The purpose of this paper is to analyse the decline in private investment and formulate a comprehensive strategy to overcome this problem, which is the main cause of deceleration in the growth momentum of Pakistan’s economy. Due to lack of investor confidence, private investment has reached its lowest point in the recent economic history of the private sector led growth phase (1978 to 2002) in Pakistan. This paper argues that economic as well as non-economic factors are responsible for this declining investment. Economic policies are formulated in such a manner that the short-term objectives of lowering the fiscal and trade deficits were to some extent achieved but overall economic performance and investment were ignored. In order to control external trade deficits, a policy of devaluation increased the cost of production through an increase in prices of imported raw material especially of plant and machinery. Higher real interest rates due to excessive public borrowing that were due to the failure in reducing fiscal deficits has resulted in financial crowding out and has corroded the savings that might be used to finance private investment. The unexplained part of private investment that is not determined by economic factors can be attributed to non-economic factors, which include internal and external shocks. These shocks start from the sanctions which were imposed after the nuclear blast. Events following that initial shock like the freezing of foreign currency accounts, the military coup, the harassment of the partially successful accountability drive of the military government, the 9/11 incident, the Afghan war and tensions on the Pak-India border have complemented the shock. A comprehensive programme is required to boost private investment and for the restoration of investor confidence. Therefore, an economic package is recommended in this paper that consists of incentives that relax the supply side constraints by reducing cost of production as well as demand-enhancing efforts. It is the best time to introduce a strategy to increase investment activities in the * Kalim Hyder is an Economist at Social Policy and Development Centre, Karachi, Pakistan. Qazi Masood Ahmed is an Associate Professor at the Institute of Business Administration (IBA), Karachi, Pakistan and is a Member of the Advisory Board at the Social Policy and Development Centre, Karachi, Pakistan.
KEYWORDS: Pakistan, investment, economic package, recommendations, sanctions, determinants.

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In recent years, there has been a rapidly expanding literature on child labour that provides empirical evidence on its nature and determinants. The previous literature on Pakistani child labour includes Khan (1982), Hussain (1985), Ahmed (1991), Khan and Ali (1991) and Weiner and Noman (1995), and recently Addision, et. al. (1997), Burki and Fasih (1998), Ray (2000a), Ray (2000b), Ray (2001) and Ali and Khan (2003). Some studies (see for instance Khan 1982; Ahmed 1991) discuss mainly the qualitative features of child labour. The recent literature has focused attention on the quantitative aspect, taking advantage of the increasing availability of good quality data on child labour. Within the empirical literature on child labour, there has been a shift in emphasis from more quantification to an econometric analysis of its determinants. As child labour is seen to result from the same variables influencing child schooling but in inverse, so school enrolment is strongly correlated with child labour. Child labour commitments are major reasons for children’s non-participation in school. So the literature has moved to incorporate child schooling and child labour and thus analyses schooling and child labour jointly (see for instance, Degraff et. al. 1993; Mahmood et. al. 1994). The present study is one of this category.
KEYWORDS: Pakistan, child labour, household, school, determinants, education, poverty.

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The basis for asset pricing in financial markets was provided by Bachelier (1900) in his magnificent dissertation “Théorie de la Spéculation” submitted at Sorbonne (Université de Paris). Although from today’s perspective, the mathematics and economics he applied were flawed, yet the great genius, Markowitz, declares this early work as an inspiration for his own classical paper of “Portfolio Selection”. The risk return relationship has always been a debatable issue in financial theory. “Portfolio Selection” came up with a meaningful measure of quantifying the risk associated with investment; the variance of returns. The equilibrium model of Capital Asset Pricing (CAPM) (Sharpe 1964, Lintner 1965, Mossin 1966) further classified the risk as relevant and irrelevant risk. According to the CAPM, the relevant risk is the systematic risk or non diversifiable risk. The systematic risk is the volatility of returns of a particular stock to the market returns.
KEYWORDS: Risk analysis, comparative, financial markets, banking sector, United States, South-East Asia, Western Europe.

