Overview National Human Development Report 2020 The three Ps of inequality: Power, People, and Policy Overview

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 inequality, that of income and human development.

This is done by showing income and human development The three Ps of inequality: values for each of Pakistan’s five income quintiles (equal Share of total income population groups categorized from richest to poorest). This 20.7 Power, People, and Policy 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 , 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, Pakistan National Human focused on Unleashing the Potential of a Young Pakistan. 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

Layout and Information Design Copyright © 2020 Nida Salman United Nations Development Programme, Pakistan 4th Floor, Serena Business Complex, Khayaban-e-Suharwardy, Sector G-5/1, Islamabad, Pakistan Operations and administration Azam Khan and Uzma Syed All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by means, electronic, mechanical, photocopying, recording or otherwise, without prior permission.

Disclaimer: The views expressed in this publication are those of the authors and do not necessarily represent those of the United Nations, including UNDP or the UN Member States.

UNDP has copyrights to all photographs used in the report taken during the NHDR 2020 Focus Group Discussions.

For contributions and feedback, please email us at: [email protected]

ISBN: 978-969-8736-21-7 Printed in Pakistan by Gul Awan Printers and King Faisal Printers

For a list of errors or omissions found after printing, please visit our website at http://www.pk.undp.org/

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 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 contribution This report is the sum of the efforts and ex- report and passionately advocated for Paki- fa Talpur, Dr. Ali Cheema, Kishwer Zehra, of government representatives, develop- pertise of hundreds of individuals and insti- stan’s marginalized groups. First, we must Dr. Akmal Hussain, and Luis Gorjon Fer- ment 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 hundreds dividuals who helped us shape the report in in their lives. velopment, Reform & Special Initiatives, of Pakistanis who participated in the 38 fo- meaningful ways. Special thanks are due to It is the product of the United Nations and his successor, Asad Umer, for allowing cus group discussions conducted with mar- everyone who was part of the advocacy and Development Programme (UNDP) in Pa- us access to their time and expertise. The ginalized communities, to those who filled communication activities related to this re- kistan, with financial contributions from Advisory Council members included Dr. out our Inequality Perception Survey, and port, including Nadeem Khurshid, urban the Swiss Agency for Development and Fahmida Mirza, Federal Minister for In- 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 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 Aliona loch, Member of the Provincial Assembly Development Association (NIDA-Paki- ences, LUMS. Niculita, Resident Representative a.i. at of Balochistan; Daniel Valenghi, Head of stan); Akbar Zeb of the Environmental We would like to express our appreciation UNDP Pakistan, as well as Ignacio Artaza, Cooperation at the Embassy of Switzerland Protection Society (EPS); Ayub Khan of to UNDP’s Human Development Report former Resident Representative, who lent in Pakistan; Hamid Raza Afridi, former Khwendo Kor; the UNDP sub-offices in Office, especially Admir Jahic, Jonathan their expertise and guidance to the project. Policy Advisor of the Swiss Agency for De- , especially Nadir Khan, Tanya Hall, Yumna Rathore, and Anna Ortubia We also owe a debt of gratitude to Julien velopment and Cooperation (SDC) at the Rzehak, and Muhammad Rohail, and in for their help with the report. We must also Harneis, UN Resident and Humanitarian Embassy of Switzerland; Luis Gorjon Fer- Quetta, especially Zulfiqar Durrani, Saman extend our gratitude to Bishwa Nath Tiwari Coordinator, as well as to his predecessor, nandez, Head of Social Policy at UNICEF Bakhtawar, Tanveer Ahmed, Zahoor Taran, at the UNDP Regional Bureau for Asia and Knut Ostby, for their support and contri- Pakistan; Khawar Mumtaz, former Chair- Muhammad Marri, Habibullah Nasar, Shu- the Pacific. In addition, we would like to butions to the report. Shakeel Ahmed, for- person of the National Commission on the maila Kamil, Sohail Khan, and Dawood thank Ayesha Babar of UNDP Pakistan for mer Assistant Resident Representative of Status of Women; Mustafa Talpur, Asia Nangyal; Islamic Relief; Zehrish Khan of her editorial oversight. the Development Policy Unit at UNDP Regional Lead with Oxfam International; the Gender Interactive Alliance (GIA); Ir- A special note of gratitude is due to Umer Pakistan deserves special thanks for his Dr. Akmal Hussain, Dean of the School of fan Abdullah of Rajby Industries; Naheen Akhlaq Malik, Policy Analyst and Offi- useful observations and comments. We Social Sciences and Humanities at the In- Syed of HomeNet; Javed Raees of the Dis- cer in Charge (OIC) at the Development acknowledge the ingenuity of our statisti- formation Technology University (ITU); abled Welfare Association; UNICEF Pa- Policy Unit, for his oversight, guidance, cian, 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, particular Manzoor, Shahzad Khalil, and Fahim Raza ingenuity of designer Nida Salman, who Communications Expert, Momina Sohail, appreciation is extended to Dr. Shamshad also provided invaluable help with the fo- shaped this report into one that is widely to make the contents of the report more Akhtar, former Under Secretary-Gener- cus group discussions, as did Alauddin accessible. accessible and publicize its major findings. al 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 fea- Contents ture of Pakistani life today. I hope the in- sights contained in this report can be used to shape a Pakistan that is more equitable Special message iv MAPS for all of its people, regardless of their eth- Foreword vi 1 Pakistan Child Development Index, (2018–2019) 12 nicity, gender, or social class. Acknowledgements viii 2 Pakistan Youth Development Index, (2017–2018) 13 3 Pakistan Labour Development Index, (2017–2018) PART I 14 A case of two different Pakistans 4 Pakistan Gender Inequality Index, (2018–2019) 16 National inequality 1 FIGURES Inequality in income 2 Inequality in wealth 4 1 Annual growth rate of real per capita income: Poorest 40 percent compared to the total population 2 Inequality in human development 5 2 Comparison of key measures of income inequality, (2018–2019) 3 Provincial and regional inequality 6 3 Robin Hood Ratio: Take from the rich, give to the poor 3 Inequality between provinces 6 Dr. Hafiz A. Pasha 4 Long-term trend in income inequality in Pakistan, (1990–2019) 4 Inequality within provinces 9 Lead author of the Pakistan National 5 Share of the richest 1 percent of Pakistan’s population 4 Special measures of inequality Human Development Report 2020 11 6 Pakistan ranks 2nd last among South Asian countries in its HDI Child Development Index (CDI) 11 value, (2019) 5 Youth Development Index (YDI) 12 7 HDI by quintiles at the national level and by inequality measures, (2006–2019) 6 Labour Development Index (LDI) 14 8 Trend in interprovincial income inequality, (1999–2000 and Gender Development Index (GDI) and Gender Inequality Index (GII) 15 2016–2017) 7 Bridging the gap between the two different Pakistans 21 16 9 Provincial Human Development Index, (2018–2019) 7 PART II 10 Human Development Index trends in Pakistan, (2006–2016) 8 The NHDR’s three Ps of inequality 11 ’s income inequality has improved significantly Power: The political economy of inequality 21 compared to other provinces, (2006–2019) 10 Powerful groups and their privileges 21 12 The gap between rural and urban HDIs is highest in Sindh and The total cost of privileges 24 lowest in Khyber Pakhtunkhwa, (2018–2019) 11 Taxation in Pakistan: Progressive or regressive? 24 13 Wider gap in female and male earnings, (2006–2019) 15 14 Sources of the privileges of different vested interests 22 Public expenditure and access to services 24 15 Ranking of vested interests in terms of the magnitude of benefits Moving forward: Improving governance and institutional capacity 27 and privileges enjoyed by each, out of total PKR 2,660 billion 24 People: Perceptions of inequality 28 16 Incidence of taxes by quintile, (2017–2018) 24 NHDR 2020 focus groups 28 17 Countries with higher investment in education, health and social Five axes of inequality 28 protection as % of GDP tend to have a higher HDI 25 Social markers and inequality 31 18 Ownership of mobile phones and access to the internet (% of the population), (2018–2019) People’s perception of inequality: Optimism or fatalism? 34 27 19 Number of times various industries were identified as potential Policy: Tackling inequality 35 cartels, (2007–2018) 28 Growth and inequality 35 20 The five axes of inequality of NHDR 2020 29 The NHDR 2020 reform agenda 37 21 Educational attainment of different social groups, (2020) 29 Towards an equal Pakistan 38 22 Wealth of different social groups, (2020) 30 23 The perception of inequality of different social groups, (2020) 32 References 40 24 Access to a laptop or computer among different social groups, (2020) 33

x PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 Contents xi 25 House ownership of different social groups, (2020) 34 TABLES 26 Modules of the Macroeconomic Model 35 1 Percentage share of benefits under different types of expenditure, 27 Impact of change in policy and exogenous variables on GDP by income quintile, (2018–2019) 26 growth, inequality and poverty 36 2 Fiscal cost of relief, incentive and development package 28 Projected index of quarterly GDP (average quarterly GDP, 2019– (PKR billion), (2020–2021) 37 2021 = 100), (2019–2020 and 2020–2021) 37

xii PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 202 PART 1 A case of two different Pakistans PART I A case of two different Pakistans

This is a highly unequal world. More poor will only become more extreme if in- than 734 million people around the globe equality, in its multidimensional forms, is live in extreme poverty, surviving on less allowed to persist. This is why it is crucial than US$1.90 a day, while a handful of bil- to unpack the notion of the two different lionaires get richer by the day.1 The wealth Pakistans – one with little income and op- of global billionaires reached US$8.5 tril- portunity, and the other with more than its lion by 2018, marking an increase of 34.5 fair share. In line with these global and na- percent since 2013.2 Growing awareness tional concerns, the Pakistan National Hu- of inequality is catalysing resistance, with man Development Report (NHDR) 2020 millions taking to the streets worldwide to focuses on the inequality that has birthed protest against extreme poverty, the scrap- the two different Pakistans. ping of fuel subsidies, and rising transport A major motivation behind studying this costs.3 theme lies in the Constitution of Pakistan Inequality is based on disparities in terms 1973, which affirms the equal rights of all of assets, income, status, education, health, citizens. Another motivation is the United rights, decent work and other opportuni- Nations 2030 Agenda for Sustainable De- ties; discrimination on the basis of gender, velopment, which Pakistan has adopted. religion, caste, or other identity markers; Sustainable Development Goal (SDG) 10, and the manipulation of policies by those in particular, focuses on reducing inequali- in power. The concept of inequality lies ty within and between countries.5 at the heart of the human development The NHDR 2020 first examines in- theory coined by Pakistani economist Dr. equality in Pakistan by exploring the two Mahbub ul Haq, who advocated for eco- different Pakistans through different mea- nomic growth accompanied by an equi- sures of inequality at the national and table distribution of income as the most provincial levels. Next, the report outlines effective path towards sustained human its framework for analysing the drivers of development.4 This forms the basis of UN- inequality, also called the three Ps: Power, DP’s global Human Development Reports People, and Policy. The report concludes (HDR), the most recent of which (HDR by highlighting some crucial steps that 2019) focused on the theme of inequality. must be taken by different stakeholders to Realizing the need to address inequality pave the way towards a more equal Paki- in Pakistan, Prime Minister stan. launched the Ehsaas strategy in 2018, an overarching umbrella to create a welfare state by lifting up marginalized communi- National inequality ties and areas that are lagging behind. This has acquired particular importance in the The idea of the two different Pakistans short-term, as the COVID-19 pandem- evokes images of the country’s richest and ic plunges vulnerable groups deeper into poorest groups – one with a multitude of poverty, unemployment, and food and opportunities to pursue quality educa- housing insecurity. Inequality has, there- tion, secure responsive health care, and fore, acquired a major global and national live off generational wealth; and the other, focus in recent years. without. To what extent is this a reality? The dichotomy between the rich and Exploring the notion of the two different

