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History of economics in Pakistan

Pakistan is a rapidly developing country and a major emerging market, with an economic growth rate of 7 percent per annum for four consecutive years up to 2007. Despite being a very poor country in !"7, Pakistan#s economic growth rate was better than the global average during the subse$uent four decades, but imprudent policies led to a slowdown in the late !!0s. Pakistan is a nation with a diverse economy that includes te%tiles, chemicals, food processing, agriculture and other industries. &n terms of purchasing power, it is the 2'th largest economy in the world while in absolute dollar terms it is the "7th largest economy. (he economy has suffered in the past from decades of internal political disputes, a fast growing population, mi%ed levels of foreign investment, and a costly, ongoing confrontation with neighboring &ndia. )ubstantial macroeconomic reforms since 2000, most notably at privati*ing the banking sector have helped the economy. Pakistan has seen a growing middle class population since then and poverty levels have decreased by 0+ since 200 . ,DP growth, spurred by gains in the industrial and service sectors, remained in the '-.+ range in 200"-0'. &n 200/, the 0orld 1ank named Pakistan the top reformer in its region and in the top 0 reformers globally. &slamabad has steadily raised development spending in recent years, &nflation remains the biggest threat to the economy, jumping to more than !+ in 200/ before easing to 7.!+ in 200'. &n 200., following the surge in global petrol prices inflation in Pakistan has reached as high as 2/.0+. (he central bank is pursuing tighter monetary policy while trying to preserve growth. )ince the beginning of 200., Pakistan#s economic outlook has taken a dramatic downturn. )ecurity concerns stemming from the nation#s role in the 0ar on (error have created great instability and led to a decline in 2D& from a height of appro%imately 3. bn to 34./ bn for the current fiscal year. 5oncurrently, the insurgency has forced massive capital flight from Pakistan to the ,ulf. 5ombined with high global commodity prices, the dual impact has shocked Pakistan#s economy, with gaping trade deficits, high inflation and a crash in the value of the 6upee, which has fallen from '0- 7)D to over .0- 7)D in a few months. 2or the first time in years, it may have to seek e%ternal funding as 1alance of Payments support. (he 8&7 estimates that inflation should drop back to single digits in 20 0, and that growth should pick up to over /+ per annum by 20 . 9lthough less then the previous / year average of 7+, it would represent a overcoming of the present crisis wherein growth is a mere 4./+ : " +. Pakistan is aggressively cutting tariffs and assisting e%ports by improving ports, roads, electricity supplies and irrigation projects. &slamabad has doubled development spending from about 2+ of ,DP in the !!0s to "+ in 2004, a necessary step towards reversing the broad underdevelopment of its social sector. ,rowing stability in the nation#s monetary policies has contributed to a reduction in money-market interest rates, and a great e%pansion in the $uantity of credit, changing consumption and investment patterns in the nation. Pakistan#s domestic natural gas production, and its significant use of 5;, in automobiles, has cushioned the effect of the oil-price shock of 200"-200/. Pakistan is also moving away from the doctrine of import substitution which some developing countries <such as &ran= dogmatically pursued in the

2 twentieth century. (he Pakistani government is now pursuing an e%port-driven model of economic growth successfully implemented by )outh 8ast 9sia and now highly successful in 5hina.

Stock market
&n the first four years of the twenty-first century, Pakistan#s >)8 00 &nde% was the best-performing stock market inde% in the world as declared by the international maga*ine ?1usiness 0eek@. (he stock market capitali*ation of listed companies in Pakistan was valued at 3/,!47 million in 200/ by the 0orld 1ank. 1ut in 200., after the ,eneral 8lections, uncertain political environment, rising militancy along western borders of the country, and mounting inflation and current account deficits resulted in the steep decline of the >arachi )tock 8%change. 9s a result, the corporate sector of Pakistan has declined dramatically in significance in recent times.

Demographics
0ith a per capita ,DP of over 34000 <PPP, 200'= compared with 32'00 <PPP, 200/= in 200/ the 0orld 1ank considers Pakistan a medium-income country, it is also recorded as a ABedium Development 5ountryA on the Cuman Development &nde% 2007. Pakistan has a large informal economy, which the government is trying to document and assess. 9ppro%imately "!+ of adults are literate, and life e%pectancy is about '" years. (he population, about '. million in 2007, is growing at about ..0+. 6elatively few resources in the past had been devoted to socio-economic development or infrastructure projects. &nade$uate provision of social services, high birth rates and immigration from nearby countries in the past have contributed to a persistence of poverty. 9n influential recent study concluded that the fertility rate peaked in the !.0s, and has since fallen sharply. Pakistan has a family-income ,ini inde% of " , close to the world average of 4!.

Tourism
&n Pakistan#s economy, tourism has the potential to play a vital role, due to the majestic landscape of Pakistan and the variation of cultures within the nation. Cowever, due to a lack of proper infrastructure in certain areas, and a worsening security situation in others, Pakistan still faces major set backs. Dtherwise, according to some international companies, Pakistan#s tourism industry has the potential to reach some 3 0 billion annually. (ourism in Pakistan is a growing industry. Bajor attractions include ruins of &ndus valley civili*ation and mountain resorts in the Cimalayas. Cimalayan and >arakoram range <which includes >2, the second highest mountain peak in the world, attracts adventurers and mountaineers from around the world.

Revenue
(he 1oard of 6evenue has collected nearly one trillionEs 6s <3 ". billion= in ta%es in the 2007-200. financial year.

