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THE WORLD BANK
Discussion Paper
.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~T-
EEDUTC ATION )ANIDTRINGSRE
Report No. EDT16
Educational Development in PakistanThe Role of User Carges
and Private Educafhn
Emmanuel JimenezJee-Peng Tan
December 1985
Education and Training Department Operations Policy Staff
The views presented here are those of the author(s), and they should not be interpreted as reflecting those of the World Bank.
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Discussion Paper
Education and Training Series
Report No. EDT16
EDUCATIONAL DEVELOPMENT IN PAKISTAN:THE ROLE OF USER CHARGES AND PRIVATE EDUCATION
Emmanuel Jimenez and Jee-Peng TanResearch Division
Education and Training Department
December 1985
The World Bank does not accept responsibility for the views expressedherein, which are those of the author(s) and should not be attributed tothe World Bank or to its affiliated organizations. The findings,interpretations, and conclusions are the results of research or analysissupported by the Bank; they do not necessarily represent official policy ofthe Bank. The designations employed, the presentation of material, and anymaps used in this document are solely for the convenience of the reader anddo not imply the expression of any opinion whatsoever on the part of theWorld Bank or its affiliates concerning the legal status of any country,territory, city, area, or of its authorities, or concerning thedelimitation of its boundaries, or national affiliation.
AIBSTRACT
Education in Pakistan is still poorly developed today. At the
primary level, less than half the eligible population is enrolled. As in
most other developing countries, the government provides highly subsidized
public education at all levels. Private education was nationalized in the
early 1970s. This policy was reversed in 1979, but in 1985 the share of
total enrollments in private institutions was still below the
pre-nationalization levels.
This paper examines the potential feasibility of increased cost
recovery and greater private participation in the provision of education in
Pakistan. It shows that policies in both directions could generate
potential gains in efficiency and equity.
TABLE OF CONTENTS
Page
ABSTRACT i
SUMMARY ii
I. INTRODUCTION 1
II. EFFICIENCY AND EQUITY IN PAKISTAN'S EDUCATIONAL SYSTEM 3
A. The Returns to Education in Pakistan 4
1. The Existing Literature 42. An Updated Estimate 93. Non-Monetary Benefits 15
B. Social Inequities 16
III. POLICY OPTIONS 23
A. The Potential for Increased Cost Recovery 23
1. Higher Education 242. Secondary Education 353. Primary Education 414. Cumulative Effect of Increased Cost Recovery 46
B. Private Schools in Pakistan 49
1. An Historical Overview 492. Present Policies and Their Implications 513. Policy Issues for the Future 66
C. Scholarships and Student Loans in Pakistan 70
1. Scholarships 702. Student Loans 723. Zakat Scholarships 73
APPENDICES
REFERENCES
- ii -
SUMMARY
In Pakistan today less than half the relevant school agepopulation attends primary school. This level of enrollment comparespoorly with the median -- of 83 percent -- among developing countries.Public spending on education, as a percent of GNP, is only about half thatin the average developing country. This allocation of fiscal resources mayaccount partly for the slow expansion of education in Pakistan. Buteducational opportunities are especially lacking at the primary level, andis due in part to the concentration of public spending on higher ratherthan primary education. Within primary education wide disparities existbetween the enrollment of boys and girls, and of children in urban andrural areas.
Previous estimates of the returns to education in Pakistanyielded mixed results as to the social profitability of investment at thedifferent levels of schooling. This paper provides updated estimates ofreturns of 16 percent for primary, 11 percent for intermediate, and 10percent for higher (degree) education. The results coincide with thepattern of returns for a large sample of other developing countries:investment in primary education yields the highest social payoff. Giventhis finding, it appears that a reallocation of public spending from higherto primary education would improve efficiency in the use of publicresources in the sector.
This reallocation toward primary education would also improveequity in the distribution of public funds for education. At present, thesubsidy received by each student in higher education far exceeds thatreceived by each child in primary school. Moreover, since the enrollmentratio in higher education is only 3 percent, it means that very fewindividuals are benefitting from the heavy subsidization at this level ofstudy. And among these students, a large number come from relativelywealthy families who can afford to contribute more toward their children'seducation. It is im,portant to note that educational subsidies are in factaccumulated throughout a student's entire schooling career. Thedistribution of such (accumulated) subsidies depends on the structure ofenrollment and the unit cost of education at the various levels of study.In Pakistan 51 percent of the population leaving the school-age rangereceive no share in such subsidies because they have never had theopportunity even to enter primary school. On the other hand, 3 percent ofthis population attains higher education and appropriates more than 25percent of these subsidies. The distribution is more unequal than that inthe average developing country.
This paper examines various options for increased cost recoveryin public education and assesses the role of private education. theseoptions are considered only in terms of their potential impact onefficiency and equity. The political considerations are obviusly alsoimportant, but are much more difficult to assess. The outcome of the
- iii -
analysis presented here is nevertheless useful in that it quantifies thecost -- in terms of foregone improvement in efficiency and equity - ofperpetuating the present system of financing education.
Excess demand is especially evident in higher education. In someof the better universities, and in such specializations as engineering andmedicine, the number of applicants exceeds the available places by a widemargin. In view of the strong demand, there is clearly room for increasedcost recovery. The precise fee increase is however difficult to determinebecause information is lacking on the responsiveness of demand to anincrease in cost and on the overall level of excess demand. The analysisin this paper therefore relies on simulations based on what are shown to bequite conservative assumptions. This paper argues that it would not beoverly optimistic to aim at recovering on average 40 percent of the publiccost of higher education.
The demand for primary and secondary education is strong in theurban areas, as evidenced by the rapid growth of private schools since theban on their operation was lifted in 1979. A possible policy option is toincrease fees modestly for public secondary and primary schools, especiallyin the urban areas. It is likely that in rural secondary schools a smallfee increase would also be feasible. A cost recovery rate of, say, 25percent in urban secondary schools, 12.5 percent in rural secondaryschools, and 10 percent in urban primary schools can be attained byimposing fees which are still very much below what is charged by theaverage private school.
The extra revenues generated by the foregoing measures could beused to expand the supply of school places. The level of education towhich the extra resources should be allocated depends on the marginalreturns to additional investments. Given the pattern of returns, it islikely that spending most of these resources in primary education wouldyield the highest social payoff. The bulk of the extra resources shouldprobably be used to expand rural primary education since enrollments areparticularly low in the rural areas. The paper shows that the suggestedcost recovery policies would reduce dramatically the disparity betweenurban and rural primary enrollment ratios. Overall, the primary enrollmentratio could be increased from the present level of 49 percent to 65percent.
Another policy option is to increase the role of privateschools. In 1972 schools were nationalized, but this policy was reversedin 1979. Today the share of enrollments in private schools is still belowthe pre-nationalization levels, particularly in post secondary education.But private schools are already contributing significantly towardeducational development in Pakistan. Without them, the government wouldhave had to increase its spending on education by about 10 percent in orderto achieve the present level of enrollments. Private secondary and primaryschools are profitable operations, with profits averaging 23 percent ofcosts in 1983. A rough estimate shows that there is probably room for a 30percent increase in private enrollments before profit rates are bid down to
- iv -
about 10 percent. Allowing the continued expansion of private education isdesirable: in light of the government's fiscal constraints, this is one wayof increasing private contributions for investment in education. In highereducation, the role of private institutions is somewhat -limited in thatdegree-granting powers have been given to only three institutions so far.
One concern over the policies suggested in this paper is theirpotential effect on equity. The increase in fees might force some talentedstudents from poor families to dropout prematurely. For this reason, it isimportant to ensure that scholarship schemes are developed in tandem withthe fee increase. At present, there are two main sources of scholarships:those given through the Ministry of Education, and those given through theZakat administration. There is scope for increasing the availability ofthese scholarships, particularly at the lower levels of education. Inhigher education, loans rather than scholarships should probably be themain instrument for relieving the hardship of students from poor families.A small loan scheme exists in Pakistan today, but the loans are highlysubsidized. An expansion of this scheme would be fiscally feasible only ifthe terms of repayment are adjusted to recoup a substantially higherproportion of the loan.
I. INTRODUCTION
Education in Pakistan is still poorly developed today. At the
primary level, less than 50% the eligible population is enrolled. As a
rough comparator, the median enrollment ratio among all developing
countries is 83%. Pakistan attains about half of the developing country
average in the percent of GNP devoted to education (World Bank Comparative
Education Indicators). Moreover, educational spending is concentrated at
higher levels, which has an arguably lower rate of return than lower
levels, and to which lower income groups have the least access.
While there are a variety of reasons for this poor record, the
method of financing arises as a predominant issue. As in most other
developing countries, the government provides highly subsidized public
education at all levels. The subsidies are greatest for higher levels of
education. Private education was nationalized in the early 1970s. This
policy was reversed in 1979, but in 1985 the share of total enrollments in
private institutions was still below the pre-nationalization levels.
Given the present public budgetary constraints in Pakistan, an
increase in the flow of resources to education in Pakistan depends
crucially on enhancing the private sector's role in the financing and
provision of education. This paper examines the potential feasibility of
increased cost recovery in government schools and greater private
participation in the provision of education in Pakistan. It first provides
a review and an update of the pattern of returns to investment in education
in Pakistan. The results show that these returns are highest for primary
education. However, the funds flowing to such investment is limited,
- 2 -
partly because of overall fiscal constraints, but also because of
misallocation across levels of education.
The paper then shows that there is large excess demand,
especially in higher education and possibly also in secondary education.
Given these demand conditions, simulations are provided to show that the
amount of additional resources that might be mobilized through increase
cost recovery would not allow the attainment of universal primary
education, but would nevertheless significantly lighten the fiscal
pressures of such a goal.
This paper also examines the role of privately provided
education. It shows that the fiscal savings from allowing such education
is substantial. There are indications that private schools provide the
kind of education sought by the public and might be more cost-effective
than public schools. the paper also shows that encouraging the additional
expansion of private schools would generate efficiency gains.
-3-
II. EFFICIENCY AND EQUITY IN PAKISTAN'S EDUCATIONAL SYSTEM
In this paper, the financing of Pakistan's educational system is
evaluated on the basis of efficiency and equity. Efficiency can be defined
in several ways. For an aggregate analysis, an educational system is
efficient if it provides enough resources from other sectors to educate the
number of students that equates social marginal benefit to cost. Within
education, the system is efficient if resources are allocated among levels
(primary, secondary and higher) according to the highest social rate of
return. Within schools, efficiency is attained when resources are used to '
buy the least-cost mix of labor (mostly teaching) and non-labor inputs and
when students who are able to gain the most from education are given
priority access. This section will focus on the first two definitions,
although the third will also be briefly discussed. The main findings are
that the rates of return to education are genereally high and justify the
channelling of more resources to the sector; and that within education, the
primary level should be given the greatest encouragement.
The notion of equity also has several connotations. Ultimately,
the judgment of what is an equitable distribution is a subjective one. In
order to avoid having to define a criterion for egalitarianism, we simply
document the degree to which government subsidies to education are evenly
distributed. The principal findings are that these subsidies are
concentrated among relatively few individuals and are focused on higher
levels of education to which the rich have more access.
-4-
A. The Returns to Education in Pakistan
There is a consensus among policy makers and their advisers that
investment in education generates significant social returns, particularly
at the lower levels (see Annex I for a description of Pakistan's
educational system). Thus, the Sixth Plan has called for an increase in
the flow of national resources going to this sector of the economy.
Given the scarcity of development resources in Pakistan, it is
important to review the evidence regarding the magnitudes of the returns to
different levels and types of education. Such an analysis would be useful
in deciding the extent of investment that should go into education and in
allocating resources within education. This section of the report assesses
this evidence through: a brief review of the literature on the rates of
return to education in Pakistan; an update of these findings in an analysis
of age-earnings profiles from the 1979 Household and Income Expenditure
Survey (HIES); and a discussion of non-monetary returns to education.
1. The existing literature:
There have been a number of studies of the rates of return to
education in Pakistan, most of which have been conducted with data
collected in the 1970's. If taken at face value as they are reported in the
original studies, the results are mixed regarding the profitability of
different levels of education relative to each other and to other sectors.
According to Table 1, three different studies on the same data base, a 1975
-5-
household survey of Rawalpindi City, came up with very different
conclusions regarding the magnitude of the rate of return relative to the
opportunity cost of capital, as well as the relative rates of return to
different levels of education. Hamdani (1977) concluded that the social
rate of return to primary education was 13% and exceeded that of higher
levels of education. Private rates of return were even higher. Haque
(1977) and Guisinger et al. (1984) concluded that the private rates of
return to primary education were even lower than the social rates
calculated by Hamdani and were lower than those to higher levels of
education. Khan and Irfan (1985), with a later (1979) nation-wide survey of
workers, came up with similar results to Haque and Guisinger et al., except
that their rates of return to higher levels were also low.
Table 1: Rates of Return to Education inPakistan From Existing Studies
Source Hamdani Hague Guisinger et al. Khan and IrfanSelf- Self-
Level of Education Private Social Private Employee Employed All Employee Employed
Incomplete primary 7 5 - - - 3.4 - -Primary 20 13 2.6 4.3 1.2 3.5 4.0 6.7Secondary 11 9 5.2 12.5 8.4 11.6 5.6 7.7College 14 10 9.8 14.2 3.7 13.1 6.8 3.4University 27 8
Coverage Rawalpindi (Same as (Same as Hamdani) All PakistanYear of Data 1975 Hamdani) 1979Source PIDE Socio- ILO-UNFPA
economic Labor Force andSurvey Migration Survey
Sample Size 1,295 11,288
"-": Not available.