PART I: A case of two different Pakistans 1 FIGURE 1 Pakistans requires an understanding of the The NHDR 2020, therefore, uses several grated Economic Survey only captured 41 FIGURE 2 extent of inequality in the country from methods to measure income inequality and percent of household income estimated Annual growth rate of real multiple lenses, such as economic measures paint a conclusive picture of the two differ- from Pakistan’s GDP. The measures of in- Comparison of key measures of income per capita income: Poorest inequality, (2018-2019) 40 percent compared to the that include income and wealth, as well as ent Pakistans. come inequality adjusted for underreport- total population measures that go beyond income, such as The Gini coefficient measures the ing change to 7.08 for the Palma ratio, 38 20 20 human development. This section analyses degree of concentration in a country’s in- percent for the Gini coefficient, and 0.68 Modified Palma ratio Richest Poorest % Bottom 40 population Total population each of these in turn, in order to trace the come distribution. A value of 0 percent for the Pashum ratio. These signal high 6 4.7:1 contours of inequality in Pakistan today. represents perfect equality, while 100 per- levels of income inequality. 5 Equality cent represents the total concentration of The Robin Hood ratio is another mea- 4 Inequality in income income. Pakistan has a Gini coefficient of sure of income inequality, indicating the 3 30 percent, signalling low inequality over- proportion of income in the richest quin- Gini coefficient 2 The stark reality of inequality in Pakistan is all. However, this value may be low due to tiles that must be transferred to poorer 30 1 revealed by disparities in income – among the Gini coefficient’s lack of sensitivity to quintiles to ensure perfect equality among 0 20 40 60 80 100 Equality Inequality 0 the most visible forms of inequality in the the entire income distribution, or because all five quintiles. According to this ratio, country. The poorest 1 percent of the pop- the country’s richest quintiles tend to un- 23 percent of the income of Pakistan’s two ulation holds only 0.15 percent of national derreport their income in the Household richest quintiles must be redistributed Pashum ratio

income, compared to the richest 1 percent, Integrated Economic Surveys (HIES). among the other three quintiles to achieve 0.50 which held 9 percent of national income in The modified Palma ratio measures perfect income equality (figure 3). This 2001-02 to 2007-08 2001-02 to 2011-12 2007-08 2011-12 to 2015-16 2015-16 to 2018-19 ∞ 6 0 0.5 1 1.5 2018–2019. the ratio between the richest 20 percent of highlights the extent of income inequality Equality Inequality Source: UNDP calculations based on HIES, multiple years, 2018-2019. To reduce income inequality, the real per the population, also called quintile 5 (Q5), between the two different Pakistans, and is capita income of the poorest 40 percent of and the poorest 20 percent, called quintile a framework to consider for redistributive Source: UNDP calculations based on HIES, 2018-2019. Pakistanis must grow at a rate that exceeds 1 (Q1). Pakistan has a modified Palma ra- policies in the future. the income growth rate of the total popu- tio of 4.7, meaning that the richest quin- Overall, income inequality in Pakistan FIGURE 3 lation. To unpack this finding, the NHDR tile has 4.7 times the income of the poorest decreased in the 1990s, rose until the mid- 2020 examines developments in income quintile. 2000s, and decreased again until the mid- Robin Hood Ratio: Take from the rich, give to the poor distribution since the turn of the century, The Pashum ratio is a new and more dle of the 2010s. Between 2016 and 2019, Take away from the rich Redistribute to the poor divided into four periods (shown in figure sensitive measure of inequality specially Pakistan saw a particular reduction in the 50 1).7 created for the NHDR 2020 to compen- difference between the incomes of the Income inequality fluctuates Between 2001 and 2012, the growth sate for the shortcomings of the Gini co- richest and poorest 20 percent of the pop- 8 with the rate of growth. rate of per capita income of the poorest efficient and the Palma ratio. The Pashum ulation, as well a generally lower rate of in- Current 40 income 40 percent was lower than that of the to- ratio moves beyond measuring inequality come inequality across all income quintiles inequality tal population. The gap was larger during in terms of just quintiles or deciles. Instead, (figure 4). However, the NHDR 2020’s the first part of this period (2001–2008), a it captures the extent of inequality across analysis shows that the plight of Pakistan’s time of relatively rapid growth in gross do- the entire population distribution, in- middle class is worsening. Based on per 30 mestic product (GDP). Between 2011 and cluding middle-income groups. Pakistan’s capita expenditure, only 36 percent of the 23.0 22.5Sustainable Development Goal 2019, the poorest 40 percent of Pakistanis Pashum ratio stands at 0.50, deviating from population was middle class in 2018–2019, 0.5 (SDG) 10 aims to ‘Reduce saw their per capita income grow at a faster a value of 0, which would signify perfect down from 42 percent 10 years earlier. 20 inequality within andPerfect among rate than the overall population, while the equality. An examination of the Pashum ra- The pressure of inflation, unemployment countries’. income economy witnessed relatively low growth, tio across quintiles also shows that income among educated workers, and decreasing equality at just above 4 percent. This implies that inequality is relatively less pronounced be- purchasing power parity is ‘squeezing’ the income distribution may tend to deterio- tween the three poorest quintiles, but rises middle class, so much so that it is pushing 10 rate during periods of relatively fast eco- sharply between the country’s two richest them to the bottom of pyramid over time. nomic growth. Part II below analyses the quintiles. Foreign remittances and income from 9.0 12.6 15.4 20.5 42.5

relationship between growth and inequal- Analysing all three measures of inequali- property are two major sources that un- 0 ity more closely. ty reveals that Pakistan has a low to mod- derlie income inequality in Pakistan. It is, uintile 1 uintile 2 uintile 3 uintile 4 uintile 5 Where does this leave Pakistan in terms erate level of income inequality (figure 2). therefore, no surprise that incomes gener- Poorest Richest of income inequality today? Over the last However, this picture changes consider- ated through wealth can have a significant Note: To have an equal level of income in all quintiles, need to take additional income above 20 from Q5 and Q4 to transfer to Q1, Q2, and Q3. two decades, Pakistan’s performance on ably when we adjust for the underreporting impact on income inequality. This is why In this case Transfer (42.5-20)(20.5-20) 23.0 of the income The Robin Hood Ratio inequality indicators such as the Gini co- of income, a typical trait in national sur- an analysis of wealth disparities in the Source: UNDP calculations based on HIES, 2018-2019. efficient and Palma ratio has been mixed. veys. In 2018–2019, the Household Inte- country is just as important as examining

2 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 PART I: A case of two different Pakistans 3 FIGURE 4 cent estimates, just 1 percent of the coun- division of land among inheritors – some- FIGURE 6 try’s richest people hold 26.4 percent of all thing that has not happened in Pakistan.9 Long-term trend in income inequality in Pakistan, (1990-2019) personal bank deposits, over 20 percent of Consequently, Pakistan has high levels of Pakistan ranks 2nd last among South Asian countries in its HDI value, (2019) farmland, and almost 16 percent of res- both wealth and income inequality.

Ratio idential property (figure 5). Income tax With this trend of increasing wealth HDI 1.000 7 payments also reveal high levels of wealth inequality, the divisions between the two inequality, with 1 percent of the popula- different Pakistans seem to be widening. Palma ratio (modified) tion possessing enough wealth and income This will lead to greater inequalities in the

6 5.93 to pay 29.8 percent of the total personal provision of resources, access to services, ERY HIGH income tax collected in Pakistan. and income generation, translating into a 0.800 5.41 5.39 Sri Lanka These inequities have either improved negative long-term impact on human de- HIGH 5 5.10 4.80 little over the years, or have become even velopment. 0.700 Maldives 4.68 4.70 more pronounced. For example, while 4.42 4.32 India inequality in property ownership experi- Inequality in human development Bhuttan 4 MEDIUM Bangladesh HIES enced no significant improvement in the 3.65 0.550 Nepal last two decades, bank deposits became While examining inequality in income and LOW PAKISTAN Below 3 more skewed in favour of the richest 20 wealth is a meaningful way to highlight 0.550 percent of Pakistanis between 2001 and the differences between the two different 2016. While the country’s farm area has Pakistans, it is important to place people 0 not increased significantly over the last 40 at the centre of this discussion. A multidi- years, its ownership has become more con- mensional approach to inequality demands centrated, with fewer people owning larger that we go beyond purely economic out- landholdings. This is unusual, as farm frag- comes. The Human Development Index 2001-02 2004-05 2007-08 2010-11 2013-14 2015-16 2018-19 1990-91 1996-97 1998-99 mentation or the redistribution of owner- provides a valuable framework to do so, ship is the most common outcome of the based as it is on indicators related to in- % come, health, and education.10 FIGURE 5 40 Pakistan had a Human Development 0 Index value of 0.570 in 2018–2019. Its Gini coefficient Share of the richest 1 percent of Pakistan’s 35 33 value has improved somewhat over the Source: UNDP 2019. 34 34 population 33 World Bank 33 33 33 33 33 years, placing the country in the medium 31 32 34 31 31 31 30 30 30 human development category. However, 29 28 Pakistan’s HDI value has only increased by well as a Human Development Index by HIES 11 25 39 percent in the past 27 years, consider- quintile which highlights the depth of in- 23 ably less than the improvements achieved equality in dimensions like education and 9.0 37.5 health between different income groups. 20 by Bangladesh (59 percent) and India (52 National income Bank advanvces (Personal) percent). In fact, Pakistan has the second When Pakistan’s Human Develop- lowest HDI value among South Asian ment Index value of 0.570 is adjusted for 0 countries (figure 6). inequality using the IHDI, its HDI value Improving human development means falls even lower, to 0.534. This demon- Source: World Bank 2019C and UNDP’s own calculations using multiple years of HIES data. enhancing the choices available to every- strates that inequality causes a significant 29.8 26.4 loss of human development in Pakistan. Income tax payments Bank deposits (Personal) one. Expanding choices translates into disparities in income. better opportunities for education, health Inequality in the country is especially pro- Pakistan has high income care, and income generation. Although nounced when you look at the differences Inequality in wealth and wealth inequality. inequality is intrinsically tied to the con- in human development between its five in- cept of human development, the Human come quintiles (figure 7). Measuring wealth inequality – based on Development Index does not specifically The HDI value of the richest 20 percent the magnitude of cash, assets, farmland, 20.3 15.8 Farm area Property capture inequality across the population. of Pakistanis is 0.698, falling in the high and other property – reveals an even great- To this end, the NHDR 2020 constructs human development category. By contrast, er divide between Pakistan’s rich and poor Source: UNDP calculation based on HIES, 2018-2019; Agricultural Pakistan’s first-ever Inequality-adjusted the HDI value of the poorest 20 percent Census, 2010; FBR Tax Directory, 2018; and SBP, 2018. than income inequality alone. As per re- Human Development Index (IHDI), as is just 0.419, corresponding to the low hu-