Structure of economy
(he economy of the &slamic 6epublic of Pakistan is suffering with high inflation rates well above 2'+. Dver ,0. patent applications were filed by non-resident Pakistanis in 200" revealing a new-found confidence. 9griculture accounted for about /4+ of ,DP in !"7. 0hile per-capita agricultural output has grown since then, it has been outpaced by the growth of the non-agricultural sectors, and the share of agriculture has dropped to roughly one-fifth of Pakistan#s economy. Pakistan ranks fifth in the Buslim world and twentieth worldwide in farm output. &t is the world#s fifth largest milk producer. Pakistan#s principal natural resources are arable land and water. 9bout 2/+ of Pakistan#s total land area is under cultivation and is watered by one of the largest irrigation systems in the world. Pakistan irrigates three times more acres than 6ussia. 9griculture accounts for about 24+ of ,DP and employs about ""+ of the labor force.

Economic aid
Pakistan receives economic aid from several sources as loans and grants. (he &nternational Bonetary 2und <&B2=, 0orld 1ank <01=, 9sian Development 1ank <9D1=, etc provides long term loans to Pakistan. Pakistan also receives bilateral aid from developed and oil-rich countries. (he 9sian Development 1ank will provide close to 3' billion development assistance to Pakistan during 200'-!. (he 0orld 1ank unveiled a lending program of up to 3'./ billion for Pakistan under a new four-year, 200'-200!, aid strategy showing a significant increase in funding aimed largely at beefing up the country#s infrastructure. Fapan will provide 3/00 million annual economic aid to Pakistan. &n ;ovember 200., (he &nternational Bonetary 2und<&B2= has approved a loan of 7.' 1n.

Remittance
(he remittance of Pakistanis living abroad has played important role in Pakistan#s economy and foreign e%change reserves. (he Pakistanis settled in 0estern 8urope and ;orth 9merica are important sources of remittance to Pakistan. )ince !74 the Pakistani workers in the oil rich 9rab states have been sources of billions dollars of remittance. Pakistan received 3/."!4 billion as workersE remittances during the last fiscal year 200'07 up by !."2 Percent against over 3".' billion in 200/-0'. 9n &B2 research paper has revealed that workersE remittances contribute "+ to the ,DP of Pakistan and are e$uivalent to about 22 percent of annual e%ports of goods and services.

Investment
2oreign direct investment <2D&= in Pakistan soared by .0.' per cent year-on-year to 7)32.22 billion and portfolio investment by 27' per cent to 3"07." million during the first nine months of fiscal year 200', the )tate 1ank of Pakistan <)1P= reported on 9pril 2". During Fuly-Barch 200/-0', 2D& year-on-year increased to 32.22" billion from only 37!2.' million and portfolio investment to 3"07." million, whereas it was 3 0.. million in the corresponding period last year, according to the latest statistics released by the )tate 1ank. Pakistan has achieved 2D& of almost 37 billion in the financial year 0'G07, surpassing the government target of 3" billion.

" (ariffs have been reduced to an average rate of '+, with a ma%imum of 2/+ <e%cept for the car industry=. (he privati*ation process, which started in the early !!0s, has gained momentum, with most of the banking system privately owned, and the oil sector targeted to be the ne%t big privati*ation operation. (he recent improvements in the economy and the business environment have been recogni*ed by international rating agencies such as BoodyEs and standard and poorEs <country risk upgrade at the end of 2004=.

Exports
Pakistan e%ports rice, furniture, cotton fiber, cement, tiles, marble, te%tiles, clothing, leather goods, sports goods <renowned for footballsGsoccer balls=, surgical instruments, electrical appliances, software, carpets, and rugs, ice cream, livestock meat, chicken, powdered milk, wheat, seafood <especially shrimpGprawns=, vegetables, processed food items, Pakistani assembled )u*ukis <to 9fghanistan and other countries=, defense e$uipment <submarines, tanks, radars=, salt, marble, ony%, engineering goods, and many other items. Pakistan now is being very well recogni*ed for producing and e%porting cements in 9sia and Bid-8ast.

Imports
Pakistan#s imports stood at 340./" billion in the financial year 200'-2007, up by ..22 percent from last year#s imports of 32../. billion. Pakistan#s single largest import category is petroleum and petroleum products. Dther imports includeH industrial machinery, construction machinery, trucks, automobiles, computers, computer parts, medicines, pharmaceutical products, food items, civilian aircraft, defense e$uipment, iron, steel, toys, electronics, and other consumer items. )ales ta% is levied at / percent both on imports and domestically produced products. (he income withholding ta% is levied at ' percent on imports and at 4./ percent on the sales of domestic ta%payers.

Research areas of Environmental economics in Pakistan


Willingness to pay and demand elasticities for two national parks empirical evidence from two surveys in Pakistan !imayatullah "han
7sing survey-based data approach for modeling the demand for environmental ,oodsGresources, this study estimates income and price elasticities of demand for improved environmental $uality of two ;ational Parks in ;orthern Pakistan. (he study uses data from two studies. (he estimates indicate that improved environmental $uality effects can be described as a lu%ury and an ordinary and price elastic service. 5onIdence intervals show however that the classiIcation as a lu%ury is not statistically signiIcant. &ncome elasticities of willingness to pay are estimated for a broad range of environmental services. (he study Inds that income and willingness to pay vary directly and signiIcantly. (he elasticity estimates, in general, are greater than *ero, but less than unity. (he study concludes that environmental improvements are more beneIcial to lowincome groups than for high-income groups.