-6-
The most recent survey of worldwide rates of return concludes that the
rates of return to education as a whole are high, exceeding the benchmark
rate used to evaluate the opportunity cost of physical capital, and that,
within the education sector, the returns to primary education are highest
(see Table 2). The studies of Haque, Guisinger et al. and Khan and Irfan
have been used to conclude that the rates of return to education in
Pakistan are different from those in other parts of, the world. Various
explanations have been advanced for this phenomenon. For example,
Guisinger, et al., ascribe the low rates of return to a conscious
government policy -- wage controls -- which drastically compressed the
skill-wage structure. If the compression in the skill-wage structure
results in an undervaluation of the returns to skill- acquisition, the true
social benefits to education are likely to exceed the estimated private
benefits. Another explanation is that the relatively high rate of
outmigration from Pakistan affected earnings differential (Irfan and
Ahmed).
Whatever the validity of these explanations the pattern in the rates
of return reported in the studies are nevertheless at variance with earlier
studies within Pakistan, such as Hamdani, with studies in other parts of
the world (Psacharopoulos, 1985) and with the prior intuition of government
policy makers and their advisers. X
-7-
Table 2: The Returns to Investment in Educationby Country Type and Level (Percent)
Number ofRegion Social Private Countries
Primary Secondary Higher Primary Secondary Higher Reporting
Africa 28 17 13 45 26 32 16Asia 27 15 13 31 15 18 10Latin America 26 18 16 32 23 23 10Europe &Middle East 13 10 8 17 13 13 9
DevelopingCountries 24 15 13 31 19 22 45
DevelopedCountries - 11 9 - 12 12 15
Source: Psacharopoulos (1985)"": Means data were not available because of the lack of a control group
of illiterates.
The question then is, are there other reasons for the different results of
the studies quoted in Table 1? In particular, if the results differ purely
for methodological or data reasons, then policy conclusions would have to
be tempered until more definitive results are obtained.
Methodology: There are two basic methodologies for estimating rates of
return to schooling. In the direct approach, rates of return are computed
directly from the education coefficient in estimated earnings functions.
In the indirect approach, internal rates of return are calculated from
a comparison of the incremental costs and the incremental earnings
associated with various schooling levels. These earnings vary according to
age-earnings profiles. Giusinger et al. admit that the two "give somewhat
-8-
different results, with the direct approach yielding consistently lower
estimates of the rates of return to schooling than the indirect approach.
This may explain why Hamdani, who used the indirect approach, found
somewhat higher rates of return than we have found."(p. 266) The reason is
that the direct approach treats the coefficient of a "level of education"
dummy variable in an earnings function as the rate of return to education.
If there is no interaction between this dummy variable and education, the
approach implicitly assumes that the difference between earnings at two
levels of education is the same throughout a person's life cycle. The
indirect approach usbd by Hamdani accepts the possibility that differences
in earnings may vary with age -- i.e., there may be complementarities
between formal schooling and experience -- since age-earnings profiles are
calculated at each educational level. The latter approach is more
attractive since it is more flexible.
There are other reasons for favoring the indirect approach. The most
important is that it allows calculation of the social rate of return to
education, whereas the direct approach does not, except under very
restrictive assumptions about the costs of education (See Psacharopoulos
and Woodhall 1985 for a comprehensive treatment of this issue.)
Data: Coverage is extremely important. The Rawalpindi City survey is
based only on workers in a city that has an over-representation of
government workers. Wider national samples, such as those used by Khan and
Irfan, would be more valid for generalizable results.
-9-
2. An updated estimate
Unfortunately, we did not have direct access to data from a Pakistani
household survey in order to update and extend the coverage of the rates of
return computed by Hamdani with 1975 data from Rawalpindi 0ity. However,
age-earnings profiles by level of education, computed from tables derived
from the 1979 Household Income-Expenditure Survey (HIES), can be used to
conduct a rate of return analysis. It should be noted that, because these
profiles are taken from aggregate-level data, they may not be strictly
comparable to those from individual-level sources. However, the gains in
terms of coverage and in the use of a better methodology partly offset the
drawbacks from the aggregate analysis.
Benefits: The age-earnings data used in the analysis are reproduced
in Appendix 2. These data are segmented by level of education: less-than-
primary, primary, high school, intermediate, degree and postgraduate
(university). Since some of the given educational intervals which have
relatively few observations, age-earnings equations were estimated in order
to smooth out the profiles. Earnings (Y) of the ith individual who has
attained the jth level of schooling were presumed to be related to age (X)
and its square (X2):
Yij = ao + a1 Xij + a2 Xij2 (1)
At any given point in the working segment of an individual's life-cyle,
then, the benefits of having acquired the jth level of schooling is the
difference between earnings at that level and those at the previous level:
Bij = Yij - Yij-1. (2)
- 10 -
The results of the estimation of (1) are reproduced in Appendix 3.
The benefits of each level of education over an individual's entire life
cycle would be the difference between the age earnings profile of any two
levels. This difference would, of course, be calculated only over the
age-range from the time that an individual begins his/her working life to
retirement (assumed to be 65 years).
The implicit assumption is that earnings capture all of the
benefits to an individual of schooling. One possibility is that, because
of labor market failure, wages do not reflect productivity. In
particular, it has been hypothesized that the returns to higher
education are underestimated by earnings because of policy-induced wage-
compression of skilled relative to semi-skilled workers. This is
exacerbated by the fact that semi-skilled workers have access to the
international labor market while skilled workers do not. (Irfan and
Ahmed, 1985). Such arguments have not been rigorously tested with available
data. Another possibility is that there are non-monetary benefits to
education. Aside from social benefits, there are the gains to farm
productivity. The samples used in the rate of return analysis do not
account for gains in the rural areas. Findings from other studies are
discussed later in this section.
Costs: The social costs of education are assumed to be the sum of the
following: the unit subsidy (unit cost less unit fee revenue) incurred by
the government to provide education at a given level; the opportunity cost
in terms of income foregone while in school, incurred by the student; and
other privately-incurred direct costs of schooling, such as transport,
school supplies, etc. The unit cost figures were taken from Ministry of
Education and University Grants Commission data and are summarized, for the
- 11 -
1983-84 period, in Table 3. The opportunity cost of the jth schooling level
was simply assumed to be the earnings, over the time that a person has to
be in school for that level, of schooling level j-1. At the primary level
two alternative assumptions were made regarding opportunity cost to span
the range of possibilities regarding rates of return -- (i) that there are
opportunity costs over the entire primary age range 6-10; and (ii) that
there are no opportunity costs at all. Finally, no data on the
privately-incurred direct costs of schooling were available from the same
data base, other studies were used to estimate these magnitudes. It was
assumed that, below the post-graduate university level, the private costs
of schooling were 25% of government-incurred direct costs. At the
university level, they were assumed at 10%. (These figures are consistent
with those found by Ghafoor 1984.)
- 12 -
Table 3: Costs of education in Pakistan
LEVEL OF EDUCATION: PRIMARY MATRIC INTERMED DEGREE POSTGRAD
Starting age of educ level 5 13 15 17 20Ending age of level 10 15 17 20 23Years not in lab. force 5 2 2 3 3
1. Direct costs per studentborne by government (83 Rs): 373 564 1566 1566 12426
2. Costs borne by students (83 Rs)a. Annual tuition 83-84: 0 2 113 113 1716b. Annual foregone income
Year of schooling:1st 254 4462 5626 7624 117342nd 736 4946 6048 8088 122053rd 1208 8554 126874th 16705th 2123
c. Other personal costs: 93 141 392 392 1243
FLOWS OF COSTS (83 Rs)Social costs (I + 2b + 2c )
Year of schooling:1st 720 5167 7584 9581 254022nd 1202 5651 8006 10046 258733rd 1674 10512 263564th 21365th 2589
Private costs (2a + 2b + 2c)Year of schooling:Ist 347 4605 6131 8128 146922nd 829 5089 6553 8593 151633rd 1301 9059 156464th 17635th 2216
Sources: 1, 2a, Ministry of Education budget documents;2b, Appendix 2; 2c, 25% of 1 for all levels exceptpostgraduate where it is 10% of 1.
- 13 -
The private costs of schooling include: the opportunity cost,
privately-incurred direct costs and tuition. Fees per student are
calculated as the average amount actually collected, rather than the amount
charged. The two are different because of various exemptions that are
granted by both provincial and university authorities. Scholarships that
are directly paid to students are not included since they are of a very
small magnitude.
Rates of return: The flows of social net benefits over an individual's
life cycle for alternative levels of schooling are depicted in Figure 1.
One interesting trend is the degree to which these net benefits rise with
age. This reflects complementarity between formal schooling and human
capital formation in the form of on-the-job experience, as proxied by age.
To compare these flows, the rates of return to various levels of
education are presented in Table 4. The rate of return is the rate of
discount that would set the net present value of the flows in Figure 1 to
zero. The greater is the degree to which benefits outweigh costs,, the
greater would this rate have to be. The main conclusion is that the trends
in, and indeed, the magnitudes of the rates of return are very similar to
those found by Hamdani for Rawalpindi City. The social rates of return to
education range from about 7% (secondary) to about 16% (primary) under the
assumption that there are opportunity costs of schooling at the primary
level. Moreover, both private and social returns decline with higher
educational level, with the exception of the relationship between secondary
and college levels, where it rises. The social rate of return to primary
education is double that of university-level education, which has a rate of
return of 7.8%. The latter is less than the opportunity cost of physical
investment.
- 14 -
Not Social Returns Primory Net Soclal Returns Intermedlote
12,
10
4 e I 2 4 is i4 3: 4*4 40 54 O- *4 *4 1'* 24 2' 34 3* 44 40 54A SD *4AG- In y..m AG. In y-
N9et Soclol Returns Secondary Nest Social Returns Degree
7~~~~~~~~~~~~~~~~~~~~~
2
1 2 7 22 27 32 3 *Z 472 02 7 *2 21 20 St 36 41 40 el1 Oa eAg. En yo- Ag. IA y..,.
Nolt Social Returns Postgrad
'3~~~~~~~~~3
2-1-
~~~~~~I ~ ~ ~1 -4
0 -s~~~~~~~~
-10~~~~~~~~-
4 24 22 34 30 44 40 54 a4
AG. 1X 7 YI
Figure 1
Note: Net annual returns calculated as per equation (2).
- 15 -
Table 4: Rates of return by level of education (Z)
Level of education: PRIMARY MATRIC INTERMED DEGREE POSTGRAD
Full opportunity costsSocial rate of return 16.4 6.3 11.3 10.3 7.8Private rate of return 21.1 6.7 13.4 11.6 11.4
No opportunity costsfor ages 6-10
Social rate of return 39.1 -------- Same as above -------
These results are remarkably similar to those of Hamdani, despite the
differences in data coverage. This implies that methodology does matter in
rate of return analysis. In particular, allowing for complementarity
between on-the-job experience and schooling changes the conclusions
regarding rates of return. The benefits to higher levels increase with
age, whereas the benefits to primary schooling stay relatively constant.
However, the latter are realized sooner and would be given a relatively
greater weight in a rate of return calculation based on earnings functions
that allowed for complementarity.
Thus, the literature has yet to achieve a consensus on quantifying
rates of return to education in Pakistan. It is not possible to reject the
notion that the returns in Pakistan exhibit a similar trend to those in
other countries: higher for primary relative to university. Relative
magnitudes appear to be lower than the average for other developing
countries. However, at least for primary levels, there is evidence that
they are higher than the returns to investing in physical capital.
The difference between the social and private rates of return measure
the degree of subsidization in any given level of education. For grades
- 16 -
above primary, the difference is greatest for university education. This
implies that it is possible to transfer costs from society in general to
the student without adversely affecting the socially desirable number of
graduates in Pakistan.
3. Non-Monetary Benefits
Rate of return calculations focus on earnings differentials and
capture benefits only in the monetized sector of the economy. Taking other
benefits into account would increase the computed rates of return
substantially. Aside from effects that are impossible to measure, such as
the impact on national unity, and socialization, researchers have attempted
some preliminary measures of non-monetary impact.
In a study of the impact of education on farm productivity, Butt
(1984) concludes that educational attainment, particularly at the secondary
level, has a significant effect on output. Education is also found to be
positively related to yield per area.
Another effect of education that has been measured for Pakistan is its
negative effect on fertility (Khan and Sirageldin, 1979), particularly in
the rural sector. Thus, to the extent that family planning is a social
concern in Pakistan, this effect would increase the social value of
education.
- 17 -
B. Social Inequities
There is evidence that social inequities are generated under the
present arrangements for financing education in Pakistan. The heavy
dependence on public funds at all levels of study, coupled with budgetary
constraints facing the government, has meant that only a limited number of
places can be provided. The result is that public expenditure on education
benefits only a small group in the country. Moreover, since the unit
public cost of education tends to increase rapidly with the level of study,
and fees at all levels are minimal, those in higher education receive
substantially more public subsidies than other students. In addition, at
each level of education, there is evidence that most of the public
educational expenditure have benefitted higher income groups in the
population.
The concentration of public educational expenditure on a
relatively small population arises partly from the present structure of
enrollment. The trends in the enrollment ratios at the three main cycles
of education appear in Table 5. At all levels, only a small proportion of
the relevant age group is enrolled. In 1985, less than half the population
aged 5-9 attended primary school; in other words, the majority of children
in this age group are currently denied the opportunity for basic
education. It is interesting to note that whereas equity considerations
point to the expansion of primary education, enrollments have in fact
expanded most rapidly in higher education in the last three decades.
