Report on Punjab Economy

Contents
o Acknowledgement..........................................................................................................................3
o EXECUTIVE SUMMARY..........................................................................................................4
o INTRODUCTION........................................................................................................................5
o Geography......................................................................................................................................6
o Climate...........................................................................................................................................7
o Economy.........................................................................................................................................7
o GDP by Province............................................................................................................................8
o Share in National Economy............................................................................................................8
o Figure 1.1 illustrates the percentage share of Punjab’s GPP in the national GDP by major sector,
while...............................................................................................................................................8
o Agriculture......................................................................................................................................9
o Trends, Structure and Performance of Agriculture.........................................................................9
o Table 1.1: Gross Provincial Agriculture Product by Sub-Sectors in Agriculture..........................10
o Table 1.2 Sectoral Shares in Gross Agriculture Product in Punjab...............................................10
o Composition of the Agriculture Sector in Punjab.........................................................................10
o Figure 1.2: Share of Value Added of Four Crops in Total Value Added of Major Crops in Punjab
......................................................................................................................................................11
o Figure 1.3: Share of Key Sub-Sectors of Punjab’s GPP in National GDP....................................11
o Table 1.3: Public and Private Research Expenditures, 2003.........................................................12
o Reasons for Ineffectiveness of Research Institutions.....................................................................12
1. Lack of Effective Autonomy to Research Institutes:...................................................................12
2. Weak Coordination Among Research Agencies:........................................................................12
3. Weak Incentive Framework and HRD for Quality Research:....................................................12
4. Insufficient Funds for Agricultural Research:...........................................................................12
5. Weak Role of Private Sector in Research:..................................................................................13
6. Lack of Effective Accountability Mechanism:............................................................................13
o Proposed Strategy........................................................................................................................13
oTechnical Support:....................................................................................................................13
oInvestment in Biotechnology:...................................................................................................13

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Report on Punjab Economy

oEncourage Private Sector Participation in Research:..............................................................14

o The Industry Sector in Punjab......................................................................................................15
o Figure 1.4: Composition of Industrial Sector of Punjab, FY 2007................................................16
o Estimates of the Number of Manufacturing Units in Punjab........................................................16
o Rising Cost of Energy...................................................................................................................17
o Figure 1.5: Energy Consumption by Industry in Pakistan.............................................................17
o Rural Development.......................................................................................................................17
o Urban Development......................................................................................................................18
o Education......................................................................................................................................18
School Attendance.................................................................................................................................19
Table 1.5: Population that has ever Attended School, Pakistan and Punjab...........................................19
Functionality..........................................................................................................................................20
Literacy.................................................................................................................................................20
Expenditure on Education.....................................................................................................................20
o Health and Population..................................................................................................................21
o Expenditure on Health..................................................................................................................21
o Population and Population Density..............................................................................................21
o Basic Health, Child Health, and Reproductive Healthcare..........................................................22
o Health Infrastructure and Expenditure.........................................................................................22
o Land..............................................................................................................................................23
o Water............................................................................................................................................23
o Future Water Requirements: National Scenario............................................................................24
o Water Requirements for Crops in Punjab.....................................................................................25
o The Services Sector......................................................................................................................28
o Employment.................................................................................................................................29
o Employment by Sector..................................................................................................................29
o CONCLUSION............................................................................................................................31
o Conclusion for Agriculture...........................................................................................................31
o Conclusion for Industrial Sector...................................................................................................31
o Conclusion for education..............................................................................................................31

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Report on Punjab Economy

Acknowledgement

First of all we thank Almighty ALLAH, we believe that without the

valor given by Allah, we were not been able to complete this

Assignment After that we want to thank all of the persons who

helped us during the challenging time we faced while carrying out

this Assignment.

We are thankful to our Teacher Ms. Maria Mashkoor

Inspiration and direction, also parents & fellows for their hold and
prayers

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Report on Punjab Economy

EXECUTIVE SUMMARY

This project is basically about the Economy of

Punjab which tell us about how much progress
taken in Punjab including employment rate to
health care and how much capital denote for
these works. So we include pillars of Punjab
economy and how much Punjab participate in
GDP and national income

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Report on Punjab Economy

INTRODUCTION

The Punjab is a province of Pakistan. It is the country's most populous region with about 56%
of Pakistan's total population. The Punjab is home to the Punjabis and various other groups.
Neighboring areas are Sindh to the south, Baluchistan and the North-West Frontier Province to
the west, Pakistan-administered Kashmir, Islamabad to the north, and the India to the east. The
main languages are the Punjabi, Urdu, Saraiki, Mewati, Potowari and Pashto. The provincial
capital is Lahore. The name Punjab literally translates from the Persian words Pañj (‫)پنج‬,
meaning Five, and Āb (‫ )آب‬meaning Water. Thus Punjab can be translated as (the) Five Waters -
and hence the Land of the Five Rivers, referring to the Jhelum, Chenab, Ravi, Sutlej and the Beas
river. These five rivers are all the tributaries of the Indus River. The province was founded in its
current form in May 1972

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Report on Punjab Economy

Geography

Former Administrative Divisions of Punjab

Punjab is Pakistan's second largest province at 205,344 km² (79,284 mi²) after Baluchistan and is
located at the northwestern edge of the geologic Indian plate in South Asia. The provincial level-
capital and main city of the Punjab is Lahore which has been the historical capital of the region.
Other important cities include Multan, Faisalabad, Sialkot, Gujranwala, Jhelum and Rawalpindi.
Undivided Punjab is home to six rivers, of which five flows through Pakistani Punjab. From west
to east, these are: the Indus, Jhelum, Chenab, Ravi and Sutlej. Nearly 60% of Pakistan's
population lives in the Punjab. It is the nation's only province that touches every other province; it
also surrounds the federal enclave of the national capital city at Islamabad. This geographical
position and a large multi-ethnic population strongly influence Punjab's outlook on National
affairs and induces in Punjab a keen awareness of the problems of the Pakistan's other important
provinces and territories. In the acronym P-A-K-I-S-T-A-N, the P is for PUNJAB.

