Printer Friendly

CHAPTER 5 - THE PROVINCIAL ECONOMY OF KHYBER PAKHTUNKHWA.

The war on terror that started in Afghanistan and spread to Khyber Pakhtunkhwa (KPK) has led to a number of fallouts. According to PIPS (2010), terrorist, insurgent and sectarian related incidents of terrorism reported across the country increased from 2,148 in 2008 to 2,586 in 2009. The highest number of attacks in both the years was reported from KPK, with 1,009 attacks in 2008 and 1,137 attacks in 2009 (see Chart 5.1). These years witnessed a sharp rise in terrorist activities compared to 2006 and 2007 when the number of terrorist attacks was 60 and 460 respectively.

In order to curb the rise in militancy and terrorist activities, the Pakistan security forces launched military operations in major conflict areas of KPK and FATA. The first military operation was launched in Dir and then in Buner in April 2009. The second operation, Rah-e-Rast, was launched in Swat and other districts of Malakand Division in May 2009.1 The affected areas include Swat, Buner, Lower and Upper Dir, Shangla, Malakand, Peshawar, Mardan, Nowshera, Charsadda, DI Khan and Tank.

These armed conflicts in Malakand Division have disrupted the lives and livelihoods of, and pro-vision of normal public services to the local populations. The ensuing fighting between the military and the militants has imposed a high cost on the local economy as a large number of people have been compelled to leave their homes and livelihoods. The current estimated number of internally displaced persons (IDPs) is between 2.7 and 3.5 million. Consequently, this has disrupted the process of steady development throughout the province. It has caused considerable damage to physical and social infra-structure, loss of lives, injuries, and damage to private and public property. Houses, standing crops, livestock, schools, health facilities, water supply/irrigation schemes, public office buildings, roads, elec-tricity/gas networks, shops, hotels and businesses; all have suffered damages to varying degrees.

This chapter looks at the structure of the economy of KPK and analyses the growth/decline fol-lowing the war on terror and later the commencement of military operations in the province. Information from a range of sources has been collected to conduct this analysis. The World Bank (2005) Economic Report on KPK provides the sector-wise GRP of the province for the period 1991-92 to 2004-05. From 2005-06 onwards data has been obtained from Development Statistics of the province, Federal Board of Revenue (FBR) Yearbook, Labour Force Survey (LFS), and Household Income and Expenditure Survey (HIES).

The period of 1991-92 to 2008-09 is divided into four sub-periods: the first covers the period up to 11 September 2001 i.e. 1991-92 to 1996-97 and 1996-97 to 2001-02; the second, covers 2001-02 to 2005-06, which was the initial period of the war on terror and finally, 2005-06 onwards, with the com-mencement of military operations in conflict zones of KPK. The year 2005-06 has been replaced with 2004-05 at some places depending on the availability of data.

Section 1 discusses the structure of the KPK economy and trends in production of different sectors; Section 2 looks at the trends in tax collection in KPK as a proxy for growth in relevant tax bases; Section 3 explains the pattern of employment in KPK; Section 4 describes the impact of the security crisis on social sectors and Section 5 presents the future outlook, noting the initiatives undertaken by the government of Pakistan and the role of international donor community to compensate the province for the deteriorating socio-economic conditions.

THE STRUCTURE AND TREND OF ECONOMIC GROWTH IN KPK

Constituting 10 percent of Pakistan's landmass and 13 percent of national population, the economy of KPK contributes about 11 percent to the GDP of Pakistan. Table 5.1 gives the composition of the KPK economy in comparison with the national economy. It shows that in the Gross Regional Product (GRP) of KPK, agriculture sector on average accounted for 20.5 percent, industrial sector 24.8 percent, and the services sector 54.7 percent from 2001-02 to 2004-05. The share of agriculture and industrial sector in the GRP has declined while that of services sector has increased from 1991-92 to 2004-05. Accordingly, the contribution of services sector in the GRP of KPK is higher (55 percent) compared to that in the GDP of Pakistan (52 percent).

Table 5.1 Composition of GDP

###Khyber Pakhtunkhwa (%)

###1991 -92 1996-97 2001 -02

###to###to###to

###1996-97 2001 -02 2004-05

Khyber Pakhtunkwa

Agriculture###22.7###23.4###20.5

Industry###25.9###24.9###24.8

Services###51.5###51.7###54.7

GRP###100.0###100.0###100.0

Pakistan###

Agriculture###25.6###25.8###23.1

Industry###24.5###23.7###25.1

Services###49.9###50.4###51.8

GDP###100.0###100.0###100.0

Source: World Bank (2005), North West Frontier Province Economic Report

Table 5.2 gives a comparison of the trend in growth of the provincial and national economies. The economy of KPK grew at an average rate of 4.4 percent per annum during 1991-92 to 1996-97, 3.2 per-cent during 1996-97 to 2000-01 and 6.4 percent during 2001-02 to 2004-05. While the growth in the GRP of KPK was higher by 0.6 percentage points than that of GDP of Pakistan during 1991-92 to 1996-97 and the same during 1996-97 to 2000-01, it was lower by 0.6 percentage points during 2001-02 to 2004-05.

A sector-wise comparison of growth in KPK and that at the national level shows that growth in all three sectors (agriculture, industry and services) remained lower in KPK than that at the national level during 2000-01 to 2004-05. Within KPK, the trend indicates that in all the sectors, the pattern of growth is similar to that of overall GRP growth of KPK. In all the sectors, growth was higher in the first period, declined in the second period and then bounced back in the third period. In particular, the growth in industrial sector registered a big increase from 2.1 percent to over 9.3 percent (an average of 7.2 percentage points) in the period of 2001-02 to 2004-05 compared to the period of 1996-97 to 2000-01. This is followed by an increase in growth from 4 percent to 6.4 percent in the services sector.

It can be said that in the immediate aftermath of the war on terrorism, the services sector of the KPK economy, revealed greater buoyancy as a consequence of the 'war multiplier' of an enhanced military presence.

Table 5.2 Trend in Growth of GDP Khyber Pakhtunkhwa and Pakistan

###(%)

###1991-92###1996-97 2001-02

###to###to###to

###1996-97###2001-02 2004-05

Khyber Pakhtunkwa

Agriculture###3.4###2.4###3.1

Industry###4.4###2.1###9.3

Services###5.1###4.0###6.4

GRP###4.4###3.2###6.4

Pakistan###

Agriculture###3.5###1.9###4.3

Industry###3.0###3.8###10.8

Services###4.4###3.6###6.5

GOP###3.8###3.2###7.0

Source: World Bank (2005), North West Frontier Province Economic Report

The Agriculture Sector

Of the overall contribution of agriculture to the provincial GRP during 2000-01 to 2004-05, the share of the crop sub-sector was on average 31 percent, livestock sector 61 percent and forestry 8 percent (Table 5.3). Comparison of the KPK and national economies indicates that contribution of livestock and forestry to agriculture output is much higher in KPK than that in national economy. Further, in KPK the contribu-tion of the crop sub-sector in agriculture has depicted a decline while that of livestock and forestry sub-sectors an increase since 1991-92.

