This Poverty Reduction Strategy Paper (PRSP) for the North West Frontier Province reinforces the poverty reduction strategy for Pakistan. Within the overall parameters of the national PRSP the strategy for the NWFP integrates the existing Provincial Poverty Reduction Plan (PRP) and the Medium Term Budgetary Framework into a three-year strategy.

1. POVERTY REDUCTION STRATEGY PAPER
ON
NORTH WESTERN FRONTIER PROVINCE OF PAKISTAN
PLANNING AND DEVELOPMENT DEPARTMENT
GOVERNMENT OF N.W.F.P.
April 2003

2. ACRONYMS AND ABBREVIATIONS
ADB Asian Development Bank
AIT Agriculture Income Tax
AWB Area Water Boards
CBO Community Based Organization
CCO Citizen Community Organization
CRPRID Centre for Research on Poverty Reduction and Income Distribution
CWD Communications and Works Department
DAC Departmental Account Committee
DAO District Accounting Officer
DCO District Coordination Officer
DFID Department for International Development
EIROP Essential Institutional Reform Operationalization Project
EMIS Education Management Information System
EOBI Employees Old-age Benefits Institution
FBS Federal Bureau of Statistics
FMC Fiscal Monitoring Committee
GAVI Global Alliance for Vaccination Initiative
GTZ German Development Corporation
HMIS Health Management Information Survey
HR Human Resource
IM&R Instructional Materials and Minor Repair
IPRSP Interim Poverty Reduction Strategy Paper
LHW Lady Health Worker
M&E Monitoring and Evaluation
MICS Multiple Indicators Cluster Survey
MTBF Medium Term Budget Framework
NAB National Accountability Bureau
NGO Non –governmental Organization
NWFP North West Frontier Province
O&M Operation & Maintenance
P&D Planning and Development
PAC Public Accounts Committee
PFAA Provincial Financial Accountability Assessment
PIHS Pakistan Integrated Household Survey
PRP Poverty Reduction Plan
PRSP Poverty Reduction Strategy Paper
PSC Public Service Commission
PTA Parent-teacher Associations
SBP State Bank of Pakistan
SDC Swiss Development Corporation
SME Small and Medium Enterprise
SPDC Social Policy Development Center
SWOT Strengths, Weaknesses, Opportunities and Threats
UNDP United Nations Development Program
WAPDA Water and Power Development Authority

3. TABLE OF CONTENTS
Executive Summary
i
Chapter 1
Introduction
1
Chapter 2
Poverty in NWFP
3
Chapter 3
PRSP Dialogue – The Consultative Process
11
Chapter 4
The Poverty Reduction Strategy
14
Chapter 5
The Medium term Budgetary Framework
40
Chapter 6
Monitoring and Evaluation
44
Annex 1
Poverty in NWFP
47
Annex ll:
Gender
60
Annex lll
Policy Matrix NWFP Structural Adjustment
64
Annex lV:
Pakistan’s IPRSP Summary
72
Annex V
Decentralization in Pakistan
80

4. ACKNOWLEDGEMENTS
This document reflects an extensive process of consultations and builds on the ongoing Poverty Reduction Plan of the Government of the NWFP.
Thanks are due to the Nazims and elected Governments as well as the District Coordination Officers and staff of all the districts of the NWFP for their input into this strategy. Thanks are also due to the Secretaries and staff of all the line departments of the Provincial government for their input.
This strategy reflects the hard work of the Planning and Development Department of the Government of the NWFP who worked zealously to put it together in a very short time.
The financial assistance and technical support of UNICEF and especially its local office in Peshawar is also gratefully acknowledged

5. i
EXECUTIVE SUMMARY
NWFP is by far the poorest province of Pakistan, with an overall incidence of poverty substantially higher than that for the country as a whole (poverty headcount in 1998-99 for NWFP is 43% as compared to 33% for Pakistan). Both urban and rural poverty in NWFP are higher than that for the entire country (poverty headcounts for urban and rural NWFP are 31% and 47% respectively, compared to 24% and 36% respectively for all of Pakistan). Moreover, the depth of both urban and rural poverty, measured by the poverty gap is relatively higher for NWFP than for the rest of the country. Consistent with the poverty estimates, the average per-capita consumption expenditures are also lower for NWFP vis-à-vis the rest of the country.
Poverty in NWFP has changed significantly over the decade. The trends are very mixed depending on the choice of the base year for comparison. If 1990-91 is compared to 1998-99, then urban poverty in NWFP appears to have declined substantially (by close to 6 percentage points)—even more than the decline in national urban poverty. Meanwhile, the rural poverty in NWFP seems to have increased by more than 4 percentage points over the same period. However, it is also important to note that notwithstanding the decline in urban poverty in NWFP during this period the urban areas in this province still remain the poorest in the country by a large margin. And even more alarming is the fact that if there is a comparison between 1993 and 1999 then the available evidence indicates a dramatic and consistent worsening of poverty in NWFP in both the rural and urban sectors
Several characteristics of poverty in NWFP based on the available research are listed below:
• NWFP faces difficult challenges due to its geography, history and location
• NWFP is the poorest Province of Pakistan
• NWFP has poor social indicators and highest gender disparity
• Gender gaps are significant for all socio-economic indicators in NWFP
• Gender gaps tend to be wider in rural areas than in urban areas of NWFP.
• Gender gaps in NWFP are found to be larger than for the country as a whole
• Land ownership in rural NWFP is less concentrated than for the rest of the country, and there is prevalence of small landholdings, low agriculture productivity and high rural poverty
A large proportion of the paid employees in the urban sector of NWFP are engaged as wage labor in the informal sector, which is a significant employer in urban areas. The poor have relatively low access to safe drinking water and sanitation facilities. Availability of safe drinking water and sanitation facilities is characterized by large rural- urban gaps in NWFP. In terms of access to safe water and drainage in NWFP both urban and rural sectors alike fare significantly worse than the country as a whole

6. i i
•NWFP has a limited resource base
•Province’s own revenues are low and its fiscal position has deteriorated during 1990
•Province’s financial management has remained weak
Much of province’s economic potential is still unexploited – while this is at present a major weakness it also offers a major opportunity in the future.
In addition to using the individual characteristics of poverty geographic targeting also provides an effective method for improving the efficiency of resource use for poverty reduction. This paper uses levels of deprivation to rank districts. The deprivation indices presented here are based on the recently released Government of the NWFP Multi Indicator Cluster Survey 2001 data set. These data were especially collected with support from UNICEF to provide district-level indicators and benchmarks for poverty reduction.
The overarching objective of the Poverty Reduction Strategy for the NWFP is poverty reduction through efforts to restore good governance and the respect for the rule of law, enhance the effectiveness of public expenditure especially in the key social sectors and re-establish the integrity of state institutions and their accountability to the public. Of course, no poverty reduction strategy can be complete without efforts to promote pro- poor growth. The PRSP for the NWFP, therefore, has the following five main pillars with strengthening governance to improve public service delivery as the central cross cutting theme:
1. Governance reforms to achieve an efficient, accountable, and service oriented civil service;
2. Reforms to improve service delivery in key sectors (especially basic social services); Fiscal and financial management reforms to improve governance in budget and financial management,
3. A medium term budget framework (MTBF), enhance effectiveness and accountability of expenditures, and strengthen resource mobilization;
4. Promote sustainable private sector development to accelerate economic growth.
5. Addressing vulnerability to shocks
Given the larger gender disparities in the NWFP mainstreaming gender is an essential element of all strategic interventions proposed here. It is not only important from a rights based perspective but is also the most optimal poverty reduction strategy given the ease with which more than fifty percent of the poor can be targeted.
This strategy is based on an extensive consultative process that was initiated in December 2002. These consultations covered the entire Province and involved stakeholders meetings at the grass roots level for the identification of the perceived strengths, weaknesses, opportunities and threat in each district and sector, as well as the recommendations to ensure opportunity, security and empowerment so necessary for effective poverty reduction. Based on this consultative process, it has become quite clear

7. ii i
that for the five pronged strategy to be successful the following basic measures must adopted:
• Training and support to enable the local Governments to think along modern lines in order to enable them to function as sustainable entities with proactive planning for the development and promotion of all available resources at the district level
• Specific training for the local Governments to enable them to prepare business plans and advertise the business and tourism possibilities in their districts along modern lines.
• Strengthening of the office of the District Planning Officer with equipment and training to act as a Business Development and Support Units for all the citizens of the districts. This office would be charged with providing essential links to the on- going national level support initiatives such as SMEDA, Qaumi Zarat Bank, Khushali Bank and other initiatives that can be tapped to develop the small and medium industries and the agriculture sector. These offices should act as conduits for business promotion in the districts and for attracting investment and finding markets to assist the local inhabitants. Over time these offices will be in a position to charge a fee for such services.
• Initiating district level studies to assess how best to develop and promote the comparative advantage of the Province, in particular horticulture and vegetable farming; processing and marketing of foods, development of timber and non-timber forest products; and the exploitation and development of minerals and gem stones on modern business lines;
• Setting up Poverty Reduction Associations of concerned well to do citizens with logistical support from the District Governments to evolve and implement schemes to improve the opportunity, security and empowerment of the vulnerable at the grassroots level. These associations should also be charged with ensuring that all such schemes are environmentally sustainable and biodiversity conserving and provide adequate opportunities to the vulnerable especially women. In addition these associations can serve as the focal mechanism for the supervision and distribution of basic food items at cost price to the poor and vulnerable as well as the provision of basic cooked food (dal and roti at designated tanoors) to the destitute in each locality through informal collections from philanthropists in and around the area.
The detailed Medium Term Budgetary framework presented here was agreed upon by the Government of the NWFP in line with the initiatives proposed under the four pillars of the original Poverty Reduction Plan in 2001. The Monitoring and Evaluation Framework with the clear designation of responsibilities and next steps was also agreed upon at that time.
Risks to the success of the overall strategy for NWFP include backsliding on the key fiscal and financial steps committed to by the Government of NWFP in 2001 as part of the conditionality for the World Bank structural adjustment credit. Additional risks come from the lack of smooth functioning of the devolved local government; the lack of effective consensus building amongst the district level government and elected officials

8. iv
to ensure ownership of the poverty reduction strategy; and lack of momentum in the overall national PRSP efforts.

