level, (2006- Source: UNDP calculations based on Pasha, 2019 and HIES, 2018- 2019) 22 2019. 20 Balochistan Khyber Pakhtunkhwa Sindh Punjab Modified Palma ratio 7 capita improved for all quintiles except the 0 two richest groups (Q4 and Q5), helping 2006-07 2012-13 2015-16 2018-19 56 In Balochistan, while income to reduce income inequality (figure 3.18). However, the three measures of inequality 1 5 inequality between the richest Pashum ratio and poorest increased slightly do not point in the same direction after 4 from 2006 to 2019, overall 2015–2016. While there is an increase in 0.5 0.46 income inequality decreased Balochistan’s modified Palma ratio, the 0.40 0.39 3 0.38 slightly. Gini coefficient and the Pashum ratio suggest a decline in inequality. This is the 0 0 only case recorded by the NHDR 2020 2006-07 2012-13 2015-16 2018-19 2006-07 2012-13 2015-16 2018-19 where the three measures of inequality do Source: UNDP calculations based on multiple years of HIES data. Gini coefficient not point in the same direction in a single 40 province.
FIGURE 3.19 30 Vertical inequality in human development Balochistan’s richest quintiles enjoy higher human development compared to the 20 poorest, (2018-2019) There are significant differences in the 0 HDI values of Balochistan’s income quin- Q1 Q2 Q3 Q4 Q5 Poorest Richest 2006-07 2012-13 2015-16 2018-19 tiles. The HDI value of the richest 20 percent of the population was 1.76 times Pashum ratio higher than that of the poorest 20 percent 1 in 2018–2019 (figure 3.19). This indicates 0.389 growing inequality since 2006, when the 0.457 0.501
0.7 0.610 0.5 0.6 0.346 richest quintile’s HDI value was 1.68 times 0.5
0.4 higher than that of its poorest quintile. 0.3 The decomposition analysis of the HDI HDI 0 and its indicators, used to assess the extent Source: UNDP calculations based on Pasha, 2019; HIES, 2018-2019; 2006-07 2012-13 2015-16 2018-19 and PDHS, 2017-2018. of inequality between different income Source: UNDP calculations based on multiple years of HIES data. groups, reveals that Balochistan faces the
50 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 Measures of regional inequality 51 that, from 2012 onward, all provinces ex- FIGURE 3.21 FIGURE 3.22 perienced a decline in income inequality, except for Punjab. Khyber Pakhtunkhwa’s income inequality Education drives the inequality in human development among the quintiles in all provinces has improved significantly compared to other (ratio of top to bottom quintile), (2018-2019) Growing income inequality in Punjab provinces, (2006-2019) can be explained by higher levels of rapid Ratio urban development in metropolitan cities, Palma Gini coefficient Pashum 3.5 %
such as Lahore, while rural and semi-ur- Education 1.5 3 ban areas grew at a slower pace. The ur- 2.5 ban-rural income gap in Punjab increased 1.0 2
by 5 percentage points between 2015 and Income 2019; while urban areas’ per capita income 0.5 0.4 1.5 Health 0.2 0.2 0.2 was 55 percent higher than that of rural 0.0 Increase in inequality 1 0 areas in 2015–2016, this difference rose 0.5 -0.3 to 60 percent in 2018–2019. Sindh, home -0.5 -0.4 -0.4 0 to Pakistan’s largest metropolitan city, Ka- Balochistan Khyber Punjab Sindh Pakistan rachi, also experienced an increase in the -1.0 Pakhtunkhwa -1.0 urban-rural income gap. However, this gap Source: UNDP calculations based on NHDR 2020 HDI. -1.5 in Sindh grew by 2 percentage points, con- siderably less than in Punjab. The opposite -2.0 FIGURE 3.23 -2.0 -2.1 trend played out in Balochistan and Khy- -2.2 The urban-rural divide ber Pakhtunkhwa, where the urban-rural -2.5 Decrease in inequality The loss of human development due to Balochistan Khyber Punjab Sindh inequality is highest in Sindh, (2018-2019) income gap decreased between 2015 and Pakhtunkhwa Rural and urban Pakistan vary significant-
2019. HDI HDI IHDI ly in terms of income, poverty, and human Note: This figure is based on the average annual rate of change in Analysing long-term trends in inequali- 1.000 development, as discussed in chapter 2. The suppression of human income inequality, as measured by the Palma, Gini coefficient, and ty reveals an alarming trend in Punjab: the Pashum ratio. This subsection compares the urban-rural development due to inequality Source: UNDP calculations based on multiple years of HIES data. province had the highest average annual 0.900 divide in inequality between the four prov- – i.e. the difference between increase in income inequality between inces. the HDI and the IHDI – is the provision of quality education that can 2006 and 2019 (figure 3.21). In the same 0.800 highest in Sindh, followed translate into productive employment and period, income inequality decreased in Inequality in income by Punjab, Balochistan, and improved incomes. Sindh and Khyber Pakhtunkhwa, with the Khyber Pakhtunkhwa. 0.700 reduction in Khyber Pakhtunkhwa signifi- Provincial Inequality-adjusted HDI The provincial distribution of Pakistan’s cantly greater than in Sindh. While overall urban population, and of the national ur- 0.600 11 inequality in Balochistan declined slightly, 0.572 0.574 ban GDP, is presented in figure 3.24. As noted above, the HDI is not sensitive 0.546 0.535 inequality between its richest and poorest to the degree of inequality within each 0.523 0.531 Punjab has the highest urban per capita 0.500 households, and between each successive of its dimensions. To compensate for this 0.473 income, followed closely by Sindh. While Punjab has the greatest income quintile, continued to increase from 2006 gap, the NHDR 2020 also calculates the 0.447 a number of cities contribute to high lev- inequality within both its urban to 2019. Inequality-adjusted Human Development 0.400 els of urban GDP in Punjab, in Sindh only and rural areas, closely followed Index (IHDI) at the provincial level. one city is the largest contributor to urban by Khyber Pakhtunkhwa, Sindh Human development-based inequality In 2018–2019, with an IHDI value of 0.300 GDP – Pakistan’s largest metropolitan and Balochistan. 0.535, Punjab had the highest inequal- city, Karachi. As box 3.4 discusses, howev- Figure 3.22 illustrates the decomposi- ity-adjusted human development level 0.200 er, the city is plagued by other issues. Khy- For human development to tion of the Human Development Index’s among Pakistan’s provinces, followed by ber Pakhtunkhwa follows Sindh in terms improve, all of Pakistan’s sub-indices at the provincial and nation- of urban GDP per capita, followed by Ba- Sindh and Khyber Pakhtunkhwa. Baloch- 0.100 provinces need to focus on the al levels among income quintiles. As it istan is last with an IHDI value of 0.447 lochistan. provision of quality education shows, disparities in human development In all provinces, urban centres have a (figure 3.23). However, the difference be- 0 that can translate into across different income quintiles are large- tween HDI and IHDI values – reflecting higher GDP per capita (PPP $) than ru- improved incomes. Balochistan Khyber Punjab Sindh ly driven by variations in the dimension of the suppression of human development Pakhtunkhwa ral areas, but they are also characterized education, followed by income, and then due to inequality – is highest in Sindh, fol- by higher levels of income inequality. In- health. To improve human development, Source: UNDP calculations based on Pasha, 2019; PDHS, 2017-2018; come inequality measured by the Gini co- lowed by Punjab, Balochistan, and Khyber multiple years of HIES data. all of Pakistan’s provinces must focus on Pakhtunkhwa. efficient suggests that income inequality
52 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 Measures of regional inequality 53 FIGURE 3.24 is higher in urban areas than rural areas in 2019, with a Pashum ratio of 0.612 and FIGURE 3.25 Punjab has the greatest level all provinces (figure 3.24). Punjab has the Gini coefficient of 34.2 percent. of income inequality in rural Inequality within rural and urban areas both greatest level of income inequality in rural Figure 3.25 compares the provincial Share of provinces in the urban and rural GDP and total population, areas, closely followed by is highest in Punjab followed closely by (2015-2016) Khyber Pakhtunkhwa, (2018-2019) areas, closely followed by Khyber Pakh- distribution of Pakistan’s rural and urban Khyber Pakhtunkhwa, Sindh, and tunkhwa, Sindh, and finally, Balochistan. population, and these areas’ share of na- Balochistan Khyber Pakhtunkhwa Punjab Sindh Balochistan. Gini coefficient The differences between inequali- tional GDP. Punjab has the highest rural % 35 ty in urban and rural areas in each prov- per capita income, followed by Sindh, Khy- URBAN
Urban 3% 4.5% 30 ince are fairly similar, although they are ber Pakhtunkhwa, and Balochistan. The 6.7% 7.6% 25 Rural slightly more pronounced in Punjab and Pashum ratio for rural income inequali- Khyber Pakhtunkhwa than in Sindh and ty is 0.49 and the Gini coefficient is 29.2 20 Balochistan. Despite the fact that income percent, confirming comparatively lower 33% 15 inequality is least pronounced in Baloch- levels of inequality in rural areas than in 40.8% 10 istan, this is not good news. It implies that urban centres. GDP share Population share 5 everyone is poor; in essence, lower levels GDP per capita (PPP $) is higher in ur- 49.5% 0 of inequality in Balochistan reflect lower ban areas than in rural areas across all four Balochistan Khyber Punjab Sindh overall incomes across all quintiles. provinces (figure 3.26). The greatest gap is Pakhtunkhwa 54.9% The magnitude of income inequality in in Sindh, demonstrating greater urban-ru- Source: UNDP calculations based on Pasha, 2019; HIES, 2018-2019. urban areas was relatively high in 2018– ral inequality in the province. The second BOX 3.4 greatest gap is evident in Punjab, followed RURAL 2.9% by Khyber Pakhtunkhwa, and then Ba- 6.7% Karachi: Plight of the primate city lochistan. 19.3% 17.4% 19.3% The NHDR 2020 measures regional in- According to the Population Census of 2017, Karachi – Pakistan’s share has increased somewhat in recent years, up from 54 percent 18.7% primate city – has a population of 14.9 million. Many believe that the in 2012–2013. come inequality between rural and urban city is actually larger, as the intercensal growth rate was only 2.5 per- However, Karachi’s share in national public expenditure remains areas, using the Gini coefficient and the cent, when in the previous 1998 Census this growth rate was record- less than 5 percent. The budget of the Karachi Metropolitan Cor- Pashum ratio, by adjusting for population GDP share Population share ed at 4.1 percent. It is estimated that almost 10 percent of Pakistan’s poration is only PKR 25 billion (US$149 million), compared to the distribution. The results in figure 3.27 population lives in Karachi. equivalent of US$4.6 billion of the Mumbai Municipal Corporation. show that the urban-rural divide, wheth- The city is estimated to generate almost 18 percent of the coun- Consequently, Karachi’s infrastructure and services are under severe er measured by the Gini coefficient or the try’s GDP. It does so through its role as Pakistan’s main port for inter- stress. Today, water scarcity, power shortages, deteriorating public Pashum ratio, is starkest in Balochistan, 58.5% 57.2% national trade, as well as the primary location for industry, banking, transport, illegal settlements, land grabbing, urban pollution, and a followed by Sindh. insurance, and other economic and social services. Almost 47 per- lack of waste disposal plague the lives of Karachi’s residents, while This differs from a simple difference in cent of Sindh’s gross regional product is generated in Karachi. hampering economic activity. The most severe monsoon rains on re- income, as the population distribution in Note: Islamabad Capital Territory is included in Punjab, FATA is excluded. Gross Regional Product (provincial GDP) Historically, Karachi has had a number of advantages due to its cord led to a virtual breakdown of the city in 2020. does not include foreign income (remittances). rural and urban areas is vastly different in Source: UNDP calculations based on Pakistan Population Census, 2017; Pasha, 2019. location, including the presence of its immense port, agglomeration, Clearly, Karachi needs more resources to improve and expand its and economies of scale in industrial production. It also boasts a rela- network of services. The Provisional Order of 2006 was conscious Balochistan and Sindh. Between Punjab FIGURE 3.26 tively educated labour force. These factors explain its relatively large of the city’s financial needs, as well as those of other large cities. and Khyber Pakhtunkhwa, Punjab has a higher Gini coefficient than Khyber Pa- contribution to both the provincial and national economy. One-sixth of the General Sales Tax was to be distributed, according Both urban and rural GDP per capita (PPP$) is highest in Sindh amongst all Pakistan has followed a regional variation on the ‘trickle-down a weight of 50 percent to the population and 50 percent to the ratio khtunkhwa, but its Pashum ratio is lower. provinces, (2018-2019) growth’ model by concentrating economic activity in Karachi. The of the collection of Octroi and Zila tax* in 1998–1999. Unfortunately, Hence, while Balochistan and Sindh stand strategy employed involves extracting the surplus from the city in the this clause was excluded in the 7th NFC Award. A new financing plan out as provinces with a greater urban-rural Urban Rural form of tax revenues and using these funds, through the NFC Award, needs to be put together for Karachi. divide in income according to both mea- to finance development in the rest of the country – with a view to The fundamental lesson is this: if resources are meant to trickle Balochistan 4,199 sures of inequality, Punjab’s and Khyber 3,325 reducing regional inequality. Thus, the revenues generated in this down, they need to be generated first. The neglect of Karachi must Pakhtunkhwa’s performance changes de- urban metropolis have funded development, including in Pakistan’s come to an end. This will contribute to improving living conditions in pending on the measure used. Khyber 4,756 underdeveloped regions. the metropolis, while generating resources more efficiently for rela- Pakhtunkhwa 3,701 This ‘trickle-down growth’ model has worked well historically. tively underdeveloped parts of Pakistan, thereby reducing regional Inequality in human development Sindh 7,547 Today, almost 56 percent of federal tax revenues, and 85 percent inequality nationwide. 4,381 of provincial tax revenues, are collected from Karachi. This former Punjab 5,909 Beyond income, urban areas also enjoy a 4,336 Note: Octroi and Zila Tax (OZT) was the amount charged on goods entering a city or district, which the Federal Government transferred to district govern- higher HDI value than rural areas across 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 ments, through provincial governments. The tax was abolished by the Federal Government in June 1999. all of Pakistan’s provinces. The greatest gap between urban-rural HDI values is in Source: UNDP calculations based on Pasha, 2019; HIES, 2018-2019.
54 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 Measures of regional inequality 55 FIGURE 3.28 SPECIALBalochistan CONTRIBUTION and Khyber Pakhtunkhwa. Shoaib Sultan Khan ern-most territory, with a population of nearly 2 million (figure 3.29). Its three Sindh has the greatest gap The process approach: Use the ‘institutions of the rural poor’ to alleviate problems The gap between rural and urban HDIs is between urban and rural highest in Sindh and lowest in Khyber administrative divisions are further divid- HDI values, followed by Pakthunkhwa, (2018-2019) ed into ten districts: Gilgit (Gilgit, Ghiz- The World Bank, in its first assessment of the Aga Khan Rural Sup- both the resources of governments and the flexibility of NGOs. The er, Hunza, and Nagar), Baltistan (Skardu, Balochistan, Punjab, and Khyber port Programme (AKRSP) in 1987, observed that AKRSP’s first four Commission recommended that South Asian governments support HDI Urban HDI Rural HDI Shigar, Kharmang, and Ghanche), and Pakhtunkhwa. years correspond to the ‘missing’ four years in many delayed rural such initiatives financially, while administratively establishing in- 1.000 Diamer (Diamer and Astore). The region development schemes across the world, which followed blueprints, dependent non-governmental support mechanisms to catalyse this has access to several corridors of connec- rather than the process approach that the AKRSP took. process. 0.900 Terming AKRSP’s process approach ‘Social Mobilization’, in 1992 The Rural Support Programmes (RSPs) set up by Pakistan’s fed- tivity with neighbouring countries, linking the Independent South Asian Commission on Poverty Alleviation eral and provincial governments since 1982 have fostered nearly Pakistan directly with China, Central and 0.800 recommended that this should be the centrepiece of all poverty al- half a million community organizations, comprising some 8 million South Asia, and Afghanistan. leviation strategies followed by South Asian states. This is because rural households (over 50 million people). However, government de- Various public and private development social mobilization enables the rural poor to participate directly in partments are not taking advantage of these networks, which can 0.700 projects have led to a dramatic transforma- 0.654 the decisions that affect their lives and prospects. be used as conduits to deliver public services, like health care and 0.631 0.612 tion in Gilgit-Baltistan over the last two It was the legendary Dr. Akhter Hameed Khan who originally es- education, or facilitate agriculture and livestock development. 0.600 decades. For example, in 2018–2019, the poused the social mobilization approach through his world-famous Given the proven success of Dr. Khan’s approach across time and 0.548 0.532 0.539 Federal Government provided PKR 51.7 Comilla project in what was then East Pakistan, now Bangladesh. He regions, and in accordance with the SAARC Poverty Commission’s 0.500 0.485 billion in financial support to the region, a advocated complementing the state’s political and administrative pil- recommendations, Pakistan’s federal and provincial governments 0.440 relatively high per capita share, in the form lars by fostering a socio-economic pillar that comprises ‘institutions must mandate their ministries, departments, and other development 0.400 of subsidies, grants, and development fi- of the rural poor’ as the conduit for the delivery of services and sup- agencies to utilize the organizations of the poor. nancing (table 3.5). plies by the public sector, civil society, and donor agencies. These institutions of the rural poor, nurtured by government-spon- 0.300 The South Asian Association for Regional Cooperation’s (SAARC) sored Rural Support Programmes that are ready-made conduits for Major administrative changes in recent Poverty Commission concluded that government departments or services and supplies, can help to reduce multidimensional poverty years include the Gilgit-Baltistan Order 0.200 non-governmental organizations cannot by themselves help the rural across Pakistan. 2018, which grants the area the same legis- poor, or help the rural poor to help themselves. The process needs 0.100 FIGURE 3.29 Shoaib Sultan Khan is Chairman of the Rural Support Programmes Network of Pakistan. Notes: ISACPA 1992; Raper 1970; World Bank Operations Evaluation Department 1987. 0 Key facts: Gilgit-Baltistan Balochistan Khyber Punjab Sindh Pakhtunkhwa 1 2 Sindh, followed by Balochistan, Punjab, health between rural and urban areas is Area : 72,971 km Sindh has the greatest gap and Khyber Pakhtunkhwa (figure 3.28). not as pronounced as the gaps in education Source: UNDP calculations based on Pasha, 2019; PDHS, 2017-2018; multiple years of HIES data. between urban and rural Among HDI indicators, the difference in and income. Population2: 1,900,000 HDI values, followed by
Balochistan, Punjab, and 3 FIGURE 3.27 Population growth rate : 2.56 Khyber Pakhtunkhwa. Inequality in Pakistan’s special regions Income inequality between urban and rural areas is highest in Balochistan, (2015-2016) Urban population4: 18.6
Punjab Sindh Khyber Pakhtunkhwa Balochistan National No analysis of human development and $ Per capita income (PPP$)5: 4,171 inequality in Pakistan can be complete without examining its three special re- 16 0.96 Net enrolment rate6: 30.1 9 gions: Gilgit-Baltistan, Azad Jammu and 0.45 0.74 7 14 24 Gini coefficient 0.50 1.74 Pashum ratio Kashmir, and the Newly Merged Districts of Khyber Pakhtunkhwa. This section Under 5 mortality rate (per 1000 live births)7: 71.6 presents a snapshot of human development in these regions, followed by a brief com- Received antenatal care from a doctor8: 71.6 parison of each region with the rest of the ∞ % 0 20 40 60 80 100 0 0.5 1 1.5 country. Stunted children9: 47.2 Equality Inequality Equality Inequality
Gilgit-Baltistan Source: (1) Gilgit-Baltistan Scouts 2020; (2) UNPO 2020; (3-4) Government of Gilgit-Baltistan 2013; (5) UNDP calculations. See Source: UNDP calculations based on Pasha, 2019; HIES, 2015-2016. technical note 4; (6) PSLM, 2014-2015; (7-9) Government of Gilgit-Baltistan is Pakistan’s north- Pakistan 2019g.