Introduction
Like many other developing countries, Pakistan is seeking to revitalize its tourism sector, including nature tourism to an expanding system of national parks and reserves. In South Asia, Pakistan is one of the poorest in bio diversity. It has experienced high rates of deforestation in recent years !"orld #esource Institute, $%%&'. (orests cover as little as ) * of the country+s area. ,ue to an ever increasing population, it is losing more and more forest cover primarily because of conversion of forest to agricultural as -ell as residential uses. .he /overnment of Pakistan has, in recent years, expressed a serious concern over deforestation and has sho-n significant interest in the gro-th of a reno-ned national park system. Pakistan has a number of national parks, reserves, and -ildlife refuges in different parts of the country. ,espite the limited number of national parks and reserves, their management is far from satisfactory. .his is partly because of insufficient government funds and open access of visitors to these places. 0urrently, entry to national parks in Pakistan is free. 1o-ever, revenue can be generated by introducing entry fees that could be spent on the improvement of the 2uality of the parks. .here is a need for a thorough investigation of ho- these parks can be -ell managed and ho- these environmental resources can be valued. 3o study on the valuation of national parks in Pakistan has ever been conducted. ;atural resource systems such as lakes, rivers, streams, estuaries, forests and parks are used e%tensively by people for various kinds of recreational activities. ;atural resource systems provide valuable services to people. 2rom an economic perspective, these services have two important features. (he first is that the economic value of these

' services depends upon the characteristics of the natural resource system. >nowledge of the values of these services may be important for a variety of resource management decisions. (he second important feature is that access to the resource for recreation is typically not allocated through the markets. 6ather, access is typically open to all visitors at a *ero price or a nominal entrance fee that bears no relationship to the cost of providing access. 9nd there is no or little variation in these access prices over time or across sites to provide data for the econometric estimation of demand functions <2reeman, !!4=. .here are t-o ma4or sources of funds re2uired for park management. .here are the federal and5or provincial government budgetary allocation and revenues generated from park entry fees. .he government budget allocated for management of national parks tends to be very limited since it must compete -ith other developmental programs including education, health care, infrastructure, defense spending, among other programs in the country !Isangkura, $%%6'. .he present study probes into the possibility of enhancing park entry fees to account for the recreational benefits that national parks provide tourists. .his study focuses on the 7argalla 1ills 3ational !713P' Park, Islamabad. .he present study deals -ith valuation of the 7argalla 1ills 3ational Park !713P' in northern Pakistan. .he data -ere collected -ith the help of an on site sample survey in 8998 9:. .he study used systematic random sampling method to collect data from a sample of $,999 visitors. It considered an individual travel cost model for environmental resources in a theoretical frame-ork consistent -ith the fundamental principles of consumer behaviour. .his model -as applied to individual household data to estimate the -illingness to pay !".P' for park visitation. It also estimated the price and income elasticities of visitors+ demand for park

Ta#le$% Reasons for &isiting '!( Park #y Sample Respondents


Reasons to Visit Park Sightseeing "alking <ird -atching #elaxation =xercising =ating Seafood S-imming <oating No. Respondents )9 ;9 :9 ;9 &9 $99 ;9 89 of Percent ) ; : ; & $9 ; 8

0ombination All

&89 $999

&8 $99

Demand curves
.-o linear demand curves for 713 Park visitation -ere estimated from the survey data that are sho-n in (igure 8. .he actual user demand for the 713 Park is represented by e2uation % and as the lo-er curve in (igure 8. Similarly a hypothetical demand for the 713 Park in case of improvement in the 2uality of park services is given by e2uation $9 and the upper curve in (igure 8. Figure-2: Park Visitation Demand Curves

Recreational &alue of the '!( Park


.able & sho-s consumer surplus and total recreational value of the 713 Park for the year 8998 9:. .he total recreational value e2uals the consumer surplus plus total cost of the visit. .he annual monetary recreational value of the 713 Park is about #s. 899 million !approximately >S ?:.;@ million'. .his is the value that the park yields every year for the economy. 1o-ever, this is not the revenue of the park. .his value is distinguished into consumer surplus of the visitors and total travel cost of the visitors. .he total travel costs paid by the visitors go to transportation companies and agents for service providers such as hotels, restaurants, tourist agencies, etc. In addition, the total recreational value -as also pro4ected in the case of park improvements -hich amounted to #s. 89% million.

. Ideally, -e -ould have liked to compare revenues generated from the entry fee -ith the costs of improvements in park 2uality. <ut, in the absence of reliable cost estimates for park improvements, the present study could not make such a comparison. .he recommendation that the entry fee be set at #s. 89 is based on revenue and consumer surplus as -ell as the researcher+s o-n observations.

)onclusions and policy implications


In the -ake of gro-ing eco tourism and the increasing interest on the part of 3/As and governments in natural resource conservation, non market valuation techni2ues are needed to estimate the economic benefits of environmental resources such as national parks in these areas. .he present study used the individual travel cost model !I.07' for analyzing and measuring the total recreational value of the 713 Park. >sing the I.07, the consumer surplus per visit -as estimated at #s. 8:$ and the recreational benefit per visit -as about #s.$,%%;. .he total annual consumer surplus -as estimated at #s.8:.8 million and total recreational value at #s.899.$ million. >sing the I.07, linear and semi log demand curves -ere estimated. A-n price, cross price and income elasticities of demand for the 713 Park -ere also estimated. .he 713 Park is highly o-n price and income elastic. .he demand curves sho- that if the 2uality of the 713 Park is improved, it -ill attract more visitors and generate more revenues. .his calls for the government to reallocate the budget for park management so that total recreational benefits of the park may be increased. .he 713 Park constitutes a valuable environmental resource. Although, at present the visitors do not pay any entrance fee, there is a large consumer surplus of -elfare to be gained from the existence of the Park. In the future, if the number of visitors to the 713 Park increases, it -ould, it is expected, become more valuable. Although the estimated recreational value is only one aspect of the total value of the Park, it indicates that -ith proper conservation and management, tourism can be a significant source of benefits. .his study constitutes the first published estimate of the economic value of 3ational Parks and other environmental resources in Pakistan. .his type of valuation has implications for management at the 713 Park as -ell as other parks at risk. .he 713 Park has high values from both the use and non use values. /overnments at various levels are no- the common planning units for natural resource management and are seriously considering