9. 1
CHAPTER 1. INTRODUCTION
This Poverty Reduction Strategy Paper (PRSP) for the North West Frontier Province reinforces the poverty reduction strategy for Pakistan. Within the overall parameters of the national PRSP the strategy for the NWFP integrates the existing Provincial Poverty Reduction Plan (PRP) and the Medium Term Budgetary Framework into a three-year strategy. The PRP for the NWFP was built on four pillars that more or less overlapped the national Interim Poverty Reduction Strategy Paper (I-PRSP). The NWFP PRP however, did not suggest any interventions for addressing aspects of vulnerability to shocks. In this important dimension the PRSP for the NWFP takes the strategic interventions that are part of the national IPRSP as given and incorporates a recommendation for strengthening the informal system of philanthropy.
The unexploited strength of the NWFP economy lies, amongst other sources, in its tremendous potential in its minerals, value-added agriculture, timber and non-timber products, hydel resources and potential for tourism development. This PRSP recognizes that accelerating economic growth and generating employment for the poor is key to poverty reduction. In this the private sector has to be the engine of growth. Such growth should be based in the rural sector where the majority of the poor reside and where the highest employment multipliers are evidenced.
The NWFP like the country as a whole is faced with the twin challenges of reviving growth and reducing poverty. There is realization that restoring economic growth and improving access to basic needs, such as primary education, preventive health care, and population welfare services, is essential for winning the fight against poverty. The complex and multidimensional nature of poverty thus warrants a poverty reduction strategy that ensures rapid pro-poor economic growth through sound macroeconomic reforms, improved access to social services, broad based governance reforms, and targeted interventions Pakistan’s interim poverty reduction strategy I-PRSP put in place in November 2001 takes into account the economic, social, and governance dimensions. Like the national strategy this provincial strategy also emphasizes policies for economic and social development but also seeks greater involvement of the poor in the formulation of these policies and management of their affairs. The strategy aims at forging broad- based alliances with civil society and the private sector in the quest for eliminating poverty and accelerating growth
The strategy is based on an extensive consultative process initiated in December 2002 that covered the entire Province and involved stakeholders meetings at the grass roots level for the identification of the strengths, weaknesses, opportunities and threat in each district and sector as well as the interventions to ensure opportunity, security and empowerment so necessary for effective poverty reduction.
This consultative process is essential for ensuring ownership and hence sustainability of any strategy. The strategic recommendations presented in this paper are backed by a well-

10. 2
defined Medium term budgetary framework. This framework enables expenditures to be directed to the key areas and then tracked over the period of implementation. Additionally The paper also presents a Monitoring and Evaluation strategy which is critical to the success of the poverty reduction strategy.
Pakistan’s I-PRSP is backed with a strong program of monitoring as well as capacity development, including that for gathering and analyzing information for impact assessment. The I-PRSP outlines new institutional mechanisms that will be employed for the regular/periodic monitoring and evaluation of poverty reduction expenditures and corresponding outcome indicators at the federal, provincial, and district levels. These institutional arrangements are presently evolving and will be finalized in consultations with provincial governments. Key outcome indictors have also been suggested. The final benchmarks and targets will be set after consultations with national and provincial statistical agencies, federal line departments, and provincial governments.
The PRSP for the NWFP draws on these aspects of Monitoring and Evaluation. Its eventual success will rest in the continuation of the reforms committed to under the structural adjustment program by the Government of NWFP and on the ownership that can be built through an ongoing process of consultations. It is imperative, therefore, that the political consensus to the reform package underlying this strategy be obtained as quickly as possible and the process of consultations at the grass roots level be concluded as quickly as possible. The NWFP is the first Province to put together a draft PRSP.
The medium term prospects for economic growth for the economy of the NWFP as the frontline province have been uncertain since September 11, 2001. This uncertainty has serious implications for the stability of NWFP’s macroeconomic and planning framework and can significantly undermine the reform efforts outlined in this PRSP. The strategy presented here therefore is based on the assumption of ceterus paribus i.e. other things remaining the same.
This strategy paper is divided into six chapters. The Poverty Profile for NWFP is summarily described in the second Chapter. Details are presented in the Annexure. The process of dialogue is presented in Chapter three. The strategic plan forms the fourth chapter. The medium term budgetary framework is described in the fifth chapter. Monitoring and Evaluation processes are described in the sixth chapter.

11. 3
CHAPTER 2. POVERTY IN NWFP
Poverty in NWFP should be understood in the broader context of poverty in Pakistan.1 In addition, understanding issues specific to poverty in the province also requires examining the concentration of poverty across areas within NWFP. Such an understanding can help to inform policymakers by identifying priority needs and target groups for intervention.
Detailed analysis of the poverty situation in NWFP is presented in Annex I. A summary is presented here to give context to the strategy presented in later chapters. The NWFP is the poorest Province of Pakistan.
Table 2.1: Poverty Trends by Province
Province
FY93
FY94
FY97
FY99
Urban Areas
20.7
16.3
16.1
22.4
Punjab
22.0
18.1
1.16.9
25.5
Sindh
17.3
11.8
12.0
16.1
NWFP
25.3
26.9
27.2
29.2
Balochistan
31.8
16.8
23.0
24.3
Rural Areas
28.9
34.7
30.7
36.3
Punjab
26.5
33.9
28.3
36.0
Sindh
29.5
31.8
19.6
34.7
NWFP
37.0
40.0
43.4
44.9
Balochistan
28.1
37.9
42.5
22.5
Overall
26.6
29.3
26.3
32.2
Punjab
25.2
29.5
25.0
33.0
Sindh
24.1
22.6
15.7
26.6
NWFP
35.5
38.1
41.2
42.6
Balochistan
28.6
35.5
38.4
22.8
Source: ADB (2002). Poverty in Pakistan: Issues, Causes and Institutional Responses
The overall picture of consumption /income poverty in NWFP corresponds closely with that of Pakistan as a whole—higher concentration of the poor in rural areas, lower average consumption levels in rural areas, and relatively higher inequality in urban areas. Moreover, as Table 2.1 shows that the 15 percentage point rural-urban gap in headcount rates for NWFP in 1998-99 is higher than that for the whole of Pakistan and second only to Sindh among all provinces. The high rural-urban gap has all the more significance for overall poverty in NWFP - since the province is much more rural than the country as a
1 The source for all data, unless otherwise specified, is the Pakistan Integrated Household Survey (1998/99). More recent data for the PIHS 2000-1 are not used because of the as yet unresolved controversy associated with the educational enrollment and other numbers based on this data set. The data from the NWFP MICS are also not used. These data require further analysis for validation.

12. 4
whole. Around 85% of the NWFP population lives in the rural areas as compared to about 72% of the country’s population. Meanwhile, the rural areas of NWFP account for around 90% of the total number of poor people in the province. NWFP is by far the poorest province of Pakistan, with an overall incidence of poverty substantially higher than that for the country as a whole (poverty headcount for NWFP is 44%, compared to 33% for Pakistan). As shown in Table 1, both urban and rural poverty in NWFP are higher than that for the entire country (poverty headcounts for urban and rural NWFP are 31% and 47% respectively, compared to 24% and 36% respectively for all of Pakistan). Moreover, depth of both urban and rural poverty, measured by poverty gap is relatively higher for NWFP than for the rest of the country. Consistent with the poverty estimates, the average per-capita consumption expenditures are also lower for NWFP vis-à-vis the rest of the country.
High Rural Poverty
The overall picture of consumption /income poverty in NWFP corresponds closely with that of Pakistan as a whole—higher concentration of the poor in rural areas; lower average consumption levels in rural areas; and, relatively higher inequality in urban areas There is a 15 percentage point rural-urban gap in headcount rates estimated for NWFP in 1998-99. This is higher than that for the whole of Pakistan and second only to the Sindh province. The high rural-urban gap has all the more significance for overall poverty in NWFP - since the province is much more rural than the country as a whole. Around 85% of the NWFP population lives in the rural areas as compared to about 72% of the country’s population. Moreover, the rural areas of NWFP account for around 90% of the total number of poor people in the province.
NWFP Poorest Province of Pakistan
NWFP is by far the poorest province of Pakistan, with an overall incidence of poverty substantially higher than that for the country as a whole (poverty headcount in 1998-99 for NWFP is 43% as compared to 33% for Pakistan). Both urban and rural poverty in NWFP are higher than that for the entire country (poverty headcounts for urban and rural NWFP are 31% and 47% respectively, compared to 24% and 36% respectively for all of Pakistan). Moreover, the depth of both urban and rural poverty, measured by the poverty gap is relatively higher for NWFP than for the rest of the country. Consistent with the poverty estimates, the average per-capita consumption expenditures are also lower for NWFP vis-à-vis the rest of the country.
Inequality in NWFP, as measured by the gini coefficient for per equivalent adult consumption, is very similar to that for the country, in both the rural and urban areas. Note that overall gini for NWFP is slightly lower than that for the country, while the urban and rural ginis are identical. This apparent paradox is caused simply by the fact that NWFP is significantly more rural (in terms of share of population) than the country as a whole, which means that the rural gini has a larger weighted in the average gini for NWFP than for Pakistan.

