ANNUAL PLAN 2010-11 PLANNING COMMISISON PLANNING AND DEVELOPMENT DIVISION GOVERNMENT OF PAKISTAN JUNE, 2010 CONTENTS Pages Foreword Executive Summary i Part-I Macroeconomic Framework 1 Chapter 1 Growth, Investment and Savings 3 2 Balance of Payments 11 3 Fiscal and Monetary Developments 21 4 Public Sector Development Programme 29 Part-II Overcoming Major Constraints 39 5 Water Resources Development 41 6 Energy Security 47 Part-III Human Resource Development 57 7 Education for Knowledge Society 59 7.1 School and College Education 59 7.2 Higher Education 62 7.3 Science and Technology 67 8 Employment 75 9 Population and Development 85 Part-IV Poverty Alleviation and Millennium Development Goals 91 10 Poverty Reduction 93 11 Health and Nutrition 101 11.1 Health 101 11.2 Nutrition 106 Part-V Main Features of Sectoral Programs 109 12 Agriculture Development 111 12.1 Agriculture Crops 111 12.2 Livestock, Poultry and Fisheries Development 119 13 Manufacturing and Minerals 125 14 Transport and Communication 133 15 Physical Planning and Housing 139 16 Information and Communication Technologies 147 16.1 Information Technology 147 16.2 Telecommunications 155 17 Women Empowerment and Social Welfare 159 17.1 Women Development and Empowerment 159 17.2 Social Welfare 162 18 Rural Development, Special Areas and Drought Recovery 165 Program 18.1 Rural Development 165 18.2 Special Areas 170 18.3 Drought Recovery Assistance Program 175 19 Environment and Sustainable Development 183 20 Mass Media, Culture, Sports, Tourism and Youth 187 20.1 Mass Media 187 20.2 Culture, Sports, Tourism and Youth 189 21 Good Governance 193 21.1 Reforms Programme 193 21.2 Monitoring and Evaluation 196 Foreword Foreword The National Economic Council (NEC) in its meeting held on 28th May, 2010 under the chairmanship of the Prime Minister, reviewed the performance of the economy during 2009-10 and approved the Annual Plan 2010-11. The economy has shown signs of recovery during 2009-10 with GDP growth at 4.1 % in comparison with hardly any growth last year (1.2%). Agriculture grew (2%) mainly due to growth of livestock while crop production remained stagnant after bumper crop last year. Despite continuous uncertainty and constraints on domestic and global fronts, the industrial sector managed to achieve a growth rate of 4.9% against the target of 1.7%. This was attributed mainly to large scale manufacturing, which posted a positive growth of 4.4 %. The economy also witnessed an upturn in exports. The services sector surpassed the target of 3.9%, mainly contributed by wholesale and retail trade (5.1%), transport, storage and communications (4.5%) and public administration and defense (7.5%). The development strategy as reflected in the Annual Plan 2010-11 rests on the following key objectives: (i) overcoming energy and water shortages through concerted short-term measures within an integrated medium-term plan for both sectors; (ii) investing in people (i.e. education, health, and social protection) to move people out of poverty through direct income support measures (BISP) and increased resources and better delivery in education and health; (iii) nurture through policy support measures, needed economic reforms and pro-investment policies, to ensure sustained growth in agriculture and industry; and (iv) continued support and highest priority to development of less developed areas especially Balochistan, FATA, and backward areas of other provinces. The Annual Plan 2010-11 targets growth of GDP at 4.5% with contribution of agriculture at 3.8%, manufacturing at 5.6% and services sector at 4.7%. Domestic and external resource mobilization endeavors would ensure improvement in investment and savings levels. Efforts would be made to minimize energy shortages that would help the revival of production in key sectors. Inflation would likely be 9.5% on the back of prudent fiscal and monetary policies. Higher growth in agriculture and manufacturing sectors and lower inflationary expectations would keep inflation within single digit. The Annual Plan 2010-11 marks a paradigm shift in the implementation of the PSDP. The emphasis will now be to complete on-going projects and new projects will be limited and carefully selected to reflect priority needs of the economy. Also a major effort will be made to rationalize the existing portfolio of projects after close consultations with all stake holders. Efficiency and timely delivery will be new watch words for PSDP. I would like to acknowledge the considerable effort and hard work of the staff of the Planning Commission as well as their professional contribution in preparing this important document. Dr. Nadeem Ul Haque Minister of State/Deputy Chairman Islamabad 5th June, 2010 Executive Summary Executive Summary Overview Pakistan’s economy has not only regained macroeconomic stability but has also shown clear signs of revival of economic growth during 2009-10. Despite electricity shortages, difficult security situation, much lower than expected foreign resource inflows, the economy grew by 4.1% against 1.2% achieved