! the plight of their natural resources and are developing management plans accordingly. Such plans re2uire budgeting and support from different departments and agencies, but often lack economic 4ustification to help decision makers appreciate -hat they are supporting. In this regard, there is an effort to raise a-areness among local and national government decision makers of the value of park resources and -hat -ould be lost if they -ere destroyed or not properly managed for long term sustainability. .his information helps 4ustify investments in management and protection at a level of government that is directly concerned -ith its natural resource base. .he focus of this study is the valuation of environmental resources and ho- this information can be used to improve planning to national parks management in Pakistan. /overnment planners envision the 713 Park as an eco tourism destination. It is representative of a number of national parks in Pakistan. It is in need of improved management so that economic and other benefits can be restored and enhanced. .he 713 Park can generate enormous economic value through recreation. Beeping in vie- the large amount of consumer surplus and recreational value of the 713 Park, the (ederal and provincial level governments can 4ustify larger annual budget allocations for the management of natural resources. 9lternatively, the government may also consider using an entry fee to the BC; Park. (he generated Juser valueE of the park provides a guideline for the possible introduction of entrance fees and makes a strong argument for sustaining the area, as it has been demonstrated that benefits derived are large. &n addition, the estimated value may also help in promoting the protection of other natural areas, and are thus presumably even more dependent on fair decision-making within the policy arena. )ince the consumers <visitors= are willing to pay much higher than they actually pay for Park visitation, an entry fee of about 6s.20 per person may be used. (his would generate a great deal of money that could be used for improving park management. .he study sho-ed that the visitors -ere -illing to pay more than -hat they actually pay and that an entrance fee of #s.89 per person per visit -ould generate sufficient amount of money to be used for park improvement. .his, ho-ever, -ould reduce the overall consumer surplus. .hus, the dra-back of this -ould be that the poor -ill be negatively affected as they -ould be less able to visit the park if an entrance fee -ere charged. 0ritical issues remain to be explored further before the recommended policy for the benefit value capture can be fully realized. .hese include policy procedures and the process for implementation, including information sharing and consultation. .he administrative organization for implementation and enforcement -ill also re2uire investigation.

Economic Evaluation of Pesticide Use Externalities in the Cotton Zones of Punjab, Pakistan
B. 9K88B >C9;, B7C9BB9D &L19M, &2(&>C96 9CB9D, and B9;KDD6 C. )DDB6D
N

I* I(TR+D,)TI+(
9t the inception of Pakistan in !"7, there was practically no plant protection service in the country and economic soundness of plant protection measures was not even reali*ed for a long time. (he use of chemicals as preventive measures to reduce losses by insects and diseases was almost non-e%istent during !'0s. Cowever, the ?grow more@ pressure rendered the traditional methods insufficient, to control the ever increasing pest problem from !70s onwards. 5onsumption of pesticides in Pakistan has increased from ''/ metric tones in !.0 to '!.!7 B( in 2002. (his colossal increase in pesticide consumption has not led necessarily to an increase in the yield of crops, as demonstrated by Poswal and 0illiamson < !!.= and 9hmad and Poswal <2000=. (his indiscriminate use of pesticides has destroyed the bio-control agents in the agro-ecosystems and the populations of natural enemies of the insects and pests have declined up to !0 + during the last decade especially, in cotton growing areas of the country. (he farmers are mainly concerned about the private cost of pesticide they have to incur to achieve desirable outputs and are least concerned about the undesirable byproducts of their production processes. (he pressure to ma%imi*e output is enormous especially, on low-income resource-poor small farms and the tenants.

-nalytical .ramework
(he e%ternal costs are categori*ed as actual and potential costs in terms of damage costs or damage abatement costs respectively (able . (he potential costs include costs of establishment of laboratories for pesticide residue analyses, residue monitoring programmes, and training programmes on the safe use of pesticides. (he loss of biodiversity, pest resistance, fatalities are the instances of actual cost born by the society. (he assessment of the actual and potential e%ternal costs was re$uired to specifically design the corrective measures in accordance to the pesticide use level and its relative impact on health, pest resistance and environment.

Externalities of Pesticide ,se


(he environmental and social cost of pesticide use to the nation amounted to !" million rupees per year <(able 2=. (he bulk of the cost is caused through production losses due to resistance development in cotton pests and damages to domestic animals, followed by damage to human health, loss of biodiversity and monitoring costs of residues in food chain. (he costs of monitoring through residue analysis and implementation of pesticide use regulations belong to the damage prevention costs.

The )ost /enefit -nalysis of Pesticide ,se


(he benefit cost ratios were estimated separately using private costs as well as social costs associated with pesticide use and are reported in (able ". Potential yield

gains of pest control were estimated by calculating 27 percent yield loss of cotton due to insect pests and assuming /0 percent effectiveness of insecticide control under farmer conditions. (he production loss estimates are based on the results presented in the annual reports < !!2- !!!= of 5entral 5otton 6esearch &nstitute, Bultan. 9bout 272 kg per hectare increase in the yield of seed-cotton was estimated with pesticide use. (he actual gross benefit of pest control was calculated as .0'! million rupees by multiplying incremental yield with price of seed-cotton <6s 7./Gkg= and the total cotton area of ! districts < .7 million hectare=. &n order to calculate benefit cost ratio, the private costs of pesticides were added to the producer rent yielding the gross value added from this input (he social cost resulted into a benefit-cost ratio of about 0."4. (his shows that benefit cost ratio of . " reduced significantly when e%ternal cost was added in the total cost. Cowever, the ratio of e%ternal costs to the private cost of pesticide use is $uite high < .'"=, which shows other tradeoffs involving environmental $uality, irreversible damages to agro-ecosystem and human health problems.