56 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 Measures of regional inequality 57 TABLE 3.5 FIGURE 3.30 adult literacy rate, which rose to 47.5 per- from 37 percent to just 7.9 percent. Pov- cent, and a 5 percent increase in net enrol- erty decreased far less markedly in rural Pakistan Federal Government financial Human development trend in Gilgit-Baltistan, ment, which reached 30.1 percent. Despite areas, from 68.9 to 49 percent.19 support to Special Regions (PKR billion), (2006-2016) (2018-2019 and 2019-2020) this progress, Gilgit-Baltistan experienced The decline in multidimensional pov- HDI the slowest improvement in education erty in Gilgit-Baltistan is linked to im- Multidimensional poverty in 2018-2019 2019-2020 1.000 indicators of all of Pakistan’s regions and provements in various indicators used to Gilgit-Baltistan has declined over (Revised (Budget provinces between 2006 and 2016. measure different forms of deprivation. the years due to improvements estimate) estimate) 0.900 For instance, deprivation declined most in health and living standards. Subsidy 62.3 29.0 Health significantly in two indicators within the Azad Jammu and Kashmir* 43.0 3.0 Among the three dimensions of human dimensions of health and living standards: 0.800 Newly Merged Districts* 12.0 18.0 development, Gilgit-Baltistan experienced increased access to electricity, and health the greatest improvement in health, mea- facilities. Deprivation also declined in oth- Gilgit-Baltistan** 7.3 8.0 0.700 sured by life expectancy at birth. In 2016, er indicators. In terms of education, more Grant 78.7 144.0 life expectancy in the region was 69.2 years, children attended school, and more people Azad Jammu and Kashmir 49.2 54.9 0.600 11 percent higher than in 2006. It also sur- completed at least five years of education. 0.538 Newly Merged Districts _ 56.1 0.491 passed the national average of 66.3 years in In terms of health, access to antenatal care 0.500 0.535 2016. This is partially due to the AKDN’s improved, as did the number of births as- Gilgit-Baltistan 29.5 33.0 work, under the Aga Khan Health Ser- sisted by skilled birth attendants. In terms Development financing 51.5 92.7 0.400 vice Pakistan (AKHSP), which runs sev- of living standards, access to sanitation fa- Azad Jammu and Kashmir 26.5 26.9 eral projects across the region, including cilities improved, alongside access to water, 20 Newly Merged Districts 10.0 48.0 0.300 a medical centre, three comprehensive cooking fuel, and assets. health centres, and 26 basic health centres. These improvements aside, the region Gilgit-Baltistan 15.0 17.8 0.200 In 2019 alone, the AKHSP reached around continues to face major challenges. The Total financial support 192.4 265.7 half a million beneficiaries in Gilgit-Baltis- division of responsibilities between Gilg- Azad Jammu and Kashmir 118.7 84.8 17 0.100 tan. Improved life expectancy can also be it-Baltistan’s Legislative Assembly and the Newly Merged Districts 22.0 122.1 attributed to the improved coverage of the Federal Government is unclear, with Gil- region by Lady Health Workers (LHWs). git-Baltistan depending on the latter for Gilgit-Baltistan 51.7 58.8 0 2006-07 2012-13 2015-16 funding and key decisions. This leads to Note: *Power tariff differential, **Wheat subsidy. Source: Government of Pakistan 2019e. Living standards ineffective public administration and inad- Note: The data for Gilgit-Baltistan was based on PSLM 2014-2015, Income per capita in Gilgit-Baltistan in- equate funding. Some initiatives under the but for consistency with other regions, the year has been shown as creased by 10 percent between 2006 and Gilgit-Baltistan Order of 2018 aim to re- lative powers exercised by other provinces 2015-2016. Source: UNDP calculations based on PDHS, 2012-2013; Pasha, 2019; 2016. This may be due to greater connec- duce these complications, but they have yet under Schedule IV of Pakistan’s Constitu- multiple years of PSLM for Gilgit-Baltistan. tivity, as this rise coincides with the re- to be effectively implemented. In addition, tion. However, the Prime Minister of Pa- construction of the Karakoram Highway the region has an extremely low population kistan has direct and final authority over in Gilgit-Baltistan are largely due to ini- (KKH) by the Government of Pakistan. density, of just 12 people per square kilo- Gilgit-Baltistan’s legislation, policies, tax- tiatives by civil society-led development The highway’s development boosted the metre.21 The scattered population makes it es, and other financial matters. projects, such as the Aga Khan Rural De- region’s economy considerably, linking cit- costly to implement socio-economic devel- velopment Network (AKDN), working ies, improving access to markets and new opment projects, and to reach economies Inequality in human development in partnership with the Government of technologies, and enabling cheaper travel of scale and boost productivity. Pakistan.15 Credit for progress is also due and the transport of goods. Nevertheless, Gilgit-Baltistan is also particularly vul- According to the latest available data, to the Government of Gilgit-Baltistan, Gilgit-Baltistan’s per capita income growth nerable to the global challenge of climate Gilgit-Baltistan had an HDI value Gilgit-Baltistan13 had a Human Develop- including legislation enabling the launch rate remains below the national average. change. With almost all of its energy gen- of 0.535 in 2016, lower than the ment Index value of 0.535 in 2016 (figure of socio-economic development and me- eration based on hydropower, the region national average of 0.570. 3.30).14 Overall, from 2006 to 2016, the ga-projects in collaboration with the Fed- Multidimensional poverty contributes next to nothing to global region experienced an improvement of 9 eral Government. These initiatives have Since 2006–2007, multidimensional pov- warming, but it suffers disproportionate- percentage points in its HDI value. Along- boosted both the region’s economy and its erty in Gilgit-Baltistan has declined by ly from the phenomenon. Warning signs side neighbouring Khyber Pakhtunkhwa, levels of human development.16 32 percent, dropping from 63.7 percent include unseasonable snowfall, unusually this was the highest percentage increase to 43.2 percent in 2012–2013.18 Between heavy rainfall and floods, and fast-melting in HDI values among Pakistan’s provinces Education 2006 and 2013, poverty decreased dramat- snow and glaciers that, in turn, provoke and regions in this period. The latest data available, from 2016, reveal ically in the region’s urban areas, falling landslides. Improvements in human development a 6 percent increase in Gilgit-Baltistan’s
58 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 Measures of regional inequality 59 Nevertheless, Gilgit-Baltistan has seen FIGURE 3.31 FIGURE 3.32 system is better than the national average. FIGURE 3.33 great improvements overall. As noted The region’s infant mortality rate is 58 Key facts: Azad Jammu and Kashmir Net enrolment rate, Azad above, this is partly due to government Human development trend in Azad Jammu deaths for every 1,000 live births, com- and Kashmir, (2006-2019) Jammu and Kashmir, (2015) initiatives, although these are limited, and pared to the Pakistani average of 66 in- 1 2 Area : 13,297 km 27 2013-14 partly due to civil society-led initiatives by HDI fant deaths. Life expectancy at birth is 2014-15 the Agha Khan Rural Support Programme 1.000 69 years, slightly higher than the national 2 and others. The construction of the Chi- Population : 4,045,367 average of 67 years in 2018–2019. Some
na-Pakistan Economic Corridor and an 0.900 75.2 percent of children between 12 and inter-district road network are expected Population growth rate3: 1.63 23 months old are fully immunized, far to boost the transport and logistics sectors more than the national average of 65.6 per- 0.800 PRIMARY 78 81 manifold, thereby improving socio-eco- Urban population4: 17.4 cent.28 Children in the region fare better in nomic integration. other respects as well, with stunting at 30 0.700 Other initiatives can further enhance $ Per capita income (PPP$)5: 5,190 0.632 percent, compared to the national average 0.621 the region’s potential. A sustainable tour- 0.603 of 38 percent.29 0.600 0.575 MIDDLE 46 50 ism policy and investments to preserve her- Net enrolment rate6: 42.4 As elsewhere in Pakistan, health statis- itage sites would be a huge boost for tour- tics vary greatly from district to district, 0.500 ism. Similarly, campaigns targeted at the Under 5 mortality rate (per 1000 live births)7: 71.6 as well as between urban and rural areas. business community can foster interest in For example, the unmet need for family HIGH 15 34 0.400 CPEC. The region also has the fifth larg- Received antenatal care from a doctor8: 87.1 planning is high in rural Azad Jammu and est mineral reserves in the world, including Kashmir at 23 percent, but lower in urban Source: Government of Azad Jammu and Kashmir 2018. almost 70 percent of Pakistan’s gemstone 0.300 centres where there is greater awareness of 9 reserves. Proper investment, and efforts to Stunted children : 30.0 reproductive health issues.30
upgrade mining and extraction technolo- 0.200 Source: (1-4) Government of Azad Jammu and Kashmir 2018; (5) gies, can generate substantial revenues. In UNDP calculations. See technical note 4; (6) PDHS, 2017-2018; Economy the long-term, well-thought-out policies, (7-9) Government of Pakistan 2019g. 0.100 Azad Jammu and Kashmir’s developing regulations, and administrative clarity are economy depends largely on agriculture, essential to reap substantial benefits. Inequality in human development services, and tourism. While the formal 0 sector has shrunk over the years, the in- Azad Jammu and Kashmir Despite the prevalence of violence, con- formal sector accounts for more than sev- 2006-07 flict, and natural disasters in the region, 2012-13 2015-16 2018-19 en-tenths of the non-agricultural sectors in Note: The data for Azad Jammu and Kashmir was based on PSLM 31 Azad Jammu and Kashmir is a self-govern- Azad Jammu and Kashmir does well in 2014-2015, but for consistency with other regions, the year has been the region. Remittances from the Kash- ing administrative territory in Pakistan. terms of access to essential services, al- shown as 2015-2016. miri diaspora, particularly the British Mir- Source: UNDP calculations based on PDHS, 2012-2013, 2017-2018; Alongside Gilgit-Baltistan, the region is though it fares worse on other indicators. Pasha, 2019; multiple years of PSLM for Azad Jammu and Kashmir. puri community, contribute significantly Azad Jammu and Kashmir’s HDI known as Pakistan Administered Kashmir In 2014–2015, 24.9 percent of its inhab- to Azad Jammu and Kashmir’s economy. value of 0.632 is far higher than (figure 3.31). The 2017 Census records itants were multidimensionally poor, the 3.33). 23 the national average of 0.570. Azad Jammu and Kashmir’s population at lowest level in Pakistan. Similarly, Azad Four of the top 10 districts in Pakistan’s Labour just over 4 million, with an annual pop- Jammu and Kashmir’s HDI value is 0.632, 2017 District Education Rankings are in Azad Jammu and Kashmir’s unemploy- ulation growth rate of 1.62 percent.22 A far higher than the national average of Azad Jammu and Kashmir: Bagh ranks ment rate of 10.3 percent is almost twice largely rural region, it is divided into 10 0.570 in 2018–2019 (figure 3.32). fifth, followed directly by Muzaffarabad, the national average of 5.8 percent.32 Em- Azad Jammu and Kashmir districts: Hattian Bala, Neelum Valley, Kotli, and Poonch.25 In fact, Azad Jammu ployment is primarily concentrated in performs better than the rest of Mirpur, Bhimber, Kotli, Poonch, Bagh, Education and Kashmir has the highest overall re- services (53.4 percent), industry (27.2 Pakistan in the dimensions of Haveli, Sudhanoti, and Muzaffarabad, Azad Jammu and Kashmir far surpasses gional education score in Pakistan, as well percent), and agriculture (19.4 percent), education and health. which is also the regional capital. In 2018– the rest of Pakistan in terms of education. as the highest score in gender parity in ed- with a labour force participation rate of 2019, the Federal Government gave Azad While some 0.6 million children in the ucation.26 Islamabad Capital Territory is 30.8 percent.33 There are large skill gaps Jammu and Kashmir a relatively high per region are out of school, its literacy rate next, followed by Punjab, Gilgit-Baltistan, in the region’s substantial informal sector, capita share of financial support, totalling of 76.8 percent was considerably higher Khyber Pakhtunkhwa, Balochistan, Sindh, particularly in terms of construction, au- PKR 118.7 billion in the form of subsidies, than the national average of 57.4 percent and the Newly Merged Districts. tomobile-related work, and chemical engi- grants, and development financing (see ta- in 2018–2019.24 Enrolment rates require neering.34 Adequate training and the estab- ble 3.5, above). more attention, especially at the mid- Health lishment of in-demand trade institutes can dle and higher levels of education (figure Azad Jammu and Kashmir’s health care address these gaps.