4 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 PART I: A case of two different Pakistans 5 FIGURE 7 The case for the two different Pakistans, Pakhtunkhwa has been improving due to in per capita income across the country’s then, seems stronger than ever. growing remittances and recent trade de- provinces. The story of the two different Balochistan has fallen HDI by quintiles at the national level and by inequality measures, (2006- behind in terms of human 2019) velopments, Balochistan continues to lag Pakistans seems to be reinforced even at behind given a decrease in the annual pro- the regional level, with some provinces far development, while Khyber Pakhtunkhwa is rapidly HDI Provincial and regional duction of natural gas, severe water con- outstripping the rest, and others unable to straints, and a steady influx of migrants. keep pace. catching up. 0.7 0.693 0.697 0.698 Quintile 5 inequality Analysing the provincial composition 0.663 Spatial inequality in human development of Pakistan’s quintiles paints a slightly dif- Inequality in human development 0.617 Quintile 4 and economic growth is an extremely rel- ferent picture. Balochistan and Sindh are 0.6 0.596 0.597 evant issue for Pakistan. In many ways, the more widely represented among the poor- Placing people back at the centre of the 0.571 0.570 Pakistan est 20 percent compared to their share in debate on inequality, the NHDR 2020 0.557 0.558 0.552 Quintile 3 geographical boundaries of districts and 0.529 0.534 0.535 provinces have come to define inequality, the overall national population distribu- analyses regional inequality in human de- 0.506 tion. Khyber Pakhtunkhwa is better rep- velopment. This multifaceted approach 0.5 0.495 Quintile 2 both in terms of income and opportunity. 0.478 0.480 How does the narrative of the two differ- resented among the lower-middle classes, aims to capture inequality in access to ed- 0.453 ent Pakistans evolve when viewed through and Punjab among the two richest quin- ucation and health care, alongside trends tiles. in income. At present, Sindh is ahead of 0.413 0.419 Quintile 1 a regional lens? To explore this, the 0.4 0.405 These differences have only become Pakistan’s other provinces, with the high- 0.383 NHDR 2020 analyses disparities between and within the countries four provinces – more pronounced with time. As shown est provincial HDI value of 0.574 (figure Punjab, Sindh, Khyber Pakhtunkhwa, and by the Pashum ratio and the Gini coeffi- 9). This is because of its leading position 13 cient, the extent of interprovincial income in terms of GDP per capita and its relative- 0.3 Balochistan. inequality in Pakistan has increased (fig- Inequality between provinces ure 8). It appears that the process of fis- FIGURE 9 cal equalization initiated by the 7th NFC 0 Pakistan has experienced uneven region- Award has been unable to bridge the gaps Provincial Human Development Index, 2006-07 2012-13 2015-16 2018-19 (2018-2019) al development over the years, with some provinces making huge strides while others FIGURE 8 HDI Modified Palma ratio lag behind. The National Finance Commis- 1.000 1.8 sion (NFC) Awards have recently aimed Trend in interprovincial income inequality, 1.73 1.68 1.72 1.67 (1999-2000 and 2016-2017) to redress regional inequality through a 0.900 1.6 process of fiscal equalization, with a view Gini coefficient to increasing the per capita transfer of 0.800 0 10 10 2006-07 2012-13 2015-16 2018-19 revenue to Balochistan and Khyber Pakh- tunkhwa – the two provinces that have not 9 0.700 Pashum ratio kept pace with the rest. The analysis below 8 8 0.600 0.2 explores the state of inequality across Pa- 0.572 0.574 0.15 0.14 0.15 0.14 0.546 kistan’s different regions as it relates to in- 7 0.500 come and human development. 0.473 1 0 Inequality in income 0.400 2006-07 2012-13 2015-16 2018-19 0 1999-2000 2016-2017 Note: The inequality measures for HDI are approximate in character. Pakistan’s provinces have varying levels 0.300 Source: UNDP calculations based on Pasha 2019 and multiple years of HIES and PDHS data. Pashum ratio of development, with Punjab and Sindh 0.4 dominating in terms of their shares in the 0.200 12 man development category. Moreover, national economy. Per capita gross region- 0.25 0.28 0.2 0.100 Pakistan has experienced the modified Palma and Pashum ratios al product (GRP) has increased for all rising interprovincial show that, over the past 10 years, the gap provinces except for Balochistan.14 Since 0 income inequality. between Pakistan’s rich and poor has de- 1999–2000, Balochistan has fallen from 0 Balochistan Khyber Punjab Sindh creased insignificantly. For all intents and second place to last place among the coun- 1999-2000 2016-2017 Pakhtunkhwa purposes, Pakistan’s richest and poorest try’s provinces, with a 7 percent decrease Source: UNDP calculations based on HIES, 2005-2006, 2011-2012, Source: UNDP calculations based on HIES, 2018-2019; PDHS, 2017- groups virtually live in different countries. in its real per capita income. While Khyber 2015-2016, and 2018-2019. 2018; and Pasha, 2019.

6 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 PART I: A case of two different Pakistans 7 ly better progress on life expectancy. Pun- country, with an HDI value of 0.621 in its provinces and special regions. rich and poor increased slightly in Punjab jab follows close behind with the second 2015–2016. It is followed by Sindh, Pun- When HDI values are adjusted for in- in terms of GDP per capita. While income highest provincial HDI value. It leads on jab, Khyber Pakhtunkhwa, Gilgit-Baltis- equality to construct IHDI values, pro- inequality has always been high, the prov- education, with the country’s highest net tan, the Newly Merged Districts of Khy- vincial rankings change. Punjab comes ince also has relatively high levels of in- enrolment ratio and literacy rate. Khyber ber Pakhtunkhwa (formerly known as the out on top, followed by Sindh, Khyber equality in education, especially in terms Pakhtunkhwa and Balochistan rank third Federally Administered Tribal Areas), and Pakhtunkhwa, and then Balochistan. This of adult literacy. Azad Jammu and Kashmir is and fourth, respectively. The provinces finally Balochistan, with an HDI value of analysis shows that Khyber Pakhtunkhwa the most developed region in have held on to their rankings since 2006– 0.465.15 experiences the smallest loss to human de- Sindh Pakistan. 2007, with Khyber Pakhtunkhwa experi- In fact, Azad Jammu and Kashmir is Pa- velopment due to inequality. While Sindh encing the greatest growth in human de- kistan’s most developed region. Its literacy has the highest HDI value in Pakistan, its Sindh is Pakistan’s third largest province velopment in this period. Balochistan, on rate of 76.8 percent is considerably higher IHDI value means that the province expe- in land area, and the second largest with the other hand, has experienced the least than the national average of 57.4 percent riences the greatest loss in human develop- respect to its share of the national popula- improvement in its HDI value between in 2018–2019, and its infant mortality ment due to inequality.17 tion. It is a major centre of economic activ- 2006–2007 and 2018–2019. rate of 58 deaths for every 1,000 live births This underscores the importance of ac- ity; with its coastline and seaports, it has Taking Pakistan’s special regions into is lower than the Pakistani average of 66 counting for inequality when analysing hu- traditionally been a trading hub. account reveals that Azad Jammu and deaths.16 Figure 10 shows human develop- man development values. It also shows that The richest 20 percent of Sindh’s pop- Kashmir is ahead of all other parts of the ment trends in Pakistan, including across the story of the two different Pakistans ulation have a GDP per capita that is 5.3 may not be as simple as identifying which times greater, and an HDI value that is 1.8 FIGURE 10 provinces have the highest income, wealth, times greater, than the poorest 20 percent. or human development levels; instead, it is The province experienced a pronounced Human Development Index trends in Pakistan, (2006-2016) about the ways in which inequality affects increase in income inequality from 2006 to these indicators. This makes it imperative 2016, after which the difference between to deconstruct inequality provinc- its richest and poorest quintiles decreased. HDI within es, as well as between them. Sindh also has high levels of inequality in 0.7 education, especially in adult literacy. On Inequality within provinces the other hand, life expectancy seems to be much more equal within Sindh. 0.6 Azad Jammu and Kashmir Inequality within Pakistan’s provinces varies hugely. While federal policies seek Khyber Pakhtunkhwa Sindh Punjab to alleviate inequality nationwide, under- Khyber Pakhtunkhwa Gilgit-Baltistan

0.5 FATA standing inequities within provinces is a Pakistan’s third largest province in terms Balochistan critical step to inform well-grounded, con- of population, Khyber Pakhtunkhwa has textualized provincial action plans that can experienced substantial human develop- 0.4 root out inequality, from the bottom up. ment in recent years. The merger of the former Federally Administered Tribal Ar- Punjab eas (FATA), now called the Newly Merged 0.3 Districts, into Khyber Pakhtunkhwa in Pakistan’s most populous province, Pun- May 2018 added another 5 million people jab, is home to some of the country’s best to its population of 30.5 million. 18 0.2 education and health facilities. With its The richest 20 percent of people in large population, productive agriculture Khyber Pakhtunkhwa have a GDP per cap- and livestock sector, and large concentra- ita that is almost four times greater, and an 0.1 tion of small and medium-sized enterprises HDI value that is 1.4 times greater, than (SMEs), Punjab is a major driver of, and the poorest 20 percent. Income inequality contributor to, Pakistan’s economy. has been steadily decreasing in the prov- 0 The richest 20 percent of people in ince since 2006. Inequality in human de- 2006-2007 2012-2013 2015-2016 Punjab have a GDP per capita that is 5.2 velopment in the province primarily stems Note: Data for the Newly Merged Districts of Khyber Pakhtunkhwa were not available for 2018–2019. Therefore, the comparison of the special times greater, and an HDI value that is 1.6 from inequalities in education, followed by regions with Pakistans provinces is only conducted until 2015–2016. times greater, than the poorest 20 percent. income. Source: UNDP calculations based on Pasha, 2019; multiple years of HIES and PDHS. Between 2006 and 2019, the gap between

8 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 PART I: A case of two different Pakistans 9 Balochistan Urban–rural divide est in Khyber Pakhtunkhwa (figure 12). kistans cannot be properly understood All of the measures discussed above without analysing its impact on key groups Pakistan’s largest province in terms of land Income inequality within provinces is de- go a long way towards unpacking the two in society like children, young people, mass, Balochistan had a per capita income termined, in no small part, by the divide different Pakistans – whether character- workers, and women. Tracing the contours second only to Sindh at the turn of the between rural and urban areas. These vary ized by a developed province compared of inequality through their perspectives century. Today, it has the lowest share of significantly in terms of income, poverty, to an underdeveloped one, by the richest reveals important insights for policy mak- the country’s population, and the lowest and human development. In all provinces, quintiles within a province over its poorest ers, especially as it relates to their inter- performance on human development indi- urban areas have a higher GDP per capita quintiles, or even at the level of urban–ru- play with the three Ps of inequality: Peo- cators. (PPP$) than rural areas, but they are also ral divides in the country. However, the ple, Power, and Policy, discussed at length The richest 20 percent of Balochistan’s characterized by higher levels of income dichotomy of the two different Pakistans below. Therefore, in addition to income, population have a GDP per capita that is inequality. Urban income inequality is also operates along axes that are not geo- wealth, and human development, the 3.7 times greater, and an HDI value that greatest in Balochistan, demonstrating graphically based. NHDR 2020 analyses four other measures of inequality that lay bare the existence of is 1.8 times greater, than the poorest 20 high levels of urban–rural inequality, and FIGURE 12 percent. Over the years, income inequali- smallest in Khyber Pakhtunkhwa.19 a segregated and unequal Pakistan. ty in Balochistan has shown no substantial Unsurprisingly, the HDI values of ru- The gap between rural and urban HDIs is change, but the province faces the most ral areas are also lower than those of ur- highest in Sindh and lowest in Khyber Child Development Index (CDI) pronounced inequalities in education and ban centres across the country. In terms Pakthunkhwa, (2018-2019) living standards in the country. Inequal- of HDI indicators, disparities in health Conversations on inequality – particular- HDI Urban HDI Rural HDI ly in Pakistan – have often neglected to ities in health are less marked. However, between rural and urban areas are not as 1.000 this is not good news – it reflects the fact pronounced as disparities in education and include children. To address this gap, the NHDR 2020 constructs, perhaps for the that almost everyone in the province has income. Comparing urban–rural divides 0.900 equally poor access to health care. across provinces shows that the gap in first time, a Child Development Index (CDI) in the Pakistani context.20 HDI values is greatest in Sindh and small- 0.800 Comparing inequalities within the Pakistan has a CDI value of 0.575, out of a potential maximum of 1. The indicators provinces FIGURE 11 0.700 0.654 that fare best are the number of children Khyber Pakhtunkhwa’s income inequality 0.631 who do not suffer from wasting, and the How do intraregional inequalities com- 0.600 0.612 has improved significantly compared to other proportion of fully-immunized children. pare across Pakistan’s provinces? Analys- 0.548 provinces, (2006-2019) 0.532 0.539 The indicators that fare worst include the ing long-term trends in income inequality 0.500 0.485 net enrolment rate at the middle school shows that Punjab had the highest average Palma Gini coefficient Pashum % 0.440 and matric levels. Overall, Pakistan’s CDI annual increase in income inequality be- 0.400 tween 2006 and 2019. While overall in- 1.5 value has improved over time. The trends in this improvement reveal that, while the equality in Balochistan declined slightly, 1.0 0.300 inequality between its richest and poorest country does relatively better on provid- 0.5 0.4 ing primary health care for children, much households, and between each successive 0.200 0.2 0.2 0.2

Increase in inequality more needs to be done to make education quintile, continued to increase from 2006 0.0 0 more accessible. to 2019. This is the only case recorded by 0.100 -0.3 Among Pakistan’s provinces, Punjab has the NHDR 2020 where different measures -0.5 -0.4 -0.4 the highest CDI value, followed by Khyber of inequality provide conflicting findings 0 on the status of inequality in a province. -1.0 Pakhtunkhwa, Sindh, and then Baloch- -1.0 Balochistan Khyber Punjab Sindh In the same period, income inequal- Pakhtunkhwa istan (map 1). Unfortunately, all provinces -1.5 ity decreased in Sindh and Khyber Pa- except Punjab fall below the national av- Source: UNDP calculations based on Pasha, 2019; PDHS, 2017-2018; erage, with children in Sindh and Baloch- khtunkhwa, with Khyber Pakhtunkhwa -2.0 multiple years of HIES data. -2.0 -2.1 istan facing huge challenges, particularly in experiencing the greatest reduction in -2.2 inequality in the country (figure 11). At -2.5 Decrease in inequality terms of nutrition. Balochistan Khyber Punjab Sindh To improve Pakistan’s performance on the regional level, at least, the two differ- Pakhtunkhwa ent Pakistans – of the ‘haves’ and the ‘have Special measures of inequality the Child Development Index, social pro- Note: This figure is based on the average annual rate of change in tection programmes for child development nots’ – seem to be continually evolving. income inequality, as measured by the Palma, Gini coefficient, and Pashum ratio. The multidimensional inequality that should focus on food supplements and im- Source: UNDP calculations based on multiple years of HIES data. cleaves the country into two different Pa- munization coverage in Balochistan and

10 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 PART I: A case of two different Pakistans 11 MAP 1 MAP 2

Pakistan Child Development Index, (2018-2019) Pakistan Youth Development Index, (2017-2018)

YOUTH DEELOPMENT INDE (YDI) CHILD DEELOPMENT INDE (CDI) High YDI 0.700 and above High CDI 0.700 and above Medium YDI 0.550 - 0.699 Medium CDI 0.550 - 0.699 Low YDI 0.549 and below Low CDI 0.549 and below

Youth Development Index for Pakistan: 0.605

Child Development Index for Pakistan: 0.575

BALOCHISTAN KHYBER BALOCHISTAN KHYBER 0.435 PAKHTUNKHWA 0.349 PAKHTUNKHWA 0.572 0.533

PUNJAB SINDH PUNJAB SINDH 0.621 0.630 0.655 0.516

Source: UNDP calculations based on the HIES 2018–2019, the PSLM 2018–2019, and the PDHS 2017–2018. Source: UNDP calculations based on LFS 2017-2018 and PMMS, 2019.