The province is a mainly a fertile region along the river valleys, while sparse deserts can be
found near the border with Rajasthan and the Sulaiman Range. The region contains the Thar and
Cholistan deserts. The Indus River and its many tributaries traverse the Punjab from north to
south. The landscape is amongst the most heavily irrigated on earth and canals can be found
throughout the province. Weather extremes are notable from the hot and barren south to the cool
hills of the north. The foothills of the Himalayas are found in the extreme north as well.

Climate

Most areas in Punjab experience fairly cool winters, often accompanied by rain. By mid-
February the temperature begins to rise; springtime weather continues until mid-April, when the
summer heat sets in.

The onset of the southwest monsoon is anticipated to reach Punjab by May, but since the early
1970s the weather pattern has been irregular. The spring monsoon has either skipped over the
area or has caused it to rain so hard that floods have resulted. June and July are oppressively hot.
Although official estimates rarely place the temperature above 46°C, newspaper sources claim

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Report on Punjab Economy

that it reaches 51°C and regularly carry reports about people who have succumbed to the heat.
Heat records were broken in Multan in June 1993, when the mercury was reported to have risen
to 54°C. In August the oppressive heat is punctuated by the rainy season, referred to as barsat,
which brings relief in its wake. The hardest part of the summer is then over, but cooler weather
does not come until late October.

Recently the province experienced one of the coldest winters in the last 70 years. Experts are
suggesting that this is due to global climate change.

As per the survey of Pakistan 1998, linguistic distribution of the Punjab province is: Punjabi
(75.23%), Saraiki (17.36%), Urdu (4.51%), Pashto (1.16%), Balochi (0.66%), Sindhi (0.13%)
others (0.95%). The population of Punjab is estimated to be between 98.21% Muslim with a
Sunni Hanafi majority and Shia Ithna 'ashariyah minority. The largest non-Muslim minority is
Christians and make up 1.31% of the population. The Other minorities include Ahmadis,
Hindus, and Sikhs etc

Economy

GDP by Province
Punjab has always contributed the most to the national economy of Pakistan. Punjab's economy
has quadrupled since 1972. Its share of Pakistan's GDP has historically ranged from 51.8% to
54.7%. It is especially dominant in the Service & Agriculture sectors of the Pakistan Economy.
Its contribution towards GDP is ranging from 52.1% to 64.5% in the Service Sector and
56.1% to 61.5% in the Agriculture Sector. It is also major manpower contributor because it
has largest pool of professionals and highly skilled (Technically trained) manpower in Pakistan.
It is also dominant in the Manufacturing sector, though the dominance is not as huge, with
historical contributions raging from a low of 44% to a high of 52.6%. In 2007, Punjab achieved

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Report on Punjab Economy

a growth rate of 7.8% and during the period 2002-03 to 2007-08; its economy grew at a rate of
7% to 8% per year

Share in National Economy

Punjab is a significant contributor to national GDP, accounting for 58.5 percent of Pakistan’s
national income according to estimates of the Government of Punjab. In FY 2007, the
province accounted for 62.6 percent of community and social services, 61.3 percent of
wholesale and retail trade, 57 percent of agriculture, and 58.2 percent of industrial value-
added in the national GDP.9 Overall, Punjab contributes more than 50 percent of the country’s
GDP in almost every sector in the national accounts.

Figure 1.1 illustrates the percentage share of Punjab’s GPP in the national GDP by major sector,
while

Agriculture
Agriculture is the mainstay of Punjab’s economy, with a 20.3% share in the GPP. Major crops
contributed about 46.5% of value-added to agriculture in Punjab in FY 2007, while livestock
contributed a further 39.1 %.
The Government of Punjab is taking several initiatives to optimize agricultural resource use
(particularly of fertilizer), improve seed quality and promote farm mechanization, plant
protection, and access to agricultural credit. Other potential areas to increase agriculture

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Report on Punjab Economy

productivity and production include promotion of nontraditional agricultural products (e.g. off-
season vegetables), and livestock, and the expansion of effective research and extension.

It employs almost half of the labor force in the province. It contributes over half to total
national agricultural value added. A detailed study21 was conducted in 2004 as part of the
background work for the Punjab Economic Report 2005 to “review the performance of the
agricultural sector and identify public policy priorities to accelerate agricultural growth, enhance
sustainable use of natural resources, and reduce rural poverty”. The growth performance of
Punjab’s agricultural sector was examined in the light of its input intensification, total factor
productivity, agricultural trade, and natural resource management. The study found output
growth of the agricultural sector in Punjab to have been satisfactory over the last twenty years.
However, in terms of productivity, the growth was evaluated to be quite dismal during the
1990s after the impressive growth of the 1980s.

Growth in the sector is crucial for Punjab’s economy and its development prospects, and has a
significant impact on poverty levels. The sector has historically had large variations in output as
a result of droughts, crop viruses and similar natural disasters. Since most of the major issues in
Agriculture in Punjab were part of the previous Punjab Economic Report and its background
work this chapter will briefly describe the main trends in the growth of agriculture and look at
the factors behind this growth. A few key potential areas which offer the greatest potential for
enhancing value-added in this sector, which were not adequately covered in the previous report
are also discussed here.

Trends, Structure and Performance of Agriculture

An analysis of agricultural performance helps in identifying sources that may be tapped for
growth in the sector. Table 1.1 shows the GDP amount originating in agriculture and its different
sub-sectors in Punjab. At constant prices of 1999/2000, agricultural GDP has increased from
Rupees 504,006 million in 1999/2000 to Rupees 624,119 million in 2006/07. There has been
growth in all sub-sectors. However, measured in terms of their contribution to total value-added
in agriculture, the contribution of fishing, forestry and minor crops has not been major.

