Friday, September 1, 2017

Eid ul Azha Observance in Pakistan Transfers Billions of Dollars From Urban to Rural Population

An often overlooked benefit of buying and sacrificing millions of animals during Eid ul Azha celebration is the massive transfer of wealth from relatively rich urban population to the comparatively poor village population.   In other words, it helps create jobs and redistribute wealth to alleviate poverty in a similar way as zakat, taxes and sadaqa (charity) do.  Here's a blog post I wrote last year (2016) on this subject and I am reproducing it below:

Pakistanis are spending about $3.5 billion on Eid ul Azha this year, according to analysts. This includes $2.8 billion worth of livestock and another $700 million on clothes,  shoes, jewelry and various services. This amount represent a huge transfer of wealth from urban to rural population in the country.

Animal Sacrifice:

Eid al Adha commemorates the willingness of Prophet Ibrahim (Abraham) to sacrifice his most beloved son Ismail (Ismael) when asked to do so by God. It follows Hajj, the annual pilgrimage of Mecca by Muslims from around the world each year. Muslims believe that God had angels remove Ismael from under the knife of blindfolded Abraham and had him replaced by a lamb.

Economic Activity: 

The commemoration includes sacrifice of cows, goats, lambs and camels on Eid al Azha. This year, the media reports indicate that 4 million goats, 2.7 million cows, 800,000 lambs and 30,000 camels are being slaughtered in Pakistan on the occasion.

Using a conservative average price of $600 per cow, $200 per goat or lamb and $800 per camel, the total cost of animals adds up to $2.8 billion. Various services offered by, transporters, butchers and slaughter houses are in addition to this amount.

Apparel Purchases:

The Eid celebration includes buying and wearing new clothes and shoes as well as women's jewelry and other accessories that add up to another $700 million spent in Pakistan.

Charity:

Animal hides and significant amounts of meat are donated to various charities and the poor on Eid. Charities like Edhi Foundation are big beneficiaries of this largesse.

Rural Economy:

Rural residents who raise animals for sale on Eid bring in billions of dollars into the rural economy. These inflows help provide livelihoods and alleviate rural poverty.

Summary:

Eid al Azha this year represents a $3.5 billion worth of economic activity that is generating jobs and helping the charities and the rural residents of the country.

Related Links:

Haq's Musings

Pakistan Among Top Meat Consuming Nations

Livestock Revolution in Pakistan

An Indian Farmer Commits Suicide Every 30 Minutes

Pakistan's Rural Economy

Strong Eid Sales in Pakistan

Happy Eid-ul-Azha: Good Hygiene and Humane Treatment of Animals

Ho Kya Raha Hai - Impact of Eid-Ul-Adha on Our Economy - 12th September 2016


9 comments:

Rashid A. said...

This is a good post. Just one observation.


The numbers estimates can be very conservative as the actual numbers might be much higher. This is because in the rural areas, animals are raised by the farmers for the purpose of Qurbani and not necessarily purchased from registered live stock markets. I do not know if the estimate accounts for that or not.

On the question of transfer of wealth, the point is valid and excellent. However, given the fact the majority of Pakistan lives in rural areas, their own Qurbani does NOT represent a transfer of wealth. This is so when the rural dwellers sacrifice an animal that they have raised and not purchased, or even if purchased, it is not a net income transfer from urban to rural.

Riaz Haq said...

Rashid: "This is a good post. Just one observation. The numbers estimates can be very conservative as the actual numbers might be much higher."

Very good comments.

Here are some of the answers to questions you raise:

The numbers of animals sacrificed is based on data on the number of animals skins/hides purchased by Pakistan Tanners Association (PTA) immediately after Eid ul Azha.

The prices of animals ($600 per cow, $200 per goat or sheep) assumed in the $2.8 billion estimate are believed to be very conservative. Actuals this year are 20-25% higher.

http://nation.com.pk/national/26-Aug-2017/price-hike-online-qurbani-changing-face-of-eid

The rural/urban divide, depending on how urban is defined, is about 60:40.

A lot of what is called rural is "peri-urban" as seen in the latest census calling half the population living Islamabad Capital Territory" (ICT) rural.

Majumdar said...

