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Reclaiming Prosperity in Khyber- Pakhtunkhwa

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Reclaiming Prosperity in Khyber- Pakhtunkhwa Working paper Reclaiming Prosperity in Khyber- Pakhtunkhwa A Medium Term Strategy for Inclusive Growth Full Report April 2015 When citing this paper, please use the title and the following reference number: F-37109-PAK-1 Reclaiming Prosperity in Khyber-Pakhtunkhwa A Medium Term Strategy for Inclusive Growth International Growth Centre, Pakistan Program The International Growth Centre (IGC) aims to promote sustainable growth in developing countries by providing demand-led policy advice informed by frontier research. Based at the London School of Economics and in partnership with Oxford University, the IGC is initiated and funded by DFID. The IGC has 15 country programs. This report has been prepared under the overall supervision of the management team of the IGC Pakistan program: Ijaz Nabi (Country Director), Naved Hamid (Resident Director) and Ali Cheema (Lead Academic). The coordinators for the report were Yasir Khan (IGC Country Economist) and Bilal Siddiqi (Stanford). Shaheen Malik estimated the provincial accounts, Sarah Khan (Columbia) edited the report and Khalid Ikram peer reviewed it. The authors include Anjum Nasim (IDEAS, Revenue Mobilization), Osama Siddique (LUMS, Rule of Law), Turab Hussain and Usman Khan (LUMS, Transport, Industry, Construction and Regional Trade), Sarah Saeed (PSDF, Skills Development), Munir Ahmed (Energy and Mining), Arif Nadeem (PAC, Agriculture and Livestock), Ahsan Rana (LUMS, Agriculture and Livestock), Yasir Khan and Hina Shaikh (IGC, Education and Health), Rashid Amjad (Lahore School of Economics, Remittances), GM Arif (PIDE, Remittances), Najm-ul-Sahr Ata-ullah and Ibrahim Murtaza (R. Ali Development Consultants, Urbanization). For further information please contact [email protected] , [email protected] , [email protected] . Table of Contents Executive Summary ............................................................................................................... 5 Chapter 1: Growth Challenges ........................................................................................... 20 Chapter 2: Emerging Growth Drivers ................................................................................. 27 2-A: Urbanization ................................................................................................................................... 27 2-B: Regional Trade ................................................................................................................................ 30 2-C: Remittances .................................................................................................................................... 36 2-D: Increased Federal Fiscal Transfers ................................................................................................. 43 Chapter 3: Priority Growth Sectors .................................................................................... 44 3-A: Industry and Construction .............................................................................................................. 44 3-B: Agriculture and Livestock ............................................................................................................... 50 3-C: Mining ............................................................................................................................................. 60 3-D: Tourism ........................................................................................................................................... 66 Chapter 4: Investment Climate.......................................................................................... 71 4-A: The Cost of Doing Business ............................................................................................................. 71 4-B: Energy ............................................................................................................................................. 73 4-C: Transport ........................................................................................................................................ 77 4-D: Rule of Law ..................................................................................................................................... 84 4-E: E-Governance .................................................................................................................................. 90 Chapter 5: Inclusive Growth .............................................................................................. 91 5-A: Health and Education ..................................................................................................................... 