Sindh. Enrolment rates at the middle and depend on whether young people are able tion ratio and the percentage of fully-em- istan (map 2). Sindh and Punjab both per- matric levels must be enhanced nation- to access skills and opportunities that can ployed youth. Overall, Pakistan’s YDI val- form better than the national average on wide. unlock their potential and improve their ue has improved slowly over time. A major this index. well-being. concern is that the male YDI value is twice The fact remains that there are 27 mil- Youth Development Index (YDI) Pakistan has a Youth Development In- the female YDI value. Young women seem lion ‘idle’ or unemployed youth in Paki- dex (YDI) value of 0.605, out of a poten- to fare worst in employment-related indi- stan. This could lead to an increased risk of Pakistan is one of the world’s youngest tial maximum of 1.21 The indicators that cators, meaning that educated women are crime and violence, cloaked in the garb of countries. Its burgeoning population of have improved over time include years of choosing not to seek employment, or are ethnicity, sectarianism, or religion. There- youth between 15 and 29 years of age will schooling, enrolment in higher education, unable to secure decent work. fore, addressing youth development should be a potentially vital factor in accelerating and the youth survival rate. However, oth- Sindh has the highest YDI value among rank high among government priorities to the pace of both economic growth and hu- er indicators seem to be worsening, most Pakistan’s provinces, followed by Punjab, prevent rising frustration and disengage- man development. However, progress will notably youth’s employment-to-popula- Khyber Pakhtunkhwa, and finally Baloch- ment among the country’s youth.

12 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 PART I: A case of two different Pakistans 13 FIGURE 13 Labour Development Index (LDI) 3).22 Pakistan’s LDI value – both with and ploitative agricultural or informal sectors in HDI achievements between women without the inclusion of decent work – has which employ the bulk of Pakistan’s work- and men’, with an absolute deviation from ers. For example, Khyber Pakhtunkhwa has gender parity that is greater than 10 per- Wider gap in female and Pakistan is home to what Karl Marx improved slowly over the years. male earnings, (2006-2019) dubbed an ‘industrial reserve army’ – Unfortunately, the labour force partici- the highest share of labour income among cent. This perfectly reflects the context of workers who are irregularly employed. A pation rate has decreased over time, as have Pakistan’s provinces. However, this growth women in the country. For example, the Estimated earned income PPP lack of education and skills, coupled with returns on education – meaning that an in- in labour income is largely led by a flour- gap in women’s and men’s earnings clearly Male limited alternative livelihood opportuni- crease in skills has not translated into im- ishing informal market wherein labour increased between 2006 and 2019 (figure rights are entirely unprotected – a worry- 13). ties, makes these workers easily exploit- proved employment opportunities. While 7,385 able. Pakistan has a Labour Development decent work conditions have improved ing situation. The Gender Inequality Index (GII) is Given its status as Pakistan’s foremost another important measure, highlighting Index (LDIDW) value of 0.442 when the in- overall, they have likely been restricted to Female cidence of decent work is considered (map the formal sector, rather than the more ex- economic hub, Sindh has the highest levels the loss in human development caused of labour development (including decent by gender inequality. In 2017, Pakistan 1,385 MAP 3 work indicators) in the country. It is fol- ranked 133rd on the Gender Inequality 2006-07 lowed by Punjab, Khyber Pakhtunkhwa, Index among medium human development Pakistan Labour Development Index, (2017-2018) and then Balochistan. Although Baloch- countries.25 Pakistan’s GII value is 0.548, istan ranks last, it experienced the sec- reflecting an improvement until 2015– ond-highest increase in its Labour Devel- 2016 and a slight deterioration thereafter. 7,528

LABOUR DEELOPMENT INDE (LDI) opment Index in the past decades. This is largely due to a decrease in women’s Appropriate policy measures are urgent- labour force participation and an increase High LDI 0.700 and above ly needed to address challenges to decent in the percentage of women between the 1,459 Medium LDI 0.550 - 0.699 work which hamper Pakistan’s overall hu- ages of 15 and 19 who have ever been mar- 2012-13 man development and economic growth. ried.26 Low LDI 0.549 and below In 2018, 53 percent of the country’s em- Among the provinces, Punjab has the ployed population was not being paid the lowest GII value, meaning that the loss Labour Development Index for Pakistan: 0.442 minimum wage, and around 83 percent of in human development due to gender in- 8,405 workers are unprotected by labour laws.23 equality is lowest in Punjab. It is followed To overcome inequality in this domain, by Sindh, Khyber Pakhtunkhwa, and fi- Pakistan must establish the grounds for nally Balochistan (map 4). Long-term decent work for all, and pass labour pro- trends suggest that gender inequality has 1,689 tection laws on minimum wages, social se- decreased in all provinces except Khyber BALOCHISTAN KHYBER 2015-16 0.405 PAKHTUNKHWA curity, and working hours, especially in the Pakhtunkhwa. 0.421 informal sector. Despite mild improvements, Pakistan ranks 151st out of 153 countries on the Gender Development Index (GDI) and Global Gender Gap Index. It also ranks Gender Inequality Index (GII) lowest among South Asian countries on 9,335 the index. Pakistan’s 9.1 million women Gender equality is at the heart of the Sus- agricultural workers are particularly vul- tainable Development Goals, adopted by nerable. While they play a substantial role all UN Member States. Not only are gen- in food production and food security, they 1,673 der equality and women’s empowerment are largely unpaid, suffer from greater time 2018-19 a standalone goal in themselves (SDG 5), poverty, and are far more vulnerable to ex- they are also a cross-cutting issue across all ploitation than men. Source: UNDP calculations based on multiple years of National Accounts, LFS, 17 global goals. Efforts are urgently needed to bridge and Population Census, 2017. The Gender Development Index the chasm of gender inequality in Paki- PUNJAB SINDH (GDI), derived by calculating the ratio stan by focusing on women’s reproductive 0.432 0.478 between female and male HDI values, is health, political empowerment, and partic- Pakistan performs poorly in 24 one way of measuring gender inequality. ipation in the labour force, while making child development, labour Pakistan has a GDI value of 0.777, putting education far more accessible to them. development, and gender Source: UNDP calculations based on Pasha 2019 and LFS, 2017-2018. it in the lowest of the index’s five catego- The NHDR 2020’s four major indices development. ries. This category signifies ‘low equality of inequality – related to child, labour,

14 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 PART I: A case of two different Pakistans 15 MAP 4 Whether these fault lines of inequality order in the NHDR 2020, listed according to their share are understood to be geographical in na- of the national population, from the largest (Punjab) to Pakistan Gender Inequality Index, (2018-2019) ture, or are informed by social and demo- the smallest (Balochistan). graphic groups, the takeaway is the same: 14 Pasha 2019. For details, see Technical note 3 on the est- There is a critical need to understand imation of gross regional product in the NHDR 2020. the processes and mechanisms that have 15 Azad Jammu and Kashmir has an HDI value of 0.632 in GENDER INEUALITY INDE (GII) 2018–2019. However, for comparability across regions, birthed the two different Pakistans, and the 2015–2016 value of 0.621 is used, based on latest High GII 0.700 and above to use this as a foundation to bridge the data available for other regions. Similarly, the latest avail- Medium GII 0.550 - 0.699 gaps between them. To do this, the NHDR able data for Gilgit-Baltistan’s HDI indicators are from 2020 proposes its framework of the three 2014–2015. However, for comparison with other prov- Low GII 0.549 and below Ps: Power, People, and Policy. inces and special regions, the NHDR refers to this data

Gender inequality Index for Pakistan: 0.548 as 2015–2016 data. 16 Government of Azad Jammu and Kashmir 2018. 17 Due to unavailability of data, the IHDI of Pakistan’s spe- Notes cial regions could not be calculated. 18 In 2015, the year used for this analysis, Punjab had a 1 World Bank 2018. population of 110 million people, representing 54 percent 2 UBS and PwC 2019. of Pakistan’s total population. Sindh had a population BALOCHISTAN KHYBER 3 Such protests have been reported over the past years of 48.8 million, accounting for 23 percent of Pakistan’s 0.686 PAKHTUNKHWA 0.652 in countries including Ecuador, Bolivia, Chile, and Leba- total population. Khyber Pakhtunkhwa’s population was non. 30.5 million, representing 15 percent of Pakistan’s total 4 For further reading on the human development paradigm, population. After the 2018 merger of the Federally Ad- see Reflections on Human Development by Mahbub ul ministered Tribal Areas (FATA), now known as the Newly Haq (1995). Merged Districts, into the province, Khyber Pakhtunkhwa’s 5 The Inter-Agency and Expert Group on SDG Indicators population increased to 35.5 million, or 17 percent of Pa- developed the indicator framework for SDG 10 on in kistan’s population. Balochistan’s population was 11.9 equality, which was adopted at the 47th session of the million, accounting for just 6 percent of Pakistan’s total UN Statistical Commission in March 2016. population. These figures were calculated using data 6 2020a. from the National Population Census of 1998 and of 7 Based on data from Household Integrated Economic Sur- 2017. Government of Pakistan 1998 and 2018c. veys between 2001–2002 and 2018–2019. See Govern- 19 For details see Technical note 5 in the NHDR 2020 on ment of Pakistan 2003, 2006, 2012, 2016b, and 2020a. the derivation of income inequality in urban and rural 8 The Gini coefficient is a less sensitive measure with a areas. maximum value of one, while the Palma ratio ignores de- 20 Technical note 6 in the NHDR 2020 outlines the meth- PUNJAB SINDH velopments in the middle classes and can only be quan- 0.500 0.599 odology used by the NHDR 2020 to derive the overall tified if information is available by deciles (10 equal Child Development Index. groups of the population) or quintiles (five equal groups 21 See Technical note 7 of the NHDR 2020 for details on of the population). For the methodology used to compute the methodology used to construct the Youth Develop- Note: The closer the GII is to 0, the better. See GII technical notes for more details. this ratio, see Technical note 2 on the Pashum ratio in ment Index. Source: UNDP calculations based on PSLM, 2018-2019; LFS, 2017-2018; and Khan, A., Naqvi, S., 2018. the NHDR 2020. 22 LDIDW denotes the Labour Development Index with the 9 Government of Pakistan 1972 and 2010a. inclusion of the incidence of decent work. See Technical youth, and gender development – high- 10 UNDP 2019. note 8 for the detailed calculations and methodology Bridging the gap between the 11 The IHDI was developed in 2010, based on measures light both programmatic and regional used. two different Pakistans examined by Foster and others 2005. See the standard 23 The minimum wage is the wage level appropriated by the priorities for development. Overall, the re- methodology for IHDI quantification development in the Government in consultation with relevant stakeholders. port finds that Pakistan performs particu- The idea of the two different Pakistans global Human Development Reports. The calculations 24 Refer to the standard methodology for GDI quantification larly poorly in child, labour, and gender de- is strongly reinforced by the measures of for the country’s HDI value by quintile use the standard in UNDP’s global Human Development Reports. velopment. For holistic progress, there is a inequality in income, wealth, and human indicators used to construct the HDI. Refer to the stan- 25 UNDP 2018. need to focus specifically on certain social dard methodology for HDI quantification in the global Hu- development at the national and provincial 26 As opposed to the Gender Development Index, the lower and demographic axes in framing human man Development Reports. the value of the Gender Inequality Index, the better the levels, as we all by the four indices of child, development policy. 12 UNDP 2019. situation is as it indicates low levels of inequality be- youth, labour, and gender development 13 Pakistan’s provinces are consistently discussed in this tween women and men. calculated by the NHDR 2020.