- 18 -
Table 5: Trends in Enrollment Ratios in Pakistan, 1951-85
Year Primary Secondarya/ Higherb/
1951 25 7 0.5
1961 32 17 1.3
1972 39 17 2.3
1980 44 18 2.7
1985 49 20 3.1
Sources: For 1951-72, the data came from Pasha et al. (1978),and for 1980-85 for primary and secondary education, from WorldBank (1985), and for higher education, from Government ofPakistan (1985) and Vu (1984).
a/ Includes middle and high school enrollment._/ Includes enrollments in colleges and universities.
The lack of educational opportunities is especially marked in the
rural areas and among girls. Table 6 shows the enrollment ratio at the
various levels among these populations. The data indicate that a child in
the urban areas is nearly twice as likely as his/her rural counterpart to
receive primary schooling. They also indicate that whereas nearly
two-thirds of all boys in the relevant age group attended primary school,
less than one-third of the corresponding group of girls are in school. The
advantage of boys over girls increases, as expected, for post-primary
education: they are nearly three times as likely as girls in the eligible
age group to enroll in secondary or higher education. No data are readily
available showing the differences in enrollment at these levels between
urban and rural populations. But it is reasonable to infer that the
- 19 -
pattern at the primary level can only be exacerbated, since the transition
rates to the higher cycles of education tend, in general, to be lower among
rural populations.
Table 6: Enrollment Ratios by Level of Education, Locationand Sex, Pakistan, early to mid-1980s a/
(Percent)
Level ofEducation Region Both Sexes Male Female
Primary Pakistan 48 63 32Urban 72 77 68Rural 40 58 20
Secondary Pakistan 20 28 10
Higher Pakistan 3.1 4.2 1.6
a/ The data for primary education are from World Bank (1985b); and forsecondary and higher education are estimated from statistics inGovernment of Pakistan (1985a and 1985b) and Vu (1984).
A second source of inequity is associated with the allocation of
public expenditure and subsidies at the different levels of education. The
relevant data appear in Table 7. They show that although only 3 percent of
the eligible population is enrolled in higher education, nearly 30 percent
of the total public educational expenditure has been allocated to this
level of study. On the other hand, less than half the total expenditure
went to primary education. This pattern of allocation, combined with the
fact that fees are low at all levels of study, implies that, on average,
a student in higher education receives a much larger subsidy than other
students. In particular, he/she receives nearly 7 times the average
subsidy per primary school student, and nearly 5 times that per secondary
school student. It should be noted that within higher education those
- 20 -
enrolled in the universities enjoy an even larger advantage, since the unit
cost of such studies is higher: the average subsidy they receive is 6
times that received by the average college student; 19 times that of the
average secondary student; and 29 times that of a primary school
student.l/
Table 7: Public Expenditure on Education in Pakistan, 1984
Share ofTotal Unit Fees as X Unit Subsidyb/
Level of Public Expenditure of Public As % of perEducation Expenditurea/ (Rupees) Expenditure Rupees capita GNP
Primary 45.6 373 0 373 8.2
Secondary 24.6 564 0.3 562 12.4
Higher 29.8 2811 9.0 2557 56.4
All 100.0
a/ Public expenditure includes current and annualized capitalexpenditure.
b/ Defined as public educational expenditure net of fees.
Sources: Data on expenditure and fee receipts are from the revisedprovincial budget estimates to 1985-86; and data on enrollment andper capita GNP are from Pakistan Statistical Yearbook 1985.
The inequities inherent in the present structure of enrollment
and pattern of subsidization are reinforced in that students from higher
income groups are over-represented at all levels of education, but
1/ According to provincial budget-statistics and data provided by theUniversity Grants Commission to the World Bank CEM mission (SeptOct 1985), the average subsidy (expenditure net of fees) percollege student in 1984 was Rs 1,761 per annum, compared Rs10,710 for university (post graduate) students.
- 21 -
especially in higher education, as indicated in Table 8. As a result, a
disproportionate share of the public education subsidies are received by
students from such backgrounds.
Table 8: Socio-Economic Background of HigherEducation Students in Pakistan, circa 1980 a/
(Percent)Socio-EconomicStatus Male Female Both Sexes
Low 28.0 4.0 22.0
Middle 45.3 40.0 44.-0
High 26.7 56.0 34.0
All Groups 100.0 100.0 100.0
a/ Based on the profile of recent graduates from higher education.
Source: Khan and Siddiqui (1984)
The preceding analysis has focused on the distribution of
educational subsidies at a given time. It is important to note that
subsidies are in fact accumulated as an individual passes through the
educational system. Thus the longer he/she remains in the system, the
larger the amount accumulated. A more complete picture of the distribution
of educational subsidies would therefore be one that takes this effect into
account. The required distribution can be calculated from the current
enrollment and subsidy structures characterizing Pakistan.2 /
The results appear in Table 9. They show that persistence of the
present enrollment and subsidy structure' would have the following
implication: in any cohort of school children, 51 percent will never enter
the education system; 29 percent will exit it with only primary education;
2/ See Mingat and Tan (1985) for the computational details of a method forincorporating this effect.
- 22 -
16.9 percent will exit it with secondary education; while only 3.1 percent
will have attained higher education. Those with no schooling obviously
receive no public educational subsidies; on the other hand, those who
attain primary education, for example, will each have received Rs 1865 (373
x 5 years). Similarly the average amount accumulated by those who attain
secondary and higher education can also be calculated. The results appear
in column (3) of Table 9. By multiplying the accumulated subsidies by the
population attaining the different levels of education, it is possible to
derive the distribution (column 5) of educational subsidies in a cohort
exiting the school age range. In Pakistan, the present enrollment
structure and pattern of subsidization implies that 51 percent of each
generation will become adults without ever receiving a share in the
educational subsidies, while a minority of 3.1 percent (those who attain
Table 9: Distribution of Accumulated Educational Subsidiesin Pakistan, circa 1985
Education Subsidies (Rupees)
Yearly, at TotalHighest Accumulated by Subsidies Share of
Level of % of Level of End of all Received SubsidiesEducation Cohort Study Studies (Rupees) (%)
(1) (2) (3) (4) (5)
No Schooling 51.0 0 0 0 0.0
Primary 29.0 373 1,865 54,085.0 30.1
Secondary 16.9 562 4,675 79,007.5 44.1
Higher 3.1 2,557 14,903 46,199.3 25.8
All 100.0 - - 179,291.8 100.0
- 23 -
higher education) receives more than one-fourth of all the subsidies
available to the population (compare columns 1 and 5). For comparison with
other developing countries, this distribution is depicted as a Lorenz curve
in Figure 2.3/ It shows that educational subsidies are less equitably
distributed in Pakistan than in the average developing country. The
distribution is probably even slightly worse than that characterizing
African countries.
Percent ofPublicEducationSubsidies
100
80 _ _ _ _ _ _ _ I
Non-African
Developing60
40 All Developing
20 Pksa
0 20 40 60 80 100 Percent of Population
Figure 2: The Distribution of Cumulative Public Educational Subsidies in Pakistanand Other Developing Countries.
Note: The data for Pakistan refer to 1984, while that for other developing countries,to circa 1980; also, in the latter, they have not been adjusted to reflect publicspending net of fees. This adjustment would probably not alter much the picturein this figure.
3/ In the Lorenz diagram, the closer to the diagonal OA is the curvedescribing the distribution, the more equal is the distributionof the subsidies.
- 24 -
III. POLICY OPTIONS
In the following sections, various policies are explored as
options to improve the present system of financing and providing education
in Pakistan. They are evaluated in terms of their likely impact on
efficiency and equity. These criteria obviously do not form the sole basis
for policy decisions: political considerations are also important. The
results of the analysis here nevertheless provide the policymaker with
information on the opportunity cost -- measured as the foregone gain in
efficiency and equity -- of perpetuating the present system.
A. The Potential for Increased Cost Recovery
As the previous sections have demonstrated, the government bears
almost the entire cost of public education at all levels. In 1985, fees
have been increased, but they remain low relative to the per student cost
of public education. The analysis below shows that there is room for
increased cost recovery, particularly in higher education, and that the
increase could lead to significant improvement in the efficiency of
resource allocation in the sector, and enhance equity in the distribution
of public spending on education.
- 25 -
1. Higher education
In 1984 each student place in higher education cost Rs 2811
(US$1 = Rs16). 4/ On average, nine percent of the total public spending
on higher education was recovered through fees (tuition plus other charges
such as admission and examination fees) paid by the students. Each student
therefore contributed Rs253 yer year and the subsidy averaged Rs2558 per
student per year.
Besides fees, students incur other expenses, mainly for transport,
books, and food and lodging. But the most important item is opportunity
cost. Ghafoor's (1984) study shows that it constitutes over 80 percent of
the total private cost of higher education. The share of fees was only
about 10 percent.
To estimate the potential effect of an increase in user charges
for higher education, data are needed on the extent of excess demand, as
well as the elasticity of demand with respect to user charges.
Unfortunately, both types of data are not readily or easily available.
There is, however, some partial evidence suggesting that there is
substantial excess demand for higher education in Pakistan, as there is in
other developing countries. Anecdotal evidence indicates that at some of
the better public colleges and universities, there could be three times as
many applicants as there are places at the postgraduate level. For
undergraduate studies, as many as 5 to 10 applicants compete for each
4/ Using data for 1985 would have been preferable since they reflectthe new structure of fees. The analysis based on the 1984 datawould nevertheless remain useful since it permits comparison betweenwhat the fee increase could have been, given the demand conditionsin 1984, and that which was actually implemented in 1985.
-26-
available seat, and this number could rise to 20 for medical and other
professional studies. The strong demand is not limited to public
universities where tuition is almost free: The Agha Khan Medical College, a
private institution which charges Rs18,000 per year (about US$1,160 at 1985
exchange rates) attracts, on average, 30 applicants per available place.
Evidence is scanty, however, on the extent of excess demand for
higher education for the country as a whole. One recent study (Khan and
Hussain, 1984) indicates that in 1980-81, there were about 2.3 to 10
applicants per available place for undergraduate studies; and for courses
at the Masters level, there were 1.4 to 3.4 applicants per place. It is
unclear how these rates have been computed, but they fall in the vicinity
of the average ratio for colleges in the Punjab -- 2.65 applicants per
place -- which have been corrected for the incidence of multiple
applications. On the whole, it seems reasonable to assume as a
conservative estimate5 / for the base case simulations, that there are two
applicants per place in Pakistani higher education. In 1984, the fees
were, on average, Rs253 per student, and 0.56 million were enrolled. Since
only half the demand for higher education is assumed to be satisfied in the
base case simulation, the corresponding expressed demand for higher
education would be 1.2 million. For the more pessimistic simulations, it
is assumed that there are 1.5 applicants per available place; this
corresponds to an expressed demand of 0.84 million at the average fee level
of Rs253 per year.
5/ Conservative in the sense that the assumption probably leads tounderestimates of the potentially feasible increase in user charges.
- 27 -
Information on the elasticity of demand for education is similarly
scarce. Jimenez's (1985) review uncovered only nine studies worldwide, of
which only one, for Taiwan in 1950-69, focussed on higher education. Given
this data gap, some assumption about the elasticity of demand would be
needed to assess the potential impact of an increase in user charges in
Pakistan's higher education. In the base case it is assumed that the
demand for higher education drops 0.25 percent for every one percent
increase in fees. This is an extremely conservative assumption: since the
share of fees in total private costs is only 10 percent, it implies that
the elasticity of demand with respect to total private cost is -2.5.6/ In
the less conservative simulations, the elasticity with respect to fees is
assumed to be -0.5.
The impact of a fee increase on student enrollment in the base
case is shown in Figure 3. It is assumed that the government outlay for
public higher education is fixed at the level in 1984, and that all the
extra revenues from increased fees are used solely to make available more
student places in higher education.7 / If fees were kept below Rsl,005
(representing a cost recovery rate of 35.7 percent), the excess demand for
higher education woulld persist, that is the number of applicants would
continue to exceed the available places. If fees were raised to Rsl,005,
the additional revenue generated would permit higher education to expand by
41.1 percent, or 0.23 million places.
6/ The relationship between the elasticity with respect to fees (ef)and with respect to total private cost (es) is given by ef = xec where x is the share of fees in total private cost.
7/ Thobani (1984) provides the theoretical framework for this analysis.
- 28 -
A valid concern with the increase in fees is that it might be
inequitable. Poor students in particular might be forced to terminate
their studies. This outcome could, however, be avoided by providing
scholarships to these students. The potential expansion of higher
education would in this case be smaller, since the provision of
scholarships reduces the funds that can actually be used to increase the
supply of places. If fees were increased to Rsl,005, 29.2 percent of the
students would drop out under the base case assumptions and would be
Demand Curve with ConstantFees per year Fee Elasticity = -0.25
_811 02811 ~ ~ --- Effective Supply with
Scholarship Scheme
{ \ / / Eff~Eective SupplyWithout Scholarship
| 9 / / \~~~Scheme
1005
253
.56 .70 .79 1.12
.;urber Enrolled(milli.ons)
Figure 3: Increased Cost Recovery in Pakistani Higher Education and theImpact on Potential Level of Effective Enrollment, With and WithoutScholarship Scheme for Likelv Dropouts
- 29 -
Table 10: Expaning BiEer Education Via Inareased CostReyery - Some Sim=itimn Results
Pakistan, 1984
Assumptions About the Equilibrium Pbtential increase (%) in EffectiveDemand for Higier Education Fee Level b/ Enrollnent in Higher Education d/
Excess Demand Elasticity As % ofSimulation Index a/ w.r.t. Fees Rupees Costs c/ Without Sdiolarships e/ With Sdholarships e/
1. Base case 2.0 -0.25 1,005 35.8 41.1 30.4
2. Demand is 2.0 -0.50 694 24.7 21.4 12.5mxreelastic
3. Excess 1.5 -0.25 651 23.2 17.9 14.3demand issmaller
4. Demand is 1.5 -0.50 472 16.8 8.9 7.1mnreelasticand excessdemandsmaller
a/ Defined as the ratio between the number of applicants and the number admitted to higher education.
b/ Me level at ffiich there is neither excess demand for nor excess supply of higaer education places.
c/ The average cost per student place was Rs2811 in 1984. Receipts from fees constituted 9 percent of totalpublic spending on education, ihid'i implies an average fee of Rs 253 per student in 1984.
d/ Assumes that all the extra revenues are used to expand the supply of places in higier education.
e/ Ihe scholarships refer to those that wld be needed to prevent dropout among the population currentlyenrolled, due to the increase in fees.