Table 1.1: Gross Provincial Agriculture Product by Sub-Sectors in Agriculture

2006/07

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Report on Punjab Economy

Weight major crops = 0.7769422

Weight minor crops = 0.2230578

Table 1.2 shows the percentage share of different sub-sectors in total agriculture while Table 3.3
presents information on growth rates. While the relative shares of fishing and forestry are low
and static, the share of livestock increases from 35% in 1999/2000 to 39 percent in 2006/2007
and that of crops falls from 64 percent in 1999/2000 to 60 percent in 2006/2007. There are large
fluctuations in the rates of growth of agriculture and almost all of its sub-sectors.

Table 1.2 Sectoral Shares in Gross Agriculture Product in Punjab

(At Constant Factor Cost of 1999/00)

Composition of the Agriculture Sector in Punjab

Four major crops (wheat, rice, cotton and sugarcane) contributed about 47 percent of value
added in agriculture in Punjab in FY 2006, while livestock contributed a further 39.1 percent.
Within major crops, wheat has consistently contributed the largest share of value added,
contributing about 40 percent in FY 2005 (see Figure 1.2). The relative shares of cotton and rice
in total value added for major crops have fluctuated in recent years – the cotton crop in particular
has been subject to the leaf curl virus (LCV).

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Report on Punjab Economy

Figure 1.2: Share of Value Added of Four Crops in Total Value Added of Major Crops in Punjab

Figure 1.3: Share of Key Sub-Sectors of Punjab’s GPP in National GDP

Public and Private Research Expenditures,

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Agricultural research at the Federal and Provincial level including Punjab is undertaken mainly
in the public sector. Of the total spending on agricultural research only 6 per cent was spent by
the private sector (Table 1.3). In view of the potential lack of effective demand responsiveness
by the public sector in research priority fixation, the dominance of public sector in research is a
major issue.

Table 1.3: Public and Private Research Expenditures, 2003

Reasons for Ineffectiveness of Research Institutions

Some of the main factors explaining the decline in the effectiveness of the research systems are
given below:
1. Lack of Effective Autonomy to Research Institutes:
The institutes are governed by departments and procedures that stifle research. Controlling
departments argue that since funding is provided by departments, government accounting rules
and procedures must apply to research institutes to ensure accountability.
2. Weak Coordination Among Research Agencies:
The fragmentation in the research system requires a Provincial Board that coordinates research
activities within the province. The need to coordinate federal and provincial research is also
equally urgent.

3. Weak Incentive Framework and HRD for Quality Research:

The absence of well-defined promotion criterion that is based on qualifications, scientific work
and peer review has led to weak linkages between merit and promotions. The salary structure is
unfavorable relative to that of civil servants. Human Resource Development
4. Insufficient Funds for Agricultural Research:
The provincial government spends no more than 0.15 percent of Punjab’s agricultural value
added on research. This funding level is low relative to the successful cases from other
developing countries. Not only are these resources low but they are being badly utilized. The
operational funds are declining as a percentage of total funds being used in agricultural research.
With such funding levels, only maintenance research is possible. There is little prospect for any
significant increase in yields of crops and livestock through the current research budgets.
5. Weak Role of Private Sector in Research:
The private sector has a very limited role in Punjab’s agricultural research. There are some
private sector research efforts in the development of varieties of maize, and hybrid seeds for
sunflowers, but no other noticeable efforts. The limited role played by the private sector is due to
limited protection provided under biosafety regulations and Plant Varietal Protection. The
absence of the corporate sector in research is a major problem.
6. Lack of Effective Accountability Mechanism:

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Last but not the least, there is no effective accountability mechanism for review of research
programs. There are no established forums for regular exchange of research results.

The factors outlined above explain the unsatisfactory state of affairs in the knowledge creation
system in Punjab. No sustainable increase in productivity is possible unless this system is
revamped.

Proposed Strategy
o Restructuring of Ayub Agriculture Research Institute (AARI):

AARI should be granted sufficient autonomy of operation through delegation of authority for
financial and personnel management from the Secretariat to the AARI management.
Furthermore, the Institute should be regrouped to form a series of units with decentralized
management, and well staffed planning, monitoring and evaluation units. Staff strength in AARI
needs to be rationalized, and regional research facilities strengthened. The incentive structure for
the scientists has to be also restructured to incorporate merit based time scale promotions de-
linked from the availability of posts in the higher cadre. More opportunities for in-service skill
enhancement should be made available, and the incentive structure should include adequate
compensation for staff posted to unattractive stations.

o Technical Support:

A well-equipped and competently staffed repair and maintenance facility should be established
for sophisticated electric and electronic laboratory equipment, which should extend services to
all research institutions in the province.

o Investment in Biotechnology:

In addition to the above measures, it is imperative that the Government of Punjab increase
investments in bio-technology. This is needed to counter the inherent biases of multinational
corporations in these areas. More importantly, the public sector needs to have a trained cadre in
biotechnology for proper regulation and risk assessment. This is required whether the research is
done in the public or in the private sector.

o Encourage Private Sector Participation in Research:

Private sector participation in research needs to be encouraged. Only when the Pakistan Patent
Act is in place would private sector participation in research rise over time.

These points are summarized below:

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Report on Punjab Economy

First, the agricultural sector needs to respond to rapidly changing domestic markets with
urbanization and more affluent consumers to expand exports into high value and value added
products. The

Government of Punjab is taking steps in this regard. With current self-sufficiency in wheat and
sugar, the Govt. of Punjab is shifting its growth strategy to fruits and vegetables, value-added
products, and livestock products, and promoting an export orientation for these products. To
regulate output quality, steps are being taken to establish pesticide residue testing laboratories
through out the province.

Second, with ever more limited prospects for expanding land area and water supplies, growth
strategies must increasingly rely on improved management and knowledge to improve resource
productivity of existing inputs. To achieve this goal, technological progress and institutional
reform is central to better system-wide and location-specific management of resources. Enhanced
efficiency is also essential for improving Pakistan’s competitive position in world markets as it
adjusts to WTO rules.