Farming is practiced at both subsistence and commercial level in many districts in KPK. Availability of cultivable land is a major constraint in the province as only 30 percent of the land is cultivable. Landholdings are small and fragmented and the majority of farming population has no access to irrigation.

Table 5.3 Composition of Agriculture Sector Khyber Pakhtunkhwa and Pakistan (%)

###1991-92###1996-97###2001-02

###to###to###to

###1996-97###2001 -02 2004-05

Khyber Pakhtunkwa

Crops###48.3###37.8###31.3

Livestock###45.0###56.4###60.8

Forestry###6.8###5.9###8.0

Total###100.0###100.0###100.0

Pakistan###

Crops###57.5###51.5###47.3

Livestock###38.9###45.1###48.7

Fishing###2.7###1.9###1.3

Forestry###0.8###1.4###2.6

Total###100.0###100.0###100.0

Source: World Bank (2005), North West Frontier Province Economic Report

Table 5.4 gives the share of major crops in total cropped acreage in KPK. In the Rabi season (winter), the cultivation of wheat occupies the bulk of the total cropped area. In 2005-06, 90 percent of the cropped area was cultivated by wheat, declining to 87 percent in 2008-09. Other Rabi crops include tobacco, mustard, gram and barley. In Kharif season (summer), maize is cultivated on almost three quarters of the cropped area. Sugarcane and rice are also two major crops cultivated in this season. Minor crops of Kharif season include bajra, cotton, jowar and sesamum. The share of gram in the total cultivated area shows a decline over the period and that of sugarcane in 2006-07 and 2008-09.

Table 5.4 Distribution of Crop Areas by Crops in Khyber Pakhtunkhwa

###Cropped Area###Distribution of Crop Acreage (%)

Years###(000

###Hectares)###Wheat###Tobacco###Mustard###Gram###Barley

###Rabi Crops

2000-01###782###84.7###3.4###1.7###7.4###2.7

2001-02###763###83.9###3.9###1.8###7.9###2.5

2002-03###705###89.1###0.0###2.0###6.4###2.5

2003-04###716###88.7###0.0###2.0###6.8###2.4

2004-05###749###85.0###4.3###2.0###6.6###2.2

2005-06###677###89.9###0.0###1.9###5.6###2.5

2006-07###746###85.6###4.1###1.9###6.2###2.2

2007-08###728###86.7###4.5###1.7###4.8###2.3

2008-09###763###86.9###4.3###1.7###5.1###2.0

###Kharif Crops

###Distribution of Crop Acreage (%)

###Sugarcane###Maize###Rice###Others

2000-01###665###16.0###73.7###8.2###2.1

2001-02###659###15.0###74.9###7.4###2.7

2002-03###626###16.4###73.5###7.9###2.2

2003-04###627###16.4###73.2###8.0###2.4

2004-05###618###16.9###72.9###7.8###2.4

2005-06###602###16.1###73.8###7.9###2.1

2006-07###629###15.9###74.6###7.8###1.7

2007-08###625###16.5###73.9###8.1###1.6

2008-09###616###15.7###74.5###8.2###1.6

Chart 5.2 gives the share of major crops produced in KPK in the total production of Pakistan and Table 5.5 reports the trend in growth of these crops. KPK is the largest producer of tobacco in the country. Its share in the total tobacco production stood at 74 percent per annum during 2000-01 to 2004-05. Maize, that occupies the bulk of the cropped acreage in Kharif season, constituted 42 percent of the total maize crop produced in Pakistan during 2000-01 to 2004-05. Since 2000-01, the production of the maize crop has been continuously declining in KPK: during 2000-01 to 2004-05 it declined on average by one percent per annum and during 2004-05 to 2008-09 by 8 percent per annum. KPK's share in the wheat production of Pakistan is less than 5 percent and it imports wheat from Punjab.

Table 5.5 Trend in Growth of Major Crops in KPK (%)

###Wheat###Maize###Sugarcane###Barley###Tobacco###Rice###Gram

Khyber Pakhtunkhwa

2000-01 to 2004-05###8.4###-1.1###0.4###-2.0###6.8###-1.3###37.5

2004-05 to 2008-09###3.3###-8.1###-2.0###-4.6###1.1###3.0###1.9

###Rest of Pakistan

2000-01 to 2004-05###3.2###28.7###2.7###-1.7###0.1###2.1###27.5

2004-05 to 2008-09###3.1###12.0###3.6###-2.1###4.4###13.9###6.5

Source: NWFP Development Statistics, Planning and Development Department, Government of KPK

Table 5.6 Crops by Major Districts in KPK

Crop###Districts

Tobacco###Swabi, Mardan, Charsadda, Buner

Wheat###Mardan, Swat, Mansehra, Peshawar, Swabi, Charsadda, DI.Khan,

###Haripur,Buner

Maize###Mansehra, Swabi, Swat, Buner, Mardan, Charsadda, Haripur,

###Kohistan, Shangla

Barley###Chitral, Mardan, Upper Dir, Lower Dir, Swabi, Nowshera

Sugarcane###Charsadda, Mardan, Peshawar, DI.Khan, Malakand, Nowshera

Rice###D.I. Khan, Upper Dir, Lower Dir, Swat, Malakand

Gram###D.I.Khan, Lakki, Karak

Jowar###Mardan, D.I.Khan, Swabi, Haripur

Rapeseed and Mustard###Mardan, D.I.Khan, Swabi, Buner, Lower Dir, Malakand

Bajra###Karak, Kohat

Cotton###D.I.Khan

Source: NWFP Development Statistics, various issues

Vegetables are grown throughout the year and are an important source of both nutrition and income for household members. Commercial production of fruit and vegetable, particularly for the main urban markets has increased rapidly, largely due to support in research, extension and marketing provided by the Swiss-funded Project for Horticultural Promotion (PHP) that worked primarily in the Swat Valley (ADB and WB, 2009).

Livestock production has been increasing in KPK due to the rise in demand from urban consumers. The sale of dairy products and live animals to urban households provide an important flow of cash income to rural areas. Livestock includes cattle, goats, sheep, donkeys and poultry. Households involved in sheep, goat and cattle rearing roughly constitute three-quarters of farm households. Generally, a family keeps up to three cows or buffalos, 5-8 sheep or goats, and 6-10 poultry. Buffaloes that are mainly brought from the Punjab remain an important source for dairy production. Commercial production has taken over from small-scale poultry farming, particularly in the central irrigated plains and Hazara (Mansehra, Abbottabad and Haripur) which have good access to markets (World Bank, 2005).