16 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 PART I: A case of two different Pakistans 17 PART 2 The NHDR 2020’s three Ps of inequality PART II The NHDR 2020’s three Ps of inequality

Inequality is a cross-cutting phenom- more egalitarian system. enon, affecting people’s ability to live life This section outlines the three main on their own terms. It is the product of a ways that Power – the first ‘P’ of inequality broad range of structures, processes, and – manifests in Pakistan. First, it discusses actions, including corruption, prejudice, the country’s most powerful groups, es- politics, taxation, development priorities, timating the monetary value of the privi- and others. In deconstructing the causes leges they have accumulated through lob- of inequality, the NHDR 2020 examines bying, connections, and legal loopholes. a host of drivers that create, maintain, and Second, it examines the incidence of taxes exacerbate disparities in the country. to analyse the progressivity of Pakistan’s Based on this analysis, the NHDR tax system. This shows whether extreme 2020 identifies three primary drivers of wealth is being redistributed equitably in inequality in Pakistan: Power, People, and the country. Third, it looks at public ex- Policy. Powerful groups use their privilege penditure priorities to determine what the to capture more than their fair share, peo- state spends on public services and social ple perpetuate structural discrimination protection programmes compared to the through prejudice against others based on resources pre-empted by vested interests. social characteristics, and policies are often unsuccessful at addressing the resulting in- Powerful groups and their privileges equity, or may even contribute to it. The overwhelming takeaway of the NHDR Many groups in Pakistan exploit their pow- 2020 is this: We must advocate for Paki- er to gain preferential treatment in laws, stan’s vulnerable communities, and unravel rules, and regulations. In doing so, they the Gordian knot of Power, People, and maintain or increase inequality. The ways Policy to alleviate inequality nationwide. in which they accumulate power and priv- ilege include the taxation system (through tax exemptions, low effective tax rates, Power: The political economy of and tax evasion), cheaper inputs (such as inequality energy and water, intermediate inputs, or machinery), higher output prices (such as ‘Power’ as a contributor to inequality re- favourable pricing formulas, high levels of fers to the groups that exploit loopholes, effective protection, or the ability to form networks, and policies for their benefit. monopolies or cartels), and preferential In many ways, structural inequality in Pa- access (in terms of land, capital, and in- kistan is both exacerbated and reinforced frastructure/services). Figure 14 classifies by these groups, whose aim is to accumu- the various types of privileges and special late wealth, power, and privilege at the ex- treatment that characterize state capture pense of others. This driver of inequality by the elite, highlighting the different spe- reflects the alignment of powerful forces. cial interests that benefit most from these It tends to persist, and even to grow, unless privileges. The privileges of these groups fundamental changes are made in the pow- are explored below.1 er structure and a radical transformation takes place in political ideology towards a

20 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 PART II: The NHDR 2020’s three Ps of inequality 21 FIGURE 14 PKR 724 billion. substantial concessions, such as tax cred- it provisions which reduce their personal Sources of privileges of different vested interests Exporters income tax liability, and the separation of taxes into different types of income (from Types of privilege Feudal Corporate Exporters Large High net worth Military State owned Total class sector traders individuals establishment enterprises In an attempt to redress Pakistan’s in- securities, shares, and bank deposits, etc.) creased trade deficit and the worrying fall which reduces the progressivity of the tax TA SYSTEM 12 in reserves, exporters have benefitted from system. Tax exemptions 4 growing incentives in recent years. These Overall, in 2017–2018, high net worth include tax breaks, with the presumptive individuals in Pakistan enjoyed privileges Low effective tax rates 5 income tax on the value of export earnings totalling PKR 368 billion. Tax evasion 3 fixed at just 1 percent. They also enjoy re- CHEAPER INPUTS 7 ductions in sales tax liabilities, as well as The military establishment zero import duties on the raw materials Energy, water 2 and intermediate goods they use. Export- Today, the military establishment rep- Intermediate inputs 2 ers also have access to a special credit line resents the largest conglomerate of busi- Machinery 3 from the State Bank of Pakistan, with an ness entities in Pakistan, besides being the

HIGHER OUTPUT PRICES 6 interest rate substantially lower than pre- country’s biggest urban real estate devel- vailing market rates. oper and manager, with wide-ranging in- Favourable pricing formula 3 Overall, in 2017–2018, exporters in volvement in the construction of public High effective protection 1 Pakistan enjoyed privileges totalling PKR projects. The military’s business activities Monopoly / cartel 2 248 billion. are essentially run through two entities, the Fauji Foundation (FF) and the Army PREFERENTIAL ACEESS 7 Large-scale traders Welfare Trust (AWF), with high net prof- Land 1 its and rapid growth. The military’s De- Capital 5 Large-scale trades include commercial im- fence Housing Authorities (DHAs) also porters, wholesalers, and retailers in the enjoy significant privileges in terms of fed- Infrastructure/ services 1 domestic market. Given the trading com- eral sales tax exemptions and the earmark- TOTAL 6 8 6 2 3 4 3 32 munity’s large size and key role in sustain- ing of property tax, which goes solely to Source: UNDP calculations based on sources mentioned in text and footnotes. ing day-to-day activities, especially in Pa- cantonment boards. kistan’s metropolitan cities, traders have Overall, in 2017–2018, Pakistan’s mili- acquired a measure of political power that tary establishment enjoyed privileges total- The feudal class The corporate sector The corporate sector is they have translated into substantial priv- ling PKR 257 billion. ileges. These include paying presumptive the greatest beneficiary of Pakistan’s feudal elite constitute just 1.1 The corporate sector encompasses Paki- income taxes on their electricity bills, un- State-owned enterprises privileges in Pakistan, followed percent of its population, but own 22 per- stan’s growing number of business own- der-invoicing (frequently with the help of by the feudal elite. cent of its farm area. They have dispropor- ers and shareholders. Businesspersons are customs authorities), and withholding tax- State-owned enterprises (SOEs) benefit tionate access to political representation often members of federal and provincial es set as low as 1 to 5 percent. from immense privileges in Pakistan as in National and Provincial Assemblies, en- cabinets. Moreover, large associations and Overall, in 2017–2018, large-scale trad- they have strong trade unions with polit- abling them to safeguard the tax benefits embassies protect the interests of multi- ers in Pakistan enjoyed privileges totalling ical links, and enjoy the support of a com- and special concessions they are granted. national corporations that operate in the PKR 348 billion. pliant bureaucracy in various ministries. These benefits include favoured tax treat- country. Overall, the corporate sector These enterprises receive subsidies worth ment for agricultural income and land rev- benefits from a host of privileges, such as High net worth individuals PKR 120 billion from the federal budget, enues, low irrigation water charges despite the recent reduction of corporate tax on the largest share of which goes to the pow- Pakistan’s water-stressed status, preferen- profits, the withdrawal of the Super Tax The top 1 percent of Pakistan’s population er sector. They also receive various grants tial access to bank credit, and subsidies for (meant for the extremely wealthy), and has 9 percent of the country’s total person- in the form of support transfers to cover fertilizers and the provision of electricity industry-specific concessions such as low- al income.3 The average income of high net operational costs, among other privileges. for tube wells. er sales tax rates on production and sales, worth households is six times the income Unfortunately, the federal budget’s other Overall, in 2017–2018, Pakistan’s feu- exorbitant import duties, and more.2 of an average Pakistani household. Despite relatively large transfers to state-owned en- dal class enjoyed privileges totalling PKR Overall, in 2017–2018, Pakistan’s cor- this, high net worth individuals evade tax- terprises remain non-transparent in nature. 370 billion. porate sector enjoyed privileges totalling es worth PKR 168 billion. They also enjoy Overall, in 2017–2018, Pakistan’s state-

22 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 PART II: The NHDR 2020’s three Ps of inequality 23 owned enterprises enjoyed privileges total- country. The primary reason for this is the helps us understand how best to reorient and clinics, while maternal and child health ling PKR 345 billion. low share of direct taxation, which is under spending priorities to alleviate inequality care receives a negligible share. In addition, 20 percent. As figure 16 shows, the burden and provide equal opportunities for all. access to drinking water, basic vaccination The total cost of privileges of taxes rises gradually with income, mak- coverage, and child delivery capacities in ing the country’s tax system only mildly Public expenditure priorities health facilities vary widely across income Figure 15 ranks the different vested inter- progressive. In essence, this is because spe- quintiles. For example, around 21 million est in Pakistan in terms of the benefits and cial interest groups have successfully ma- Over the years, Pakistan has invested less people in Pakistan have no access to clean privileges they enjoy. The corporate sector nipulated the system to seek and obtain a than the optimal amount in delivering drinking water near their homes.4 is the beneficiary of the greatest privileges, host of tax breaks and exemptions. Thus, public services. In fact, it spends a smaller including both industry and the banking taxes have played a very limited role in re- proportion of its GDP on social services FIGURE 17 sector. The feudal class is next, followed by ducing inequality or making income distri- to improve human development indica- high net worth individuals. bution less skewed in favour of the rich. tors – such as health, education, and social Countries with higher investment in Overall, the total privileges enjoyed by There is a clear need both to move to- protection – than most countries in the education, health and social protection as % of GDP tend to have a higher HDI Pakistan’s most powerful groups amount- wards a more progressive tax system, as region, including Nepal, Sri Lanka, and In-

ed to PKR 2,660 billion in 2017–2018. well as to generate more tax revenue by dia. It is little surprise, then, that Pakistan HDI % Equivalent to 7 percent of the country’s withdrawing special treatment, plugging ranks lower on the Human Development 1.000 10 Nepal 10.00 GDP, these privileges can be broken down loopholes, and reducing tax evasion. As index than neighbouring countries (figure The value of the privileges of into favourable pricing, lower taxation, only 20 percent of public expenditure is 17). Limited investment in services is driv- 0.900 9 Pakistan’s vested interests and preferential access. The correspond- spent on human development, tax revenue en by fiscal limitations, as well as by priori- adds up to PKR 2,660 billion. ing cost of social protection programmes should also be used more efficiently to pro- ties that have not always been aligned with 0.800 8 estimated by Pasha (2019) was PKR 624 vide basic services like quality health care human development. Sri Lanka billion. Therefore, diverting just 24 per- and education. In terms of Pakistan’s total expendi- 0.700 7 Sri Lanka 7.10 cent of these privileges to the poor could ture on social services, education receives India Public expenditure and access to India double the benefits available to them. To the largest share (64 percent), followed by 0.600 Bangladesh 6 6.30 alleviate inequality, redistribution along services health (31 percent). Other services lag far Nepal Pakistan these lines is a crucial first step. behind – the environment, water supply 0.500 5 Pakistan Achieving inclusivity in opportunities for and sanitation sector receives just 4 per- 5.10 Taxation in Pakistan: Progressive or growth depends on two key factors: the cent, and population planning a meagre Pakistan’s tax system is only regressive? ability of state expenditure to deliver af- 1 percent. This does not bode well for a 0.400 4 mildly progressive. Bangladesh fordable and quality public services, and country with surging climate change-re- 3.70 Pakistan’s tax system does not contribute people’s ability to access these services. Un- lated vulnerabilities, an increasingly scarce 0.300 3 significantly to reducing inequality in the derstanding public expenditure on services and unsafe water supply, and a high unmet need for family planning despite an unsus- 0.200 2 FIGURE 15 tainably high population growth rate. Breaking down public expenditure fur- Ranking of vested interests in terms of the magnitude of benefits and FIGURE 16 0.100 1 privileges enjoyed by each, out of total PKR 2,660 billion ther reveals that primary and secondary Incidence of taxes by quintile, (2017-2018) education receive the largest allocations 0 0 from provincial education budgets, with Corporate sector Banking 196 Industry 528 Direct tax Indirect taxes the focus on secondary schooling growing Global Human Investment in education, 5 3.8 10.8 Development Index health and social protection Feudal class 370 Richest in recent years. Even so, there are 23 mil- as a of GDP 4 2.6 10.1 lion out-of-school children in Pakistan, High net worth individuals 368 Source: Government expenditure on education as percentage of GDP alongside 22 million enrolled in low qual- and domestic general government health expenditure as percentage Large traders 348 3 1.1 9.9 ity government schools. Poor quality edu- of GDP are sourced from Data Bank of The World Bank. The years on which data is reported for education expenditure in this table vary for State owned enterprises 345 2 0.8 9.4 cation is partly due to a lack of investment each country based on the most recent data available. However, the Military establishment 257 year for health expenditure is 2016 for all countries. The expenditure 1 0.5 9 in teacher training and vocational training on social protection as a percentage of GDP was taken from the 2016 Exporters 248 Poorest – the facet of education that receives the report of Asian Development Bank. Social protection includes expenditure on social insurance, social assistance and labour market % 0 2 4 6 8 10 12 14 16 smallest allocations. programmes, with the most recent data reported for 2012. The data Pakistan’s richest quintile PKR billion 0 100 200 300 400 500 600 700 800 The greatest share of provincial health provided in this table varies slightly from the information given in this benefits the most from public Source: UNDP calculations based on sources mentioned in text and chapter for Pakistan, as international sources comparable across Source: UNDP calculations based on sources mentioned in text and footnotes. footnotes. expenditure is spent on general hospitals countries are often updated but not regularly. expenditure.

