Prime Minister Shaukat Aziz, Members of the Cabinet, Delegates to the PDF, Ladies and Gentlemen

This is my third address to this forum. And on both previous occasions I had the good fortune of a great cricket opener happening at the very same time: in 2004, Pakistan embraced the India team with historic warmth on your home grounds; a year later you thumped India on their home turf in return. This year I’m stumped, off season. No cricket to warm me up. 

Instead I will reflect briefly on some heartwarming experiences of the past four days during which I’ve seen for myself some tremendous progress in Pakistan’s development agenda. I’ve also been sobered by some of the great challenges that remain. We got a bird’s eye view of the eastern coastal zone of the Indus delta in Sindh where those challenges are stark for a number of people who have not benefited from the vast irrigation networks upstream. They are indeed the tail of the tailenders and represent some of Pakistan’s most vulnerable people.
It was heartening to see Farmer Organizations in Sindh and Punjab really beginning to take command of their water management. And at the Taunsa Barrage which we are helping Pakistan rehabilitate, we saw the sort of cutting-edge engineering that is needed to meet Pakistan’s infrastructure needs for the 21st Century. But on the river banks, we heard voices of discontent among fisherfolk who had not been among the 160 families resettled into new homes by the project. For Pakistan’s infrastructure agenda to be achieved, it is the likes of the delta tailenders and the poorest of the fisherfolk who will have to be brought along too.    

I wanted to share this immediate snapshot with you as it captures much of what Pakistan confronts today – social change and a growing hunger for development. Taking a longer view from the perspective of my first visit to this country in 2003, I am most struck by the remarkable economic recovery that is taking place. Growth rates have been consistently above 6% over the past 4 years, exports have expanded strongly, and investment is now picking up. 

This is largely due to the economic reforms of the past seven years which, unlike so many other attempts at reform around the world, were truly homegrown – designed and implemented in Pakistan, by an economic team of Pakistanis.

While there is good news, we also think back to the destructive earthquake of October.    It presented the people of Pakistan a demanding test of character and they responded with the great generosity and hospitality for which Pakistanis are famous.  The Government should once again be lauded for its outstanding response and for shielding hundreds of thousands of families from the harsh Himalayan winter.  The recovery process is now well underway though much remains to be done even as reconstruction costs are rising.  The donor community pledged generously to the tune of 6 billion dollars in November.  For us the challenge is to now translate these pledges – especially grants and concessional credits – into disbursements, through effective, viable actions to restore public services and infrastructure, and to help people rebuild homes and livelihoods.

The theme of this year’s PDF – Drivers of Economic Growth – focuses our attention on the critical challenge ahead: sustaining growth.  Many over the past few years have said that strong growth would make little difference in the lives of the common Pakistani – or in reducing this country’s high levels of poverty.  They were wrong. The recently-completed household survey shows that poverty in Pakistan has declined considerably since 2001.  It confirms one of the most robust findings in development:  sustained, broad-based growth in a pro-poor policy environment is the most powerful way to reduce poverty.  So this is very good news. It confirms our sense that the government’s poverty reduction strategy is working.

Yet, as we manage earthquake recovery it is essential that we not be distracted from the fundamental challenge of poverty reduction.  At this time we cannot become complacent.  Sustaining growth and poverty reduction over the long-run is tough.  But it can be done.  Actions on three fronts will make it possible.

Firstly, Pakistan has a history of boom-bust cycles and now is the time to sharpen the watch on the macroeconomic situation.  The Government of Pakistan needs to ensure the capability of adjusting nimbly to developments, both at home and abroad.  This year, in addition to two negative shocks to the economy – the international oil price increase and the October earthquake – there are signs of possible economic “overheating”.

Imports of all types of goods are swelling – at a faster rate and from a higher level than exports.   Inflation has started to come down, but we still see inflationary pressures.  The root causes of the growing external imbalances – which are the same ones behind the rise in inflation – need to be addressed so that rapid growth can be sustained not just over the next two years, but over the next ten to twenty. International experience shows that an early and coordinated monetary and fiscal policy response can avoid the pain and disruption of a “hard landing.” I must tell you that when I was in Karachi this weekend we had a good discussion with the Governor of the Central Bank: what strength to have her steady hand as Pakistan faces some of these tough choices.
 
The second is to ensure that everyone benefits from growth.  Growth will reduce poverty very slowly unless that growth benefits the poor more than the better off.  How can this be done?  First and foremost by social mobilization of rural families into viable village organizations through Pakistan’s powerful anti-poverty weapon—rural support programs.  These help the poor develop the capacity to acquire and make effective use of assets whose value increases with growth.  In Pakistan, the majority of poor people are in rural areas.  By rehabilitating and reforming irrigation, expanding access to credit and developing land markets, we give people a chance to farm, raise livestock or start a business and share in the benefits of growth. I mentioned the Farmer Organizations I met in Sindh and Punjab. Both were an important example of this sort of social strength but it seems Sindh has the edge as it is beginning to bring in the women. I met Shakila, a landowner herself who has researched and found some 1500 women landowners in Sindh and begun to organize their voices. Perhaps it is too early for them to become one with the male organizations but once they find that voice I wouldn’t give it long. Social mobilization without the voices of women will not deliver inclusive growth, as simple as that. 

In rural and urban areas, the main asset of the poor is their labor.  For this to be productive, the poor must have two other assets—education and health.  Pakistan is finally making real progress in basic education – teaching children and illiterate adults how to read and write, in Urdu and in English. 

But efforts need to be doubled to meet the Millennium Development Goal of universal primary education by 2015.  Again, bring in the girls. Furthermore, one cannot stop at the primary level – Pakistan needs quality secondary and university level education for the leaders of tomorrow.

Third, despite the trade, banking and regulatory reforms of the past seven years, the costs of doing business in Pakistan are still too high.  Needed are second-generation institutional and policy reforms, as well as investments in infrastructure.  Several sessions of this Forum are rightly dedicated to this theme. As we discuss this let’s look for the sort of opportunities that are strategically located to yield the highest returns to society. 

Here, I would single out energy, transport, and irrigation infrastructure.  Reliable energy is critical and energy pricing needs to be rationalized.  Enhanced transport services, by rail, road, and sea, can pay dividends well beyond our lifetimes.  The National Trade Corridor initiative has brought Pakistanis together with a vision of the road ahead.   

Pakistan is beginning to reap the benefits of the reforms and actions taken over the past few years. This has been a great start.  But it is only a start.  The macro-economy must be managed for the long term; the poorest of the poor, the tailenders and fisherfolk of my visit, need also to reap benefits; and momentum behind second generation reforms needs to be maintained.

This is a tall order – but we look forward to working with the Government of Pakistan and development partners.  At this juncture we must renew our commitment to the people of Pakistan – including those whose lives were devastated by the earthquake – to ensure continued growth and poverty reduction not only for the next five to seven years, but for future generations.