13. 5
Poverty Trends in NWFP
Poverty in NWFP has changed over the decade. The trends are very mixed. In comparing
1990-91 to 1998-99, urban poverty in NWFP appears to have declined substantially (by
close to 6 percentage points)—even more than the decline in national urban poverty.
Meanwhile, the incidence of poverty in rural NWFP seems to have increased by more
than 4 percentage points over the same period; although the rural poverty headcount for
the country actually fell slightly over the same period. Poverty reduction in NWFP when
comparing the estimates for 1990-1 with those for 1998-99 appears to have occurred only
in urban areas while rural areas have become poorer on the average. However, it is also
important to note that notwithstanding the decline in urban poverty in NWFP during this
period the urban areas in this province still remain the poorest in the country by a large
margin. And even more alarming is the fact that if there is a comparison between 1993
and 1999 then the available evidence indicates a dramatic and consistent worsening of
poverty in NWFP in both the rural and urban sectors. [Figure 2.1].
Figure 2.1: The Continuously Deteriorating NWFP Poverty Situation 1993 to 1999
Characteristics of Poverty
Several Characteristics of poverty in NWFP based on the available research are listed
below:
• NWFP faces difficult challenges due to its geography, history and location
• NWFP is the poorest Province of Pakistan
• NWFP has poor social indicators and highest gender disparity
• Gender gaps are significant for all socio-economic indicators in NWFP
• Gender gaps tend to be wider in rural areas than in urban areas of NWFP.
• Gender gaps in NWFP are found to be larger than for the country as a whole
26.6
29.3
26.3
32.2
35.5
38.1
41.2
42.6
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
FY93 FY94 FY97 FY99
Pakistan NWFP

14. 6
• Land ownership in rural NWFP is less concentrated than for the rest of the country, and there is prevalence of small landholdings, low agriculture productivity and high rural poverty
• A large proportion of the paid employees in the urban sector of NWFP are engaged as wage labor in the informal sector, which is a significant employer in urban areas.
• The poor have relatively low access to safe drinking water and sanitation facilities
• Availability of safe drinking water and sanitation facilities is characterized by large rural-urban gaps in NWFP.
• In terms of access to safe water and drainage in NWFP both urban and rural sectors alike fare significantly worse than the country as a whole
• NWFP has a limited resource base
• Province’s own revenues are low and its fiscal position has deteriorated during 1990s
• Province’s financial management has remained weak
• Much of province’s economic potential is still unexploited – while this is at present a major weakness it also offers a major opportunity in the future.
Correlates of Poverty
Several correlates of household characteristics and income poverty can be established from the available research for the NWFP:
• The poor are more likely to live in larger households
• Poverty is associated with lack of asset ownership. The average size of agricultural land owned by poor households is 0.25 hectares in rural NWFP, compared to 0.71 hectares for the non-poor
• Rural poverty headcount falls as the size of land holdings increases
• Small and marginal landholders are almost equally poor as those who own no land,
• Poverty among large landowners is significantly lower
• Poverty, is strongly associated with lack of human capital, measured by the education and literacy status of the head of the household
• In urban NWFP, employment of the household head does not show clear patterns with poverty status, partly due to the lack of detailed employment data.
• However, a much larger proportion of households in the bottom quintile of expenditure have the head of the household working as paid employees, as compared to the urban population as a whole.
• In rural NWFP, the poor households are relatively more likely to be headed by individuals working as a paid employee
These correlations along with the characteristics of poverty listed above provide the indicative framework for the effective targeting of scarce resources within the poverty reduction strategy for NWFP.

15. 7
The Multiple Indicator Cluster Survey
Geographic targeting provides a method for improving the efficiency of resource use for poverty reduction. Resources can be assigned on the basis of district ranking. In order to collect information on key social and economic indicators at district level, the government of NWFP, through the Planning and Development Department (P&DD) and support from UNICEF conducted a household survey (Multiple Indicators Cluster Survey MICS) from September to December 2001. A total of 13,076 households drawn from 873 primary sampling units of which 223 were urban and 650 rural were interviewed. This survey is the first attempt to get district-level representative estimates in the NWFP. This survey collected data on wide range of indicators concerning children and women. Indicators comprise income, infant and under-five child mortality, under nutrition, education, adult literacy, water and sanitation, ante-natal and birth care, birth registration, feeding patterns, young child recent illness and cost of treatment, and use of contraceptives and awareness of HIV/AIDS. The aims of this survey were:
• To establishes a credible baseline for monitoring socioeconomic status of districts at the start of the new decade and devolution process
• To develop ranking of districts to highlight the inter-district disparities in social and economic indicators so as to be able to address these through appropriate district level social sector planning efforts by the provincial government.
• To provide information on the situation of children and women, as well as child- focused benchmarking for measuring progress in post devolution era and for reporting on the World Summit Goals for Children.
• Rectify data gaps in information systems from national surveys and sectoral databases; and address gender disparities and lack of uniformity in resource distribution among districts.
• Building capacity of relevant government institutions, especially the provincial Bureau of Statistics, through their active involvement in all the phases of the survey.
Based on the data of this survey, Table 2.2 below presents ranking of districts based on six key indicators: infant mortality, primary school enrolment, adult literacy, water and sanitation and income per day per capita. The results from MICS show that there is considerable variation within the province in terms of poverty and social indicators. Districts of Kohistan, Upper Dir, Bunner, Batagram, Shanga and Tank are among the poorest six districts in NWFP, and ranking extremely low in terms of social indicators.
The composite rank is the weighted sum of all ranks for these six indicators. The composite rank indicates that Haripur is the least deprived district while Kohistan is the most deprived district of NWFP. Looking at other indicators, this table shows that Kohistan ranked lowest for 5 out of the six indicators. Haripur remained on top for infant mortality while for safe water it ranked 14. Bannu was observed to be number 1 for the use of safe water. However, for all the othert indicators it is amongst the most deprived.

16. 8
For enrolment and literacy, Abbotabad was the top ranked district. Peshawar ranked number 1 and Shangla ranked lowest in terms of urban population.
At the research level there are two major issues that require immediate attention for devising an effective poverty reduction strategy. The low agricultural productivity in NWFP combined with the smaller landholding size and the lower inequality of landholding needs to be examined in depth. Such an analysis should also seek to identify the key constraints to rural incomes and productivity in the province – whether the issue of access to land is of crucial importance, or whether other factors, like lack of access to factors like infrastructure including irrigation and credit, play equally critical roles.
Also at present the relatively high availability of health and education facilities in the NWFP does not appear to translate into commensurate outcomes in health and education. NWFP tends to lag behind the rest of the country in these outcomes. While the higher (relative to the country) rural male primary enrollment rate in NWFP is consistent with the almost universal availability of male primary education, female primary enrollment in NWFP lag behind rural Pakistan, in spite of the far higher incidence of girls’ schools in the province.
Table 2.2: NWFP- Summary results of districts by Rankings
District
Combined rank
Infant mortality
Enrolled in primary school
Adult literacy 15+
Use of safe water
Adequate toilet
Average income per day per capita
Urban pop
Haripur
1
1
2
2
14
2
3
12
Abbotabad
2
6
1
1
12
4
4
7
Malakand
3
2
3
7
4
8
8
15
Kohat
4
7
6
3
10
5
1
2
Mansehra
5
5
4
5
17
14
7
19
Peshawar
6
4
13
6
3
3
12
1
Nowshehra
7
8
7
10
7
6
11
3
Mardan
8
12
5
11
6
13
9
5
Karak
9
3
14
4
11
19
15
17
Chitral
10
11
6
8
15
1
18
13
Hangu
11
10
16
14
16
9
5
4
Swabi
12
18
9
13
8
12
10
8
Bunner
13
9
20
22
19
18
2
22
Lower Dir
14
15
10
17
21
22
6
18
Swat
15
21
11
9
9
7
17
11
D I Khan
16
17
17
19
2
10
13
10
Charsadda
17
13
15
16
18
20
14
6
Bannu
18
16
19
12
1
16
20
16
Lakki Marwat
19
14
21
15
5
15
22
14
Tank
20
20
18
18
13
17
21
9
Batgram
21
23
12
21
20
21
16
21
Upper Dir
22
19
22
23
23
23
19
20
Shangla
23
22
23
20
22
11
24
24
Kohistan
24
24
24
24
24
24
23
23
Source: District-based Multiple Indicators Cluster Survey (2001)