24 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 PART II: The NHDR 2020’s three Ps of inequality 25 TABLE 1 er among richer income quintiles. There FIGURE 18 issues of governance and institutional ca- is also a quality dimension to consider in pacity. For example, despite the impor- Percentage share of benefits under different types of expenditures, by terms of access to education. Poor fam- Ownership of mobile phones and access to tance of the rule of law, Pakistan’s justice income quintile, (2018-2019) the internet (% of the population), (2018- ilies are only able to spend up to a maxi- 2019) system is highly skewed towards the rich mum of 2 percent of their income on their and powerful. A lack of equitable access uintile uintile uintile uintile uintile Palma Rural Urban Type of expenditure 1 2 3 4 5 Total ratio children’s education, relegating them to to justice is a huge source of inequality in the domain of poorer quality public edu- % the country. The formal justice system fails Social services 20.9 22.9 20.9 21.2 14.1 100 0.7 cation, and limiting their choices for work 70 to reach low-income and disadvantaged Economic services 7.9 11.6 15.8 21.2 43.5 100 5.5 in the future. In effect, this means that the 64 groups, especially those living below the Subsidies and social protection 31.6 20.9 14.1 15.8 17.6 100 0.6 world of the two different Pakistans will poverty line. Factors behind this include continue in the next generation. 60 an extreme backlog of court cases, the in- General expenditure 9.6 11.4 13.9 18.9 46.2 100 4.8 Access to basic health services is simi- adequate number of judges, high costs as- Total public expenditure 14.2 14.5 15.1 19 37.2 100 2.6 larly limited and highly unequal. Low-in- 50 sociated with accessing justice, a lack of Income 9.2 12.9 13.6 21 43.3 100 4.7 come families have little or no access to the public awareness about existing legal aid

Source: UNDP calculations based on sources mentioned in text and footnotes. health care they need; if they face a major and its poor implementation, and the in- illness, they are often compelled to take 40 efficient enforcement of contracts. For in- out loans to pay for health care. Ill-health stance, just over 3,000 judges in Pakistan Perhaps most importantly, the NHDR can cause heads of households to lose their are responsible for handling over 1.7 mil- 30 2020 reveals that Pakistan’s people do not jobs or suffer a permanent loss of income, 26 lion pending court cases. benefit equally from public expenditure. with catastrophic consequences for them- Poor regulation by the National Electric The overall share is 14.2 percent for the selves and their dependants. As expected, 21 Power Regulatory Authority (NEPRA) 20 poorest income quintile, compared to 37.2 access to health care varies significantly and the Oil & Gas Regulatory Authority percent for the richest quintile (table 1).5 with the distribution of wealth. In Paki- 13 (OGRA) increases the cost burden on end This means that Pakistan’s richest quintile stan, the richer you are, the better your ac- 10 consumers and hinders socio-economic benefits most from public expenditure. cess to health services. development. The State Bank of Pakistan Fortunately, the distribution of public Another important factor affecting has been unable to control the build-up of expenditure is less unequal than the dis- access to opportunity is infrastructure, 0 a credit monopoly in the financial sector. Mobile Phones Internet tribution of income in the country. Thus, including the water supply for irrigation, As a result, low-income individuals are de- public expenditure does contribute to re- housing and shelter, and the road network. Source: PSLM 2018-2019. nied access to credit. The Securities and ducing inequality. However, attempts are Infrastructure facilities are not equitably Exchange Commission of Pakistan (SECP) urgently needed to increase this contribu- distributed in Pakistan. Large-scale farm- has been unable perform its core function tion by raising basic social services’ share in ers pre-empt most of the water available The underlying lesson here is that both of creating confidence in the stock market public expenditure, increasing cash trans- for irrigation. Some 28 percent of poor public expenditure and access to services and raising enough capital for new listings. fers, and widening the coverage of pension households each live in a single room, fre- must be reoriented if Pakistan is to im- The Competition Commission of Pakistan schemes. quently with as many as eight family mem- prove its levels of human development and (CCP), too, remains relatively inactive in bers. The National Highway Authority overcome entrenched inequality. ensuring competitive pricing and fair trade Access to public services routinely neglects farm-to-market roads practices. Consequently, there is evidence The lack of access to justice is which are essential for linking farmers and Moving forward: Improving gover- of major regulatory failures to break mo- a huge source of inequality in Beyond public expenditure, inequality small-scale producers with work and liveli- nance and institutional capacity nopolies and cartels in the country. In fact, Pakistan. is also determined by access to services. hood opportunities. from 2007 to 2018, the NHDR 2020 iden- If anyone remains deprived of access to Access to digital services in Pakistan is Powerful groups’ accumulation of wealth tifies an average of six industries per year public services, they face a key form of in- also low, with a ‘digital divide’ that spans and privilege maintains inequality and, in that are either potential cartels, or practice equality: inequality of opportunity. This across income quintiles, rural and urban many cases, infringes on the rights others, deceptive market practices. The most egre- prevents people from reaching their full areas, and even gender. Only 45 percent thereby creating new inequalities. Taxes do gious of these are the cement, sugar, and potential and keeps them from improving of people own mobile phones, and just 17 little to redress inequality, the coverage of motor industries (figure 19).6 their own, and their families’, well-being. percent use the internet (figure 18). Over- social protection and poverty alleviation These findings demonstrate how power- There is evidence of major Despite a growing number of public all, this divide is the result of digital mo- programmes is very limited, and public ful groups and weak governance ultimately regulatory failures to break and private schools in Pakistan, access to nopolies, language barriers, and existing sector priorities are not as focused on hu- increase inequality in Pakistan. Alleviating monopolies and cartels in education is not uniform across all income inequalities in affordability and accessibil- man development as they should be. the situation demands a comprehensive Pakistan. groups. Net enrolment rates are far high- ity. These themes are intrinsically tied to approach. Strict measures of accountabil-

26 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 PART II: The NHDR 2020’s three Ps of inequality 27 FIGURE 19 quality of life than a poor male farmer. structured around five axes of inequality in one woman was told she could not bring This is where intersectionality comes into Pakistan – that is, five ways through which her child to a session of the Provincial As- Number of times various industries were 9 identified as potential cartels, (2007-2018) play. It helps us analyse how social, cultur- inequality might manifest itself in the sembly. Another insight is that meaning- al, or political identities overlap to create country (figure 20). ful education often helps groups to over- Food Products complex discriminatory reactions. Such come prejudices, or even learn to advocate Fuel Energy analysis, in turn, provides the opportunity Identity and representation for themselves. This was the case for trans- Chemical Pharmaceuticals to develop effective recommendations to gender women in Karachi, who began to Information, Comm. Transport counter inequality. This is the perspective Our consultations show that greater rep- stand up for themselves after working with Motor Vehicles, Trailers Autoparts that the NHDR 2020 takes in speaking of resentation can create positive change in a non-governmental organization that Cement Industry ‘People’ as drivers of inequality. people’s lives. One example is of women champions transgender rights. Figure 21 Sugar Industry parliamentarians in Quetta, who banded presents levels of educational attainment NHDR 2020 focus groups together to demand day care facilities after by social marker, based on the NHDR Source: UNDP calculations based multiple years of SBP data. 2020’s Inequality Perception Survey. To offer an inclusive, participatory perspec- FIGURE 20 ity and transparency can bring crumbling tive of inequality in Pakistan, the NHDR Social mobility The five axes of inequality of NHDR 2020 public systems to life. The Public Financial 2020 team spoke to people who experience Management Act 2019 and the Right to inequality on a daily basis. We conducted Individuals and groups who experience Information Act 2017 can help to reduce 38 focus group discussions (FGDs) with inequality tend to enjoy limited social inequalities, but only if federal and provin- marginalized groups across the country, mobility. This begins at an early age, with cial departments adopt them and monitor affording access to human stories behind Identity and poor foundational education, and greater representation their implementation in both letter and the statistics of inequality. Most consulta- Region of instances of child labour and early mar- spirit. At the same time, good governance tions involved 10 to 20 people at a time, residence riage. For example, all 14 women we spoke with a community contact present to act Social to in Mithi, in Sindh’s district of Thar- at all levels of policy formulation, admin- mobility istration, and implementation is vital to as an intermediary and ensure participants’ parkar, were married before the age of 16. conduct public affairs effectively, to man- comfort. Focus group discussions were As a result, they could not attain higher held with gender minorities, persons with Safety and education, which could have helped them age public resources, and to tackle differ- social ent forms of the abuse of power. disabilities, informal workers, displaced comfort Access to achieve social mobility. Social mobility ap- persons, religious and ethnic minorities, services pears easier in Khyber Pakhtunkhwa, where people living in poverty, underprivileged remittances have contributed to far-reach- People: Perceptions of inequality children, bonded labourers, refugees, youth ing economic improvements for many fam- not in education, employment or train- ing, young mothers, white-collar workers, FIGURE 21 People are contributors to inequality in the upper classes, and workers engaged in terms of how they treat a community or particularly marginalized professions like Educational attainment of different social groups, (2020) individual based on sociocultural mark- farmers in Punjab, miners in Balochistan, ers – for example, investing less in a girl’s and textile workers in Sindh.7 8 None Primary (Class 1 to 5) Secondary (Class 6 to 10) High school (Class 11 to 12) University and above education, refusing to employ a Christian The main goal of these focus group dis- professional, or denying service to a trans- cussions was to enable vulnerable groups gender person. Such differences in treat- in Pakistan to give voice to their lived ex- ment are often expressed as bias, prejudice, periences in their own words. This section or discrimination against vulnerable social presents major insights from these discus- Women Persons with Workers Refugees and Transgender groups, which impact their income, access disabilities displaced persons people sions, alongside the results of the NHDR to opportunities, and general quality of 2020’s Inequality Perception Survey, con- life. This ultimately exacerbates inequality. ducted with 386 participants from our 38 It is important to note that individu- focus groups. als have multifaceted, complex, and fluid identities. While a woman may generally Religious and Youth People who receive Small and medium Upper class Five axes of inequality ethnic minorities remittances business owners have access to fewer opportunities com- pared to a man in Pakistan, a wealthy fe- Note: The confidence interval for any point estimate in the above figure is +- 20 percent of the reported magnitude. The NHDR 2020’s focus groups were male landowner is likely to have a better Source: UNDP calculations based on the NHDR 2020 Inequality Perception Survey.

