Shahid Amjad Chaudhry & Masooma Habib 41

Pakistans Experience in Employment Generation at the

Micro and Macro Levels, and Future Directions*
Shahid Amjad Chaudhry & Masooma Habib
Abstract
The Pakistan economy is currently going through a period of much
needed structural adjustment focusing on: (i) Reducing fiscal deficits from
about 6 to 4 per cent of GDP, which should reduce public sector
borrowing and bring down interest rates and inflation; (ii) Reducing tariffs
from an average of about 80 per cent in 1993 to about 60 per cent
currently and about 45 per cent next year which while requiring painful
adjustments particularly in the industrial sectors, should make Pakistan
more competitive in the long term and also benefit consumers; (iii)
Reducing the size of the public sector in the economy by privatising
nationalised banks, nationalised and public sector industry and public
utilities including power, gas and telecommunications, which should
increase the efficiency of these sectors. All these measures have
implications for employment generation. In the short term they are
slowing down the economy and therefore employment creation is not
taking place at the earlier higher rates. In the long term they should help
stabilise the economy and add significantly to economic growth.
Within this context the employment outlook for Pakistan is difficult
and challenging at the same time. Difficult because Pakistans formal
employment growth areas which have been geared to absorb substantial
additions to the labour force are no longer directly appropriate for this
purpose. And challenging because the large and growing informal sector
comprising many small entrepreneurs, could be an important potential
source of employment creation. The ability of small entrepreneurs to
respond to industrial modernisation in the face of structural reforms will
depend on their access to credit and modern production techniques, and
the upgrading of their skills, given the present low literacy and skill level of
the labour force. Let us first look at each of the formal growth areas.
The government has traditionally been the biggest source of
organised institutional employment, with an estimated 4 million workers
(within a total national employment envelope of 32 million). These
workers in the public sector are also spectacularly numerous when we
*

Paper presented at the Workshop on National Employment Programme, Islamabad,

20-21 November, 1995.

42 The Lahore Journal of Economics, Vol.2, No.1

compare them to the 1.5 million workers in private large scale enterprises
employing ten or more people in all Pakistan. It, therefore, has to be
recognised that the numbers of public employees cannot be increased any
further and in fact need to be reduced. Major immediate reductions will
come with the privatisation of public industrial enterprises and public
utilities (which together employ about 0.4 million workers). Similarly,
large scale industry is coming under competitive pressure with the
reduction of tariffs and will therefore not likely increase its employment
levels substantially. Small and medium scale industry (particularly textiles)
are also very inefficient compared to international standards and will
probably shed labour from its current level of about 2 million workers.
The labour force directly employed in agriculture (15 million) may
increase marginally although recent employment elasticity estimates are
close to zero. Construction, trade, transport, communications, financial
and other services are likely to be the growth areas of the future. Yet in
terms of employment generation they are unlikely to absorb a significant
proportion of the new entrants into the labour force. Recent estimates
suggest that civilian non-government persons working for wages will
probably increase only at modest rates from their current level of 10
million (Chaudhry, 1995). There would be a substantial addition to the
labour force if more women were to enter it. The present female labour
force participation rate is only 9 per cent.
The good news is that ordinary Pakistanis are increasingly taking
their future in their own hands and creating millions of micro-level
enterprises. There were 14 million people counted as self-employed in 1992
and while there are some definitional problems associated with this number,
e.g. millions of agricultural haris are counted as self-employed, overall they
indicate that the bulk of Pakistanis work for themselves. Self-employment
numbers become even more staggering when one adds the remaining 7
million unpaid family members who comprise the remaining part of the
employed labour force. Thus fully 21 million Pakistanis or 68 per cent of
the employed labour force of 31 million in 1992 were working for
themselves or their families alone. These micro level enterprises have been
and will continue to be the growth areas for employment in the future.
Government policy is only slowly beginning to focus on the needs and
requirements of the sector. One indicator of both government policy and
the situation on the ground is scheduled banks advances by size of advance.
At end Dec. 1994, there were 7,16,000 advance holders (70 per cent of the
total) of Rs. 50,000 and below involving total lending of Rs. 8.8 billion (2.5
per cent of the total) while only 4,998 advance holders (0.5 per cent of the
total) had obtained advances of Rs. 185 billion (55 per cent of the total)
(State Bank of Pakistan, Annual Report 1994-95).