17. 9
This apparent puzzle may be explained by a number of factors. Social and cultural mores, particularly as they relate to demand for girls’ education or use of health services for females, may play a role; lack of income or wealth may also depress demand for education.2 Equally important is the fact that the figures listed above are but imperfect measures of access. Firstly, the mere presence of a facility is not enough to guarantee quality, or even that the facility is functional. Quality problems in education and health facilities, according to a number of studies, are rampant in Pakistan, and the conditions in NWFP are similar which can be ascertained only after careful study. Secondly, these measures do not account for the exclusion of social groups, which are also likely to have high concentration of poverty, from services and facilities. Both these problems can significantly reduce the effectiveness of services for the poor and disadvantaged groups, thereby affecting their potential to develop skills and enhance future economic opportunities. Females are a largely disadvantaged group in the NWFP. There is a large gender gap in the NWFP in terms of both the level and access to opportunity, empowerment and security considered essential for reducing poverty.
Focusing on the Large Gender Gap
The gender gap can be monitored through the present level of indicators in NWFP for females versus males. A selected number of indicators has been presented in the following table. Ideally, the Female/Male ratio should be 100% and the Male-Female gap should be zero. In general, the lower the Female/Male ratio or the larger the Male-Female number, the wider is the gender gap. When the Female/Male and Male-Female indicators obtain values of greater than 100% and negative, respectively, then the incidence among female population is higher than male population. From the table below it can be observed that the number of underweight female children is higher than the number of underweight male children. This category applies to under-five children. Again, this is a gender gap in favour of the male under-five population. All the indicators noted below point to the fact that the female population has greater barriers to physical and mental development than the male population. Thus, focusing on strategies to address this issue becomes urgent in NWFP.
Table 2.2: NWFP Gender Gap in Key Indicators
Indicator
Female/Male
Male - Female
Adult Literacy rate (15 years +)
36.7%
36.4%
Net primary school enrolment
72.7%
12%
Immunization (BCG scar)*
94.0%
4.2%
Children reaching grade 5
98.5%
1%
Underweight (-2SD) under 5 years of age
108.0%
-3% (negative 3%)
Source: “NWFP, A District-based Multiple Indicators Cluser Survey, 2001”; GoNWFP, PDD, May 2002.*Data analyzed and presented from original data set by UNICEF; disaggregated data not present in the MICS report.
Considering the district data from the MICS report, Kohistan district has the widest net primary school enrolment gap (Female/Male = 48%; Male – Female = 11%) and
2 Regression analyses have shown household’s economic status to be an important determinant of school participation, for entire Pakistan and individual provinces alike.

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Abbotabad has the lowest gap (Female/Male = 96%; Male – Female = 3%). Considering adult literacy rates, Kohistan district has the widest gap (Female/Male = 10.2%; Male – Female = 21.4%) and Abbotabad has the lowest gap (Female/Male = 57.7%; Male – Female = 33.1%).
When adult literacy rates are compared to net primary school enrolment, the improving situation of gender gap can be observed. Therefore, it can be forecasted that the adult literacy gap will be closed as time passes. When implementing the strategies addressed to education and adult literacy, this fact will be taken into consideration.
At the same time, the large variation in the gender gap between Kohistan district and Abbotabad indicates that further district level analysis on strategies should be undertaken at the time of implementation. Obviously, in areas or districts where gender disparity represented by Female/Male ration is 50% lower (a 50% ratio indicates there are twice as many males than females in this category) accelerated strategies for closing the gap should be followed. The adult literacy gender ratio of 10.2% quoted above indicates that there are 10 times more literate men than women.
The Poverty Reduction Strategy therefore attempts to address the quality and governance aspects, to improve service delivery of education and health with a special focus on reducing the gender disparities.

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CHAPTER 3. PRSP DIALOGUE
In preparing the Poverty Reduction Plan during 2000-2001 the government of NWFP held extensive consultations with NGOs, donors and other stakeholders. However, the NWFP Government did not discuss and/or disseminate the PRP program to the new District Nazims, Councilors, and district officials. It was waiting for them to settle into their new roles.
This process of consultation at the local level was finally initiated in December 2002 when SWOT (Strengths Weaknesses, Opportunities and Threats] analysis was initiated at two levels. Templates and instructions were issued to all DCOs to involve the devolved elected local Government and elected officials and other stake-holders in the consultative process. Discussions were also initiated with all the heads of sections within the Planning and Development Department of the Government of the NWFP and the Chief Planning Officers of the key departments in order for them to initiate discussions at the sectoral levels with all key stake-holders. The intention was to initiate dialogue with the new district governments and all levels of civil society to ensure that the detailed sectoral strategies and investment programs contained in the PRSP fully reflect the district government priorities. This was extremely essential to engender ownership of the reform objectives.
As part of this initiation program presentations on the determinants and dynamics of poverty in NWFP and the key elements of the Poverty Reduction Plan were presented to the Section Chiefs of the P&D Department and the Chief Planning officers of the line ministries and to all the DCOs and elected Nazims and other officials of the local Governments who were invited to Peshawar for discussion in mid January 2003.
The response was significant. All the participants welcomed the process and stressed the need to define their own strategies of poverty reduction based on their own perceptions of poverty. Based on this response there is even more reason for the consultative process to be made an ongoing process for monitoring and evaluation and be given the highest priority to ensure effective ownership and sustainability of the poverty reduction strategy.
Detailed guidance notes as well as an instrument based on the SWOT (strengths, weaknesses, opportunities, threats) framework was also circulated to every DCO in the province requesting that consultative workshops for stakeholders be organized in each district. The objective was to bring stakeholders from all segments of civil society into the PRSP formulation discussions in order to determine the strengths, weaknesses, opportunities and threats facing the districts as well as to suggest key interventions to increase opportunity, security and empowerment of the people. These latter three aspects are based on international experience, considered to be essential for any effective poverty reduction strategy.
The DCO led consultations with the elected officials and the representatives of civil society were held in every district. And following the meeting held in Peshawar to which

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all the DCOs in the Province as well as the District Nazims were invited it was decided to conduct a series of larger stakeholder consultations in the selected districts to be facilitated by the PRSP consultant and his team of experts. These consultative workshops were held in five districts namely, Peshawar, Mardan, Swabi, Dir and Mansehra during February 2003.
Earlier in January 2003, a meeting was also held in Peshawar with the Federal Secretary, Economic Affairs Division coordinated by the Additional Chief Secretary Development. The Federal Coordinator of the PRSP Program also attended. All the Provincial Secretaries of the key line departments in the province attended. This meeting provided the general direction and agreement on the salient features of the PRSP
The completed SWOT instruments from the consultations in all the Districts as well as the results from the five extended workshops in the selected districts were analyzed and integrated into the PRSP.
The main results of the assessment of the Strengths weaknesses opportunities and threats from these consultations are summarized below:
The main strengths listed by the stakeholders during the consultative workshops included:
 Innovative and hardworking manpower
 Rich Mineral resources
 Abundant Hydel resources
 Fertile land; and
 Horticulture including fruits vegetables and rare medicinal herbs and livestock.
The main opportunities were seen in the areas of:
 horticulture and vegetable production and value-added processing
 mineral and natural resource exploitation and processing within the province
 the use of the hydel resources as a source of power for small and medium scale industry and for small scale power generation
 dairy and livestock development
 tourism and
 the opportunities arising out of the Afghan reconstruction.
The main weaknesses that came up in the discussions included:
 extreme poverty
 Inadequate resources given size of poverty problem
 high population growth
 pressure of Afghan refugees
 high population pressure on good agricultural land
 high population pressure development and social sector resources
 Great geographic and development diversity across regions both with and across districts Poor exploitation of natural resources including wate

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 Low quality and coverage of infrastructure
 Poor quality drinking water in a number of districts and urban areas
The threats were seen to come mainly from:
 poor governance
 poor understanding of the rights and responsibilities under the Devolution Plan
 Inadequate functioning of the local government system
 lack of effective district to province and province to center coordination
 high refugee population
 drought
These SWOTS formed the basis of the interventions suggested by the consultative process. These are discussed at the end of the next section. It is expected that this process of consultation will continue over time and that regular two-way flow of information from the provincial P&D Department to the districts and from the districts back to the P&D Departments will take place on a continuous basis. Such a two-way flow of information is absolutely essential for the monitoring and evaluation of the overall poverty reduction strategy.

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CHAPTER 4. THE POVERTY REDUCTION SRATEGY (PRS)
Background
The Government started to address the multiple social and economic problems during 2000, with varying degrees of success. Recognizing that many of the problems were interdependent and needed a more systematic approach, the Government of the NWFP decided to develop a comprehensive reform program for the province. For this purpose, it prepared a strategy document, the Provincial Reform Program (PRP) 2001-2004, which was discussed extensively with various agencies, including the World Bank. The proposed program was approved by the NWFP Cabinet in June 2001. Several of the PRP reform measures were incorporated in the FY02 Budget and reflected in the Budget White Paper and other documents. NWFP was the first province to embark on such a comprehensive reform program. That on going PRP forms the core of the Provincial PRSP. Moreover the Government of NWFP has committed to a structural adjustment program to bolster this medium term plan. Elements of the Structural Adjustment Program are presented in Annex II. This lists the actions taken so far as well as those planned over the medium term 2003-2005 for each one of the key poverty reducing interventions.
With the coming into power of an elected Government in 2002 it was imperative that that the commitments made for the medium term i.e. 2003-2005 be ratified as quickly as possible. No strategy can be effective without political commitment. On April 5, 2003 the PRSP for the NWFP was presented before the Senior Minister and the Health Minister as well as the Secretaries of the key line Ministries. What is presented below has the approval of the Senior Minister and is based on the assumption that the political consensus exists to carry forward the commitments made in the past two years. In all strategic planning of an economic nature the crucial assumption is cetirus paribus i.e. all other things being equal.
The overarching objective of the Poverty Reduction Strategy Paper for the NWFP is to restore good governance and the respect for the rule of law, enhance the effectiveness of public expenditures, re-establish the integrity of state institutions and their accountability to the public. These objectives are in line with the goals of the I-PRSP for Pakistan [see Annex III]. The PRSP for the NWFP has the following five main pillars with strengthening governance to improve public service delivery as the cross cutting theme:
1. Governance reforms to achieve an efficient, accountable, and service oriented civil service;
2. Reforms to improve service delivery in key sectors (especially basic health, education and social services);
3. Fiscal and financial management reforms to improve governance in budget and financial management, adopt a medium term budget framework (MTBF), enhance