Third, declining labor productivity in the agriculture sector needs to be halted immediately
before skilled labor, investors, and interested stakeholders loose their interest in the sector. For
this purpose, enhancing and sustaining the labor-intensive non-farm sector growth, encouraging
labor intensive rather than labor saving technologies in agriculture, and investing on skill training
and family planning are the keys. These need commitments at the highest government level, and
collaboration between various ministries, NGOs, and the private sector.

Fourth, sustainable agricultural growth depends on improved management of land and water
resources to reduce natural resource degradation. This will require political commitment at the
highest level, to mount a concerted effort across a wide range of government departments, as
well as close coordination with federal agencies, and local governments, on a priority basis.

Fifth, for specific commodities, these challenges suggest that Punjab should:

1. Continue to ensure a moderate growth in wheat production, but recognizing that under current
yields and world prices, it does not have a comparative advantage in wheat exports;

2. Improve competitiveness of rice and cotton, given aggressive efforts by other countries in
these markets, especially India in Basmati rice, and most major producers in cotton that have
sharply reduced their production costs by adopting Bt cotton;

3. Judiciously seek opportunities in import substitution, especially oilseeds for more sustainable
cropping systems, but only where they have a clear competitive advantage. Current high prices
for oilseeds in world markets fueled by rapid growth in demand for livestock feed in

Asia, provide a more favorable opportunity for import substitution;

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Report on Punjab Economy

The Industry Sector in Punjab

The industrial sector comprises mining and quarrying, manufacturing, construction, electricity
and gas distribution, and water supply. The manufacturing sector in turn comprises the large- and
small-scale manufacturing sub sectors, and the slaughtering industry. Overall industrial growth is
driven mainly by the large-scale manufacturing sector, which constitutes 55.03 percent of value
added in the industrial sector, with small scale manufacturing adding on a further 20.52,
percent as shown in Figure 1.2. The industrial sector’s share in GPP was 25.7 percent in FY
2007, compared to roughly 17 percent in FY 2000. The large and small scale manufacturing sub
sectors accounted for 14.14 and 5.27 percent of provincial GPP respectively in FY 2007. In
terms of contribution to the national economy, Punjab’s manufacturing sector contributes 15.04
percent of national GDP: large-scale manufacturing accounts for 8.28 percent, small-scale for
3.09 percent, and the slaughtering industry 0.83 percent of national GDP.

Figure 1.4: Composition of Industrial Sector of Punjab, FY 2007

According to estimates prepared by the BOS, Punjab’s industrial sector grew at an average rate
of 10.05 percent per annum between FY 2004 and FY 2007, led mainly by average annual
growth rates of over 14 percent in large-scale manufacturing, and over 7 percent in construction.

Estimates of the Number of Manufacturing Units in Punjab

Industrial sector surveys have not been conducted regularly in Pakistan in the last decade or so,
and paucity of data on industrial establishments is a major issue. This is particularly true for

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small and household level establishments, which operate as informal sector units and do not
maintain documentation for the most part.36 According to the most recent Survey of Small and
Household

Manufacturing Industries (SHMI) conducted by the Federal Bureau of Statistics (FBS) in 1997,
there were approximately 427,784 manufacturing units in the country, of which 70 percent
were located in Punjab. Thus in 1997, there were approximately 299,448 or almost 300,000
small-scale manufacturing units in the province. National and Punjab Government data gives the
average growth rate of the small-scale industry sector as 7.98 percent over the last four years. If
this growth rate is applied to the 1997 data, we can get a rough estimate of the number of small-
scale manufacturing establishments in Punjab, which works out to about 645,000. We must
caution that this estimate is not entirely robust given the lack of survey data on small-scale
manufacturing, and the consequent inability to calculate reliable inter-censal growth rates for the
sector.

Rising Cost of Energy

Electricity, gas, petroleum, and coal are the industrial sector’s major sources of energy.
According to the Energy Year Book, industry consumed 14,654,360 TOE in 2006, of which oil
accounted for 11.6 percent, gas for 52.7 percent, electricity for 11 percent, and coal for 24.6
percent. The data show that coal consumption by the industrial sector has been declining
progressively since 2003/04, while the consumption of gas and oil has been increasing. The year
to year growth rates shown in Figure 1.3 below also indicate that electricity consumption has
grown at a more or less constant rate of around 7 percent every year.

Figure 1.5: Energy Consumption by Industry in

Pakistan

Rural Development

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Report on Punjab Economy

For agricultural growth linkages to be strengthened and have the greatest possible impact on
rural poverty it is important to have a thriving and vibrant non-farm sector. Effective rural
development not only facilitates this growth of incomes but the provision of publicly provided
goods and services to the rural sector also add to rural welfare. The provision of public goods—
electricity, public utilities, and farm-to-market roads—is an essential part of rural development.
In Punjab, the number of electrified villages has grown by 11% per year from FY 1996 to FY
2006. About 91% of villages in
Punjab already has electricity and the rural electrification program continues to be executed on a
priority basis. These developments are particularly conducive to the promotion of agro-based and
cottage industries.
The network of farm-to-market roads has grown at a fast 9.5% per year after FY 2002,
strengthening the link between rural areas and urban centers. Land ownership along with
education and employment opportunities in the formal sector have been found to be important
correlates of household wellbeing; although their effects vary with region and kinship group.
Kinship group identity is an important determinant of relative well being. The Government has
also, indirectly, been an important driver of pro-poor change. The initiatives and announcements
from the Government have served to rally the efforts of the rural people leading to significant
changes. Fuller understanding of the dynamics of rural poverty reduction is increasingly forming
the basis of the Government’s policies in this area. Several special programs to develop the
province’s less developed areas have been started by the Government of Punjab with the
objective of reducing regional disparities and alleviating poverty. Particular attention is being
focused on barani (rain-fed) regions of Potohar, Cholistan, and Dera Ghazi Khan. Individual
landholdings in these regions are small, agricultural techniques primitive, and there is an acute
water shortage. New initiatives include drought management efforts, the Barani Village
Development Project, Sustainable Livelihoods in Barani Areas Project, Bahawalpur Rural
Development Project, and Dera Ghazi Khan Rural Development Project. These initiatives aim to
achieve rural development through income-generating employment activities, improvements in
regional infrastructure, and provision of financial support for skills development through
participatory organizations.