- 30 -
replaced by those who can afford the fees.8/ To avoid this problem, the
potential dropouts could be fully shielded from the fee increase through
scholarships equal in value to the fee increase. (This assumption is
conservative since some of the dropouts might be able to continue their
studies with smaller scholarships.) The fee increase accompanied by a
selective scholarship scheme would permit higher education in Pakistan to
expand by 0.7 million places or 30.4 percent.
The potential expansion in higher education remains significant
even when the base case assumptions are made even more conservative. The
results corresponding to the alternative assumptions appear in Table 10.
When the elasticity of demand with respect to fees is doubled, fees can be
raised to Rs694 without causing the supply of places to exceed demand.
This level of fees implies a cost recovery rate of 24.7 percent, and would
permit higher education in Pakistan to expand by 0.12 million places (21.4
percent), if scholarships are not provided for potential dropouts; and by
0.07 million places (12.5 percent), if selective scholarships are
provided. The potential expansion is of the same order of magnitude when a
smaller excess demand -- reflected in a applicants-to-admitted-students
ratio of 1.5 instead of 2.0 -- is assumed in the calculations. For
completeness, the results corresponding to the most pessimistic simulation
-- in which simultaneously the demand with respect to fees is more elastic,
and excess demand is smaller - are also presented. Not surprisingly, the
potential expansion is much smaller. The result should, however, be taken
as the minimum possible increase in user charges for higher education.
8/ This result probably overestimates the number of dropouts, since itassumes that those who are actually enrolled have the same elasticitywith respect to fees as those who would like to enroll, but areactually not enrolled due to the shortage of places.
- 31 -
So far the calculations assume that the extra revenues from
increased fees are used to expand higher education. Alternatively, the
extra funds could be used to expand primary or even secondary education.
Since the social returns to investment at the lower levels exceed those in
higher education, this reallocation is likely to generate more efficiency
equity in the distribution of public spending on education. In particular,
expansion at the lower levels will enhance the access to basic education
for children who would otherwise be denied this opportunity.
In the base case simulations, the fee elasticity of demand for
higher education is assumed to be constant at -0.25; and the excess demand,
to correspond to an applicants-to-admitted-students ratio of 2.0. Under
these assumptions, it can be shown that if the provision of places in
higher education were fixed at its 1984 level of 0.56 million, excess
demand would persist even if fees were raised to recover costs fully. This
result was shown in Figure 3. With full cost recovery in higher education,
the extra revenues would permit primary school enrollments to be expanded
by 59.9 percent; or alternatively, secondary school enrollments to be
expanded by 115 percent.10 / Thus the enrollment ratio in primary
education could potentially be raised from 49 percent to 78 percent; or
that in secondary education from 20 percent to 42 percent. The results
corresponding to alternative assumptions about excess demand for higher
education, and the fee elasticity of demand appear in Table 11. As before,
10/ These calculations are based on the unit subsidy in 1984. As coverageextended, a higher subsidy may be needed to encourage enrollment; forexample, in the rural areas, transportation costs and children'sforegone production in farming may have to be compensated for. If so,the potential increase in places would be smaller.
- 32 -
even under the most stringent assumptions, it would be possible to increase
fees substantially without precipitating excess supply of places in higher
education. For example, if simultaneously the ratio of applicants to
admitted students were 1.5 instead of 2.0, and the fee elasticity of demand
were 0.5 instead of -0.25, fees can be raised to Rs564 (recovering 20.1
percent of unit costs) without causing supply to exceed demand. Under
these extremely unfavorable assumptions, the extra revenues would permit a
modest expansion at the lower levels of schooling -- by 7.3 percent in
primary education, or 13.5 percent in secondary education. Again, these
outcomes represent the lower bounds. It is probably feasible to aim at a
higher rate of cost recovery: the assumption required to raise fees to,
say Rsl,281 or Rsl,050 (recovering respectively 45.6 percent and 45.6
percent of unit costs) without resulting in excess supply, would still be
very stringent. As indicated in Table 11, the extra funds could
potentially increase the primary enrollment ratio from 49 percent to
between 58 and 61 percent; or alternatively, increase the secondary
enrollment ratio from 20 percent to between 27 and 29 percent.
- 33 -
Table 11: Increased Cost yecovr in Hig2er Fjucati to ExpandPrr or Secxa - swE Slatioa Results:
Pakistun 1984 a/
EquilibriumAssumptions About the Fee Level in % Expansion Potential Enrollrnt
Demand for Higher Education Hiiger Education in Enrollments Ratio (%)
Excess Demand Elasticity As % of Primaryc/ Secondaryc/Simulation Index w.r.t. Fees Rupees Cost Primary Secondary (49%) (20%)
1. Base case 2.0 -0.25 28 11 b/ 100.0 59.9 115.0 78 42
2. Demand is 2.0 -0.50 1050 37.4 18.7 34.7 58 27moreelastic
3. Excess 1.5 -0.25 1281 45.6 24.1 44.8 61 29demandis smller
4. Demand is 1.5 -0.50 564 20.1 7.3 13.5 53 23moreelastic,and excessdemandsmaller
a/ See footnotes of Table 10.
b/ The equilibrium fee is actually mach higher. However, since profit-madng is not an objective of publiceducation, the full oost recovery level of fees is assumed to be the equilibrium fee.
c/ Figure in parenthesis is the current enroilment ratio.
The above policy -- increasing fees in higher education and
reallocating the extra revenues toward primary or secondary education --
would also have a positive impact on equity. This is because it redirects
public resources towards those who are at present denied even the
opportunity for basic education. The gain in equity would persist even if
the increase in fees in higher education causes some students.from poor
families to dropout. The tradeoff is between avoiding some dropout among
- 34 -
those who already have at least secondary education, and widening
educational opportunity for those who do not yet have any schooling. Since
the latter are likely to be even poorer than the potential dropouts in
higher education, the equity loss in higher education is very likely
outweighed by the gain in equity for the sector as a whole.
To illustrate, consider the outcome when fees are raised to
recover costs fully, and the extra revenues are used to expand primary
education. Previously, those who entered adulthood with no schooling or
only primary schooling represented 80 percent of the population, and
accumulated 3.1 percent of the public subsidies for education. With the
increase in user charges and reallocation towards primary education, their
share would rise to 53.6 percent. The overall change in the distribution
of cumulative public spending on education is depicted in Figure 4. The
figure also shows the extent to which equity would improve if the demand
conditions permit only partial cost recovery, for example when the fee
elasticity of demand is -0.5 instead of -0.25.
- 35 -
Percent of
PublicEducationSubsidies
100* 45
80 _ _ _ _ _ _. ICurrent Distribution
60 _''
Distribution Afterz" § ' > Pa~~~rtial (37.4%) Cost
_____,_||_\ , Recovery and Reallocation40 , ' )/ \ from Higher to Primary
Education
20 4---; . ;-f- Distribution After
/ l ( / X q ~~~~~~Full Cost Recovery/ I ! / / \ t ~~~~~~and Reallocation
From Higher to PrimaryEducation
0 20 40 60 80 100
-percent of Population
Figure 4: The Distribution of Cumulative Public Educational Subsidies,Before and After Increased Cost Recovery in Higher Education,Pakistan 1984.
To summarize, the foregoing discussion shows that there is room
for increasing user charges in Pakistani higher education. Although the
lack of data prevents disaggregation of the analysis by fields of study,
the results support a policy in which user charges are, on average,
enhanced to recover a substantial portion of the cost of higher education:
the conditions under whicl it is reasonable to aim, say for a 40 percent
cost recovery rate, appear probable, and arguably even conservative. The
extra revenues from the increased fees could be reinvested in higher
education, but the social benefits -- in terms of efficiency and equity
gains -- would be larger if most, tf not all, of the funds were
reallocated toward primary educ'-iton.
- 36 -
2. Secondary Education
In 1985, about 20 percent of the population in the relevant
age-range was enrolled in secondary education in Pakistan. The level of
enrollment tends, however, to vary significantly across provinces and
between rural and urban areas within provinces. The data on enrollment
ratios appear in Table 12. It shows, for example, that whereas 40 percent
of the eligible population in urban Sind is enrolled, the corresponding
figure for urban Baluchistan is only 19 percent. The disparities are even
greater between urban and rural areas within each of the provinces. In the
Punjab and NWFP, the enrollment ratio in urban areas is over three times
that in rural areas; in Baluchistan, it is over five times; and in Sind,
nearly seven times.
Table 12: Secondary Enrollment Ratios, by Provinceand Locality, Pakistan Circa 1980
(Percent)
Province Urban Rural
Punjab 26.3 7.8Sind 39.6 5.8NWFP 20.1 6.5Baluchistan 19.3 3.6
Source: Khan, Mahmood and Hussain (1985)
- 37 -
The financing of secondary education is largely managed by the
provincial governments. Table 13 provides information on the extent of cost
recovery, and the unit public expenditure and subsidy for secondary
education in the four provinces. In all areas, the current rate of cost
recovery is very low. The increase in the Punjab, from 0.1 percent in 1984
to 6.8 percent in 1985, reflects the government's recent decision to
introduce tuition fees for secondary education, Rs3 per month for middle
school and Rs6 per month for high school. The Sind government plans to
follow suit, but no data are as yet available on the actual extent of cost
recovery envisaged. In the NWFP, there seems to be a reversal in trend,
while in Baluchistan, the rate of cost recovery is expected to remain at the
1984 level of 0.3 percent.
Table 13: User Charges, Public Spending and Subsidies PerStudent in Secondary Education, Pakistan 1984-85
Receipts as % of Public Expenditure Public SubsidyGovernment Expenditure per Student (rupees) per Student (rupees)
Province 1984 1985 1984 1985 1984 1985
Punjab 0.1 6.8 491 610 490 569
Sind 0 534 596 534 -
NWFP 1.2 0.9 786 889 777 882
Baluchistan 0.3 0.3 1,363 1,596 1,359 1,592
Pakistan 0.3 - 564 666 562 -
a/ Include annualized capital expenditure.
Sources: Provincial budget documents; Pakistan (1985); Punjab (1985); Sind (1985);authors' estimates based on historical growth rates of enrollments andprovincial distribution of population and enrollments; and personalcommunication from the Education Department of the Government of NWFP.
- 38 -
There are substantial differences across provinces in the
expenditure per pupil. It is relatively low in Sind and Punjab, in
contrast to NWFP and Baluchistan. This pattern coincides with the decline
in enrollments across the four provincesll/ and suggests that the
differences in unit expenditure may be partly attributable to economies of
scale. Since fees are low, the average secondary student receives a
substantial public subsidy, particularly in NWFP and Baluchistan.
The scope for increased cost recovery is difficult to assess
because little direct information is available on the extent of excess
demand for secondary education, and the elasticity of demand. There are,
however, indications that the demand for education is strong, and that
households are willing to pay, particularly for education services that are
perceived to be of higher quality than those offered in the public
schools. The rapid growth of private schools since the policy to
denationalize schools was implemented in 1979, testifies to the strength of
the demand for secondary education. The latest figures, for 1983, show
that the private sector share of total enrollment is nevertheless still
very much below its share before nationalization in 1972 (42 percent in
1968): a substantial private willingness to pay therefore remains to be
tapped. The demand for secondary education is, however, probably stronger
in urban than in rural areas, partly because of the higher personal costs
(foregone income and transportation) incurred by children in the rural
areas. One indication of the weaker demand -- lower student-teacher ratios
- appears in Table 14. The data also show that the demand for secondary
/ The distribution of total secondary enrollment across the fourprovinces are as follows: Punjab (56%); Sind (27%); NWFP (14%); andBaluchistan (3%).
- 39 -
education is weaker among girls than boys; they corroborate other evidence
that Pakistani families are generally more reluctant to enroll their
daughters, particularly in the rural areas.
Table 14: Student-Teacher ratios in Secondary Education,Education, Pakistan, Circa 1980
Urban RuralProvince Male Female Male Female
Punjab 25 18 14 6
Sind 29 19 19 10
NWFP 18 13 13 4
Balachistan - - - -
Source: Khan, Mahmood and Hussain (1985)
Increased cost recovery in secondary education is a potentially
feasible policy. Although the lack of the relevant data -- on excess
demand and the elasticity of demand -- is a severe handicap on the
analysis, the policy's impact can be assessed by some simple simulations.
The following assumptions underlie these simulations. First, since
education at the lower levels are managed largely by the provinces, it is
assumed that the extra resources mobilized via increased user charges are
used to expand education within each province. Second, the extra resources
are reinvested in rural primary education to offer more places or to
stimulate demand. This allocation is likely to be socially beneficial,
since the returns to primary education are higher than those to secondary
education; moreover, it will reduce the disparities in the access to basic
education between rural and urban populations. Finally, the feasible rate
- 40 -
of cost recovery is assumed to be lower in rural than urban secondary
schools, since the demand is probably weaker in the rural areas.
