Monday, April 19, 2021

Income Inequality: Elite Capture in Pakistan

A recent United Nations report on inequality reveals that the richest 1% in Pakistan take 9% of the national income.  A quick comparison with other South Asian nations shows that 9% income share for the top 1% in Pakistan is lower than 15.8% in Bangladesh and 21.4% in India. These inequalities result mainly from a phenomenon known as "elite capture" that allows a privileged few to take away a disproportionately large slice of public resources such as public funds and land for their benefit. 

Share of Income of Richest 1% in South Asia

Elite Capture:

Elite capture, a global phenomenon,  is a form of corruption. It describes how public resources are exploited by a few privileged individuals and groups to the detriment of the larger population. 

A recently published report by the United Nations Development Program (UNDP) has found that the elite capture in Pakistan adds up to an estimated $17.4 billion - roughly 6% of the country's economy. 

Pakistan's most privileged groups include the corporate sectorfeudal landlordspoliticians and the  military. UN Development Program's NHDR for Pakistan, released last week, focused on issues of inequality in the country of 220 million people. 

Ms. Kanni Wignaraja, assistant secretary-general and regional chief of the UNDP, told Aljazeera that Pakistani leaders have taken the findings of the report “right on” and pledged to focus on prescriptive action. “My hope is that there is strong intent to review things like the current tax and subsidy policies, to look at land and capital access", she added. 

Inequality in Pakistan. Source: UNDP

Income Inequality:

The richest 1% of Pakistanis take 9% of the national income, according to the UNDP report titled "The three Ps of inequality: Power, People, and Policy". It was released on April 6, 2021. Comparison of income inequality in South Asia reveals that the richest 1% in Bangladesh and India claim 15.8% and 21.4% of national income respectively.

In addition to income inequality, the UNDP report describes the inequality of opportunity in terms of access to services, work with dignity and accessibility. It is based on exhaustive statistical analysis at national and provincial levels, and includes new inequality indices for child development, youth, labor and gender. Qualitative research, through focus groups with marginalized communities, has also been undertaken, and the NHDR 2020 Inequality Perception Survey conducted. The NHDR 2020 has been guided by a diverse panel of Advisory Council members, including policy makers, development practitioners, academics, and UN representatives.

Savings, Investments and Exports:

It is generally accepted that the rich save a much bigger portion of income than the middle class and the poor. The effect is strongest among those in the top quintile of the lifetime earnings distribution—they have substantially greater wealth relative to their earnings than those in the bottom 80% of the distribution, according to published research

Lower inequality in Pakistan is reflected in its abysmal domestic savings and investment rate of around 10% of GDP. It shows in Pakistan's lower economic growth rate compared to Bangladesh and India. The distribution of national income in a country is a key socioeconomic variable with broad economic and societal implications. Income inequality and wealth inequality are related because the flow of income determines savings and investments, which in turn determine GDP growth and accumulation of wealth. An economic model offered by Galor and Zeira finds that the effect of rising inequality on GDP per capita is negative in relatively rich countries but positive in poor countries like Pakistan.

Investment as Percentage of GDP Source: State Bank of Pakistan 

While Pakistan's per capita income more than doubled from $500 to $1,000 in the ten years 2000 to 2010, the growth has slowed to less than 30% from 2010 to 2020. Faster GDP growth in the decade of 2000-2010 was partly the result of significant increase in Pakistan's savings and investment rates. Meanwhile, rising worker remittances from overseas Pakistanis have been boosting Pakistan national savings rate and helping reduce current account deficits
Savings Rate in Pakistan. Source: Dawn

Pakistan's exports doubled from $10 billion to $20 billion in years 2000-2010. In the last decade 2010-2020, the nation's exports have grown only about 25% to $25 billion. Exports have declined in terms of percentage of the country's GDP from 13% to 10% in the most recent decade. 

Pakistan FDI inflows have significantly lagged behind those of the rest of South Asia.

FDI Inflows in Pakistan. Source: World Bank

Pakistan saw rapid economic growth in the 1960s in spite of low domestic savings rate. This can be explained by foreign development aid of as much as 10% of GDP that Pakistan received in that decade. . 

Foreign Aid to Pakistan as Percent of GDP Source: World Bank


The richest 1% of Pakistanis take away 9% of the national income. Inequality in Pakistan has many dimensions beyond income. The rich enjoy greater access to education, healthcare, financial services, employment and business opportunities. Corporations, feudal landowners, politicians and the military are the most privileged groups with the best opportunities to own businesses, financial assets, farmland and real estate. They capture an estimated $17.4 billion - roughly 6% of the country's economy. Ms. Kanni Wignaraja, assistant secretary-general and regional chief of the UNDP, told Aljazeera that Pakistani leaders have taken the findings of the report “right on” and pledged to focus on prescriptive action. “My hope is that there is strong intent to review things like the current tax and subsidy policies, to look at land and capital access", she added. The policymakers in Pakistan should consider the negative economic implications of any such moves, particularly on savings and investments in the country.  


Rk singh said...

Riaz Bhai, Pakistan lacks wealth creators. India has the third biggest number of super rich (also known as Billionaires) after USA and China. They may hold lot of capital, but still create lots of jobs down below. This is part of process called Capitalism, like it or not. In socialism, nobody make money- reason USSR disappeared. China is Dictatorial capitalism disguised as communist- reason why they have grown so fast. So the general message is try and become billionaires, rather than cribbing at their wealth.

Now coming to Pakistan. Pakistan has been an economical nightmare since creation. Army creates (or rather attracts) wealth. Nobody else stands a chance of gaining that slice of pie. Papa Johns pizza General is a case point. And the same army people migrate abroad with their wealth, after retirement. So the super rich is missing from Pakistan. Since the wealth and wealth creators are constantly eroding.

Rk singh said...

India is Behind USA and China with number of Billionaires totaling more than 150. The list is getting bigger every year. Most of the people in the list are entrepreneurs who came from middle class backgrounds. if you are talented, you can succeed here. Another truth - Only a lazy person can die of hunger in India.

Fahad said...