Table 5.7 shows the size and growth of livestock in KPK and Pakistan. Comparison of the two latest censuses (1996 and 2006) indicates that the size of total livestock increased from 10.7 million to 20.9 million (an average annual growth of 7 percent) in KPK whereas it increased from 94.7 million to 116.3 million (an average annual growth of 2 percent) in the rest of Pakistan. Further, growth in all categories of livestock was higher in KPK compared to that in the rest of Pakistan during the period of 1996 and 2006 censuses. However, given the security crisis, it is likely that the population of livestock in KPK would have fallen and its share in Pakistan would have declined.

Table 5.7 Livestock Population in Khyber Pakhtunkhwa and Pakistan

###Size (Million)###Growth###Share in

###1996###2006###(%)###Pakistan (%)

Khyber Pakhtunkhwa

Cattle###3.3###6.0###6.1###20.2

Buffaloes###1.3###1.9###4.0###7.1

Sheep###1.5###3.4###8.4###12.7

Goats###4.6###9.6###7.6###17.8

Total###10.7###20.9###6.9###15.2

Rest of Pakistan

Cattle###17.1###23.6###3.3###79.8

Buffaloes###19.0###25.4###2.9###92.9

Sheep###22.0###23.1###0.5###87.3

Goats###36.6###44.2###1.9###82.2

Total###94.7###116.3###2.1###84.8

Source: NWFP Development Statistics 2005 and 2009

Note: 1996 and 2006 are years of Agriculture Census.

Overall, from 2001-02 to 2004-05, the agriculture sector of KPK showed dynamism both in the crop and livestock sub-sectors. In 2005-06 unfortunately the province faced huge devastation because of a massive earthquake. From 2006-07 and onwards agriculture activity in the province has declined sharply. This could be at least partially attributed to the increase in militancy and the military operations carried out in KPK.

Impact on Agriculture Sector2

According to the ADB and WB (2009) report, over 80 percent of the population of the crisis affected districts depends on agriculture as their main source of livelihood. The impact of the war on the agri-culture sector as described by these sources is given below.

- Major damages occurred as animals and standing crops ready for harvest were abandoned when civilians moved to safer places.

- In addition, major losses occurred due to lost production as farmers could not return to plant the next crop, physical damage to buildings, roads and public utilities, including irrigation facilities, government offices, including veterinary hospitals, offices and research facilities which were looted and vandalized.

- The direct damage in the form of lost livestock is estimated at Rs28,952 million. A total of 553,000 large animals (buffalo, cows, sheep, and goat) and 594,000 small animals (donkeys and asses) and 1.8 millions heads of poultry have either perished or subjected to distress sale (around 40 percent of total lost animals) at prices as low as half the prevailing market prices.

- Livestock losses vary significantly among districts. Comparing losses with the pre-crisis stocks, Swat has suffered the most losses (42-65 percent ). This is followed by Buner (36-60 percent), Shangla (26-50 percent), Dir Lower (24-38 percent) and Dir Upper (8-17 percent).

- The direct damage in the form of un-harvested standing crops of the Rabi 2008-09 season is estimated at Rs 6,605 million - mostly wheat (60 percent of total crop damage), fruits (22 percent), and vegetables (16 percent).

- In terms of the extent of damage by district, Swat incurred the highest losses (Rs 3,141 million), followed by Buner (Rs 1,206 million), Dir Lower (Rs 443 million), and Dir Upper (Rs 273 million).

- The direct damage to the irrigation sub-sector is estimated at Rs 873.9 million. The largest share of damage is reported on flood protection (Rs 398.5 million) and surface irrigation infrastructure (Rs 383.2 million). It is reported that out of a total of 631 irrigation canals available in the five districts, 259 canals have been partially damaged. Out of 127 km of flood protection embankments, 9 km long embankments have been fully damaged, and 25 km of embankments partially damaged. Around 26 tube wells and 12 lift pumps have been damaged. District-wise, Lower Dir represents the largest share in total damages (39 percent of total damages in the irrigation sub-sector) followed by Swat (35 percent), Buner (14 percent), Upper Dir (7 percent), and Shangla (5 percent).

- The total indirect losses of livestock sub-sector in the form of lost milk production of cows, buffalo and goat are estimated at Rs 4,994 million. The total indirect losses of crop sub-sector for 2009 Kharif and 2009-10 Rabi seasons are estimated to be around Rs 14,736 million.

The Industrial Sector

The industrial sector of the KPK economy largely comprises of manufacturing activity. Of the total industrial production, manufacturing had a share of 64 percent, construction 15 percent and electricity and gas distribution 21 percent between 2000-01 to 2004-05 (Table 5.8). Compared to similar shares in industrial production at national level, the shares of construction and electricity and gas distribution are higher in KPK. The trends in these shares indicates that the share of manufacturing increased in KPK during early 1990s to mid 2000s from an average of 57 percent per annum to 64 percent per annum.

Though the share of construction in industrial production declined considerably from an average 15.7 percent per annum to 9 percent per annum at national level, in KPK it stabilised around 15 percent per annum. The share of electricity and gas distribution declined considerably from an average of 27.4 percent per annum to an average of 20.7 percent per annum.

Table 5.8 Composition of Industrial Sector Khyber Pakhtunkhwa and Pakistan (%)

###1991-92###1996-97###2001-02

###to###to###to

###1996-97###2001-02###2004-05

Khyber Pakhtunkwa

Mining and Quarrying###0.2###0.2###0.3

Manufacturing###57.1###58.2###64.1

Construction###15.3###15.2###14.9

Electricity and Gas Distribution###27.4###26.4###20.7

Total###100.0###100.0###100.0

Pakistan

Mining and Quarrying###2.4###5.3###10.3

Manufacturing###68.5###65.7###68.4

Construction###15.7###13.0###9.0

Electricity and Gas Distribution###13.5###16.1###12.5

Total###100.0###100.0###100.0

Source: World Bank (2005)

An overview of large-scale manufacturing in KPK based on Census of Manufacturing Industries (CMI) reveals that there are three groups of industries that account for more than 80 percent of the total large scale production in manufacturing (Table 5.9). These include beverages and tobacco, textile, apparel and leather, and non-metallic industries.3 Food, beverages and tobacco have the highest share in large scale production (43.7 percent) and value added (42.3 percent), and these shares have been growing since 1994-95. Non-metallic industries, which accounted for 9 percent share in value of production and 12 percent in value added in 1995-96, grew rapidly and the shares increased to 22.6 percent and 27 percent respectively by 2005-06. Shares of textile, apparel and leather, and the other industries including metal products, machinery equipment, handicrafts and sports have declined.