in the previous year 2008- 09. Large scale manufacturing and exports have shown respectable growth while workers remittances and foreign exchange reserves improved substantively. Acceleration in inflation has also been checked. Short term measures including improved demand management, reducing circular debt, installation of rental power plants and adjustments in energy prices have eased the energy gap. Benazir Income Support Programme of direct income support to the poor female heads of households launched in 2008 has been expanded in the current year to 3 million families. There is however, little room for complacency. Serious infrastructure gaps exist. Electricity crisis will continue for sometime in coming years. Inflation and debt liabilities are still high. The decline in investment and saving levels need to be reversed and significantly increased to ensure stable and higher growth. The coming year 2010-11 is a challenging one not only because the economic recovery remains fragile but also because the implementation of the 7th NFC Award and 18th Constitutional Amendment will require that the federal and provincial governments work in close harmony to ensure that the “growth dividend” as a result of these changes is fully realized. Other major challenge is to ensure a smooth introduction and enforcement of VAT to ensure resources to meet security and development needs. Similarly, export momentum of 2009-10 must be maintained to exert positive influence on external accounts. Inflationary expectations are to be checked to arrest increasing trend of inflation through prudent combination of fiscal and monetary policies. Review of Annual Plan 2009-10 GDP Growth: GDP growth for the year 2009-10 has been estimated at 4.1% against the target of 3.3%. Agriculture sector grew by 2.0% against the target of 3.5%. Industry registered a growth rate of 4.9%, surpassing the target 1.7%. Manufacturing and construction are the main contributors to this growth. Large scale manufacturing posted a positive growth of 4.4%, whereas, construction recovered from the low base and has shown a growth of 15%. The services sector achieved a growth rate of 4.6% compared to the target of 3.9%. The growth of services sector mainly stemmed from wholesale and retail trade (5.1%), transport & communication (4.5%) and general services (6.6%). Sectoral Growth Performance Agriculture: Growth of all major crops except cotton that grew by 7.4%, remained negative. Livestock has posted a growth of 4.1% mainly contributed by increase in production of milk (3.3%), meat (4.3%), wool (1.2%), hides (3.4%) and skins (2.3%), respectively. Water availability adversely affected the crops. Besides, realization of Annual Plan 2010-11 i Executive Summary lower prices in preceding season for rice and sugarcane combined with weak demand for credit turned out to be the main impediments for agriculture growth. Manufacturing: The sector recovered well amid uncertainty in global demand and domestic constraints especially power outages. Data for 9 months, July- March 2009- 10 showed a growth of 4.4% in large scale manufacturing. Large part of recovery emanated from the consumer durables and allied industries. Growth has been seen in production of jeeps, cars, tractors, motorcycles, cement, fertilizers, leather and cotton cloth. Moreover, the revival in construction activities in both public and private sectors resulted in a sharp increase in demand for cement. Main factors contributing to the growth in consumer durables are improvement in rural incomes and record high remittances. Services: Transport and communication, wholesale and retail trade and social, community and personal services are main contributors to the growth of 4.6% in services sector against 1.6% achieved in 2008-09. Transport, storage and communications sub-sector posted a growth of 4.5% due to increase seen in value addition of air and road transport, storage and telecom sector. Wholesale & retail trade activities are likely to benefit from recovery seen in commodity producing sectors. Savings and Investment: Total investment has fallen significantly in 2009-10 and is expected to be 16.6% of GDP compared to 19% achieved last year and against target of 20%. The decline in investment is largely a reflection of security situation, reduced external inflows and slow global recovery after 2008 recession. Public sector inclusive of general government development spending is 4.3% of GDP. National savings are expected to decrease to 13.8% of GDP from the targeted figure of 14.7%. Foreign Direct Investment: Foreign direct investment (FDI) for July-April 2009-10 shows a decline of 45% to $1,773 million from $3,205 million achieved during corresponding period last year. Decline in mainly attributed to security situation. The major sectors attracted FDI include oil and gas exploration ($605 million), telecommunication ($222 million), financial business ($133 million), transport ($104 million), construction ($86 million), paper and pulp ($81 million), chemicals ($79 million) and trade ($75 million).