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Khadija Haq, (Edited) The South Asian Challenge, Oxford University Press 2002, Second impression: OUP Pakistan 2003, pp 333. The South Asian Challenge is a compilation of nine essays on South Asia by eminent economists and social science researchers. The idea was initiated by Dr. Mahbubul Haq who had set up a South Asia Commission to analyse and identify the challenges facing the region, in order to publish a report on its recurrent issues of poverty and economic crises, and to offer new directions for meaningful change. Before the Commission could draft an outline of the Report, Dr. Mahbubul Haq passed away. Subsequently it was decided by the Human Development Centre in Islamabad to publish this collection of essays as a tribute to his memory and his quest for a new world.
KEYWORDS: Book review, South Asia, South Asia Commission.

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It is becoming obvious that all large multi-ethnic societies, after attaining the beatific status of development, lose interest in removing poverty. The undying myth of development, that it will remove all poverty forever from all comers of the world, now lies shattered. It comes somewhat as a surprise that so many people believed it for so many years with a sense of naivety and innocence. Even affluent economies such as the US have not been able to rid their societies entirely of the plague of poverty from within their borders. That said, it appears that somebody somewhere means business. The Centre for Research on Poverty Reduction and Income Distribution (CRPRID), an autonomous body with its own board of directors, has published its rather glossy Human Condition Report 2003, the second in its series. The main intent of the Report, as stated in the Forward, is to guide and influence policy makers and be an autonomous tool for monitoring and evaluating the progress made towards achieving the targets laid out in the Poverty Reduction Strategy of Pakistan as well as the Millenium Development Goals.
KEYWORDS: Book review, UN, united nations, Human Condition report.

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This paper examines the temporal interdependence between gross domestic product and health expenditure per capita for Pakistan in an augmented Solow growth model suggested by Mankiw, Romer and Weil (1992) for the period of 1973-2001. This paper is an extension of the MRW model by incorporating health capital proxied by health expenditure to the augmented Solow model. Moreover, an openness variable is also included in the model in order to capture the effect of technological changes on growth. The paper employs co-integration, ECM methodology and several diagnostic and specification tests. The empirical findings show a significant and positive relationship between GDP and Health Expenditure, both in the long- and short-run.
KEYWORDS: Pakistan, GDP, health expenditure, income, spending, modelling.

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Pakistan as a multilingual country faces numerous problems in language planning in higher education. As educational standards in higher education decline, there are concerns about student difficulties in English and lack of required materials in Urdu, The research reported here is a nation wide survey of 2136 students, 121 Subject and English teachers of public and private sector colleges and universities from all the capital cities of Pakistan, as well as 63 parents who responded to the questionnaire. The survey examines the learner's background, attitudes to languages and motivational orientation, availability and quality of materials in different mediums, learner difficulties in English, provision of English support programmes, and language outcomes. Results point to the significant differences between private sector and public sector students in terms of socio-economic status, and other variables. The study recommends that public sector students be provided more state support by adopting an 'English for all policy', and strengthening the English programmes through a revision of courses, development of materials, and training of teachers so as to meet the students' learning and target needs.
KEYWORDS: Pakistan, language, higher education, access, English language teaching, Urdu, educationists.

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In the traditional sense, governments have predominantly funded social sectors. But in the face of limited financial resources and other constraints, governments have found it easier to formulate policies rather than to implement them. Thus the private sector has begun to play an increasingly important role both in the financing and in the provision of social services. However, neither sector can be relied upon completely to deliver comprehensive results independently. It seems apparent, therefore, that a public private mix of financing and provision will be the most sensible approach to achieve economic efficiency and equity in the provision of social services. Governance structures and degrees of progress towards governance goals vary widely and appear to be systematically related to the organisation, composition, location, and activity of each partnership. This paper highlights how a successful partnership can be evolved in the presence of synergy between partners; strong leadership; shared objectives; success in coalition building; appropriate change in governance structure; a proper legal framework; and building in of safeguards and outside patronage. It examines successful interventions of the public private partnership in the health sector between a private medical college in Abbottabad and a public hospital in Mansehra, both within the province of NWFP, Pakistan. This paper has seven sections: An overview; The Partners; The Process of Building a Partnership; The Model of the Partnership; Workings of the Partnership; Evaluation of the Partnership and finally, some conclusions.
KEYWORDS: Pakistan, health sector, PPP, nationalised institutions, private sector participation.

