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Report No. 55998-PK Pakistan Gilgit-Baltistan Economic Report Economic 55998-PK No. Gilgit-Baltistan Report Pakistan Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of the World Bank World Document ofthe December 2,2010 Transformation Broadening the Gilgit-Baltistan EconomicReport Pakistan Report No.55998-PK The Government of Pakistan Asian Development Bank Asian Development ofPakistan Government The Pakistan – Government’s Fiscal Year July 1 – June 30 Currency Equivalents Currency unit: Pakistan Rupees (PKRs. or Rs.) US$1 = 85.87 PKR as of October 29, 2010 ABBREVIATIONS AND ACRONYMS ADB Asian Development Bank GBAD Gilgit Baltistan Agriculture Department ADP Annual Development Program GBLA Gilgit Baltistan Legislative Assembly AIOU Allama Iqbal Open University GDP Gross Domestic Product AJK Azad Jammu and Kashmir GEMCEP Gemstone Corporation of Pakistan AKCSP Agha Khan Cultural Service - Pakistan GoGB Government of Gilgit-Baltistan AKDN Agha Khan Development Network GoP Government of Pakistan AKES-P Agha Khan Education Service - Pakistan GSP Geological Survey of Pakistan AKHSP Agha Khan Health Service - Pakistan GTZ German Agency for Technical Cooperation AKRSP Agha Khan Rural Support Program HMIS Health Management Information System ALF Agriculture Livestock and Forestry IDPs Internally displaced persons AMC Army Medical Corps IFA Individual Financial Assistance ARI Acute Respiratory Infection IFR Instrument Flight Rules BHU Basic Health Units IMF International Monetary Fund BISP Benazir Income Support Program IMR Infant Mortality Rate BWB Basin Water Board IUCN International Union for Conservation of Nature CAA Civil Aviation Authority IWRM Integrated water resource management CAR Central Asian Republics JICA Japan International Cooperation Agency CBOs Community Based Organizations KAGB Ministry of Kashmir Affairs and Gilgit- Baltistan CDM Clean Development Mechanism KARINA Karakoram Agriculture Research Institute for Northern Areas COPD Chronic Obstructive Pulmonary Disease KIU Karakoram International University CPR Contraceptive Prevalence Rate KKH Karakoram Highway CSOs Civil Society Organizations KVO Khunjerab Village Organization DoAH Department of Animal Husbandry LG & RD Local Government and Rural Development DoH Department of Health LHVs Lady Health Visitors DoMD Department of Mineral Development LHWs Lady Health Workers ESGO Empowerment and Self Governance LOC Line of Control Order FATA Federally Administered Tribal Areas LSOs Local Support Organizations FBR Federal Bureau of Revenue MCH Maternal and Child Health FLCF First level Care Facilities MDGs Millennium Development Goals FTA Free Trade Agreement MMR Maternal Mortality Rate GB Gilgit-Baltistan MoF Ministry of Finance MFPL Mountain Fruit Private Limited PPIB Private Power Infrastructure Board MoT Ministry of Tourism PTDC Pakistan Tourism Development Corporation MTBF Medium-Term Budget Framework RTA Road Transport Authority MTDF Medium-Term Development Framework SDP Sost Dry Port MW Megawatt SMEs Small and Medium Enterprises NACCI Northern Areas Chamber of Commerce SP Social Protection NAEP Northern Areas Education Project SRDPT Silk Route Dry Port Trust NAFD Northern Areas Forest Department TB Tuberculosis NAGMA Northern Areas Gemstone and Mineral TDP Tourism Development Plan Association NAP National Aviation Policy TFR Total Fertility Rate NAPWD Northern Areas Public Works TVE Technical and Vocational Education Department NASSD Northern Areas Strategy for Sustainable UNESCO United Nations Educational, Scientific Development and Cultural Organization NATCL Northern Areas Trading Cooperation V/WO Village and Women Organizations Limited NATCO Northern Areas Transportation Company VOs Villages Organizations NATD Northern Areas Tourism Department WAPD Water and Power Department NATDB Northern Areas Tourism Development WAPDA Water and Power Development Board Authority NEAS National Education Assessment System WMD-AD Water Management Directorate of the Agriculture Department NGO Non-Governmental Organization WRMDD Water Resource Management and Development Directorate PMDC Pakistan Mineral Development WSS Water Supply & Sanitation Corporation PPHI People's Primary Health Care Initiative WUO Water User Organization ASIAN DEVELOPMENT BANK WORLD BANK Country Director: Rune Stroem Vice President: Isabel M. Guerrero Task Team Leaders: Farzana Noshab Country Director: Rachid Benmessaoud and Safdar Parvez Sector Director Ernesto May Sector Manager: Miria Pigato Task Team Leader: Christian Eigen-Zucchi Foreword We are pleased to present the Gilgit-Baltistan Economic Report which is the product of a collaborative effort of the Government of Gilgit-Baltistan, the Asian Development Bank, the World Bank, and other stakeholders