Two simulations are made, corresponding to alterative assumptions
about the feasible rate of cost recovery. In the first, it is assumed that
user charges are raised to recover 50 percent of the cost of secondary
education in urban areas, and 25 percent in rural areas. The increase in
fees would be quite substantial, as Table 15 shows. In Punjab, Sind, and
NWFP the new fees would nevertheless remain substantially below the fees in
Table 15: User Charges for Secondary Education in Pakistan
(Rupees per year)Fees in Public Secondary SchoolsAfter Increased Cost Recovery
Current User Charges Simulation I c Simulation II d/Province Public Private a/ Urban Rural Urban Rural
Punjab 41 440 305 153 153 77
Sind b/ 0 628 332 166 166 83
NWFP 9 468 445 222 222 112
Baluchistan 4 410 682 341 341 171
a/ These fee levels are probably underestimates, since they reflect the averageof primary and secondary private education, and refer to 1983.
b/ Figure for current user charges for public education refers to 1984. Thesimulated level of fees is based on a 24.2 percent increase in the 1984 unitexpenditure; this being the increase in Punjab where data for both 1984 and 1985are available.
c/ Fees are raised to recover 50 percent of the cost in urban secondary schoolsand 25% in rural secondary schools.
d/ Fees recover 25% of the cost in urban secondary schools and 12.5% in ruralsecondary schools.
Sources: For fees in private schools, from Survey of Private EducationalInstitutions, 1981-2; for those in public schools, from provincialbudget estimates, and projected enrollment data from PakistanStatistical Yearbook 1985, and authors' estimates based on the provincialdistribution of total enrollments.
- 41 -
private schools. They therefore, represent realistic, although perhaps
still optimistic, targets. In Baluchistan, these rates of cost recovery
imply fees which are comparable or higher than those in private schools,
owing to the very high unit cost of secondary education in these
provinces. It may therefore not be feasible to aim at a similar rate of
cost recovery. In the second simulation, it is assumed that fees are
raised to recover 25 percent of costs in urban secondary schools, and 12.5
percent in rural schools. The corresponding level of fees would all fall
below the fees charged by private schools. In the Punjab and Sind,
especially, the new fees are targets which are probably attainable and not
overly optimistic.
The simulation results appear in Table 16. They indicate that
under the probably optimistic assumptions of Simulation I, the increase in
user charges for secondary education would permit significant expansion of
rural primary education. In none of the provinces, however, would this
expansion be large enough to eliminate existing differences in the primary
school enrollment ratio between urban and rural areas. In the second
simulation, a lower rate of cost recovery is assumed; the results therefore
show a smaller, although still significant potential expansion of rural
primary enrollments.
- 42 -
Table 16: increased Cost Recoery in Seconiary F4uaxtit toExnd Ruwal Prnary lcatim - TWo Sbm]atisa,
Pakistad 1985
QCrrent Prinary % Increase in Public Budget Potential Rural PrimaryEnrollmnt Ratio for Primary Education Enrollment Ratio (%)
Province Urban Rural Simulation I Simulation II Sinilation I Sinulation II
Punjab 68 45 16.4 6.5 57 50
Sind a/ 78 39 25.1 10.2 58 46
NWFP 52 33 32.9 16.0 50 37
Baludiistan 47 16 17.5 8.7 22 20
Note: For Simlation I, fees in secondary education are raised to recovery 50% cf publicexpenditure in urban areas, and 25% in rural areas. For Simulation II, the rate ofcost recovery is 25% in urban areas, and 12.5% in rural areas.
a/ For Sind, the extra revenues generated are based on the assumption that in1985, the rate of cost recovery is similar to that in Punjab. (Thisassumption is necessary because of the lack of this information for Sind in1985; and is valid because the Sind government has announced plans tofollow Punjab's cost recovery strategy, announced and implemented in 1985.)
3. Primary Education
In 1985, fees were introduced for primary education in Punjab
province. The Sind Government is considering a similar policy, but in NWFP
and Baluchistan, tution-free primary education is expected to be
continued. Despite the introduction of fees in Punjab, the government
continues to provide heavily subsidized primary education, as Table 17
shows. The subsidy per student is high in all provinces, but
especially in Baluchistan.
- 43 -
Increased cost recovery or the introduction of user charges for
primary education might appear at first sight to be an inappropriate
policy. Critics argue that education at this level confers substantial
externalities; that is, its benefits to society exceed those that are
captured privately by individual students. The existence of externalites
is, however, valid only as an argument for subsidized education but not
necessarily for free education. In fact, some children, especially those
from higher socioeconomic groups, are likely to enroll even if education
were not free. In general, the stronger the private demand for education,
the lower the extent of subsidization needed to encourage enrollment, and
the greater the scope for increased cost recovery. It may be
administratively impossible to differentiate fees at the individual level.
However, at a higher level of aggregation, fees can be differentiated. In
particular, since the demand for education is stronger in urban than rural
areas, there is probably scope for increased cost recovery in urban primary
schools.
Table 17: User Charges, Public Spending and Subsidies per Studentin Primary Education, Pakistan 1984-1985
Fee Receipts as % of Public Expenditure Per Subsidies per StudentGovernment Spending a/ Student (rupees) (rupees)
Province 1984 1985 1984 1985 1984 1985
Punjab 0 2.2 366 410 366 401
Sind 0 - 340 370 340 -
NWFP 0 0 410 452 410 452
Baluchistan 0 0 677 865 677 865
Pakistan 0 - 373 414 373 -
a/ Includes annualized capital expenditure.
Sources: See Table 9.
- 44 -
A second argument against increased user charges for primary
schooling is that it might hurt equity by reducing the access to basic
education among children from poor families. Again this argument is only
partly valid: it supports not so much free education per se, but free
education for specific groups, namely children whose families cannot afford
the private costs. Most of the children in this category are likely to
reside in the rural areas: first, rural incomes tend, on average, to be
lower; and second, the private cost of schooling tends to be higher, since
the foregone production of children in agriculture is an important cost.
For these reasons, there is again greater feasibility for increased cost
recovery for urban primary education.
The appropriate level of fees to charge depends, as before, on
the extent of excess demand and the elasticity of demand. But these data
are not easily available. The public school system is obliged to accept
any student who applies, and to accommodate all those who have passed the
previous grade. The strength of the private demand for primary school is
nevertheless suggested by the rapid growth of private schools in recent
years. In the Karachi region, for example, the share of enrollments in
private institutions has grown to 25 percent only six years after schools
were denationalized in 1979. In some schools, despite the full cost
recovery level of fees charged, the number of applicants exceeds the
available places.
Given the data gap, the analysis below will merely examine the
potential impact on resource mobiliz'ation through some simulation. It is
assumed that the extra revenues from increased fees in urban primary
schools will be used to expand rural primary education within each
- 45 -
province.12/ Two simulations are presented here. In the first, fees are
raised to recover, on average, 20 percent of the cost of public primary
education. In the second simulation a lower rate of cost recovery - 10
percent -- is assumed. These rates of cost recovery are by necessity quite
arbitrary. They have been chosen for illustration. They are nevertheless
reasonable targets, since even with a 20 percent cost recovery rate, the
fees in public schools are far below what is charged at private schools.
Table 18: User Charges in Public and Private Primary SchoolsPakistan, Circa 1985
(Rupees per year)
Current User Charges Fees in Urban Schools Assumed inProvince Public Private a/ Simulation I D/ Simulation II c/
Punjab 9 440 82 41
Sind d/ 0 628 76 38
NWFP 0 468 90 45
Baluchistan 0 410 173 87
a/ The actual fees are probably somewhat lower since these data refer tothe average in private primary and secondary schools.
b/ Fees recover 20 percent of unit public spending on primary education.
c/ Fees recover 10 percent of unit public spending on primary education.
d/ Figure for current user charges for public education refers to 1984.The level of fees assumed in the simulation is based on a 12.0 percentincrease in the 1984 unit expenditure, this being the increase in thePunjab where data for both 1984 and 1985 are available.
12/ There are indications that the demand for primary education isweaker girls than boys. In view of this, the extra revenues couldalso be used partly to increase subsidies for girls to encouragegreater school participation among them.
- 46 -
The simulation results appear in Table 19. With a 20 percent
cost recovery rate in urban primary schools, sufficient additional
resources would be mobilized to permit the rural enrollment ratio to be
increased by, on average, 5 percentage points. Although the differences in
urban-rural enrollment ratios would be reduced, they would nevertheless
remain substantial. Quite obviously, under the more pessimistic assumption
of a 10 percent cost recovery rate, the potential increase in rural
enrollments would be much smaller.
Table 19: Increased Cost Recovery In Urban Primery Sdioolsto Expand Rural Prisy MdatiUon - To SimoiLtions,
Pakdstan 1985
Current Primary % Increase in Public Budget Potential Rural PrimaryEnroLlment Ratio (%) for Primary Education Enrollment Ratio (%)
Province Urban Rural Simlation Ia/ Sinilation IIb/ Similation Ia/ Sinulation Ila/
Punjab 68 45 6.8 3.0 50 47
Sindc/ 78 39 8.6 3.8 46 42
NWFP 52 33 7.6 3.8 37 35
Baludhistan 47 16 10.7 5.4 20 18
a/ Fees in urban primny schools are raised to recover 21 percent of the averagecost per student place in primary education.
b/ Fees in urban primary sdcools are raised to recover 10 percent of the averagecost per student place in primary education.
c/ See footnote a/ in Table 12.
- 47 -
4. Cumulative Effect of Increased Cost Recovery
The previous sections have examined the potential increase in
primary enrollments that could result from separate cost recovery policies
in higher, secondary and primary education. This section provides an
evaluation of their cumulative effect.
In higher education, it is assumed that user charges are
increased to recover 40 percent of the public cost; as indicated
previously, this rate of cost recovery is probably feasible, given the
demand conditions in higher education. The extra revenues generated are
assumed to be distributed in proportion to the population share of the four
provinces1 3 /, and used solely to increase the provision of rural primary
education. For secondary education, the rate of cost recovery is assumed
to be 25 percent in urban schools, and 12.5 percent in rural schools: these
assumptions correspond to those for the more pessimistic simulation
discussed previously. The additional resources are retained within each
province for expanding rural primary education. Finally, it is assumed
that fees in urban primary schools are raised to recover 10 percent of the
public cost of education at this level -- again, this corresponds to the
more pessimistic simulation in the previous section. The extra funds are
assumed, as before, to be reinvested in rural primary education.
13/ The provincial distribution of Pakistan's population according tothe last census (1981) is as follows: Punjab (56.5 percent);Sind (22.6 percent); NWFP (15.7 percent); and Baluchistan(5.1 percent).
- 48 -
T1be 2D: Qmilative Effect of TxreI Cost ReP¢ey am&tral Primry Emrolmnts, Padstan 1985
Current Primary Potential Rural Primary Enrollmnt Ratio (x)Enrollment Ratio (%) After Increased Cost Recovery in
Province Urban Rural H ra/ SecondaryD/ Urban PrivaW All Levels
Purnjab 68 45 61 50 47 67
Sind 78 39 56 47 42 66
MWE? 52 33 47 41 35 58
Baluchistan 47 16 23 19 18 28
Pakistan 72 40 56 46 43 63
a/ Assumes that user charges recover 40 percent of the public spending per student.
b/ Assunes that user charges recover 25 percent of the average public spending perstudent urban secondary schools, and 12.5 percent in rural schools.
c/ Assunes that user charges recover 10 percent of the public spending per student inurban primary schools.
The impact of the separate cost recovery policies and their
cumulative effect appear in Table 20.14/ It is clear that a substantial
expansion in rural primary education would be possible merely by
implementing the suggested policy in higher education. When supplemented
by increased cost recovery in secondary and urban primary schools, the gap
in rural-urban enrollment ratios would be further reduced; in NWFP
province, these policies could potentially even eliminate it.
14/ The results in Table 20 might slightly overestimate the potentialexpansion in rural primary enrollments. This is because the unit costof rural primary education might be higher than the cost figures --based on provincial averages -- assumed in the calculations.
- 49 -
To summarize, increased cost recovery for education, particularly
at the higher levels, offers the possibility for substantial expansion of
investment in Pakistani primary education. This expansion is likely to
benefit society since the returns to primary education -- in terms of
increased human productivity and other additional non-market effects such
as improved health and community life -- are very high, and probably exceed
those to other levels of education. Mloreover the expansion would improve
the access to basic education for children who might otherwise never have
the chance to acquire literacy and numeracy skills. The cost recovery
goals suggested above might appear ambitious in a country where the
tradition of free or heavily subsidized education is long-standing and
heavily entrenched in public opinion. However, a move toward these goals
is inevitable if primary education is to become better developed. Although
they would not generate enough resoures to permit attainment of universal
primary education, the suggested policies would at least lighten the fiscal
pressures of such a plan.
- 50 -
B. Private Schools in Pakistan
Given the financial constraint confronting Pakistan's public
educational system, another policy response might be to allow the private
sector a greater role: as a provider as well as financier. Indeed, since
1979 the government has pursued such a policy. This section reviews its
history, evaluates this policy, and suggests that there is room for further
improvement. In particular, the government should do more to disseminate
information about the relative quality of schools; assist would-be private
school operators to gain access to capital markets; and structure
scholarship schemes to allow low-income students greater choices in public
versus private education.
1. An Historical Overview
Before nationalization in 1972, much of the country's secondary
and higher level education was in the hands of the private sector, at least
in the urban areas. Although exact figures are relatively scarce, a rough
picture can be pieced together. In 1968, over half of all students in
higher education were enrolled in private institutions. The percentages
declined by level of education (Table 21).
Table 21: Private Sector Enrollment by Level of EducationBefore Nationalization (1968)
Private Sector EnrollmentNumber ('000) As % of Total Enrollment
Primary 3,744 22Secondary 1,070 42Intermediate 128 55Universities 77 51
Source: World Bank, 1977.