Table 5.9 Large Scale Manufacturing in Khyber Pakhtunkhwa

###Production###Value Added

###1995-96###2000-01###2005-06###1995-96###2000-01###2005-06

All Industries (Rs Million)###62,208###50,630###164,313###27,941###26,570###57,563

Share (%)

Food, beverages and tobacco###35.3###35.9###43.7###30.0###39.6###42.3

Metal products, machinery equipment,###16.9###3.1###1.3###30.9###2.1###0.3

Non-metallic industries###9.2###17.4###22.6###12.3###21.2###27.3

Textile, apparel and leather###27.9###22.0###13.9###19.9###20.2###12.9

Others###10.8###21.7###18.5###7.0###16.9###17.2

Total###100.0###100.0###100.0###100.0###100.0###100.0

Source: Census of Manufacturing Industries (CMI) 1995-96, 2000-01, 2004-05

Table 5.10 gives the trend in the quantity of production of selected items in KPK vis-a-vis the total of Pakistan. In food, beverages and tobacco, the share of KPK in total production of cigarettes increased from an average of 28 percent during 2001-02 to 2004-05 to over 31 percent during 2004-05 to 2008-09. Also, the growth in production from an average of negative 1.8 percent per annum in the first half of 2000s moved to an average of 11.4 percent per annum in the second half of 2000s. This was double the overall growth in Pakistan.

The share of KPK in the total production of cooking oil and ghee also increased in the second half of 2000s as compared to that in the first half of 2000s. The growth in their production declined in the later period which is in line with the growth trend in Pakistan as a whole. However, on average, the growth in their production remained higher than that of the country as a whole in both the sub-periods. Growth in the production of beverages indicated a jump in KPK as well as at national level in the later period but in KPK it was well above that at national level. Sugar production in KPK declined during 2004-05 to 2008-09, when reportedly there was an increase in the country. During 2001-02 to 2004-05, KPK contributed 3.8 percent to the sugar production in Pakistan. However, during the later period this contribution declined to 1.6 percent.

Table 5.10 Performance of Selected Large-scale Manufacturing Items in KPK

###Share of###Growth (%)

###Khyber Pakhtunkwa in

Industry and Item###Pakistan (%)###Khyber Pakhtunkwa###Pakistan

###2001-02 to 2004-05 to###2001-02 to 2004-05 to 2001-02 to 2004-05 to

###2004-05###2008-09###2004-05###2008-09###2004-05###2008-09

Food, beverages

and tobacco

Cigarette###27.8###31.5###-1.8###11.4###4.0###5.6

Cooking Oil###8.4###11.8###59.6###5.4###18.2###4.9

Ghee###25.2###29.5###14.7###3.7###10.0###0.5

Beverages###-###-3.7###35.8###12.2###22.7

Sugar###3.8###1.6###7.9###-22.9###2.5###3.9

Textile

Cotton Cloth###1.2###0.4###76.5###-15.0###18.4###2.5

Cotton Yarn###0.003###0.003###15.2###1.4###8.3###6.4

Non-metallic industries

Sanitary Ware###-###58.8###3.3###-###-

Wall Tiles###34.5###15.0

Cement###28.1###27.2###34.4###11.4###22.4###14.9

Sheet Glass###-###-0.2###10.9###-###-

Source: Computations based on data from KPK Development statistics, Economic Survey, SBP Annual Report

In textiles, cloth production in KPK constitutes a meager 1.2 percent of total cloth production in Pakistan which declined to less than half percent during 2004-05 to 2008-09. The share of yarn production however is almost negligible. As the growth in production of both cloth and yarn declined in Pakistan, the performance of KPK in textiles has also been declining and remained below the coun-try's average. In KPK, the production of cloth grew on average at a rate of nearly 77 percent per annum during 2001-02 to 2004-05, dropped by an average of 15 percent per annum during 2004-05 to 2008-09 while the growth in production of yarn declined from 15 percent per annum to just 1.4 percent per annum.

In the non-metallic mineral products category, cement production constitutes 27 percent of the total production in Pakistan. Compared to country wide figures, the growth in its production depicts a mas-sive decline in KPK. While production grew at an average rate of 34.4 percent per annum in KPK during 2001-02 to 2004-05 compared to 22.4 percent per annum in the country, growth during 2004-05 to 2008-09 was 11.4 percent per annum in KPK compared to an increase of 15 percent per annum in Pakistan. Other items in this category such as ceramics, including sanitary ware and wall tiles also registered a declining growth rate. Sheet glass production however, shows an increase in growth in the later period.

Overall, in the aftermath of rise in militancy and military operations in KPK, the production in manufacturing, which is already small compared to that in Punjab and Sindh, has declined. Production of sugar and cotton cloth declined massively while the cooking oil and ghee, cotton yarn and non-metal-lic product industries slowed down from 2006-07 and onwards.

Table 5.11 shows the spread of major large scale manufacturing units by districts in KPK. It indi-cates that there are six districts where manufacturing activity mainly takes place. These include: Peshawar, Swabi, Swat, Haripur, Mardan and Nowshera. The number of units in these districts declined from 1,679 units to 1,622 in 2007-08.

Table 5.11 Location of Large Scale Industries by Districts in KPK

Districts###Major Industries###Other Industries

Peshawar###Beverages, Biscuits and Sweets, Flour Mills,###Printing Press, Pharmacy,

###Preservation of Fruits, Leather, Fibre Glass, Ceramics,###Plastic and Rubber and Arms and Ammunition

###Motor Cycle Rickshaw, Marble and Chips, Engineering Haripur###Biscuit and Sweet, Vegetable Ghee and Oil, Preservation###Chemical, Pharmacy, Plastic and

###of Fruits, Textile Loam, Fibre Glass, Ceramics###Rubber, Packages

Swabi###Cigarettes, Corn, Textile Loam and Mills, Cement based###Plastic and Rubber, Chemical,

Swat###Rice, Motor Cycle Rickshaw###Silk, Plastic and Rubber

Mardan###Marble and Chips, Flour Mills, Ceramics, Cement based

Nowshera###Marble and Chips, Cement based

D. I. Khan###Rice and Sugar mills

Bannu###Leather

Buner###Marble and Chips

Source: NWFP Development Statistics

Peshawar, the capital of KPK is the industrial hub of the province. The major industries located in Peshawar include beverages, biscuits and sweets, flour mills, preservation of fruits, leather, fiber glass, ceramics, motor cycle rickshaw, marble and chips, and engineering. Haripur is another major industrial district that accounts for major production of biscuit and sweets, vegetable ghee and oil, textile loam, fiber glass and ceramics. Swabi has a concentration of industries such as cigarettes, textile loam and milling industries while Swat has mostly rice mills. Swat also used to produce motor cycle rickshaws up to 2006. Mardan and Nowshera also contribute significantly to the production of marble and chips, Mardan producing flour and ceramics as well. Besides these, some other important districts are D. I. Khan with rice and sugar mills, Bannu with leather factories and Buner with marble and chip factories.