Dear Unknown

According to you, lot of jobs are created by these few rich and multi-millionaires on India ,if this is infact true then why according to some of the authors and writers who have written articles online, India is facing the huge unemployment in the entire history of the country?

Since BJP came into power, how many jobs have been produced in India?

According to some surveys and researches, the richest people of India have increased from 5% TO 40% but the poverty in India is still a serious issue.

Fahad said...

Mr. Unknown,

The economy of Pakistan was much better than the economy of India in 1960s,70s and 80s. Purchasing power in Pakistan, per capita income in Pakistan was higher than that of India and value of Pak Rupee was stronger as compared to Indian Rupee against US$ in 1960s,70s and 80s.

In 1971 when East Pakistan seperated and became Bangladesh after the war, Pakistan was known as "ASIAN TIGER" at that time.

I am sorry to say this but economists use to make fun of the economy of India in 1960s and 1970s.

The economy of Pakistan actually started to suffer after when Gen.Musharaf completed his tenure as a President. Even before 2008, when Gen.Musharaf completed his tenure, Pakistan was much better than India in terms of development ,the ranking of Pakistan in HDI(Human Development Index) was better than that of India.

Also Pakistan had better ranking than India in "BUSINESS FRIENDLY COUNTRIES" index when Gen.Musharaf was ruling the country.

In 1960s, Pakistan was making great progress , the kind of progress which India can't even imagine in its dreams.

Kabir said...

Income share is 21% they control over 73% of wealth in India

Riaz Haq said...

ELITE political bargains are informal, relatively stable agreements among national elites about the pecking order of different ethnicities and classes (in our case state institutions too) in accessing economic privileges. This includes their relative access to economic resources and opportunities (eg government expenditures, subsidies and licences, access to state and private capital) and tax burdens.

Conservative estimates show that the privileges add up annually to nearly Rs370 billion for landed elites, Rs725bn for the corporate sector, Rs600bn for traders and Rs250bn for military elites. This is a total of nearly Rs2 trillion annually for a tiny sliver of the population. In contrast, Pakistan spent only around Rs1.3tr annually in recent years on education, health and other social expenditures to cater to the needs of its masses. Even a chunk of this is siphoned off by the rich.

Riaz Haq said...

Inequality and relative saving rates
at the top

by Philipp Lieberknecht, Philip Vermeulen

The distribution of national income and wealth are key economic variables with broad economic and societal implications. The recent development of the World Wealth and Income
Database (WID), a large-scale database featuring historical cross-country inequality measures,
allows for a long-term analysis of the relationship between income and wealth inequality. Income inequality and wealth inequality are related because the flow of income determines saving,
which in turn determines the accumulated stock of wealth. A look at French and US data, two
countries with the longest time span of data available, shows that in recent decades the share
of income that goes to the top 1% or the top 10% has been rising. Simultaneously, the share
of wealth owned by the top 1% and top 10% has been rising as well. Remarkably, over the last
century, the top shares of income and wealth have been evolving in broadly similar ways. This
paper provides an analysis of the strong co-movement of income and wealth inequality across

Riaz Haq said...

From World Inequality Database

Top 1% national income share;PK;IN;BD/last/eu/k/p/yearly/s/false/5.336/22.5/curve/false/country

World: 19/1%

Pakistan 18.3%

India 21.4%

Bangladesh 15.8%

Top 10% national income share;PK;IN;BD/last/eu/k/p/yearly/s/false/28.711499999999997/60/curve/false/country

World 51.6%

Pakistan 44.6%

India 56.1%

Bangladesh 41.7%

Bottom 40% national income share;PK;IN;BD/last/eu/k/p/yearly/s/false/3.7324999999999995/17.5/curve/false/country

World 5.9%

Pakistan 13.8%

India 10.4%

Bangladesh 14.1%

Anonymous said...

Farad beta if Pakistan was so much better than India till the 1980s why is it that it has no heavy industrial base or scientific and research institutes of the sort India has?

Why can't it design and build its own brand of cars trucks buses vaccines etc?

Riaz Haq said...

Wealth of India's richest 1% more than 4-times of total for 70% poorest: Oxfam

India's richest 1 per cent hold more than four-times the wealth held by 953 million people who make up for the bottom 70 per cent of the country's population, while the total wealth of all Indian billionaires is more than the full-year budget, a new study said on Monday.

Releasing the study 'Time to Care' ahead of the 50th Annual Meeting of the World Economic Forum (WEF), rights group Oxfam also said the world's 2,153 billionaires have more wealth than the 4.6 billion people who make up 60 per cent of the planet's population.

The report flagged that global inequality is shockingly entrenched and vast and the number of billionaires has doubled in the last decade, despite their combined wealth having declined in the last year.

"The gap between rich and poor can't be resolved without deliberate inequality-busting policies, and too few governments are committed to these," said Oxfam India CEO Amitabh Behar, who is here to represent the Oxfam confederation this yea ..

Riaz Haq said...

The United States had Rockefellers, JP Morgans, Carnegies, Fords and others who built American business and industry. Japan has Hitachi, Honda, Mitsubishi and other big names credited with building its business and industry. South Korea is home to recognized global giants like Samsung, Hyundai and others. A handful of individuals and families, aided by their governments, have played outsized roles in industrialization and economic growth in most major economies.

The captains of business and industry neighboring India are also a few known large families including Ambanis, Birlas, Hindujas, Jindals, Mittals, Tatas, and a few others. They have contributed to economic growth in their country.

Pakistan had the so-called 22 families which began the process of industrialization in 1960s but they were devastated by the 1971 war. What was left of their business and industry was nationalized by the PPP government led by Zulfikar Ali Bhutto in 1970s. Many of these families have since recovered and rebuilt and several new ones have now emerged. Their continued growth and Pakistan's economic progress depend largely on the continuity of business-friendly government policies in future.

Fahad said...


In 1960s ,PIA was the 2nd best Airline in the world after Penam(American Airline ), how were Indian Airlines performing at that time ,pls note that I am talking about aviation industry. How well has India performed in aviation industry ?. Pls note that after 1960s,the ranking of PIA ,fell but still it was ranked in the top 10 Airlines of the world in 1980s.

