The full text of Clare Short's speech in Pakistan

"It is a great pleasure for me to be back in Pakistan and I am very honoured that you have asked me to contribute alongside such distinguished speakers.

I have a longstanding interest in Pakistan. Many families in my parliamentary constituency are originally from here and continue to maintain their links with family and friends.

They often express their concerns about poverty and corruption back home. I have also seen their hopes and subsequent disappointment with the recent series of governments.

Following the coup in October 1999, the UK government decided that we should put our development work on hold and observe closely what kind of regime had taken over.

I was very conscious that since independence, the people of Pakistan had been seriously let down by bad governance, poor economic management and corruption - and that this in turn had led Pakistan to make limited progress in the reduction of poverty.

But early on, there were clear signs that your government was committed to a crackdown on corruption, responsible economic management, pro-poor policy and a transition to genuine democracy; and there has been good progress since.But we all know that the transition to effective democracy and sustainable development in Pakistan is an enormous challenge, and that there will be many tough choices and obstacles along the away. But we know, too, that Pakistan may not get a better chance. Now is the moment, to break with the failed policies of the past, to build a new inclusive democracy, and to drive through a far-reaching reform agenda to reduce poverty. This is not just an agenda for economic reform; political and social reform are equally vital.

Giving the poor a more effective political voice and investing in human development will drive sustained economic growth and development. This is a truly historic opportunity for Pakistan; all who care for its people and their future should work hard to ensure that this transition is successful. With the right policies and support from the international community I believe that Pakistan can make this transition and offer a better future to its people.

But success this time means learning from the mistakes and missed opportunities of the past. There were similar hopes for a new era at the beginning of the 1990s. Aspirations for the future of the country internally and externally were huge. Commitments were made to reform public services, to reach out to the poor, generate livelihoods, respect human rights and attract inward investment and economic growth. Morale was high and success seemed to be on the horizon. But these hopes and promises were dashed. As you know, from 1988 to 2000 four successive governments failed in their democratic responsibilities.The price of this failure has been high. A decade of political instability in turn generated economic instability. As a result, annual GDP growth in the 1990s averaged 4 per cent compared to 6.2 per cent in the 1980s, and poverty increased to the extent that almost a third of Pakistanis today live on less than $1 a day.

Between 1997 and 2000, per capita expenditures on health and education under the Social Action Programme declined by more than 10 per cent. Inevitably public services declined. Poor people suffered the most.

Elementary school enrolment rates have largely stagnated. Health has fared slightly better, but infant mortality is declining only slowly and maternal mortality hardly at all. People in poor rural areas and poor urban neighbourhoods have been largely failed by both the public and the private sectors.

For Pakistan, in terms of human development and poverty reduction, the 1990s were a lost decade. This is the sorry legacy with which your government is grappling. But we know that real progress is possible.

Your government has set out an ambitious reform agenda, and the UK government and other members of the international community are committed to supporting this process of reform.

We know that for poverty to be reduced, there has to be faster and more inclusive economic growth. The reforms that have been introduced to encourage increased investment - both domestic and foreign - must be carried forward. That includes tougher action on corruption.

However, faster growth alone will not reduce poverty. Pakistan will also need to invest more in education and healthcare. In our globalising world, where information technology is driving change and development, investment in human capital delivers high returns. In the field of education, the evidence is clear that investment in universal primary education, with a special effort to include girls, is the single most important investment in development that any country can make.

Girls that have been to school transform their country as they grow up. They tend to marry later and have fewer children who are more likely to live. They help increase household income and in turn they insist on access to education and healthcare for their own children.

Similarly with healthcare, it used to be assumed that better healthcare was highly desirable but that the first priority was economic growth in order to pay for it. This is wrong. The poor are not a static group of people. They work enormously hard and often manage to lift themselves out of poverty but ill health constantly throws them back.

Frequently the breadwinner becomes sick and therefore cannot work, or a child is sick and families sell what they have and borrow what they cannot afford to obtain medical care, throwing themselves into deeper poverty.

The report of the Commission on Macroeconomics and Health commissioned by the World Health Organisation and led by Jeffrey Sachs of Harvard has demonstrated that investing relatively small amounts - $30 per head - to put in place basic healthcare systems not only saves lives but also produces enormous economic gains.

This is not just academic theory; we know it works in practice. Take the experience of the East Asian economies. These countries achieved a faster reduction in poverty for a larger number of people than has ever previously been achieved in history. The reform that delivered this was both economic and social. Economic policies to attract inward investment, but also investment in health and education - the nation's human capital - to increase productivity and growth.

By investing in its human capital, Pakistan too can make major progress in poverty reduction and development. And by creating hope for ordinary people, this will also support the government's objectives of building a more tolerant, open and democratic society.

Achieving progress in human development requires political will and commitment at every level of government. In many respects, this has been the biggest failing in Pakistan over recent decades. Without such a commitment, the pledges set out in the Poverty Reduction Strategy Paper will not be delivered. At the Pakistan Development Forum last March, government and donors focused on the need to move beyond policy to implementation.

I am greatly encouraged by the progress that you have made since then despite difficulties created by the drought and more recently the war in Afghanistan. Pakistan's first ever completion of an agreement with the IMF is a very significant milestone and a symbol of the seriousness of your commitment to the reform process.