The industrial sector in five crisis affected districts (Swat, Shangla, Buner, Upper Dir and Lower Dir) of Malakand Division, generally comprise of small and medium-sized units based primarily on locally available materials. The main industries are mining (marble, granite, gemstones), mini hydro power generation, flour mills, rice mills, silk mills, furniture, vegetable and ghee mills, rubber and plastic goods, handicrafts, and cement based products. Many of these products are used in the area, whereas marble, silk, gemstones and furniture are transported to other parts of the country. The area with the maximum private sector activity is Swat (ADB and WB, 2009).

Impact on Industrial Sector

The power loom sector has been a strong presence in Swat due to tax advantages, skill availability and associated benefits of a developed cluster. ADB and WB (2009) indicate that 11 units out of 65 have been damaged due to the war on terror. This constitutes about 17 percent of the total number of units. It is assumed that the damage rate to industrial units and businesses would be the same as that of the power loom sector, i.e. 17 percent. The ADB/WB report gives the preliminary estimates of damages in the affected districts for shops of Rs 396 million and for industry and business of Rs 341 million.

According to the All Pakistan Marble Mining, Processing, Industry and Exporters Association (APMMPIEA), the war on terror has disrupted the work in marble units. In Mardan, 100 marble units have shut down and 15,000 workers rendered jobless. In Buner, nearly 250 industrial units and in other areas 100 units have closed down. Around 20,000 skilled and semi-skilled workers in Buner and about 35,000 indirectly employed in allied industries have been laid off.

Overall, according to estimates, 1660 out of 2254 industrial units in the province have closed down, resulting in thousands of people becoming jobless with shifting of businesses to the Federal Capital and Punjab. These units belong to the textile, plastics, marble, cosmetics, and pharmaceutical sectors. The number of industrial workers still on the job has fallen from 84,000 to 40,000.

The Services Sector

In the services sector, wholesale and retail trade is the largest activity: however, its share in services sector output declined from 36 percent during 1991-92 to 1995-96 and to 30 percent during 2000-01 to 2004-05 (Table 5.12). The share of other activities including transport, storage, and communications and public administration has increased significantly in the early part of the last decade compared to that in the 1990s. As mentioned earlier that this could be the effect of the 'war multiplier.' The increased movement of goods and services due to the presence of the army and supplies to the NATO forces in Afghanistan has caused an increase in activities related to transport and communications.

Table 5.12 Composition of Services Sector: Khyber Pakhtunkhwa and Pakistan (%)

###1991-92###1996-97###2001-02

###to###to###to

###1996-97###2001-02###2004-05

Khyber Pakhtunkwa

Transport, storage, and Communication###17.1###20.6###24.0

Wholesale and retail trade###36.2###32.7###29.8

Finance and Insurance###7.3###6.8###4.1

Ownershipofdwellings###5.7###4.7###4.1

Public administration and defense###16.4###16.5###20.2

Comunity and social services###17.2###18.6###17.8

Total###100.0###100.0###100.0

Pakistan###

Transport, storage and Communication###20.3###21.2###21.3

Wholesale and retail trade###33.0###32.6###35.1

Finance and Insurance###6.4###6.7###6.9

Ownershipofdwellings###8.8###7.8###5.9

Publicadministrationanddefense###15.8###14.1###12.1

Community and social services###15.6###17.6###18.8

Total###100.0###100.0###100.0

Source: World Bank (2005)

Tourism had grown as a major sector in KPK over the past three to four decades, which had been a major source of employment and income generation. In particular, Swat emerged as a major attraction for tourists, resulting in investment in hotels and ancillary services. These are supported by a large network of shops and businesses all over Swat as trading in the region had grown, creating employment opportunities. It is estimated that about 40,000 persons are associated with the tourism and ancillary industry. The decline in wholesale and retail trade that also includes hotels could be at least partially due to damage to the tourism industry in Swat.

ADB and WB (2009) mention that about 500 hotels have been operating in the Malakand division out of which about 60 were damaged in the crisis. Some of these were prominent and popular hotels such as the Pakistan Tourism Development Corporation (PTDC) Hotel at Malam Jabba, Pamir Hotels, and Rock City Hotel at Fizzagut, which received extensive damage before and during the military operation.

TAX COLLECTION

Tax collection is used as a proxy for the size and growth of different tax bases. Growth in collection of federal excise duty (FED) and general sales tax (GST) indicates the performance of manufacturing sector and growth in income tax shows the performance of the overall provincial economy, excluding the agriculture sector.

In the earlier years of the last decade, KPK accounted for over 17 percent of the total excise duty collected in Pakistan (see Table 5.13). One of the negative implications of war on terror is the decline in FED both in terms of magnitude and share in the total FED collection in Pakistan.After the earthquake of October 2005, the share of FED in total collection declined to 10.6 percent in 2005-06,and fellfurther to 5.3 percent by 2008-09 as a result of security crisis in the province. Collection of duty under FED on cigarettes and tobacco,perfumery and cosmetics shows an increase while those on beverages concentrate and natural gas shows a decline.

Table 5.13 Trend in Collection of Taxes in Khyber Pakhtunkhwa

###Valu (Rs millions)###Share (%)