In 1960s, a high tension lab was setup in government colledge Lahore which was the only type in entire Asia.

In 1960s ,industrial setup was made in Korangi area of Karachi by President Ayub Khan and after that the economy of Karachi boosted .

In 1980s,Shipping corporation of Pakistan was ranked at 4th number . I hope you understand that Shipping corporations are part of shipping industry .

Take the example of textile industry which contributes to the economy of Pakistan to great extent ,out of 100% of the economy of Pakistan ,60% of the economy of Pakistan depends on textile industry .

The film industry of Pakistan was also performing well in Pakistan during 1960s and 70s.

Fahad said...


As far as automobile industry of Pakistan is concerned ,pls note that out of 100% of the auto parts and tools which are used in the cars of Pakistan ,more than 50 % of those tools and autoparts are locally produced in Pakistan .

Fahad said...

Mr. Anonymous

Pls note that even before partition of 1947, this part of sub-continent which is now called "PAKISTAN" was the least developed part in entire South Asia . Pls note that British before partition, have ruled that part of sub-continent which is now called "INDIA" more than this part of sub-continent called "PAKISTAN". They built railway lines, airports and sea ports, institutions and universities and also built factories in Eastern Part of India.

On this side of sub-continent(PAKISTAN), how many airports, sea ports, railway lines, highways and factories were built by British?

I am sorry to say but British gave most of the things to Indian politicians in plates, the Muslim politicians and leaders who played an important role in the creation of Pakistan, had no choice but to start from scratch. Pls note that their was huge shortage of administrative units and buildings in Pakistan during partition of 1947, many of the officials in Pakistan didn't had tables and chairs to sit on and work in offices. And pls note that Indian politicians had to allocate some amount to Pakistan after partition so that Politicians and Leaders in Pakistan could run and manage the affairs of the country but Indian politicians stopped the allocation of those resources and money to Pakistan.

Pls note that it is not easy to built a country from scratch. Also Pakistan has suffered from nationalization which Sir Riaz has already mentioned . Also the country had to face martial law . Has India ever faced martial law?

It was the responsibility of the Indian politicians to transfer the resources and amount to Pakistan after partition as British government wanted Indian politicians to do, because British had to leave the Indian sub-continent during 1947.

As far as Scientific Institutions are concerned, India already had base of Scientific Institutions even before partition of 1947. Banaras in India is well known for its Astrological Research and this research is going on their even before partition happened.

But you must also accept and appreciate the fact that at the moment Pakistan is the only and 1st Muslim country in the world which has a research station in Antartica. Also Pakistan is the only Muslim country in the world which has a space agency called SUPARCO.

The Indian Archeologist who discovered Mohonjo Daro in Sindh Province of Pakistan before partition was a Hindu and he studied Archeology in Indian University before partition.

Riaz Haq said...

Effect of Workers Remittances on Private Savings Behavior in Pakistan

by Rahila Munir, Maqbool Sial, Ghulam Sarwar and Samina Shaheen

The worker remittances are an important component of national savings, increased enormously at the rate of 30 percent per annum during the last eight years (2000-2007) and be around $ 5.5 billion by June, 2007. With higher increase in worker remittances and rate of return on deposits the level of national savings would increase more.

Riaz Haq said...

The rise and rise of remittances
Mohiuddin Aazim

Remittances remained above the $2 billion mark in December 2020 for the seventh month in a row. In the first half of 2020-21, inflows totalled $14.2bn. The amount was about 25 per cent higher than $11.37bn received in July-Dec 2019.


But if a reasonable portion of remittances goes towards savings and investment, it will be more helpful and reduce our dependence on external borrowings.

The PTI government is trying to promote such savings and investment by facilitating and incentivising overseas Pakistanis to use their remittances’ accounts for investing in Pakistan’s debt, equity and mortgage markets. Long-term success of this policy, however, depends on close coordination of fiscal and monetary authorities and overall political stability.

RKS said...

Riaz Haq: "Wealth of India's richest 1% more than 4-times of total for 70% poorest: Oxfam"

Dear Riaz Haq, you need to realize that some of the India's rich own wealth equivalent to 10 to 30% of Pakistan's GDP. But the lowest rung of people as as poor as poorest Pakistanis. This kind anomaly can be expected. India is a combination of Pakistan and EU. So super rich exist side by side with super poor. Only difference between India and Pakistan, super rich missing from Pakistan- since that kind of economic activity is missing.

Fahad said...


Pls note that poverty in India is much higher than that of Pakistan. I can quote tones of articles written by Indian and Western authors who have shown concern over the issue of poverty in India. In "GLOBAL POVERTY" index, India had a share of 33%, it is the highest share any country had in "GLOBAL POVERTY" index. Do you know how much is the share of Pakistan in "GLOBAL POVERTY" index? Only 3%. Now you will say again that India is a huge country with huge population, so obviously their will be more poors in India as compared to Pakistan or any other country ,if you use this kind of excuse to cover up the growing issue of poverty in India, then pls note that China has even more population than India. China is the largest country in the world in terms of population and India is the 2nd largest country in the world in terms of population, so their should be more poors in China as compared to India but in "GLOBAL POVERTY" Index, China only has a share of 13% which is much lower than the share of 33% which India has in "GLOBAL POVERTY" index.

Pls note that Indians proudly claim to be one of the largest democracy in the world and also claim to be one of the fastest growing economy in the world, while keeping these claims in view, India shouldn't have this much poverty but it is surprising to know that India has such a severe level of poverty which is only their in poverty stricken countries like Ethopia, Gana and Congo which are located in Africa.

Also know that a nation or a country is not called progressive or developed ,if their is a huge gap between rich and poor. In India their is a huge gap between rich people and poors,also the middle class population of India is very small as compared to neigbhouring countries, specially as compared to Pakistan.

Fahad said...


