Sustainable development in Khyber Pakhtunkhwa

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2. 2
During a survey by Sustainable
Development Policy Institute (SDPI), the
business community in Khyber
Pakhtunkhwa highlights four key issues
stifling the growth of private enterprise in
the province. These include: multiplicity of
taxes imposed by federal, provincial and
district administrations often giving rise to
incidence of double taxation and increased
cost of trade; uncertainty with regard to
incentives for private sector (e.g. missing
information regarding how micro, small and
medium enterprises can gain from projects
and special economic zones under China
Pakistan Economic Corridor); energy
shortages and high costs of accessing
electricity and gas; and rampant informal
economy riding on the back of illegal and
informal trade.
The civil society organisations also
highlight some gaps which
include: development
funding mostly channeled
towards districts
represented by treasury
benches in the provincial
parliament; need to raise a
more capable and
autonomous provincial
civil service free form
political interference;
sluggish pace of
implementation of laws
that strengthen voice and accountability in
the provinces (e.g. Police Ordinance 2016,
Right to Public Services Act 2014, Right to
Information Act 2013, Whistleblower
Protection and Vigilance Commission
Act 2016, Ehtesab Commission Act 2014,
Local Government Act 2013), and slow
progress towards implementing the
promises under the economic legislation
furnished by the current provincial
government (e.g. Industrial Policy 2016,
Minerals Policy 2014, Tourism Policy 2014,
Hydropower Policy 2016, Small Scale
Gems & Mining Policy 2014 and proposed
investment policy).
In the same survey, academics in the
province also reveal low quality of human
resource as a key impediment to economic
growth. According to them, proliferation of
public sector universities in the province
was not matched by higher incentives for
more experienced faculty at these
universities. As a result, we see several
large university departments without a
single full professor or equivalent. Even at
the primary school level, flagship teachers’
training programme has been reported to be
falling behind timelines due to
mismanagement and coordination issues.
The ongoing vocational training
programmes face challenges which prevent
scaling up to western and southern districts
in the provinces.
Given the above-mentioned challenges,
what is the way forward for achieving
sustainable development
goals in Khyber
Pakhtunkhwa? First and
foremost is the need to
expedite ongoing reforms to
improve quality of public
administration, transparency
and accountability. This is
most desired to mitigate the
incidence of corruption,
timely completion of
development programmes,
managing existing
infrastructure and social sectors in a cost-
effective manner, and to be more able
partners for China in implementation of
CPEC portfolio in Khyber Pakhtunkwa. An
evaluation is also required as to why
previous civil service capacity building
programmes have not delivered the
envisaged outcomes.
Second, we need to position Khyber
Pakhtunkwa as a supplier of relatively
economical and clean energy to the rest of
Pakistan and the western region including
Afghanistan. As the province is already a
conduit for some mega energy projects such
as Central Asia South Asia-1000 MW
A more appropriate
way forward may be to
put in place public
private advisory
councils at departments
of finance, planning and
development, industries
and agriculture.

3. 3
electricity project and Tajikistan
Afghanistan Pakistan India (TAPI) gas
pipeline project, it may also offer its own
potential for renewable energy including
hydropower to the region. The CPEC
portfolio only includes a single project on
the high priority list from Khyber
Pakhtunkhwa i.e. Suki Kinari Hydro power
station with a capacity of 870 MW. An
inter-governmental high-level energy
working group having participation of
federal government may be constituted to
see what other projects can be offered to
foreign and local investors. Regular
meetings of this working group will also
help implement the measures under Khyber
Pakhtunkhwa Hydropower Policy 2016.
Third, focus on primary industries for
medium term economic growth and job
creation at local level. For this, Khyber
Pakhtunkhwa Integrated Development
Strategy does talk about several ongoing
agriculture projects aiming to increase crop
varieties and value addition in agriculture.
However, the strategy is silent on ‘market
development’ for farmers — who can only
be compelled to experiment with new
methods, dedicate greater working capital
and employ innovative technologies if
market signals greater profitability in crop
and livestock sectors.
Farmers’ cost of doing business which
sharply increased since 2013 due to
multiplicity of indirect taxes, particularly on
inputs, needs to be rationalised. The
Agriculture Policy of Khyber Pakhtunkwa
does recognise that a reformed regulatory
regime is required to ‘cater for standardised
market operations and reduce cost of doing
business’. However, the policy is silent on
how this may be achieved. The policy also
needs to address climate related challenges
faced by agriculture sector.
The province has also witnessed frequent
floods in recent past. It is worth noting that
the perennial flow in most parts of Khyber
Pakhtunkwa is untapped for the use of
agriculture. This can be achieved by
channeling streams of water from the main
river flow towards the agricultural lands
which will not only result in a sustainable
agricultural sector but also mitigate the
impact of flood risk.
Fourth, creating formal and competitive
markets for farmers will pave way for a
more efficient food processing sector which
can form the basis for revival of secondary
industry in Khyber Pakhtunkhwa. The
higher volumes of agricultural output,
particularly fruits can be processed into
various forms for boosting exports. Value
chain integration with countries in the
region, particularly Afghanistan, Iran and
other Central Asian economies can provide
additional avenues for local investors and
traders in Khyber Pakhtunkhwa.
Fifth, the above-mentioned developments
will require improvements in human
resource. In education sector, this has to
start by bringing greater balance across,
primary, secondary and tertiary education
spending. Currently, per student expenditure
on primary students is far lower than
secondary and tertiary education. Second,
bring a more rational balance in the budget
allocation between physical infrastructure in
education and teacher capacity building.
Finally, the provincial development budget
for education should be given protection by
law. It must not be diverted to other
expenditures as and when required by
treasury benches.
Equally important for development of
human resources is improvement in
outcomes of health sector interventions in
Khyber Pakhtunkhwa. Like education,
health budget should also be protected by
law. Furthermore, future expenditure can be
saved with enhanced focus on primary
preventive health care, particularly through
dedicating greater funds for primary care,
mother and child healthcare, and
immunisation. The governance of health
sector can improve through decentralisation

