Situation and Cooperation

Pakistan faces multiple challenges in its political, economic and social de­vel­op­ment. The differences between rich and poor are enormous, for ex­am­ple between large landowners and agricultural labourers. The edu­cat­ed elite, employed in political and administrative posts, the army and the private sector, contrasts starkly with the broad mass of the pop­u­la­tion, who live at or below the pov­er­ty line. About one third of the pop­u­la­tion is considered to be absolute­ly poor. In the Human De­vel­op­ment Index (HDI 2011), Pakistan ranks 145th among 187 countries.

Notwithstanding the efforts made, overall government action is still not sufficiently development-oriented. Within Pakistan's federal budget, the development bud­get, which was never large, has been used regularly in past years to offset deficits in other areas. Export earnings and tax revenues are not sufficient to drive forward economic and social development and combat poverty on a sustainable basis. At about nine per cent of GDP, the country's tax ratio is one of the lowest in the world.

Not enough is being invested in education. About one half of all adults are illiterate. For women, the figure is as high as 60 per cent. Health care for all has yet to be achieved, and child mor­ta­li­ty is above the average for Asia.

With a population growth of 2.4 per cent, Pakistan is under con­si­der­able pressure in terms of population and resources. Rapid demographic growth in recent decades has meant that children and young people today make up more than 50 per cent of the population. The average age in Pakistan is 21 years. More and more young people are living at the lower end of society – with­out any prospect of obtaining a job or starting a successful busi­ness. Over-exploitation of scarce natural resources, especial­ly agricultural land and water, is a further consequence of popu­la­tion growth.

Providing for refugees also poses a challenge. The military clashes with Taliban insurgents and the floods of 2010 forced millions to flee their homes. Although most of them have now re­turned to their villages, the number of internally displaced per­sons is still estimated to be around 1 million. In addition there are the displaced people from Afghanistan - 1.7 million of them are officially registered in Pakistan. Some of them have been living for decades in the border region with Afghanistan.

Economic development

In the view of the generally volatile situation, un­fa­vour­able in­vest­ment con­di­tions and the ef­fects of the glo­bal fi­nan­cial cri­sis, Pa­ki­stan's eco­no­my has cooled mar­ked­ly since 2008. The country has not been able to replicate the economic suc­ces­ses of earlier years (economic growth in 2004: 7.4 per cent; 2005: 7.7 per cent; 2006: 6.1 per cent; 2007: 5.6 per cent). In 2008 economic growth fell back to only 1.6 per cent, not enough to match demographic growth.

In autumn 2008, Pakistan managed to avert national bankruptcy, but only after it had secured a standby agreement with the Inter­na­tion­al Monetary Fund (IMF) worth US$11.3 billion. The final two instalments of the programme were not disbursed because Pa­ki­stan had not fulfilled its commit­ments, one of them being to raise the tax ratio. Consequently, Pakistan has not sought a further standby agreement. With public debts rising, it is now vital that Pakistan should be able to meet its obligations without external support.

The slow progress on economic and fiscal reform, a subsidy policy that lacks transparency and an export economy heavily de­pen­dent on a small number of products (cotton, textiles, leather, rice, sports goods) are among the main causes of economic stag­na­tion. Moreover, the Pakistan economy is being held back by poor infrastructure and an acute energy crisis. Frequent power black­outs are a daily hindrance and create enormous economic losses. A high rate of inflation, currently around 15 per cent, is an in­creas­ing threat to the small middle class and is leading to an increase in poverty and food insecurity.

Agriculture is the largest employer, providing jobs for almost one half of the population. Pakistan has the largest area of artificially irrigated land in the world, in the provinces of Punjab and Sindh. Parts of these irrigation systems date back to British colonial times, and their capacity is therefore limited.

Pakistan's largest "export article" is its labour. Pakistan guest workers are to be found principally in Saudi Arabia and the United Arab Emirates. Remittances from Pakistanis living abroad have risen significantly in recent years and today make a significant contribution to the country's balance of payments. In the wake of the global economic and financial crisis, however, there has been a sharp decline in remittances from the Gulf states.