It is true that multi-billionaries or millionaires in India have increased in the last few years but the question is that how much has India and its nation benefited from such rich and multi-billionaire people? You have Mithal and Ambani who are the richest people of India, but the question is that if they have really contributed in the economy of India, then why since B JP came into goverment, India is facing job crisis and huge shortage of jobs?

Since last few years, India is facing huge unemployment which the country hasn't seen in the last 45 years, even when Congress was ruling over India, unemployment wasn't as high as it is today.

Now you tell me honestly, if you really believe that economy of India is performing really good, then why doesn't BJP government releases the DATA OF UNEMPLOYMENT? Why BJP government is hiding and keeping secret the "DATA OF UNEMPLOYMENT"?

Do you know Mr.Surjit Bhalla? He was a member of Economic Advisory Council in India, in the last few years he resigned from his position, if Indian economy is performing really good then why Surjit Bhalla Sahab resigned from his position of Economic Advisory Council?

Pls note that even the Chief or Governor of RBI(Reserved Bank of India) which I think is the central bank of India, has resigned from his position.

Fahad said...


When Indians proudly make claims of something, then burden of prove lies on Indians to prove that why inspite of all the claims which Indians make about their economic growth, still India is suffering from huge poverty issues and suffering from other issues?

Pls note that India is a country which is suffering from multi-dimensional poverty. I hope you know what is multi-dimensional poverty.

samir sardana said...

Pakistan is still way ahead of India and Bangla.The 1% only control 9% ! Also note that they pay a third of the taxes - which funds the govtt salaries and the military (to the extent of the direct taxes).They also might be paying MORE than a 3rd of the Indirect taxes - due to their luxury consumption !

All these cars being made and sold,in Pakistan - are bought by the so called ELITE and their EMPLOYEES ! And all those cars CARRY VAT which CANNOT BE AVOIDED.Pakistan needs more of these ELITES,who set up industry and enterprise.The Political Elite,is a different story

They also account for a 3rd of the bank loans - which is what funds the savings rates of the Pakistani salaried and pension class ! dindooohindo0

India is in a doomed scenario !

Look at the COVID situation ! In Pakistan - the rich and the poor, are dying, inspite of equal efforts, to save their lives !

Look at India - the Oxygen Doom - ever heard of any tycoon dying in India,for lack of O2 ?


The frames of the crematoriums used to BURN THE HINDOO DEAD BODIES HAVE "MELTED" ! YES - MELTED !




The Indians have just exported 60 million COVID Vaxes - with a profit of say 1.5 USD/vax. That is a 100 Million USD, lining the profits of some INDIAN ELITE ! The beauty is that the Indian VAX is being sold in the importing nation at less than half of the VAX MRP in India!

This is ELITISM !

Jiye Jiye Pakistan !

Riaz Haq said...

How Much Inequality Is Necessary for Growth?
by Fuad Hasanov and Oded Izraeli

As the Occupy Wall Street protesters have pointed out, the strong global economic growth of the past few decades (not counting the Great Recession) left a lot of people behind. For example, the U.S. Congressional Budget Office recently reported that from 1979 to 2007 the top 1% of earners more than doubled their share of the nation’s after-tax income.

For decades economists have wondered whether inequality is bad or good for long-term growth. On one hand, entrenched inequality threatens to create an underclass whose members’ inadequate education and low skills leave them with poor prospects for full participation in the economy as earners or consumers. It can cause political instability and thus poses risks to investment and growth. On the other hand, some argue that because inequality puts more resources into the hands of capitalists (as opposed to workers), it promotes savings and investment and catalyzes growth.

To try to answer this question, we examined economic data from 48 U.S. states for the census years from 1960 to 2000. We discovered new evidence that inequality and growth are entwined in complex ways and found that overall, both high and low levels of inequality diminish growth.

We looked at the data through a number of lenses, each based on a different statistical model. Using one lens, we found a hump-shaped relationship between inequality and growth. Raise inequality above the average level in 2000, and growth declines; lower it, and the same thing happens. According to this analysis, inequality at that time was at a sort of optimum level, for lack of a better word.

Using another lens, we found a similarly hump-shaped relationship, but with the hump in a different place. From this perspective, the 2000 level of inequality is good for growth, but a higher level would, to a certain degree, be even better: A moderate rise in inequality—by one standard deviation—would increase annual growth by about 0.6 percentage points.

What are the long-term implications? The gains from rises in inequality are murky: Although our findings suggest that modest increases can generate growth, other data indicate that heightened inequality shortens growth spells and may halt growth. Reducing inequality, though, has clear benefits over time: It strengthens people’s sense that society is fair, improves social cohesion and mobility, and broadens support for growth initiatives. Policies that aim for growth but ignore inequality may ultimately be self-defeating, then, whereas policies that decrease inequality by, say, boosting employment and education have beneficial effects on the human capital that modern economies increasingly need.

Riaz Haq said...

"Due to a combination of GDP growth and strengthening of Pak rupee against the US Dollar, per capita income of Pakistan jumped by 13.4 percent during the current fiscal year (2020-21) from $1361 to $1543", Minister for Planning, Development and Special Initiatives Asad Umar said.

In a tweet he said total GDP increase from $263 billion to $296 billion an increase of $33 billion which is the highest ever increase in any year.

The minister said after finalizing the GDP growth estimates, national accounts committee has estimated the growth at 3.94 percent in a period in which COVID placed a huge challenge to the economy. He said the growth is extremely gratifying and proof of success of Prime Minister Imran Khan economic policies.

Earlier the National Accounts Committee estimated provisional growth of Gross Domestic Product (GDP) for the year 2020-21 at 3.94 percent as GDP as current market prices reached at Rs47,709 billion, showing growth of 14.8% as compared the corresponding period of last year.

The estimation was made in the 103rd meeting of the National Accounts Committee, which was held here to review the Gross Domestic Product (GDP) was held under the Chairmanship of the Secretary Ministry of Planning, Development and Special Initiatives.

The provisional estimates of the GDP and Gross Fixed Capital Formation (GFCF) for the year 2020-21 were presented on the basis of the latest data of 6-9 months which were annualized, says a press release issued by Ministry of Planning, Development and Special Initiative.

