Social security remains a distant reality for most

Pension and retirement savings schemes are few in number and underutilized, because the majority of workers are not salaried employees, but rather self-employed. Although the two-tiered health care system includes a public system, it is poorly funded and faced with severe shortages. There is no public support system for children and adolescents, many of whom are victims of child labour. The growth of the informal economy has led to declining tax revenues and greater poverty and insecurity for workers.
Aijaz A. Qureshi
Indus Development Foundation

Pension and retirement savings schemes are few in number and underutilized, because the majority of workers are not salaried employees, but rather self-employed. Although the two-tiered health care system includes a public system, it is poorly funded and faced with severe shortages. There is no public support system for children and adolescents, many of whom are victims of child labour. The growth of the informal economy has led to declining tax revenues and greater poverty and insecurity for workers.

A highly limitedpension system

In Pakistan the only existing pension scheme is exclusively for public sectoremployees. The government workers covered by the scheme can retire at the age of60 and receive a pension for the remainder of their lives. In the event that thebeneficiary dies before reaching retirement age, the pension is passed on to thefamily. In some cases, the children of old age and survivor’s pensionrecipients have their education costs covered up to the college level.

Some companies also offer pension schemes in which the employer and employeeeach contribute a certain percentage of the worker’s salary to an account on amonthly basis. When the worker retires, the accumulated contributions plus theinterest earned on them are paid out in a lump sum.

The current pension system was developed at the time Pakistan became anindependent country in 1947. This system emanates from the days of British ruleover the Indian sub-continent (of which Pakistan formed part) which lasted closeto a century.

The retirement savings tools currently available are not many in number, andeven the few that exist are underutilized. The reason for this is the fact thatthe majority of workers are not salaried employees, but rather self-employed. Asa result, the concept of a regular income is a distant reality for most of theworking population, and so is the possibility of a pension scheme.

The majority of the country’s population lives below the poverty line, and theelderly typically live with the younger generations of their families. They havefew opportunities for employment, and depend on their children not only forfood, but for medicines and other basic needs.

The government has recently attempted to introduce voluntary pension schemes forthe future generations. In the words of the government, it is essential topromote long-term savings by the younger generations, especially since pensionshave not only a social impact but an economic impact as well.

Privatization continues despite public protest

The privatization process began in the 1980s, and more than 100privatizations have taken place in the past 15 years. The majority of them haveinvolved small productive units which were sold to a handful of privateenterprises. With no full legal coverage or support, many of them collapsed,leaving thousands of workers in the lurch.

Successive governments have shown interest in selling off major enterprises suchas banks, electric supply corporations and steel mills. There has beenconsiderable anti-privatization mobilization, with demonstrations taking placethroughout the country, but in spite of this, the privatization process has beenaccelerated since 1999. Even so, the International Monetary Fund (IMF) hasexpressed concern over the purported slowness of the privatization process.

In 2005, despite widespread public opposition, the auctioning off ofstate-operated companies was nonetheless put into practice, and even progressedto the actual transfer of ownership. The greatest public concern arose over theauctioning of the country’s steel mills, and following a petition filed in theSupreme Court of Pakistan, the auction was deferred.

However, another of the country’s biggest public companies, the KarachiElectric Supply Corporation (KESC), was successfully privatized in 2005, andthis has created considerable problems with regard to power supply to thisimportant provincial capital (which is also the country’s largest city).

The auction of KESC had initially been planned for 2004, but eventually tookplace in February 2005, when 73% of the company’s stock was successfully bidon by a joint venture formed by the Kanooz Al Watan Group of Saudi Arabia andSiemens Pakistan. The successful bid was in the amount of PKR 20.24 billion (USD336.2 million). However, the sale was cancelled when payment did not arrive bythe established deadline, and the privatization of the company was postponedonce again. On 22 August 2005, Hassan Associates, the second highest bidder atthe first auction, agreed to pay PKR 20.24 billion, and on 29 November, KESC wastransferred to a joint venture formed by Hassan Associates and the Al-JomaihHolding Company of Saudi Arabia.

Meanwhile, in June 2005, 26% of the stock of the state-owned PakistanTelecommunications Company Limited (PTCL) was put up for auction. Thisrepresented the largest transaction ever in terms of the monetary amountinvolved. The auction had originally been planned for 10 June, but had to bepostponed until 18 June because of the opposition raised by the trade unionrepresenting the PTCL workers. A company from the United Arab Emirates,Etisalat, put up the winning bid, offering PKR 155.16 billion (USD 2.58 billion)for 26% of PTCL stock and management rights. Once again, however, payment wasnot made on time due to an impasse in negotiations following the auction. On 29October, the government’s Privatization Committee announced that theprivatization process would start afresh. In the end, the pending issues wereresolved and Etisalat successfully completed its purchase of a 26% stake in PTCLon 12 March 2006.