60 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 Measures of regional inequality 61 Gender mitigate the impact of natural disasters. nomic growth. To raise human develop- FIGURE 3.34 Azad Jammu and Kashmir is also an area ment levels, it is essential to address these Women in Azad Jammu and Kashmir fare Key facts: Newly Merged Districts slightly better than the average Pakistani crying out for stability. Tensions with In- issues while simultaneously improving woman. The female literacy rate is 64.9 dia over Kashmir threaten violence ranging health, education, and living standards. Area1: 27,220 km2 percent, much higher than the national from skirmishes and ceasefire violations, to average of 49 percent.35 The region ranks outright war. A sustainable dialogue pro- Newly Merged Districts fifth highest in the country in terms of cess between the two nuclear-armed neigh- Population2: 5,001,676 women who read a newspaper at least bours aimed at resolving the Kashmir issue The Newly Merged Districts are located once a week, and fourth highest in terms is essential, taking into account the needs in the north-west of Pakistan. Formerly Population growth rate3: 2.41 of women who use the internet every day.36 and aspirations of the Kashmiri people.38 known as the Federally Administered Trib- This implies women’s considerable access It is worth examining the main eco- al Areas (FATA), the region was officially to technology and information, as well as nomic areas, like farming, that can help merged with the province of Khyber Pakh- Urban population4: 2.85 the leisure time needed to engage with in- Azad Jammu and Kashmir to harness its tunkhwa in 2018, as noted above (figure 3.34 and box 3.5).42 With a population of formation technologies. potential. Nearly 87 percent of the re- 5 $ Per capita income (PPP$) : 3,174 However, only 7.9 percent of women in gion’s households own land or farms, but over 5 million, the region encompasses sev- Azad Jammu and Kashmir participate in smaller farm sizes and low access to credit en semi-autonomous tribal agencies (Khy- the labour force, compared to men’s labour greatly inhibit agricultural income.39 The ber, Mohmand, Bajaur, Kurram, Orakzai, Net enrolment rate6: 22.9 force participation rate (LFPR) of 54.8 Government of Azad Jammu and Kashmir North Waziristan, and South Waziristan) has begun investing in crop maximization and six frontier regions, now called ‘subdi- percent. Converted to the augmented la- Under 5 mortality rate (per 1000 live births)7: 71.6 schemes, as well as pest and disease man- visions’ (Kohat, Bannu, Lakki, Tank, Dera bour force participation rate, this percent- 43 age rises to 39.4 percent.37 This indicates agement, to increase productivity. Addi- Ismail Khan, and Peshawar). 8 that most women in the region are engaged tional steps, such as farm collectivization In the last two decades, the population Received antenatal care from a doctor : 65.5 in marginalized occupations or subsistence to benefit from economies of scale, can of the Newly Merged Districts grew by al- agriculture, which does not improve their further improve efficiency. most 37 percent despite mass migration Stunted children9: 52.3 well-being. The region’s tourism industry remains from the area, catalysed by security chal- severely untapped. The Government of lenges. Urbanization, however, remains ex- Source: (1) Government of FATA 2019; (2-4 and 7-9) Government of Pakistan 2019g; (5) UNDP calculations. See technical note 4; (6) Challenges and opportunities Azad Jammu and Kashmir has begun to tremely small-scale. FATA Development Indicators Household Survey (FDIHS), 2013-2014. Although Azad Jammu and Kashmir fares address this by launching a tourism police The Newly Merged Districts’ annual better than Pakistan as a whole in terms force in 2019, and lifting the requirement BOX 3.5 of human development, various challeng- of No Objection Certificates (NOCs) es continue to hold it back. These include for international travellers.40 Taking such Implications of the merger with Khyber Pakhtunkhwa cross-border firing along the Line of Con- initiatives forward will help to boost the Pakistan’s 25th Constitutional Amendment merged the Newly Merged Political representation: The Newly Merged Districts’ political repre- trol in violation of the 2003 Ceasefire regional economy and raise standards of living. Districts with the province of Khyber Pakhtunkhwa. The merger was sentation was increased in Khyber Pakhtunkhwa’s Provincial Assem- Agreement, alongside natural disasters like finalized on 31 May 2018. Before this, while the Constitution of Paki- bly, from 16 to 24 seats, and in the National Assembly from six to 12 Improving regional connectivity would earthquakes, landslides, and floods. The stan protected the basic rights of people in the region, it was beyond seats. This is a huge gain for a population that has historically been 2005 earthquake in particular caused mas- also enhance development in Azad Jam- the jurisdiction of Pakistan’s judicial system. As such, constitutional disenfranchised. sive damage in the region, claiming around mu and Kashmir. CPEC envisages four rights could not be guaranteed. The implications of the merger have Fundamental rights: There is credible hope that nullifying the Frontier 100,000 lives and destroying buildings, mixed-industry projects in the region. To been hotly debated. Some of the hopes riding on it, and the challeng- Crimes Regulation will end structural violence. Increased attention to emergency services, and infrastructure. aid these, the Government of Azad Jammu es posed, are discussed here. fundamental rights may encourage the provision of basic facilities In response, the Government estab- and Kashmir has launched special incen- Regulation: A widely hailed aspect of the merger is its abolition of like health care, education, infrastructure, water, and power supplies. lished the Earthquake Reconstruction and tives for these projects, involving tax-free Frontier Crimes Regulation (FCR) that meted out collective punish- Socio-economic transformation: Economic concessions to the New- Rehabilitation Authority (ERRA) in 2005, imports, permission to self-generate elec- ment, holding an entire family or tribe accountable for an individual’s ly Merged Districts may translate into new opportunities for local 55 followed by the National Disaster Manage- tricity for industries, and the construction actions. Eliminating the regulation has ended this archaic practice. businesses and greater cross-border trade. In 2018, the Economic 41 Regular courts began functioning in the Newly Merged Districts on 4 Coordination Committee (ECC) exempted the Newly Merged Districts ment Authority (NDMA) and State Disas- of infrastructure. In tandem, the Govern- ment established a Board of Investment March 2019, enabling its people to access Pakistan’s courts for re- from taxes for five years, while Parliament exempted the erstwhile ter Management Authority (SDMA) in the 56 (BOI) to encourage investment, especially dress. However, habits formed over more than a century under the Provincially Administered Tribal Areas (PATA)* from taxation for a following years. These institutions have Frontier Crimes Regulation may be hard to break. decade. been crucial for addressing the devastation by the Kashmiri diaspora. A sustained fo- caused by natural disasters nationwide. cus on these areas will enable the region to Note: The Provincially Administered Tribal Areas (PATA) were Pakistani administrative subdivisions designated in Article 246(b) of the Constitution of Further steps are needed to enhance pre- break its reliance on foreign remittances Pakistan. paredness, in order to predict, prevent and and move towards more sustainable eco-
62 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 Measures of regional inequality 63 population growth rate of 2.4 percent is The population per hospital bed – 2,433 Gender devolved a considerable degree of power the same as the national average. However, people per bed – is nearly twice the nation- Only 4.2 percent of women in the New- to subnational governments in 2010. Af- its population density is only 184 people al average of 1,341. Social norms hinder ly Merged Districts are allowed deci- ter that, when more than half of Pakistan’s per square kilometre, compared to the na- women from accessing reproductive health sion-making powers, either alone or with resources were given out to the provinces, tional average of 287 people per square ki- centres attended by male specialists, poten- their husbands, regarding their own health there was little left for the Newly Merged lometre. In 2018–2019, the Federal Gov- tially putting their lives at risk. Access to care, major household purchases, or social Districts. To counter this, the Government ernment allocated PKR 22 billion to the modern health care is rare, including ante- visits.47 This is compared to 35.8 percent of Pakistan developed and funded pro- region in the form of subsidies, grants, and natal and postnatal care, and deliveries in in the rest of Pakistan. Over 95 percent of grammes designed in line with the New- development financing – a relatively low health facilities. This contributes to the re- women in the region, compared to the na- ly Merged Districts’ share of the national per capita share (see table 3.5, p. 58) gion’s high maternal mortality rate, of 380 tional average of 41.7 percent, are unaware population. However, this has not alleviat- . women’s deaths per 100,000 live births, of their basic rights, and believe that their ed the region’s markedly low levels of de- Inequality in human development compared to the national average of 186 husbands are justified in beating them over velopment. deaths per 100,000 live births reported by domestic matters. These statistics are not The security situation makes matters Poor infrastructure and services, coupled the Pakistan Maternal Mortality Survey surprising considering that 56.2 percent worse. Armed militancy and military oper- with limited opportunities, negatively im- (PMMS) 2017. Moreover, only 30.4 per- women in the region have experienced ations in 2014 forced 0.9 million people to pact human development in this largely re- cent children between 12 and 23 months physical violence since the age of 15, com- flee from elsewhere in the Newly Merged mote and underdeveloped region. Overall, old are immunized, less than half of Paki- Districts to North Waziristan and Khyber 44 pared to the national average of 27.6 per- 50 The Newly Merged Districts have the Newly Merged Districts’ HDI value is stan’s already low average of 65.6 percent. cent.48 These figures are likely to be much Agency. By mid-2015, the number of in- the second lowest HDI value in abysmally low, at just 0.479 in 2015–2016. ternally displaced persons from the Newly lower than real rates of violence, as gen- 51 Pakistan, just 0.479. Access to basic health care, education, util- Economy der-based violence tends to go unreported Merged Districts reached 1.56 million. ities, and even sanitation is unpredictable Historically, the Newly Merged Districts around the world. A lack of employment opportunities, in- or non-existent. have been a strategically vital region. Al- adequate access to public education, and though the region accounts for 2.4 percent Multidimensional poverty unregistered madrassas continue to fuel 52 Education of Pakistan’s population, its share in the No comprehensive quantitative data on extremism. All of this has cost the region The Newly Merged Districts’ primary net national economy is a mere 1.5 percent, poverty in the Newly Merged Districts dearly. enrolment rate, 52.1 percent, is far lower making it the country’s poorest perform- had been collected before the publication On a positive note, plans to revitalize than Pakistan’s average rate of 78 percent. ing region in economic terms. The New- of the Multidimensional Poverty Index the Newly Merged Districts are under- The same is true for its literacy rate, which ly Merged Districts’ per capita income of (MPI) by UNDP, the Oxford Poverty & way. The arrangements of its merger with stands at just 33 percent compared to the US$3,174 (PPP $) is far lower than the the province of Khyber Pakhtunkhwa in- 45 Human Development Initiative (OPHI), national average of 57 percent. As many as national average of US$4,534. Although and the Government of Pakistan, in 2016. clude development projects like construct- 701 of every 1,000 children in the region the region has been tax-exempt for years, it ing small dams, water and power supply The MPI report showed that the Newly 74 percent of people in the are out of school. There are few secondary has no formal structure for industry. Work Merged Districts have the highest levels of schemes, and other infrastructure, coupled education facilities in the region, and ghost opportunities are largely primary level eco- with mineral development. Power projects Newly Merged Districts are multidimensional poverty in Pakistan. Al- multidimensionally poor, and schools abound. Teacher absenteeism and nomic activities. Agriculture is the leading most 74 percent of the region’s people are worth PKR 2 billion have already been corporal punishment are common, even source of income for residents, followed launched.53 Under the 7th NFC Award, 52 percent are deprived of multidimensionally poor, and over half, 52 education. in functional schools. A parallel school by the private sector, livestock, small in- percent, are deprived of education.49 the Federal Government also reiterated its system of madrassas (religious seminaries) dustries, mining, and small firms. Most of There is overwhelming poverty in the commitment to bear all expenditures in- absorbs 98 percent of the region’s children. the labour force is unskilled or semiskilled. region, coupled with widespread illitera- curred on the ‘war on terror’ in any part While these institutions do impart basic Women are normally engaged in unpaid cy, under-training, and few opportunities. of Pakistan. Recognizing Khyber Pakh- literacy skills, their limited religion-based family work. As most people face similar deprivations, tunkhwa’s role as a frontline province in syllabus renders graduates unfit to com- levels of inequality are low. However, low this conflict, the Federal Government and pete in the job market. Labour inequality on these terms is unacceptable. the provinces earmarked 1 percent of the The labour force participation rate of the The aim is for Pakistan to achieve low in- net proceeds of the Federal Divisible Pool Health Newly Merged Districts is just 35.2 per- equality alongside high levels of human for the province Khyber Pakhtunkhwa as Health indicators in the Newly Merged cent. Its unemployment rate of 7.1 per- development. an additional resource during the NFC Districts are extremely poor. There are few cent outstrips the national average of 5.8 Additional challenges in the Newly Award period. basic health units (BHUs) and only one percent. Workers are overwhelmingly em- Merged Districts include historically low Since the merger, regional develop- doctor for every 7,670 people, compared ployed in low-paying jobs, and women’s levels of federal grants, an area which the ment programmes planned for the Newly to the national average of 1,226. There are participation in the workforce is particu- Merged Districts include a 10-year Tribal 46 Federal Government was responsible for no private hospitals at all in the region. larly low. until the 18th Constitutional Amendment Decade Strategy, effective from 2020 to
64 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 Measures of regional inequality 65 2030, and the Accelerated Development and Kashmir ranked second in terms of per lochistan fared worst. FIGURE 3.36 Unit (ADU) in Khyber Pakhtunkhwa’s capita income in the country. Gilgit-Baltis- To reduce regional disparities, develop- Planning and Development Department. tan ranked fourth, marking an improve- ment needs to be prioritized in provinces Ranking of human development dimensions across Pakistan, (2006-2016) This is responsible for implementing proj- ment from its previous position (fifth). and regions with lower HDI values, such HDI Adult Net Life Per capita Human ects related to water and infrastructure, Due to the limited availability of data, as Balochistan and the Newly Merged Dis- ranking literacy enrolment expectancy income development forests, and agriculture. Committed to and the fact that the NHDR 2020 only tricts of Khyber Pakhtunkhwa. This can be 1 Azad Jammu helping the Government of Khyber Pakh- computes one year of HDI for the Newly achieved by convening a new NFC Award & Kashmir tunkhwa in social, political, educational, Merged Districts, no long-term compar- to update the magnitude of horizontal and economic terms, the Federal Govern- ison is possible for this region. However, criteria, according to data from the Pop- 2 Sindh ment earmarked PKR 48 billion under the it is worth noting that in 2015–2016, the ulation Census of 2017. This will change 10-Year Development Plan of 2019.54 Newly Merged Districts had the lowest in- provincial shares from the Federal Divis- Overall, the Newly Merged Districts come per capita in Pakistan. ible Pool.58 Simultaneously, budgets can 3 Punjab remain among Pakistan’s most underde- In 2015–2016, Azad Jammu and Kash- be allocated to underdeveloped districts veloped regions. Better outcomes may be mir ranked above the national average in based on a formula provided by the Pro- 4 Khyber on the horizon if the region is granted the terms of education, with the highest val- vincial Finance Commission, with non- Pakhtunkhwa sizeable budget for development that it has ues in both adult literacy and the net en- lapsable funds. Economic development requested. rolment ratio. Gilgit-Baltistan came fifth, can be boosted in underdeveloped regions 5 Gilgit while the Newly Merged Districts were by devising a special medium-term strate- Baltistan Comparing inequality across Pakistan’s near the bottom in terms of both indica- gy based on their comparative advantages regions tors (figure 3.36). – such as in mining and quarrying, minor 6 Newly Merged Health was the only dimension where crops, fishing, and forestry. Moreover, the Districts According to the latest available data from the Newly Merged Districts performed exceptionally low HDI value of the Newly 2016, Azad Jammu and Kashmir has the better than some other regions in Pakistan. Merged Districts can be improved by in- 7 Balochistan highest levels of human development Azad Jammu and Kashmir ranked fourth creasing the special federal grant to more among Pakistan’s regions and provinces. in terms of the health dimension of human than its existing value of PKR 56 billion,
Gilgit-Baltistan ranks fifth out of seven, development, while Gilgit-Baltistan did while prioritizing the provision of quality 8 and the Newly Merged Districts rank sixth unexpectedly well, ranking third. Overall, education, health care, and infrastructure. (figure 3.35).57 Azad Jammu and Kashmir performed best
Between 2006 and 2016, Azad Jammu among all of Pakistan’s regions, while Ba- 9
FIGURE 3.35 Note: Data for the Newly Merged Districts of Khyber Pakhtunkhwa were not available for 2018–2019. Therefore, the Notes comparison of the special regions with Pakistan s provinces is only conducted until 2015–2016. Human Development Index trends in Pakistan, (2006-2016) Source: UNDP calculations based on Pasha, 2019; multiple years of HIES and PDHS data. * Name changed to protect the informant’s identity. This story was shared during the NHDR focus group discus- 6 In 2015, the year used for this analysis, Punjab had a pop- sion in Umerkot, Sindh, on 21 June 2019. The languages ulation of 110 million, representing 54 percent of Paki- Non-lapsable funds can be HDI used were primarily Dhatki and Sindhi, with Urdu trans- stan’s total population. These figures were calculated us- allocated to underdeveloped 0.7 lations. The quotes used in the story are approximate ing data from the National Population Census of 1998 provinces and regions on a translations. and of 2017. Government of Pakistan 1998 and 2018g. 0.6 Azad Jammu and Kashmir priority basis to reduce regional 1 Pakistan’s provinces are consistently discussed in this Punjab Sindh 7 Javed and Naveed 2018. disparities. Khyber Pakhtunkhwa Gilgit-Baltistan FATA 0.5 Balochistan order in the NHDR 2020, listed according to their share 8 In 2015, the year used for this analysis, Sindh had a popu- of the national population, from the largest (Punjab) to 0.4 lation of 48.8 million, accounting for 23 percent of Paki- the smallest (Balochistan). stan’s total population. These figures were calculated us- 0.3 2 Pasha 2019. ing data from the National Population Census of 1998 0.2 3 For details, see Technical note 3 on the estimation of and of 2017. Government of Pakistan 1998 and 2018g. gross regional product. 9 In 2015, the year used for this analysis, Khyber Pakh- 0.1 4 Government of Khyber Pakhtunkhwa 2020. tunkhwa’s population was 30.5 million, representing 15 0 5 The calculations are based on the following formula, percent of Pakistan’s total population. After the 2018 2006-2007 2012-2013 2015-2016 where\ {HDI}_i is the HDI value of the provinces, \bar{HDI} merger of the Federally Administered Tribal Areas (FATA) Note: Data for the Newly Merged Districts of Khyber Pakhtunkhwa were not available for 2018–2019. Therefore, the comparison of the special is the national HDI value, and E is for education, H for – now known as the Newly Merged Districts – into the regions with Pakistan s provinces is only conducted until 2015–2016. health care, and I for income: Source: UNDP calculations based on Pasha, 2019; multiple years of HIES and PDHS. province, Khyber Pakhtunkhwa’s population increased to 35.5 million, or 17 percent of Pakistan’s population.
