Keynote Speech at 20th Sustainable Development Conference

Delivered at 20th Sustainable Development Conference, Sustainable Development Policy Institute (SDPI) in Islamabad, Pakistan

Fellow Colleagues

Congratulations to the team of the Sustainable Development Policy Institute - SDPI - on its 25th anniversary. SDPI deserves special recognition. You help with public advocacy, advisory support, and allow a platform of exchange for leadership, politicians and policy makers on the key issues our country faces.

The 70th anniversary of the independence of Pakistan, the theme to this conference, is a soul-searching opportunity for the nation. It’s a year in which Pakistan needs to prioritize the United Nations’ 2030 Agenda for Sustainable Development. One in which a strong political consensus should resolutely back this agenda and build an inclusive implementation architecture to “leave no one behind.”

So where do we stand? The Nation’s development framework – Vision 2025 - focuses on inclusive growth, sustainability, and social transformation. It is in step with the 2030 Agenda’s Sustainable Development Goals - SDGs -; it is people centric and it recognizes the significance of democratic governance and active public-private partnerships. By legislating to support this sustainable agenda, Parliament, the Planning Commission and the provinces have institutionalized the SDG Task Force and recognized the importance of the statistical system which allows for the monitoring of 55 SDG indicators.

Pakistan’s development achievements are many if we set the base year as 1947. With the emergence of a new global agenda, lets reset the base year to 2016. Judging by the core objective of sustainable development, that of eradicating poverty in all its forms, Pakistan has a complex and long journey to improve the lives of the 29.5 per cent of its people who live under the national poverty line. Viewed through a multidimensional lens which captures human development indicators, there are 60 million vulnerable people whose lives we need to change.

Regional records of poverty decline vary significantly across provinces. The incidence of poverty is much steeper in Balochistan and Sindh. Across the country, rural poverty incidence is about 36 per cent compared to urban poverty incidence of 18 per cent. A number of social indicators are truly distressing. 36.5 per cent lack good access to sanitation and water shortages can be acute. Shockingly, the incidence of stunting and malnutrition among children is above 50 per cent in Balochistan and Sindh. Low outcomes on key human development indicators compounds matters. Public spending on education and health is barley 4 per cent of GDP. Malnutrition undermines human capital and economic productivity.

The human development challenges Pakistan faces are compounded by the devastating impacts of climate change and natural disasters. Pakistan ranks seventh among the countries most adversely affected by climate change on the 2017 Global Climate Risk Index. Floods and droughts regularly take a toll on agricultural production. The floods of 2010 alone affected over 18 million people. Damages were estimated around $10 billion. They were followed by heavy monsoon rains in September 2011, affecting some 9.7 million people in Sindh and Balochistan. Climate change in Pakistan is causing and exacerbating disasters, disproportionately affecting those excluded and most vulnerable.

A strategic and sustainable approach to poverty reduction and the strategization of SDG priorities, along with sustainable, robust and quality growth must be Pakistan’s No. 1 priority. Political stability and a smooth democratic transition will help the public and private sectors embark steadily on this journey. At the same time, Parliament needs to proactively promote good governance and the rule of law to underpin sustainable development. Think tanks such as the SDPI have a key role to galvanize political momentum, promote stakeholder, private sector and civil society engagements and independently monitor development progress.

This overarching framework needs to be reinforced by action in the following areas.

First, a plan must be prepared to substantially scale up social safety nets such as the Benazir Income Support Program whose coverage in 2016/17 reached 5.4 million households. Its sustainability should be enhanced by increasing beneficiaries’ access to financial services. Despite recent improvements, less than a quarter of the adult population is currently served by the banking system.

Second, more effective vertical and horizontal federal-provincial-local fiscal arrangements would be critical. SDGs responsibility disproportionately falls on the provinces and local governments as the 18th Constitutional amendment resulted in significant devolution to provinces of social and environmental responsibilities along with expenditure assignment. It further called on provinces to devolve political, administrative and financial responsibility to local governments. Decentralization has been a landmark achievement and resource transfers were agreed upfront. However, given the scale of a devolution and its implications, there is need to, among others, reflect further on the sharing of financing and expenditure burdens for joint projects, development of new cooperative federal-provincial-local institutional coordination mechanism, and mitigate the political resistance to tax major sources of local revenues. This may call for further deliberations at the Council of Common Interest and by provincial governments. These is a need to further think through how provincial and local governments should overhaul local taxation systems and options for financing and streamlining SDG responsibilities.

