Monday, August 14, 2023

Independence Day: Growing Share of Working Age Population in Pakistan

Dependency ratio, defined as the percentage of children and retirees to the working age population, is rapidly declining in Pakistan (current dependency ratio is 69.03%) and the rest of the developing nations of Asia and Africa. This demographic shift means that the world's richest and most powerful nations with the largest share of working populations will no longer be in Europe and North America by 2050. Among South Asian nations, Bangladesh has already joined the list of top 10 nations in terms of the largest share of the working age population. India and Pakistan are expected to join it by 2050. Increasingly better educated working age population is expected to significantly enhance their productivity and increase their incomes. 

Shift in Share of Working Age Populations. Source: NY Times

The total dependency ratio reported for Pakistan in 2022 is 69.03%, much higher than Bangladesh's 47.09% and India's 47.5%, according to the World Bank.  Dependency ratio for China is 44.96% but it is rapidly increasing.  China's share of the working age population will no longer be in the top 10 by 2050 due to its aging population, according to the UN projections. 
Declining Dependency Ratio in Pakistan. Source: Trading Economics/World Bank

Global Age Dependency Ratio Map. Source: World Population Review

New York Times' visual journalist Lauren Leatherby recently described this major demographic and economic shift in the following words: "The richest most powerful countries today have long had these really large working-age populations. And economists agree that that’s been a huge, huge advantage economically and geopolitically. And meanwhile, a lot of developing nations have had quite high dependency ratios having a high number of children compared to working-age people. And so, I think we know a lot of these storylines one by one, but putting it all together, it’s just like the world is going to shift really dramatically". 

Current Share of Working Age Populations. Source: NY Times

"And then I think what we see (rapidly aging population) in Japan today is only the tip of the iceberg. A lot of East Asia, China, Europe, South Korea will be much older than Japan is today, in just you know, 20 or 30 years. Some countries will have upwards of 40% of their population that are 65 or older in just two or three decades. And meanwhile, on the other end, you have a lot of these other countries that have long been, you know, hindered economically by their age structures. And suddenly a lot of them will start to enjoy the exact same age structures that Europe and East Asia, the U.S., that a lot of those countries have historically enjoyed", Leatherby added. 

Prijected Share of Working Age Populations in 2050. Source: NY Times

It is based on this demographic shift that Goldman Sachs analysts Kevin Daly and  Tadas Gedminas are projecting Pakistan's economy to grow to become the world's sixth largest by 2075.  In a research paper titled "The Path to 2075", the authors forecast Pakistan's GDP to rise to $12.7 trillion with per capita income of $27,100.  India’s GDP in 2075 is projected at $52.5 trillion and per capita GDP at $31,300.  Bangladesh is projected to be a $6.3 trillion economy with per capita income of $31,000.  By 2075, China will be the top global economy, followed by India 2nd, US 3rd, Indonesia 4th, Nigeria 5th and Pakistan 6th. The forecast is based primarily on changes in the size of working age populations over the next 50 years.  

GDP Ranking Changes Till 2075. Source: Goldman Sachs Investment Research 

Economic Growth Rate Till 2075. Source: Goldman Sachs Investment Research 

Economic Impact of Slower Population Growth: 

Daly and Gedminas argue that slowing population growth in the developed world is causing their economic growth to decelerate. At the same time, the economies of the developing countries are driven by their rising populations.  Here are four key points made in the report:

 1) Slower global potential growth, led by weaker population growth. 

2) EM convergence remains intact, led by Asia’s powerhouses. Although real GDP growth has slowed in both developed and emerging economies, in relative terms EM growth continues to outstrip DM growth.

3) A decade of US exceptionalism that is unlikely to be repeated. 

4) Less global inequality, more local inequality. 

Goldman Sachs' Revised GDP Projections. Source: The Path to 2075

Demographic Dividend: 

With rapidly aging populations and declining number of working age people in North America, Europe and East Asia, the demand for workers will increasingly be met by major labor exporting nations like Bangladesh, China, India, Mexico, Pakistan, Russia and Vietnam. Among these nations, Pakistan is the only major labor exporting country where the working age population is still rising faster than the birth rate. 