- 51 -
Table 22: Percent of all.educational institutionsthat are private, 1971-78
Schools (Primary and Secondary) CollegesYear Government Private % Private Government Private % Private
1972-3 54,296 2,198 4.1 244 90 35.41973-4 55,726 2,182 3.9 337 17 5.01974-5 56,034 2,317 4.1 336 25 7.41975-6 58,527 2,103 3.6 380 24 6.41976-7 60,437 927 1.5 416 17 4.1
Sources: Calculated from Pakistan, 1979.
The nationalization order of 1972 changed the overall picture
immediately and drastically. Private school enrollment figures after 1972
are not available, although statistics on the numbers of institutions are.
According to Table 22, by 1972-3, only 4% of all primary and secondary
schools were in private hands.15/ The decline in private schools
thereafter stabilized until 1976 when the numbers were halved again. At
the higher level, by 1973, only 5% of all institutions were private, and,
by 1976-77, there were only 17 private colleges in the country.
Eventually, the government nationalized a total of 3,334
educational institutions. These included 1,828 regular primary and
secondary schools; 346 out of 893 Madrasah schools, which concentrated on
Islamic religious instruction, as well as logic and philosophy; 155
15/ Since private schools are concentrated in urban areas and areconsequently slightly larger, on average, (nation-wide) than publicschools, the percentage of private enrollment would be somewhatlarger.
- 52 -
colleges; and 5 technical institutions. 25,000 teachers were inducted into
government services (Pakistan, 1979). Some private schools were exempted
from nationalization. These included religious schools and some elite
institutions. There appears to have' been more exemptions at the lower
relative to the higher levels of education. In addition there were some
elite institutions which were private in all but name and whose status did
not change. Modeled after the British public schools, these institutions
charged high fees, did not rely on government subsidies to cover their
recurrent expenditures and paid their staff substantially more than regular
public schools. They are public only because the chancellor of the school
is a public official and its board of governors is drawn from both the
public and private sectors. The government also provides a limited amount
of grants for development and for land acquisition. These institutions,
such as Aitchison College in Lahore and the Hyderabad Public School,
catered to the elite of the country and were not affected by the
nationalization.
2. Present Policies and Their Implications
In 1979, a new government revised the policy towards private schools.
In its National Education Policy and Implementation Programme, the
government allowed private enterprise to open educational institutions
"provided the administration of these institutions ensures availability of
suitable physical facilities like buildings, playgrounds, laboratories,
libraries and adoption of prescribed standards of qualifications and scales
of pay for teachers." (p.26) The rationale was that the national exchequer,
- 53 -
as a result of the nationalization "had to bear an additional burden of
more than RS. 15 crore (150 million) recurring expenditure per annum.
Further investment by private sector in education was blocked. This negated
the prinicple of community participation in the development of education
[thus impeding] ... expansion of education in the country." The government
policy statement included a call for safeguards and assurance about
non-nationalization, provided the institutions met the prescribed
standards.
The private sector in Pakistan was given an added impetus with
the Sixth Five Year Plan. The discussion in that Plan, dated 1983, was as
follows:
...The nearly comprehensive nationalization of educational
institutions and the accompanying policy of free education ten
years ago had at least two casualties. An already impoverished
Government was landed with a large financial burden which
restricted it from expanding education. And many of the schools
of high quality, some of them run by education-conscious
communities, lost their excellence under the public control.
This, in both quantity and quality, was counter-productive
(pp.318-319).
The Sixth Plan proposed to encourage the re-emergence of private schools by
supporting the earlier decision to allow new ones to open. In addition,
the Plan also called for "denationalization" of schools "whenever it can be
ensured that the quality and coverage will not suffer as a result." (p.319)
The evidence indicates that over the past five years, the private
sector has re-emerged as a major provider of educational services. Many
new schools, particularly at lower levels, have been started within the
- 54 -
last four years. The "denationalization" effort has proceeded more
slowly. In Sind, some 60 private schools, those run by philanthropic
organizations, have been returned to their original owners.
The current debate is whether this rebirth of the private sector
in education has been beneficial for Pakistan. In particular, the
questions that are being raised revolve around the impact of increased
private participation in: (a) the quantity of educational effort in
Pakistan; (b) the quality of that effort; (c) the unit cost of providing
educational services, and (d) the distribution of educational subsidies and
on the future distribution of income in Pakigtan. It is still too early in
the Pakistan experience to get definitive answers on these questions. In
particular, more research on the quality of private institutions and the
socioeconomic composition of their students needs to be undertaken to
address questions (b), (c) and (d). However, enough evidence exists to
support a positive answer to (a). This chapter reviews that evidence and
also discusses the likely implications on (b), (c) and (d). It concludes
with an analysis of the future role of government policy .
The Impact on Educational Expansion: Since about 1980, the
growth of private schools has added significantly to the overall
educational effort in the country. Reliable data on the growth of the
private system after liberalization has been difficult to obtain. However,
a comprehensive school mapping survey exercise provides a rough indicator
of how much the private sector has grown since the late 1970's. Since
there were only 927 private schools in 1977, the data of Table 23 indicate
- 55
Table 23: Private Schooling - 1983a/
Coverage Primary and secondary schools Enrollment
Government Private Private Government Private Private
Sind 14;370 1,369 8.7 1,324,104 194,398 12.8NWFP 7,714 1,019 11.7 999,800 144,698 12.6Baluchistan 2,714 244 8.1 204,417 34,648 14.5Punjab N.A. N.A. N.A. N.A. N.A. N.A.
Sources:1983 - Pakistan, Ministry of Education, School Mapping Survey.
a/ Under the assumption that average private school size is 142. (Source:Pakistan, Federal Bureau of Statistics, 1981).
that there has been a substantial growth of private institutions. The
school mapping survey of 1983 did not report the enrollment of private
schools. However, under the assumption that average school size is 142 (as
a number based on a schools survey of one of the two Sind regions),
enrollment in private schools constitutes up to 15-17% of total school
enrollment. No data on private colleges could be collected after 1977.
The consensus among those interviewed is that private institutions of
higher learning have all but disappeared.
The growth of private schools continues unabated to this day. The
government has not collected information on the exact size of this
subsector, although it is in the process of obtaining information on the
number of registered schools in the country. Even this will not provide an
accurate count, since many of the newest private schools are unregistered
with the provincial ministries of education. There is at present, no direct
penalty for non-registration. The one accurate count of private schools is
a census undertaken by the Directorate of School Education for the more
- 56 -
urbanized of the two educational regions of Sind (Karachi Region). There
were, in August 1985, some 1,400 private schools in the Karachi Region
alone (Table 24). Since the 1983 school mapping survey counted only 1,369
private schools in all of Sind, there has been a substantial growth over
1983-85. Approximately 30% of all institutions at primary and secondary
levels in the Karachi Region are private. These institutions had about 21%
of all 1.2 million students in the region as of mid-1985. The percentage of
private school students is highest at the primary level -- 25%.16/
Table 24: Private Schools in Karachi Region - August 1985
Percent of Private inNumber of Institutions Enrollment Total (%)
Registered UnregisteredPrivate Private Public Private Public Institutions Enrollment
Primary 566 566 2,575 155,506 621,274 30.5 25.0Lower Sec. 79 58 329 7,011 68,195 29.4 10.3Upper Sec. 194 9 597 46,978 298,129 25.4 15.8
Total 839 633 3,501 209,495 987,598 29.6 21.2
Source: Survey of private schools, worksheets. Directorate of SchoolEducation, Karachi Region, Government of Sind.
16/ Notice that in table 24 averege school size of Karachi public schoolsexceeds that of private schools. This is because Karachi region isdominated by the Karachi metropolitan area.
- 57 -
Has this expansion resulted in a net addition to the educational
effort in Pakistan? In terms of sheer quantity of students, the answer is,
yes. The growth of private schools has not come at the expense of a
diminution of enrollment in the public school system. There are a number
of reasons for this conclusion. First, there is excess demand for public
school places in urban areas of Pakistan. While public schools have
nominally open admissions policies and no one who has passed a previous
grade can be turned away, meeting demand has resulted in overcrowding.
Moreover, the building of public schools has not kept pace with the pattern
and density oa urban settlement, so that many families do not have easy
physical access to educational facilities. Families, willing to pay a
premium for space and access, generated a ready market for private schools
which are of a similar quality and provide a similar education as public
schools, except that they are less crowded and are closer to home.
- 58 -
Second, there has been a pent-up demand for types of education
that are simply different from that provided in public schools. For
example, there is a strong demand for schools where English is the medium
of instruction. Except for some elite English-medium public schools, most
other public schools in Pakistan are Urdu-medium or in the provincial
vernacular. Entrance to the elite English-medium public schools is limited
-- they charge very high fees and, even at that price, there is very stiff
competition to enter. Thus, limited educational choices in the public
system English-medium schools, which span the quality spectrum from those
wRich are accredited to A and 0-levels or Cambridge-based examinations, to
those which only hint at the possibility of such accreditation.
The social gain from privatization can be depicted graphically in
Figure 5, where the private and social demand curves are, respectively, Dp
and Ds. Suppose that the long run marginal cost of private and public
schools iq the same for both types of schools and constant at c. The
effective supply curve for an underfunded public school system is given by
S. If there is a cap on user charges that the public system can levy at p,
only qo students can be accommodated at a certain quality level. With a
restriction on private schools, this would lead to an effective excess
demand of qlqo. However, if the restrictions were lifted, as it was in
1979, the private sector would offer school places to cover costs.
Initially, the first private school owners would be able to charge a price
Eqo and might earn "economic profit" -- profits in excess of a
competitively determined rate of return. However, with free entry, prices
would be bid down to c, where proprietors would recover a reasonable return
on their investment. Economic profits would eventually drop to nil. The
"effective" supply curve in this mixed system would be FG for q qo and c
- 59 -
for q qo (heavy line). The social gain to allowing the private sector
operate is DCBA.
Notice the following:
- An increase in prices of public schools by p Pl would
have the same social benefit as a policy of easing the
restriction on private schools. The difference would be
in the distribution of the benefits. The amount ABq2qO
would accrue to the owners of schools, rather than to
the government or to parents and students in the latter
policy.
P'C
D
I \
c~~~ q q ~
BI I\ ,~S=( )
o q2 q3 q1
Figure 5
- 60 -
- This policy of allowing a mixed public-private system is
dominated by one which raised prices in the public
system until effective excess demand were eliminated. A
price increase in the public system to P2 would result
in an additional gain of CHIB relative to free entry in
the private market. The reason is that the
externalities to schooling are not taken into account by
the private system.
Data on private proftability can be used to gain further
insights. One question is whether the estimated share of private school
enrollment in the country can be expected to grow appreciably more beyond
present levels. Is the system presently in equilibrium? The last
nationwide estimate gives private schools enrollment in 1983 as about 15%
of government enrollment, or 1.36 million students, if we assume a
proportional role of private schools in Punjab as in the other provinces.
According to the data in Table 25, profits in 1983, were expected to be
about 23% of the cost. If a normal accounting rate of profit which covers
a reasonable return on investment is about 10%, then we can conclude that
private schools can be expected to grow. How much? If we assume a linear
demand curve with an elasticity of demand of -.25 at the 1983 enrollment
level, the increase in private school enrollment necessary to bring
observed profits to 10% would be 570,000 students (or a 30% increase from
present levels).17/ This is a rough calculation which assumes no growth
in government schools and free entry into the private school market.
Nevertheless, it is an indicator of the degree of responsiveness of the
private system.
17/ Under the assumption that the first owners got a 100% return due toeconomic rents.
- 61 -
The social gain depicted in Figure 5 assumes that the social
benefits imparted by a private school are equal to those provided by public
schools. Because of curriculum differentials, it may be that many would
consider this invalid within Pakistan. Even if there were no social
benefits imparted by private schools beyond those that accrue to their own
students and parents, the social gain to letting them expand to equilibrium
is significant. The schools are obviously valued by students and their
parents, who are willing to pay significant amounts for the education that
they provide. These fees account for the bulk of revenue for the private
schools. On average, a survey of private educational institutions in
1982/83 indicates that 84% come from tuition, admission and other fees.
Government aid, at 2%, is minimal. The average annual fees for students in
1982/83 was 632 rupees (Table 26). This is substantially more than the
fees for public primary and secondary schools, which range from nil to less
than 40 rupees per student per year. In terms of Figure 5, this private
gain to allowing private schools to expand to equilibrium would be of the
amount ABE.
Because of rationing at higher levels, tutoring (private tuition)
centers have arisen. These schools assist students in preparing for
examinations or in specialized technical courses. The social marginal gain
from these types of schools may be less than the willingness to pay of
consumers. The reason is that if these tutoring centers impart knowledge
that is useful only to enhance the chanels of entry into a rationed school
system, the educational gain would arise only because of its signalling
effect. In this case, all individuals would have an incentive to invest in
an unproductive signal.
- 62 -
Table 25: The Profitability of Private Schools
Profit as UnitReceipts Total Cost Profit % of Cost Profit(Rs) (Rs) (Rs) (Rs)
Punjab 35,531,825 29,374,071 6,157,754 21.0 86
Sind 77,365,296 63,381,800 13,983,455 22,1 135
NWFP 16,680,330 12,788,390 3,891,940 30.4 132
Baluchistan 5,197,318 4,180,525 1,016,793 24.3 116
Pakistan 134,774,769 109,724,826 25,049,943 22.8 117
Source: Pakistan, Federal Bureau of Statistics, 1985b.