Urban Development

Punjab is urbanizing faster than any other province in the country: its level of urbanization has
increased from 17.4% in 1951 to 31.36% in 2006. In 2006, of its total population of 87.5 million,
urban Punjab had a population of 28 million. The Government of Punjab has, therefore, put
urban development at the forefront of its strategy. Its urban planning and implementation is
backed by a series of research studies that cover nearly every conceivable aspect of urban
development. These cover the areas of water supply, sanitation, sewerage, urban waster
management, land management issues including land titling and records, urban immovable
property taxation, traffic planning, transportation and environmental issues to name a few.
Special programs are being developed for the five large cities of Punjab which together account
for over fifty percent of its urban population and given their large size have specific issues. The
Government of Punjab in close consultation with the city district governments (CDGs) and tehsil

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municipal administrations (TMAs) has evolved and is in the process of evolving holistic
strategies to address the urban development issues.

Education

SThe Government of Punjab has taken the development of education to be its key challenge; and,
the slogan of ‘”parha likha Punjab” exemplifies its vision. Gross enrolment rates at primary,
middle, and matriculation levels have increased over time for both males and females, although a
large rural-urban gap persists. Total expenditure on education as a percentage of Punjab’s GPP
has increased steadily after FY 2004, especially following the initiation of the Punjab Education
Sector Reform Program (PESRP). Allocation to education is expected to treble from Rs. 9,200
million in FY 2006 to Rs. 21,480 million in FY 2009. Under the Chief Minister’s accelerated
program for education, several key initiatives have been taken, including the improvement of
physical infrastructure in seven universities, provision of IT equipment to schools, a science
education project, provision of libraries in schools, and the establishment of child-friendly
schools, among others.
Technical and vocational education had been a neglected sub-sector in Punjab in the past, with
little effort to prepare curricula and devise a system of examination for such education in keeping
with modern trends. Courses offered depended on the skills of available instructors. There were
no uniform criteria to evaluate graduates, and thus no standardized examinations. Curricula did
not match the demands of the market place; resulting in surplus skilled manpower in some trades
and shortages in others. Teacher training had not been paid much attention either. To deal with
issues in this important educational sub-sector, the Government of Punjab has established the
Technical Education and Vocational Training Authority (TEVTA).
With the increasing focus on higher education the number of private universities in Punjab has
grown at an average annual rate of 12.8% since FY 1996. The performance of the education
sector has remained unsatisfactory in Pakistan throughout the country’s history. Not only is the
overall education level low, there are wide gender and rural-urban differences in the provision of,
and access to education services. According to the available statistics, the proportion of literate
households is much higher in northern Punjab than in central and southern Punjab. The data also
indicate that the literacy rate of poor households is about half that of non-poor households, and
that this difference is even higher in urban areas. This chapter looks at Punjab’s education
indicators, and at recent initiatives in the sector that are expected to yield dividends in the
medium term.

Key Indicators
This section looks at some key education indicators in Punjab, and benchmarks the situation with
regard to educational attainment.

School Attendance

The proportion of females who have ever attended school shows an encouraging trend. The
proportion of population that has ever attended school is higher and the gender difference lower

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among higher income groups. However, a comparison of data from the PIHS (FY 1996) and
PSLM (FY 2006) shows that the proportion of males that has ever attended school has declined
over time, not only in Punjab but also in Pakistan overall (Table 8.1). This decline has occurred
largely in rural areas.

Table 1.5: Population that has ever Attended School, Pakistan and Punjab

Functionality

The PESRP Annual Progress Report (2004/05) shows that the number of public sector functional
schools increased from 60,003 to 62,672 in Punjab during FY 2002 to FY 2005. The report also
finds that the actual posts filled against sanctioned posts were 87 percent at primary level and 80
percent at middle school level in Punjab as per May 2005. Highlighting the presence of facilities
in primary and middle schools, the report says that middle schools are better equipped with
water, latrines, electricity, and boundary walls. By May FY 2005, nearly 16 percent of primary
schools had no water, 38 percent had no boundary walls, 65 percent had no electricity, and only
59 percent had latrines. Middle schools fare better in terms of available facilities.

Literacy

The literacy rate in Punjab is marginally higher than the average for Pakistan. Overall literacy in
Punjab is 65 percent for males and 44 percent for females. A remarkable improvement has
occurred over time in Punjab’s female literacy rate: it increased from 29 percent in FY 1996 to
47 percent in FY 2006. This increase is higher than average relative to Pakistan (Table 8.2).

Table1.6: Literacy Rates in Pakistan and Punjab

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Expenditure on Education
Total expenditure on education as a percentage of Punjab’s GPP has increased steadily after FY
2004, since the initiation of the Punjab Education Sector Reform Program (PESRP). The
distribution of education-related expenditure across broad categories indicates a sharp and
substantial rise in expenditure on primary education, especially after FY 2003. A rise in
secondary and university education expenditure can also be seen in Figure 8.3. However,
expenditure on professional education shows a declining trend.

Health and Population

Punjab is the most populated province of Pakistan, with 87.5 million people as of 2006. At its
current growth rate of 2.64%, Punjab’s population will double by the year 2026. Dependency
and vulnerability rates are quite high with 47% of the population classifiable as dependant.
Actual dependency is much higher due to the low participation of women in economic activities.
About 69% of the population—comprising women, children, and the aged—can be classified as
vulnerable.