Shahid Amjad Chaudhry & Masooma Habib 43

More recently, starting from the mid 1980s, the government, NGOs
and external donor agencies have begun to focus on the micro-enterprise
sector. The governments initial emphasis was on the educated unemployed
(e.g. The Small Business Finance Corporations Scheme for professionals,
then the Youth Investment Promotion Society Programme and then the Self
Employment Programme) although it quickly moved to more general microlevel programmes like the short-lived Yellow Cab Scheme. The NGO efforts
were exemplified in the external donor supported Agha Khan Rural
Development Support Programme in the Northern Areas, the purely
indigenous Orangi Pilot Project of Dr. Akhtar Hamid Khan and the more
recent and much simpler Government/ILO/Japan Strategic Employment
initiatives. The scheduled banks have also started small business finance
schemes recently. This is therefore a good time to take stock of the various
major initiatives in this field.
Summary of Major Employment Generation Initiatives
Only five major employment generation initiatives are reviewed in
this paper in large part because they are the major ongoing current
initiatives but also because they are sufficiently different in approach that an
interesting comparison can be made and lessons drawn. These initiatives,
referred to above in paragraph 4, are two NGO initiatives (AKRSP and OPP),
two government initiatives (YIPS, SBFC) and the government / ILO / Japan
Project.
The Agha Khan Rural Support Programme (AKRSP) is a classic example of
a well managed integrated development programme. Initiated in Gilgit in
January 1983 and covering Baltistan and Chitral from 1986 it focuses on
organising communities, institution building and human resource
development, rural development programmes (physical productive
infrastructure or PPI) and provision of credit for economic activities and
mobilisation of savings. It is a massive programme in both geographical
terms and coverage. As of mid-1995, of the total 2,070 villages in the above
districts, Village Organisations (VOs) have been created in 1880 and womens
organisations (WOs) in 803. There are 77,000 VO members and 27,000 WO
members among a total of 103,000 households in these areas. Credit advances
amount to Rs. 41 crores and savings mobilised amount to Rs. 23 crores. PPIs
amounting to Rs. 29 crores in 1600 projects have been completed or are
underway. Eight thousand field specialists in various disciplines have been
trained. Overall, the programme has been rated as very successful (World
Bank, 1990) and is being replicated by the provincial governments in areas
in NWFP and Balochistan, and nationally by the Federal Government
through a Rs. 50 crores endowment to the newly created NRSP (National
Rural Support Programme). The higher levels of administrative costs associated

44 The Lahore Journal of Economics, Vol.2, No.1

with this comprehensive integrated rural development programme about

30 per cent (AKSRP Twelfth Annual Review 1994) and possible criticism on
focus and capture by elite groups/rich people (Nayab, 1994) together with
the special case argument of the Ismaili peoples of the Northern areas
complete the summary picture.
The Orangi Pilot Project was started in 1980 with the assistance of
the now defunct Bank of Credit and Commerce International (BCCI) which
funded the cash component of workers self-help contributions to construct
5000 underground sewage lines (Farooq-i-Azam, 1995). Starting initially
with PPI programmes such as the AKSRP, it moved into the provision of
credit through the creation of the Orangi Charitable Trust (OCT) in
September 1987 to provide loans to small household enterprises. Total
lending until December 1994 amounted to Rs. 4.5 crores in its Family
Enterprise Programme (there are two other much smaller programmes) to
about 3000 individuals. OCT borrows funds from banks and onlends to
individuals without service charges, which is financed by donors, and
without collateral for business and family enterprise production related
activities. There is no savings programme.
The Government/ILO/Japan Project is part of an intercountry project
which is testing out strategic approaches to employment promotion in
several South Asian countries. The model is simple and somewhat unique in
that it does not aim for integrated community development projects of PPI,
but focuses simply and clearly on forming Community Based Organisations
(CBOs) which mobilise community members to start regular savings, elect
credit management committees, frame savings and credit rules and extend
credit to members for individually managed micro-enterprises. Additional
funding (upto three times savings) is provided by the ILO/Japan project or
by arrangement with the Allied Bank which extends the loan to the CBO
which, in turn, onlends to the individual for productive employment. The
Project (started in January 1994) now covers 81 sites (villages, urban areas)
involving 67 CBOs in villages (male, female or both) and 33 other centres
(rural, semi-urban or urban). Projects in Khairpur and Rotla have been
particularly successful. Funds disbursed until July 1995 amounted to Rs. 2.3
million to 669 individuals. Most of the schemes follow the savings/credit
approach but there are also projects focusing entirely on skills training
based on fees repayable after the completion of training against perusal
guarantees. Skills training was provided to 608 individuals to enable them to
be gainfully employed.
The Youth Investment Promotion Society (YIPS) was established by
the Federal Government in February 1987 with NDFC, FBC and SBFC as
shareholders to offer technical assistance and provide loans on soft terms to