4. 4
of planning and budgeting of health
activities at the district level, putting in
place a more transparent monitoring and
evaluation system at all levels.
Sixth, commercial trade and transit provide
immense opportunities given Khyber
Pakhtunkhwa’s strategic location and land
route linkages with the region. The SDPI’s
research demonstrates that during the period
2004-2011, employment in Khyber
Pakhtunkhwa provinces increased in
transport, trade and warehousing sectors,
primarily due to increased transit flows to
Afghanistan. This increase in employment
was particularly significant in the poorest
quintiles. Now that Tajikistan has also
requested for transit, provincial government
in consultation with all stakeholders should
put in place a coherent transit trade strategy.
The provincial government will need to
include federal government’s focal
organisation i.e. Ministry of Commerce in
this exercise. Improved transit linkages will
in due course boost revenues for the
province.
Seventh, for success of newly-identified
special economic zones, it is important to
first conduct an evaluation of past industrial
estates in Khyber Pakhtunkwa. Such an
exercise will identify those key reforms
which may be pre-requisite for the success
of future economic zones in the province.
Such an evaluation should also answer how
Khyber Pakhtunkhwa’s economic zones and
industrial states can get integrated with
regional trade and investment cooperation
programmes such as Central Asia Regional
Economic Cooperation Programme
(CAREC). A study on overall regulatory
burden faced by Khyber Pakhtunkwa’s
private sector is also long due. This burden
and related transactions cost increase due to
lack of judicial reforms that can ease the
process of dispute resolution and cut down
litigation related costs.
Eight, a more conducive fiscal regime is
required for businesses in districts hit hard
by conflict and violence. In this regard, the
government of Khyber Pakhtunkwa should
negotiate a special fiscal package with the
federal government, including preferential
tax and development spending allocations
for revival of micro, small and medium
enterprise in such districts. This can be done
as part of the forthcoming budget 2017-18.
Ninth, the revenues of the provincial
government can increase in turn also
boosting spending on social sector priorities
if ongoing reforms of tax departments are
expedited. To reduce compliance cost of tax
payers and bring down administrative costs,
the three revenue collection bodies in the
province may be merged. All taxes
rendering miniscule revenues, but having
larger administrative costs, may be merged
to form a single uniform tax. Also,
incidence of double taxation under general
sales tax on services and federal excise duty
may be corrected.
Finally, the provincial government needs to
put in place a more structured public-private
dialogue mechanism. Currently, the
business community feels that their voice is
not heard at the policy forums. Their
proposals to the government are not
scientifically evaluated. Therefore, a more
appropriate way forward may be to put in
place public private advisory councils at
departments of finance, planning and
development, industries and agriculture. A
quarterly follow-up meeting of such
councils will not only ensure demand-side
accountability, but also allow the provincial
government to present their constraints and
possibly engage the private sector towards
collective solutions of complex policy
issues.
The writers are associated with www.sdpi.org
http://tns.thenews.com.pk/sustainable-development/#.WS0iqJKGPIU