Expenditure on Health

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Report on Punjab Economy

In line with the policy emphasis on social services provision, the Government of Punjab has
made hefty budgetary allocations for the health sector. The revised expenditure on health
amounted to
Rs.20.12 billion in FY 2005 compared with Rs. 6.93 billion in FY 2002—an average compound
growth of 42.7 percent per annum.63 The Government proposes to raise the sector budget further
over this larger base in the next three years. According to the MTDF, the total health expenditure
allocation has risen to Rs. 6.5 billion in FY 2008

Population and Population Density

In 2006, Punjab’s population was around 87.5 million people, equal to about 55.6 percent of the
country’s total population. The province occupies 26 percent of the country’s land area. Between
1951 and 1998, its population density increased by 252 percent. Since 1981, the province’s
population has grown at an annual rate of 2.64 percent. At this growth rate, Punjab’s population
is projected to double by 2026. The total area of Punjab is 205,345 km2, giving it an average
population density of 359 people per km2. Administratively, the province is divided into 35
districts, 129 tehsils, and 25,914 villages. The population of a district ranges from less than a
million to more than 4 million people. The population density varies further, from 98 people per
km2 in Bahawalpur to 3,566 people per km2 in Lahore. The population growth rate in urban
areas has outstripped the overall growth rate, and the share of the urban population in Punjab’s
total population rose from 17 percent in 1951 to 31.3 percent in 1998.
More than 50 percent of the population in Lahore, Rawalpindi, and Gujranwala districts resides
in urban areas, while Muzaffargarh, Narowal, and Chakwal are the least urbanized districts.
According to the last two population censuses, Lahore and Muzaffargarh recorded the highest
population growth rates (3.46 and 3.38 percent, respectively) while Mandi Bahawluddin and
Jhelum had the lowest population growth rate (1.87 and 1.09 percent respectively).

Basic Health, Child Health, and Reproductive Healthcare

Immunization coverage of children in Punjab increased from 39% in FY 1999 to 58% in FY
2005 when measured on the basis of records. This is reflected in the decline in the Infant
Mortality Rate
(IMR), particularly in the rural areas, from 123 to 82 deaths per 1,000 live births - although
significant variations exist across districts depending on the level of development.
A significant proportion of children in Punjab (aged under 5) are underweight, reflecting poor
overall health and well being and child health and nutrition continues to be a major concern of
the Governments health policy.
Improvement in maternal health is one of the Millennium Development Goals. About 71% of
births in Pakistan take place at home; most commonly with the assistance of trained dais,
traditional birth attendants, or family members resulting in high maternal mortality rates (MMR).
The Government has focused its attention on decreasing the MMR by increasing ante and post
natal care.

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Health Infrastructure and Expenditure

Punjab has the largest health infrastructure in Pakistan but medical facilities in small towns and
union councils, i.e., rural health centers (RHCs) and basic health units (BHUs) continue to
require attention.
The major constraints relate to management issues due to geographic dispersion, the shortage of
qualified personnel, non-availability of diagnostic equipment and medical supplies, and
inadequate funding. A Health Sector Reform Program is now being implemented in the province
to intervene with greater financial allocations and other policy measures to overcome these
inadequacies.

Land

Between FY 1991 and FY 2006, Punjab’s cultivated area increased from 11,819,000 ha to
12,510,000 ha due to improved water supply. However, per capita availability of cultivated land
fell due to the rising population. Land ownership in Pakistan is highly skewed and inequality is
increasing. For farms larger than 50 acres, the share in land owned increased from 16% in 1990
to 21% in 2000 according to the Agricultural Census of Pakistan.
There is also an increasing preponderance of small holdings; and the average size of small
holdings has fallen drastically. This has important implication for poverty alleviation for the
majority of the small holders since the landholding is too small to provide adequate collateral to
access finance for utilizing modern inputs for agricultural growth.
The Government of Punjab is focused on instituting reform of the system of land records and
titling. A comprehensive policy on regulating land use in rural areas would help to address the
misuse of productive agricultural land. Conversion of private agricultural land for other uses, i.e.,
commercial, industrial, or residential takes place without any check. Enforcement of contracts
can be improved by on-the-spot inspections, reducing the number of tiers in the system, and
barring the jurisdiction of civil courts in revenue matters are all steps that would improve the
bottlenecks associated with land markets.
A special land survey to confer conclusive titles to land for different landowners will help to
strengthen the land records and land titling efforts of the Government. The present records-of-
rights need to be updated after the due process of extensive consultation with all stakeholders. It
would also be helpful to integrate land sales and land mutation processes in one administrative
wing so that the work of both is facilitated. Following this, land records need to be computerized.
The overriding objective of accurate land records is to promote greater efficiency through faster
information retrieval, transparency, and reduction of transaction costs for landowners.

Water

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Punjab, like the rest of Pakistan, is a water-scarce area both with reference to irrigation needs and
drinking water and sanitation needs in rural and urban areas. Water conservation and
management is crucial to ensure continued, adequate water supplies. A water conservation
strategy for the province will require the use of innovative technology as well as institutional
reforms to achieve the desired results, but the Government of Punjab has already taken some
important steps in this direction and plans to do far more.
Judicious use of the country’s scarce water resources is crucial to ensure food security and
maintain growth in the economy. Two demand scenarios are explored. Under the high-demand
scenario, meeting production targets would require the cropped area to increase to 30.88 million
hectares (Mha) by 2010 and to 31.83 Mha by 2025. Compared with a cropped area of 22.7 Mha
in 2000, this represents a large increase that will require the addition of new areas and large
investments in irrigation and drainage works. The low-demand scenario implies that cropped
area needs to increase to 26.1 Mha by 2010 and to 26.26 Mha by 2025. The targets of the low-
demand scenario are largely achievable through the intensification of existing cropped area
without significantly expanding into new areas. The high-demand scenario envisages
improvements in irrigation efficiency by 45 percent by 2010 and by 50 percent by 2025.
Assuming that the aforementioned gains in irrigation efficiency can be realized, canal water
diversion requirements would be 170.44 million acre feet (MAF) in FY 2011 and 155 MAF in
FY
2025. The lower figure for FY 2025 is the consequence of expected water savings due to higher
irrigation efficiency. In the absence of additional storage, the mean annual surface water
availability would remain at
103.81 MAF, translating into a shortfall of 39 percent by FY 2011 and 33 percent by FY 2025.
The requirements of the domestic and industrial sectors would be in addition to the agricultural
water demands mentioned above. Urban domestic and industrial water use was 4.3 MAF in 2002
and is projected to increase to 7.1 MAF by 2011 and to 12.1 MAF by 2025.1 Rural domestic
water use was 0.8 MAF in 2002 and is expected to increase to 1.86 MAF by 2011 and to 3.2
MAF by 2025.
The Punjab water sector’s mission statement is to “provide adequate and reliable irrigation
supplies to cultural lands of Punjab aiming at enhanced agricultural productivity, sustainable
development with focus on holistic management, and broad-based institutional reforms.’’ The
Framework of Action to implement this mission is supported by the medium-term investment
framework for the period FY 2008 to FY 2010. The Government of Punjab is in the process of
implementing a comprehensive package of reforms under the Punjab Irrigation Sector Reform
Program (PISRP). The reforms, supported through a series of Development Policy Loans (DPL)
from the World Bank, focus on participatory management, and aim at improving service delivery
and sustainability of irrigation infrastructure through effective participation of farmers at all
levels of irrigation management.
Built on four reform pillars covering institutional policy, water management, irrigation service
delivery and on farm water management the major initiatives under DPL are: 2