The provisional growth of GDP for the year 2020-21 has been estimated at 3.94 percent, which was based upon growth estimates of the agricultural, industrial, and services sectors at 2.77%, 3.57%, and 4.43%, respectively. The growth for 2019-20 was revised downward from -0.38% to -0.47%.

The agriculture sector grew by 2.77% in 2020-21 as against 3.31% in 2019-20. The growth of important crops during this year was 4.65% on the back of the historic highest ever production of wheat, rice, and maize while sugarcane registered the second-highest ever production.

This growth in the production of wheat, rice, sugarcane, and maize was at 8.

1%, 13.6%, 22.0%, and 7.38%, respectively. However, cotton has witnessed negative growth of 22.8%, which also resulted in a 15.6% decline in cotton ginning. Other crops (vegetables, fruits and green fodder) showed positive growth of 1.41% mainly because of an increase in the production of oil seeds and vegetables. The livestock sector registered a growth of 3.1%. Forestry has grown at 1.4%.

The overall industrial sector has witnessed a positive growth of 3.57%. The value-added in the mining and quarrying sector has declined by 6.5%.

The large-scale manufacturing (LSM) sector, which is driven primarily by QIM data (from July 2020 to March 2021), showed an unprecedented healthy growth of 9.29%.

Major contributors to this growth were textile sector grew by 5.9%, food beverage & tobacco 11.73%, petroleum products 12.71%,pharmaceuticals 12.57%, chemicals 11.65%, on-metallic mineral products 24.31%, automobiles 23.38%, and fertilizer production grew by 5.69%.

The electricity and gas sub-sector had witnessed declined by 22.96% mainly due to lower allocation of subsidies by the government to DISCOs, low increase in output, and a higher proportional increase in intermediate consumption.

The construction activity has increased by 8.34% mainly due to an increase in general government expenditure and private sector construction-related expenditures.

Meanwhile, services sector remained a major growth driver for many years and this year it witnessed a growth of 4.43% in the provisional estimates. While the wholesale and retail trade sector grew by 8.37% primarily because of an increase in the marketable surplus, the transport, storage, and communication sector has declined by 0.61%.

Riaz Haq said...

#Pakistan's public #debt stands at 78% of #GDP. Annual interest payments to use up one-third of the Rs. 8.5 trillion ($54 billion) 2021 federal budget....90% of debt payments are for domestic debt & 10% for foreign debt servicing. #economy #Budget2021

Interest payments consume one-third of Pakistan's budget
Over-reliance on loans bodes ill for fiscal sustainability and domestic needs

Fiscal sustainability has become a major issue among political and economic analysts after Pakistan revealed early this month that servicing debt accounts for more than one-third of its federal budget.

Finance Minister Shaukat Tareen in the National Assembly on June 12 announced the fiscal 2021 federal budget of 8.48 trillion rupees ($54 billion). Interest payments on debt, which are expected to grow by 3.9% from the ongoing fiscal year, account for 3.06 trillion rupees, or 36% of budget expenditures. In contrast, the government is only spending 600 billion rupees on subsidies and 100 billion rupees for COVID-19 vaccinations and emergencies.

The budget also reveals a deficit of 3.99 trillion rupees. The federal government plans to borrow 3.74 trillion rupees to finance this deficit, which makes up 94% of the deficit.

Pakistan's reliance on debt is a violation of the country's Fiscal Responsibility and Debt Limitation Act 2005, which states that the government must limit debt to 60% of gross domestic product. Currently, the ratio stands at 78% of Pakistan's $303 billion GDP.

Hasaan Khawar, a public policy analyst based in Islamabad, says Pakistan borrows heavily not only to finance current expenditures but also to service existing debt. "Pakistan is a having a primary fiscal deficit. That's why the [International Monetary Fund] has been demanding a primary budget surplus so that it starts reducing debt."

"Resources that could have been spent on essential sectors like health, education or public investment are now being dedicated to interest payments," said Naafey Sardar, a senior research associate at Texas A&M University in the U.S., emphasizing that increased debt financing presents a trade-off for Pakistan. "Since increased public investment and expenditures on education and health are associated with improvements in economic growth, higher debt financing expenditures reflect a missed opportunity," he said.

Of the 3.06 trillion rupees earmarked for interest payments on debt, 2.76 trillion rupees, or 90%, will go toward servicing domestic debt.

A senior official involved with the government's development planning told Nikkei on condition of anonymity that domestic borrowing is unsustainable. "Domestic borrowing is always at high commercial rates and external borrowing is mostly at concessional rates. That's why domestic borrowing costs the economy more," the official said.


Experts believe that a combination of reduced government spending and a tax increase is the solution.

Sardar believes that the way out is to increase tax revenue. "Higher tax receipts can be earned by increasing the corporate tax rate from 29% to 35%," he said. Sardar added that at a time when corporate profits are surging, increasing corporate taxes could be a viable option.

Khawar believes that Pakistan can accrue surpluses by controlling fiscal waste. He says there is a multipronged strategy to deal with the problem. "Government needs to widen the tax base using technology for tax enforcement while reducing expenditures in loss-making state-owned enterprises," he said. "There is no quick fix to this. That's the bottom line."

Riaz Haq said...

China's Xi Pressures Tycoons With 'Common Prosperity' Talk

Four decades ago, Deng Xiaoping declared that China would “let some people get rich first” in its race for growth. Now, Xi Jinping has put China’s tycoons on notice that it is time for them to share more wealth with the rest of the country.

As the country’s leader prepares for a likely third term, he is promising “common prosperity” to lift farmers and working families into the middle class.

Mr. Xi says the Communist Party will pursue “common prosperity,” pressing businesses and entrepreneurs to help narrow the stubborn wealth gap that could hold back the country’s rise and erode public confidence in the leadership. Supporters say China’s next phase of growth demands the shift.

“A powerful China should also be a fair and just China,” Yao Yang, a professor of economics at Peking University who endorses the shift in priorities, said by email. “China is one of the worst countries in terms of redistribution, despite being a socialist country. Public spending is overly concentrated in cities, elite schools and so on.”