91 5-B: Skills Development ....................................................................................................................... 110 Chapter 6: Fiscal Space ................................................................................................... 122 6-A: Expenditure Management ............................................................................................................ 123 6-B: Revenue Mobilization ................................................................................................................... 124 Annexures ......................................................................................................................... 132 Annex A: Note on Urban Agglomeration ............................................................................................. 132 Annex B: Strategies to Minimize Negative Impacts on Affectees of Decrease in Transit Trade ......... 169 Annex C: Further Information on Hydropower and Mirco Hydel Options .......................................... 171 Annex D: Criminal Justice in KP ............................................................................................................ 173 Annex E: Methodology for Expenditure and Revenue Forecast for KP (2013 to 2020) ...................... 180 Annex F: Data And Methodology for Calculation of Revenue From AIT (2009-2013) ......................... 184 2 List of Tables TABLE 1.1: LABOR FORCE PARTICIPATION AND UNEMPLOYMENT RATES IN PAKISTAN, 2010-2011 (%) ..................... 20 TABLE 1.2: DEPENDENCY RATIOS IN PAKISTAN, VARIOUS YEARS (RATIO OF PROPORTION OF POPULATION UNDER 15Y & OVER 65Y TO PROPORTION OF POPULATION BETWEEN 15-64Y) ............................................................. 21 TABLE 1.3 AFGHANISTAN-PAKISTAN TRADE, 2008-2013 (USD MILLION) ..................................................................... 24 TABLE 2.1: SHARE OF TOTAL EXPORTS WITH NEIGHBORS, 2000-10 (% OF TOTAL EXPORTS FROM PAKISTAN) ........... 30 TABLE 2.2: PREFERENCES FOR THE USE OF REMITTANCES BY MIGRANTS’ HOUSEHOLDS, 2010 ................................ 37 TABLE 2.3: SHARE OF TOTAL REMITTANCES ALLOCATED TO VARIOUS USES BY KP SAMPLE OF HOUSEHOLDS WITH AT LEAST ONE MEMBER WORKING IN SAUDI ARABIA (%) ....................................................................................... 38 TABLE 2.4: DISTRIBUTION OF PAKISTANI MIGRANT WORKERS IN THE MIDDLE EAST BY OCCUPATION, 1971-2013 (% OF TOTAL PAKISTANI MIGRANT WORKERS) ....................................................................................................... 39 TABLE 2.5: SKILL COMPOSITION OF CURRENT EMIGRANTS FROM PESHAWAR DISTRICT BEFORE MIGRATION AND WHILE ABROAD, 2013 (% OF TOTAL EMIGRANTS) ............................................................................................. 40 TABLE 3.1: ANNUAL SHARES OF GROSS PROVINCIAL VALUE ADDED TO NATIONAL INCOME USING ESTIMATES AT CURRENT PRICES, VARIOUS YEARS (%) ............................................................................................................... 45 TABLE 3.2: EMPLOYMENT BY MAJOR SECTORS, 2007-2011 (MILLIONS OF WORKERS)................................................ 48 TABLE 3.3: EMPLOYMENT IN THE INFORMAL SECTOR, 2007-2011 (MILLIONS OF WORKERS) ..................................... 48 TABLE 3.4: CROSS COUNTRY COMPARISON OF CULTIVATED AREA AND PRODUCTIVITY OF MAJOR CROPS, VARIOUS YEARS (HECTARES & TONNES PER HECTARE) ..................................................................................................... 50 TABLE 3.5: TRENDS IN LAND UTILIZATION AND CROPPING INTENSITY IN KP, 2007-2012 .......................................... 52 TABLE 3.6: FERTILIZER USE IN PAKISTAN BY CROPPING REGION, 1990-2012 (KG/HA) ............................................... 54 TABLE 3.7: IMPROVED SEED DISTRIBUTION BY PROVINCES IN PAKISTAN, 2011-2012 (% OF TOTAL REQUIREMENT)54 TABLE 4.1: RANK OF PAKISTAN AND PESHAWAR ON VARIOUS COST-OF-BUSINESS INDICATORS, .............................. 71 TABLE 4.2: POWER GENERATION OPTIONS .................................................................................................................. 75 TABLE 4.3: CHANGE IN ROAD NETWORK BY PROVINCE, 2009-2012 (KM INCREASE OR DECREASE) ............................ 78 TABLE 4.4: IMPORTANT DISTRICTS (RANKED BY NO. OF OPERATING UNITS), 2005-06 ................................................ 80 TABLE 4.5: PLAN FOR INVESTMENTS IN THE ROAD SECTOR ......................................................................................... 82 TABLE 4.6: PLAN FOR INVESTMENTS IN THE TRANSPORT SECTOR ............................................................................... 82 TABLE 5.1: PERFORMANCE ON VARIOUS HEALTH INDICATORS, VARIOUS YEARS (%, RATIO) ...................................... 92 TABLE 5.2: PERFORMANCE ON VARIOUS HEALTH INDICATORS, 2008 (%, RATIO) ......................................................
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