An eye opener, sir. I saw with dismay on Facebook, that several Pakistani and Indian Muslims suggesting that the holy custom of animal sacrifice should be done away with, even some redoubtable warrior of Islam from chowk times, have fallen victim to such Western propag@ndu.

Regards

Riaz Haq said...

Pakistan received around $2 billion in foreign remittances, partly because of the seasonal effect of Eidul Azha.

The SBP is expected to officially announce the foreign remittances statistics next week.

https://tribune.com.pk/story/1501689/money-matters-pakistan-gets-230m-loans-cushion-forex-reserves/

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Pakistan has received two short-term loans worth $230 million from international creditors, meant to keep the official foreign exchange reserves at a level sufficient to provide cover to three-month import bill.

According to officials, the country received an amount of $153 million from Citibank in August. Besides, Islamic Development Bank (IDB) gave a $77 million short-term loan in July for crude oil import.

The IDB’s short-term facility is meant for import of crude oil from Saudi Arabia and the lender directly makes payments to the oil supplier on behalf of an oil importer. It partially helped lower pressure on the country’s forex reserves.
From April to May this year, Pakistan had signed three separate short-term loan agreements with the IDB valuing $700 million. Of this amount, Pakistan has already imported crude oil equivalent to $340 million.

For the current fiscal year, the government has estimated receiving $1.55 billion short-term loan from the IDB against the oil import facility.

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During the week ending August 31, 2017, the SBP’s reserves increased by $338 million to $14.681 billion due to official inflows, the central bank had reported on Thursday.

For almost one month, Pakistan was touching the three-month import cover border line as its reserves remained at around $14.3 billion.


In order to avoid downgrading in its credit ratings and keep the tap of budget financing open from the World Bank, Pakistan has to maintain its official foreign currency reserves above the three-month import cover level.

The finance ministry is currently making arrangements for floating about $1 billion worth of Sukuk Bonds by middle of November and a better credit rating will help lower the cost of borrowing. It had also raised $1 billion last year at 5.5% interest rate – the lowest rate on the Islamic bond that it ever paid.

The government was reviewing different options to keep the reserves above the level of three-month import bill. The options included incentives for expatriates to invest in Pakistani dollar-denominated bonds, more restrictions on imports and steps that will encourage exporters to bring back export proceeds.

Finance Minister Ishaq Dar on Friday held a meeting with his Chinese counterpart Xiao Jie and discussed issues of mutual interests – including ways and means to further enhance bilateral economic relations.


During FY2016-17, Pakistan had borrowed a record $10.1 billion external loans that included a record-breaking $4.4 billion short-term financing.

Out of this, $2.3 billion came from Chinese financial institutions. The government took $1.7 billion from the China Development Bank, $300 million from the Industrial and Commercial Bank of China, and $300 million from the Bank of China.

It also obtained $445 million from the Noor Bank of the UAE, $650 million from a consortium of the Suisse Bank, the UBL and the ABL, $275 million from Citi and $700 million from the Standard Chartered Bank, London.

This was the first time in Pakistan’s history that any government has taken over $10 billion as fresh foreign loans in a single year.

Pakistan Tahreek-e-Insaf Chairman Imran Khan on Thursday called Finance Minister Ishaq Dar Pakistan’s economic hitman while criticising his economic policies.

In July, Pakistan obtained a total of $254.9 million loans, including $77 million from IDB. It received $75 million from the World Bank for project financing.

China also gave $71.5 million worth of loans for carrying out various Beijing-funded schemes. The Asian Development Bank provided $28.8 million worth of loans.

The $254.9 million loans were 3.2% of the total annual budgetary estimates of $8 billion for FY2017-18.

Ali K. said...

Well fortunately rural areas in Pakistan are doing exceptionally well as compared to urban areas. Also UNDP report 2017 says healthcare is the largest contributor to poverty in Pakistan and not hunger.

Riaz Haq said...

Ali: "Well fortunately rural areas in Pakistan are doing exceptionally well as compared to urban areas. Also UNDP report 2017 says healthcare is the largest contributor to poverty in Pakistan and not hunger."

There's a lot more poverty in rural areas of Pakistan. Multi-dimensional poverty in urban areas is 9.3 percent vs 54.6 percent in rural areas. Multi-dimensional poverty includes income poverty and access to education and health care. http://www.pk.undp.org/content/pakistan/en/home/presscenter/pressreleases/2016/06/20/pakistan-s-new-poverty-index-reveals-that-4-out-of-10-pakistanis-live-in-multidimensional-poverty.html

Riaz Haq said...