Officials are pledging to make schooling, housing and health care less costly and more evenly available outside big cities, and to lift incomes for workers, helping more people secure a place in the middle class. The “common prosperity” campaign has converged with a crackdown on the country’s tech giants to curb their dominance. Facing scrutiny, some of China’s biggest billionaires, like Jack Ma, have lined up to pledge billions of dollars to charity.

The pledges hold out the prospect, endorsed by Mr. Xi in a meeting last month, that China is now affluent enough to shift closer to the Communist Party’s longstanding ideal of wealth sharing. For Mr. Xi, the Communist Party’s long-term authority is at stake.

Now that economic growth is moderating, many young Chinese feel that upward mobility is diminishing. Well-paying white-collar jobs can be hard to find. Tech workers complain of punishingly long hours. Families feel they can’t afford to have more children, adding to a looming demographic crisis. For now, Mr. Xi faces little opposition, but longer term that could turn if such grievances pile up.

“Achieving common prosperity is not just an economic issue; it’s a major political matter bearing on the party’s foundation for rule,” Mr. Xi told officials in January. “We cannot let an unbridgeable gulf appear between the rich and the poor.”

The party is keen to show that it is listening to the complaints as Mr. Xi lays the groundwork for a likely third term as the party’s general secretary beginning next year. Mr. Xi wants to stave off any doubts about his claim to another term by arguing that the party can deliver social progress while rivals like the United States stagnate in inequality, said Christopher K. Johnson, a former United States government analyst of Chinese politics​​.

Riaz Haq said...

Look at the #economic growth trend in #SouthAsia! #Pakistan #economy grew rapidly in 2000-2008 during #Musharraf years!! And then the bottom fell out!!! Bitter fruit of kleptocracy disguised as "democracy"??? #PPP #PMLN #PTI #PandoraPapers

Mr Khan’s current diplomatic offensive comes in the context of the dwindling options bequeathed by his country’s feeble economy, hypocrisy over Xinjiang and long history of double-dealing. “Pakistan is trying to use Afghanistan to rehabilitate itself,” says Michael Kugelman of the Wilson Center, an American think-tank. “Its message is that we were right all along, there never was a military solution, so it is wrong to blame us.” What Pakistan now wants is for other countries to lend a hand, and help shore up the Taliban government as the only way of sustaining regional stability. The trouble is that just as Pakistan’s leaders imagine the country’s strategic significance to have grown because it holds unique influence over the Taliban, the West’s withdrawal has entailed a steep decline in its interest in the region.

Mr Khan may well be right that the best hope for preventing a humanitarian disaster in Afghanistan now, and for keeping a grip on jihadist groups that linger on its blood-soaked soil, is to help the Taliban keep a lid on things. “If Afghanistan destabilises, the spillover effect comes to Pakistan,” says Moeed Yusuf, Mr Khan’s national security adviser. “After Afghanistan we are the biggest victim of the past four decades and we are not interested in going there again.” But coming from a country that has for so long run with the foxes while hunting with the hounds, as Pakistan has, such words carry limited credibility. ■

Riaz Haq said...

Pakistan’s poverty rate to ease in FY22: World Bank

In comparison, the poverty rate in other regional countries is much higher than that in Pakistan.

The World Bank report titled “Shifting Gears: Digitization and Services-Led Development” noted that the international or extreme poverty rate in Bangladesh was 12.5pc which would ease to 11.9pc in the next fiscal year.

Similarly, lower middle-income poverty rate and upper middle-income poverty rate in the country is 48.9pc and 82.1pc respectively.

ٹی وی چینل میں اگر غلطی سے پاکستان کی تعریف کر دی جائے تو اکثر اینکر اور حکومت مخالف تجزیا کار بیچ میں بھارت اور بنگلادیش کی معاشی تاریفیں اور پاکستان کو نیچا دیکھاتے ہیں۰ ورلڈ بنک کے مطابق پاکستان میں غربت کی شرح 4.8%، بھارت 22.5%، اور بنگلادیش 12.5%

The World Bank has set the extreme poverty line at $1.9 per person per day, however since 2017, the World Bank has also been reporting poverty rates for all the countries using two new international poverty lines, a lower middle-income International Poverty Line, set at $3.20 per day, and an upper middle-income International Poverty Line, set at $5.50 per day. According to a recent report released by the Bank, Pakistan’s lower middle-income poverty rate would also decline from the current 37pc to 35.7pc in FY22 and 33.8pc in FY 2022-23.

Similarly, the upper middle-income poverty rate has also been projected to ease from 77pc to 76.2pc in FY22 and 75pc in the next fiscal year.

Riaz Haq said...

Bangladesh’s monthly minimum wage lowest in Asia-Pacific region: ILO
Neighbouring country Pakistan topped the chart in South Asia with a monthly minimum wage level of $491, while India has the second lowest minimum wage level of $215

The monthly minimum wage level in Bangladesh was $48 or around Tk4,070 in 2019 – the lowest among all nations in Asia and the Pacific region, reveals the Global Wage Report 2020–21.

Published by the International Labour Organization (ILO) on Wednesday, the report calculated the "Gross Monthly Minimum Wage Levels in Asia and the Pacific" using the Purchasing Power Parity (PPP) values.

Globally, Bangladesh ranked fifth from the bottom among 136 countries. Neighbouring country Pakistan topped the chart in South Asia with a monthly minimum wage level of $491, while India has the second lowest minimum wage level of $215 in the region, it says.

In the Asia and the Pacific region, the median (average) minimum wage is $381, which is $333 or around Tk18,250 higher than that of Bangladesh. However, the ILO report excluded agriculture and domestic workers while calculating Bangladesh's monthly minimum wage level.

Commenting on the matter, Policy Research Institute's Executive Director Dr Ahsan H Mansur said, "Actually, minimum wage is only applicable to Bangladesh's garments sector, and it has no application in any other ones. Elsewhere, the minimum wage is even lower.