Shahid Amjad Chaudhry & Masooma Habib 45

the educated unemployed youth (18-35 years). YIPS has recently increased
its lending limit from Rs. 1,00,000 to Rs. 2,00,000 for individuals and upto
Rs. 20 lakhs for groups upto 10 persons. YIPS processes all loan
documentation and approves the loan, but actual disbursements and
repayments are handled through the SBFC. Loans sanctioned till June 30,
1995 amounted to Rs. 7 billion for 59,000 projects. In 1994-95 Rs. 2.3
billion was sanctioned for 13,124 projects involving 14,174 youth. All funds
are made available to YIPS through a concessionary credit line from the
State Bank of Pakistan.
The Small Business Finance Corporation is a development finance
institution established by the Federal Government in 1972 to provide
financial assistance on soft terms to: (i) Small Business Enterprises (Rs. 20
lakhs limit) and individual businessmen (Rs. 5 lakhs limit) against
hypothecation of business assets and mortgage of immovable properties;
(ii) Professionals doctors, engineers, lawyers (upto Rs. 1 lakhs) against
personal sureties; and (iii) Individuals and Groups of Individuals under the
self employment scheme (up Rs. 3 lakhs for individuals and Rs. 10 lakhs
per group of 5) against registered mortgage of immovable property as
collateral. The loans schemes for Small Enterprises and professionals have
now been almost phased out and the Self-Employment Scheme (SEP) is its
major lending activity. The SBFC received a concessionary credit line of
Rs. 3.8 billion from the State Bank in 1994-95 for the SEP which was
entirely committed. Disbursements in 1994-95 amounted to Rs. 1.3
billion for about 8,963 persons (or groups of persons). Recovery rates are
low 56 per cent in 1992, 63 per cent in 1993 and 73 per cent in 1994
mainly due to pressure to lend in these years, but SBFC performance is
rapidly improving.
Comparison of Schemes
All the five programmes are significant to the Pakistan situation. In
order to have a clearer idea about their differences, they are now compared
across seven areas (conceptual model, economic model, financial model,
credit and savings system, employment creation, focus on women, and
physical productive infrastructure and training).
Conceptual Models The conceptual models underlying the five
programmes (See Table-1 below) are significantly different and in fact reflect
integrated rural development model experimented with world wide and in
the united Pakistan of the 1960s in Comilla (and re-invented in Bangladesh
as BRAC see Annexure II). The genius of Dr. Abdul Hamid Khan, the
founding spirit of Comilla, resulted in the transformation of the integrated
rural development concept into the urban area of Orangi using the power of

46 The Lahore Journal of Economics, Vol.2, No.1

organised communities to create economic infrastructure through self-help

and then moving onto individual economic activities. Interestingly, neither
AKRSP nor OPP/OCT have moved into health and education financing,
delivery and cost recovery in a significant way (unlike Bangladeshs BRAC)
although AKRSP is now (since early 1995) being used as the implementing
agency for SAP education (primary school) programmes. The ILO/Japan
project uses the community based approach in that communities are
organised into CBOs but only to obtain or mobilise credit from banks or
donors, secured in part by CBOs own savings contributed by members. This
is on lent to members, both rural and urban, for micro level enterprises.
The conceptual model here is that of community mobilisation for financial
assistance for self-employment purposes only. The YIPS/SBFC model is the
final modern extreme of using a financial institution to provide concessional
credit for self-employment purposes.
Table-1: Conceptual Models
Integrated
Organising Economic Infrastructure Health/
Development Communities Activity
Based
Education
Based
Based