28 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 PART II: The NHDR 2020’s three Ps of inequality 29 ilies. Figure 22 presents data on wealth by spoke to said that the fear of violence pre- the Government. This narrative of neglect er in terms of happiness than most other social marker, based on the NHDR 2020’s vents them from leaving Hazara Town in can severely, perhaps irreparably, damage groups, regardless of income, indicating Inequality Perception Survey. Quetta, whether for work, education, or to people’s trust in the Government. a fatalistic attitude towards their futures. pursue better opportunities. In a different Similarly, the upper classes have happiness Access to services vein, militancy continues to be a part of Social markers and inequality scores that are lower than expected across Pakistani life. We spoke with people from the board. Groups that may be expected One of the main ways in which inequality the Newly Merged Districts whose lives The NHDR 2020’s focus group discus- to be less satisfied with the state of things, impacts individuals is by limiting their ac- were overturned by terrorism and subse- sions engaged marginalized and vulnerable such as religious and ethnic minorities, cess to basic services. The NHDR 2020’s quent military operations to stem the tide groups from all over the country, showing generally score higher – especially in the focus groups demonstrate just how com- of militancy. This kind of violence, and the us the many different ways in which differ- categories of identity and representation, mon ‘ghost’ schools and health facilities are resulting displacement and destruction of ent groups experience inequality. Figure 23 and safety. The NHDR 2020’s Inequality in Pakistan; their existence on paper paints people’s homes and possessions, no doubt presents the results of the NHDR 2020’s Perception Survey, therefore, reveals the a deceptive picture of progress. Youth from contributes to inequality. Inequality Perception Survey, highlighting complexities of people’s perceptions of in- Bara in the Newly Merged Districts of the extent to which different social groups equality, and underscores the importance Khyber Pakhtunkhwa told us they have to Region of residence are happy or unhappy with certain themes of this perception in expanding human po- travel to Peshawar even for minor surger- related to inequality. tential and happiness. ies. At the same time, access is sometimes Pakistan’s regions embody inequality in The survey highlights some interesting Having discussed people’s perceptions restricted for cultural reasons. Parents in different ways. The variety of languages, findings – both obvious and surprising. of inequality across multiple axes, the next rural areas may not send their daughters to ethnicities, and cultures in the country The upper classes and owners of small and section delves into different social groups’ school because these are located far away, can contribute to discrimination based medium-sized businesses appear content particular experiences of inequality. may be unsafe, or do not have covered toi- on these identity markers. As an example, with their access to public utilities, educa- lets. Therefore, a nuanced intersectional Afghan refugees in Swat prefer to remain tion, and health care. On the other hand, Women perspective is required to improve access in this district of Khyber Pakhtunkhwa women, persons with disabilities, labour- to services. – with its language, culture, and ethnic ers, refugees, displaced persons, and the Women in Pakistan have historically had makeup so close to their own – because transgender community all express dissat- fewer opportunities than men, and face a Safety and social comfort they fear being treated poorly in culturally isfaction with their access to public ser- dual burden of work even if they find em- distant places like Punjab or Sindh. An- vices. ployment. The working women we spoke A core aspect of living as a minority in other aspect of region-based inequality is The transgender community and per- to still perform all the chores in their Pakistan is negotiating the dangers that evident in the popularly-held belief that sons with disabilities are unhappy with is- households, with no help from their hus- come with it. The Hazara community we ‘poor’ regions are intentionally ignored by sues of ‘identity and representation’, as they bands or families. In essence, they do twice feel that they are not treated equally in the work performed by men, without re- FIGURE 22 society. An interesting finding is that the muneration or recognition for domestic upper classes are also dissatisfied with how work. We heard harrowing tales of vio- Wealth of different social groups, (2020) they are treated, perhaps underscoring the lence – sexual and otherwise – carried out importance of cross-cutting identity mark- against women for disagreeing with their Lower Middle Upper ers (such as gender, age, and caste, among husbands, for example, or for refusing to others) in determining the way people feel hand over the government cash grants they about their place in society. Safety is un- receive to their families. derstandably a concern for the transgender Women also have more restricted ac- community, labourers, and persons with cess to technology in general, which limits Women Persons with Workers Refugees and Transgender disabilities displaced persons people disabilities, while women cite a lack of em- their earning potential. Figure 24 (p. 33) ployment opportunities as one of their big- presents data on the ownership of a com- gest concerns. Unsurprisingly, people who puter or laptop by social marker, based on receive remittances all believe that they the NHDR 2020’s Inequality Perception have a better quality of life than their par- Survey. This shows that women are the

Religious and Youth People who receive Small and medium Upper class ents. Labourers and youth feel differently, least likely to personally own a laptop or ethnic minorities remittances business owners expressing unhappiness with opportunities computer among all the groups surveyed. for social mobility. Note: The confidence interval for any point estimate in the above figure is +- 20 percent of the reported magnitude. Source: UNDP calculations based on the NHDR 2020 Inequality Perception Survey. In fact, youth generally score far low-

30 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 PART II: The NHDR 2020’s three Ps of inequality 31 FIGURE 23 FIGURE 24

The perception of inequality of different social groups, (2020) Access to a laptop or computer among different social groups, (2020)

Personal Shared No

The size of this circle represents 100 happiness.

Public Identity and Safety and Social Region of Utilities Education Healthcare Employment representation social comfort mobility residence

Women Persons with Workers Refugees and Transgender Women disabilities displaced persons people

Persons with disabilities

Religious and Youth People who receive Small and medium Upper class ethnic minorities remittances business owners

Note: The confidence interval for any point estimate in the above figure is +- 20 percent of the reported magnitude. Workers Source: UNDP calculations based on the NHDR 2020 Inequality Perception Survey.

Person with disabilities cational qualifications often choose not to enter the labour market at all. Refugees and displaced persons About 6.2 percent of the people in Paki- Unemployment and underemployment stan have some form of disability.10 The complicate things further. Many informal Disabled Persons (Employment and Reha- workers we spoke to work 12 hours each day, usually without knowing how much Transgender people bilitation) Ordinance of 1981 was amend- ed as recently as 2015, but the people we money they will make on a given day. Many spoke to highlight the inadequacy of its youths who took part in the focus groups implementation. Pakistan has performed are college graduates; some even have Mas- Religious and ethnic minorities poorly on making public and private spac- ter’s degrees. Yet most are unable to find es accessible to persons with disabilities, decent work in their hometowns, villages, making it that much harder for them to or cities. participate in public life and public spaces. Youth Women with disabilities have additional Refugees and displaced persons vulnerabilities, such as increased vulner- ability to sexual harassment, forced ster- Afghan migration to Pakistan began ilization or menstrual suppression, and during the Soviet-Afghan war in the late People who receive remittances greater discrimination when seeking mar- 1970s, followed by another huge wave riage compared to men with disabilities. of refugees driven out of their homes by American operations in Afghanistan after Labour 9/11. Militancy and military operations in Small and medium business owners Pakistan’s north-west also provoked a surge Many workers in Pakistan are not protect- in the number of internally displaced per- ed by its labour laws. Currently, 9.9 percent sons (IDPs) within the country. of children between 10 and 15 years old are Afghan refugees living in Pakistan feel Upper class engaged in work, while around 3 million ostracized. They are often unable to open people live in modern slavery as bonded bank accounts, own property, or even send labourers.11 Most of the country’s women their children to government schools. Note: The size of the circle represents groups happiness with the key themes outlined above, out of 100. Responses of unhappy and neutral are not included in the graph. The confidence workers are concentrated in marginalized Many displaced persons from the New- interval for any point estimate in the above figure is +- 20 percent of the reported magnitude. professions, while women with higher edu- ly Merged Districts are still waiting for Source: UNDP calculations based on the NHDR 2020 Inequality Perception Survey.

32 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 PART II: The NHDR 2020’s three Ps of inequality 33 the compensation they were promised to own homes among all of the groups sur- when they base their perceptions of others understanding of the first two Ps, as well rebuild their homes and livelihoods de- veyed. on deeply embedded discriminatory belief as of Pakistan’s macroeconomic context. stroyed by violence in the mid-2010s. Both systems. This leaves us with an important This section first outlines the theoretical communities feel short-changed and un- Religious and ethnic minorities concluding question: What do marginal- grounding that informs the NHDR 2020’s Religious minorities are certain living in Pakistan today. ized Pakistanis feel about the status of in- reform agenda. It analyses the relationship relatively satisfied with Pakistan is home to several religious and equality in the country? between inequality and growth, before public services in Pakistan, Transgender persons ethnic groups, adding diversity to the Many participants feel that the situation examining the macroeconomic impact of while labourers, refugees, country’s sociocultural landscape. The fo- is improving, including religious minori- the COVID-19 pandemic on the country. transgender people, and Pakistan’s transgender community is cus group participants we spoke to reveal ties, some of whom are relatively well-off, Building on this theoretical framework, persons with disabilities among its most marginalized. Transgender the systemic discrimination that minori- and mid-level career women in positions the section ends by offering targeted rec- are not. persons have to negotiate a life of ridicule, ties often face, such as water tankers cost- of some authority. People who have experi- ommendations to reduce inequality in Pa- violence, and sexual abuse. Awareness is ing more in Hazara colonies, or govern- enced significant intergenerational upward kistan. crucial, not just for the rest of Pakistan, ment hospitals being a fair distance away mobility are another sizeable group that is but also for the transgender population. from them. They can also face more ‘sub- optimistic about the future. Other groups Growth and inequality We spoke with transgender women who tle’ forms of discrimination, such as Sikh are less optimistic, most notably women were not aware of the Transgender Persons children being forced to recite the Kali- domestic workers, the Hazara community, The NHDR 2020 examines various ways (Protection of Rights) Act of 2018, which mah in class.12 At the same time, howev- the transgender community, and persons of measuring inequality, but the question lays out their legal rights in the form of er, some religious minorities reported no with disabilities. It seems that these vulner- still stands: Can low levels of inequality key anti-discrimination policies. They also experiences of discrimination, such as the able groups – who have the greatest need lead to higher economic growth? The re- have trouble accessing the most basic ser- Hindu community in Mithi, in Sindh’s dis- for changes in social attitudes, investments port’s Macroeconomic Model of Pakistan vices – such as health care, education, and trict of Tharparkar. Muslims in the area re- in infrastructure, and political reform – do is the first attempt at empirically determin- even transport – because of familial or so- spect them, they said, and even participate not see much progress in Pakistani society. ing the bidirectional relationship between cietal attitudes. Transgender persons find in their festivals and visit their temples. The NHDR 2020’s findings point to a inequality and growth. Its modules include it exceptionally difficult to rent houses at clear conclusion: to solve people-centric equations on the different components of fair rates, or to own their own homes. Fig- People’s perception of inequality: inequality, Pakistan needs a people-centric GDP related to the demand side, the bal- ure 25 presents home ownership by social Optimism or fatalism? response. ance of payments, public finances, employ- marker, based on the NHDR 2020’s In- ment, and inflation. It also includes special equality Perception Survey. It shows that The NHDR 2020’s focus groups demon- modules on the determinants of corporate transgender persons are the least likely to strate that people contribute to inequality Policy: Tackling inequality profitability, inequality, and poverty (fig- ure 26).

Policy is the third driver of inequality FIGURE 26 FIGURE 25 identified by the NHDR 2020. It refers to policies that are either ineffective, or op- Modules of the Macroeconomic Model House ownership of different social groups, (2020) posed to the principles of social justice. In many ways, policies that reinforce or create Personal Shared No Policy variables Exogenous variables inequality can be affected by, and affect, the first two Ps: Power and People. Pow- erful groups can ensure that their interests Growth Balance of payments Public finances are protected, either by being part of the policy-making class, or by exploiting their Women Persons with Workers Refugees and Transgender networks and wealth to lobby for policies Corporate disabilities displaced persons people Employment Investment Inflation profitability that are favourable to them. Certain pol- icies can be unfair to specific sociocultur- al groups, either by not protecting their Level of inequality rights, or by lacking frameworks to effec- Religious and Youth People who receive Small and medium Upper class tively implement existing policies to pro- Poverty ethnic minorities remittances business owners tect them properly. Policies to alleviate inequality, there- Note: The confidence interval for any point estimate in the above figure is +- 20 percent of the reported magnitude. Source: Developed by NHDR 2020, UNDP. Source: UNDP calculations based on the NHDR 2020 Inequality Perception Survey. fore, need to be grounded in a nuanced

