result in improved operational efficiency and effectiveness due to lower costs, reduced prices, and improved innovation in products and services. however, at the same time the emergence of such groups has also added complex linkages and relationships among economic agents. consequently, they have also necessitated a paradigm shift in the supervisory approaches all across the globe to assess, manage, and mitigate risks stemming from such arrangements. like other countries, these developments have steadily gained momentum in the pakistani financial sector. the existing regulatory framework in pakistan under sbp gradually became more open, flexible and allowed the banks to set up subsidiaries to operate non - bank financial businesses. the prevalent structure under which non - bank financial services are being offered is mostly through the parent – subsidiary form of structure wherein banks are parent of their non - banking subsidiaries, or in some cases banks have non - banking finance companies ( nfbcs ) as associates. some elements of universal banking also exist, for example banks are allowed to undertake investment banking, and leasing businesses on their own balance sheet as well. while the central bank showed flexibility in allowing these developments, the underlying legal architecture was not changed in line with the market needs and developments. as such, the current legislation and regulatory tools are not adequate to effectively address the potential risks to the safety and soundness of the financial sector. the safety and soundness of the banking sector, being at the core of all activities of the financial sector, is critical for the general public, for the financial sector itself and for the economy as a whole. the governing law of the banking sector viz. the banking companies ordinance ( bco ) was introduced in 1962 and occasional changes were made in it in response to the challenges of different phases of development. the significant challenges posed by universal banking, large financial groups and holding company structures now warrant a matching legal framework to avoid any major disruptions in the economy and in the process of financial intermediation. recognizing these challenges, sbp has sought in principle approval from the requisite forums for amendments in the bco to enable it to supervise banks, groups and financial holding companies in line with international trends. besides forestalling various risks, these amendments would enable significant benefits in the form of operational efficiency, lower costs, reduced prices and innovation in products and services. moreover, one of the core principles for effective banking supervision ( cp - 24 ) issued by the basel committee on banking supervision requires that a banking supervisor should be able to supervise the banking groups on a consolidated basis. presently, pakistan

encouraged under the current arrangements of program delivery. third, the excessive focus on public budgetary allocations on education and health has neglected the tremendous expenditures, being made by the households themselves in spending on schooling, health care, water and sanitation and also the efforts being made by other providers of these services in non - governmental sector. attention should be shifted from the level of public expenditures or its share in gdp to the productivity of these expenditures. these stereotype and meaningless indicators with which the countries are flogged for lack of their commitment are not very helpful. fourth, it is my contention that we should distinguish between financing and provisioning. while the government should be responsible for financing primary and to a large extent secondary education and basic health services particularly preventive it should have, however, no exclusivity or monopoly in providing these services. for the poor quintiles the access to quality services can be improved if the government provides scholarships, stipends, per capita grants and financial assistance to the non - governmental or quasi - governmental institutions in a transparent and targeted manner. the government is already providing several incentives to these providers in the context of its public - private partnership program which needs further strengthening in operational terms. to illustrate this point education and health in pakistan has been blessed recently with the entry or private sector, not - for - profit organizations, semi or quasi - governmental bodies ( annex i for a tentative list ). the national commission on human development, the national or provincial educational foundations, rural support programs, fauji foundation, private foundations, charitable hospitals and clinics are taking an increasing burden of provisioning every day. there is no reason that the government cannot use some of these quality institutions for financing the services targeted at the poor. so a competitive business model in which all service providers irrespective of their affiliation meeting the set criteria can provide the education, health or other services to the poor households needs to be implemented. if the above holistic framework encompassing the concept, measurement, financing, provisioning of human development is agreed upon and a consensus is reached then the issue of financing human resource development becomes less pressing. table - i financing human development 2005 - 2010 public private total basic and college education health, nutrition and populate water and sanitation skilled based literary, technology education higher education, s & t total annual the total financing requirements for human development as identified in the mtdf and estimated on the basis of household expenditures amount to rs. 2160 billion over 2005 - 2010 period or