AKRSP

Yes

Yes

Yes

Yes

No

OPP/OCT

Yes

Yes

Yes

Yes

No

ILO/Japan

No

Yes

Yes

No

No

YIPS

No

No

Yes

No

No

SBFC

No

No

Yes

No

No

Economic Models. These are also significantly different in the

programmes under review (Table-2 below). The integrated rural/urban
development economic model is distinct in its basis that local government
either does not exist or has failed to mobilise community funding. Thus
ADRSP and OPP both substitute either NGO own funding (donor financed)
or mobilise community funding, both in cash or kind for undertaking
community based PPI projects. The other significant part of the economic
model is provision of credit for micro-level economic activities and training
for productive employment, both individual micro-level and institutional
level. Here ADRSP provides credit for economic activities and also provides
free-of-cost training. OPP/OCT like YIPS and SBFC provide credit for
economic activities but no training, while ILO/Japan is unique in that it
provides credit for both economic activities and training. The provision of a
credit based human resource development programme being experimented

Shahid Amjad Chaudhry & Masooma Habib 47

with by ILO/Japan (at its computer centre in Islamabad with a pay-as-youearn after training component for students not able to afford to pay the
fees) is an important step in extending the concept of provision of credit
and cost-recovery for human resource development. The logical extension is
to first extend micro- and small- and medium-scale credit to create training
institutions by private individuals and NGOs and then extend credit for
training purposes to be utilised by individuals who train in these
institutions.
Table-2: Economic Models
Provides NGO
Own Funds for
(Local) Govt.
Type Activities

Provides
Community
Funds in
Absence of
Local Govt.

Credit for
Economic
Activities

Training
provided

Training
Cost
Recovery
Credit
Based

AKRSP

Yes

Yes

Yes

Yes

No

OPP/OCT

Yes

Yes

Yes

No

No

ILO/Japan

No

No

Yes

Yes

Yes

YIPS

No

No

Yes

No

No

SBFC

No

No

Yes

No

No

Financial Models. The financial models underlying the programmes

are very distinct (Table-3 below). There is one grouping which is based on
the philosophy that the NGO or the Bank is the major decision-making
authority for lending and for recovery (OPP/OCT, YIPS, SBFC), while the
ILO/Japan project has the borrowing, lending and decision making agency as
the CBO. The AKRSP is a mixture in that the NGO role is very strong in
community managed lending. Savings schemes (save first borrow later) are
an integral part of both the AKRSP and ILO/Japan projects, while OPP/OCT
as well as YIPS and SBFC do not have any savings schemes. These make the
latter schemes (OPP/OCT, YIPS and SBFC) vulnerable to the vagaries of
outside funding, such as concessional credit lines from the State Bank of
Pakistan for YIPS and SBFC. The lower default rates of the NGOs seem
strongly linked both to community involvement and savings collateral
provided in the case of AKRSP and ILO/Japan. An extremely competent
NGO mechanism in the case of OPP/OCT seems to be responsible for the
current excellent repayment rates, but OCT did have substantial problems
effecting recoveries when it was first established.

48 The Lahore Journal of Economics, Vol.2, No.1

Table-3: Financial Models

Community
Managed
Disbursement
and Recovery
of Loans

NGO / Bank
Managed
Disbursement
and Recovery
of Loans

Saving
Schemes
Part of
Programme

Default
(Rates (%)

AKRSP

Yes

Yes

Yes

3.4%

OPP/OCT

No

Yes

No

4.4%

ILO/Japan

Yes

No

Yes

2.0%

YIPS

No

Yes

No

27 %

SBFC

No

Yes

No

27 %

Credit and savings system. These are summarised in Table-4 below.