34 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 PART II: The NHDR 2020’s three Ps of inequality 35 The Macroeconomic Model yields im- pects for the country as a whole. kistan was estimated at 37 percent. This FIGURE 28 COVID-19 has left 5 million portant conclusions on the determinants of The Macroeconomic Model also simu- implies that 11.4 million households, with people unemployed as of GDP growth, inequality, and poverty (fig- lates the impact of external and domestic an average household size of seven, earned Projected index of quarterly GDP (average quarterly GDP, 2019-2021 = 100), (2019-2020 and 2020-2021) June 2020. It will lead to an ure 27). It concludes that it is possible to shocks prompted by the COVID-19 pan- incomes that were below the poverty line. additional 28 million people achieve higher and more inclusive growth demic. Fortunately, the incidence curve Projections using the Macroeconomic living below the poverty line by 2019-20 2020-21 while simultaneously reducing inequality. of the virus has flattened out since 20 July Model suggest that there will be a huge in- 104 the end of 2021. This can be done through a greater level of 2020 in Pakistan. The quarterly growth crease in the number of households below 104 102 102 fiscal effort, higher development spending, rates presented below indicate that the the poverty line. By the third and fourth 102 101 relatively lower nominal interest rates, and economy will start recovering from the first quarters of 2019–2020, their number will 100 more expenditure on human development quarter of 2020–2021 (figure 28). Even so, reach 14 million, before swelling to 15.4 98 98 and social protection. both Pakistan’s balance of payments and its million by the end of 2020–2021. In es- 98 Lower levels of inequality achieved by budgetary position are expected to come sence, the pandemic will add another 28 96 these means will have a twofold effect. On under pressure in 2020–2021. Overall, the million people to Pakistan’s poor. 95 94 the demand side, they will raise consumer negative impact of COVID-19 is expect- In light of its impacts on the economy, 92 expenditure, thereby stimulating growth. ed to be greater in urban areas and in the employment, and poverty, COVID-19 will 92 Less inequality will also, perhaps sur- regional economies of Punjab and Sindh. have far-reaching consequences for the 0 prisingly, lead to higher tax revenues and The pandemic’s effect on employment state of inequality in Pakistan. Alongside 1 2 3 4 1 2 3 4 A relief, development, and greater public spending. Thus, lower levels and poverty is substantial. As of the end of the recommendations presented below, incentive package of PKR of inequality do more than just improving June 2020, an estimated 5 million workers there is an urgent need for an immediate Source: UNDP NHDR 2020 Macroeconomic Model simulations. 1.2 trillion is proposed for prospects for Pakistan’s most vulnerable in Pakistan have lost their jobs. Before the relief, incentive, and development package. economic revival in response people; lower inequality improves pros- pandemic, the incidence of poverty in Pa- This is vital to facilitate the early revival of to COVID-19. the economy, while protecting the poor TABLE 2 FIGURE 27 and unemployed from a worsening eco- nomic plight. The NHDR 2020 proposes Fiscal cost of relief, incentive and development package (PKR billion), Impact of change in policy and exogenous variables on GDP growth, inequality and poverty a PKR 1.2 trillion package that includes an (2020-2021) enhanced development allocation for the Increase Decrease Little change health sector, tax relief and incentives, and Cost PKR billion Change in Impact on growth Impact on inequality Impact on poverty the wider coverage of social protection in- struments – especially as these relate to the Social protection 690 Policy variables Ehsaas programme – to mitigate the fall- Transfer of PKR 12,000 per family to 2.0 million families twice in 2020-2021 480 Higher fiscal effort out from the pandemic. Table 2 highlights Subsidy to the Utility Stores Corporation the overall financial outlay proposed for 50 Higher development spending this package. Reduction in petrol levy 60 Higher current expenditure Special Flood Relief Program 100

The NHDR 2020 reform agenda Tax relief and incentives 210 Lower nominal interest rate Reduction in sales tax and excise duty rates on selected industries 40 Lower exchange rate depreciation Inequality is a complex phenomenon that has been entrenched for decades in the sys- Restoration of the zero-rating facility to exports for six months 40 Higher expenditure on human development tems, structures, and mindsets of Pakistani Restoration of full investment allowances 60 and social protection society. It is naïve to expect a magic bullet Enhancement in personal income tax exemption limit 20 Exogenous variable solution that creates lasting and sustain- Increased tax deductibility on health insurance, charitable contributions and 50 able change. To deal with Policy as a driver introduction of deductibility on housing loan repayments Faster growth in world trade of inequality, we must address three major Special development package 300 Faster growth in remittances domains in order to alleviate inequality in the country. Below, we present the high- Enhanced development allocation for the health sector 150 Lower oil prices lights of the NHDR 2020’s reform agen- Special Development Program of small, labour-intensive projects with youth 150 da aimed at revitalizing regions that are involvement Note: With respect to the level assumed in the base scenario. lagging behind, empowering the country’s Total package 1,200 Source: Simulations of the Macroeconomic Model, NHDR 2020. most vulnerable groups, and bridging the Source: NHDR 2020 suggestions based on Macroeconomic model. gap between the two different Pakistans.

36 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 PART II: The NHDR 2020’s three Ps of inequality 37 Reducing the privileges of the elite continuous process, and one that must be- bridge the gap between the two different in academia can improve on the ideas we Policies and reforms to tackle gin immediately if Pakistan hopes to com- Pakistans. have outlined. Those of you who are policy inequality must withdraw the As the NHDR 2020 shows, elite capture pete with its global partners in the race to If the real wealth of a country is its peo- makers can translate the NHDR’s recom- privileges of the elite, promote has shaped the social, political, and eco- attain equality in opportunities, capabili- ple, Pakistan faces an embarrassment of mendations into actionable policy. And all more decent work and gender nomic contours of Pakistan today. Re- ties, and outcomes. riches. It is because of this that the work of you, the people of Pakistan, can extend equality, and increase outlays ducing unfair privileges is a prerequisite of the report culminates in you, the read- tolerance and acceptance towards those on human development and for achieving equality. This will involve er. Each and every one of you has a part to who are different, in fundamental ways, social protection. wide-ranging tax reforms, the elimination Towards an equal Pakistan play in taking forward the findings of the from yourselves. Together, we can move of subsidies, changes in the pricing policy, NHDR 2020. Those of you in the media away from the two different Pakistans – of and measures to ensure equitable access to The NHDR 2020 demonstrates that im- can disseminate the reform agenda con- the haves and the have nots – and build a land and capital. Overall, this could yield mense inequality exists among and be- tained within this report. Those of you more inclusive, equal nation. up to PKR 500 billion in savings and reve- tween Pakistan’s provinces and special re- nue generation. gions, across the urban–rural divide, and within marginalized and underprivileged Notes Spending more on human development segments of the population – such as chil- and social protection dren, youth, labourers, and women. The 1 See Chapter 5: The political economy of inequality in March 2020. Due to logistical constraints, the NHDR various indices and measures used, both the NHDR 2020 for detailed footnotes regarding privileg- team was unable to hold consultations in Gilgit-Baltistan. The funds gained by reducing the privi- conventional and developed specifically es of groups. 8 Wealth is computed through an additive score index. Par- 2 Data on the Super Tax extracted from the Financial State- ticipants chose from a list of 12 assets in the NHDR leges of the elite must be redistributed to for the NDHR 2020, provide a quantita- ment Analysis of Companies (Non-Financial), SBP 2019a. 2020’s Inequality Perception Survey. Each asset that they tive grounding for the report’s analysis. the country’s poorest and most vulnerable, 3 Government of Pakistan 2020a. ticked received a score of one point. The points were then and geared towards redressing regional This analysis is enriched by the lived expe- 4 Water Aid 2018. sorted into three wealth categories: ‘lower class’ for 0–4 inequality. They can be used to increase riences of the NHDR 2020’s focus group 5 For more detail, see Chapter 5: The political economy of assets, ‘middle class’ for 5–8 assets, and ‘upper class’ public expenditure in the critical areas of participants from all over the country, inequality in the NHDR 2020. for 9–12 assets. health and education, as well as expanding representing particularly vulnerable com- 6 For a more detailed analysis, see Chapter 6: Governance 9 Dawn 2019. social protection, such as through the Eh- munities who face inequality in their daily and institutional capacity in the NHDR 2020. 10 Government of Pakistan 2019a. saas programme. This will lay the necessary lives. 7 Discussions took place in Punjab, Sindh, Khyber Pakh- 11 Government of Pakistan 2018b; Minderoo Foundation foundation for expanding human capabili- The report highlights why studying tunkhwa, and Balochistan, and with people from the New- 2019. ties, bridging regional disparities, and re- inequality is important for Pakistan, and ly Merged Districts, in 2019. Consultations planned for 12 The Kalimah, often recited by South Asian Muslims, are ducing inequality of opportunity. how this issue has plagued the country’s Azad Jammu and Kashmir had to be postponed due to the formal declaration of a Muslim’s faith. economic and social progress. It discuss- tensions at the border and could not be held until early Improving conditions of work and provid- es how, despite the Constitution of Paki- ing employment stan upholding equality and despite global commitments such as the Sustainable De- While direct assistance for the marginal- velopment Goals, the nation is still grap- ized is crucial, it is equally important to pling with the reality of the two different empower people with the tools they need Pakistans – one for the rich, with access to for growth and self-sufficiency. This is why the best avenues and opportunities, and it is essential to provide decent work for all. one for the poor, forced to eke out a living This means enhancing the rights of work- from a narrow pool of choices. ers, raising the minimum wage and ensur- The report outlines its framework of ing its full coverage, increasing non-mar- analysis, examining the three Ps driving ginal work opportunities for women, and inequality in Pakistan: Power, People, and leveraging Pakistan’s youth bulge to ad- Policy. It shows how they interact to create vance technology-led development. myriad inequalities in the country; some The NHDR 2020’s framework for tack- overt and structural, others subtle and ling inequality provides a sustainable blue- social. The NHDR 2020 aims to unravel print for the creation of equal opportuni- the Gordian knot of constrained choices ties nationwide. It is important to note, propelled by the three Ps, culminating in however, that tackling inequality must be a a reform agenda to tackle inequality and

38 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 PART II: The NHDR 2020’s three Ps of inequality 39 References

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40 PAKISTAN NATIONAL HUMAN DEVELOPMENT REPORT 2020 United Nations Development Programme 4th Floor, Serena Business Complex, Khayaban-e-Suharwardy, Sector G-5/1, Islamabad, Pakistan

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The richest 20 percent of Pakistan’s population has an HDI of To this end, the report undertakes exhaustive statistical 0.698, falling in the high human development category, while analysis at national and provincial levels, and includes the poorest 20 percent has an HDI of only 0.419, falling in the new inequality indices for child development, youth, labour low human development category. It seems the country is and gender. Additionally, a more nuanced measure of split into the two different Pakistans - one with a multitude of inequality, the Pashum ratio, has also been developed for opportunities to pursue quality education, secure responsive the report, to deconstruct income inequality in the country. health care, and live off generational wealth; and the other, Qualitative research, through focus groups with marginalized without. Exploring this dichotomy requires an understanding communities, has been conducted all over the country, of the extent of inequality in the country from multiple lenses, enabling vulnerable groups to share their lived experiences such as economic measures that include income and wealth, and highlight what living with inequality is really like. as well as measures that go beyond income, such as human If the real wealth of a country is its people, Pakistan development. faces an embarrassment of riches. However, despite the The National Human Development Report 2020 focuses on Constitution of Pakistan upholding equality and despite these measures of inequality, and the mechanisms that have global commitments such as the Sustainable Development allowed it to persist. To do this, it uses its framework of the Goals, the nation is still grappling with the reality of the two three Ps of inequality: Power, People, and Policy, examining different Pakistans. It is our hope that the NHDR 2020’s the ways in which each of these enable wealth, privilege, and framework to tackle inequality provides a sustainable development to be concentrated in the hands of the few, at blueprint that can help us alleviate disparities, bridge gaps, the expense of the many. and pave the way towards a more equal Pakistan.

“Sustainable human development is not possible in the absence of equality. Tackling inequality must therefore be a continuous process, and one that has to begin immediately if Pakistan hopes to compete with other countries in the race to providing equality in opportunities, capabilities and outcomes.” — Dr. Hafiz A. Pasha, lead author of the NHDR 2020

“The worst form of inequality is depriving people of opportunities to participate in social and economic activities. In the long run, this only worsens their vulnerabilities. This is why Pakistan must collectively work towards inclusion through participation, social acceptability, and policy reforms to ensure and enforce the rights of all individuals.” — Nayyab Ali, transgender politician and gender expert.

“Inequality not only hurts individuals but also communities and nations. It makes people desperate for their rights and, in their struggle for survival, creates an imbalance. We all need a society where people, no matter what their race, gender, or religion, are treated as equal human beings and there are ample opportunities for education, employment, and growth.” — Faiza Yousuf, Founder, WomenInTechPK, and Co-founder, CodeGirls, Technologist

“Inequality is a product of myriad factors and must be challenged from the ground up. Education is a particularly great equalizer, especially for marginalized sections of society. It can help communities exercise their rights as citizens and pave the way towards further social mobility.” – Muhammad Sabir, education activist and founder of Slumabad