66 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 Measures of regional inequality 67 These figures were calculated using data from the Na- 26 Ibid. tional Population Census of 1998 and of 2017. Govern- 27 Government of Azad Jammu and Kashmir 2018. ment of Pakistan 1998 and 2018g. 28 Government of Pakistan 2019g. 10 In 2015, the year used for this analysis, Balochistan’s 29 Ibid. population was 11.9 million, accounting for just 6 percent 30 Government of Pakistan 2018a. of Pakistan’s total population. These figures were cal- 31 Government of Pakistan 2018b. culated using data from the National Census of 1998 and 32 Government of Pakistan 2018c. of 2017. Government of Pakistan 1998 and 2018g. 33 Ibid. 11 For details see Technical note 4 on the estimation of ur- 34 GIZ Pakistan 2017. ban and rural GRP. 35 Government of Azad Jammu and Kashmir 2018. 12 For details see Technical note 5 on the derivation of in 36 Government of Pakistan 2018a. come inequality in urban and rural areas. 37 Government of Pakistan 2018c. 13 As recent or relevant data are not available, many of the 38 The Pakistan-India People’s Forum for Peace and Democ- headings within these sections on Pakistan’s special re- racy (PIPFPD) – the region’s largest, oldest people-to- gions do not coincide. people group – has been demanding, since it was found- 14 This figure was calculated for Gilgit-Baltistan using the ed in 1994, that India and Pakistan settle the Kashmir dis- latest available data on HDI indicators for 2014–2015. pute according to the needs and aspirations of the Kash- However, for comparison and consistency with other miri people, and include them in any dialogue about provinces and special regions, this report refers to this their future. See: ‘De-escalate Tensions between India data as 2015–2016 data. and Pakistan: PIPFPD 26 February 2019, Joint Statement 15 The AKDN includes the Aga Khan Foundation, Aga Khan by the National Committees PIPFPD of India and Paki University, and the Aga Khan Health Service. stan’, Sabrang 2019. 16 These include the Gilgit-Baltistan Civil Servants Act 2011, 39 The News International 2015. the Auditor-General of Gilgit-Baltistan (Functions, Pow- 40 Radio Pakistan 2019; Pakistan Today 2019. ers and Terms and Conditions of Service) Act 2012, the 41 Dawn News 2019. Gilgit-Baltistan Council (Election) Ordinance 2015, the 42 Pakistan Today 2018. Gilgit-Baltistan Council (Salaries, Allowances and Privi- 43 Peshawar here refers to the former Frontier Region with leges) (Amendment) Act 2012, and the Gilgit-Baltistan the same name as Khyber Pakhtunkhwa’s capital city. Council Adaptation of Laws Act 2015, among others. 44 Government of Pakistan 2008b. 17 Information about AKDN and its health interventions was 45 Statistical annex table 1A. obtained from AKDN. 46 Government of Pakistan 2018b. CHAPTER 4 18 Government of Pakistan 2016. 47 Government of Pakistan 2019g. 19 Ibid. 48 Ibid. 20 For details on indicators and a description of assets used 49 Government of Pakistan 2016. to calculate multidimensional poverty, refer to the Multi- 50 IDMC 2014. dimensional Poverty in Pakistan Report, published in 51 Ibid. 2016. 52 Ahmad and Junaid 2010. Special measures 21 Gilgit-Baltistan’s population density of 12 is based on its 53 Jabri 2018. population of 0.884 million according to the Census of 54 Alam 2019. 1998 (Government of Pakistan 1998). Its population has 55 Khan 2018. of inequality not been officially reported since this Census. The Sta- 56 Noor and others 2018. tistical Cell of the Planning and Development Department 57 The latest available data for Gilgit-Baltistan’s HDI indi- of Gilgit-Baltistan (2013) calculated a population density cators are from 2014–2015. However, for comparison projection of 18 persons per square kilometre, using a with other provinces and special regions, the NHDR refers population projection of 1.301 million. to this data as 2015–2016 data. 22 Government of Azad Jammu and Kashmir 2017. 58 Balochistan’s share will accordingly increase from 9.09 23 Government of Pakistan 2016. percent in the 7th NFC Award to 10.81 percent. This will 24 Government of Azad Jammu and Kashmir 2018. facilitate further development in the province. 25 Alif Ailaan 2017.
68 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 CHAPTER 4 Special measures of inequality
After barely a few years of marriage, Ayesha’s* husband suddenly passed away. The young widow lives with her parents and daughter in Rahimyar Khan, Punjab. Realizing that her daughter’s education now depends on her, she began taking classes to train as a beautician. After completing her certification, Ayesha plans to move to Lahore because jobs in Ra- himyar Khan are hard to come by. This will be difficult, especially with a young child in tow. With no family in Lahore and day care too expensive for all but the richest Pakistanis, Ayesha knows it will be hard to find a job that allows her to take her daughter to work. “The Government should make policies that make it easier for women with children to work in different environments,” she says. She suggests subsidized day care facilities, or flexible schedules if the work allows it. There are 2.5 million unemployed young people like Ayesha in Pakistan today. Like her, many are stuck between a rock and a hard place.1 Even if they have some level of education or training, those in smaller towns are unable to find decent work close to home. Most need to find steady jobs to provide for their families. This usually forces them to move to a big city, uprooting their lives in places where they have family support. Unemployment and underemployment among Pakistan’s youth exacerbate inequality, squandering the potential of the country’s most important resource.
One of the NHDR 2020’s objectives is to Reports. Since 2014, these reports have examine the impact of inequality on hu- also included performance on the Gender man development through the lens of so- Development Index (GDI). However, the cial strata like children, youth, gender and lack of a Child Development Index (CDI) labour. These lenses affect both the eco- remains a major gap. nomic and social dimensions of well-be- Pakistan’s NHDR 2020 attempts to ad- ing in terms of access to, the availability dress this gap by constructing, perhaps for The NHDR 2020 constructs and usage of resources. Examining these the first time, a Child Development Index Pakistan’s first Child aspects in terms of inequality and human in the Pakistani context. For this purpose, Development Index, which development reveals results of great im- it uses three groups of indicators related deconstructs inequality among portance for policy makers. For instance, to children’s living standards, health, and the country’s children. the Human Development Index for youth levels of education. Living standards en- offers evidence that can inform policies to compass three indicators, while health and tackle the issue of ‘idle’ youth, in order to education include four indicators each, as include them in economic activities. Sim- described below. ilarly, policy interventions can be identi- fied to tackle gaps in child development, Living standards labour, and gender development. The three indicators used to determine liv- ing standards for the Child Development Child development and inequality Index are: households’ average child-equiv- alent level of income, the percentage of Since 1990, UNDP has published coun- children in the two richest quintiles, and try rankings on the Human Development the percentage of children who are not en- Index in annual Human Development gaged in child labour.
70 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 Special measures of inequality 71 The child-equivalent of income, YNE, and those who do not suffer from wasting. Pakistan’s national Child Development rate (2.68 percent) between 2001-2002 is first derived for a typical household us- Index had an intermediate value of 0.575, and 2007-2008. This increased to an extent ing the following formula: Education compared to a potential maximum value of between 2007–2008 and 2011–2012 (2.9 1. Some indicators register relatively high percent), before slowing again between The first three education indicators of the sub-index values, such as the percentage 2011–2012 and 2015–2016 (1.8 percent), Child Development Index relate to net of children who do not suffer from wast- and between 2015–2016 and 2018–2019 Where NE is the number of child enrolment rates at the primary, middle, ing (0.828), the percentage of fully-immu- (0.9 percent).
equivalents, NA is the number of adults, and matric levels. The fourth indicator is nized children (0.777), and the percentage
NC is the number of children, and Y is the the amount of education expenditure per of children who are not engaged in child Provincial Child Development Index average income per household. child. This is taken as a proxy for the qual- labour (0.670). Compared to these, the This is similar to the Organisation ity of education. sub-index values of other indicators are The NHDR 2020 derives Child Develop- of Economic Co-operation and Devel- The primary sources of information very low, specifically the net enrolment ment Index values for each of Pakistan’s opment’s (OECD) approach to deriving for these indicators are the Household In- rate at the matric level (0.284) and at the four provinces for 2018–2019 (table 4.2 adult equivalents. tegrated Economic Survey, the Pakistan middle school level (0.292). and map 4.1). The results show that Pun- Punjab has the highest Social and Living Standards Measurement The only indicator among the Child jab has the highest CDI value, followed by Child Development Index Health and nutrition (PSLM) Survey, and the Pakistan Demo- Development Index’s 11 indicators that has Khyber Pakhtunkhwa. Sindh, Balochistan, value, followed by Khyber graphic and Health Survey, carried out pe- experienced a decline is the percentage of and Khyber Pakhtunkhwa have CDI values Pakhtunkhwa, Sindh, and The four indicators used to gauge health riodically in the country.2 children in the two richest quintiles, which below the national average – almost 10.3 Balochistan. Punjab is the only and nutrition in the Child Development dropped from a sub-index value of 0.625 in percent, 39.3 percent, and 7.3 percent be- province whose value is above Index are: the percentage of fully-immu- National Child Development Index 2001–2002, to 0.544 in 2018–2019. low the national average, respectively. the national average. nized children, children who survive up to Overall, the national Child Develop- Among Pakistan’s provinces, Punjab the age of five, those who are not stunted, According to table 4.1, in 2018–2019, ment Index experienced an annual growth registers the highest values for nine of the
TABLE 4.1 TABLE 4.2
Trends in the national Child Development Index and in sub-indices, (2001-2019) Magnitude of Child Development Index and sub-indicies by province, (2018-2019)
2001-2002 2007-2008 2011-2012 2015-2016 2018-2019 Khyber Punjab Sindh Pakhtunkhwa Balochistan Pakistan Standard of living index 0.463 0.493 0.538 0.611 0.611 1) Income per child equivalent 0.275 0.445 0.515 0.601 0.618 Standard of living index 0.687 0.548 0.552 0.399 0.611 2) % of children in top two quintiles 0.625 0.563 0.540 0.575 0.544 1) Income per child equivalent 0.699 0.569 0.521 0.376 0.618 3) % of children not engaged in child work 0.490 0.472 0.558 0.656 0.670 2) % of children in top two quintiles 0.683 0.465 0.422 0.087 0.544 Education index 0.273 0.357 0.428 0.411 0.420 3) % of children not engaged in child work 0.679 0.610 0.712 0.735 0.670 1) Primary level enrolment rate 0.420 0.550 0.570 0.570 0.528 Education index 0.542 0.392 0.361 0.183 0.420 2) Middle level enrolment rate 0.213 0.240 0.293 0.293 0.292 1) Primary level enrolment rate 0.596 0.477 0.478 0.330 0.528 3) Matric level enrolment rate 0.180 0.220 0.260 0.280 0.284 2) Middle level enrolment rate 0.365 0.208 0.242 0.152 0.292 4) Education expenditure per child 0.280 0.417 0.590 0.499 0.578 3) Matric level enrolment rate 0.377 0.209 0.167 0.112 0.284
Health and nutrition index 0.454 0.545 0.598 0.677 0.694 4) Education expenditure per child 0.828 0.673 0.558 0.137 0.578
1) % Immunised fully 0.413 0.663 0.775 0.775 0.777 Health and nutrition index 0.736 0.607 0.685 0.466 0.694 2) % not stunted 0.417 0.448 0.473 0.526 0.558 1) % Immunised fully 0.919 0.730 0.654 0.304 0.777 3) % not wasted 0.715 0.723 0.730 0.794 0.828 2) % not stunted 0.649 0.413 0.525 0.442 0.558 4) Infant survival rate 0.271 0.347 0.413 0.538 0.613 3) % not wasted 0.908 0.710 0.815 0.558 0.828 Child Development Index 0.397 0.465 0.521 0.560 0.575 4) Infant survival rate 0.467 0.573 0.747 0.560 0.613 Average annual growth rate - 2.68% 2.90% 1.80% 0.90% Child Development Index 0.655 0.516 0.533 0.349 0.575
Source: UNDP calculations based on multiple years of HIES, PSLM, and PDHS. Source: UNDP calculations based on the HIES 2018–2019, the PSLM 2018–2019, and the PDHS 2017–2018.
72 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 Special measures of inequality 73 MAP 4.1 province whose Child Development Index on all three sub-indices. Sindh performs value is higher than the national average. especially poorly in terms of health and nu- Sindh’s Child Development Pakistan Child Development Index, (2018-2019) The province registers relatively high val- trition, while gaps in education are greatest Index value is lower than the ues on all three sub-indices. By contrast, in Khyber Pakhtunkhwa and Balochistan. national average because of the other three provinces perform poorly health and nutrition, while Khyber Pakhtunkhwa’s and CHILD DEVELOPMENT INDEX (CDI) TABLE 4.3 Balochistan’s values are below average due to education. High CDI 0.700 and above Factors that contribute to deviations from the national CDI value (%) Medium CDI 0.550 - 0.699
Low CDI 0.549 and below Child Standard Health and Development of living Education Nutrition Index Punjab 4.4 7.1 2.4 13.9 Child Development Index for Pakistan: 0.575 Sindh -3.7 -1.6 -5.0 -10.3 Khyber-Pakhtunkhwa -3.4 -3.5 -0.4 -7.3 Balochistan -12.2 -13.7 -13.4 -39.3
Source: UNDP calculations based on NHDR 2020 CDI. BALOCHISTAN KHYBER 0.349 PAKHTUNKHWA 0.533 Youth development and 3. the employment-to-population ratio inequality of Pakistan’s youth;
Pakistan’s burgeoning youth population – 4. the extent to which employed youth comprising young people between 15 and are engaged in full-time jobs (35 or 29 years old – will be a potentially vital more hours a week); and factor in accelerating the pace of economic growth. However, progress will depend on 5. the youth mortality rate, which is used whether youth entering employment have to calculate the Youth Survival Index. more education and skills than the existing labour force, and whether they are fully Primary sources of data for the Youth and productively absorbed into employ- Development Index are the various Labour Force Surveys undertaken by the Pakistan PUNJAB SINDH ment with quality jobs. Otherwise, with 0.655 0.516 growing numbers of ‘idle’ unemployed Bureau of Statistics since 2001–2002, as youth, there is an increased risk of crime well as the Pakistan Demographic and and violence cloaked in the garb of ethnic- Health Survey 2006–2007, and the Paki- stan Maternal Mortality Survey 2019 by Source: UNDP calculations based on the HIES 2018–2019, the PSLM 2018–2019, and the PDHS 2017–2018. ity, sectarianism, or religion. The NHDR 2020 constructs a Youth the National Institute of Population Stud- Development Index (YDI) primarily to as- ies (NIPS). Child Development’s 11 indicators. Khy- es have a very high incidence of stunting The Youth Development Index in- ber Pakhtunkhwa performs exceptionally and wasting among children. Social pro- sess trends in young people’s human capital endowment, and the extent to which they cludes estimates at the national level for well on three indicators: the percentage tection programmes for child development 2001–2002, 2007–2008, 2012–2013, and of children who are not engaged in child in Sindh and Balochistan need more of a contribute to the economy through full- time employment (figure 4.1). The Youth 2017–2018, and at the provincial level for labour, the percentage who do not suffer focus on food supplements, immunization 2017–2018, with a gender-based variation from wasting, and the survival rate among coverage, and enhancing enrolment rates Development Index is based on five key indicators: in the index calculated at the national lev- infants. at the middle school and matric levels. el.3 Balochistan registers low values for vir- 1. the mean years of schooling of the Sources of inequality in the Child De- tually all indicators, except the percentage youth population; National Youth Development Index of children who are not engaged in child velopment Index labour. In fact, both Balochistan and Sindh 2. their enrolment rate in higher educa- The national Youth Development Index are facing a nutrition crisis – both provinc- As table 4.3 reveals, Punjab is the only tion (colleges or universities); only grew at a rate of 1.41 percent per year
74 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 Special measures of inequality 75 from 2012 to 2018, and stood at a moder- growth. MAP 4.2 ate value of 0.605 in 2017–2018. A down- ward trend is evident in two of its indica- Provincial Youth Development Index Pakistan Youth Development Index, (2017-2018) tors: the employment-to-population ratio for youth and the percentage of youth who The Youth Development Index at the YOUTH DEVELOPMENT INDEX (YDI) are in full-time employment (figure 4.1). provincial level in 2017–2018 shows that Sindh and Punjab perform The indices which registered a positive Sindh and Punjab perform better than the High YDI 0.700 and above
better on the Youth trend are years of schooling, the extent of national average (map 4.2). This is due Medium YDI 0.550 - 0.699 Development Index than enrolment in higher education, and the to higher levels of full-time employment Low YDI 0.549 and below Khyber Pakhtunkhwa and youth survival rate. among youth in Sindh, and Punjab’s slight- Balochistan. The results indicate that, fundamen- ly better performance in terms of young tally, the working environment has not people’s years of schooling. Youth Development Index for Pakistan: 0.605 changed for Pakistan’s youth over time. Among the provinces, Punjab performs The most rapid improvement in the Youth best in terms of years of schooling and Development Index, albeit at a low rate the youth employment-to-population ra- of almost 2.0 percent, was apparent be- tio. Khyber Pakhtunkhwa has the highest
tween 2001–2002 and 2007–2008, during levels of youth enrolment in higher edu- BALOCHISTAN KHYBER the tenure of the Musharraf government. cation. Sindh has the highest percentage 0.435 PAKHTUNKHWA 0.572 The index subsequently experienced little of youth in full-time employment in the FIGURE 4.1 country, while Balochistan has the highest youth survival rate.4 Trends in the national Youth Development Index and its sub-indices*, (2001- 2018) Sources of inequality in the Youth
HDI Development Index 1.000 Punjab performs better than the national 0.900 average on the Youth Development Index because of the province’s better perfor- % of fully employed youth 0.800 mance on education indicators (table 4.4). Sindh’s above average YDI value is due
