Mr Prime Minister, Excellencies, Ladies and Gentleman
I am delighted to be here today. This is the 4th time that I have visited Pakistan this year: the first was in January while I was still in opposition; the second was in June as my first overseas visit in Government; I visited in August during the dreadful floods and today to pledge my support to the future development of Pakistan.
The UK has a long and close friendship with Pakistan. But I know I speak for the entire international community when I say what happens in Pakistan matters for the rest of the world. And I want to acknowledge here Pakistan’s sacrifices in the struggle against terrorism. We all want to see a vibrant future for this country.
Pakistan can realise that goal. It sits at the crossroads of South Asia, Central Asia, China and the Middle East. It is the sixth most populous country in the world. And in my visits here, I have always been struck by the vibrant entrepreneurship of the Pakistani people, the importance they attach to education and the spirit of zakat.
The question for us all here at the Pakistan Development Forum is how we support Pakistan to realise that potential and support the Minister of Finance and his excellent team.
Pakistan faces enormous challenges. Economic growth needs to reach 8% just to keep pace with population growth. The Millennium Development Goals are off-track. Half of the adult population is illiterate. Women are particularly disadvantaged. And security and corruption are pressing and immediate concerns.
On top of these challenges, as I saw in August, is that the floods have left millions of people destitute and homeless. Through the massive and commendable joint efforts of the Government of Pakistan and the international community, we are slowly moving into the recovery phase. But as we have seen from the Damage and Needs Assessment, the losses are approaching ten billion dollars. And it will take years to rebuild the lives and livelihoods of those who have been affected.
So we cannot underestimate the desperate needs of those affected by the floods. But nor can we ignore the plight of millions of others trapped in poverty and hopelessness. Underlying this is the urgent need to lay the foundations of an economy that can sustain economic growth above 8%.
Last month, the UK published its Comprehensive Spending Review which set out our plans to make significant cuts in our public spending. The UK Government has had to make difficult and unpopular decisions. But it was absolutely essential to address the deficit so that we can build our economic potential. Having taken these decisions, we are now on the road to recovery.
Pakistan is at a similar crossroads. To realise its economic potential, it will have to implement some difficult, short-term reforms, to gain real long term benefits. Three key issues stand out for me.
A stronger tax base that does not balance the books on the backs of the poor. The Federal Board of Revenue and its provincial equivalents must be strengthened to implement existing tax laws. But in the short term, to stave off a crisis, the General Sales Tax must be implemented. British taxpayers can’t be expected to support your development if the wealthy in Pakistan don’t pay their dues.
Second, the need to reform state-owned enterprises and tackle corruption to get the best value for public money.
And third, the need to reform the energy sector. Government subsidies are using up valuable revenues while power outages cripple business and leave millions of people sitting in darkness. But more reliable power means higher prices.
I know progress is being made in these areas. The Government has taken tough decisions to increase electricity prices by 2% a month and has tabled the General Sales Tax before Parliament. Ultimately, it is the Pakistani Government that must own and drive these reforms with the support of the international community. We cannot and should not impose change but we can support your efforts, providing assistance in step with your readiness to take the brave decisions that are needed. I am pleased that the Government has called on the IMF and World Bank to support them in delivering these reforms. Their support is critical. I am pleased also that the UK has played a leading role in the EU’s initiative to cut tariffs on key Pakistani exports. The EU will shortly be asking the WTO for a waiver and I hope that all countries will support us in ensuring this is approved quickly.
As a politician and friend of democratic government, I know that these reforms are unpopular and difficult. The same is true for any government. But that is exactly when we politicians earn our pay. Not just those of us in Government but those in opposition as well. We need to provide a long-term vision if we are to ask people to accept the need for painful reforms.
I want to reassure Prime Minister Gilani and his team, as well as the Pakistani people, that they are not alone in facing these difficult decisions. The international community will stand by them.
That means in the short-term we must support reconstruction. For our part, the UK is prepared to support the Family Compensation Scheme, which the Minister of Finance mentioned in his speech, provided we can ensure the funds reach those most in need. And we will aim to ensure our education programmes in the Punjab and Khyber Pakhtunkwa support the rehabilitation and reconstruction of schools that have been damaged by the floods.
But over the medium-term, donors must get better at supporting the Government of Pakistan. I look forward to co-chairing the Aid Effectiveness session this afternoon and to agreeing how we - as donors - can commit to concrete improvements in the way we work, inclduing better donor co-ordination and clearer prioritisation.
Ladies and Gentleman, let me conclude my remarks by saying these are challenging times for Pakistan. But I know I speak for all of my international colleagues when I say we are determined to ensure we play our part in supporting that difficult transition.