Pakistan Population Youngest Among Major Asian Nations. Source: Nikkei Asia

World Population 2022. Source: Visual Capitalist

World Population 2050. Source: Visual Capitalist

Over a million Pakistani university students are currently enrolled in STEM courses. Over 10 million Pakistanis are currently working/living overseas, according to the Bureau of Emigration. Before the COVID19 pandemic hit in 2020,  more than 600,000 Pakistanis left the country to work overseas in 2019. Nearly 700,000 Pakistanis have already migrated in this calendar year as of October, 2022. The average yearly outflow of Pakistani workers to OECD countries (mainly UK and US) and the Middle East was over half a million in the last decade. 

Consumer Markets in 2030. Source: WEF

World's 7th Largest Consumer Market:

Pakistan's share of the working age population (15-64 years) is growing as the country's birth rate declines, a phenomenon called demographic dividend. With its rising population of this working age group, Pakistan is projected by the World Economic Forum to become the world's 7th largest consumer market by 2030. Nearly 60 million Pakistanis will join the consumer class (consumers spending more than $11 per day) to raise the country's consumer market rank from 15 to 7  by 2030. WEF forecasts the world's top 10 consumer markets of 2030 to be as follows: China, India, the United States, Indonesia, Russia, Brazil, Pakistan, Japan, Egypt and Mexico.  Global investors chasing bigger returns will almost certainly shift more of their attention and money to the biggest movers among the top 10 consumer markets, including Pakistan.  Already, the year 2021 has been a banner year for investments in Pakistani technology startups

Record Remittances From Overseas Pakistanis:

Pakistan is already seeing high levels of labor export and record remittances of over $30 billion pouring into the country. Saudi Arabia and the United Arab Emirates(UAE) are the top two sources of remittances but the biggest increase (58%) in remittances is seen this year from Pakistanis in the next two sources: the United Kingdom and the United States.

Remittances from the European Union (EU) to Pakistan soared 49.7% in FY 21 and 28.3% in FY22, according to the State Bank of Pakistan. With $2.5 billion remittances in the first 9 months (July-March) of the current fiscal year, the EU ($2.5 billion) has now surpassed North America ($2.2 billion) to become the third largest source of inflows to Pakistan after the Middle East and the United Kingdom. Remittances from the US have grown 21%, second fastest after the EU (28.3%) in the first 9  months of the current fiscal year. 

Pakistan ranks 6th among the top worker remittance recipient countries in the world.  India and China rank first and second, followed by Mexico 3rd, the Philippines 4th, Egypt 5th and Pakistan 6th.  

Pakistan Demographics

About two million Pakistanis are entering the workforce every year. The share of the working age population in Pakistan is increasing while the birth rate is declining. This phenomenon, known as demographic dividend, is coinciding with declines in working age populations in developed countries. It is creating an opportunity for over half a million Pakistani workers to migrate and work overseas, and send home record remittances. 


Riaz Haq said...

Age dependency ratio (% of working-age population) in Pakistan was reported at 69.03 % in 2022, according to the World Bank collection of development indicators, compiled from officially recognized sources. Pakistan - Age dependency ratio (% of working-age population) - actual values, historical data, forecasts and projections were sourced from the World Bank on August of 2023.


Age dependency ratio (% of working-age population) in India was reported at 47.5 % in 2022, according to the World Bank collection of development indicators, compiled from officially recognized sources. India - Age dependency ratio (% of working-age population) - actual values, historical data, forecasts and projections were sourced from the World Bank on August of 2023.


Age dependency ratio (% of working-age population) in Bangladesh was reported at 47.09 % in 2022, according to the World Bank collection of development indicators, compiled from officially recognized sources. Bangladesh - Age dependency ratio (% of working-age population) - actual values, historical data, forecasts and projections were sourced from the World Bank on August of 2023.

Vineeth said...

Whether it be India or Pakistan, a large working-age population can be an asset or a nightmare. If the economy has strong fundamentals, robust growth and is able to provide jobs for the large working-age population and encourage entrepreneurship, they are an asset. If not, the same population would become fertile ground for radicalization, social unrest and crime.

