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enter image description hereTen percent of the world’s education deprived primary-aged children live in Pakistan. This sad reality persists even after the amended constitution (Article 25A, 18th amendment) declared education free and compulsory for children between the ages of 5 and 16.

The first budget of the new government in Pakistan will be presented on June 12. Within a short span of a few weeks, the newly elected government has to shift gears from promising the world to the electorate to delivering on those promises. In a resource constrained economy where the tax revenue and exploitable natural resources are in short supply, the newly elected government of Prime Minister Nawaz Sharif has to invest strategically to get the highest rates of returns on public sector investments.

While many demands would compete for the government’s investments in the new budget, nothing, however, is more important than the need to invest in education. And whereas many would campaign for investments in higher education, the Sharif government should realise that investment in primary education has a higher social rate of return than the rest.*

It was only a few weeks ago when the Nawaz League promised the voters that if elected, they will increase the education budget from under 2 per cent of the GDP to 4 per cent by 2018. The Pakistan Peoples Party pledged even a higher share of 4.5 per cent of the GDP for education by 2018. Imran Khan’s party pledged to increase the education budget by five-fold. This is, however, not the first time that political parties campaigned to increase investment in education. The post-election reality of severely constrained tax revenue, huge obligatory payments for debt servicing and the armed forces, and the lack of commitment to education, often result in even lower investment in education than before.

Despite the promises for increased education spending in Pakistan, the abysmal state of literacy, let alone education, has persisted. Estimates suggest that no fewer than 7 million primary-aged children are out of school. The enrollment rates are lower for Khyber Pakhtunkhwa (KP) than the other provinces. And even within KP, far fewer girls than boys are enrolled in schools. UNESCO reported that the net enrollment ratio for primary-age children was 72 per cent (2011) against the regional average of 89 per cent. The gross enrollment ratio for secondary education is 35 per cent (2011) against the regional average of 60 per cent. And finally the gross enrollment ratio for tertiary education is 8 per cent (2011) against 18 per cent in the region.

At the same time, UNESCO estimates some 50 million Pakistanis are illiterate. How is it possible that every incoming government promises more spending on education, and yet one finds millions of illiterate in Pakistan?

The federal government, after the 18th constitutional amendment, is responsible for tertiary or higher education. Provinces have been devolved the responsibility for education up to grade 12. Primary and secondary education in fact falls under the purview of district governments. This creates an interesting challenge in Pakistan where primary education has been devolved to local governments who are the most cash-strapped level of government, given their inability to generate buoyant sources of tax revenue.

Despite the fact that primary education receives the highest share of education spending in Pakistan (34 per cent of total education spending), the demand for primary education services far exceeds the supply. The result is obvious. Poor quality and an inadequate primary school system has failed to meet the demand for primary education, resulting in a large number of school-aged being not in school.

Source: *Macro trends in financing of education in Pakistan: An analysis of public sector allocations and expenditures*. 2011. UNESCO.
Source: *Macro trends in financing of education in Pakistan: An analysis of public sector allocations and expenditures*. 2011. UNESCO.

Given the poor quality of infrastructure and teaching in government-operated primary schools (read FAFEN’s report on the poor state of school infrastructure), middle- and upper-class households no longer send their children to government-run primary or secondary schools. A parallel universe of for-profit primary and secondary schools has emerged in Pakistan. These schools charge exorbitant tuition fees, which are often beyond the reach of middle-class households, let alone the lower middle-class and low-income households.

This has resulted in a multi-tier education landscape in Pakistan where the children of high-income earners are being educated at high-quality private schools, while lower middle-class children and others are condemned to government-run public schools. And the very poor in Pakistan are simply out of luck since their children are not in the school system.

UNESCO has documented the huge disparities in education attainment between the rich and the poor in Pakistan. For both rural and urban households, the number of years of schooling is much higher for the top earners in Pakistan, the bottom earners; females belonging to the lowest 20 per cent earners in rural households reported the least years of schooling.

Source: *The State of the World’s Children*, 2012. UNESCO.
Source: *The State of the World’s Children*, 2012. UNESCO.

The Social Rate of Return on Primary Education

A World Bank study from 1986 estimated that for developing countries, social rate of return to higher education, estimated as an increase in wages resulting from higher education, are lower by 13 per cent than those to lower levels of education. This suggests that the biggest bang for the buck is delivered by the investment in primary education rather than in higher education. The Sharif government, however, has the restricted mandate to invest in higher education alone.

This is not to suggest that there are no benefits of investing in higher education. In fact, a subsequent critique of the World Bank report appeared in 1996 in the journal Economics of Education Review in which the author argued that the measures of social rates of return ignore other unmeasured social benefits, which support investments in higher education.