###Khyber###Rest of###Khyber###Rest of

###Total###Total

###Pakhtunkwa###Pakistan###Pakhtunkwa###Pakistan

Federal Excise Duty

2000-01###8,853###40,337###49,190###18.0###82.0###100.0

2001-02###7,381###39,827###47,208###15.6###84.4###100.0

2002-03###7,960###36,976###44,936###17.7###82.3###100.0

2003-04###7,881###37,742###45,623###17.3###82.7###100.0

2004-05###9,260###43,893###53,153###17.4###82.6###100.0

2005-06###5,882###49,636###55,518###10.6###89.4###100.0

2006-07###7,628###64,312###71,940###10.6###89.4###100.0

2007-08###7,468###84,706###92,174###8.1###91.9###100.0

2008-09###6,238###111,292###117,530###5.3###94.7###100.0

General Sales Tax

2000-01###5,204###148,361###153,565###3.4###96.6###100.0

2001-02###6,111###160,450###166,561###3.7###96.3###100.0

2002-03###5,355###189,784###195,139###2.7###97.3###100.0

2003-04###5,326###213,841###219,167###2.4###97.6###100.0

2004-05###5,602###287,844###293,446###1.9###98.1###100.0

2005-06###5,355###321,881###327,236###1.6###98.4###100.0

2006-07###6,512###339,913###346,425###1.9###98.1###100.0

2007-08###5,923###399,682###405,605###1.5###98.5###100.0

2008-09###5,889###472,851###478,740###1.2###98.8###100.0

Customs Duty

2000-01###2,629###62,418###65,047###4.0###96.0###100.0

2001-02###2,252###45,566###47,818###4.7###95.3###100.0

2002-03###1,810###67,026###68,836###2.6###97.4###100.0

2003-04###2,307###88,738###91,045###2.5###97.5###100.0

2004-05###1,787###113,586###115,373###1.5###98.5###100.0

2005-06###1,967###136,417###138,384###1.4###98.6###100.0

2006-07###2,767###129,532###132,299###2.1###97.9###100.0

2007-08###1,869###148,794###150,663###1.2###98.8###100.0

2008-09###2,110###146,293###148,403###1.4###98.6###100.0

Income Tax

2000-01###3,105###114,357###117,462###2.6###97.4###100.0

2001-02###3,474###133,068###136,542###2.5###97.5###100.0

2002-03###3,846###141,520###145,366###2.6###97.4###100.0

2003-04###4,634###166,998###171,632###2.7###97.3###100.0

2004-05###7,910###175,463###183,372###4.3###95.7###100.0

2005-06###8,083###216,905###224,989###3.6###96.4###100.0

2006-07###5,200###328,537###333,737###1.6###98.4###100.0

2007-08###6,577###381,285###387,861###1.6###98.3###100.0

2008-09###8,430###435,118###443,548###1.9###98.1###100.0

Source: FBR Yearbook, various issues.

The share of sales tax collected from Khyber Pakhtunkwa was over 3 percent ten years ago which declined to less than 2 percent in recent years. In 2008-09, the province contributed only 1.2 percent of the GST collected in Pakistan.

The share of KPK in total income tax collected in Pakistan was 4 percent in 2004-05. Since then this share has declined to less than 2 percent. Moreover, the magnitude of income tax collected in the province during 2006-07 and 2007-08 was far below that collected in 2004-05 and 2005-06 (see Table 5.13).

Therefore, the overall lack of buoyancy in tax revenues from KPK confirms the process of slowing down in the process of economic growth in the province, especially after 2004-05. This is largely attributed to the intensification of the war on terror.

THE PATTERN OF EMPLOYMENT IN KHYBER PAKHTUNKHWA

The labour force participation rate in KPK depicted a declining trend in the first half of the 1990s showing a movement in line with that in rest of Pakistan (Chart 5.3). In the second half of 1990s, it exhibited several fluctuations while an upward trend was observed in the rest of Pakistan. The participation rate in KPK declined from 39.5 percent in 1991-92 to 36.4 percent in 2001-02. During the last decade it has risen in KPK as well as in rest of Pakistan. During 2001-02 to 2005-06, the initial period of war on terror, the labour force participation rate in KPK increased from 36 percent to almost 40 percent, and has remained, more or less, constant since then.

The unemployment rate in KPK, while showing several fluctuations, particularly in the second half of the 1990s, increased from as low as 1.6 percent in 1993-94 to as high as 11.9 percent in 1990-00. As against in the rest of Pakistan, the unemployment rate increased from 5.8 percent in 1993-94 to 7.3 percent in 1999-00. According to the Labour Force Survey, in the 2000s, the unemployment rate in KPK initially increased even further and then declined somewhat. Employment growth appears to have been fairly rapid in KPK during the last decade (see Table 5.14a).

Table 5.14a Employment Size and Trend Khyber Pakhtunkhwa and Pakistan

###Period###Pakistan###KPK###Other provinces

Employment (Million)

###1991-92###31.1###3.3###27.7

###1996-97###34.1###3.8###30.4

###2001-02###39.6###4.3###35.3

###2005-06###46.9###5.2###41.7

###2007-08###49.1###5.7###43.4

ACGR (%)

###1991-92 to 1996-97###1.9###2.5###1.8

###1996-97 to 2001-02###3.0###2.7###3.1

###2001-02 to 2005-06###4.3###5.0###4.3

###2005-06 to 2007-08###2.3###4.8###1.9

Note: ACGR implies average cumulative growth rate.

Source: Computations based on data from Labour Force Survey

The Household Integrated and Economic Survey (HIES) depicts a rather different picture of employment growth in KPK as reported in Table 5.14b. Compared to the period of 2001-02 to 2005-06, the decline in employment growth is far more pronounced in KPK during 2005-06 to 2007-08 than in other provinces. Thus according to this source the employment in KPK has been adversely affected by the militancy and military operation in the conflict areas.

The Household Integrated and Economic Survey (HIES) depicts a rather different picture of employment growth in KPK as reported in Table 5.14b. Compared to the period of 2001-02 to 2005-06, the decline in employment growth is far more pronounced in KPK during 2005-06 to 2007-08 than in other provinces. Thus according to this source the employment in KPK has been adversely affected by the militancy and military operation in the conflict areas.

Table 5.14b Employment Size and Trend Khyber Pakhtunkhwa and Pakistan

###Period###Pakistan###KPK###Other provinces

Employment (Million)

###1998-99###39.6###4.16###35.6

###2001-02###42.2###4.44###37.8

###2005-06###45.1###5.06###40.0

###2008-08###46.2###5.07###41.1

ACGR (%)

###1998-99to2001-02###2.13###3.07###2.02

###2001-02to2005-06###1.65###3.32###1.44

###2005-06 to 2007-08###1.26###0.08###1.41

Note: ACGR implies average cumulative growth rate.

Source: Computations based on data from Labour Force Survey

Youth Unemployment

There is a view that young males who are unemployed are likely to get attracted more towards militant groups. Table 5.15 indicates that youth unemployment rate has been highest in KPK and remained well above the national rate in all the three years reported in the Table. In 2008-09, the unemployment rate in KPK was 13.6 percent followed by 9 percent in Punjab. Comparison among 2005-06 and 2008-09 shows that while youth unemployment rate of male declined considerably in Sindh and Balochistan and somewhat in Punjab, it slightly increased in KPK.