"So, the report is not a real reflection of the true picture, and if the minimum wage is increased artificially, it would not be very beneficial at all. If we increase the minimum wage level only in a particular segment and exclude the whole economy, there will not be any positive."

He added that Bangladesh does not have a minimum wage level in every sector and for every job, so the comparison made by the ILO is not appropriate.

Additionally, the report mentions that Bangladesh's actual monthly minimum wage was only $18 last year.

In the region, Australia has the highest monthly minimum wage of $2,166 in terms of PPP, followed by New Zealand with $2,126 and South Korea with $2,096.

What is the situation in South Asia?

Nepal is following the chart-topper Pakistan with a minimum wage level of $396 in this region, and Afghanistan is just behind Nepal with $306.

At the bottom end, Bangladesh and India is followed by Sri Lanka, which has the third lowest minimum wage level of $247 in the South Asia region.

Bangladesh revises the minimum wage every five years and last did it in December 2018. The report mentions that out of 149 countries, only Bangladesh and Angola have not yet made any schedule for the next adjustment of the minimum wage.

About the issue, Dr Mansur said, "Amid this Covid-19 crisis and the ongoing export situation, if the minimum wage is increased now, unemployment may rise further. Instead, we should focus on increasing our labour productivity.

"Productive workers can get an annual pay rise automatically."

Globally, the median value of gross minimum wages for 2019 is $486 per month, indicating that half of the countries across the globe have minimum wages set lower than this value, and half have minimum wages set higher.

Largest decrease in real minimum wage

Bangladesh has seen 5.9% decrease in real minimum wage growth annually, from the period between 2010 and 2019. This was the largest decrease in Asia and the Pacific region.

Meanwhile, the neck and neck RMG export competitor Vietnam (11.3%) observed the highest increase of real minimum wage growth.

Addressing the issue, Dr Mansur said, "This is not desirable and a matter of deep concern too."

On a separate note, the annual labour productivity growth increased by 5.8% in Bangladesh, compared to 5.1% of Viet Nam for the same period.

Riaz Haq said...

World #Inequality report 2022 says #India is one of the world' most unequal countries, with rising #poverty & an affluent elite. Govt policies have had a negative impact on the #poor while making the #rich even richer. #Modi #BJP #Islamophobia #Hindutva

If growth had been distributed more equally since the 1990s, there would be less poverty today and more middle-class families, says Chancel. In order to generate prosperity for the bottom 50% of the population, public investments are key — equal access to basic services such as quality education, transport and health, says Chancel. "This is still lacking in India."


According to the World Food Program, a quarter of the world's undernourished people live in India. And despite steady economic growth and per capita income having tripled in recent years, the WFP notes that minimum dietary intake fell.
It's almost as if there are two countries in India: a very small, very rich country (the country of prosperous Indian urban centers) and a very large, poor country, says Lucas Chancel, lead author of the report and co-director of the World Inequality Lab. "For a long time, it has been said that the richer the rich part of the country, the better for the rest," he says.

The coconut seller Pachavarnam hasn't felt that, though. And experts like Chancel acknowledge that this is an outlook that's left many families vulnerable.

A coconut vendor says she's 'terrified of the future'
Panchavarnam, who goes by one name, has sold tender coconuts on the streets of Madurai for the last 40 years and remembers a time when the bustling residential neighborhood where she now sells her wares used to be a forest. Today, it's filled with signs of development. There's a highway close by. Busy streets brim over with traffic. In the last decade, apartment complexes, department stores and schools have sprung up around her.

For the 50-year-old, however, little has changed.

She still works 12 hours a day. It's a job she's been doing since the age of 9 helping her dad. That's when she first learned how to hold a sickle to slice into the thick, fibrous coconut. She and her husband begin their workday at 5 a.m., when she buys the coconuts from a wholesale market to fill their rented cart.

She may sell her coconuts at a higher price than she did ten years ago, but her family's daily living expenses and rental for her cart have increased too. Inflation has skyrocketed. But even though her profit may be wafer thin, she's grateful she can at least work.

"During the lockdown, we suffered a lot," she says. "It struck me then how little we had saved. For the first time, I was terrified of the future. What would happen to me and my family if we could no longer work?"

Panchavarnam is one of India's many informal workers, an estimated 485 million people — which according to a 2014 survey by the government of India's Labour Bureau is roughly 50% of the national workforce. Some reports estimate that their numbers are far higher — almost 80% of the workforce. While Panchavarnam is self-employed, other informal workers are hired by companies. But their situation isn't necessarily any easier.

A female construction worker's dusty burden
Selvi, 37, is a construction worker in Chennai, a city in Southern India, who earns Rs 350 ($4.60) a day, carrying heavy loads of cement, bricks and gravel. She winds a thick cloth turban style over her head and places her loads directly on it.

Top 1% Income Share: India 22%, Pakistan 9%

Riaz Haq said...

Hanging out with Pakistan’s 1%

Australian anthropologist rubbed shoulders with Pakistan's wealthiest people for 14 months to understand how they live

Choosing Pakistan for her PhD research project, she set out to investigate Pakistan’s elite. Her research based on interviews of many people from elite families revealed that beneath the formal structure lie networks of power and influence linked by family, social connections and marriages through which economic and political competition, deals and alliances are made.

Initially, her focus was going to be about the aspirations of the middle class, but a car ride to Lahore, changed the course of her research. “I wanted to learn more about middle-class Pakistanis as I spent a lot of time with my colleagues and my friends,” she says. “But one day, I had to go to Lahore to meet some academics at LUMS and was all set for a Daewoo trip, but my friend who I was staying with suggested that I go with a friend of hers who was driving to Lahore. Over the three and a half hours of this car ride to Lahore, I started asking questions and this amazing story came out about this person’s family business as a cigarette manufacturer, his family, networks of uncles and cousins and family members involved in trade with China, and of the bribes they’d recently been asked to pay.”