to better understand the development process of Gilgit-Baltistan and propose policy actions to help increase economic growth, reduce poverty, and improve social outcomes. In August/September 2010, as this report was being readied for publication, Pakistan endured extensive and catastrophic flooding as a result of unusually heavy monsoon rains. While a detailed Damage and Needs Assessment is being finalized, initial indications suggest massive damages across Pakistan. Gilgit-Baltistan accounts for a relatively small part of this, but the devastation wrought by raging rivers rushing through narrow canyons has been immense. The fast moving waters washed away bridges (including 5 major spans on the Karakoram Highway), link roads, irrigation infrastructure, water supply schemes, and scarce agricultural land. The flooding disaster has major implications for the development trajectory of Gilgit-Baltistan (as well as Pakistan more widely). The destruction of infrastructure has disrupted private sector activity, severed trade with China via the Khunjerab pass on the Karakoram Highway (already blocked by a landslide in January 2010 and the formation of the Attaabad lake), and has left entire communities cut-off from markets and income earning opportunities. Restoration and rehabilitation activities have put additional demands on public resources. Even with the mobilization of international support, government resources will be stretched and it will be essential to ensure accountability and adequate administrative capacity for effective public resource use. At the same time, the floods present an opportunity to rebuild assets with greater resilience to withstand future disasters. The changed and rapidly evolving circumstances make the key themes as well as the information, analysis, and recommendations brought together in this report even more relevant. The flooding and the Attaabad lake disasters underscore the importance of economic geography in shaping the development of the territory. The introduction of reforms through the Empowerment and Self-Governance Order in 2009 highlights the significance of governance (the other theme woven through the report) and the need to enhance institutional capacity in seeking to effectively address various challenges, including disaster risk management and preparedness. At the sectoral level, the areas reviewed are critical to the development prospects of Gilgit- Baltistan, and the policy options identified will help accelerate progress. Looking forward, the Damage and Needs Assessment, coupled with more detailed analyses of the fuller implications of the floods will help underpin requisite development initiatives, and we hope that this report will be useful in providing a baseline as well as galvanizing the strong engagement of all stakeholders for the future of Gilgit-Baltistan. Rune Stroem Rachid Benmessaoud Country Director, Pakistan Country Director, Pakistan Asian Development Bank World Bank Acknowledgements This report was prepared by a team led by Pervaiz Ahmed (Aga Khan Foundation), Christian Eigen- Zucchi (World Bank), and Farzana Noshab and Safdar Parvez (ADB). It drew upon background papers and direct contributions from Ceren Ozer and Abdul Malik (WB - Compilation), Nobuo Yoshida and Tomoyuki Sho (WB - Poverty Analysis), Mehrdad Yousuf (ADB - Governance), Hanid Mukhtar (WB - Fiscal), Shabana Khawar and Sohail Younas Moghal (WB - Private Sector Development), Kevin Crawford (WB) and Abdul Latif Rao (ADB - Rural Development), Michael Stanley, Ekaterina Koryukin and Rashid Malik (WB - Minerals), Isfandyar Zaman Khan, Huma Waheed and Raffaele Gorjux (WB - Tourism), Kaspar Richter, Philippe Cabanius-Matraman and Upali Nihal Pitigala (WB - Trade), Qazi Azmat Isa and Maliha Hamid Hussein (WB - Community Driven Development and Social Capital), Muhammad Iftikhar Malik and Gul Najam Jamy (WB - Social Protection), Sofia Shakil, Madiha Ahmad and Safiya Aftab (WB - Education), Inaam Haq and Shehla Zaidi (WB - Health), Nadir Abbas (WB - Water Supply & Sanitation), Shahid Ahmad (ADB - Irrigation), Rashid Aziz (WB) and Asad Aleem (ADB - Hydropower / Energy), and Zulfiqar Ahmad (WB - Transport). On the World Bank side, Zahid Hasnain and Kaspar Richter initiated the study, and Irum Touqeer, Shafiq Mohammed, Shafqat Manzoor Mirza, Shabnam Naz, Nimanthi Attapattu and Jennifer A. Casasola provided administrative support. The report benefited from the detailed comments and suggestions of Edgardo Favaro (WB), William Dillinger, Somik Lal and Stephen Rasmussen (WB - peer reviewers), as well as the editorial assistance of Kim Murrel and Peter Honey (WB). The report was prepared under the guidance of Miria Pigato (WB - Sector Manager) and Satu Kahkonnen (WB -
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