0.700 largely to a higher rate of the absorption of young people into employment. Khyber PUNJAB SINDH 0.621 0.630 Youth Development Index Pakhtunkhwa has a lower YDI value than 0.600 Youth Survival Index Years of schooling of youth the national average because of low rates % of enrolled youth in higher education of youth employment. Balochistan’s poor Source: UNDP calculations based on LFS 2017-2018 and PMMS, 2019. 0.500 performance on the index is due to low Youth employment-to- population ratio levels of education among its youth. TABLE 4.4 0.400 The determining equation is: Youth bulge: Not just unemployed but Impact of different factors on deviation from the national YDI value Number of [100 – employment-to-pop- 0.300 also ‘idle’ ‘idle’ or unem- = ulation ratio - % of youth ployed youth enrolled in higher educa- Youth Years of employment of youth in of fully deviation 0.200 This analysis also enables the NHDR 2020 tion] X youth population schooling to population higher employed from National to quantify the number of ‘idle’, or unem- of youth ratio education youth YDI ployed, youth in Pakistan. This is perhaps 0.100 There are as many as 27 million ‘idle’ or Punjab 1.6 0.0 2.0 -1.3 2.3 the key indicator of the extent to which unemployed young people in Pakistan Sindh -1.2 0.5 -0.8 5.3 3.8 the youth bulge has been accompanied by 0 (figure 4.2). One-quarter are young men, a high rate of the absorption of young peo- Khyber-Pakhtunkhwa -3.5 -4.3 6.6 -4.6 -5.8 2001-02 2007-08 2012-13 2017-18 while most (three-quarters) are young ple into full-time jobs, thereby contribut- Balochistan -10.3 -5.5 -17.8 5.3 -28.3 Note: The actual value of each indicator is given in the Statistical Annex. women. This highlights the predicament ing to higher national income. Source: UNDP calculations based on NHDR 2020 YDI. Source: UNDP calculations based on multiple years data of LFS, PDHS, and PMMS. that Pakistan finds itself in. The large pop-
76 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 Special measures of inequality 77 ulation of youth, their expectations raised engage 44.28 percent and 38.49 percent, ation without gender-based discrimina- Employment-to-population ratio in the run-up to the 2018 General Election respectively, of the country’s total em- tion. Pakistan has always had a gender gap by the ruling party, face the prospect of an ployed workers. in wages. National statistics show that the This dimension provides information uncertain future and a lack of opportu- In 2006, the Government of Paki- adjusted gender wage gap across all occu- about the economy’s ability to absorb the nities. Tackling this challenge must rank stan embarked on the process of estab- pation groups amounts to 50 percent. This labour force drawn from a country’s popu- high among the Government’s priorities to lishing decent work standards. Pakistan’s means that men are likely to earn 50 per- lation of working age. It is a more represen- prevent rising frustration and disengage- third Decent Work Country Programme cent more than women employed at the tative measure of labour absorption in the 11 ment among Pakistan’s youth. (DWCP III) 2016–2020 is currently be- same level or in the same position. The market than the unemployment rate. If the ing implemented.5 However, the country’s adjusted gender wage gap is slightly higher FIGURE 4.2 employment-to-population ratio increases, massive ‘industrial reserve army’ keeps it in rural areas (52 percent) than in urban it indicates that a larger number of people 12 Number of ‘idle’ or unemployed male and from achieving Sustainable Development areas (46 percent). of working age are gaining employment. female youth in millions, (2017-2018) Goal 8, with its focus on decent work for Pakistan desperately needs to lay the This means that more people are working, There are 27 million ‘idle’ youth all. groundwork for decent work for all. This indicating a positive development in the in Pakistan; three-quarters are Decent work is defined as a job and is vital to reduce inequality, while curb- labour market. young women and one-quarter work environment where workers’ funda- ing the sense of deprivation and lack of are young men. mental rights are protected – such as work self-worth that plague workers toiling in Share of labour income safety, respect, decent working hours, and deplorable working conditions. Happy, fair remuneration – where there is space satisfied workers translate into a more pro- This measure provides information on the Female 13 20.3 to maintain physical and mental integrity, ductive labour force. proportion of income accruing to workers Male room for professional and personal devel- Pakistan’s labour protection laws do set out of total national income. An increase opment without gender-based discrimina- standards for minimum wages and work- in this dimension indicates that workers tion, and space for freedom of speech. ing hours, but these only cover the formal are receiving a higher share of national in- Despite Pakistan’s Minimum Wage sector. Workers in the informal and agri- come, reflecting a positive labour-related Ordinance of 1961, in 2018 only around cultural sectors comprised the bulk (82.77 development. 53 percent of Pakistan’s total employed percent) of those employed in 2018, yet Male 6.7 workers received the minimum wage, earn- they are unprotected by labour laws or reg- Skill premium ing less than PKR 17,500 per month.6 Of ulatory authorities, while lacking job safety 14 those employed, 40.42 percent do not have and health insurance. This dimension reflects how much more decent working hours; as such they work likely educated, skilled persons are to earn either more than 48 hours per week or six Labour Development Index an income, compared to those who are un- days each week, or less than 10 hours per Source: UNDP calculations based on LFS, 2017-2018 and PES, week.7 To assess labour development and the FIGURE 4.3 2016-2017. Vulnerable employment with low wages gravity of the situation in the country, the Dimensions of the Labour Development and no health insurance is not considered NHDR 2020 constructs Pakistan’s first Index Labour development and decent work. In 2018, 3.74 percent of em- ever Labour Development Index in normal The NHDR 2020 constructs Pakistan’s first ever Labour inequality ployed workers in Pakistan suffered from conditions (LDIN) and a Labour Devel- occupational injuries or diseases at work. opment Index with decent work inclusion Employment Development Index, both with 15 to population and without the inclusion of Countries like Pakistan, with a huge sur- Most (2.94 percent) were in rural areas, (LDIDW). The Labour Development In- ratio plus of labour, have what Karl Marx termed compared to far fewer (0.8 percent) in ur- dex ranges from 1 to 0, where the value of decent work. 8 an ‘industrial reserve army’ – that is, work- ban areas. 1 reflects the highest level of labour devel- The Constitution of Pakistan and many opment, and 0 the lowest. The LDI has Incidence Share of ers who are irregularly employed. A surplus N of decent labour of its laws prohibit the employment of four dimensions: the employment-to-pop- work Labour income of low-skilled or unskilled workers, most Development of whom are illiterate, is an inexhaustible children who are under the age of 14. De- ulation ratio, the share of labour income, Index (with reservoir of ‘disposable’ manpower. A lack spite this, 2.92 percent of the country’s la- the skill premium, and human capital. The decent work) of education and skills, coupled with lim- bour force is between 10 and 14 years old; LDIDW includes these four dimensions ited alternative livelihood opportunities, that is, approximately 1.8 million children with the addition of one more: the inci- 9 are engaged in work. Figures are higher dence of decent work, comprising three Human Skill makes these workers easily exploitable, capital premium willing to live and toil in deplorable con- in rural areas (1.57 million) than in urban sub-indicators. All five dimensions are dis- 10 16 ditions to make ends meet. In Pakistan, the centres (0.24 million). cussed briefly below (figure 4.3). informal sector and the agricultural sector Decent work also entails fair remuner-
78 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 Special measures of inequality 79 FIGURE 4.5 educated and unskilled. The skill premium 10 hours and below 48 hours); 2018, the national LDIDW stood at a low can have a negative connotation as well; an value of 0.442. Changes in the dimensions of the national increase in the difference in wages between c. the percentage of the labour force em- The long-term trend shows that nation- Labour Development Index, (2012-2018) the highly-educated and those who are un- ployed in the formal sector, which cap- al labour development is indeed increasing, educated implies an increasing disparity in tures those working under the protec- but the extent of development decreases Employment to population income distribution. However, when con- tion of labour laws; when decent work indicators are consid- Skill premium Share of labour income structing the Labour Development Index, ered, resulting in lower LDIDW values. This the NHDR 2020 used a positive interpre- d. the percentage of the employed who implies that although general labour devel- Human capital tation for the skill premium, treating it as a are paid, excluding contributing family opment in Pakistan is increasing, decent Incidence of decent work
‘measure of returns on education’. The log- workers; and work is not growing at the same pace, and % 30 ic behind this interpretation is that labour needs to pick up pace. The good news is 29% productivity should increase if there is an e. the gender wage ratio. that, over the years, the LDIDW value is
increase in the quality of the labour force, catching up with Pakistan’s LDIN value. that is, an increase in more highly-educated National Labour Development Index This trend indicates that decent work and skilled workers. An increase in the skill conditions in Pakistan’s labour market are 25
premium, therefore, reflects an increase in Figure 4.4 plots the national LDIN and improving, albeit slowly. Between 2012
labour development. LDIDW over time. The results reveal that and 2018, a decline in the labour force par- including the incidence of decent work in ticipation rate led to a reduction in the em- Although it is improving Human capital the index suppresses the values of the nor- ployment-to-population ratio (figure 4.5). 20 slowly, Pakistan’s Labour mal Labour Development Index. In other This decline was caused by young people Development Index value The fourth dimension of the Labour De- words, the LDIDW with decent work in- entering the labour market later in life, ei- (with decent work inclusion) velopment Index considers mean years of clusion is lower than the LDI . In 2017– ther because more of them pursued higher N 15 is quite low. schooling, measuring the stock of knowl- education to become more competitive in edge, social capital, and an individual’s FIGURE 4.4 the labour market, or because they migrat- personality. The index includes this di- ed abroad in search of better opportuni- Over the years labour development is 17 mension because it reflects the ability of improving with regards to decent working ties. 10 the labour force to contribute to the econ- conditions, (2012-2018) A reduction in returns on education omy. As such, it determines the position of (the skill premium) can be explained by 7% 7%
labour development in the market. An in- 0.45 the increase in the unemployment rate crease in human capital reflects an increase for highly-skilled individuals (4 percent), 5 in labour development as well. and a decline in the unemployment rate for low-skilled and unskilled workers (1 Incidence of decent work 0.44 18 LDI Normal percent) between 2012 and 2018. The reason for this could be the lack of quali- 0
This dimension captures the labour mar- LDI including decent work ty jobs needed to absorb highly qualified ket’s ability to provide decent work. In this 0.43 workers. context, and in line with available data, de- Meanwhile, the positive trend in the -3% cent work is defined as work that is at least share of labour income can be explained -5 10 hours or up to 48 hours per week, pays by a 55 percent increase in the average 0.42 above the minimum wage, and is in a sector monthly wages at the national level, both -7% protected by labour laws – that is, the for- in nominal and real terms, from 2012 to mal sector. To quantify decent work, the 2018.19 This is certainly a step in the right -10 NHDR 2020 uses five sub-indicators: 0.41 direction. However, a point of concern
remains: the highest proportion of the to- Source: UNDP calculations based on Pasha 2019 and multiple years a. the percentage of the labour force who tal civilian labour force (37.7 percent in of LFS. earn more than the minimum wage, 0 2018) remains illiterate and adds no value out of the total employed labour force; 2012-13 2014-15 2017-18 to human capital. This group is most like- to a report published in 2015 by the South ly to be part of lower-income households Asia Forum for Education and Develop- b. the percentage of employed work- Source: UNDP calculations based on Pasha 2019 and multiple years because low levels of income play a role in ment (SAFED), children from the poorest of LFS. ers with decent working hours (above keeping children out of school. According backgrounds are twice as likely to remain
80 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 Special measures of inequality 81 out of school as those from the richest.20 employed worked as contributing family MAP 4.3 The overall increase in the incidence workers (13.2 million), who are not paid of decent work can be attributed to im- at all. Women are still being paid 50 per- Pakistan Labour Development Index, (2017-2018) proved performance on a number of in- cent less than men in positions of the same dicators. The greatest improvement is level (box 4.1). About 32.8 million people apparent in terms of the percentage of in Pakistan do not work decent working LABOUR DEVELOPMENT INDEX (LDI) employed persons who are paid above the hours (40 percent), and around 51 million minimum wage, followed by an increase (83 percent) work without the protection High LDI 0.700 and above in the percentage of workers employed in of labour laws. Medium LDI 0.550 - 0.699
the formal sector. This is evident from the Low LDI 0.549 and below 16 percent increase in employment in the Regional inequality in the labour
formal sector, compared to an increase of market Labour Development Index for Pakistan: 0.442 7 percent in the informal sector, and a 12 percent decline in the agricultural sector, Pakistan’s labour market is an amalgama- between 2012 and 2018. This suggests that tion of its provincial labour markets, each improvements in the incidence of decent characterized by different labour dynam- work are more likely to be caused by bet- ics. To understand the change in national ter working conditions in the formal sector labour indicators and dynamics, it is essen- BALOCHISTAN KHYBER 0.405 PAKHTUNKHWA than in the less protected informal or agri- tial to look at the provincial level. As such, 0.421 cultural sectors. the NHDR 2020 has constructed the first
Thus, it is no wonder that, despite im- provincial LDIDW in Pakistan’s history, in provements in the incidence of decent order to understand labour dynamics and work, about half of those employed in Pa- the depth of disparities between the prov- kistan (53 percent) were not being paid the inces.21 minimum wage in 2018 – about 24.9 mil- The results show that the provincial
lion people. In tandem, 21 percent of those LDIDW increased for all provinces from
BOX 4.1
Inequality in wages in the labour market
There are two dimensions to inequality in work-related payments. The fundamental problem is not relative wages, but the low lev- The first is the share of wages in national income, which is relatively el of wages of the ‘lower’ categories of workers. As noted above, a
low in Pakistan, at 42 percent. large percentage of such workers do not even receive the minimum PUNJAB SINDH The second is inequality between workers with different skill en- wage set by provincial governments. Some 57 percent of plant and 0.432 0.478 dowments in the total remuneration received. Wage data became machinery operators, for instance, did not earn the minimum wage in available for the first time in the Labour Force Survey of 2008–2009 2017–2018. The corresponding percentages for sales workers, craft
for nine categories of workers – ranging from managers and profes- workers, and workers in elementary occupations were 66 percent, 61 Source: UNDP calculations based on Pasha 2019 and LFS, 2017-2018. sionals, to those engaged in ‘elementary occupations’. percent, and 77 percent, respectively. The skill premium in 2017–2018, adjusted for the population, was As the presence of trade unions and collective bargaining process- 2.61 as measured by the ratio of emoluments of the top two, and bot- es remain limited in Pakistan, it is not surprising that the corporate 2012 to 2018, but not by much. In fact, ranking in terms of labour development. tom two, occupations. It fell to 3.01 in 2008–2009, slightly less than sector does not adequately share its growing profits with workers. its peak of 3.03 in 2014–2015. The decline in returns on education Between 2014 and 2018, net corporate profits went up substantially, in 2017–2018, all provincial values were Sindh, Pakistan’s economic hub, performs is evident in the increased unemployment rate for highly-educated rising by 75 percent. However, workers’ remuneration in large compa- below 0.500 – a worrisome state of affairs best on two indicators: human capital, and (map 4.3). Punjab experienced the highest the skill premium. It also has the highest individuals – that is, people with degrees, post-graduate studies, and nies only increased by 41 percent. Sindh has the highest Labour PhD holders. This rate rose from 7.18 percent in 2008–2009 to 25.75 Provincial labour departments will have to function more effec- increase (7.2 percent), followed by Baloch- overall Labour Development Index value Development Index value with percent in 2017–2018, according to table 35 of the Labour Force Sur- tively to address this situation. There is a clear need to monitor the istan (6.9 percent), Sindh (6.6 percent), with decent work inclusion (LDI ). Pun- DW decent work inclusion, followed veys of 2008–2009 and 2017–2018. level of wage payments, especially for relatively unskilled workers. and Khyber Pakhtunkhwa (4.9 percent). jab, the most populous province with the closely by Punjab, and then The NHDR 2020 computes the Gini coefficient of wage distribution Labour courts must address complaints by workers regarding the Sindh maintained its top ranking in terms highest rate of labour force participation, Khyber Pakhtunkhwa and among the nine main categories of workers in Pakistan. It was 0.19 in non-payment of at least the minimum wage. This is essential to re- of labour development that includes de- performs well in one indicator: the abili- Balochistan. 2008–2009, and is estimated at 0.21 in 2017–2018. Therefore, wage duce the incidence of poverty among Pakistan’s workers. cent work, while other provinces have at- ty to absorb the labour force. However, it inequality is not very pronounced and has grown only modestly. tempted to catch up. fares worse on two indicators: human cap- Figure 4.6 shows the overall provincial ital and the incidence of decent work. As a