I would not read too much into the flow of investment into startups. Many of these startups grow rapidly like a bubble and burst likewise. What matters more to me is whether the economic foundations of a country is robust, resilient and innovative enough to face the challenges of the modern era. Chinese deserve credit for having created such an economy. India, not so much and has a long way to go. Pakistan, far worse.

I think Pakistan needs to get its basics right to realize its potential. Political stability, policy continuity and sustained economic reforms are key. A country that knocks at IMF's doors every three years for bailouts and has its meagre forex reserves periodically propped up above zero by deposits from "friendly nations" wouldn't inspire confidence in any investor. This is aside from the larger social need for inculcating critical reasoning and scientific temper over religion and superstition among the people. Of course, this latter point applies equally to India as well.

Majumdar said...

Anyway back to the topic. The basis of my fundamental positivity about Pak is very simple. It is the heir to a 5,000 year old civilisation. Its people know how to feed, house and clothe themselves and they have fed and clothed others as well (some voluntarily, others involuntarily) . It is just a matter of time and getting proper systems in place.

Mengal said...

Mr. Majumdar: Absolutely. Even a Pakistan hater like Pervez Hoodbhoy says that Pakistani people are intelligent and hardworking--he actually said that recently!
I believe the biggest worry for Pakistan is managing its water resources. No water, no life. Do that and the rest will fall in place! And the increasing rainfall every Monsoon may just be the help Pakistan needed above everything else.
Even the extra large population will become a huge asset in just a few decades, if not sooner. The world will be hungry for people in an ageing and dying world!

Vineeth said...

Mengal said: "Even a Pakistan hater like Pervez Hoodbhoy says that Pakistani people are intelligent and hardworking--he actually said that recently!"

Its amusing how "patriotic" Indians love Pakistani liberals like Pervez Hoodbhoy and "patriotic" Pakistanis love Indian liberals like Arundhati Roy, but neither group can stand liberals in their own countries. I have read Dr. Hoodbhoy's articles in DAWN and he struck me as a reasonable academic. From what I read, the gist of his writings have been that Pakistani educational system needs to give more importance to science than religion in its schools to enable students develop their skills at critical reasoning. "Hard work" alone cannot make a country great as long as its people remain illiterate, ignorant and superstitious. I do not know if India's educational system is somehow better off (I doubt it), but the fact that India was ruled for most of its history by relatively liberal and secular parties like the Congress did have beneficial effects. Also, India has never had its military poking its nose into domains that isn't its business. For instance, Pakistan's space agency SUPARCO has a Major General as its Chairman, while the Indian counterpart ISRO is headed by a civilian engineer who has worked for decades on its launch vehicle projects. However, things have been going steadily downhill here in India under Modi the megalomaniac and his pseudo-science. But that's another story.

AND, don't bet the future of your nation on monsoons or exporting unskilled manpower to ageing nations. (The skilled ones who go abroad are less likely to return in any case, as there would be nothing in their own country to give them the opportunities and lifestyle they seek.)

Anonymous said...

Well said.

G. Ali

Anonymous said...

Vineeth, I am a hardcore nationalist and don't agree with Dr. Hoodbhoy on many issues but I am proud of him. I am proud that he is a Pakistani and that in my country he can speak his mind.


Ahmed said...

Salam Mr. Zameer

Thanks for your reply , I agree with you .

Riaz Haq said...

Pakistan's interim PM says Saudi Arabia to invest $25 bln over next five years

By Gibran Naiyyar Peshimam

ISLAMABAD, Sept 4 (Reuters) - Saudi Arabia will invest up to $25 billion in Pakistan over the next two to five years in various sectors, Pakistan's caretaker Prime Minister Anwaar-ul-Haq Kakar said on Monday, adding his government would also revive a stalled privatisation process.

The South Asian nation is embarking on a tricky path to economic recovery under a caretaker government after a $3 billion loan programme, approved by the International Monetary Fund (IMF) in July, averted a sovereign debt default.

Kakar, speaking to journalists at his official residence, said Saudi Arabia's investment would come in the mining, agriculture and information technology sectors, and was a part of a push to increase foreign direct investment in Pakistan.