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effectiveness and accountability of expenditures, and strengthen resource mobilization; and
4. Promoting Sustainable growth.
5. Addressing Vulnerability to Shocks
A prosperous and stable NWFP is geographically and economically critical to Pakistan’s well being. In addition, there is a consensus among the policy makers and civil society that a more literate and healthy population would enhance job opportunities within and outside the province, and mitigate the risks for extremism. Recently, the Government of Pakistan, together with the governments of NWFP and Balochistan, has initiated preparation of a federally funded development program to address the under development of the areas bordering Afghanistan. The majority of the populated border areas fall in NWFP. These areas are amongst the poorest in NWFP, and the program is intended to provide resources for physical infrastructure, social services, and income generating activities. Moreover, the Federal and the NWFP government have also formulated a long- term program to mainstream the tribal areas – politically, legally and constitutionally – with the rest of the country.
A) Strengthening Accountability and Professionalism of State Institutions
Decades of neglect and decay took their toll on governance in the province, as in the rest of the country. The result has been excessive staff, poor compensation (especially at higher levels), declining quality of civil servants, over-centralization of decision-making, complaints of widespread corruption and malfeasance, poor management systems, and cumbersome and costly procedures. These are complex issues that would take a long time to address. The Government of NWFP has therefore drawn up a phased and realistic program to achieve its objectives in this area.
Devolution and Civil service Reforms
Objectives and Strategy. The objectives of the devolution and civil service reforms are to increase the efficiency of government operations, make them more accountable to users, effective in delivering public services, and raise the level of competence and integrity of government officials. Government strategy to achieve these objectives is to fully implement the devolution of power, decentralize functions and operations, reduce staff at the provincial level, tighten the system of accountability, reorganize functions and departments at the provincial level, improve recruitment and make promotions more performance based, simplify procedures, and computerize business process.
Recent Reforms. The restructuring and rightsizing of provincial government, including administrative and operational aspects of the Devolution, have been largely completed. In regards to devolution, the required staff (around 200,000 out of total 280,000 provincial employees) has been assigned to district governments3; and district budgeting
3 Eventually most of these staff would become district government employees. For now they are provincial employees, but their postings and performance evaluation is now down by district governments.

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and most other non-policy functions have been transferred to the districts. The district Rules of Business have been prepared, training of elected representatives and staff has been instituted, local government contract rules have been notified, and district accounts have been established. In regards to rightsizing, the Government of NWFP has restructured 26 provincial departments, merging several departments, closing autonomous bodies and several specialized agencies, thus streamlining and downsizing the departmental structure and refocusing it according to new functions. Consequently on the basis of identified redundancies, over 6,000 employees have been placed in a surplus pool, many of whom have been assigned to districts.
Recruitment, promotion, and transfer policies have been revised and the key institution managing them strengthened. The provincial Public Service Commission (PSC) has been strengthened and made more autonomous, through appropriate changes in its legislation and government’s administrative and Financial Rules. The PSC has been made fully responsible for all recruitment of officials of officer grade. Institutional mechanisms have been put in place to make recruitment and promotion merit- and performance-based. The existing contract employment policy is being revised with a view to making all task- and location-specific positions subject to contract employment. The Government is continuing its freeze on new hiring, except for social sector delivery staff such as teachers; and the compulsory retirement rules have been amended to facilitate retiring of redundant or incompetent officials.
Far reaching Judicial Reforms have been initiated. The judicial and executive functions have been legally separated. The judiciary has been made autonomous in matters of recruitment of judicial officials and financial aspects, which is a significant step in enhancing the independence of the judiciary.
Several institutional reforms and capacity building programs have been initiated. These include: (i) the Essential Institutional Reform Operationalization Project (EIROP) funded by UNDP, SDC and GTZ, was initiated in March 2001 to assist with human resource (HR) and institutional reform and support capacity building and training at the district level. The EIROP will be implemented over three years; (ii) with DFID support, a training program for the new elected representatives and officials has been launched at district and lower levels. In phase I, all union councilors were trained. A special program of training women councilors is planned shortly. The government has started training of district government functionaries in Financial Management, Budgeting, and Development Planning. It has also launched a program of IT training; and (iii) cognizant of the huge capacity building needs, especially to implement the PRP and the expanded social sector programs, the government has initiated a review of unmet capacity needs. It has already decided to establish the Education and Health Sector Reforms Units, the Budget Analysis Unit, and the overall Economic Reforms Unit. In addition, the government has approved a comprehensive three-year capacity building program to strengthen the managerial and technical capacity of provincial and district officials.
Medium-Term Reforms. Over the medium term, the Government plans to continue to implement the reforms under way and further intensify them. Among the planned actions

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are: (i) implementing the expanded capacity building program; (ii) developing a HR database using computerized payroll data and by conducting a civil servants census; (iii) reviewing and adjusting the restructuring, downsizing, and personnel management measures; (iv) strengthening district government staffing and staff training; (v) completing district rules of business and codes; (vi) establishing courts for small causes and family disputes; (vii) establishing public safety and accountability commissions/offices at the provincial and district levels; (viii) appointing separate senior officials to handle public complaints against officials; and (ix) establishing a Local Government Commission to oversee performance of district governments. The ongoing and planned reforms are expected to have a significant impact in terms of increasing the efficiency, effectiveness, and integrity of the civil service, as well as making it more responsive to people’s needs through devolution and administrative decentralization.
Anti-Corruption Initiatives
The government has moved aggressively on anti-corruption by sending a clear signal that no one is above the law, and taking steps to reduce corruption in the future. Anti- corruption rules have been simplified to make disciplinary actions easier to implement. Better enforcement has resulted in the initiation of 2240 disciplinary cases since 1999 (compared to a similar number in the last decade), over half of which have been decided. In addition, it has dismissed or suspended about 300 education department employees (including teachers) for negligence and prolonged absence from duties.
B) Accelerating Human Development
Social Asset Creation:
Impoverished communities usually do not have access to basic social services. They need the support of the government to be able to raise their children in a healthy and productive environment. Today’s children are parents to the next generation, thus, if they are not properly supported through social assets such as health facilities and primary schools, they become transmitters of poverty. In a vicious cycle, malnourished girls grow up to become malnourished mothers who give birth to underweight babies, parents lacking access to crucial information are unable to optimally feed and care for their children; and illiterate parents cannot support children in their learning process. Children are often hardest hit by poverty. It causes lifelong damage to their minds and bodies. They are therefore likely to pass poverty on to their children, perpetuation the poverty cycle.
The provincial government strategy with respect to social asset creation for the poor includes support to establishment of primary schools, primary health facilities, safe water points, communal latrines and capacity building of established entities that work with the communities, such as the Lady Health Workers (LHW). Special attention will be given to the welfare and access of poor children within this strategy. Nutritional needs of the population will be addressed within this strategy. One of the major strategies of the

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government is to break this cycle of poverty through creating social assets that is accessible to the poorest of the poor, the vulnerable groups, women and children.
Investments in children today will help lay a solid foundation for sustained and equitable economic growth in the future. Attainment of sustained rapid economic growth is not possible with high levels of illiteracy, malnutrition and morbidity. Therefore social asset creation for the poor, economic and social reform go hand in hand in to ensure a strategy that will alleviate poverty for the population successfully and in a sustainable manner.
A major thrust of the Government’s reform effort is to improve the delivery of human development services to turn around the current situation and have a lasting impact on productivity, equity, poverty, and social support system. These efforts are in tandem and complementary to the financial and governance reforms that would have a positive impact on improved delivery of various government services, through increased resources, efficiency, and responsiveness of the system. The important reforms in the delivery of social services and delivery of community infrastructure services are discussed below.
Education
The education indicators in the province are still relatively low, the main reasons for which are: inadequate financial resources; physical inaccessibility of many areas; poorly trained and ill-paid teachers; general decay in educational standards in the country; inadequate supply of instructional materials in schools; poor physical facilities in schools; weak accountability, institutional capacity and management of the educational system; and lack of community involvement in school affairs.
Objectives and Strategy. The Provincial Reform Program has made educational improvement the foundation for achieving longer-term economic development and poverty alleviation in the province. “Education is the first priority, second priority and third priority of the government” according to the Government of NWFP. The Government’s medium-term objectives in the sector are to:
(i) improve primary education (both enrollment and quality of instruction);
(ii) reduce gender and rural-urban disparities; and
(iii) expand the capacity at the secondary school level.
These objectives will be achieved by increasing resource allocation to the sector, allocating more resources to female education, upgrading the quality of instruction and teacher training, improving the management structure, implementing devolution, and increasing community and private sector involvement. In May 2002, the government approved a comprehensive medium-term reform program, which builds upon and strengthens the reform program developed in 2001 under the PRP and reflects higher budgetary allocations included in the MTBF for FY03-05.