Table 5.15 Youth and Graduate Unemployment Rate (%)

###Both###Male###Female

Region###2001-02 2005-06 2008-09 2001-02 2005-06 2008-09 2001-02 2005-06 2008-09

###Youth

Pakistan###13.4###8.7###8.3###12.0###8.4###7.5###20.6###9.6###11.3

Punjab###13.4###8.5###9.0###11.9###9.1###8.6###19.2###6.8###9.8

Sindh###8.3###6.5###5.0###7.5###6.1###3.9###18.3###11.0###10.7

###20.9###14.5###13.6###19.5###11.2###11.6###33.6###31.4###20.8

Balochistan###18.2###5.8###3.3###16.0###5.6###2.1###42.9###7.8###14.3

###Graduate

Pakistan###8.7###7.1###6.2###7.4###6.2###4.2###16.7###11.6###15.4

Punjab###10.6###6.9###7.0###8.5###5.1###5.0###16.1###13.0###14.0

Sindh###5.8###6.3###3.6###5.1###6.0###2.9###9.8###8.5###8.2

###11.6###10.9###12.3###11.2###7.9###6.9###15.0###24.2###36.0

Balochistan###12.5###7.4###2.0###11.1###7.2###2.2###28.6###22.2###5.3

Source: FBS, Labour Force Survey

IMPACT OF CRISIS ON THE SOCIAL SECTOR OF KPK

The acute security situation in KPK has adversely affected performance of the social sector in the province. This section discusses the state of social sector since the province has become a centre for the war on terror.

According to ADB and WB (2009), in five crisis affected districts of Malakand Division (Swat, Shangla, Buner, Upper and Lower Dir) of KPK, there are 5,347 government schools and colleges, 820,000 students (37 percent of which are girls) and 22,364 enrolled teachers. In these five districts, 427 (8 percent) school have been fully or partially damaged including residences and hostels of which 237 are fully damaged and 190 partially damaged. Of the total fully damaged schools 63 percent are girls schools. The most affected district is Swat, with 276 fully or partially damaged schools. The total cost for restoring fully or partially damaged educational buildings, material, furniture and equipment is estimated at Rs2,696 million (see Table 5.16).

Table 5.16 Summary of Damaged Schools

###Number of Damaged Schools###Cost of Damaged Schools

###Fully###Partially###Total###(Rs. Million)

Districts

###Male Female Total###Male Female###Total###Male Female Total###Fully###Partially###Total

Swat###46###125###171###63###42###105###109###167###276###1,234.0###566.1###1,800.2

Buner###8###1###9###17###10###27###25###11###36###59.1###133.2###192.3

UpperDir###16###6###22###7###0###7###23###6###29###206.9###144.3###351.2

Lower Dir###12###17###29###16###12###28###28###29###57###162.6###34.4###196.9

Shangla###6###0###6###21###2###23###27###2###29###44.3###111.0###155.3

Total###88###149###237###124###66###190###212###215###427###1,707.0###989.0###2,696.0

Source: ADB and WB (2009) Preliminary Damage and Needs Assessment

The health delivery system in KPK comprises both public and private providers where the latter are largely limited to urban areas. According to ADB and WB (2009), out of a total of 217 public health facilities in five crises affected districts, 63 (29 percent) facilities have been damaged (Table 5.17). Among these, 19 are fully damaged and 44 partially damaged. The damaged facilities include first level health care facilities or the community health centers and civil dispensaries (such as Rural Health Centers, Basic Health Units, MCH/CH Centers) and other health facilities including dispensaries and first aid posts. The secondary health care facilities (District Headquarter Hospital (DHQ)/Agency Headquarter Hospital (AHQ) and Tehsil Headquarter Hospital (THQ)) however, have been less affected. The damage to health facilities includes offices, residences, medical equipment, furniture and vehicles.

Table 5.17 Summary of Damaged Health Facilities

###Number of Damaged Health Facilities###Cost of Damaged Health Facilities

Districts###(Rs. Million)

###Fully###Partially###Total###Fully###Partially###Total

Swat###6###12###18###97.3###52.9###150.2

Buner###1###21###22###16.2###92.6###108.8

Lower Dir###9###7###16###145.9###30.9###176.8

Upper Dir###3###3###6###48.7###13.2###61.9

Shangla###0###1###1###-###4.4###4.4

Total###19###44###63###308.0###194.0###502.0

Source: ADB and WB (2009) Preliminary Damage and Needs Assessment

Of the five crisis affected districts, fully damaged health facilities were largely reported in Lower Dir and partially damaged facilities in Buner. The total damage cost is estimated to be Rs502 million. Among completely damaged health facilities, 93 percent of the damaged cost is related to the damage of offices and buildings while for the partially damaged this cost is 80 percent. These estimates are likely to be understated as they do not include estimates of damage to private health care facilities.

The security crisis in Malakand Division has affected the housing settlements in all the five districts severely. Forceful occupation particularly of private houses by militants in both urban and rural areas forced the population to take shelter in rescue camps of the government or NGOs, or to flee to adjoining or distant locales. Moreover, the recent military operations in the area also caused an internal displacement of around 2 million people. In the affected districts, altogether 13,214 houses were damaged, of which 5,934 were fully damaged and 7,280 partially damaged. Swat is the worse affected with 3,738 fully damaged and 4,387 partially damaged houses. The overall estimated cost of damage is Rs3,538 million (see Table 5.18).

Table 5.18 Summary of Damaged Houses

###Number of Damaged Houses###Cost of Damaged Houses

Districts###(Rs. Million)

###Fully###Partially###Total###Fully###Partially###Total

Swat###3738###4387###8125###1495###702###2197

Buner###1126###990###2116###450###158###608

Shangla###292###373###665###117###60###177

Lower Dir###233###428###661###93###69###162

Upper Dir###545###1102###1647###218###176###394

Total###5934###7280###13214###2373###1165###3538

Source: ADB and WB (2009) Preliminary Damage and Needs Assessment

Various types of drinking water facilities exist in Malakand Division including tube-wells with dis-tribution networks, protected springs, hand pumps, open wells etc. Almost all water supply facilities are ground water based and cater to almost 60 percent of the total population. Out of 1508 water schemes, 451 (30 percent) have been damaged. Of these 111 have been completely damaged and 340 have been partially damaged. The worst affected district is Swat. Estimated cost of damage comes to Rs62 million (see Table 5.19).

Table 5.19 Summary of Damaged to Water Supply Schemes

###Estimated Cost of Damaged Schemes

###Total###Number of Damaged Schemes###(Rs. Million)

###Schemes Completely Partially###Total###Completely###Partially###Total

Swat###371###21###148###26.9###169###0.44###27.34

Shangla###256###21###44###5###65###0.45###5.45

Buner###248###23###49###7.13###82###2.03###9.16

Upper Dir###308###23###31###4.8###54###2.03###6.83

Lower Dir###325###23###58###11.32###81###2.03###13.35

Total###1508###111###330###55.15###451###6.98###62.13

Source: ADB and WB (2009) Preliminary Damacie and Needs Assessment

Sanitation facilities in Malakand Division include mainly street pavements and street drains, and sewerage network in some urban centres. Damage to sanitation facilities is estimated to be Rs 44 million (Table 5.20).