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The health sector in Pakistan is replete with multifarious problems. It is not responding to the needs of the masses in a way that would provide high-quality care to all in need. Despite the announcements our governments make about health care each year, it limits people’s life chances. That international financial institutions claim that state subsidies to health care create undesirable ‘ market distortions’ that benefit the rich is another contradiction faced by the health sector. In the name of greater equity and efficiency, they argue that users of primary health care services should pay user fees, even if they are from the impoverished class. These institutions have provided structural adjustment loans to remove short-term problems. This lending has not contributed to the improvement of health facilities. The state has significantly withdrawn itself from health matters: it only spent 0.7 % of GDP in 2000. According to the 1995-96 PIHS the private sector controls 80% of the health care provisions in Pakistan. Ongoing privatisation of hospitals is likely to strengthen the private sector further. In sum, the neo liberal medicine is not having the desired effect on the health status of the population
KEYWORDS: Pakistan, healthcare, adjustment, overall expenditure, health expenditures, household incomes.

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This paper examines the trends in marginal rates of return to various levels of education for paid employees and how rewards for additional investments at a particular level of education has changed over time. Although the findings are indicative of increasing returns at different educational levels (excluding Graduation) over the years, we find no evidence that additional investments at successive levels bring consistently higher returns as highlighted by certain previous studies in Pakistan. The changes in returns at the primary and pre secondary levels have been found to be miniscule, taking the time span into consideration. The paper has also examined the returns to education between males and females and across urban and rural areas in view of the large disparities that exist by gender and region. Our findings indicate that although the wage structure may be biased in favour of males, additional investments made in female education accrue higher returns in comparison to males. Moreover, higher education is better rewarded in the urban areas whereas medium of instruction is a significant indicator of earning differentials in the labour market.
KEYWORDS: Pakistan, education, labour market, investment, schools, educational profile.

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The twin problems of low school enrolment and high gender disparity have widely been addressed in the literature. In this paper we investigate the determinants of schooling of children overall and separately for boys and girls using primary data of rural households. The contribution of this paper lies in integrating the child schooling decisions of the households by rigorous econometric analysis. The empirical estimates based on the model point to certain findings. The first enrolment of children in schools is delayed and it is more severe for girls. There exists gender disparity in children’s schooling. The head of the household education significantly increases the probability of overall children’s schooling. It has a greater effect on boy’s schooling and does not matter in girl’s schooling. The head of household income has a slight impact on overall children’s enrolment but for girls it is significantly higher than boys. Parental education also significantly increases the probability of child’s schooling. Mother’s education exerts a much stronger effect of increasing school enrolment. The estimates of the gender specific determinants suggest that maternal education increases the likelihood of girl’s schooling enrolment than of boys. Higher per capita income of households and ownership of assets by households increases the probability of school attendance. Family size and household composition also plays a significant role. Children from large families are more likely to go to school but children from households with a large number of children (up to 15 years) are less likely to go to school. Similarly, children from households with larger number of children (in the age group of 5-15) are less likely to go to school. It is sibling size (in both age groups) which hinders the schooling of children, not the family size.
KEYWORDS: Pakistan, gender disparity, education, enrolment, human resources, agricultural productivity, poverty alleviation.

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Based on the Pakistan Integrated Household Survey (PIHS) 1998-99 the paper highlights the factors that influence the decision of married women in their participation/economic activities in rural Pakistan. Employing the probit model on 9427 observations it is found that married women in Sindh and Punjab are more likely to engage in economic activities than their counterparts in Balochistan and NWFP. Women’s age, family size and husbands working in agriculture have a significant positive effect on the involvement of rural women in economic activities. Household annual income, nuclear family system, number of children and husbands' literacy level and age have a strong negative effect. No significant relationships of education, migration status and the female being head of the household have been found.
KEYWORDS: Pakistan, rural, employment, gender, women, household, unemployment.