- 63 -
Table 26a: Sources of Income in Private Schools (Z)
Admission Tuition Other Government ManagementProvince Fees Fees Fees Aid Donations Aid Other
Punjab 3.2 73.5 11.5 1.3 2.0 7.1 1.4
Sind 6.4 75.0 2.9 1.1 5.0 7.4 2.3
NWFP 5.9 72.2 2.9 2.0 1.5 12.0 3.4
Baluchistan 12.1 64.8 3.0 22.5 3.7 4.3 3.8
Pakistan 5.3 73.9 5.1 2.1 3.6 7.8 2.2
Source: Pakistan, Survey of Private Educational Institutions 1981-82
Table 26b: Average Annual Fees by Province (1982/83 Rs)
Province Total Receipts Admission Fees Tuition Fees Other Fees Total
Punjab 499 16 367 57 440
Sind 745 48 559 21 628
NWFP 565 34 408 17 468
Baluchistan 594 7 395 18 410
Pakistan 632 33 467 32 533
Source: Pakistan, Survey of Private Educational Institutions 1981-82
- 64 -
The growth of private schools has enabled the expansion of
education without putting additional pressure on the government budget
(Table 27). The latest estimates for private school enrollment are for
1983. They are taken from Table 23. Assuming that the average unit
subsidy in public schools is about Rs 423, we can calculate the public cost
of enrolling then, as is done in column (3) of Table 27. This can be
compared to 1983 public educational budgets, in column (4). Had these
private school students been accomodated in public schools, there would
have been an addition of about 10% to the public budget for education.
Table 27: Fiscal Savings From Private Schools (1983)
(1) (2) (3) (4) (5)Public Cost Public
Private Public of Enrolling EducationalSchool Unit Private Budget (3)/(4) X
Enrollment Subsidy Student (mill.Rs) (mill.Rs) 100
Sind 194,39891 82.23 870 9.45Baluchistan 144,698 423 61.21 586 10.4NWFP 34,648 14.66 172 8.5Punjab N.A. N.A. 2032 N.A.
Quality, Internal Efficiency and Equity of Private Schools:
Although the positive impact of private schools on the size of overall
enrollment is clear, some have expressed concern about their impact on the
quality of education, the efficiency with which it is provided and equity
of access. Hard facts on these issues have yet to be gathered, although the
- 65 -
preliminary evidence indicates that many of the concerns are unfounded.
As stated previously, the quality of private schools in Pakistan
spans a wide range. Although there are no rigorous studies that measure
this, the mission was able to accumulate a considerable amount of
qualitative evidence on the basis of school visits and interviews with
school administrators. The elite schools have British-administered A and 0
level school leaving examinations. While most of the private schools only
aspire to this level of certification, they are generally considered, even
by public servants who send their children there, to be, on average, at
least as good as schools in the public system. There is no evidence that
private schools must offer extremely low quality education in order to turn
a profit. Quantitative evidence would be available only with further
research.
Because one of the main attractions of a private school is its
ability to offer English-medium instruction, the question of the need to
maintain Urdu as the medium of instruction arises. At the present time,
students have the option to take qualifying examinations at the
intermediate or degree levels in English or in the vernacular. The
language issue remains a political issue. There appears to be a strong
broadly based support for allowing English as an optional medium of
instruction, since it is required for advancement in the public and private
sectors. The demand for English-medium schools is not likely to be
diminished until the private payoffs from English language proficiency,
which are high even in the public sector, are also decreased.
There is an overall consensus, even among public school
authorities, that private schools, by being forced to be competitive, are
more efficient than their public counterparts. Again, no rigorous studies
- 66 -
are available to make an adequate comparison. The unit cost figures of
Table 28 show that, in all of Pakistan, private schools do not have
significantly lower unit costs than public schools during roughly
comparable time periods. Part of this difference is undoubtedly due to
higher quality in the private sector. However, it is interesting to note
that unit costs in the public schools of NWFP and Baluchistan exceed those
in private schools. Given that private school quality is generally
expected to be at least as good as public schools, there is little doubt
that private schools are more efficient in these two provinces.
Table 28: Unit recurrent costs of public and private schools(Rupees) 1983-84
Public PrivateProvince Primary Secondary Weighted Average Weighted Average
Punjab 366 487 396 413Sind 340 534 387 610NWFP 424 836 552 433Baluchistan 589 1,071 690 478
Pakistan 373 564 423 515
Would the private schools lead to greater or less access for
poorer students? If the private schools attract the richer students, then,
there would be more places for the poor in the public schools. Of course,
the students would be willing to pay more for private schools only if they
offer a better education than the public schools. The existence of private
schools may lead to a greater disparity in the educational attainment of
the population -- with poorer students going to low-quality public schools
and richer students going to higher-quality private schools. As long as the
public schools meet certain minimum standards, this would not necessarily
be an undesirable outcome.
- 67 -
We have no information at present regarding the socio-economic
composition of students in private versus public schools. No studies of
private school students have ever been undertaken in Pakistan. However, if
the few elite public schools are excluded, it would seem reasonable to
assume that private school students are generally more privileged than
their public school counterparts.
If society felt that it were necessary to have equal access to
education at all quality levels, then, a scholarship scheme would have to
be expanded to allow students to attend private schools. This is discussed
further in the next subsection.
3. Policy Issue for the Future
The private sector response has, thus far, been triggered by only
one direct form of government action -- the 1979 directive permitting
private schools to operate -- and the perception among providers that the
danger of renewed nationalization is relatively remote. However, there are
still several policy issues that need to be resolved. In particular, what
should be the relative size of the private versus the public sector? What
is the role of government within the private sector?
Regulating the private sector: At the present time, registered
private schools must follow government-prescribed curricula. However, not
all private schools are registered and no sanctions are taken against those
that are not. One issue is whether some additional controls should be
imposed on the private sector.
- 68 -
There are several reasons why the government may wish to regulate
the operation of private schools. They can be summarized as follows:
Policy Objective Policy Device
(a) Meet social goals which may not Curriculum control;be highly valued as privately Medium of instruction.(e.g., national unity, goodcitizenship).
(b) Compensate for lack of informa- Curriculum control andtion about the relative benefits minimum standards inof education in different schools. input use (student:
teacher ratio, etc.)
(c) Compensate for failure in market Enrollment ceilings.for graduates.
(d) Compensate for failure in markets Wage floors forof educational inputs: labor teachers; Employment.(teachers) and materials.
(e) Equal access for all students. Fee ceilings.
It is beyond the scope of this paper to analyze in detail the
validity of the motivations described above. However, it can be reasonably
assumed in the Pakistani case that labor markets are relatively well
functioning so that (c) and (d) are not good justifications for
intervention.
The merits of promoting of national unity (a) through the
imposition of a medium of instruction depend upon the speed of
implementation. This goal seems to be at variance with the incentives that
exist in the Pakistani labor market. The government has just announced
that, as of 1987, all qualifying exams will be given in Urdu. Thus,
students will no longer have the option to take the examinations in
English. This will inhibit private school development, if implemented.
It will not affect the most elite institutions that offer accreditation
through British examinations. It would, however, affect the other schools
- 69 -
which feed their graduates back into the Pakistani educational system.
There is some skepticism regarding the government's ability and will to
implement Urdu-only examinations. Private school owners pointed out that
the government-run elite public schools have been allowed to teach in the
English medium.
Regarding (b), in the long run, parents who have their own
self-interest at heart will be able to gauge schools on the basis of
reputation. In the short run, this reputation is not likely to be fully
reliable, since many of the private schools are new. Regulation through
minimum standards is costly to enforce and maintain and may be difficult to
formulate. For example, it would be difficult for present provincial
education ministries to establish a school inspectorate that would set and
enforce minimum quality standards for all private schools. An alternative
response would be to try to disseminate as much information as possible
about the relative quality and the types of education that different
schools offer. It would thus be efficient to have, initially, an
inspection/monitoring scheme that penalized fraudulent institutions. At
the same time, a system of standardized tests should be established, in
which their students' performance can be used to market an individual
school's services. This is preferable to having the government close all
schools which do not register, since parents and students, rather than the
government, should be able to have a say in whether a school is viable or
not.
At the higher levels, the private sector has yet to make any sort
of inroads. This is in sharp contrast to the period before
nationalization, when the bulk of higher education students were in the
private sector. The problem is that the government, while theoretically
- 70 -
allowing private schools to exist, has not given them the power to grant
their own degrees. Presently, the power to grant degrees must come from a
presidential charter, which has only been given to three specialized
institutions: the Aga Khan Medical University of Karachi, and in Lahore,
the University of Management Sciences and the religious Hamdard
University. The latter two are not yet operating. Thus, private colleges
must affiliate themselves with provincial examining boards (at the
intermediate level) or with public universities (at the degree level). The
high fees that would be required to maintain a private college would not be
worth paying if the outcome, as a signal to the labor market, is the same
as that from going to a public college or university. The result has been
that, contrary to the trend pre-1972, the share of enrollment in private
colleges is almost non-existent, compared to the share of enrollment of
private schools.
Public role in financing the private sector: At present the
government provides little financial assistance to private schools. Some
of these schools are able to obtain heavily subsidized land, especially
those in new urban housing colonies. While we identified examples, we
could not determine the extent of this subsidization. Aside from
scholarships that some of their students are able to win, we know of no
other form of government assistance.
Should private schools be subsidized? The answer depends on how
the subsidy is to be distributed. There may not be much efficiency gain to
offering direct subsidies to private schools, if those subsidies are
distributed in the same way as they are given to public schools. However,
subsidies may be given directly to students (scholarships) to increase
- 71 -
competition between private and public schools. This will increase
pressure on all schools to provide the type of education parents and their
students want. Schools that do not meet the standards of the consuming
public should be allowed to close. If these subsidies are related to
income criteria, they would also lead to greater equity.
Another constraint to the development of private schools is the
lack of an adequate financial market. Many private schools in Pakistan
start in rented accommodation. Physical facilities are limited because
proprietors cannot mobilize sufficient capital. There are economic reasons
why small commercial lenders fail to provide capital in a risky business
where there is no collateral. Thus, there is a role for government to
facilitate the operation of these markets, through guarantees or direct
provision at cost recovery interest rates. These guarantees are likely to
be less costly for the government than expanding the public system.
C. Scholarships and Students Loans in Pakistan
1. Scholarships
Scholarships constitute a very small proportion of total public
spending on education. According to the 1984-85 budget data provided to
the mission, some Rs. 118.8 million (or 1.3% of all educational
expenditures), were spent on scholarships. Most of. the scholarships were
given by the federal government. Provinces generally spend less than 1% of
their budgets on scholarships.
- 72 -
Table 29: Government Scholarships in Pakistan, 1984-85 (budget)
Source byGovernment Amounit As % of Education BudgetLevel (Rs. million) of Each Government Level
Federal 73.5 3.8AJK .3 .001NWFP 9.6 .7Punjab 24.4 .7Sind 5.6 .3Baluchistan 5.4 1.2
Pakistan 118.8 1.3
Source: Central Bureau of Education, Islamabad, BudgetAllocation Tables, 1984-85.
The scholarships tend to be allocated primarily on the basis of
merit, and only secondarily, on the basis of need. For example, for
the President's One Thousand Scholarships, only applicants who have passed
matriculation examinations in first division were considered, except for
second division finishers from Baluchistan and federally administered
tribal areas. Scholarships for studies overseas, such as those given by
the Ministry of Science and Technology for graduate studies, were allocated
on the basis of scores on written tests.
In addition to these government granted scholarships, the institutions
themselves grant a very limited number of scholarships. For example, the
University of the Punjab allocated some Rs. 500 000 in 1983-84 for
scholarships, of which 70% was distributed on the basis of merit and 30% on
the basis of need, with the department head certifying who is needy. At
other levels, the provincial authorities allow some fee concessions for
families who have more than one child in school.
The overall picture is that direct payments to students are
limited, particularly at lower levels. Scholarships are distributed on
- 73 -
the basis of merit, rather than need. It would be worthwhile to
examine the desirability and feasibility of shifting more of the
educational subsidies through direct scholarships and less through
grants to schools that charge fees that are less than cost, at least
at the college level. The benefits of this are that students'
preferences are given more weight in resource allocation and there is
more scope for egalitarian transfers.
2. Student Loans
The most important student loan scheme in Pakistan is a joint venture
between the government and the private banking system, through the Pakistan
Banking Council. Called the Qarz-e-Hasna Scheme for Education, its
objective is "to provide financial assistance to students of insufficient
means and of outstanding calibre, who are unable to pursue their studies
due to financial difficulties." (Pakistan Banking Council, n.d.) The main
vehicle is through interest free loans for students in higher education.
There are two parts to the Scheme, which was established in 1981. Out
of a total of Rs. 7 million in 1984, Rs. 5 million were awarded for loans
for studies within Pakistan. The student must be in a post-intermediate
degree course in the fields of engineering, medicine or the sciences and
must have achieved a minimum of First Division in the intermediate degree.
(Post-graduate loans in business and economics are also allowed.) Out of 2
million applicants, 12,000 loans were awarded in 1984. The maximum award
was Rs. 5,000 and they are reduced by Zakat receipts of students. The
amount awarded is determined by means tests, which are evaluated on the
basis of income tax certificates and other documents.
- 74 -
The other part of the Scheme (Rs. 2 million) is for studies
overseas. For a maximum of Rs. 125,000 per year, these loans are for
post-graduate studies only. Of 1,000 applicants for this part of the
Scheme in 1984, 200 were accepted.
The terms of the loans are generous. There is no interest. There is
also a two-year grace period on the repayment of the principal after
completion of studies. Thereafter, repayment is made in monthly
installments for a period of no more than 10 years. Unsatisfactory academic
performance results in immediate repayment of the loan. All recipients of
must serve in Pakistan if a job is offered to him within the country.
Otherwise, a penalty of up to twice the principal is assessed.