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Recent Reforms. The highest priority is being given to improving quality and access by taking the following measures:
Approving a comprehensive province-wide staff and facility rationalization plan which would serve as a basis for needs-based recruitment, rationalization of facilities to reduce inefficiencies, and redeployment to ensure every primary school meets the targeted teacher student ratio of 1:30. As part of this rationalization plan, recruitment for 2,100 additional teachers has been approved for immediate deployment to schools without adequate teachers; addressing teacher absenteeism by deploying teachers to their home districts and facility-specific contract recruitment; introducing a results-based teacher evaluation and reward system and initiating a province-wide periodic student assessment system as part of the National Education Assessment System (NEAS), which would be fully funded in the FY03 budget.
Strengthening of teacher training programs; The institutional and management reforms comprising bifurcation of the provincial education department into lower and higher level education; Creating separate teaching and management cadres, the latter is meant to establish a professional school managerial cadre; Introducing computer literacy and English-medium instruction on a pilot basis; Introducing textbook deregulation for Classes 9-12, and developing a road map for expanding this initiative to the primary sector, to allow for more efficient and competitive printing and publishing of textbooks.
Establishing clear criteria for the establishment/construction of primary schools and up gradation of schools, in order to strengthen transparency of decision making and ensure that decisions are in line with sector goals; and Establishing an Education Sector reform Unit and staffing it to monitor and oversee progress in implementation of reforms.
Public-private partnerships and community involvement is being encouraged through:
Initiating a program to encourage private sector to use unoccupied government buildings for establishing schools; restructuring the Frontier Education Foundation which supports NGOs providing education, to make it autonomous and expand its activities to promote public-private partnership with adequate linkages with the Departments of Education;
strengthening parent-teacher associations (PTAs) in almost all 20,000 primary schools; and providing funds for instructional materials and minor repair (IM&R) to individual schools through the PTAs.
The monitoring and supervisory mechanisms have been strengthened. Circle Teams have been designated to carry out field visits every two weeks to monitor absenteeism and availability of inputs at the facility level based on the new monitoring forms. The reports are reviewed monthly at the district level, and will now be reviewed quarterly by the Education Minister. The government views these steps as supplementing the citizen/community oversight and accountability arrangements built into the devolution plan. These are viewed as the only sustainable and effective way to monitor agency performance. In addition, the Education Management Information System (EMIS) would be fully funded in the regular budget, starting in FY03.

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Steps have been taken to reduce gender disparity. The FY02 budget allocated 70% of the sector’s development budget to girls’ schools, and innovative incentive schemes are being developed to increase girls; enrollment. A major primary school facility upgradation program is being initiated to ensure that essential missing physical facilities (such as toilets, boundary walls, electricity) are provided to 100% of girls schools by end- FY03.
The allocation for education has been increased significantly. Expenditures on education have increased by 27% from Rs. 6.9 billion in FY 99 to Rs. 8.8 billion in FY01. Expenditures have been reallocated toward primary and secondary education and vocational training (including teacher training and away from tertiary and university education. User charges from higher education, which have historically been very low, were increased by around 20% in FY01.
Medium-Term Reforms. Over the medium term, the Government plans to take the following actions:
• Increase allocations by over 73% from Rs. 8.5 billion in FY02 to Rs. 14.7 billion in FY05, including increasing instructional materials and minor repair allocations several folds;
• Complete the management reforms to implement the process of district-based management, separation of teaching ad management staff, and training of staff;
• Complete the teacher redeployment, and facility rationalization based on the approved staff and facility rationalization plan;
• Expand school capacity in partnership with the private sector and communities and continue the strengthening of PTAs;
• Provide essential physical facilities in all primary schools, especially for girls, and continue the policy of larger allocation of development funds for girls’ schools;
• Deployment of teachers in home districts and location-based new recruitment, and in-service teacher training;
• Consolidate performance-based teacher evaluation and compensation, and the province-wide student assessment system;
• Continue textbook de-regulation;
• Expand secondary school capacity, PTAs for secondary schools, and school facilities for computer literacy;
• Establish primary schools in seriously deficient districts;
• Further increase in higher education user charges; and
• Continue to strengthen the monitoring and supervision system including the commission of a regular third party user and facility survey in October 2002, and annually thereafter, for independent monitoring of, among others, service delivery indicators.
The impact of these wide-ranging reforms is expected to be substantial. By the end of FY05, the overall primary school enrolment is expected to increase by 15%, with girls’

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enrolment increasing by 30%.4 By the end of FY03, 100% of girls’ schools would have basic physical facilities (such as toilets and boundary walls), and 100% of boys’ schools will achieve the target by end of FY05. Serious gaps in school capacity in remote areas would have been remedied. The quality of teachers, instruction, and student achievement are also expected to be significantly higher by FY05.
Health
Underlying the low level of health indicators are inadequate and uneven availability of primary health facilities, poorly staffed and stocked clinics, unplanned expansion of facilities, inadequate allocations which are heavily skewed towards the tertiary health care, and high incidence of preventable diseases.
Objectives and Strategy. The objective in the health sector is to significantly improve health indicators in the province over the medium term. The Government’s strategy, prepared in consultation with stakeholders, is to improve the management structure, reorganized health facilities, with a multi-level referral system, focus on preventive and primary health care, remove obvious gaps in facilities, increase budgetary allocations as well as user charges, and increase reliance on the private sector with adequate regulation.
Recent Reforms. The Health Care and Hospital System Management Reforms have been initiated. The Department of Health has been restructured in line with the Devolution initiative with a substantive shift of staff and resources to the districts. A management cadre has been created, and the separate male/female cadres of doctors have been merged. A Health Sector Reform unit has been established to strengthen capacity for planning and monitoring the reform process. Plans are being formulated, on a district basis, to rationalize health service delivery and facilities aimed at developing a graded and referral based system with appropriate staffing norms. A pilot is under implementation in one district to rationalize facility and serve as the basis for wider replication. Rationalization studies are underway in 13 other districts. All tertiary hospitals have been given financial and administrative autonomy with the aim of achieving financial self-sufficiency in three years, while plans are being developed to protect access of the poor through safety nets. A hospital management system is being developed to improve cost effectiveness and efficiency of public hospitals. A three-year program has been approved to engage more female nurses to meet acute shortages at the district and sub-district hospitals. And finally, facility-specific contracts have been introduced to reduce absenteeism.
Communicable Disease Control and Maternal Health Programs have been strengthened. A program to expand the coverage of immunization under the Global Alliance for Vaccination Initiative (GAVI) has been approved. This expanded program includes support for activities such as monitoring, staff development, and cold chain improvement which are all expected to improve coverage of immunization. The Hepatitis B vaccination has been initiated in three districts and province-wide coverage will being in
4 Traditionally, the government has tracked gross enrollment rates. With the introduction of MICS and strengthening of EMIS, NWFP will start tracking net enrollment rates from FY04.

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FY03. A provincial task force, chaired by the Governor, for polio elimination has been overseeing an aggressive campaign against polio. Polio cases have been reduced from 57 in FY00 to 28 in FY01. An intensive campaign for TT immunization of pregnant women in 15 high risk areas, with involvement of Lady Health Workers (LHWs), was initiated in August 2001. A plan to recruit1800 additional LHWs has been approved, and their role and that of paramedics is being expanded to include nutritional and reproductive health education. Finally, the TB DOTS program has been revitalized in 5 districts covering 20 percent of the population.
Allocations for health sector have also been increased More emphasis has been given to expenditures on primary health care and mother and child care where the expenditures have increased by 8% compared to a 2% overall increase in health expenditures during the MTBF period.
Medium-Term Reforms. As health sector reforms have been initiated in all the important areas, the emphasis in the medium term will be on consolidation and strengthening. In particular, the Government plans to focus on the following activities:
• Strengthening the Reform Unit, capacity and training of the district staff, and the hospital management system;
• Reviewing the experience of the pilot project for a graded referral system and replicate it in other districts;
• Expanding the use of LHWs and paramedics as the frontline health workers and continue location-specific recruitment/deployment of health workers;
• Augmenting public health services in partnership with the private sector and local communities;
• Implementing phased increases in user charges and putting in place an effective safety net for the poor;
• Expanding the coverage of communicable disease control programs of immunization, TB DOTS, and of reproductive health services;
• Increasing total expenditure by 120% to Rs. 4.3 billion in FY 05, with higher allocation for primary care; and
• Monitoring the impact of reforms through periodic MICS and third party surveys.
Women Development
Progress in this area has been going on for many years. Women are increasingly receiving education, participating in many professions and businesses, and playing an active role in politics. However, as shown in the Gender Gap Analysis (Annex ll), the Government realizes that it has to sharpen and strengthen its focus on this important development issue to fully utilize its human resources.
Girls and women constitute a large portion of the population in NWFP. A comparison of social indicators shows that girls and women lag behind boys and men in terms of

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survival, development, protection and participation. Contrary to international trends, there are fewer females than males in Pakistan. Less girls than boys get enrolled in schools, as can be seen in the Gender Gap Analysis. Girls and women are also more at risk of violence and exploitation. Families often take the decision of restricting mobility of girls and women to protect them from external threats of violence and abuse, thus depriving them of equal opportunities for development.
As a result of reduced opportunities, girls and women are unable to develop their full potential thus limiting their ability to contribute fully to the development of the family and the community. It also places a heavy responsibility on boys and men, who often have to support large families of 8-10 persons on a single income. Translated at the provincial level, the inadequate human development and protection of girls and women deprives the province of huge economic and development potential. Without addressing the issues of gender-based biases and discriminations against girls and women, poverty reduction strategies would not have the desired impact in the province.
Government of Pakistan acceded to the Convention on Elimination of Discrimination Against Women (CEDAW) in 1996, thus indicating its commitment to provide equal opportunities for development and elimination of discriminations against girls and women at all levels, including various government and social levels. The Government of Pakistan has also prepared a National Plan of Action, which outlines plans for key areas of development for girls and women, which include health, education, economic empowerment, political participation and protection from violence and exploitation. The plans addresses the issues of development of girls and women in different spheres of life. It proposes selected strategic interventions aimed at providing equal and equitable human development opportunities and protection from violence and abuse for girls and women.
Future Strategy:
The provincial government will implement numerous strategies in this regard, which include: promoting the participation of women in decision making processes; policy change to facilitate female participation; capacity building and skill development; partnership with community, NGO and private sector; gender disparity reduction; ensuring access to gender disaggregated data; and provision of improved access to social services for the female population.
In line with this strategic approach, key interventions proposed include a focus on the following:
 Review and bring about required changes in legislative framework and policies to end discriminations and gender biases with a focus on education, health, finance, asset ownership, labour and protection from violence;
 Promote participation of women in decision making processes at all levels including in the political processes;
 Build the capacity of women in decision making positions to enable them to fulfill their responsibilities;