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Gordon de Brouwer (ed)., Financial Markets and Policies in East Asia, London: Routledge, 2002, ISBN 0-415-27388-9 When Thailand was forced to devalue its currency in July 1997, no one predicted the financial turmoil that would follow. Over the next two years, financial crises took a heavy toll on the economies of Indonesia, South Korea, Malaysia, the Philippines, Hong Kong, Russia and Brazil. Indeed, few developing countries emerged unscathed. Thus, it is hardly surprising that no event of the past fifty years has generated more calls for a reexamination of the institutions, structures and policies aimed at crisis prevention and resolution than the Asian financial crisis of 1997. This excellent volume moves beyond providing the now familiar story of the origins and impact of the crisis. Rather, the fourteen wellorganised chapters competently address three critically interrelated issues. Chapters 2 to 4 provide a concise discussion about the changing patterns of finance in East Asia. Chapters 5 to 7 document and assess the financial restructuring and liberalisation with particular focus on the five worst affected economies, including China. Chapters 8 to14 provide wide-ranging analyses of financial policies in the region, with special emphasis on monetary and exchange rate policy, including how they are related.
KEYWORDS: Book review, Asian finance markets, Asian financial crisis, 1997.

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M. Ashraf Janjua, History of the Slate Bank of Pakistan, Volume 111 (1977-88), Karachi, State Bank of Pakistan, 2003, pp. 790, Price: Rs.750 (US$30). If ever a history of development of institutions in Pakistan is written, the State Bank of Pakistan will occupy a central place in it. Of course the State Bank has a pivotal position in economic policy formulation and implementation in the country. Furthermore, the institution was founded and its basic processes laid down by men of integrity and vision and despite attempts at some stages of its evolution to denude and make it serve lesser purposes, the State Bank has managed to retain the dynamism and professionalism of its original wisdom. It is also worthwhile to note that the State Bank is probably the only institution to compile a well documented and comprehensive study of its evolution and performance "in the context of the changing political, institutional and economic milieu", as the State Bank governor points out in the foreword of the volume under review. The future historian of institutional development in Pakistan could not have asked for more from the premier institution of the country.
KEYWORDS: Book review, State Bank of Pakistan, financial sector, Pakistan, ministry, government, state.

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In an underdeveloped country, the state regulates not only the short- term performance of the economy but also its path of development. Such an overwhelming role of the state derives its justification from the very nature of underdevelopment itself. Economics and economists are usually concerned with policy, with a view to determining as to what policies are appropriate in a given economic situation to attain policy objectives such as economic growth, full employment, price stability, redistribution of income and wealth. But adopted policies are often not the policies that economists recommend as the best or even the second best. It is generally observed that vested interests and pressure groups compete for a greater share in the resources and only those policies have to be put into practice in a society which are adopted by all or a significant majority. The basis of decision-making is not economic factors alone and the influence of non-economic factors has been found more important in terms of compromising the interest of transparency as well as the system in almost all developing countries as against the developed countries1. Pakistan is no exception.
KEYWORDS: Pakistan, economy, political economy, fiscal policy making, theoretical framework.

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Diarrheal disease poses mortality and morbidity risks to infants and young children. Based on losses in terms of disability-adjusted life years, the World Development Report (1993) estimates that diarrheal disease is the third most burdensome illness among children in the 1 to 5 years age bracket. Using 1990 data, Murray and Lopez (1994) estimated that about 3 million children die every year due to diarrheal disease. Severity of diarrheal illness and alternative interventions are necessary inputs into the government’s decision-making. However, there is currently much uncertainty about the most appropriate policies in the context of low-income environments such as Pakistan. The debate could be described in terms of efficacy of economic/behavioural or environment/infrastructure. In this study, we explore the socioeconomic and environment determinants of diarrheal disease for children in Paksitan. The diarrheal determinants equation was estimated by logistic techniques. Diarrheal illness jointly with defensive behaviour was estimated from the reduced form to fully capture the relationship between defensive actions and illness. Such an endeavour will provide decision makers and policy analysts information to formulate policy design for the necessary interventions and respective investment plans for the alleviation of dairrheal disease among children, depending upon the relative contribution of socioeconomic and enviromental factors. For the specific case of Pakistan, socioeconomic development strategies do not necessarily gaurantee lowering the incidence of diarrhea, particularly among children below five years of age, unless supported by environmental interventions.
KEYWORDS: Pakistan, Diarrheal disease, policy design, solution, household behaviour, sanitation.