82 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 Special measures of inequality 83 FIGURE 4.6 percent) and the informal sector (44 per- than men in percentage terms, revealing sume holding Pakistan Tripartite Labour FIGURE 4.7 cent), which comprises cottage industries that the greatest difference in wages is in Conferences. These are important fora for Provincial Labour Development Index rankings by indicator values, (2017- Gender wage ratios, (2012- 2018) as well. Compared to this, only 17 percent Punjab. Here, women earn 52 percent less discussing the ILO Conventions that Paki- 2018) of Punjab’s employed labour force works in than men for jobs of the same level. Sindh stan has ratified, gaps in legislative frame- the formal sector.22 This implies that, de- follows, with women earning 39 percent works, and other labour issues. Male Female Employment Share of spite having the largest capacity to absorb less than men. In Khyber Pakhtunkhwa, Legal provisions can also be enacted to Ratio Punjab LDI to population labour income Skill Human Incidence of Ranking ratio in GDP premium capital decent work its labour force, workers in Punjab are less women earn 26 percent less than men, ensure that informal sector workers receive 0.8 1 Balochistan likely to enjoy decent work standards. while in Balochistan, they earn 24 percent at least the minimum wage, have access to 0.6 Khyber Pakhtunkhwa has the highest less. Nevertheless, the good news is that social security, and enjoy decent terms of share of labour income among Pakistan’s improvements are apparent over the years employment and workplace conditions. 0.4 provinces. However, this growth in income – that is, the gender wage ratio has nar- Such laws should not apply exclusively to 0.2 is largely led by a flourishing informal mar- rowed, although at a snail’s pace. registered formal sector organizations. For 0 2012-13 2014-15 2017-18 2 Khyber ket with no protection of labour rights – a A major concern is that much of Paki- that matter, the Government and civil soci- Pakhtunkhwa worrying situation. stan’s employed population works in the ety organizations should educate informal Ratio Sindh In terms of the incidence of decent informal and agricultural sectors as an in- workers about their legal rights. In tan- 0.8 work, Balochistan performs better on the dustrial reserve army, largely in conditions dem, all labour rights should be extended 0.6 index than the other provinces. However, with little or no occupational safety and to informal workers, including the right to 0.4 this does not mean that the province has health (OSH) measures in place. Given the 3 Sindh form unions for workers without perma- better labour market conditions. Its higher prevalence of child labour, the gender wage nent contracts. This will help to curb the 0.2 ranking in this dimension is due to a com- gap, occupational injuries, and employees exploitation of workers by employers. 0 2012-13 2014-15 2017-18 paratively higher number of people em- working excessive hours at below the mini-
ployed in the formal sector (19 percent), mum wage, decent work for all seems like a Sources of inequality in the Labour Ratio Khyber Pakhtunkhwa the second greatest proportion after Sindh difficult goal to achieve. Development Index 0.8 4 Punjab (21 percent). Since the formal sector tends There have been improvements, but 0.6 to have better working conditions, Ba- progress is slow. For instance, after the Sindh is the only province with higher 0.4 lochistan emerges at the top. Given that 18th Amendment in 2010, responsibility LDI values than the national average be- DW 0.2 so many more workers are employed in for labour and other social domains was cause it has the highest skill premium and Balochistan’s informal sector (40 percent) devolved to the provinces. A decade lat- 0 5 human capital, coupled with a moderate 2012-13 2014-15 2017-18 and agricultural sector (40 percent) than er, provincial governments are still in the incidence of decent work (table 4.5). Pun- in the formal sector, only 19 percent of process of adapting federal legislation. Ba- jab performs lower than the national aver- Ratio Balochistan 0.9 Source: UNDP calculations based on Pasha 2019 and LFS 2017-2018. people employed in Balochistan enjoy de- lochistan is far behind in terms of adopting age because of its lower skill premium, hu- cent work conditions. required labour laws, while Punjab, Sindh, man capital, and incidence of decent work. 0.7 result, the province has the second highest It is no surprise that Sindh, whose in- and Khyber Pakhtunkhwa have at least ad- Khyber Pakhtunkhwa performs lower than 0.5 LDI value in the country. Khyber Pakh- dustrial and service sector hub is Pakistan’s opted the fundamental laws, regardless of average because it has the lowest labour 0.3 DW economic capital, has the highest skill pre- their level of implementation. Overall, in- tunkhwa performs best on one indicator, absorption capacity among the provinces, 0.1 mium and human capital among the prov- terprovincial disparities continue. the share of labour income, but its perfor- and a low skill premium. Balochistan per- 2012-13 2014-15 2017-18 mance is poor or average on other indica- inces. It does comparatively better in terms Appropriate policy measures are ur- forms far more poorly than all other prov- of labour development, including improv- gently needed to address the challenges to tors compared to the other provinces. As a inces, and lower than the national average, Ratio Pakistan ing decent work for all. decent work that hamper Pakistan’s over- result, it ranks third in terms of its LDI because of its poor labour absorption ca- 0.8 DW Gender-based discrimination in the all human development and economic value. Balochistan performs best in one pacity, extremely low skill premium, and 0.6 dimension, the incidence of decent work, labour market is yet another setback that growth. Several measures can be taken to low human capital. perpetuates labour inequality and hampers lessen discrimination in the labour mar- 0.4 but ranks last overall on the LDIDW. In terms of the dimensions of the La- labour development. Figure 4.7 illustrates ket, such as the effective implementation 0.2 provincial and national adjusted gender of laws, and learning from other provinc- The gender wage ratio reveals bour Development Index, as noted above, 0 23 2012-13 2014-15 2017-18 discrimination in the labour Punjab has the greatest capacity to absorb wage ratios (female/male), an indicator es. First, as in Sindh, each province’s In- which is used to gauge the incidence of de- dustrial Relations Act should affirm the market by showing how much its population of working age into the Source: UNDP calculations based on less women earn than men. labour market, as measured by the em- cent work. It is alarming to see the differ- right of agricultural and informal sector multiple years of LFS. This ratio is highest in Punjab, ployment-to-population. As an agrarian ences in adjusted gender wage ratios over workers to form trade unions, like their followed by Sindh, Khyber economy, most of Punjab’s labour force is the years. In 2017–2018, the gender wage counterparts in the formal sector. Second, Pakhtunkhwa, and Balochistan. concentrated in the agricultural sector (38 ratio showed how much less women earn all of the provinces should, like Sindh, re-
84 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 Special measures of inequality 85 TABLE 4.5 PML-N government, before increasing to National Gender Development Index 0.564 in the 2015–2020 period. HDI values for both women Impact of different dimensions on deviation from the national Labour Development Index To assess inequality in gender devel- The Gender Development Index is derived and men improved between opment, the NHDR 2020 uses the gen- after obtaining the ratio of the HDI values 2006 and 2019, leading to an Labour der-based Child Development Index, Employment Share of Incidence Development for women and men. The results suggest improvement in the Gender to population labour income Skill Human of decent Index Youth Development Index, and Labour that the HDI values for both women and Development Index. ratio Index in GDP premium capital work (decent work) Development Index, in addition to the men improved between 2006–2007 and Punjab 1.7% 0.3% -1.2% -1.5% -1.5% -2.1 HDR’s two traditional indices. The tra- 2018–2019 (figure 4.9). Overall, the pace ditional gender inequality indices are the Sindh -0.8% -2.5% 5.8% 3.0% 2.7% 8.1 of improvement in the female HDI value Gender Development Index (GDI), which still ranks in the category of low human de- Khyber Pakhtunkhwa -4.5% 4.0% -4.4% 1.8% 3.9% -4.7 calculates the gap in achievements of wom- velopment compared to men’s HDI value, Balochistan -2.2% 1.9% -7.1% -1.3% 6.5% -8.2 en and men caused by gender disparities, which falls in the medium human develop- Source: UNDP calculations based on Pasha 2019 and LFS 2017-2018. and the Gender Inequality Index (GII) ment category. Pakistan’s overall Gender that calculates gender inequality’s cost to Development Index value in 2018–2019 human development. was 0.777. The percentage increase in the Gender development and 2030. Pakistan is ahead of only Iraq and Ye- Gender Development Index inequality men on the Global Gender Gap Index FIGURE 4.9 2020. It ranks 151st of 153 countries on The Gender Development Index shows Pakistan Gender Development Index, Gender equality is at the heart of the 17 this index, having closed only 56 percent how much women lag behind men in each (2006-2019) Sustainable Development Goals, adopt- of the gender gap in the country.28 This dimension of human development. To ed by all UN Member States. Not only is the lowest ranking among South Asian gauge this gap, the NHDR 2020 computes Female HDI Male HDI GDI Pakistan are gender equality and women’s empow- countries, continuing the trend observed the Gender Development Index using the HDI erment a standalone goal in themselves since 2015, when it ranked 144th of 145 HDI values for women and men, as de- 1.000 (SDG 5), they are also a cross-cutting issue countries on the index. With the exception fined by UNDP’s standard methodology across all 17 global goals. SDG 5 includes of political empowerment, where Pakistan for 2006–2007, 2012–2013, 2015–2016, 0.900 an explicit commitment to ending discrim- ranks 93rd, the country performed poorly and 2018–2019.29 ination against all women and girls every- in terms of educational attainment (rank- As in the HDI, the gender-based dimen- 0.800 where, including gender-based violence in ing 143rd), health and survival (149th), sion of health in the Gender Development the public and private spheres. Given the and economic participation and opportu- Index is estimated using the indicators of 0.700 cross-cutting nature of gender equality, it nity (150th). As table 4.8 shows, Pakistan’s life expectancy at birth for women and is crucial to view the issue not just in terms overall performance on the Global Gender men. Similarly, gender-based adult litera- of the equal allocation of, and access to, re- Gap Index improved to 0.559 during the 0.600 cy for persons over the age of 15, and the sources, but rather in terms of equality of 2013–2015 period, the early years of the 24 opportunity for resources and rights. net enrolment ratio in the 5–14 year age 0.500 group, are used as the proxy for education. Women are more likely to be affected FIGURE 4.8 To calculate the estimated earned in- by low human development than men. The 0.400 deprivations they face affect both their Pakistan’s performance on the Global comes of women and men, the NHDR own productivity, as well as their ability Gender Gap Index, (2006-2018) 2020 calculates the wage bill, applying to contribute to the overall economic de- the ratio of both wages in terms of pur- 0.300 velopment process. Women account for 0.6 chasing power parity (PPP $). The other 0.559 0.564 around 47 percent of the world’s labour 0.543 0.546 indicators are women’s and men’s employ- 0.200 force.25 In South Asia, this figure is low- ment-to-population ratio, the proxy for Women account for only 22 er, at around 24 percent. It is even lower the economically active population, as well 0.100 percent of Pakistan’s labour in Pakistan, at 22 percent, 2 percent more 0.4 as women’s and men’s shares of the popula- force. than in India, and 14 percent lower than tion, and gross national income (GNI) per 0 in Bangladesh.26 At the current rate, it will capita. The NHDR 2020 only analyses Pa- 2006-07 2012-13 2015-16 2018-19 take over two centuries (202 years) to close kistan’s Gender Development Index at the 0 national level. Note: GDI is the ratio of female to male HDI values. the gender gap in economic opportunities 2006 2013 2015 2020 Source: UNDP calculations based on HIES, 2005-2006, 2011-2012, worldwide27, unless the world achieves 2015-2016, and 2018-2019; Global HDR, 2018, and Population census, SDG 5’s aspirations of gender parity by Source: WEF 2020. 2017.
86 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 Special measures of inequality 87 FIGURE 4.10 Gender Development Index from 2006– the better a country’s performance in terms SPECIALBalochistan CONTRIBUTION and Khyber Pakhtunkhwa. Khawar Mumtaz 2007 to 2015–2016 remained at just 4.1 of reducing the loss to human development Wider gap in female and How gender and poverty are intertwined in Pakistan male earnings, (2006-2019) percent, before decreasing by 0.5 percent caused by gender inequality. The higher between 2015–2016 and 2018–2019. It the level of gender inequality, the greater Sustainable Development Goal 1, ‘End poverty in all its forms every- voter registration (approximately 12.4 million in the 2018 elections) Estimated earned income PPP is important to note that the average HDI the loss to human development. values for women and men (0.564) in In 2015, Pakistan ranked 130th of 188 where’, is indicative of the recognition of different dimensions of pov- and vulnerability to domestic violence (44 percent of men and wom- erty – looking beyond the numbers of those living under US$2 a day, en believe that husbands are justified in beating their wives). Conse- Male 2018–2019 are close to the national HDI countries on the global Human Develop- to how poverty impacts different members of a household. quently, the dependency ratio in poor households that are also large value (0.570) calculated in this report. ment Report’s Gender Inequality Index, 7,385 Poverty for women (and the third gender), who are often the poor- in size continues to negatively affect their poverty condition. Multiple factors affect women’s partici- falling from a ranking of 121st in 2014. est of the poor in Pakistan, is intertwined with their unequal status Pakistan’s policy makers recognized the social and gender di- pation in economic growth, decision-mak- In 2017, Pakistan ranked 133rd on the at home and in society. As a result, the vulnerability of women and mensions of poverty in the Poverty Reduction Strategy Paper back Female ing, and their mobility. This trend suggests Gender Inequality Index among medium girls is increased. They do not have a say in household decisions, ed- in 2003, and linked poverty reduction to the removal of the “social 1,385 that improvements in the female adult human development countries. In terms of ucation, employment, and marriage, nor do they have agency. While and economic constraints that have hampered women’s access to 2006-07 literacy, an increase in women’s labour countries in South Asia, Pakistan ranks be- poverty drives women to enter the labour force, it also prevents them and use of resources.” However, these barriers persist and continue force participation, and in women’s life low India (127th) and just one place above from acquiring education or employable skills, restricting them to to prevent women from realizing their potential – a reality evidenced expectancy contribute to gender-related Bangladesh (134th).31 menial or low-skill jobs – either as domestic helpers or home-based by Pakistan ranking 151st of 153 countries in the World Economic human development achievements up to The NHDR 2020 computes a Gen- workers in urban areas, or non-formal workers in agriculture and fish- Forum’s Gender Gap Index 2020. 7,528 2018–2019. However, the gap in women’s der Inequality Index at the national and eries in rural areas. The perception continues of women as lower status dependants, and men’s wage bills has increased (figure sub-national levels based on UNDP’s Given that education, paid employment, and household well-being their work largely invisible, lacking information about opportunities, are positively correlated with women’s decision-making, the estimat- assets and services, and without control over resources. Additionally, 4.10). The estimated earned income of methodology used to measure human de- ed 12.5 million girls who are out of school, and only 12 percent of women’s mobility remains restricted, their skills are not marketable, 1,459 both genders reveals that, in 2018–2019, velopment indices and indicators. This young women (15–29 years old) who complete middle level educa- they have no voice, and they continue to face violence and the fear 2012-13 women in Pakistan earned an average of composite index gauges the inequality in tion in Pakistan, have limited opportunities for meaningful employ- of violence. US$1,673 (PPP $ equivalent) compared women’s and men’s achievements through ment. Women’s low-paying informal sector employment does not It is obvious that realization is important, but not enough, to ad- to an average of US$9,335 (PPP $ equiv- three aspects of human development: re- contribute to household well-being, lift households out of poverty, or dress gender and poverty dynamics. The way forward is to create alent) earned by men. In other words, the productive health, empowerment, and eco- raise women’s voice and status at home. a transformative environment, supported by laws, institutions, and 8,405 estimated earned income of women was nomic status. Entrenched social norms that discriminate on the basis of gender effective implementation mechanisms. It is clearly imperative to only 18 percent that of men. The standard indicators used to mea- translate into the devaluation of women’s multidimensional work. In eradicate and reduce poverty and end gender inequalities. To achieve As a result, in terms of GDI groups – sure reproductive health are the maternal Pakistan, this means a 50 percent wage gap, early marriages (25 per- this goal, among other things, it is essential to address power rela- that is, the absolute deviation of the Gen- mortality ratio and the adolescent birth cent of under-18s are married) and early motherhood (34 percent of tionships between women and men. under-20-year-olds become mothers). It also means a gender gap in 1,689 der Development Index from gender parity rate. As data are not available at the inter- 2015-16 (100 ∙ |GDI – 1|) – low levels of equality provincial level, the NHDR 2020 replaces Khawar Mumtaz is a women’s rights activist and former Chairperson of Pakistan’s National Commission on the Status of Women. between women and men are evident in these indicators with the average number Notes: Figures estimated from the PSLM 2018–2019 in CGAPs, UN Women, and NCSW, Young Women in Pakistan Status Report 2020; Labour Force HDI achievements (group 5) in all three of women who did not receive prenatal Survey 2017–2018; PDHS 2017–2018; Government of Pakistan 2020i; Government of Pakistan 2003c; World Economic Forum 2020. periods analysed.30 The closer the GDI to and postnatal consultations, and the per- 1, the better it is. A GDI of 0.777 does not centage of ever-married women between FIGURE 4.11 9,335 suggest meaningful efforts to reduce the the ages of 15 and 19 out of the total num- in the labour force improved between gender gap. Therefore, Pakistan clearly ber of married women. The report uses the Pakistan’s Gender Inequality Index over the 2006–2007 and 2015–2016. The GII val- needs to develop and implement policies standard methodology for other indica- years, (2006-2019) ue of 0.540 in 2015–2016 worsened to that are inclusive of everyone, both women tors, as in the global HDR. 0.548 in 2018–2019 due to a decrease in 0.6 1,673 and men. 0.582 women’s labour force participation, and an 0.555 0.540 0.548 2018-19 National Gender Inequality Index increase in the percentage of ever-married Gender Inequality Index women between the ages 15 and 19. Source: UNDP calculations based on Pakistan’s Gender Inequality Index value Despite Pakistan’s growing population, multiple years of National Accounts, LFS, 0.4 and Population Census, 2017. The Gender Inequality Index measures the improved until 2015–2016, before dete- a general analysis of reproductive health costs to human development that result riorating slightly by 2018–2019 (figure indicators shows a decline in the total fer- from disparities between women and men. 4.11). The resulting index value of 0.540 tility rate, which decreased from 4.1 in 32 Pakistan’s Gender Inequality Thus, it shows the loss in potential human in 2015–2016 is close to the GII value of 2006–2007 to 3.6 in 2017–2018. It is 0 Index value declined slightly development due to gender inequality. 0.546 computed by the global Human De- 2006-07 2012-13 2015-16 2018-19 critical to pay adequate attention to im- from 2006 to 2019, reflecting Ranging from 0 to 1, a value of 0 indicates velopment Report 2015. Overall, repro- proving and sustaining health facilities and Source: UNDP calculations based on multiple sources of PSLM, LFS; a modest decline in gender complete gender equality, while 1 denotes ductive health, female education, political and Khan, A., & Naqvi, S. 2018. services, especially for the most vulnerable inequality. utter inequality. The closer its value is to 0, representation, and women’s participation groups, such as women. As most maternal