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 Raise awareness on equal rights of girls and women for survival, development, protection and participation from policy to household level, with a focus on boys and men;
 Develop capacity of women for improved participation, financial and land management as well as entrepreneurial skills;
 Ensure equal access to services for girls and women including in the areas of health, education, skills training and credit;
 Ensuring that routine monitoring systems used for data generation, surveys and evaluations will provide gender disaggregated quantitative and qualitative information;
 Ensure that the planning process does utilize gender disaggregated data to ameliorate the situation of the female population;
 Develop capacity of service providers for ending gender-biases in planning and access to services and gender-based violence and exploitation;
 Remove barriers of age, domicile, female discrimination as an affirmative action to help reduce the gender gap in employment;
 Document, monitor and address gender-based biases and violence against women.
Specifically, in each of the sectoral reform areas, especially in the crucial education sector, concerted efforts are being made to reduce gender disparity. Also access to maternal and family planning services is being increased. The Department of Women Development has under implementation several schemes, partly with support from the private sector and local communities, to promote skill development among women and provide temporary shelter, a crisis center, and free legal assistance for women in distress. The Government plans to expand these activities through public-private partnership, community help, and NGOs’ assistance.
A Provincial Steering Committee, including civil society members, would oversee these activities, and provide a vehicle to raise people’s awareness of the needs and rights of women.
Children constitute majority of Pakistan’s population. The proportion of the population aged less than 15 years is higher in NWFP than the national average. Government of Pakistan is committed to welfare and development of this large cohort. Child rights are recognized through the Convention on the Rights of the Child (CRC) to which Pakistan is a signatory. Recently, in the UN Special Session on Children, 2002, Pakistan alongwith the rest of the world, agreed to make policies and take actions for meeting goals and objectives set at the Special Session. These commitments are contained in the outcome document entitled “A World fit for Children”. As a follow up, Pakistan is preparing a National Plan of Action [NPA] for Children. Similar planning initiatives are going on in provinces and Provincial Plans of Action [PPA] for Children are under preparation. This document is set to lead action for child rights and child welfare in the next 10 to 15 years. It is recommended that the strategies under the Provincial Plan of Action (PPA) under preparation be given priority in the overall poverty reduction strategy of the NWFP.

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There are elaborate national and provincial plans to provide education and health to children. However in crucial areas such protection from violence and child labour plans are still being developed. Plan of Action for Children for NWFP would therefore serve to fill these crucial gaps in the social sector policies relating to children in a holistic manner.
It is now accepted worldwide that there can be no sustainable development without giving access to rights. Rights of the children are of special significance in this regard. The government has shown commitment by announcing plans to of adequately funding the Plan of Action for Children. While detailed indicators are included in the PPA, three indicators on birth registration, juvenile justice and education of worst forms of child labour are being included in the PRSP for creating sharp focus and linkages between the policies of the government and its implementation methodology. The Plan of Action for Children will provide the matrix for implementing the commitments contained in the PRSP.
Water Supply and Sanitation5:
Only Sixty-three percent of NWFP population has access to safe drinking water, which excludes open dug wells. This figure stands at 89 and 59 per cent for urban and rural access, respectively. Thirty-nine per cent of the population in NWFP have access to adequate sanitation. The urban – rural access is 75 and 33 per cent respectively. Lack of access to safe water, inadequate sanitation and poor hygiene practices are some of the underlying causes of malnutrition, disease and death in children. The lack of access to safe sanitation is one of the major reasons for prevalence of sicknesses such as diarrhea in children and adults. Ensuring access to safe water and adequate sanitation can have a major impact on raising the long-term GDP levels of the province. The ranking of provinces in with respect to adequate sanitation has been presented in table 2.1.
Under the devolution plan, rural water has been increasingly decentralized to the district and sub-district level including the allocation of funds to the different social sectors. Provincial governments are now releasing block allocations to districts. The funds earmarked for the sector are included in overall provincial budgets (e.g the Public Health and Engineering Departments, Local Government).
Within the existing fiscal space there is a need to ensure that budgets for rural water and sanitation are earmarked within the block allocations to districts and included in the Khushal Pakistan Programme. Rural water and sanitation projects can also be funded from the special funds allocated to each MNAs and MPAs.
It will be imperative to allocate funds for rural areas for water and sanitation as traditionally, the focus has been on large infrastructure urban projects with high Operation & Management costs and little community involvement, affecting the sustainability of these projects. Low cost solutions for rural water and sanitation have proved effective and have been insitutionalised within the local government. With the redefinition of the roles and redistribution of functions of the local government, resources
5 All data quoted in this subsection are from NWFP MICS 2001

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and information on low cost technological options need to be provided at district and sub- district levels.
Strategies for rural water and sanitation: The following strategies will be followed for rural areas:
 Policy shift focussing on low cost technology and sustainable models;
 Capacity building of district and sub-district functionaries vis-à-vis their new roles and responsibilities;
 Replication of successful low cost interventions with community involvement.
The devolution has provided an opportunity to address key institutional constraints, which have historically hindered the delivery of urban services, especially to the poor [see Annex IV]. Using this opportunity, Government of NWFP has: consolidated various service delivery agencies (Communications & Works and Public Health Engineering Department) with fragmented and overlapping service provision mandates; transferred functions and organizations to the local governments (including the Urban Development Authorities); and instituted special arrangements for the main urban center, the Peshawar City District. A regulatory body will be established for the urban water sector at the provincial level. The Government of NWFP has nurtured an enabling environment for participatory development and has spearheaded Community Driven Development initiatives throughout the province. The World Bank’s Community Infrastructure Project in NWFP has been a success story to the extent that a follow-on operation is being planned. The Province is also the first in the country to start the development of an integrated and participatory strategic plan at a city district level, which is likely to provide a model for a comprehensive development framework for the newly formed district governments. The Government intends to examine the need for any further streamlining of agencies in this sector, adopting a uniform policy for community participation and responsibility, and upgrading the management and technical capability of the local government urban services institutions.
C) Improving Fiscal Sustainability and Restoring Financial Accountability.
Fiscal and Expenditure Reforms
Objectives and Strategy. To expand fiscal resources for meeting its growing development and service needs, the GOVERNMENT OF NWFP has adopted a comprehensive medium-term fiscal strategy. This includes:
• Increasing provincial revenues through further tax reform and accelerating user charge increases and saving interest payments through better debt management;
• Divesting inessential activities;
• Implementing fiscal devolution;
• Improving budgetary process, financial management, procurement process and transparency;
• Strengthening the audit oversight arrangements; and

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• Formulating a medium term budget framework.
The key medium term pillar of fiscal adjustment is expenditure management and increasing non-tax revenues and user charges, given the low immediate potential for enhancing taxes.
Recent Reforms. The Government has started implementing the above strategy and has already taken actions in key areas as discussed below:
Implementation of fiscal decentralization has begun at the provincial level. In anticipation of the devolution of powers, the province prepared the initial district budgets for FY02. Local governments are preparing their own budgets for FY03, and the needed staff has been re-assigned to the districts. Starting in FY02, the province began allocating certain development funds across districts based on clear criteria, including population and indicators of social development and backwardness. NWFP is the first province to have used a needs-based formula for budgetary transfers to the districts.
Revenue measures are being implemented to strengthen revenue mobilization. The tax reforms include reducing and restructuring provincial taxes; imposing of income-based agricultural income tax to complement the province’s land-based tax (unlike the other provinces the land tax in NWFP is applied to all landholdings without exemptions); outsourcing of collection of motor vehicle tax and harmonization of rates with other provinces; and restructuring and expanding of the base of the Urban Property Tax from 18 to 27 rating areas. Moreover, enhancement and rationalization of user charges has been initiated, especially for economic and tertiary-level social services. Irrigation water rates (abiana) are being increased by 25% each year. Higher user charges for roads and tertiary health and education services are also planned, beginning in FY03.
Expenditures have been reprioritized to improve composition and strengthen expenditure management. The development program was rationalized. Over the last two years, the number of ongoing projects has been reduced by two-thirds, from 1125 to 375 projects; as a result the “throw-forward” of fiscal liabilities to complete ongoing projects was also reduced by 62% from Rs. 24 billion to Rs. 9 billion. Throw-forward now is around 100% of the annual development program compared to more than 300% a few years ago. The share of development expenditure in total expenditures has increased from an average of 10-15% during FY98-01 to 25% in FY02. The Government Of NWFP has reduced the wheat subsidy from Rs. 2.7 billion in FY99 to Rs. 1 billion in FY02. A number of public enterprises and autonomous bodies have been closed, which would save around Rs. 70- 100 million annually.
Budget formulation and monitoring has improved. Unlike past practices, the government is no longer permitting spending commitments to be made against net hydel profits above the capped amount of Rs. 6 billion. It has also programmed expenditures assuming a shortfall of around 5% in federal tax transfers to NWFP. The Government of NWFP has also instituted several reforms in the preparation, processing, and execution of the budget