Third, Pakistan has yet to fully leverage multiple Regional Cooperation and Integration platforms. These are critical for the country’s economic and trade diversification, the country’s deeper market integration, and enhanced seamless and multimodal transport connectivity. A connectivity which should be coupled with energy and ICT connectivity, and the implementation of other reforms to achieve transboundary SDGs. We need to sharpen our response to climate change and changing ecosystems, and improve natural resource management. The Belt and Road Initiative has given impetus to regional connectivity. Yet we should reflect on how BRI projects can mainstream sustainable development priorities and how Pakistan could take advantage of other regional cooperative arrangements. ESCAP has been at the forefront of pushing for regional cooperation and integration in Asia so that this is informed by the sustainable development agenda.

Fourth, to capitalize on institutional and operational achievements on SDGs, Pakistan should focus on mainstreaming SDGs more effectively across central and local governments’ development plans and budgets. By translating SDG targets into specific budgetary allocations, Pakistan will generate the triple dividend of achieving higher quality growth through sustainable investment, promote balanced development and nurture social and nature harmony. Spearheading the localization of the 2030 Agenda in the provinces and municipalities, with the latter bearing the bulk of the responsibility for urban SDGs, is vital. A bottom up approach that will highlight the specific, operational and implementation needs of provincial governments on implementing SDGs should to be followed.

Fifth, leveraging private finance and capital is critical to meet the growing demands of infrastructure. Despite substantial progress in the financial sector, there is evidence that it lacks depth and diversification. Integration of capital markets provides a unique opportunity for our corporates to list and improve their governance, while raising risk capital competitively. There is significant potential and room for improvement in raising domestic resources, should the government move on strengthening its tax base, and rationalize tax incentive regimes. Improving the ease of doing business, calls for more aggressive digitization of approvals and reducing the procedural clearances. Pakistan should become a party to our Agreement on the Facilitation of Cross-border Paperless Trade in Asia and the Pacific.

Sixth, by recognizing the integrated and interdependent nature of the three dimensions of sustainable development, namely economic, social and environmental, there is substantial scope for Pakistan to develop a better understanding of intersectoral and indivisible linkages of the SDGs, and instruments to assess energy-water-agriculture nexus and growth and environmental tradeoffs. Policies to promote one subset of the goals may have significant spill-over effects - positive or negative - on the achievement of other SDGs and national targets. ESCAP is developing tools and economic modelling frameworks to promote system thinking, policy coherence and integration of environmental and social dimensions in plans and fiscal framework and their impact assessments. We are also building capacity for the application of tools to prioritize goals and define national and local responses for each goal.

To conclude, Pakistan must go beyond setting up task forces and implement deeper structural reforms. We must reflect on sector policy dynamics and strive for federal provincial fiscal coordination as well as policy coherence. Also, macroeconomic and financial stability must be recognized as key to achieving medium and long-term growth. These are the prerequisites of sustainable development and given the resurfacing of macroeconomic vulnerabilities there is no room for complacency. Fiscal consolidation has slowed, and deficit targets remain elusive. The external current account deficit is widening as exports remain stagnant, while imports of capital goods and energy have increased. Foreign exchange reserves vulnerabilities could grow. And while the business climate and financial inclusion reforms have continued, financial losses of ailing public-sector enterprises weigh on scarce fiscal resources, which are likely to be under pressure given the growing external risks. Normalization of monetary policy will tighten financial conditions, growth and trading dynamics of key trading partners will change as countries enhance their competitiveness and productivity, and oil prices rise. In this context, our debt sustainability must be carefully managed.

I look forward to considering SDPI’s analysis to find intelligent, balanced and progressive policy solutions in these areas in the months and years ahead.