In terms of volume of lending. YIPS and SBFC are the major institutions
having lent about Rs 8 billion through the YIPS and SEP programmes and
currently together committing about Rs. 4-5 billion per annum. While these
institutions have tried to diversify to smaller communities with more offices/
branches, the bulk of their lending is to the urban areas and to the
educated upper/middle classes. This is reflected in their average size of
lending and upward moving limits (Rs. 2 lakhs in 1994-95). Sources of
funding for YIPS and SEP are concessionary credit lines from the State Bank
of Pakistan. As of the time of the writing of this paper, these lines were
effectively suspended in that new lines for 1994-95 had not been released to
these institutions because of their high default rates and apparent nonsubmission of audited accounts for the last three years. There has been
considerable pressure to lend on these institutions, and coupled with
political interference in both appointments/transfer of personnel as well as
approval of loans, this has led to poor financial performance.
AKSRP is the most sophisticated of NGOs in terms of both savings,
lending and number of operations. Their average size of loan is relatively big
(Rs. 34 thousand) and this is owing to lending for both micro- as well as
small-scale enterprises (which is demonstrated in the following paragraph).
The OPP/OCT average size of lending is probably just right for micro-level
enterprises in urban areas in that period (Rs. 15,000) while ILO/Japan
shows that self-employment generation in rural areas is not very costly (at
Rs. 3400).

Shahid Amjad Chaudhry & Masooma Habib 49

Table-4: Credit and Savings System

Deposits
Total
No. Of
Mobilised
Lending
Loans
(Rs.Million) (Rs.Million)
(Rs.)

Av. Size
of Loan

Default
Rate

AKRSP(Dec. 92-June 95)

231

413

12,306

33,560

3.4%

OCT (Sept. 87-Nov.94*

..

45.6

3,013

15,134

4.4%

0.54

2.3

669

3,438

2.0%

ILO/Japan

(1994-June 95)

YIPS(1988-June 1995)

..

3,715

36,882 1,00,727

27 %

SBFC

..

4,392

34,638 1,26,797

27 %

(Sept.1992-June 1995)

* Family Enterprise Economic Programme

Employment Creation. Table-5 below indicates that both ADRSP
and ILO/Japan are effectively creating jobs in the rural areas with very
minimal investments (Rs. 3500-4000) while OCT is creating jobs very
efficiently at the lower end of the social scale in the urban areas also (at
about Rs. 21,000 per family enterprise which may therefore involved more
than one person in the family). The YIPS and SEP average cost of
employment numbers (Rs. 35,000 47,000) indicate that self-employed
educated urban youth or adults tend to employ other lower paid individuals
in their enterprise and the average cost of job creation reflects the
combination of the higher and lower pays from income streams expected
from these investments.
Table-5: Employment Creation
Total
Lending
(Rs. Mn)

Number of
Beneficiaries
or Employment
Generation

Average
Cost of Job
Creation
(Rs.)

AKRSP (April-June 95)

26.8

6,783

3,951

OPP/OCT (94 95) *

7.6

360

20,987

ILO/Japan (1994-95)

2.3

669

3,438

YIPS (1994)

1,211

34,664

34,935

SBFC (1994)

1,261

26,889

46,897

50 The Lahore Journal of Economics, Vol.2, No.1

* Per family enterprise

Focus on Women. The NGO programmes (AKRSP, OCT, ILO/Japan)
focus heavily on women Table-6 below. While the concept of separate
programmes for women is an excellent idea in societies such as Pakistan (and
Bangladesh), their increasing rapid growth within the overall combined
programme seems to be a matter of natural evolution. For instance, in the
case of the Grameen Bank and BRAC in Bangladesh, poor rural women are
the major borrowers. YIPS and SBFC (SEP) have also tried to increase their
focus on lending to women but their current lending ratios reflect either
than womens access to these credit lines is difficult, or that educated urban
women are more likely to seek institutionalised employment rather than
seek to create their own micro-enterprises.
Table-6: Focus on Women
Women
Organisations
(WOs)

AKRSP

WO/
Total

Credit to
Women
(CW)

CW/
Total

Savings
by
Women
(SW)

SW/
Total

803

30%

N.A.

N.A.

Rs. 42
million

18%

..

..

Rs. 9
million

22 %

..

..

13

46 %

238
loans

36 %

N.A.

N.A.

YIPS

..

..

N.A.

10 %

..

..

SBFC

..

..

N.A.

N.A.

..

..