)onclusion
(he studies conducted at the international arena have shown massive e%ternal costs, associated with the use of pesticides in agriculture, to the respective societies. Pimental, et al. < !!2= estimated that the e%ternal cost of pesticide use for the 7)9 amounted to 3. billion per annum. 9 second attempt was made by )teiner, et al. < !!/= who estimated a cost of e%ternalities of the order of 3 .4 billion to 34.' billion for the 7)9 economy. (his was two to three time less than the e%ternality cost estimated by Pimental and his colleagues. 0aibel, et al. < !!!= estimated an e%ternal cost of pesticide use amounting to at least 2/2 million DB per year for 8% 2ederal )tate of ,ermany. (his cost accounted for 24 percent of the respective private cost actually paid by the producers. (hese e%ternal costs are not paid for the impairment of health among pesticide users, reduction in biodiversity, ground water contamination, residues in food items, and so on. (hese costs need to be internali*ed by making all the stakeholders to consider it into their accounts. (his study attempts at highlighting the e%ternal costs associated with pesticide use in Pakistan and to suggest appropriate guidelines for regulating the safe use of pesticides in the country. (he e%ternalities assessed in this study arise from the routine and legal use of pesticides on cotton crop in Bultan and 1ahawalpur, the two main cotton-producing divisions of Punjab. (he estimates include the $uantitative e%tent of adverse impacts of pesticide on human health, natural resources, food chain, production losses, and domestic animal poisoning.

Environmental Preservation 0 Sustaina#le Development in Pakistan


(he subject of the environment has to be transformed into a movement. 0ith the launching of this movement the following objectives should be achievedH

-wareness
0hen the subject environment would develop into a movement, there will be an increase in awareness in public, at all levels. People would come to know of the importance of this issue.

Participation of the People


;o scheme or plan launched by the government can be successful until and unless there is involvement on behalf of the people. 0hen people will get involved then they will take personal interest in this matter and make the movement a success. &t is true that unless the issue of environment is not so widely understood in the country, it will be very difficult for the agencies to get the involvement and the participation of the people.

Planning the 'ovement


(o introduce and form environmental clubs in schools and colleges in various cities. 8%hibition, debates and essay competitions in schools and colleges, emphasi*ing the necessity and importance of a clean environment. Mearned people in the field of environment and well-known personalities should be asked to address the students on this issue. 5elebrities, sportsmen and television personalities can be involved at this stage. (he young people cannot be e%pected to do everything and anything on their own. 2or them the easiest and most effective method is to set out certain scales in front of them. 2or e%ampleH O 5lassroomGCome O )choolG5ollegeGMocality O District O 5ity O 5ountry Pouth should first try to work towards one scale and then proceed to the ne%t.

Estimating entry charges for the 'argalla !ills (ational Park 1'!(P2 in Pakistan
(he study reveals that the benefits from the park to consumers or consumer surplus, amounts to a significant 6s. 24 million per year. 1ased on simulated demand for park services, the study recommends an entrance fee of 6s. 20 per visitor. &mplementing such a fee would generate annual revenues to the e%tent of appro%imately 6s. million to the ,overnment of Pakistan. (his is a si*able sum, since it e$uals " percent of PakistanEs budget allocated to the environment sector. 2or natural systems and ,overnment managers perpetually strapped for funds, this valuation e%ercise provides important lessons that go beyond the BC;P itself. Cimayatullah >han values the recreational benefits from Bargalla Cills ;ational Park in ;orthern Pakistan in what is the first valuation study of its kind in the country. (he study is based on a survey of 000 visitors to the Park in 2002-04.

W!+ &ISITS T!E '!( -(D W!-T D+ T!E3 4I"E5


(he authorEs survey of a 000 visitors to the BC;P provides an opportunity to

4 assess the market for recreation in Pakistan. (he data shows that the average visitor who enjoys natural areas around &slamabad is appro%imately 4! years old, has at least a primary school education and is married with seven children. )i%ty + of the visitors are from urban areas. )ome '/+ of the sample respondents earned between 6s./000 to 6s.20,000 in monthly income. (he response from the sample respondents establishes that the majority of visitors are happy with the recreational $uality of the park. Cowever, '2 percent of visitors wanted improvements in the $uality of the services available at the park. 9 significant 4. percent of visitors felt that Park entry fees should be raised to finance improvements. (hus, this market survey suggests that the BC;P is visited often by middle-class households who live in nearby 6awalpindi and &slamabad, and also by people from out of town. Qisitors appear to truly appreciate the amenities of the BC;P and may even be willing to pay for improvements.

T!E RE)RE-TI+(-4 &-4,E +. T!E '!(P


Cimayatullah >han estimates the total recreational value from BC;P to be 4./ million 7)D. (his sum e$uals economic benefits plus the total cost of the site visit. (otal economic benefits alone are estimated to be a whopping 6s. 24 million or . percent of the total budget allocation for PakistanEs environment sector. 2urther, the improved park services would increase economic benefits by 6s. ! million. (his jump in surplus indicates that visitors are willing to pay for park improvements.