88 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 Special measures of inequality 89 and neonatal deaths occur within 48 hours means of advancing women’s economic MAP 4.4 of delivery, prenatal and postnatal care are empowerment, while reducing their vul- particularly critical.33 The number of wom- nerability and dependence on others.39 Pakistan Gender Inequality Index, (2018-2019) en who receive prenatal and postnatal care Empirical evidence demonstrates that mi- in Pakistan has improved, increasing from crofinance enables beneficiaries to increase 37 percent in 2006–2007 to 58.5 percent their incomes, expand their assets, and im- GENDER INEQUALITY INDEX (GII) in 2018–2019. However, this is still far prove their living standards.40 In fact, mi- from the goal of ensuring that all women crocredit has a positive relationship with High GII 0.700 and above
receive adequate reproductive health care. human development and tangible asset cre- Medium GII 0.550 - 0.699 There have been some significant ation.41 Expanding outreach and the inclu- moves towards empowering women at the sion of women in microfinance networks Low GII 0.549 and below
political level. For instance, the Devolu- is, therefore, pertinent for reducing gender Gender inequality Index for Pakistan: 0.548 tion of Power Plan of 2000 reserved 33 inequality overall. percent of seats at the local government Fortunately, Pakistan has a growing Pakistan’s growing microfinance level for women. The Legal Framework microfinance sector. It currently offers mi- sector offers credit in 139 Order (Constitutional Amendment) 2002 crocredit in 139 of the country’s districts, districts to 7.2 million active reserved 17 percent of seats for women in with 7.2 million active borrowers and a borrowers. the National Assembly and Senate, while gross loan portfolio of more than PKR 308 BALOCHISTAN KHYBER establishing a 17.6 percent quota in Pro- billion. In the first quarter of 2020, 50 per- 0.686 PAKHTUNKHWA vincial Assemblies.34 Efforts to improve cent of microcredit borrowers were wom- 0.652 women’s political participation led to en.42 The microfinance sector also offers the election of the first woman Speaker saving services, with 49.3 million active of the National Assembly in 2008, under savers and a savings portfolio of more than the People’s Party government. In the lo- PKR 263 billion. Women accounted for 23 cal government laws of all of Pakistan’s percent of these savers in the first quarter provinces, presented in 2013, Punjab and of 2020.43 Sindh reduced the quota for women coun- To continue to use microfinance as a cillors to 15 and 22 percent, respectively, tool to enhance financial inclusion and al- although these provinces have the highest leviate poverty, especially among women levels of women’s political participation. and other marginalized groups, it is imper- This reflects the fragile nature of women’s ative to expand the outreach of financial empowerment measures.35 services to include the 100 million people In terms of women’s economic partici- who are ‘unbanked’ in Pakistan. To do so, PUNJAB SINDH pation, many women in Pakistan join the provincial governments can initiate large- 0.500 0.599 labour force to help their families make scale financial education and literacy pro- ends meet.36 Nevertheless, their labour grammes on the ground, and expand access force participation rate remains low, as points for commercial banking services by Note: The closer the GII is to 0, the better. See GII technical notes for more details. Source: UNDP calculations based on PSLM, 2018-2019; LFS, 2017-2018; and Khan, A., & Naqvi, S., 2018. noted above. In 2015–2016, while men’s liaising with postal or microfinance net- labour force participation rate stood at 68 works. All government-to-people transfers percent, it was just 22 percent for women, related to pensions, social protection, and Provincial Gender Inequality Index inces except Khyber Pakhtunkhwa. with both rates determined for persons subsidies, among others, can be shifted Although Pakistan’s network of 600 Balochistan performs poorly 37 of and over the age of 10. Women’s par- from cash to digital payments. Increasing With a GII value of 0.500 in 2018–2019, rural health centres (RHCs) is clearly in- on the Gender Inequality ticipation in the labour market decreased the availability of low-risk microcredit will Punjab performed best on the Gender In- adequate for its population of over 200 Index, followed by Khyber slightly thereafter, falling to 20.1 percent also require a stronger, better regulatory equality Index among Pakistan’s provinces million, reproductive health improved Pakhtunkhwa and Sindh. Gender 38 in 2017–2018. environment to ensure consumer privacy, (map 4.4), and considerably better than in all provinces except Sindh between inequality has decreased in while simultaneously helping fin-techs to the national average (0.548). Sindh follows 2006–2007 and 2012–2013.44 Punjab has all provinces except Khyber Microfinance and women’s tap into consumers’ digital footprint. with a GII value of 0.599, followed by Khy- the greatest number of rural health centres Pakhtunkhwa. empowerment ber Pakhtunkhwa (0.652), and Balochistan (293), nearly half the total number, as well (0.686). Long-term trends suggest that as the greatest number of basic health units Asset creation has proven a successful gender inequality has decreased in all prov- (2,456) across its 36 districts.45
90 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 Special measures of inequality 91 The percentage of women between 15 Balochistan, where militants have targeted spend a comparable amount of time sup- 2015–2016, and 2018–2019 at the nation- and 19 years old who have ever been mar- girls’ schools. porting agricultural activities, if not more al and provincial levels (table 4.7). At the ried declined in Sindh and Balochistan, In terms of changing trends over time, time, than men. For instance, 4.3 million national level, both the male and female but increased slightly in Punjab between the overall decrease in women’s labour women spend an average of 191 minutes indices improved at the same rate. The 2006–2007 and 2018–2019. Khyber Pakh- force participation has been most signif- per day on crop farming activities, 7.8 mil- results reveal a slight difference between tunkhwa has the highest percentage of ev- icant in Balochistan. In 2018–2019, the lion spend 115 minutes each day on tend- girls’ and boys’ Child Development Index The disparity in male and female er-married women in this age group, which province had the lowest female labour ing to animals and fish farming, as do 1.6 values in 2018–2019, with no substan- Child Development Index values rose from 31.5 to 31.8 percent during this force participation rate, while Punjab had million on collecting water. Women’s crop tial improvement in the female-to-male shows no substantial change period. Multidimensional poverty in Khy- the highest. farming activities include sowing, weed- CDI ratio at the national level compared nationally and provincially, with ber Pakhtunkhwa (with its MPI value of ing, hoeing, threshing, and seed storage, to 2015–2016. The female-to-male ratios boys faring better than girls. 0.250 in 2015) and Balochistan (with its Women’s role in agriculture while tending to animals (livestock) in- improved in Punjab and Sindh between MPI value of 0.394 in 2015) may explain cludes milking, feeding, treating sick ani- 2007–2008 and 2015–2016, but worsened this trend, as families try and relieve the Agriculture contributes approximately 19 mals, collecting fodder, caring for poultry, between 2015–2016 and 2018–2019. The pressures of household expenditure by percent of Pakistan’s GDP and employs breeding, weaning, cleaning shelters, con- annual growth rate was slightly higher for marrying off their daughters early. 39 percent of the labour force. Some 14.7 verting manure to fuel, processing milk, girls than boys in both provinces. Baloch- Education significantly impacts and percent of these agricultural workers (9.1 and processing wool and hair. istan also witnessed a slight improvement empowers women, improving their deci- million) are women. Thus, women in agri- The few women agricultural workers in the female-to-male CDI ratio during sion-making capacities, helping them raise culture are central to the economy, playing who are paid are peasant farmers, working these years, with a substantially higher educated children, and increasing their a substantial role in food production and on their landlords’ farms. Payment gen- growth rate for girls than boys. In Khyber productivity. These improvements, in food security. Despite this, women’s role erally takes the form of in-kind support. Pakhtunkhwa the female-to-male CDI ra- turn, contribute to enriching society and in agriculture in Pakistan can be broadly Even if some women are paid in cash, their tio declined, and the average growth rate reducing inequality. Not even half of the defined by the ‘three U’s’: unrecognized, remuneration is far lower than men’s. The was higher for boys (2.1 percent) than girls girls in Pakistan’s provinces complete their unappreciated, and unaccounted for. average monthly wage of men engaged in (0.9 percent).50 primary or higher level education, with the While women’s role in agriculture over- the agricultural, forestry, and fishery sec- Figure 4.12 elaborates on the gen- exception of Punjab (52 percent). Girls’ shadows that of men in many agricultural tors (PKR 11,806) is almost twice that of primary level and higher education is low- tasks, it often goes unrecognized at the women (PKR 6,007).48 TABLE 4.7 est in Balochistan (19 percent) and Khy- national level. Unfortunately, 7 million Women in agriculture also face far more 7 million Pakistani women Trends in the gender-based Child Development Index, (2007-2019) ber Pakhtunkhwa (30 percent).46 Many women agricultural workers are contribut- exploitation than men, given gendered cul- in agriculture are unpaid girls drop out of school due to economic ing family workers; as their work is largely tural constraints and the fact that unskilled contributing family workers. 2007-2008 2015-2016 2018-2019 Average growth rate and social pressures, as well as restrict- unpaid, their substantial contribution to agricultural work is largely unprotected by ed mobility. Violent extremism has also agriculture remains unrecognized.47 labour legislation. Sindh is the only prov- Pakistan contributed to blocking girls’ education, Table 4.6 presents the results of the ince that has taken a historic step to ad- Male 0.47 0.563 0.586 2 particularly in Khyber Pakhtunkhwa and Time Use Survey. It reveals that women dress this situation by approving the Sindh Female 0.46 0.556 0.563 1.9 Women Agriculture Act 2019, a first in Punjab TABLE 4.6 Pakistan. It seeks to empower rural wom- Male 0.515 0.588 0.656 2.2 Time use: Numbers of men and women, and mean minutes per day spent on activities, (2009) en by conferring all the rights, protections, and benefits available to industrial workers Female 0.504 0.594 0.654 2.4 under existing labour laws to women agri- Male Female Sindh cultural workers.49 While the results of its Number Minutes Number Minutes Male 0.405 0.476 0.521 2.3 implementation have yet to be seen, it is a Crop farming and market gardening: planting, Female 0.39 0.507 0.51 2.5 9,651,807 261 4,329,982 191 step in the right direction. Pakistan’s oth- weeding, harvesting, picking, etc. er provinces will need to think along the Khyber Pakhtunkhwa Kitchen gardening – backyard cultivation: planting, 78,483 140 57,732 61 same lines to empower and protect women Male 0.449 0.581 0.564 2.1 weeding, harvesting, picking, etc. in agriculture. Female 0.45 0.533 0.498 0.9 Tending animals and fish farming 8,929,194 154 7,882,374 97 Balochistan Hunting, fishing, gathering of wild products Gender-based Child Development 210,027 310 46,827 115 and forestry Index Male 0.333 0.359 0.353 0.5 Collecting water 341,406 62 1,660,394 86 Female 0.291 0.315 0.344 1.5 The NHDR 2020 computes a gender-based Source: UNDP calculations based on multiple years of HIES, PSLM, and PDHS. Source: Government of Pakistan 2009d. Child Development Index for 2007–2008,
92 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 Special measures of inequality 93 FIGURE 4.13 der-based child development sub-indices Gender-based Youth Development is confirmed by the gender-based Labour The disparity in male and female for 2018–2019. The results reveal that the Index Development Index with decent work in- Youth Development Index values The male YDI is twice the female YDI, (2018) girls are at a disadvantage in terms of living clusion for women, LDIDWfemale, and men, has decreased over the years, standards, with a sub-index value of 0.569, LDI (see Technical note 8 for de- The NHDR 2020 also analyses the Youth DWmale with the female value growing at compared to a value of 0.649 for boys. In Development Index from a gender perspec- tailed calculations and the methodology a much faster rate than the male terms of education, boys have an advantage used). In 2012–2013, the LDI value Male tive at the national level for multiple years: DWmale value between 2006 and 2019. compared to girls, although the difference was 0.501, compared to the LDI val- 2001–2002, 2007–2008, 2012–2013, and DWfemale YDI between them is fairly small. In the health 2017–2018. As table 4.8 shows, the gap ue of 0.193. This means that the LDI value 0.692 and nutrition sub-index, girls have a clear between male and female YDI values was with decent work inclusion was almost 2.6 advantage over boys, as girls’ nutritional much larger in 2001–2002, with a male- times higher for men than for women. status and child survival rate is better than The good news is that the LDIDWfemale 51 to-female ratio of 2.1, than in 2017–2018, b oy s’. when this ratio decreased to 1.48. Another value grew at a rate of 4.7 percent per year, Female positive development is the rapid growth considerably faster than the 1.2 percent level of growth of the LDI value be- YDI FIGURE 4.12 of the female YDI value, which is growing DWmale 0.467 at a much faster rate (2.9 percent) than the tween 2012 and 2018. Nevertheless, the Gender-based Child Development Index, (2018-2019) male YDI value (0.8 percent). difference between women’s and men’s LDI values remained virtually unchanged Male The extent of variation in YDI values 0.567 0.804 0.920 CDI 0.586 between young women and men highlights during this period (figure 4.14). This in- 0.667 0.696 dicates that the female LDI value needs to a huge gap between the two (figure 4.13). 0.540 0.509 0.124 0.468 0.502 Young women fare better in some respects, grow faster than the current rate to achieve gender parity (box 4.2). for example, they have a higher survival Percentage of Years of Youth Percentage of Youth Positive growth in Labour Develop- enrolled youth schooling employment fully employed survival Female rate than young men. Overall, however, ment Index values for both women and in higher of youth -to- population youth rate CDI 0.563 there is a clear gap between young women education ratio and men in Pakistan wherein women are men is only apparent in three dimensions. Source: UNDP calculations based on LFS, 2017-2018 and PMMS, 2019. at a disadvantage, especially in employ- The share of labour income in GDP expe- rienced the greatest growth, followed by ment-related indicators. Young women’s FIGURE 4.14 mean years of schooling are substantially human capital, and the incidence of decent work. The gravity of the current situation lower (0.509) than young men’s (0.667). Labour Development Index with decent work The disparity in male and female can be assessed by looking at the largest gap 0.719 The gap in enrolment in higher education inclusion, (2012-2018) Labour Development Index 0.649 in dimensions between women and men. is slightly smaller, but a large gap exists in values has decreased over the 0.439 This gap is most pronounced in the em- LDI Growth rate two employment-related indicators. The years, although the female value ployment-to-population ratio, where the 0.6 1.40% 1.20% 4.70% 0.669 female sub-index value for the employ- needs to grow at a much faster 0.569 LDI value for men is 250 percent higher 0.401 ment-to-population ratio is 0.124, com- rate to achieve gender parity. than the value for women, followed by the Male pared to the male value of 0.804, while the 0.5 Education Standard of living Health and Nutrition share of labour income, where men’s LDI index income index index value for the percentage of fully-employed young women is 0.468, compared to 0.920 value is 171 percent higher than women’s. Pakistan Similarly, in terms of human capital, the 0.4 Source: UNDP calculations based on HIES, 2018-2019; PSLM, 2018-2019; PDHS, 2017-2018. for young men. This shows that young women in Pakistan have fewer economic male LDI value is 63 percent higher than the female LDI value, and 39 percent high- opportunities available to them, especial- 0.3 TABLE 4.8 ly in the labour market, than young men. er with regard to the incidence of decent Special government policy interventions work (figure 4.15). Gender-based Youth Development Index, (2001-2018) Female are needed to improve the economic status The only exception is the skill premium, 0.2 of young women in Pakistan. where the LDI value for women was higher Per annum than the value for men in 2012–2013 and 2001-2002 2007-2008 2012-2013 2017-2018 growth rate 0.1 Gender-based Labour Development 2017–2018. In 2017–2018 alone, educat- Male 0.605 0.639 0.659 0.692 0.8 Index ed women earned 25 percent more than Female 0.288 0.374 0.416 0.467 2.9 educated men. This suggests that women 0 in Pakistan must be highly educated in or- 2012-13 2014-15 2017-18 Ratio 2.10 1.71 1.59 1.48 Patriarchal attitudes and power structures der to face less discrimination in the labour Source: UNDP calculations based on Pasha 2019 and multiple years Source: UNDP calculations based on multiple years of LFS. underlie widespread gender-based discrim- of LFS. ination in Pakistan’s labour market. This market.