There are, however, several other concerns about investing aggressively in higher education in Pakistan that merit some debate. Writing in the same space earlier, I had argued that the higher education spending on research has not served the immediate needs of the nation. Pakistan-based academics are busy researching problems that do not offer immediate reprieve to the masses. I wrote:

“The following graph is a pictorial representation of the subject areas used to categorise the 7,151 doctoral dissertations. The size of each subject area is in proportion to how frequently it appeared in the list thus revealing Chemistry and other basic sciences along with Islamic studies and Urdu being the most common research areas for doctoral dissertations in Pakistan. Education and agronomy are rare examples of frequent research topics that address immediate needs in Pakistan.

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“When one thinks of the grave challenges Pakistan has faced in the past three decades, Chemistry, Zoology and Urdu literature do not come to mind. One sees poverty, income inequality, food security, water shortages, infrastructure deficits, illiteracy, violence, wars, religious fundamentalism and sectarianism as some of the challenges that threaten the survival of the society and the State.”

Investing in research in higher education makes sense if the academics align their research priorities with the needs of the nation. With over 800 million rupees allocated to research in 2010-11 budget alone, one wonders how much of the funds were spent on research in poverty alleviation, improving literacy, and improved access to water, sanitation, and affordable power.

The other big concern about investing in higher education is that the government subsidises all who attend institutes of higher learning by not charging as tuition fees the cost of operating universities. The subsidy is thus extended to both deserving and underserving students. Furthermore, a large number of those who pay a fraction of what it costs to train doctors and engineers leave Pakistan for opportunities abroad, thus depriving the nation of the opportunity to reap the benefits of investments in human capital.

Many will argue that investment in research and development is necessary for economic development of the nation. While this is true for advanced economies, the same does not necessarily apply to Pakistan. Consider that the advanced research in nuclear weapon program has produced hundreds, if not thousands, of highly trained physicists, yet it has no impact on the nation’s ability to overcome power and water shortages. In fact, Amatul R. Chaudhry and others in Pakistan Journal of Commerce and Social Sciences in 2009 observed that in the case of Pakistan “higher education does not cause economic growth.” Their empirical tests suggest that the unidirectional causality runs from economic growth to higher education.

The impact of higher education on economic growth perhaps is observable only in the long run. Saima Riasat and others writing in the journal Educational Research in December 2011 demonstrate the point that “education expenditures have a significant impact on long-run economic growth.” However, a review of studies exploring the relationship between education expenditure and economic growth in India failed to find a “robust relation between education expenditure and growth.” Sayatan Ghosh Daastidar and others at the University of Dundee in a discussion paper made the observation that “expenditure on education is a necessary, but not a sufficient condition for growth.” The impact depends more upon the labour market and economic conditions. They observed that it was only after India opened its economy to the world in 1991 that the effect of education expenditure was felt on growth.

The education budget for Pakistan

If the Sharif government is serious about using education as a vehicle to increase growth, it has to make smart investments in the education sector. Increased spending on education without due consideration may have adverse impacts. The financial planners toiling with the budget should consider the following.

  1. The Federal government cannot confine its role to higher education, thus leaving primary education to the cash-strapped local governments. The federal government has to pump significant funds into primary and secondary education, while the operation of schools can still be left to local governments. The federal government can establish a task force to monitor, benchmark, and document the efficacy of funds transferred to lower tiers of government to improve primary and secondary education.
  2. The higher education spending has to be primarily spent on research and development on problems that require solutions in the short-term. A solution for power shortages, water scarcity, stagnant crop yields, preventing against the devastating impact of natural disasters, e.g., floods and earthquakes, and improving law and order are some examples of research priorities.
  3. The public sector universities should charge adequate tuition fees to cover operating costs for the undergraduate degrees. This would eliminate the practice of subsidising even those who do not qualify. Need-based scholarships be offered to those who would demonstrate financial need after qualifying for higher education. This would free-up significant funds that could be made available for research.
  4. A grass root campaign be launched to mobilise Pakistani youth to improve literacy by teaching basic literacy to adults. Similar plans in the past turned into gimmicks. This could be done better by engaging celebrities in Pakistan to lead the initiatives.

A literate Pakistan will be able to meet challenges better. If millions are left out of schools, and an increasingly disproportionate number of girls remain illiterate or semi-literate, the resulting workforce in Pakistan will not be able to compete globally.

The new government should therefore set meaningful targets. Promising an increase in the education budget is not a smart goal. Instead the Sharif government should set the target of achieving 100 per cent literacy for primary-age children by 2018. By leaving no child behind, Pakistan can move forward.

Psacharopoulos, G., Tan, J. and Jimenez, E. (1986). *Financing education in developing countries. Washington, DC. The World Bank.