,SI(6 -( E(TR3 .EE T+ R-ISE P-R" RE&E(,ES


9nother relevant outcome from the study is the estimation of an entry fee. 9s shown in the ne%t figure, a fee increase from the present charge of 0 to 6s. /0 would result in revenues for BC;P first increasing and then decreasing as visitors

P+4I)3 +,T)+'ES
9t a basic level the study underlines the importance of using non- market valuation techni$ues to estimate hitherto un-captured and under-captured economic benefits from environmental resources such as national parks. &n the conte%t of Pakistan, the study places the spot light on three important issues. &ncreased budget outlays for BC;P maintenance are viable and justified, as an improved park would attract more visits and could in turn generate revenues. 5learly, the government should look at such allocation as an investment in itself. 9n entrance fee of 6s.20 for BC;P could be introduced, as consumers are willing to pay for benefits from the park. (his charge would generate close to million rupees for the e%che$uer. (he implications of the valuation e%ercise for BC;P go beyond this park, and need valuation more national parks

"

.orest Resource -ccounting


2orest industries the world over are considering the transition to sustainable forest management <)2B=. )ignificant stresses are being e%perienced by forest stakeholders as they come to terms with this transition, which includes notions of resource scarcity, sustainable practices and non-timber forest values. Mocal conditions strongly influence the definition and implementation of new management practices, which results in very different transitions being re$uired in different locations. (he 2orest 6esource 9ccounting cycle contains five processes, the first of which agree forest goals - aims to agree the principles, policies, values and issues which define )2B under the prevailing local conditions. 9 high degree of consultation is re$uired during this process, helping to build ties between stakeholders and facilitate further cooperation. (he approach can be applied at various geographic and technical levels. (o date, it has been piloted in 8cuador, ,uyana, &ndonesia <one province= and Pakistan, and is being considered for implementation in several other countries. ;ational forest agencies may apply 2orest 6esource 9ccounting to their overall information strategies <e.g. as in ,uyana and Pakistan=, but 2orest 6esource 9ccounting may also be applied to specific topics <e.g. plantation development in 8cuador= or specific localities <e.g. Fambi Province in &ndonesia=. 2orest 6esource 9ccounting approaches started at the local level have the potential to evolve into national systems, and vice versa.

Eco News
Pakistan has formulated Policy for Development of Renewable Energy for Power Generation - 2006, for using all alternative energy sources to generate electricity to

meet the growing demand by 10 to 12 percent annually. The policy is to encourage employing of small hydra, wind, and solar technologies by offering attractive incentives to attract investment. For example, small projects for selfuse will not require any permission from government.

NATIONAL ENVIRONMENTAL POLI ! "##$


Policy Instruments

Economic and 'arket /ased Instruments


a= 8nvironmental fiscal reforms would be promoted. b= (rade barriers for the import of clean technologies, fuels, and pollution control e$uipment would be removed. c= &ncentives including reduced tariffs, ta% concessions and other incentives <such as environment and energy award= would be offered to private and public sector for compliance with environmental laws and standards. d= )ustainable development funds would be operationali*ed at the federal and provincial levels. e= &ndustries would be encouraged to introduce environmental accounting systems in their financial management systems.
f= )pecial creditsGlow interest loansGsubsidies would be offered for the

establishment of waste management system, introduction of clean technology and

/ relocation of polluting industries. g= Dpportunities for green business such as environmental engineering manufacturing and installations, environmentally-certified products and
businesses, energy service and conservation companies, and ecotourism would be

promoted.

Environmenta%&'reen Accountin( from T)eory to Practice


Chair: Pervez ahir !iscussant: "hreekant #u$ta Dr. Buhammad &rfan >han from the 9&D7 in his presentation Environmental Accounting and Auditing said that it is the responsibility of business firms to use environmentally friendly and cost effective technologies in the working environment for saving energy and reducing pressure on natural resources. (he speaker felt that environmental accounting is a newly emerging concept in Pakistan, and focuses on private cost rather than cost incurred by the society due to various developmental activities or business operations. 8nvironmental Banagement 9ccounting, as defined by Dr. &rfan, is the identification, collection, estimation, analysis, internal reporting, and use of environmental cost information, for both conventional and environmental decision making within an organi*ation. 0hile highlighting the differences between ordinary accounting and green accounting, Dr. &rfan e%plained that the former talks of monetary resources, while the later focuses on energy resources within a business firmGorgani*ation. Cighlighting the importance of environmentalGgreen accounting, the speaker asserted that one must comply with the international standardi*ation principles, &)D !000 and &)D "000. Ce cautioned that environmental performance could be one of the technical barriers to our trade under the 0(D regime. (he speaker stressed the need for a change in Pakistan#s domestic policies by encouraging innovations in policy procedures and operations, use of raw material, packaging, consumption patterns, manufacturing cleaner production technologies in the wake of unprecedented challenges and reaping ma%imum benefits out of the global market. Ce recommended timely decisions on the part of business management to reduce environmental costs significantly, right from operational changes and house keeping, investment in green process technology, and redesigning our processes and products. %r& 'bid "hah from the '(ha )han University, )arachi, in his $resentation
Environmental Management Accounting (EMA): A Potential Decision-Making tool for Environmental Management and Sustainable Development in Pakistan emphasi*ed that business firms must fulfill their

corporate responsibilities during their operations. 1usiness entities must take into account all aspects of sustainable development including environmental, economic, and social building blocks. Ce recommended that 8nvironmental Protection 9ct !!7 must be implemented in its true spirit and that 8nvironmental &mpact 9ssessment <8&9= must be made mandatory before taking any development initiatives. Ce felt that sustainable business management is becoming a goal for business corporations due to the stakeholder pressure, local compliance and benefit to the community. 5iting the e%ample of >irthar ;ational park in )indh, the speaker said that outside companyGbusiness firms# operations would have impacted the social, cultural and ethical values of the local community as well as affected the flora, and fauna, which is the common property of the community.