There was no immediate response to a Reuters request to the Saudi Arabian government for comment on Kakar's remarks.

If confirmed, a series of investments worth $25 billion would be the biggest ever by the kingdom in Pakistan.

A longtime ally of Riyadh, Pakistan is dealing with a balance of payments crisis and requires billions of dollars in foreign exchange to finance its trade deficit and repay its international debts in the current financial year.

Kakar did not specify projects Riyadh was looking at for investment, but last month Barrick Gold Corp (ABX.TO) said it was open to bringing in Saudi Arabia's wealth fund as one of its partners in Pakistan's Reko Diq gold and copper mine.

Pakistan's untapped mineral deposits are conservatively valued at about $6 trillion, said Kakar, whose government is meant to be an interim set up to oversee national elections scheduled for November but are expected to be delayed by months.

Barrick considers the Reko Diq mine one of the world's largest underdeveloped copper-gold areas and it owns a 50% stake, with the remaining 50% owned by the governments of Pakistan and the province of Balochistan.

Kakar also said his government would push to complete two privatisation deals, probably for state-run power sector entities, in the next six months, and would also look to privatise another government owned enterprise outside the energy sector.

Pakistan's state owned enterprises have long been an area of concern with bleeding financials adding to financial stress. Recently Pakistan added struggling state-run Pakistan International Airlines to the privatisation list again.

The privatisation process has largely stalled in the country with selling of state assets a politically sensitive issue that many elected governments have shied away from.

Reporting by Gibran Peshimam; Additional reporting by Aziz El Yaakoubi in Riyadh; Editing by William Maclean

Riaz Haq said...

Pakistan Expects $50 Billion Investment from Saudi Arabia, UAE Within 5 Years's%20caretaker%20prime%20minister%20said,strapped%20country%20within%20five%20years.

Pakistan's caretaker prime minister said Monday that Saudi Arabia and the United Arab Emirates will invest $25 billion each in his cash-strapped country within five years.

Anwaar-ul-Haq Kakar told a group of Islamabad-based foreign journalists late Monday that different sectors, such as mines and minerals, agriculture, defense production and information technology, would receive the investment. He did not elaborate.

Economic revival

The prime minister said that the Saudi and UAE investments are part of a new "strategy for economic revival" to increase foreign direct investment in Pakistan under the supervision of the recently set up Special Investment Facilitation Council, or SIFC.

Established in June, the council comprises Pakistan's civilian and military leadership.

Kakar spoke a day after the Pakistani military chief Asim Munir, while addressing business community leaders in the southern city of Karachi, emphasized the SIFC's potential to attract investments of up to $100 billion from Saudi Arabia, the UAE, Qatar, Kuwait and other Middle Eastern countries.

"I can confirm it," he said when asked for his comments on the reported remarks by his military chief that Pakistan could receive an unprecedented $25 billion each from the Saudi Kingdom and the UAE under the SIFC.

Saudi and UAE officials did not immediately comment on Kakar's assertions.

Kakar said that Pakistan's untapped mineral deposits are estimated to be worth around $6 trillion. He noted work on the massive Reko Diq gold and copper mines in southwestern Baluchistan province was expected to start in December.

Last month, a Saudi delegation visited Pakistan to study mining sector investment opportunities and showed its readiness to tap into the Reko Diq deposits.

Pakistan is scrambling to deal with a critical balance of payments crisis. The country of about 241 million people needs billions of dollars in foreign exchange to repay international debts and bridge its trade deficit in the current financial year.

Islamabad is implementing long-delayed economic reforms in line with IMF requirements, leading to a historic increase in energy prices when inflation is already hovering at around 29%. The tough reforms have triggered almost daily nationwide protests, bloated electricity bills and soaring fuel prices.

Riaz Haq said...

SIFC focuses on 5 sectors for investment - Business - DAWN.COM

KARACHI: In continuation of its efforts to improve the country’s business climate, the Special Investment Facilitation Council (SIFC) has asked Karachi’s business community to exploit huge investment potential in agriculture, livestock, information technology, mining and energy sectors.


