In many areas of rural development, Pakistan lags behind its Asian neighbours with fewer natural resources. Drought and the poor performance of crops and livestock often force rural people to migrate at least temporarily to the cities.
This situation is exacerbated by the system of landholding, which is characterised by a high degree of land concentration by ownership and by a high incidence of sharecropping tenure in the two most populous provinces of Sindh and Punjab.
According to a report of Asian Development Bank, cities like Karachi with a population of around 14 million are increasingly ill-equipped to handle the concomitant problems of overcrowding and pressure on the urban infrastructure and environment.
The urban population grew from 24 million in 1981 to 53 million in 2005. Hence, there is a pressing need to seek non-traditional work opportunities in rural areas. Efforts must be made to diversify the rural economy in non-farm sectors such as services, small-scale manufacturing, and value-added agricultural processing.
In South Asia as a whole, ADB's report said that the non-farm economy accounts for roughly 25 percent of rural employment and 29 percent of rural incomes. Seasonal trading, agro-processing, manufacturing, and service activities enhance rural livelihoods, support a growing agriculture, and supply consumer goods and services.
Non-farm activity offers important economic opportunities for the rural poor in areas where landlessness is high. Pakistan's population is 68 percent rural and agriculture accounts for almost 45 percent of total employment. Outside the agriculture sector, 46 percent of the rural poor (and 22 percent of the rural population) are non-farm households that do not share directly in incomes derived from agricultural crop production.
If Pakistan is to meet its goal of reducing poverty by 2015, rural economic opportunities must expand in agriculture and the non-farm sector. In the absence of a change in the structure of rural incomes and employment, growth in traditional crop agriculture and associated growth linkages may not be adequate to substantially raise the incomes of the rural non-farm poor households.
Strategies to promote rural non-farm income opportunities are necessary to make an impact on rural poverty in Pakistan.
Presently, ADB has actively engaged the Small and Medium Enterprise Development Authority (Smeda) in reorienting its BDS approach. As a result, Smeda has started to move away from direct intervention in SME training and preparation of business plans to a more facilitative role.
Additional impetus to these efforts will come from the business support fund (BSF), which upon its establishment will improve market-based SME access to BDS. Despite adequate planning and consultations during the preparation of SMESDP, the establishment of BSF has taken more time than expected.
From experience, innovative initiatives involving a new and diverse set of stakeholders require adequate planning and support for public sector consensus building to ensure that the initiative can take off.
Public funds should be used for developing markets rather than individual businesses, so that more target commercial stakeholders could benefit. Publicly funded programmes should focus on market growth and address market gaps and failures to the advantage of the target business groups.
Direct interactions between publicly funded programmes and small businesses are based on an unequal relationship if the latter cannot hold accountable for the quality and range of the services provided. These interactions should be mutually accountable, businesslike, and transaction-based.