94 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 Special measures of inequality 95 FIGURE 4.15 BOX 4.2 such as education and health care, for FIGURE 4.17 2015–2016 and 2017–2018. The Gov- Dimensions of the Labour Marginalization of the female labour force Gender-based public education expenditures, Development Index revealing ernment’s sectoral priorities within the (2015-2016 and 2017-2018) gender discrimination in the Figure 4.16 presents the distribution of Pakistan’s This means that as many as 18.7 million women spheres of education and health are dis- labour market, (2012-2018) female labour force The augmented female la- within the female labour force (74 percent) are in cussed separately in chapter 6. Primary education Secondary education bour force consists of women workers engaged marginalized roles. The corresponding estimate % General universities, college and institutes Male Female in residual economic activities, such as subsis- for an earlier year, 2007–2008, is 83 percent. The Education 80 70 Ratio Employment to population tence agriculture, the construction of their own proportion of men engaged in marginal economic 0.7 dwellings, and caring for livestock, among others. activities is much smaller, as only 17 percent of Education accounted for the highest 60 Women contributing family workers are those male workers are in this residual category. 50 0.5 share of public expenditure (26 percent) who work without payment, either in cash or in In effect, a minority of women workers are 40 Gap between male250 in 2017–2018, according to the Poverty and female 0.3 kind, in enterprises operated by a member of their engaged in mainstream economic activities. Reduction Strategy Paper (PRSP), rising 30 family or kin. Women’s participation in marginal work is often 20 from 25 percent in 2015–2016.52 Public 0.1 Contributing family workers represent the part motivated by pressure to augment their family’s 10 expenditure on primary education, sec- 2012-13 2014-15 2017-18 of the female labour force engaged in ‘marginal’ income, either by providing free inputs to increase 0 roles, alongside members of the augmented la- household outputs, or by earning wages through ondary education, and general universi- Female Male Female Male Ratio Skill premium bour force, and the unemployed within the con- marginalized activities, often by working part- ties, colleges, and institutes accounts for 2015-16 2017-18 4 82 percent of total education expendi- ventional labour force. time. Over 46 percent of working women in Pa- Source: UNDP calculations based on multiple years of PRSP and -25 3 Estimates of the size of the ‘marginal’ female kistan are from the two poorest income quintiles. ture. Analysing these figures from a gen- Government of Pakistan 2018j. 2 labour force based on the Labour Force Survey To emancipate women workers, Pakistan will der perspective reveals a dismal picture. 2017–2018 indicate that Pakistan’s total fe- need to broaden the scope for women’s partici- In 2017–2018, only 39 percent of public 1 male labour force is 25 million strong. Among pation in well-remunerated, productive jobs, and sector education expenditure was spent on interventions, instead the opposite trend their ranks, 1.2 million women are unemployed, offer greater opportunities for women to acquire 2012-13 2014-15 2017-18 girls and women, compared to 61 percent has played out: an increased gap in expen- 7 million are engaged in unpaid work, and 10.5 market-related skills. on boys and men – 10 percent less than diture on male and female education. million are part of the augmented labour force. Share of labour income in GDP in 2015–2016. Government priorities ap- Ratio FIGURE 4.16 pear clearly tilted towards educating boys Health 0.5 and men, with a share of 70 percent of Marginalization of the female labour force 0.3 171 public expenditure spent on boys’ prima- In 2017–2018, 13 percent of the Govern- ry education, and 56 percent on boys’ and ment’s current and development expendi- 0.1 Femal labour force young men’s secondary education (figure ture was spent on health, up from 10 per-
2012-13 2014-15 2017-18 4.17). The deprivation in expenditure on cent in 2015–2016. Public expenditure on girls’ and young women’s education is one general hospitals and clinics, maternal and Conventional labour force Augmented labour force Ratio Human capital key reason why the majority of Pakistan’s child health care and facilities, and preven- 7 out-of-school children – between 5 and tive health measures accounts for 80 per- 5 63 Unemployed Contributing family workers Mainstream employment 16 years old – are girls. The trends clearly cent of Pakistan’s total development and indicate a lack of funds for infrastructure current expenditure on health. 3 and facilities for girls’ and young women’s When analysed from the viewpoint 1 education. of gender-sensitive budgeting, in 2017–
2012-13 2014-15 2017-18 The overall picture of public spending 2018, the Government spent 52 percent of The gender-based Labour Development adopting systematic gender-sensitive bud- on education in 2017–2018 is one of in- this budget on facilities related to women’s Index affirms what most Pakistanis already geting in national and provincial policies, % Incidence of decent work creasing gender inequality, which has wors- and girls’ health, while the greatest single Gender-sensitive public know: gender-based inequality is rife in programmes, and projects. This is also cru- ened compared to 2015–2016. Only 34 proportion of the budget (56 percent) was 18 spending on education 39 the labour market. Concrete policy mea- cial for Pakistan to achieve SDG targets percent of the development budget, and 40 spent on general hospitals and clinics (fig- 14 decreased from 2015 to sures need to be developed and, crucially, by 2030, and to uphold its commitments percent of the current budget, is spent on ure 4.18). Breaking down the first figure 10 2018; only 34 percent of its implemented to eliminate gender-based to the international conventions it has rat- female education. The 18th Constitution- by budget types reveals that 50 percent of 6 development budget and 40 discrimination. ified on women’s rights, human rights, and al Amendment in 2010 introduced Article the development budget, and 53 percent percent of the current budget is 2 equality. Targeted interventions are vital 25-A into the Constitution, affirming the of current budget, was spent on facilities 2012-13 2014-15 2017-18 spent on female education. Gender-sensitive budgeting for greater inclusivity in both economic state’s responsibility to provide free, com- linked to women’s and girls’ health. Source: UNDP calculations based on Pasha and social development processes. pulsory education for all children between Gender-sensitive health planning in 2019 and multiple years of LFS. The discussion above on gender-based The NHDR 2020 analyses public ex- 5 and 16 years old. While this should have Pakistan requires more of an emphasis on indices provides a clear justification for penditures on basic services in Pakistan, motivated budgeting for gender-specific the provision of health facilities, as well as
96 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 Special measures of inequality 97 FIGURE 4.18 Women’s economic empowerment is vi- 8 Government of Pakistan 2018a. GDI from gender parity, 100 - |GDI – 1|. tal for reducing inequalities like the gender 9 The LFS does not report data on children under the age Group 1: 2.5 percent or less = high equality in HDI Gender-based public health expenditures, of 10. achievements between women and men. (2015-2016 and 2017-2018) wage gap. Policy interventions should in- clude the provision of interest-free, small 10 The Constitution of Pakistan in Article 3 specifies: “the Group 2: 2.5–5 percent = medium to high equality in HDI state shall ensure the elimination of all forms of exploita- achievements between women and men. General hospitals and clinics Mother & child health and medium-term loans, coupled with spe- tion and the gradual fulfilment of fundamental principle, Group 3: 5–7.5 percent = medium equality in HDI achieve- % Health facilities and preventive measures cial facilities for women entrepreneurs, en- from each according to his ability and to each according ments between women and men. 70 suring equal pay for women and men, pro- to his work.” Article 11(3) states: “No child below the age Group 4: 7.5–10 percent = medium to low equality in HDI 60 tecting women’s rights in workplaces, and of 14 years shall be engaged in any factory or mine or achievements between women and men. 50 ensuring conducive workplace conditions any other hazardous employment.” The Employment of Group 5: Absolute deviation from gender parity of more 40 and terms of employment for women work- Children Act of 1991 and Article 11(3) of Pakistan’s Con- than 10 percent = low equality in HDI achievements be- 30 ers. These include separate toilets, mater- stitution expressly prohibit the employment of children tween women and men.
20 nity leave, upholding the minimum wage, below the age of 14 in any factory, mine, or any other 31 UNDP 2018. decent working hours, curbing workplace form of hazardous employment. Government of Pakistan 32 Fertility rates for women aged 15 to 45 per 1,000 women. 10 harassment, and crèches for child care. A 2012a and 1991. Government of Pakistan 2008b and 2019g. 0 Female Male Female Male system of quotas for women in jobs could 11 UNDP calculations based on the Labour Force Survey 33 Government of Pakistan 2019g. 2015-16 2017-18 also be established. Civil society must play 2017–2018; Government of Pakistan 2018b. 34 Both legislative frameworks were initiated and imple- a key role in supporting women in the in- 12 These results are based on data from the Labour Force mented in the Musharraf era. See Government of Paki- Source: UNDP calculations based on multiple years of PRSP and Survey 2017–2018 using the methodology of the ILO’s stan 2002a. Government of Pakistan 2018j. formal sector to organize themselves and Global Wage Report regarding the average gender pay 35 Batool 2019. form women-focused trade unions. Pro- gap, adjusted for the percentage of employed persons. 36 UNDP 2016b. vincial governments should complement on preventive measures, such as immuni- 13 Preston 2017. 37 Government of Pakistan 2016c. these efforts through legislative reform to zation. Imbalances in the health facilities 14 Government of Pakistan 2018a. 38 Government of Pakistan 2018c. available for women and children are re- explicitly protect women engaged in infor- 15 See Technical note 8 for the detailed calculations and 39 Microfinance institutions offer clients a wide variety of flected in the country’s high infant mortal- mal jobs, in line with the example set by the methodology used. loan products and services, ranging from livestock loans ity rate, of 62 infant deaths per 1,000 live Sindh Home Based Workers Act of 2018. 16 See Technical note 8 for detailed information on calcu- to purchase sheep, goats, and buffalo, to loans for the births, and its under-five mortality rate, of lations. purchase of knitting and sewing machines, and loans to 17 UNDP 2017b. start or expand businesses. 74 deaths per 1,000 live births (80 deaths 18 Government of Pakistan 2014a; Government of Pakistan 40 Kandker 2005; Mushtaq and Shahnaz 2011. among boys and 68 among girls). Low Notes 2018a. 41 Pitt and Khandker 1996. levels of public spending also expose the 19 Ibid. 42 Pakistan Microfinance Network 2020. health sector’s considerable dependence * Name changed to protect the informant’s identity. This 20 UNDP 2017b. 43 Read more on financial inclusion as a mechanism for re on the private sector, which needs to be story was shared during the NHDR focus group discus- 21 See Technical note 8. ducing poverty and inequality in the special contribution addressed. sion in Rahim Yar Khan, Punjab, on 13 November 2019. 22 Government of Pakistan 2018a. by Dr. Shamshad Akhtar in this report. Looking at human development The language used was Urdu. The quotes used in the st- 23 Despite the Bonded Labour Abolition Act of 1992, and the 44 See Statistical annex table 7. through a gender lens is a cross-cutting ory are approximate translations. Employment of Children Act of 1991, debt bondage and 45 World Health Organization 2020; Government of the Pun- issue. Pakistan can reduce gender-based 1 UNDP calculations using data from the LFS 2017–2018. child labour persist in Pakistan. jab 2010. discrimination by introducing specialized 2 Technical note 6 outlines the methodology used by the 24 World Bank 2006b. 46 See annex table 7A. health, economic empowerment, and ed- NHDR 2020 to derive the overall Child Development In- 25 World Bank 2020. 47 UNDP calculations based on LFS data for 2017–2018. ucation programmes that address gender dex. 26 Ibid. 48 Government of Pakistan 2018b. 3 See Technical note 7 for details on the methodology used 27 WEF 2018a. 49 Dawn 2019d. gaps in these spheres – gaps which over- to construct the Youth Development Index. 28 WEF 2020. 50 See annex table 4 for detailed results. whelmingly disadvantage women and 4 See annex table 5 for detailed numbers. 29 Refer to the standard methodology for GDI quantification 51 Ibid. girls. Targeted programmes should involve 5 ILO 2016. in UNDP’s global Human Development Reports. 52 Government of Pakistan 2017g and 2019i. expanding the conditional cash transfer 6 The minimum wage is the wage level appropriated by the 30 The GDI groups are based on the absolute deviation of the scheme under the Benazir Income Support Government in consultation with relevant stakeholders. Programme and the Ehsaas initiative, to 7 Under the Factories Act of 1934, no adult employee – de- provide incentives for immunizing chil- fined as a worker who has completed his or her 18th year dren and preventing child labour. Special- of age – can be required or permitted to work in any es- ized nutrition interventions are needed for tablishment in excess of nine hours per day and 48 hours pregnant and lactating women, newborns, per week. Similarly, no young person – that is, no one un- and children up to the age of five, as are der the age of 18 – can be required or permitted to work food fortification initiatives for basic food in excess of seven hours a day and 42 hours per week. items.
98 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 Special measures of inequality 99 PART 2 Power
100 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 The political economy of inequality 101 CHAPTER 5 The political economy of inequality
102 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 The political economy of inequality 103 CHAPTER 5 The political economy of inequality
When Maria* was in her teens, she lost both her legs in a car accident in Islamabad. She was determined to continue her education because, she says, that’s the only way “people like me can work in places other than KFC or beauty parlours.” But university was not easy for Maria, now 28. Initially, the administration ignored her requests to install ramps on campus, to shift her classes to the ground floor, or to provide an accessible washroom. It took Maria months of persistent campaigning – letters, phone calls, and in-person visits – before they finally agreed. Her difficulties didn’t end there. It’s hard enough being a woman in Pakistan, Maria says. “Having a disability on top of that makes life twice as difficult, because men know that you can’t physically defend yourself.” After being groped when her wheelchair was being hoisted onto a bus, she has not used public transport. Without a car of her own, this means she is mostly homebound. Her education and writing skills have enabled Maria to find work online and support her elderly parents. Access to the internet allows her to learn, work, and shop from the safety of her home. It also connects her to a larger community through social media channels like Facebook. “Through them, I have learned that my disability does not define me, my abilities do.” Like Maria, 6.2 percent of Pakistan’s population – around 12.8 million people – have some form of disability.1 The discrimination and lack of accessibility they face, day in and day out, fan the flames of social and structural inequality.
Power as a driver of inequality sivity of the tax system. The third section looks at public expenditure priorities to determine what the state spends on public The Pakistan NHDR 2020 highlights services and social protection programmes, three core drivers of inequality: Power, compared to the resources pre-empted by People, and Policy. vested interests. In the process, it identifies Power refers to the groups who exploit people’s access to different services. loopholes, networks, and policies for their own benefit. In many ways, structural in- equality in Pakistan is both exacerbated and reinforced by these groups, whose aim The powerful and their is to accumulate power, wealth, and priv- privileges ilege. This happens at the expense of the relatively deprived majority. The political economy of inequality relates This chapter outlines three key com- to the sources, nature, and dimensions of ponents of Power as a driver of inequality. privilege. Vested interests are able to ac- The first section discusses the powerful and quire these through the political process their privileges. It focuses on the benefits in a democratic system, or through patron- enjoyed by selected wealthy and powerful age in an autocratic one. This is sometimes groups in the country, in order to estimate referred to as ‘state capture by the elite’. It the share of resources captured by vested involves special and favoured treatment of interests. The second section examines the the privileged in laws, rules, and regula- incidence of taxes to analyse the progres- tions, along with preferential treatment by
The political economy of inequality 105 public institutions. This preferential treat- the country’s political ideology, in order to SPECIALBalochistan CONTRIBUTION and Khyber Pakhtunkhwa. Mustafa Talpur State capture by the elite ment may be based on the perceived im- move towards a more egalitarian system, involves special and favoured portance of the role of a particular vested frequently through a broad-based people’s How power structures affect inequality treatment in laws, rules, and interest in the process of economic growth. movement. regulations. It may also be the result of lobbying with Figure 5.1 classifies the various types of Inequalities in societies like Pakistan are the result of the imbal- tions and wrong interpretations of religion and tradition, continue to the senior echelons in public office or the privileges and special treatment that char- ance in the distribution of economic and political power. The British hold back any progress. Empire promoted the landed aristocracy, coupled with a bureaucratic The economic elites often use their wealth and power to influence political leadership, sometimes on the ba- acterize state capture by the elite. It identi- structure and laws to rule the vast area under its control. In Pakistan, government policies, political decisions, and public debates in ways sis of large payments ‘on the side’. It may fies the different special interests that ben- this structure has not been dismantled in the last seven decades to that lead to a greater concentration of wealth. Money buys political also involve a conflict of interest on the efit most from these privileges. The types lay the foundation of a fair society. clout, which the richest and most powerful use to further entrench part of key government functionaries. and magnitude of privileges enjoyed by In a country starting with such unequal access to power and their influence and advantages. To explain the large gap between the different vested interests are described in wealth, where a privileged few upheld by colonial rulers set the rules Many of Pakistan’s wealthiest people today have made their for- income and wealth of the elite versus the general terms below for 2017–2018 and, of game, the majority’s access to political power, wealth, and resourc- tunes thanks to exclusive government concessions, tax exemptions, majority of the population, it is essential wherever possible, for more recent years. es has been limited. This historical configuration gives a head start to sweetheart contracts, land concessions, subsidies, privatization to understand the political economy of in- Details are provided in the footnotes. those with inherited wealth, money, and connections. (even in the education and health systems), corruption, and the mo- equality. This root cause of inequality re- A number of fiscal incentives – espe- Those fortunate enough to be born to a few rich families are able nopoly of power. Private health care providers, and a few organized flects the alignment of political forces and cially those related to the promotion of to provide their children and future generations with access to good private education institutions, have become so powerful in recent groups in a country. Such inequality tends exports, investment, and the development education, a path to continue and strengthen their power. This histor- years that the Government is unable to trim their influence and pro- to persist, and even grow, unless fundamen- of underdeveloped areas – may also confer ical trend explains the low social mobility in Pakistan. While a small vide equal access to quality education and health care for all – both window is always open in the political and bureaucratic structure to of which are essential to address inequality. tal changes are made in the power structure benefits in the form of increased employ- tap talent, those from underprivileged sections of society who get an Powerful elites also use their money, power, and influence to cap- and a radical transformation is affected in ment and labour income. opportunity find it hard to challenge the existing power apparatus, or ture the media and other spaces to shape narratives and public de- FIGURE 5.1 to become part of it. bate. They use this influence to promote ideas and norms that sup- Basically, people and geographical areas with less voice, power, port the economic and political interests of the privileged. As a result, Sources of privileges of different vested interests and wealth have been systematically discriminated against in Paki- there is considerable public misperception about the scope and scale stan. They are less likely to have equal access or the ability to catch of inequality, as well as its causes. Types of privilege Feudal Corporate Exporters Large High net worth Military State owned Total up in the near future. A conspicuous example is half the country’s To create a just and equal society, it is essential to break the cycle class sector traders individuals establishment enterprises population: women. of power and privilege linked to the concentration of wealth, and to The existing unequal power structure makes things difficult for so- democratize the economy and politics with the equal participation TAX SYSTEM 12 ciety as a whole, but particularly for women, who have less political of women and other vulnerable communities. Rather than clamping Tax exemptions 4 and economic power. It is hard to uplift society without the equal down on civic space, democracy, and gender equality, the Govern- participation of women in economic and political activities. Strong ment must reduce the undue power and privileges of the few who are Low effective tax rates 5 patriarchal norms reinforced by state policies, based on misconcep- holding back the progress of Pakistani society. Tax evasion 3 Mustafa Talpur is the Regional Lead for Asia of Oxfam International’s Inequality Campaign. CHEAPER INPUTS 7