1. Preparation of a 5-10 year Asset Management Plan

2. Realistic O&M funding on the basis of updated yardsticks
3. An effective O&M performance evaluation system for greater transparency and
accountability
4. Evolving a framework for O&M cost sharing

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5. Establishment of 2 AWBs and 100 FOs during each of the next two years.
6. Developing a comprehensive system for monitoring and evaluation of canal allocations
and canal operations. Greater transparency and accountability through display of canal
flow data on the website

Future Water Requirements: National Scenario

Two demand scenarios are presented in the Pakistan Water Sector Strategy (2002) document: (i)
a high demand scenario based on production targets given in the Ten Year Perspective Plan, and
(ii) a low demand scenario based on high per capita demand projections for 2002 as given in the
Report of the National Commission on Agriculture (1988). Both demand scenarios hold constant
per capita demand and project total demand on the basis of population.
Under the high-demand scenario, meeting production targets would require the cropped area to
increase to 30.88 million hectares (Mha) by 2010 and to 31.83 Mha by 2025. Compared with a
cropped area of 22.7
Mha in 2000, this represents a large increase that will require the addition of new areas and large
investments in irrigation and drainage works. The low-demand scenario implies that cropped
area needs to increase to 26.1 Mha by 2010 and to 26.26 Mha by 2025. The targets of the low-
demand scenario are largely achievable through the intensification of existing cropped area
without significantly expanding into new areas. The water requirements of both demand
scenarios are presented in Tables 12.1 and 12.2, respectively. The high-demand scenario
envisages improvements in irrigation efficiency by 45 percent by 2010 and by 50 percent by
2025. Assuming that the aforementioned gains in irrigation efficiency can be realized, canal
water diversion requirements would be 170.44 million acre feet (MAF) in FY 2011 and 155
MAF in FY
2025. The lower figure for FY 2025 is the consequence of expected water savings due to higher
irrigation efficiency. In the absence of additional storage, the mean annual surface water
availability would remain at
103.81 MAF, translating into a shortfall of 39 percent by FY 2011 and 33 percent by FY 2025.
The requirements of the domestic and industrial sectors would be in addition to the agricultural
water demands mentioned above. Urban domestic and industrial water use was 4.3 MAF in 2002
and is projected to increase to 7.1 MAF by 2011, and to 12.1 MAF by 2025.70 Rural domestic
water use was 0.8 MAF in 2002 and is expected to increase to 1.86 MAF by 2011 and to 3.2
MAF by 2025.

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Report on Punjab Economy

Water Requirements for Crops in Punjab

According to the Directorate of Land Reclamation, Punjab’s crop water requirements at canal
head, calculated on the basis of average cropped area for the period 1998 to 2002, were 106.62
MAF. Of this, 70.90 MAF were required for the kharif season and the remaining 35.72 MAF for
the rabi season. During this period, average annual canal withdrawals were only 49.0 MAF with
33.9 MAF available in kharif and 15.1 MAF in rabi. Tube wells added an estimated 38 MAF92
of groundwater to give total water availability for agriculture of about 87 MAF.93
Although tube wells have assumed a significant role in augmenting irrigation water supplies,
their sustainable yield depends on aquifer recharge. There are indications that usable
groundwater recharge is less than the actual amount pumped. Estimates of total recharge and
usable recharge vary. The Government considers the latter to be in the 12 to 15 MAF range.94
The uncertainty regarding these quantitative estimates could easily focus attention away from the
critical point that much of the groundwater recharge (80 percent, according to some reports) is
dependent on surface water. Saline groundwater zones are saline because they are located away
from recharging rivers and typically lie in the center of doabs in Punjab. Increasing the
availability of surface water would also increase groundwater recharge. This fact and the huge
imbalance between water demand and supply mentioned earlier underscores the need to create
additional storage in the Indus river system.
In Punjab, nearly 39 percent of the cropped area is under wheat, the main food staple. Of the
other important food crops, rice accounts for 11 percent of cropped area. Thus, the main food
crops account for about 50 percent of the area cropped in Punjab (Figure 12.5). Based on
estimates of crop water requirements of individual crops for FY 2003 (Figure 12.6) reported in
Ahmad (2005), the share of these crops in total net crop water requirement (CWR) is 49 percent,
which is roughly proportionate to their share in cropped area. This, however, marks the
differences within the group. The wheat area is
41 percent but its share in total CWR is only 29 percent; the rice area is only 11 percent but its
share in total CWR is 20 percent. Rice CWR share is almost twice its share in cropped area.