' Due to the absence of any action on the part of 8nvironm ental Protection 9gency, the oil e%ploring company in >irthar ;ational Park did not pay as per its commitment to the local community, the cost of using water during its operations. Cere, the ultimate losses were borne by the local community. (he speaker was optimistic that environmental management systems are becoming popular in Pakistan, companies have become sensitive to environmental concerns mainly due to 8nvironmental Protection 9ct !!7 which emphasi*es that all projects undergo initial environmental e%amination or what is called 8nvironmental &mpact 9ssessment <8&9=. (he speaker appreciated the empowerment of provincial 8nvironmental Protection 9gencies and the advocacy campaigns launched by various civil society organi*ations including )DP&, &75;, 002, and )ungi Development 2oundation in this regard. Br. Busharaf 9li (alpur from the 7niversity of )indh, Famshoro, in his presentation
Economic Value of Environment, Market Failure and Costs of Environmental Degradation: A Case Study of the Indus Delta Mangrove orests in Sindh! Pakistan

emphasi*ed that &ndus delta mangrove forests must be protected on a sustainable basis as an estimated .2 million people are directly and indirectly dependant on these for their livelihood. (he speaker cautioned that the failure of both the market and government policy could lead to the degradation of mangroves through over-e%ploitation. 2or sustainable conservation, the allocation of water for crop production in the rest of the country must not affect the supply of water to the mangroves. (he speaker also pointed out other uses of mangroves such as being a source of timber, fuel wood, water and fodder for livestock, tourism etc. )horeline stabili*ation, sedimentation retention, and ground water retention are some other functions and services Pervai* (ahir, chief economist, Planning 5ommission, ,overnment of Pakistan, chaired the session. (he discussant, )hreekanth ,upta, from Delhi )chool of 8conomics, appreciated the role of )DP& for sensiti*ation on environmental and green accounting. Ce asserted that we have ignored the fact that our economies have grown at the cost of environmental damage, a fact that is not reflected in our national income account. 9ccording to the discussant, nowadays Jgross national products# are used as synonymous to Jgross nature products#, and that one should do away with the parado%ical way of measuring national income, which caters to physical capital and ignores natural capital. Ce also recommended that we develop eco-friendly technologies and allocate special funds for $uantifying damages to the environment. 0e should also incorporate and strengthen ethical values in our business operation systems, asserted ,upta. During the discussion session one of the participants said that the research should not stop here rather it should trickle down to the product level and it should be business firms and not the consumer charged with added product pricing due to environmental damage.
Reported ! "#u$at Ali %#an

Welfare Impact of External /alance in Pakistan )6E$'icrosimulation -nalysis


Qa$ar 9hmed Ministry of Planning & Development, Pakistan

(his paper studies the welfare impact of changes in the e%ternal balance of a developing economy <Pakistan=. 0e e%plain that the economic growth achieved during the past decade is highly dependent on the improvements in e%ternal balance. 9fter 200 , Pakistan has benefited from, an increase in the inflow of remittances, foreign assistance from bilateral and multilateral sources, and a relatively stable e%change rate. (his was complimented by growth in the real sector. (he ,DP grew at an average of 7 percent from 2002 to 2007. During the same time period the growth in per-capita income was around 4 percent in dollar terms. (his performance however has come under pressure due to the rising inflation, slowing down of global economy and e%ternal price shocks. (he increase in import price of petroleum, raw materials and other manufactured goods has the potential of reducing the growth performance, impacting the competitiveness of the economy and thereby threatening the gains achieved during the past seven years in reducing the poverty levels. 0e study using a 5,8-microsimulation model the effects of changes in import prices faced by Pakistan. 9lso provided in the simulation e%ercise is an analysis of increase in foreign savings that are usually prescribed for developing economies in order to augment the domestic savings and channeling investment towards developments in infrastructure and social sectors.

.iscal Policy in Pakistan


(he overall resource base in Pakistan is composed of four main components. 2irst the revenue receipts include the ta% revenue, non-ta% revenue and surcharges2. )econd the capital receipts includeH a= e%ternal borrowing, and b= internal non-bank borrowing. (hird e%ternal resources include the aid received from the consortium and nonconsortium sources. ,rants received by the country are divided into project and non project aid. (he later can be further sub-divided into food, non-food, balance of payments and relief aid. 2inally self financing by autonomous bodies is the surplus net of e%penses of all autonomous departments <)ee )aeed 200/=. (able 2 gives a time-series of fiscal indicators as a percentage of ,DP. (he e%penditure structure is divided into the current and development spending. (he former includes categories such as debt servicing, defence and public administration, social services, law and order, provision of subsidies, grants to 9*ad Fammu and >ashmir, grants to railway and other departments, community services and economic services. (he development budget is called the Public )ector Development Program <P)DP=. 6ecently a major chunk of P)DP has been reserved for the infrastructure sectors such as water, power, transport and communications. (his kind of public sector investment is now necessary due to its crowding-in and employment