Public health system still inaccessible for the very poor

Pakistan has a two-tiered health care system, comprising a public systemmade up of government hospitals (known as Civil Hospitals), Basic Health Unitsand Rural Health Centres, and a private system, which includes large privatelyowned hospitals. The public health system is markedly inferior to the privatesystem due to the lack of state funds allocated to the health sector – a mere0.4% of GDP – and poor management.

Successive governments have launched a variety of health campaigns and expandedimmunization programmes with the goal of eradicating the most prevalentinfectious diseases, such as malaria and tuberculosis. Over the past 60 years,innumerable health sector slogans have been trumpeted, including Health For AllBy 2000. The results achieved, however, have been minimal.

Pakistan is a poor country, where roughly a third of the population lives belowthe poverty line. The incidence of poverty is even greater in rural areas.Despite the existence of a public health system, even the government-runhospitals charge fees from their patients. For their part, the private hospitalscharge exorbitant fees that very few can afford.

The public health sector also faces severe shortages of trained personnel. Thereis only one doctor for every 1,254 people, one dentist for every 20,839, and onenurse for every 2,671.[1]Doctors in public hospitals are also required to work longer hours than thoseemployed in private hospitals. To make matters worse, there has been a ban onthe recruitment of doctors for several years, which has made the situation evenmore critical.

As a consequence, the country’s alarming health indicators come as nosurprise. For every 1,000 babies born in Pakistan, 70 of them die as newbornsand 60 mothers die during childbirth. Meanwhile, the majority of deaths amongchildren are due to curable and preventable diseases.

No public support for children and adolescents

Despite the great need, there is no established public support system forchildren and adolescents. A small number of private organizations working onhumanitarian grounds have established centres to provide support for childrenand youth. In many cases, the young people they serve are given some form ofemployment training and prepared for work in the private sector in the largecities. Other centres provide care for children and adolescents who have losttheir parents.

The largest of all the private humanitarian organizations working in Pakistan isthe Edhi Welfare Centre, which has its head office and various centres inKarachi, the capital city of Sindh province.

The government has recently begun to publicly address the idea of establishingschemes for adolescents. There are teenagers and even younger children who arepoor, orphans or runaways working in factories and brick kilns, with no legal orofficial protection of any kind.

A few private organizations and semi-government organizations have establishedmicro-credit systems for youth which have begun to achieve positive results, butso far these are negligible.

Growing informal economy means more poverty, less security

Since 1973, the informal sector of the economy has been growing at a faster ratethan in previous years. There has been a clearly marked relationship between theexpansion of the informal economy and tax evasion, and the rapid growth of theinformal sector is a major reason for the budget deficit, given the decline intax revenue income.

At the same time, government expenditure has grown in line with the overallgrowth of the economy – in the formal and informal sectors combined –because although the informal economy generates losses in tax revenues, itincreases the demand for public services, thus further exacerbating the budgetdeficit.

The money sent home by emigrant workers also forms part of the informal economy,since most of these remittances are not accounted for and taxed.

The other face of the informal economy is the child labour which is used in coalmines, tanneries, brick kilns, carpet factories, deep sea fishing, rag pickingand other dangerous occupations.

The growth in the informal economy has also led to a rise in poverty. There isno government support for people working in the informal sector, who are totallydeprived of the protection of any kind of legal instruments.

Millions of Afghan refugees

In recent decades, Pakistan has been a major destination country for asylumseekers. Millions of people immigrated here from Afghanistan during mid-1980s asa result of the Afghan war. The US government provided considerable resourcesfor the reception and settlement of Afghan refugees, who gradually scatteredthroughout various regions and cities around the country. The government hasgiven them full protection.

Besides the Afghan refugees, people from various South Asian and Asian-Pacificcountries have immigrated to Pakistan. Because the country is not a signatory ofthe 1951 UN Convention relating to the Status of Refugees, there is no legalsystem to ensure that the principles of the UN High Commission on Refugees arefollowed in the treatment of asylum seekers. There has recently been a declinein the number of immigrants due to the political changes in countries likeAfghanistan, Iran and Iraq.

On the other hand, sizeable numbers of Pakistanis have also gone abroad, aboveall to the United States, the United Kingdom and other developed Europeancountries. While many emigrate for economic reasons, some have left the countrybecause of the political situation.

TABLE 1. Basic indicators

Total population (thousands), 2004


Adult literacy rate (% ages 15 and older) (HDI), 2004


GDP per capita (PPP USD) (HDI), 2004


Life expectancy at birth (years) (HDI), 2000-2005


People undernourished (% of total population), 2001-2003


Population without sustainable access to an improved water source (%), 2004


Probability at birth of not surviving to age 60 (% of cohort), 2000-2005


Urban population (% of total), 2004


Population under age 15 (% of total), 2004


Population ages 65 and older (% of total), 2004


Ratio of estimated female to male earned income


Source: UNDP, Human Development Report 2006.


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