(Dec. 82-June 95)

OCT *
(Sept. 87-Nov. 94)

ILO/Japan
(March 94-August 95)

* Women Enterpreneurs Programme. Women may also have benefited from

the Family Enterprise Programme.
Physical Productive Infrastructure (PPI) and Training. Table-7
below summarises the fact, mentioned earlier, that both AKRSP and OPP
have substantial PPI components reflecting their integrated development
approach and seeking to build community structures through this
modality. Table-7 also shows that training (human resource development)
for job creation (as opposed to in-house training for own staff which is
undertaken by all institutions) is an integral part of the AKRSP and
ILO/Japan projects.

Shahid Amjad Chaudhry & Masooma Habib 51

Table-7: Physical Productive Infrastructure and Training

PPI
Investment
(Rs.Million)

Number
of
Projects

Average
Cost of
Project
(Rs.)

291.6

1529

1,90,712

8337

7344

Self Help

5,000

N.A.

..

..

..

..

..

..

608

YIPS

..

..

..

..

..

SBFC

..

..

..

..

..

AKRSP

Specialists
Public
Trained
Trained
(Number) (Number)

(Dec. 82-June 95)

OPD
(Jan. 80-June. 95)

ILO/Japan
(Jan. 94-June 95)

Impact of Government Policies

While there are several government policies which have both a
macro-economic / micro-level impact, this paper will consider seven major
areas in this regard; (i) Exchange Rate and Trade Policies; (ii) Credit Policies;
(iii) Banking Regulation Policies and Status of Savings and Loans Associations;
(iv) Regulatory Structures; (v) Training and Technology; (vi) Social Security
Nets; and (vii) Local Government.
Exchange Rate and Trade Policies. A flexible exchange rate policy
and an under-valued rather than overvalued exchange rate generally boosts
domestic employment creation and the economic viability of micro-level
enterprises. The recent 7 per cent devaluation in October 1995 has been
justified on account of export competitiveness but rising import duties and
increasing costs of raw materials due to inflation are likely to have a
dampening effect on investment opportunities in the small scale industrial
sector. Increasing interest rates will also dampen investment. More liberal
trade policies would be beneficial in that the freer availability of technology
(both in hard and soft forms) increase the productivity of self-employed
labour (electric hand-tools, simple machinery, manuals, work processes etc.
Are particularly relevant in this regard).
Credit Policies. It is very difficult to establish or expand a small
business using formal credit. Large firms compete and lobby for the
already scarce funds available to the private sector. When small firms do
try to borrow from formal lending institutions, they invariably cannot

52 The Lahore Journal of Economics, Vol.2, No.1

meet the collateral requirements or have to go through cumbersome loan

sanctioning procedures. Even special schemes meant for small enterprises
tend to get diverted to large firms. For instance, in the State Bank Small
Loans Scheme (SLS), the upper limit of loans has been enhanced,
qualifying larger enterprises to also receive loans; and information is not
available on the proportion of SLSs actually sanctioned to small
enterprises. Therefore small and micro enterprises generally conformed to
borrowing in the informal sector, at higher than market rates. Credit
policies clearly need to be refocused on the micro-level sector. This paper
has already mentioned earlier that institutional micro-lending is clearly
inadequate in terms of volume (paragraph above). This needs to be
increased by market based incentives (e.g. not taxing the income of
commercial banks from micro-level lending for investment purposes).
Special credit lines from the State Bank as well as concessionary finance
should be done away with. Even when the objective of such schemes is to
provide credit to small business, large manufacturers usually appropriate
the majority of loans. Both YIPS and SBFC should be allowed to float
bonds with government security, mobilise deposits and lend at market
rates. Since small and self-employed entrepreneurs pay higher than market
rates for loans through informal channels, it is access to credit, and not
high lending rates, that pose the main restriction.
Banking Supervision Policies and Status of Savings Associations. The
success of the NGOs in mobilising savings and lending to individuals raises
the issue of creating the institution of Savings and Loans Associations
similar to those that exist in the U.S.A. The failure of the Co-operative
Banks System needs to be examined and protection of savings assured
perhaps by guarantee of deposits by a Federal Deposit Insurance
Corporation. At this moment we have NGO type savings efforts which are
essentially of an informal nature or at the other extreme big commercial
banks or DFIs. Thus the AKRSP is planning to become a Development Bank
for the Northern Areas. Intermediate financial mechanisms and institutions
have to be created.
Regulatory Structures. The Pakistan employment scene today is
virtually crippled by an overwhelming set of regulations which hamper
individual private enterprise. The public sector is exempt from these
regulations created by bureaucrats. An example is that to set up a school or
office in the urban cities requires private individuals to commercialise such
property at enormous cost public offices or schools do not have to
undergo this process. This example is particularly relevant since the most
effective micro- and small scale enterprises that can be created as schools
and training institutions. Currently there are more than 1 million teachers
employed in public sector schools. The nation-wide primary school

