Poverty Reduction in Pakistan with Respect to China

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PIDE Monograph Series

Poverty Reduction in Pakistan: Learning from the Experience of China

G. M. Arif and Shujaat Farooq

PAKISTAN INSTITUTE OF DEVELOPMENT ECONOMICS ISLAMABAD

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means—electronic, mechanical, photocopying, recording or otherwise—without prior permission of the author and or the Pakistan Institute of Development Economics, P. O. Box 1091, Islamabad 44000. © Pakistan Institute of Development Economics, 2012.

Pakistan Institute of Development Economics Quaid-i-Azam University Campus P. O. Box 1091, Islamabad 44000, Pakistan E-mail: publications@pide.org.pk Website: http://www.pide.org.pk Fax: +92-51-9248065

Designed, composed, and finished at the Publications Division, PIDE.

CONTENTS

Page 1. Introduction 2. Methodological Issues in Poverty Comparison 3. A Review of Income, Poverty, Macroeconomic and Political Conditions 3.1. Rural Poverty Trends 3.2. Urban Poverty 3.3. Social Poverty 3.4. Macro-economic and Socio-political Conditions 3.5. Should China be an Economic Role Model? 4. Understanding China’s Progress against Poverty 4.1. Rural Reforms 4.2. Public Investment in Education, Research and Infrastructure 4.3. Labour Absorption in Non-farm Sector and Urbanisation 4.4. Regional Cooperation and Globalisation 4.5. Rising Inequality in China 5. Poverty Reduction Strategies in Pakistan: A Historical View 5.1. Land Reforms 5.2. Agricultural Growth and Rural Poverty 5.3. Rural Non-farm Economy 5.4. Urbanisation 5.5. Public Spending 1 2 3 3 6 7 7 11 12 12 13 14 16 16 17 18 19 22 26 29

Page 6. Why Pakistan could not Succeed in Poverty Reduction? 6.1. Policy Gaps or Poor Implementation 6.2. Weak Institutions, Poor Governance and Deteriorating Law and Order Situation 6.3. Neglect of the Social Sector 6.4. Power Structures in Rural Areas 6.5. Lack of Effective Targeting 6.6. High Population Growth 6.7. Conflicts and Poverty Reduction 7. Policy Lessons for Pakistan 7.1. Asset Creation 7.2. Growth Inclusiveness 7.3. Macroeconomic Stability 7.4. Enhancing Capacity of Institutions 7.5. Integration of Markets—Development of Non-farm Sector Urbanisation 7.6. Public Investment 7.7. Reducing Regional Disparities 7.8. Reaping the Demographic Dividend 8. Concluding Remarks Appendix References List of Tables Table 1. Table 2. Table 3. Incidence of Rural and Urban Poverty in China and Pakistan, 1978–2005 Governance and Institution Indicators in Pakistan and China Per Capita Income and Incidence of Rural Poverty in China

33 33 35 35 35 36 37 37 37 38 38 38 39 39 39 40 40 40 42 43

4 10 12

(ii)

Page Table 4. Table 5. Table 6. Table 7. Table 8. Table 9.
Composition of Rural Income in China by Productive Activities (%) Distribution of Landownership in Pakistan Percentage Distribution of Farms by Size and Type of Tenure Land Reforms in Pakistan (000 Hectares) Factor Inequality Weights of Source Incomes in Overall Income Inequality Distribution of Loans by Agricultural Development Bank of Pakistan, 1982-83

13 18 18 19 21 22 23 24 25 30

Table 10. Percentage Distribution of Employed Persons of 10 Years Age and Above by Major Industry, 1974–2008

Table 11. Percentage of Rural Households in Pakistan that Own Shop and/or Other Businesses

Table 12. Source of Income by Operated Landholdings, 1986-89 and 2002 Table 13. Special Programmes for Poverty Reduction and Human Development

List of Figures Figure 1. Rural Poverty in China: Population Living Below the Poverty Line

5 5 7 8 9 9 9 14 15 (iii)

Figure 2. Rural Poverty in Pakistan: Population Living Below the Poverty Line

Figure 3. Human Development Index Trends, 1980–2010 Figure 4. GDP Growth Rate of Pakistan and China, 1980–2009 Figure 5. Inflation (CPI) in Pakistan and China, 1987–2009 Figure 6. Unemployment Rate (%) in Pakistan and China, 1980–2010 Figure 7. Income Inequality (Gini-coefficient) in...
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