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including: posting fiscal data on the web; economic classification of expenditures in budget documents; introducing amid-term review; computerizing budget preparation; establishing a new schedule for timely release of funds; and establishing a professionally staffed Budget Analysis Unit, to start functioning in early FY 03.
Budget Outcome for FY02 is on track. During the first 9 months of FY02, provincial tax collection was well on track to meet the budget targets mainly due to higher collection of electricity duty; collections of other taxes are also consistent with the budget. Collection of user charges add up to 65 percent of the budgeted amount despite lower collection of ‘abiana’ on account of drought. Federal tax transfers have been slightly lower than anticipated due to lower collection at the federal level. However, transfer of hydel profits, up until May, were only Rs. 1.7 billion out of the ‘capped’ Rs. 6 billion for the year. Substantial federal grants for the Khushal Pakistan Program and subvention have offset some of the shortfalls in total revenue receipts. On the expenditure side, partly reflecting revenue shortfalls and transitional disruptions due to devolution, total expenditure is just above 60 percent of the budgeted amount for the whole year. Expenditures have picked up in the fourth quarter, now that procedural bottlenecks to transfer of funds to the districts have been resolved.
As a result of fiscal restructuring, the share of current expenditures will fall from 74% of total spending in FY02 to 69% in FY05, with a corresponding increase in development expenditure. The expenditures on priority social sectors – mainly education and health – will increase from 27% of total expenditures in FY02 to 35% in FY05.6 It is expected that with the implementation of its fiscal strategy, the province would have a more sustainable fiscal position, and, together with institutional reforms, an improved public service delivery.
To complement efforts to generate their own resources, the Government of NWFP is seeking financial assistance from the Bank, for support of its broad based development efforts and restructuring of the provincial fiscal accounts. As a result of the projected borrowings from the Bank, the Government of NWFP’s total outstanding debt will increase from Rs. 73 billion in FY02 to Rs.95 billion FY05, but total debt service (including principal) will decline from Rs. 8.6 billion to Rs. 7.8 billion over the same period due to lower interest payments. As a proportion of the government’s receipts, total debt service will decline from 23% in FY02 to 17% in FY05.
Medium-Term Reforms. The medium-term reforms in this area focus on efforts to strengthen implementation of revenue and expenditure reforms consistent with the MTBF, and include further improvement of revenue mobilization to achieve a sustainable fiscal position, and enhanced funding for social services to meet medium term target outcomes. In addition, the Government of NWFP aims to further strengthen budget processing and monitoring, including computerization, increasing the coverage of fiscal data posted on the web, and program and performance budgeting. The permanent
6 In education: from an annual average of Rs. 0.5 billion (FY98 – 02) of development expenditures to an annual average of Rs.2.9 billion during FY03-05; and in health: from Rs.200 million annual average, during FY98-02, to annual average of Rs. 0.9 billion during FY03-05.

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Provincial Finance Commission would be established to institutionalize fiscal decentralization and review on an ongoing basis fiscal performance of the districts. In addition the government will be undertaking a study on tax potential which will be completed during FY03, to provide the provincial government with the analysis and recommendations on further tax measures for the FY04 budget. A medium term plan will be developed, during FY03, for the modernization and strengthening of AIT collection and processing. Also an agreement would be reached with the Federal Bureau of Statistics, and funding provided, to collect reliable provincial economic data.
Financial Management and Accountability
Financial management and accountability issues are at the center of the NWFP Government’s reform program. Improvement in fiscal management, quality of public accounts, public accountability and procurement are among the key reform targets. The Government of NWFP has taken the following actions to strengthen and improve financial management.
The Fiscal Monitoring Committee (FMC) and the Departmental Account Committees (DACs) are fully functioning. The Provincial FMC has been functioning adequately and has done a good job. According to the provincial AG, for FY01, 100% of NWFP’s provincial receipts and 100% of expenditures were reconciled, compared to only 50-60% a few years ago. This was a good achievement compared with past experience and the situation in other provinces. Reconciliation between the AG and the State Bank of Pakistan (SBP) have improved substantially and the amounts in suspense are now insignificant, with the re-introduction of next day reconciliation between the DAOs and the SBP/National Bank of Pakistan. Unlike the past when DACs were infrequently held, the DACs are now being held regularly as per the schedule provided by the AG’s office. In FY01 and FY02, 100% of the DACs were held.
The accounting capacity is being strengthened as follows: (i) NWFP will appoint in early FY03 a Provincial Controller in its Department of Finance to lead financial management reforms. The Controller’s main task will be to implement financial management and public financial accountability reforms. In addition, the Controller will be responsible for: (a) accounting and financial reporting (jointly with the provincial AG); (b) developing provincial capacity to handle accounting and payroll; (c) preparing program to strengthen internal controls, internal audit, and financial policies and procedures; and (d) assisting agencies respond to audit observations and systemic issues; and (ii) the position of the District Accounting Officers – the linchpin in the accounting systems – are being upgraded to professionally manage the accounts under the newly devolved fiscal authority. The province has decided to upgrade, for all major districts, these DAO positions to officer grade to attract qualified staff. They will induct younger and better trained staff at this critical first tier accounting management position.
A Public Accounts Committee (PAC) has been formed. The functioning of the ad hoc PAC in NWFP was delayed due to a High Court ruling against it. This judgment has recently been rescinded, and the Committee formed in end-May 2002. The Governor has

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requested the PAC to review past audit reports on last-in first-out basis and open all Committee meetings to the public. It is expected that PAC will be made a fully functioning agency with the province taking prompt action on its recommendations.
Fund Release Procedures for Development and Non-salary Funding for Priority Sectors have been streamlined. For the development budget, 50% of releases are now made each in July and January. In case of non-development expenditures, releases are being made as follows: 10% in July, 40% in August, 40% in January, with remaining 10% kept as contingency.
The Overall Legal and Regulatory Framework for Procurement is being improved starting with the approval of a new Procurement Ordinance to simplify processes, increase competition and transparency, and introduce a code of ethics.7 Thereafter, during FY03, detailed rules and regulations would be notified, the existing Purchase Manual revised, and standard bidding documents introduced.
The General Provident and Pension Funds have been established. In order to better manage the government’s deferred liabilities, the Government of NWFP has established a separate General Provident Fund and a Pension Fund outside the Provincial Consolidated Fund. At present, the General Provident Fund has a total deposit of Rs. 3 billion, against the present total deferred liability of Rs. 6 billion. The Pension Fund presently has deposits of Rs. 1.6 billion against the current pension liability of Rs. 2.5 – 3 billion per annum. The government has been increasing the capital of the Pension and Provident Funds in the last two years and intends to continue this during FY03-05, depending upon resource availability. The amounts placed in these Funds are invested in approved fixed income securities and the interest income generated is ploughed back into the respective Funds.
In addition to above measures, the Government of NWFP has recently approved a Financial Management Reform Program. This program provides a broad framework, a road map for its implementation and benchmarks. It was agreed with the Government of NWFP that a detailed Provincial Financial Accountability Assessment (PFAA) would be conducted jointly by the Bank and the Government of NWFP by December 2002. Based on the findings of the PFAA, a more comprehensive short, medium, and long term financial management reform action plan will be prepared and agreed between the Bank and the Government of NWFP.
Supplementing the provincial efforts, the World Bank supported project for strengthening accounting and financial reporting is also being implemented at the provincial level. Under the project, the adoption of the New Accounting Model and computerization of government accounting system will have a positive impact on the reliability and timeliness of provincial accounts. By December 2003, all of the District Accounting Officers (DAOs) will be computerized and linked to the provincial Accountant General’s (AG’s) Office and the Finance Department.
7 The NWFP Governor approved enactment of the Ordinance on May 30, 2002.

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D) Promoting Sustainable Growth
The unexploited strength of the NWFP economy lies, amongst other sources, in its tremendous potential in its minerals, value-added agriculture, timber and non-timber products, hydel resources and potential for tourism development. This PRSP recognizes that accelerating growth is key to poverty reduction but also that the private sector has to be the engine of this growth and that such growth should be based in the rural sector where the majority of the poor reside and where the highest employment multipliers are evidenced. The PRSP also strongly endorses the mainstreaming of gender in all growth promotion activities in the Province as the most efficient means for poverty reduction.
The Rural Development Strategy proposed here relies on the acceleration of growth in value-added agriculture and overall agriculture development accompanied by the development of the non-farm sector to bring about poverty reduction. In this respect the Government is envisaged to play only a supporting role to promote the private sector through the provision of farm to market roads, easy and timely availability of institutional credit and easy and timely availability of information and technology.
Within agriculture development the Government should ensuring farmers’ easy access to necessary technical information and inputs so that they can exploiting the province’s comparative advantage in terms of location to supply not only the large domestic markets but also the middle east. An important step in this regard is the rationalizing of the Agriculture Extension Department and the initiating of programs to enhance its technical capacity to help farmers increase production and export. Other specific areas of focus include assisting the development of the seed industry with public-private partnership; expanding the vaccination coverage of livestock; reducing the role of the public sector and improving the overall functioning of agriculture markets.
The largest poverty reduction comes from the development of the non-farm sector in rural areas. This sector is generally extremely employment intensive and requires the lowest amounts of capital per job created. It is therefore ideal in the resource constrained conditions of NWFP. The Government will actively promote off-farm employment opportunities by promoting agro-based industries and employment through processing and other activities and services that rely on the linkages with the farm sector The dairy and livestock sector offer enormous potential in this regard.
The Province has enormous mineral resources including marble and precious gemstones. These need to be fully exploited for sustainable poverty reduction. It is important that the minerals be processed within the province so as to create jobs locally. In this regard it is important to allow easy entry of small-scale businesses by encouraging private investment and improving the law and order situation.