Shahid Amjad Chaudhry & Masooma Habib 53

enrollment rates are less than 50 per cent (and even lower for secondary
schools and colleges). Thus many million new jobs can be created in this
sector alone if private initiative is allowed through de-regulating the
education sector. Other issues of over-regulation related to labour laws,
social security laws, pension laws, utility laws etc. All these need to be reexamined with regard to their adverse effects on micro and small scale
enterprises.
Social Security Nets. As Pakistan de-regulates and moves to more
market-friendly economic and labour policies, it needs to create more
effective social security nets. Thus old age pension schemes need to be made
universal but based on individual, personally maintained pension accounts
rather than the government bureaucracy. Similarly health, education and
even cash assistance can be made available to the poor and the needy, not
by creating more government institutions, but by direct transfer
programmes to individuals who can utilise the funds to get appropriate
service from private providers of these services.
Absence of Local Government At The village/Local Urban Level. An
important issue relates to the absence of local government and tax and
expenditure functions at the local level. Thus in Pakistans local government
the village is not the smallest unit, unlike in India. The recent Local
Government Ordinance of the Punjab tried to rectify this marginally but is
likely to lapse because of opposition from the feudal lobby. Similarly, in the
larger gowns and municipalities, the smaller wards are not financially
independent and thus there is no local control over finances and
expenditures which then gets inefficiently utilised at city wide levels. If the
lack of local government institutions continue, then CBOs will spring up
and try to replicate the missing local government functions (e.g. as in
AKRSP and OPP/OCT). A positive measure would be reinstating
Employment Exchanges in the Punjab. If successful local government
institutions can be created then CBOs can restrict their activities to
provision of credit (e.g. as in the case of ILO/Japan Project). In the Pakistani
context where institutional change (particularly regarding local government)
is difficult, we are likely to need both types of institutions.

54 The Lahore Journal of Economics, Vol.2, No.1

Annexure - 1
LABOUR / CAPITAL RATIO
(Rs. In 000)

All Industries

173

Food, Beverage & Tobacco

170

Food Manufacturing

189

Beverage Industry

138

Textile, Apparel & Leather

-

Manufacturing of textiles
Weaving apparel
Leather & Leather products

98
106
43
108

Footwear except Rubber & Plastic

52

Ginning & baling of Fibers

50

Wood, Wood Prod & Furniture

178

Wood, wood & cork products

194

Furniture and Fixture (non metal)

147

Paper, Printing & Publishing

-

Paper and paper products

Printing & Publishing

Chemicals, Rubber & Plastic

-

Industrial Chemicals

Other Chemicals Prod.

Petroleum Refining

117
163
80

221
424
97

858

Shahid Amjad Chaudhry & Masooma Habib 55

Products of Petroleum & Coal

120

Non-Metallic Mineral Products

325

Pottery, China & Earthenware

70

Glass & Glass Products

167

Other non-metallic mineral products

422

Basic Metal Industry

-

Iron & Steel

Non-Ferrous metal based industry

Metal Products, Machinery & Equipment

608
614
19

84

Fabricated Metal Products

65

Non-electrical Machinery

106

Electrical Machinery & Supplies

83

Transport Equipment

80

Scientific & Measuring Equipment

62

Handicraft, Shops & Other

43

Handicrafts

80

Sports & Athletic goods

49

Other manufacturing

38

Source:

Census of Manufacturing Industries, 1988.

56 The Lahore Journal of Economics, Vol.2, No.1

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