. generating features. 1esides Pakistan is also trying to offer and portray itself as a potential energy and trade corridor to the Biddle 8ast and 8ast 9sian countries. 5hina has already e%pressed its willingness to engage in PakistanEs road and communications sector so that it can secure an easy access to the 9rabian )ea. 9s the fiscal deficit position improved in Pakistan , this created additional space for spending on social sectors such as education, health and population welfare. 7ntil 2004 the development e%penditure as percentage of ,DP was on a continuous decline. During the same time period the current e%penditures remained high thus compromising the social sector and infrastructure capital spending. (his trend has now reversed and considerable emphasis is being given to sectors essential for long term economic growth. 9s in most developing countries Pakistan has seen periods of high deficits in the past. 9nd during those times it resorted to five different sources for bridging the deficitR a= Printing new notes, b= 1orrowing from public, c= 2oreign loans, aid and grants, d= 1orrowing from banks, and e= using previously saved balance4. (he domestic debt burden has been ever increasing, which in turn contributed to rising interest payments. &t was much later that the government slashed the state-run ;ational )avings )cheme rates in order to bring its long term debt commitments under control. Dn the other hand ta% revenue has not increased on a similar pace. &n fact &B2 on its every mission in Pakistan has been e%pressing concerns over the low ta% to ,DP ratio in Pakistan. &t was advised by the multilateral organisations that efforts should focus more at e%panding the ta% net further into the agricultural and services sectors, rather than reducing too much ta% rates for the manufacturing sector in the hope of boosting growth in this sector, and thus future revenues. 2urthermore in the past few years, ta% revenues have not shown the buoyancy that would warrant such an approach. Petroleum levies need to be cut back as these directly create inefficiencies in the economy. Dn the brighter side however Pakistan has achieved one of the fastest reductions in it e%ternal debt volumes. (his view has been endorsed by the donor agencies such as the 0orld 1ank and 9sian Development 1ank. (he e%ternal debt and liabilities to ,DP ratio was /2 per cent in the year 2000 and within a time span of five fiscal years it was brought down to around 2. per cent in 200'. &n the past however rising debt servicing levels and the conse$uent increases in the deficits have led to increases in the inflation indices. 2or the past five years the inflation seems to be increasing due to factors other than the budget deficit. (he government is trying to look into the institutional factors that are impacting consumer price inde% during times of high economic growth. 9s regards the food inflation government has tried to neutralise the inflationary impact by liberalising the import of food items from abroad. 9nother factor that has recently contributed to an increase in the general price level is the rising global oil prices. (his in fact has also deteriorated PakistanEs trade balance as the value of imports has risen. (able 4 shows the break up of group-wise inflation. &t is interesting to see the group-wise linkages in price changes. (he energy group has grown the most in 5P& basket of !2 items. (hese energy prices also pushed up the transport and communication costs, which in turn were instrumental in adversely impacting the prices of the food group.

! &n line with the promise of bringing about fiscal discipline in the budgetary operations, the ,overnment in 200/, enacted a 2iscal 6esponsibility and Debt Mimitation 9ct 200/. (he main thrust of this act is to reduce and ultimately finish the revenue deficit and minimise the public debt levels. (he main highlights of this act includeH (o eliminate the revenue deficit by not later than Fune 40, 200. and to thereafter maintain a revenue surplus, (o ensure that within a period of ten years beginning from Fuly , 2004, the total public debt at the end of the tenth fiscal year <ending Fune 40, 20 4= does not e%ceed '0 per cent of the estimated ,DP for that year and thereafter to maintain total public debt below '0 per cent of ,DP for any given fiscal year, (o reduce the total public debt by not less than 2./ per cent of the estimated ,DP in every fiscal year", provided that the social and poverty related e%penditures are not reduced below "./ per cent of the estimated ,DP for any given fiscal year, and (o not issue any new guarantees, including those on 6upee lending, bonds, rates of return, output purchase agreements and all other claims and commitments that may be prescribed from time to time for any amount e%ceeding 2.0 per cent of estimated ,DP in any fiscal year. 1esides the 2iscal 6esponsibility and Debt Mimitation 9ct, the government has also initiated several institutional reforms, whose benefits have recently started to appear. 1y 200" all ta% whitener schemes had been eliminated and a detailed ta% survey S documentation e%ercise was undertaken. (his led to an addition <in the ta% base= of 24", .! new income ta% payers and 4",000 new sales ta% payers. 9 two-tier ta% on those associated with the agriculture sector was introduced in 2004 while a number of small ta%es at the federal and provincial levels were reduced/. (he new income ta% ordinance that was introduced in 200 was purely on universal self-assessment basis with more e$uitable rates as compared to the past schedules.

20

Willingness to pay and demand elasticities for two national parks empirical evidence from two surveys in Pakistan !imayatullah "han 7sing survey-based data approach for modeling the demand for environmental goodsGresources, this study estimates income and price elasticities of demand for improved environmental $uality of two ;ational Parks in ;orthern Pakistan. (he study uses data from two studies. (he estimates indicate that improved environmental $uality effects can be described as a lu%ury and an ordinary and price elastic service. 5onIdence intervals show however that the classiIcation as a lu%ury is not statistically signiIcant. &ncome elasticities of willingness to pay are estimated for a broad range of environmental services. (he study Inds that income and willingness to pay vary directly and signiIcantly. (he elasticity estimates, in general, are greater than *ero, but less than unity. (he study concludes that environmental improvements are more beneIcial to low-income groups than for high-income groups. (his study is based on a merged data set from two different studies conducted by the author. (he author is highly indebted to the Cigher 8ducation 5ommission, &slamabad, and the )outh 9sian ;etwork for Development and 8nvironmental 8conomics <)9;D88= for providing Inancial support for this study.

References*
. 2. 4. ". /. '. 7. .. !. httpHGGwww.unep-wcmc.orgGforestGprojectsGfra.htm DateH 24G 2G200. httpHGGen.wikipedia.orgGwikiGPakistan httpHGGmpra.ub.uni-muenchen.deG!2'7G 0orld 1ank 5ountry 5lassification ,roups, <Fuly 200' data= httpHGGgeo.tvG -27-200.G2!'"..htm httpHGGwww.statpak.gov.pkGdeptsGfbsGstatisticsGnationalTaccountsGtable 4.pdf httpHGGmpra.ub.uni-muenchen.deG2'..G httpHGGwww.economist.comGcountriesGPakistanGprofile. httpHGGmpra.ub.uni-muenchen.deG 0"77G