Progress and potential

The Government of Pakistan has taken a number of steps to bring about the political consolidation of the country. For example, in 2010, following a re­or­ga­ni­sation of the division of rev­e­nues between the federal and provincial governments, a wide-rang­ing con­sti­tu­tional amend­ment was adopted streng­then­ing the position of the Prime Minister, the powers of the pro­vinces vis-à-vis central gov­ern­ment and the inde­pen­dence of the judiciary. The right to information and the right to education were also enshrined in the constitution.

Further efforts are required, however, if sustainable development and stability are to be achieved. This depends to a large extent on universal human rights protection, legal certainty and better governance. A more efficient administration, a reduction in the level of corruption, and political and social inclusion for all pop­u­la­tion groups would pave the way for comprehensive reforms in agriculture, industry and the energy sector.

Sustainable progress also depends crucially on the state being perceived by the population as a guarantor of protection and a provider of services in all parts the country. This is especially true in the disputed regions in the north-west. In order to prevent a return to insurgency, a functioning civil administration must be built up in these areas, the security of the civilian population guaranteed and economic development encouraged.

With that aim in view, Pakistan together with inter­national part­ners such as Germany drew up a strategy which was subsumed into the Post-Crisis and Needs Assessment (PCNA) of the Asian Development Bank, European Union, United Nations and the World Bank. The PCNA provides a common framework for action, and Germany will continue in the years ahead to give high priority to supporting its implementation. In addition to its bilateral de­vel­op­ment co­op­er­ation, Germany participates in multi­lateral in­stru­ments such as the Khyber Pakhtunkhwa, Federally Administered Tribal Areas (FATA) and Balochistan Multi-Donor Trust Fund.

The PCNA lists the following relevant measures: restoration of the state's monopoly on the use of force; confidence building between government and citizens through more efficient and integrative administration; reconciliation; access to education and health care services; building and promoting the private sector and jobs; and reform of the status of FATA.

The most important driving force for development in Pakistan are its people. The economic and social potential, in particular of young people, has not yet been fully tapped. Women are heavily disadvantaged socially and cannot develop freely. Although the constitution contains a non-discrimination clause, the position of women in everyday life is often far worse than that of men. Tap­ping potential and creating prospects depend crucially on the determination of the Government of Pakistan. Germany is en­cour­ag­ing Pakistan to undertake the necessary reforms and supports their imple­men­tation through development cooperation.

Priority areas of Germany's cooperation with Pakistan

The priority areas of Pakistan-German development cooperation are derived from Pakistan's principal challenges and the political priorities of its government:

• Good governance

• Basic education and vocational training

• Health

• Renewable energies and energy efficiency.

At the government negotiations in May 2011, it was agreed to implement programmes in these priority areas for a total amount of 90 million euros for 2011 and 2012.

In addition, the German government provides substantial emer­gen­cy and transition aid as needed. Most recently, in October 2011, 5.6 million euros was provided for flood victims in the pro­vinc­es of Sindh and Balochistan, of which 4.6 million euros comes from the Federal Ministry for Economic Cooperation and De­vel­op­ment (BMZ) and 1 million euros from the German Foreign Office.

These two ministries had already made emergency aid available totalling 35 million euros following the disastrous floods in the summer of 2010 for food, medicines, emergency shelter and transitional assistance measures.

In 2009, the German government provided financial aid through the United Nations Refugee Agency and the World Food Pro­gramme in support of internally displaced persons in Pakistan. The German government continues to provide steady support for Afghan refugees and their host communities in Pakistan.

Debt swaps in education, health and disaster protection, amount­ing to 166 million euros, are also part of Pakistan-German co­op­er­a­tion; debts amounting to twice this amount are cancelled in fa­vour of the Government of Pakistan, to be spent on public invest­ment in agreed development programmes.

Pakistan covers a large area geographically and has a large pop­u­lation, and so Pakistan-German development cooperation, in order to be able to make a significant contribution, is con­cen­trated on the province of Khyber Pakhtunkhwa (formerly the North-West Frontier Province), the FATA and the central gov­ern­ment. Isolated actions are carried out in Gilgit-Baltistan and the Punjab where regional extension is necessary to ensure that the impact of sector programmes is sustainedo. In Azad Jammu Kashmir reconstruction work in the aftermath of the 2005 earth­quake is being finalised.

Germany is one of the few donors working in Khyber Pakh­tunkh­wa and FATA with their own structures and staff. The difficult security situation is placing a growing strain on project de­vel­op­ment and implementation.