Table 5.20 Damage to Sanitation Facilities in Malakand

###Facility###Unit###Damaged Quantity###Estimated Cost

Street Pavement###sft###1,053,536###21.92

Street Drains###rft###72,877###17.64

Sewerage Pipes###rft###51,000###4.94

Total###44.5

Source: ADB and WB (2009) Preliminary Damage and Needs Assessment

Though this damage is not sizeable in monetary terms, but given the importance of these basic facilities and their impact on overall health of people and the environment, the indirect effect is significant.

FUTURE OUTLOOK

Given the challenges of socio-economic revival in KPK, both the Government of Pakistan and international donor community have provided various relief measures and additional resources. The summary of these relief measures and initiatives is given in the following two sub-sections.

Government Relief for KPK

In an attempt to compensate for the economic losses the federal government has granted various relief measures to the province, as follows:

- Under the 7th NFC Award, one percent of the net divisible pool (1.8 percent of the provincial pool) is earmarked for KPK, in recognition of its role in the war on terror.

- The long standing issue of payment of the net profits on account of the Hydel power generation to KPK has been resolved. As a result, KPK will benefit on two counts. First, receipt of net Hydel Profit as per agreed formula would likely enhance this profit in future. Second, KPK will receive arrears of the net Hydel profit amounting to Rs110 billion from the federal government over the next five years. The first instalment of Rs. 10 billion has been paid to the Government of KPK in November 2009 while the remaining four instalments of Rs25 billion each will be made on 1st July every year.

- KPK has been exempted from 50 percent on leviable rate of sales tax on supplies made of goods excluding cement, sugar, beverages and cigarettes.

- Under the Prime Minister's Fiscal Relief Package for KPK, FATA and Provincially Administered Tribal Areas (PATA), an additional tax relief of about Rs2 billion has been provided to benefit 300,000 taxpayers.

- Under the Relief Package, Banks and DFIs shall charge a mark-up rate on all business loans (corporate, SMEs, agriculture, microfinance) outstanding as on December 31, 2009 from the borrowers of KPK, FATA and PATA at 7.5 percent per annum or six month KIBOR, whichever is lower for the period from January 1, 2010 to July 1, 2010. This exclude loans extended to cigarette, cement, sugar and beverages. Earlier, the textile sector of these areas was not included in this package but later the Federal Government amended it for KPK, FATA and PATA. The sector also stands eligible to receive this mark-up rate subsidy on business loans taken during the period from January to June 2010.

- The KPK government has established the Provincial Reconstruction, Rehabilitation and Settlement Authority (PaRRSA) to exclusively concentrate on the reconstruction, rehabilitation and settlement activities in the affected areas of the Malakand Division. l As a short term measure, Rs. 850 million of the Italian Debt Swap Grant is being given to the agriculture sector in Malakand Division. Under this program, seeds, fertilizers, orchards and farm related services will be provided to the farmers free of cost to boost the agriculture sector on immediate basis.

Role of the Donor Community in Reconstruction and Rehabilitation of KPK

Alongside the government, the donor community is providing sizeable amount of funds for the reconstruction and rehabilitation of Malakand Division, as follows:

- The KPK Government in collaboration with the World Bank and Asian Development Bank (ADB) has worked out the Damage Needs Assessment (DNA) survey in the Malakand Division and is planning to launch DNA-II to determine the requirements of all the remaining districts of the Province.

- The Government of Pakistan and USA through USAID have signed an assistance agreement for the implementation of Emergency Supplemental Funding. USAID will carry out the Malakand reconstruction and recovery program of $36 million. This includes elementary and secondary education of $20 million, health facilities of $12 million, water and sanitation schemes $3 million and capacity building of PaRRSA $1 million.

- The United Nation Development Programme (UNDP) is funding a project "Sustainable Development through Peace Building, Governance and Economic Recovery in Khyber Pakhtunkhwa" to the tune of $25 million primarily for the rehabilitation of vulnerable, disadvan-taged and traumatized population.

- China has invested Rs720 million in humanitarian recovery schemes such as construction machinery and equipment for technical education.

Other projects that are in the pipeline include:

- KOICA through government of Korea intends to invest in rehabilitation and reconstruction in Malakand Division in education, health, water supply and technical education sectors.

- Islamic Development Bank (IDB) intends to provide school uniforms, books and teaching mate-rial. l USAID intends to fund construction of 15 sub-complexes in Malakand Division at a cost of about

- Rs2.5 billion and "Restoration of Natural Resources at Landscape Level in District Swat and Buner" with an indicative cost of US$ 40 million.

- World Vision, an international NGO intends to invest in rehabilitation of partially damaged schools in District Dir (Lower).

- Cordaid an international NGO intends to invest in reconstruction of fully damaged schools in District Shangla.

Aid for Refugees and Orphans (ARO), a local NGO, intends to establish a technical training school in Mingora and Swat through German assistance.

These relief measures together with additional resources from the government and donors provide a window of opportunity for the socio-economic revival of KPK.

In conclusion, the province of KPK has suffered large economic losses due to the war on terror. The process of economic growth has slowed down sharply since 2004-05. In the previous chapter, it was assumed based on the above evidence that the province has experienced an economic growth rate two percentage points below the national average for the last five years. This implies that the regional economy of KPK has grown at the average rate of about 2.5 percent and per capita income has been largely stagnant over the last few years.

NOTES:

1. In 2008, the government had launched three major military operations, all in FATA. The first military operation, Sirat-e-Mustaqeem, was launched in June 2008, while Operation Sherdil was launched in August 2008 and Operation Darghalam in December 2008. In 2009, five military oper-ations-Buner Operation (April 2009), Rah-e-Rast (May 2009), and operations Bia Darghalam, Kwakhbadesham and Rah-e-Nijat (October 2009)-were launched and were more successful than the operations in 2008 (PIPS, 2010).

2. ADB and WB (2009), "Preliminary Damange and Need Assessment: Immediate Restoration and Medium Term Reconstruction in Crisis Affected Areas."

3. The non-metallic sector consists of the cement, ceramics, glass and lime. Their products are used in a wide range of applications, from entirely in the construction industry like cement, bricks and roof tiles, wall and floor tiles, sanitary ware and some glass products, to consumer products like tableware and decorative goods.
COPYRIGHT 2010 Asianet-Pakistan
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2010 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Publication:Annual Review Social Development in Pakistan
Date:Dec 31, 2010
Words:9349
Previous Article:CHAPTER 4 - SOCIAL DEVELOPMENT DURING SECURITY CRISIS.
Next Article:CHAPTER 6 - IMPACT OF CONFLICT ON HOUSEHOLD WELFARE.
Topics:

Terms of use | Privacy policy | Copyright © 2020 Farlex, Inc. | Feedback | For webmasters