Eid economy takes an upturn
Afshan SubohiUpdated August 20, 2018

https://www.dawn.com/news/1428014/eid-economy-takes-an-upturn

The demand price spiked by 20 per cent on average in 2018 because of higher transport and incidental expenses, but the increase in the selling price is in the range of five to 10pc depending on the buyers’ negotiation skills.

The greater volume of cattle trade on “Bakra Eid” means a bigger net wealth transfer from urban to rural Pakistan, with cattle farmers of Punjab being rewarded generously for their better cattle rearing skills by the market. In contrast, ultimate beneficiaries of higher consumer spending on Eidul Fitr are urban manufacturers, traders and service providers. The gains, however, are not equitably shared across all regions on both festive occasions owing to the geographical disparities in development.

Roughly one-tenth of the total population of goats and cows is sacrificed every year during the three days of Eidul Azha. Livestock has a growing share of 58.9pc in the agriculture sector and 11.1pc in the gross domestic product, according to the Pakistan Economic Survey 2017-18. The growth in the livestock sector remained 3.7pc last year, which is 80 basis points higher than the agriculture-sector growth of 2.9pc.

Currently, general sentiments are upbeat. The nation has heaved a sigh of relief at the peaceful transfer of power for the third consecutive time.

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The cash-based nature of cattle trade makes it difficult to monitor the flow of money. There is a whole chain of people involved in the activity that spans over the year and culminates on Eid. There are investors, breeders, cattle farm owners, short-term retail investors, brokers, transporters, mandi operators, caretakers in urban centres, service providers and millions of temporary workers. Identifying the share of each segment in the pie of the Eid economy is hard, but the risk-reward ratio for brokers with both ends secured is said to be the most lucrative. For all others, risks are high and returns are uncertain.

Many dependable indicators that shed light on the size of the market — like the data of hides and skins collected and the consolidated number of the headcount of cattle marked by the state-managed markets — are released after a lag of one month. At this point, we know that remittances spiked by 25pc in July to $1.93 billion from $1.5bn in the same month of 2017. Some of this hike is attributed to Eidul Azha-related transfers by overseas Pakistanis.

The figures of Eid-induced cash withdrawals and the tally of additional payments to employees in the form of bonuses have yet to surface.

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Final figures are not available, but early indicators point to a massive Eidul Azha economy revolving primarily around cattle trade. Preparations for the festive occasion spur the sale of clothes, shoes and accessories, but the major share of Eid-centric liquidity is soaked up by qurbani.

“Counting their blessings in a pleasant weather this year, Pakistanis are all set to loosen the purse strings and delve deep in fervour to celebrate the religious festival of Eidul Azha. The visible level of the activity is more than the last year’s as male members of families hit the mandis and ladies frequent malls for preparation,” a market watcher commented.

The composition of the Eidul Azha market is expected to remain unaltered as Pakistanis switch in greater numbers to the ‘group’ segment to follow the religious tradition of sacrificing cattle in the name of Almighty.

“I would love to keep the affair exclusive, but my conditions do not permit the luxury any more. After several visits to the mandi over the past week, I have decided to pool in with neighbours for a collective qurbani as the prices are way beyond my reach. I settled for a pair of goats when cows became too expensive. Last year, I sacrificed one goat. My income increment has failed to keep pace with growing family expectations,” said a senior officer of the Punjab Livestock Department over the phone.

Riaz Haq said...

#Pakistan's Rural Transformation With #Education, #Remittances, #Healthcare & #Communications: Motorized Vehicles replacing horses & bulls, sturdy brick/cement replacing mud houses, TVs & Mobile Phones everywhere, Migrant workers bringing money & ideas. https://www.thenews.com.pk/print/685889-changing-landscape-of-village-life-in-pakistan

Islamabad:The countryside life in far-flung areas of Pakistan, once considered totally isolated and secluded from the rest of the world and devoid of modern-day facilities, has undergone a massive transformation during the last two decades or so by changing the entire landscape of village life.