Special Investment Facilitation Council

Interaction with Business Community by Special Investment Facilitation Council (SIFC)

As part of outreach strategy, SIFC arranged an interaction with Business Community of Karachi on 5 September 2023.
SIFC’s Team led by Dr Jehanzeb Khan made detailed presentations encompassing various aspects of SIFC Initiative. Pakistan's latent potential and investment opportunities in the key sectors of Agri/ Livestock, IT, Mining/ Minerals and Energy were highlighted along with ongoing efforts to improve business climate in the country.
Business Community was taken on board to attract investments in Pakistan and be part of valuable projects. SIFC ensured to extend its facilitative role in realising such endeavours by domestic investors.
At the end, an interactive session provided Business Community with the opportunity to share their investment-related feedback and suggestions. Business Community also displayed keen interest in asking questions related to various investment opportunities and investment environment in general.

Riaz Haq said...

Top Source Countries of Immigrant STEM Workers in US in 2019

1. India (720,000) 2. China (273,000) 3. Mexico (119,000), 4. Vietnam (100,000), 5. Philippines (87,000), 6. South Korea (84,000), 7. Canada (56,000), 8. Taiwan (53,000), 9. Russia (45,000), 10. Pakistan (35,000).

Since 2000, the share of foreign-born workers in the STEM workforce has increased by more than 40 percent.

The share of foreign-born workers in STEM occupations has grown significantly in recent years. As shown in Table 2, the number of foreign-born STEM workers increased from 1.2 million (16.4 percent of the STEM workforce) in 2000 to 2.5 million (23.1 percent of the STEM workforce) in 2019.

Because immigrant STEM workers tend to possess skills that complement those of their U.S.-born co-workers, the presence of immigrants in the workplace increases the productivity (and therefore the wages) of all workers. Moreover, innovation by immigrant workers increases the revenue of the firms in which they work, which enables employers to hire more workers. The overall share of workers who are foreign-born and hold advanced degrees from either a U.S. or a foreign university is also associated with higher levels of employment among U.S.-born workers. A 10 percent increase in the share of foreign-born workers with advanced degrees working in STEM occupations boosted the U.S.-born employment rate by 0.03 percent. This means that every additional 100 foreign-born workers with an advanced degree working in a STEM occupation creates roughly 86 jobs for U.S. workers.

August 18, 2023 at 9:48 PM Delete
Blogger Riaz Haq said...
72,000 non immigrant visas issued in year 2022 to Pakistanis for USA.

In 2019 the number was 59,000

2020 and 2021 Covid time was 34 and 20k

So 2020 2021 2022 average is still around 40k which is lower than 2019 avg

I can sympathize with ppl who see lots of ppl leaving and feeling every one is leaving as number of ppl leaving is 3 times more than 2021 and twice as much as 2020 .

However fact is ppl are going as they have always done. In fact we haven't returned to pre Covid levels of Emigration and tourism outside Pakistan

Even in 1997 close to 50,000 ppl were issued non immigrant visa by US from Pakistan!


Who’s Getting U.S. Immigrant Visas?
Last year, more than 285,000 U.S. immigrant visas were issued. Here’s a look how that is distributed across every country worldwide:

Rank Country Immigrant Visas Issued (2021)
#1 🇲🇽 Mexico 40,597
#2 🇨🇳 China 18,501
#3 🇩🇴 Dominican Republic 17,941
#4 🇵🇭 Philippines 15,862
#5 🇦🇫 Afghanistan 10,784
#6 🇻🇳 Vietnam 10,458
#7 🇮🇳 India 9,275
#8 🇸🇻 El Salvador 7,813
#9 🇵🇰 Pakistan 7,213
#10 🇧🇩 Bangladesh 5,503
Total 285,069


H1 B visa from Pak to US

What is the H-1B Visa Category? The H-1B is a temporary (nonimmigrant) visa category that allows employers to petition for highly educated foreign professionals to work in “specialty occupations” that require at least a bachelor's degree or the equivalent.

In year 2022 , 1100 from Pakistan

166,000 from India !

If the exodus is 1100 ppl then we have nothing to fear

If 1100 is exodus than what is 166k

Why the one with 166k is rising India and one with 1100 failing Pakistan