The Scheme is financed 50% by the government and 50% by the
participating private banks. In addition, all administrative work and
collection are handled by the private banks. Thus far, there has been
no experience with collection because the scheme is new and even the
earliest recipients are still within the grace period.
While these schemes are still small, they are an interesting
experiment. They rely on the private banking system, which has a much
broader range of experience on the administration of loans. The great
excess demand for these loans suggests that they are extremely popular.
Thus, it may be feasible to expand this scheme to recover a larger
proportion of its costs.
3. Zakat Scholarships
The President of Pakistan promulgated the Zakat and Ushr Ordinance on
June 30, 1980. Its purpose was to institutionalize a system for collecting
- 75 -
funds to assist "the needy, the indigent and the poor (that is, the
"mustahequeens"), with a view to securing their economic well-being (and)
to help them stand on their own feet and become useful members of society"
(Central Zakat Administration, n.d.). Under the provision of the0
Ordinance, collected funds18/ can be used for educational purposes, as
long as they are disbursed to benefit individuals directly, that is
disbursed as scholarships.
The system is still in its infancy. A substantial fund has
nevertheless been collected since it came into being. The relevant data on
collection appear in Table 29. Periodically these funds have been
disbursed to the Provincial Zakat Councils, which in turn allocates the
funds to local Zakat committees. The disbursement follows the guidelines
shown in Figure 6.
18/ Zakat funds are collectable from two sources: through levies onfinancial assets, operationalized since the promulgation of the Ordinance;and through a tax on agricultural produce which became operational in March1983. The latter tax, known as Ushr, is a Zakat on agricultural produce.The economic efficiency of this method of collecting the wealth tax hasbeen questioned (Cheong, 1985), because of its possible distortionaryeffects on financial and agricultural markets. However, this is beyond thescope of this discussion. The tax is interpreted as a religious mandateand for now must be accepted as given.
- 76 -
Table 30: Collection of Zakat Funds in Pakistan, 1980-85
(Million Rupees)Tax on Tax on Agricultural Produce (Ushr)
Year Financial Assetsa/ Punjab Sind NWFP Baluchstan Totale/
1980-81 845.06 0 0 0 0 0
1981-82 799.87 0 0 0 0 0
1982-83b/ 856-41 208.60 78.79 11.66 7.64 306.73
1983-84c/ 1012.18 34.71 21.43 1.34 1.10 58.60
1984-85d/ 1227.00 - - - - -
a/ Includes voluntary Zakat, usually a very small sum.
b/ The amount of Ushr represents collection during two agriculturalseasons: Rabi (April-September) and Kharif (October-March).
c/ The amount of Ushr represents collection during the Kharif season only.
d/ Data on collection of Ushr not available.
e/ Includes a small amount collected in the Islamabad capital territory.
Source: Central Zakat Administration (n.d.).
Central Zakat Fund
Provincial Zakat Councils(I in each province, total number =4)
/ ~~0% 1 5% 15
Local Zakat Students in Other Health
Committees Religious Students (Patients) Others(Total Number Studies
36,672)
Subsistence Rehabilitation Stipends toGrant to of Primary Studentsmustahequeens" "mustahequeens" Grades 4 and 5
Figure 6: Guidelines for the Disburseuent of Zakat Funds in Pakistan
- 78 -
Strict adherence to these guidelines would imply that 42.5
percent of the Zakat funds are allocated for educational purposes through
scholarships. Reflecting the priorities set by the central Zakat council,
the allocation is largest (25 percent of the total Zakat funds) for
students of religion in "deena madarisas". The remaining amount for
general studies is still substantial -- about Rs 177 million if the 1983-4
Zakat collection from financial assets are disbursed according to the
guidelines. These Zakat scholarships are therefore comparable to the total
amount allocated in 1984-5 as government scholarships in provincial
budgets.
In 1982-3, there were about 32,600 recipients of Zakat
scholarships, and it is envisaged that this number will increase to 100,000
in 1983-4. "A large number" of these students are for primary and middle
level schools (Central Zakat Council, n.d.). Data on the distribution of
the recipients by level of education are, however, available only for
NWFP. They appear in Table 30. Slightly over half the recipients were
students in primary and secondary schools. However, they received only
one-quarter of the total amount of Zakat scholarships, because the size of
each scholarship was much smaller than that at the other levels of study.
The awards for university studies are especially generous, and reflect the
priorities established by the Central Zakat Council: special emphasis has
been placed on "mustaheq" students pursuing studies in medicine,
engineering, accountancy, commerce and agriculture. The size of the
stipends envisaged for these students is shown in Table 4.
- 79 -
Table 31: Zakat Scholarships in NWFP, 1985-6
No. of Scholarship Amount (Rupees)Type of Institution Recipients Total (million) Per Recipient
Schoolsa/ 7,881 2.527 321Colleges 3,355 2.380 709Technical Institute 1,746 1.100 630Universities 1,973 3.618 1,834Other 179 0.375 2,095
Total 15,174 10.000 659
a/ Primary and secondary schools.
Source: Personal communication from the Education Department, NWFPGovernment.
Table 32: Stipends From Zakat Funds for Higher EducationStudents in Pakistan
(rupees)Monthly Stipend Lump Sum Stipend Payable
Course of Study Non-Boarders Boarders At Beginning of Year
Medicine 250 300 2,000Engineering 250 300 1,500Agriculture 150 250 1,000Accountancy 150 250 1,000BusinessAdministration 150 250 1,000
Source: Central Zakat Administration.
The number of scholarships is expected to increase "as the
Provincial Zakat Administration get better organized... and finalize
institutional arrangements for the grant of scholarships on a wider scale"
(Central Zakat Administration, n.d.). The anticipated expansion is
especially important if increased cost recovery for education is
implemented. One advantage of the Zakat scholarship scheme is its focus on
"mustaheq" students who are identified by local administrators actually
-80 -
resident in the same area as the recipients. Moreover, the clear
association of these scholarships with poverty discourages application from
those outside the target group. As the Zakat scholarship is expanded,
steps should be taken to strengthen its focus on rural primary education.
This emphasis would ensure that the scholarships continue to benefit
children from the poorest income groups in Pakistan. In addition, the
availability of such scholarships should be widely publicized, especially
in the rural areas, as a way to encourage parents to enroll children who
are not yet in school.
STRUCTURE OF THE EDUCATIONAL SYSTEM (FORMAL ONLY)GRADE I 11 iII IV v Qe vi# Vl.i l x x xi xii xil xiv xv xW
NORMAL AGE 5*t 617 ;/p 8/9 9/10 10/11 i1112 12/1J 13/14 14/15 15J18 1117 17/18 l lU19 19/2 20R/21 cTECHNICAL TEACHER TRAINtNG IINDUSTRIAL ART) . 0
CERTIFICATE DIPLOMA i
I b EOCOllbffCIAtSrEC"ICAL 17PRIMARY CERTIFICATE EDfJMCALrCNA mTEACHER C TEACIfERI RAINING
tP TI TRAINING ICT) B. ED PA. ED -t
PRIMARY MI(I)OtI HIGH INTERMEDIATE PASSlEGREE ASTERSDEGREE m
C} C1 {}{X DT~~~~~~~~~~~~~~~~~~~~~O t-A OEG9S 0
BE ACHELOR OF iMEDICINE/SURGERY 0
}{H^CHELOBAHELR OfrDENtTISTRY t
AGRICULTURAL COLLEGES AND UNIVERSITY
Fl 1 VIAR OF EIUICAJIONONOIS A IC ULTAGRICULTURE ANOB. Sc. HONURS M. Sc. AGRICULTURAL EDUCATION M
* YI AR OF Allt)N | {3{H1ENG,N 11ENGINEERING AND VETERINARY MEDICINE
ENGINFERtINGt COt tEGES AND UNIVERSITY Tt5SIJPERVISED THAINING IN { SC ENGINEERINGri INIUS I fhY -JC -l I - -mS NIERN
NEW SCHEME 11973 19741 >
DiPI OMA (ASSOCiATE 8. TECH PASS OENGINEERI r
AGRICULttURAL FIELD ASSISTANTTRAINING INSTITI/rE
i VOCATIONALINStITUTES IFOR BOYS)
-4]-...47J--C CERTIFICATE ISKILLEO WtRKERSI
IFORO WOMEN)t_F_A_E DIPLOMAVOCATIONAL TRADES
CfERTIFICATE OIPLOMAA
Appendix 2: Age-Earnings Profiles by Level of EducationPakistan Males, 1979
Less Than Post-Age Primary Primary Matric Intermediate Degree Graduate
10-14 203 - 269 - -
15-19 314 428 353 463 630 -
20-24 406 436 469 589 712 877
25-29 521 545 673 629 812 1226
30-34 572 700 703 939 1233 1528
35-39 638 774 803 999 1149 1474
40+ 732 1093 1089 1437 1189 2757
Source: Household Income and Expenditure Survey, 1979.
Appendix 3: Age-Earnings Regressions
Level of Schooling Intercept Age2
Less than Primary -134.3477 31.2404 -.2804(1.5911) (.0244)
Primary 147.7675 12.7737 .1062(9.1288) (.1296)
Matric -69.2633 28.2948 -.1167(5.9061) (.0906)
Intermediate -4.3069 25.8117 .0387(15.8336) (.2248)
Degree 269.7713 14.3921 .3208(28.0786) (.3986)
Post-Graduate 622.9908 -3.5541 .8481(65.6273) (.8676)
Source: Computed from Appendix 1.
Appendix 4: Public Spending and Fee Receipts in Primary andSecondary Education, Pakistan 1984-5
(million rupees)
Level of Education/ Public SpendingProvince Current Capital Fee Receipts Net Subsidya/
1984 1985 1984 1985 1984 1985 1984 1985
Primary
Punjab 1407.579 1630.406 12.102 60.826 0 36.412 1408.789 1600.077Sind 541.390 612.581 35.827 - 0 - 544.973 -NWFP 313.875 .361.953 122.465 107.952 0 0 326.122 372.748Baluchistan 112.854 148.708 2.600 1.000 0 0 113.114 148.808
Total 2375.698 2753.648 172.994 - 0 - 2392.998 -
Secondary
Punjab 624.296 813.806 29.162 14.765 0.45 55.131 626.762 760.152Sind 328.858 384.472 5.455 - 0 - 329.404 -MNFP 272.100 321.381 13.910 23.921 3.184 2.880 270.307 320.893Baluchistan 59.490 72.804 4.750 6.300 0.150 0.190 59.815 73.244
Total 1284.744 1592.463 53.277 - 3.784 - 1286.288 -
Source: Provincial Budget documents.
a/ Calculated as the sum of current public spending and annualized capitalspending (at 10%) minus the fee reeipts.
Appendix 5: Urban-Rural Distribution of Population and Enrollmentsin Primary and Secondary Education, Pakistan 1985
Level of Education/ 1981 Enrollment Ratio (x) % Urban in TotalProvince Urban Rural Enrollmentsa/
Primary
Punjab 61.4 40.4 37.4Sind 66.5 29.0 47.4NWFP 51.1 32.5 38.2Baluchistan 44.9 15.3 53.5
Secondary
Punjab 26.3 7.8 57.0Sind 39.6 5.8 72.8NW4FP 20.1 6.5 54.8Baluchistan 19.3 3.6 67.8
Source: Khan, Mahmood and Hussai-n (1985).
a/ Calculated as:US = (UE.UP/(UE.UP + RE.RP)) 100where US = urban share of total enrollments;
UE = urban enrollment ratio;UP = urban share of population;RZ - rural enrollment ratio;RP = rural share of population ( 1 - UP).
According to 1981 census, UP 22.8%.
Appendix 6: Estimated Population and Enrollments in Primary and Secondary Education,Pakistan, 1985
Level of Education/ Populationa/ ('000) Enrollments ('000) Enrollment Ratio (%)Provinces Total Urban Rural Totald/ Urbane! Rural Total Urban Rural
Primary (Age 5-9)
Punjab 7,759 2188 5571 3994 1494 2500 51.5 68.3 44.9Sind 3,098 874 2224 1655 784 871 53.4 78.0f/ 39.2NWFP 2,152 607 1545 824 315 509 38.3 51.9 32.9Baluchistan 699 197 502 172 92 80 24.6 46.7 15.9Total 1 3 ,7 0 8b/ 3866 9842 6645c/ 2685 3960 48.5 69.5 40.4
Secondary (Age 10-14)
Punjab 6,733 1899 4834 1337g/ 762 575 19.9 40.1 11.9Sind 2,688 758 1930 645g/ 470 175 24.0 62.0 9.7NWFP 1,868 527 1341 364g/ 200 164 19.5 38.0 12.2Baluchistan 606 171 435 46f/ 31 15 7.6 18.1 3.4Total 1 1,8 9 5b/ 3354 8541 2392'/ 1463 929 20.1 43.6 10.9
a/ Estimated according to provincial share of population in 1981 census.b/ Vu (1984)c/ Pakistan (1985)d/ Provincial share (for primary education) according to World Bank (1985).e/ Urban-rural share according to Table A.2, last column.f/ The estimated share seems high at 89.7 percent. It is adjusted downwards by taking the
average of this estimate and the enrollment ratio for 1981 (Table A.2).g/ Estimated according to provincial share in 1984 (based on Punjab (1985), Sind (1985), and
personal communication from Education Department, NWFP Government).h/ Residuali/ Estimated from enrollment data for 1984 (from Pakistan (1985)) by assuming annual growth
rate between 1979-84.
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Baluchistan, Government of, Estimates of Charged Expenditure and Demandfor Grants, 1984-5, Quetta: Finance Department, 1984.
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Thobani, Mateen, Charging User Fees for Social Services. The Care ofEducation in Malawi, World Bank Staff Working Paper # 572,Washington, D.C: The World Bank, 1983.
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