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The study analyses the degree of integration of Pakistan’s economy in global trade and financial flows. Pakistan’s integration into the global economy gained momentum in the late 1980s and early 1990s when it adopted more open and liberal policies as part of stabilisation and structural adjustment programmes negotiated with the IMF and World Bank. The paper presents an overview of Pakistan’s economy in the before and after period, it will specifically examine the trade performance from the 1980s onwards to see the progress made towards the integration of the Pakistani economy into the world economy. It will look into the opportunities that Pakistan is likely to gain in a more globalised world, with special focus on the textile and clothing sector and the potential growth in this sector after the abolition of the Multi Fibre Arrangement (MFA) in 2005. New challenges that may emerge in a more open trading environment will also be discussed.
KEYWORDS: Pakistan, globalisation, Mutual Fibre Agreement, MFA, integration, Pakistani economy.

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During the last two decades the role of international trade and flow of foreign capital have received considerable attention in the literature. Various studies have examined the impact of export instability and capital instability on economic growth in less developed countries.1 Empirical evidence supports the hypothesis of a deleterious impact of export instability on economic growth. However, some studies also indicated that the relationship was unstable but positive with economic growth.2 Yet there are no systematic empirical investigations into the implied links between export diversification and long-term economic growth, particularly in the case of South Asian countries. The major concern regarding export instability is that it retards economic growth. The theoretical rationale for the same is that export instability creates uncertainty in the supply of foreign exchange earnings, discourages capital formation and hence hampers economic growth.3 Another notion is that capital instability affects economic growth more significantly than that of exports instability.4 When a country uses other sources to finance development than export earnings, it leads to forced savings and foreign aid for funding investment projects, and then the speed and volume of capital formation determines economic growth, not the instability of export earnings. Thus, if there is instability in mobilising capital itself, it will be pernicious to output growth. As a result, it will affect economic growth more than export earning instability.
KEYWORDS: Capital instability, export instability, South Asia, international trade.

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A high quality teaching staff is the cornerstone of a successful education system. Daily interaction between teachers and students is at the center of the educational process. Attracting and retaining high quality teachers is thus a primary necessity for a strong education system. One step in developing a high quality faculty is to understand the factors associated with teaching quality and retention. One of these factors is job satisfaction. Very often, it is not merely satisfaction with the job, but with the career in general, that is important. With teachers, satisfaction with their careers may have strong implications for student learning. Specifically, a teacher’s satisfaction with his or her career may influence the quality and stability of instruction given to the students. Some researchers argue that teachers who do not feel supported in their work may be less motivated to do their best work in the class- room (Ostroff, 1992; & Ashton & Web, 1986). This would ultimately have an adverse impact on student achievement. In addition, highly satisfied teachers are less likely to leave the teaching profession altogether than those who are dissatisfied with many areas of their work life (Choy et al., 1993). Such departures disrupt the education system and result in the shift of valuable educational resources away from actual instruction towards costly staff replacement efforts. It is not necessary to be a management expert or an economist to understand that if the education managers are spending thousands of rupees and hours of their time to replace teachers who have left, preventing the brain drain in the first place might have saved some of those resources. Because faculty are both the largest cost and the largest human capital resource of an education system, understanding factors that contribute to teacher satisfaction (or dissatisfaction) is essential to improving the information base needed to support a successful educational system.
KEYWORDS: Pakistan, Lahore, education, private sector, higher education, university, college.

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This paper develops a multivariate model to test the causality between exports and investment and economic growth in Pakistan. Most of the previous studies in this area have not paid any attention to stationarity and co-integration issues. The underlying series are tested and it was found that the series are non-stationary in their levels and not co-integrated. The Hsiao’s version of the Granger Causality method is used, the order in which the variables are entered into the model is also considered by using (SG) criterion, which is very important in the multivariate frame work and it improves the robustness of the causality results. The results show that there exists a strong bi-directional causality between exports growth and investment growth to GDP growth. It was also found that exports growth causes imports growth, investment growth causes exports growth, and imports growth causes GDP growth and investment growth, but not the opposite. These findings support the fact that both exports and investment are considered as an engine of growth in Pakistan. The causal inferences are fairly stable over the sample period.
KEYWORDS: Pakistan, trade, investment, neo-classical, economic growth, national income, domestic output.

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