The rural life is often considered backward, fixed and hostage to tribal culture and traditions. Similarly, the popular social discourse that nothing has changed in Pakistan contradicts with historical facts.

Looking at the national picture of rural life in Pakistan rapid changes have occurred in almost all spheres of life from communication to education, socialization to healthcare, transportation to banking, governance to farming and cultivation to harvesting due to technological advancement, developmental works, penetration of information technology, remittances and domestic tourism.

Among others, the two factors of economic and technological developments as the agent of change had proved instrumental in shaping the process of change not only in the urban areas but also in suburbs of the country. Not more than twenty years ago when mobility was considered difficult in the remote areas not only due to missing road infrastructure but also due to poor transportation facilities.

‘Tonga,’ a carriage pulled by a horse, was the only facility for public transport while bullock-cart was commonplace phenomena for weight transportation in almost all small villages. The houses made of mud have also slowly been replaced by cemented buildings while the social structure was also changed due to disintegration of combined family structure to separate family system.

Likewise, only a few professions of handicrafts have survived due innovation to capture the pace of time and demand of the market while others have totally faded away. Similarly, the obsolete tools, techniques and methods are no more used in farming, cultivation and harvesting due to low production. Therefore, it could not survive at all in the face of modern technologies.

The media revolution in the country with more than 100 private TV channels has brought the whole world at the doorstep of the villagers while the mobile phone companies and 3G/4G technologies have brought it further closer to the palms of people. Hardly there is anyone left without having a smartphone even in the remotest parts of the country.

Almost everybody has got access to the unbridled flow of information on social media in every nook and corner of the country. Thus the electronic media and communication technologies have brought together the collective experiences of the whole world into rural households. The occupation and profession in rural areas once used to be farming and handicraft only. Now it has also transformed into government services, urban migration, overseas workers and businesses. The migrant workers are not only bringing money to the rural economy, but also ideas and experiences about how people in urban areas and the world outside live.

The villages, the basic components of civilization, where a large segment of society is living, have either transformed into model villages/towns or merged with nearby cities having urbanized lifestyle and lots of hustle and bustle. But in developed parts of the globe, the difference between village and city life is still quite visible due to well-planned construction, proper waste disposal mechanism, sewerage system, cleanliness and greenery.

Riaz Haq said...

How about virtual #Hajj2020 amid #COVID19 ? Even without the #pandemic, a vast number of #Muslims can’t journey to #Mecca for financial or medical reasons. Virtual hajj technology would let them see inside the city. #VR #technology #Hajj #Pakistan https://www.wsj.com/articles/software-developers-look-to-offer-virtual-hajj-as-a-viable-alternative-for-pilgrims-11595325600 via @WSJ

The annual hajj that brings more than 2 million pilgrims to Saudi Arabia’s Mecca has been drastically scaled back this year due to the coronavirus pandemic, but virtual software developers are hoping to let Muslims experience what it’s like to worship at the city’s holy sites from far away.

Social-distancing measures by the Saudi government to fight the new coronavirus mean only a limited number of pilgrims already in the country can participate when this year’s hajj begins July 28. The decision is a blow for those hoping to fulfill their once-in-a-lifetime obligation to perform hajj in 2020.

Some see the news as a boon for virtual hajj software, but some Muslims question whether holy pilgrimages can be replicated virtually.

“Unfortunately, tech acceptance in the Islamic world has been a bit slower than our ambitions, with the result that specific segments of the population are unable to see the future benefit that virtual hajj can provide,” said Mohammed Alsherebi, founder of Centillion Inc., a company that advises companies expanding in the Middle East. “By focusing only on the inconvenience of the present moment, many of us are unable to see the incredible opportunity that lies ahead of us.”

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“We don’t believe there can be a substitute to an in-person hajj experience,” said Mr. Maqbool. “However, if we can bring some measure of spiritual and emotional peace to Muslims world-wide during these tough times, then we will have met our goals.”

Mr. Alhaddad, the iUmrah.World chief executive, said he is confident that a virtual hajj or umrah will one day be considered as legitimate as the real thing. The company, which Mr. Alhaddad hopes to take public in 2022, is also developing an iVatican product.

“Yes, it’s better to go yourself,” said Mr. Alhaddad. “But can you get the same experience or fulfillment by watching a pilgrimage being performed? Yes, I believe you can.”