But enormous challenges lie ahead particularly in the social sectors. Strong and committed government action is required to respond to the needs of ordinary people for education, life skills, health, water, sanitation, livelihoods, security, and rights.

At the national level, the government has already charted a timetable for political reform. Local elections have taken place - with one third of the seats reserved for women. This is also an important achievement and you are heading towards parliamentary elections in October 2002. You have set out an agenda to reform political parties, strengthen elected assemblies and the Senate, and provide greater freedom of information.

This will help to improve the accountability of the political system and to give poor people a more effective voice to safeguard their interests. This is essential if Pakistan is to sustain the economic and social reforms necessary for growth and poverty reduction.

At the local level, devolution offers a unique opportunity - perhaps a once in a generation opportunity - to build a relationship of trust between government and citizen that has been so lacking in Pakistan. For the first time in many years, people will be able to hold government directly accountable for the services they receive, through the mechanisms created by devolution and ultimately through the sanction of the ballot box.

Government - whether at district, provincial or federal level - must value and nurture this accountability.

People should know in clear terms the minimum standards they can expect from their schools, from their health providers and from their water and sanitation authorities. They should be informed about the money that has been provided and the way it is being spent. They should be empowered to demand their rights. Above all, the voices of the poor need to be heard.

It is important that the expectations created by devolution are not disappointed. Government needs to strengthen its capacity to deliver services. Fulfilling the objectives of the Poverty Reduction Strategy will require a campaign of action that gives provinces and districts both adequate resources and the capacity and authority to implement agreed policy.

The interim PRSP and the recently agreed programme with the IMF map a provisional path for poverty reduction, and spending to support social services. I understand that further work is underway to refine the analysis underpinning the PRSP; but our preliminary work indicates that the current spending projections are unlikely to be sufficient to achieve social sector targets. I welcome the higher poverty related expenditure in recent budgets, but greater fiscal resources are likely to be required.

The government and donors need to work together to agree how to increase resources to support social spending. On the government side, this may include increasing tax revenue, and the reallocation of resources by reducing the debt burden and cutting expenditure on non-priority areas.

And resources that are allocated must be spent. Between 1997 and 2000, only 72 per cent of what was budgeted for basic education was actually spent. Looking within the education budget, non-salary components fared even worse. There is a similar picture for health. We should not delude ourselves over the impact of cutting expenditure in this way. This has a major adverse impact on the lives of the poor.

But, as you know, the public sector reform agenda is not just about resources. There is also an urgent need for institutional reform. Transforming the bureaucracy into a true "public service", oriented towards serving the citizens of Pakistan, is a fundamental challenge.

Obviously the unresolved conflict over Kashmir could endanger progress. We must all work for a peaceful resolution of the dispute that improves the life of all the people of Kashmir and reduces defence spending in both countries so that greater progress can be made in reducing poverty.

Addressing these issues may be difficult, but the potential dividends are obviously enormous. More teachers in school, better motivated, trained and equipped to do their job; effective water and sanitation systems; and health staff committed to their work in decent buildings with essential drugs and other equipment.

In Pakistan, the private sector has come to play an important part in education and health. This does not mean that the public sector can withdraw and leave education and health to the private sector; but rather that there is a strong basis for partnership between the public and private sector to help the Government meet its responsibility for delivering basic services.

I know that such models are being developed in education, for example in allowing NGOs and communities to use government primary schools to provide middle and secondary education; and in health, for example under the national TB control programme. Such examples should be encouraged and nurtured. However, for partnership to work, there needs to be a clear understanding of what the respective roles and capacities are, with regulation where appropriate to ensure quality of service. We should regard the private sector as partners and innovators.

Finally, I want to turn to the role of donors, including the UK, in supporting your reform agenda. The decade of the 90s that began with such promise also began with a campaign to revive the social sectors - the Social Action Programme. This campaign had noble objectives: to increase access to education, health and rural water and sanitation, particularly for the poor. But, in a decade of interrupted political processes, failing governments and economic decline it is hardly surprising that the campaign had limited impact. Government became disheartened. And donors became frustrated. And too many people are still waiting and wanting for basic services.

Today, donors as well as government need to learn the lessons. New targets for the social services have now been set in the interim PRSP. These sector objectives and plans are being refined further and need to be costed realistically. Donors and government need to find new mechanisms and instruments to support different tiers and functions of government to reach these targets.

Pakistan needs a set of donors who work well together. We should stand ready to rally around a single plan, to offer our commitment for the long-term, to build up the capacity of Pakistan's own institutions and to work together more collaboratively than in the past. This means sharing information, trusting each other's work, pooling funds, and working with common procedures. The UK government is committed to such collaboration and is keen to work with others who share these aims.

I have spoken today in candid terms. As a friend of Pakistan - a friend that is committed to work with you to reduce poverty and give the people the chance of a better future. You and I both know that this is a long-term agenda. Entrenching a genuine democracy, growing the economy, rooting out corruption and expanding and improving education, healthcare, water and sanitation will not be achieved overnight. But it can be done if there is political will. It is imperative for the future of Pakistan that this time we succeed."