Non-governmental agencies play a major role in development cooperation with Pakistan. Church aid organisations, political foundations and non-governmental organisations are imple­ment­ing, often with BMZ funds, programmes on good governance, demo­cratisation, civil society participation and control, human rights promotion, and peace and conflict resolution. The orga­ni­sa­tions are responsible for the design of the programmes and their choice of partners.

Good governance

In 2009, in the transition phase from military rule to demo­cra­ti­cal­ly elected government, Germany and Pakistan agreed on an ad­di­tion­al priority area of cooperation, namely good governance. Germany supports Pakistan in carrying out administrative re­forms, introducing a transparent and fair taxation system and combating violence against women.

Administrative reform, for example, is about widening coverage of state services, particularly in rural areas, and making ad­mi­nis­tra­tive action more transparent. Crisis intervention and prevention programmes also play a major role in the priority area of good governance. For example, the livelihoods of Afghan refugees and their host communities are being improved.

Moreover, good governance is of crucial importance for other sectors, for example health care, and the focus here too is on strengthening reliable, transparent and efficient state structures.

Basic education and vocational training

Education has been a priority area of Pakistan-German de­vel­op­ment co­op­er­ation since the 1980s. Germany contributes to build­ing and equipping classrooms, setting up school libraries, amend­ing curricula and text­books, and training teachers. There is a special focus on the promotion of girls schools. The Pakistan government is also receiving support for wide-ranging reform of vocational training.

Under Technical Cooperation, the National Ministry of Education is receiving advice on formulating and implementing its objectives. A new national education policy was developed with German support; the responsible officials at provincial and district level were included in the process. The achievements made here are now to be transferred to the vocational training system. Germany is assisting the National Commission for Vocational Education and Training in its reform efforts. The aim is to match the state-defined framework of vocational training with the needs of the labour market and Pakistan’s private sector.

Health

In Pakistan, many people still suffer from diseases, like polio, which have been virtually eradicated elsewhere. The maternal and infant mortality rate is among the highest in the world. The quality and accessibility of public health services in Pakistan are comparatively low. The only other medical care on offer – if at all – comes from private providers and they are not subject to state control. The aim of Pakistan-German development cooperation in the health service, therefore, is to help improve basic health care and develop quality standards for the commercial health sector.

In addition, Ger­many sup­ports programmes to fight tuber­culosis and to promote re­pro­duc­tive health and family plan­ning, with mo­bile health care facilities being used in remote regions. A national blood bank is being set up, also with German support. The German engagement also comprises basic training, advanced training and sustainable deployment of health man­ag­ers and medical staff. Support is also being provided for the development of social financing systems and the improvement of access to health services.

Renewable energies and energy efficiency

Development cooperation between Germany and Pakistan in the priority area of renewable energies and energy efficiency began in the 1960s. More than 50 per cent of the total of around 2.3 billion euros in bilateral development cooperation has been in­vest­ed since then in the harnessing of hydro­power. Pakistan wants to expand further the use of renewable energies in order to reduce dependence on imported oil. There is great, as yet untapped potential for the use of hydropower in the north of the country. The results of Germany's decades-long commitment are clearly visible: Germany was involved in building a whole ge­ne­ra­tion of hydro-electric power plants and has played a major role in the construction of substations and transmission lines to minimise transmission losses.

Pakistan and Germany are cooperating on other alternative forms of energy too – biomass, wind, sun. This work is going on prin­ci­pal­ly in rural areas not connected up to the national grid. In these relatively remote areas it is hoped to contribute to eco­no­mic development, the protection of scarce natural resources and poverty reduction.

Improving energy efficiency is another priority area of co­op­er­a­tion. The inefficient use of energy is impedes competition and the development of manu­fac­tur­ing industry. In cooperation with the private sector - for example the textiles industry - and with the Ministry of Commerce, experts financed by Germany are en­dea­vour­ing to identify savings potential and to determine what spe­cif­ic measures could be taken to increase efficiency.

In addition, Germany plans to engage in action to conserve bio­di­ver­sity and protect the forests in Pakistan. Besides protecting scarce national resources and protecting against disasters (flood protection and protection of water catchment areas), the aim is to contribute to the avoidance of greenhouse gases and emis­sions. Thus, the German government is also responding to the challenges of climate change in its cooperation with Pakistan.