Figure 2.3: Shares of Major Crops in Cropped Area in Punjab 2005- 06

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Figure 2.4: Shares of Major Crops in Terms of Water Requirements

Figure 2.5: Sectoral Shares in Punjab’s GPP, FY 2007

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Report on Punjab Economy

Given the increasing importance of services in the provincial economy, a further breakdown of
the services sector is useful for analyzing key sources of growth. Figure 2.4 illustrates the
breakdown of the services sector in Punjab. Wholesale and retail trade constitutes by far the
largest share, accounting for about 37 percent of services. This is followed by transport and
communications, which accounts for 21.1 percent. Other services, including a wide range of
community, social, and personal services, and others not classified separately, constitute 19
percent of total services.

Figure 2.6: Composition of Punjab’s Services Sector, FY 2007

Similar breakdowns can also be estimated for the commodity producing sectors. Within the
agriculture sector, major crops make up 46.5 percent, minor crops 13.4 percent, forestry 0.34
percent, and fisheries 0.6 percent of output; livestock makes up the remaining 39.1 percent.
Within the industry sector, large-scale manufacturing accounts for about 55.03 percent and
small-scale manufacturing about 20.5 percent of total value-added. The slaughtering industry,
which is now officially, designated part of the manufacturing sector, makes up 5.5 percent. The
sectoral breakdown of GPP is indicative of the structural changes in Punjab’s economy over the
years, with its reliance on agriculture being gradually replaced by the increasing importance of
services and, to a lesser extent, by manufacturing. This shift is particularly noticeable when
trends in sectoral value-added are analyzed over time. Government of Punjab data indicate that
from FY 1991 to FY 2007, the share of agriculture has declined from 31 to 20.3 percent, while
that of industry (including what was earlier classified as “other production”) and services has
increased from 20 to 25.7 percent, and from 49 to 53.9 percent, respectively.10 This shift has
important implications for the magnitude and direction of future growth and for employment
generation, as explained in subsequent sections.

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Report on Punjab Economy

The Services Sector

The services sector has become increasingly important to Punjab’s economy. Its share now
exceeds that of all the commodity-producing sectors combined. As indicated in Chapter 2, the
services sector as a whole contributes 53.9 percent to Punjab’s GPP and employs a significant
proportion of the province’s labor force – wholesale and retail trade alone employs 14.08
percent.

Employment
The broad-based economic growth needed for poverty reduction requires that the poorer
segments of society be included in the growth process. Employment offers the most direct
mechanism to ensure this inclusion. According to the BOS estimates 3.5 million new jobs had
been created in Punjab in the three years preceding 2006; 60 percent of which were in the
agricultural sector and 20 percent in services.

Employment by Sector
Data from the recently released Labor Force Survey of Pakistan 2005/06 show that employment
in the province is largely concentrated in the agricultural sector, which employs 44 percent of the
provincial labor force. As is obvious from Figure 2.6, agriculture, construction, and personal
services are the three sectors of the provincial economy whose labor force absorption rate
(measured by the percentage of total labor employed in that sector) is higher than their share in
the provincial economy.

Thus, while the impressive growth of the services sector serves to boost GPP, growth in
agriculture and, to a lesser extent, in construction, can have a far wider effect on incomes,
employment, and incidence of poverty in the province. Fluctuations in agricultural growth thus
have serious implications for social welfare in Punjab. This is discussed in more detail in the
next section.

Figure 2.7:
Share in

Employment
and Value-
Added for
Key Sectors,
FY 2006

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Report on Punjab Economy

The rural economy has undergone structural changes over time. The percentage of people
employed in agriculture in the rural areas declined from 66.44 percent in FY 2000 to 58.98
percent in FY 2006, while the proportion employed in manufacturing in the rural areas increased
from 7.68 to 11.26 percent. A similar pattern occurs in employment in certain services
(wholesale and retail trade, and restaurants and hotels) in rural areas, as shown in Table 2.2.

The high proportion of labor absorption in agriculture tends to lend certain distinguishing
characteristics to rural labor markets in Punjab. Overall, there is a high proportion of self-
employed labor in the province (37 percent), and a large majority of female workers who work
as unpaid family workers. The rate of self-employment is, however, much lower in urban areas.
The bulk of employment in the province is in the informal sector, which employs nearly two
thirds
(74 percent) of the non-agricultural employed labor force.13 Female workers are particularly
vulnerable in this regard: of the total number of employed females in Punjab’s non-agricultural
sector, 73 percent work in the informal sector. Table 2.3 highlights how the informal sector is
composed of either self-employed or wage employees. The proportion of unpaid family helpers
is only 11.26 percent.

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CONCLUSION

Conclusion for Agriculture

Major crops account for almost half of output in the agriculture sector in Punjab, but livestock is
fast catching up, with a contribution of about 40 percent to value added in the sector.
Agricultural production is vulnerable to shocks, both weather related as well as due to pest
infestations. In general, average yields remain below potential – a problem that has been
exacerbated by relatively low investment in the sector in recent years.

Several factors are responsible for the low productivity and efficiency of the agriculture sector in
Punjab. These factors were covered in detail in the background study on Agriculture prepared by
the World Bank for the previous Punjab Economic Report. That study30 presented a five point’s
agenda to reverse the source of growth from input intensity to productivity and efficiency. This
agenda is long term and continues to be as relevant today as it was three years ago when that
study was conducted.

Conclusion for Industrial Sector

As in the case of agriculture, Punjab’s industrial sector makes a significant contribution to
national GDP. Data on the number of industrial establishments in the province is sketchy, but the
available data suggests a preponderance of SMEs in manufacturing, which are poorly
documented and whose growth dynamics are not very well understood. Other key issues in
industrial development include (i) the increasing environmental degradation associated with the
manufacturing sector, (ii) the rising cost of energy, which has a significant impact on
profitability, and (iii) the need to improve the overall business climate in the province.

Conclusion for education

Education indicators in Punjab are generally better than for Pakistan as a whole, but the province
is still riddled with disparities in education across region and by gender. The PESRP is perhaps
the most ambitious initiative in education ever taken in Punjab, with possibly significant long-
term effects. In general, the prominence accorded to education in Punjab in recent years is likely
to have positive effects, if the Government adheres to its efforts.

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