By the time they arrived in Lahore, Armytage had made up her mind to write a book about big business families. “A few days later, I sat with an industrialist, his brother and his cousin and one of their family friends, the son of a prominent Lahore politician and they drew this three-page long list of the wealthiest and most powerful business people in Pakistan to be interviewed,” she recalls. “They marked at least 20 people off that list that they could access either through work or friends.”

Eventually, Armytage had several interviews lined up with some of the biggest business families in Lahore.

“Every person that I interviewed introduced me to more,” says Armytage. “Some I met multiple times for second interviews or to meet more people and it just spiralled. There were challenges, but it opened up in a way that I hadn’t expected. A lot of these families had gone through turbulence because of the instability in Pakistan so was plenty to tell. Sometimes they would speak for hours and I would be exhausted.”

Did they enjoy talking to her or thought she was being nosy? “People were clear about what I was doing,” says Armytage. “I had to form relationships of trust with people who I would be introduced to and I told them that I am writing a book. People enjoy talking about what they do and it’s surprising how much they tell you if you’re genuinely interested in their lives,” she says. “Pakistanis are so used to being asked about terrorism and political instability that I think they were delighted to be asked about their success. Mostly, it would be about their work, families and friendships. Also I could gauge how much freedom I had to ask. There were some areas, however, where I was advised to not go too far.”

Riaz Haq said...

Hanging out with Pakistan’s 1%

Did being a foreigner and a woman help in these influential people loosening up?

“I have an entire chapter in the book about my position as a middle-class foreign woman enabling me to access often older, Pakistani, wealthy men who were far above me in social class and from a different culture,” she responds. “Being a woman changes the dynamic significantly. That type of access is difficult for Pakistani journalists.”

Armytage claims to be well-accustomed to the Pakistani society, since she has been exposed to it for 22 years in different capacities.

Her research points out that the wealthy in Pakistan are not a homogenous group, but divided along various lines such as region, ethnicity, religion, and business sector. Armytage argues that these divisions are important for understanding the micro politics of wealth in Pakistan, as they shape the ways in which the wealthy interact with each other and the society.

Hence, the central message of her book is that Pakistan is run by a small group of elite families who comprise different power blocks in business, politics, bureaucracy and military. “They determine the direction of the country, make laws and benefit from that,” she says. “The book looks at how they have power that they have maintained since Partition and in times of major upheavals such as the 1965 and 1971 wars. Basically, the elite creates regulation, but does not have to follow it. They get wealthier and more powerful as they shape up for a better control on things. The book also looks at strategic socialising and marriages and the ‘culture of exemptions.’”

Armytage explains that this culture enables the elite to maintain and buttress their positions and thwart competition. The use of law as a mechanism, plus extralegal and sometimes illegal activities constitute the means of wealth accumulation and preservation as well as tax avoidance.

“Much like the global elite of which they are a part, the Pakistani elite direct the legal and regulatory structures that determine wealth flow and opportunity within the country, while simultaneously operating outside of, and above these structures,” she explains. “There are two groups of established elite. Firstly, those who acquired their wealth pre-partition through land grants and other perks from the Mughal empire all from association with the British and through benefitting from that particular regime, and also in the first couple of decades after Pakistan. Then there are those who acquired their wealth mostly post-1977 in relation to the military regime of the time and other regimes that followed. Within the established elite group, there are a couple of different groups. There is the group of mainly middle-class Gujrati traders who Muhammad Ali Jinnah relied on to establish the new Pakistani nation and that becomes really important when we look at Pakistani elite today. They were called upon to help establish the industry that Pakistan needed. At the time of Partition, all the industrial infrastructure of united India remained in India and an enormous vacuum needed to be filled to justify the needs of the new Pakistan. So these middle-class groups were lured over to Pakistan by Jinnah and his government and given tax concessions and other perks to make business lucrative for them. As a result they really thrived within that community. Most of those traders moved to Karachi while the established elite settled in Lahore, which is closer to the Indo-Pak border that they crossed over.”

Armytage observes that marriages among the elite create bonds between families and promote ‘political dynasties’ which helps protect their power and influence.

Riaz Haq said...

Hanging out with Pakistan’s 1%

“Interestingly, military officers prefer industrialist girls or even the daughters of bureaucrats with good standing and they seem to shy away from politicians,” she says. “Marital strategies continue to be one of the most powerful mechanisms employed by the Pakistani elite to protect their economic assets and their social status, to foster inter-elite networks and to gather information on other elite families.”

Many of the established elite families that Armytage spoke to view themselves as having really high culture and elite dispositions. “Often they have actually lost a lot of wealth that they originally had, but they continue to own property and have high status, even though they’re no longer the most-wealthy people in Pakistan. Many wealth holders are the nouveau riche families but they don’t have old-money prestige and hence feel stigmatised. Often the established elite as gatekeepers, keep out the nouveau riche from institutions such as the elite social clubs of Lahore and Karachi and established elite schools that they want to be part of and where business and marriage decisions are made. They try to keep them out because these families are losing income comparative to the nouveau riche families. Marriages blend the wealth of one family with the status of another, provide an overall security and stability, and protect these families from political volatility. Some influential families have connections to the princely states in India so it’s all about propelling upward mobility.”

Armytage explains why, for instance, people from solid middle-class backgrounds who were in the military weren’t able to break into the social forums of the established elite and weren’t even able to do business with a certain group of people. “It is because they were never invited to the right parties,” she says. “But when they go about setting up marriages with the daughters or sons of some of those most established elite families, it brings a huge influx of capital to families who are running on fumes despite huge properties.”

Another interesting deduction Armytage makes is that Pakistani elites don’t like to dominate and be competitive in the world because they enjoy being big fish in a little pond. “A number of elites in other parts of the world also find that when they leave their country, they lose their status and access that they had before,” she points out. “When the Russian elites came to London, they brought in enormous wealth, much more than the Londoners they were spending time with. Yet they couldn’t break into these elite circles because they were viewed as too ostentatious and crass.”

Since most of her research done in 2014 was a turbulent time for Pakistan, many people told Armytage they couldn’t possibly move overseas permanently, because it would be dull without the excitement of Pakistani politics and being in the centre of the constant drama.

Towards the end of the book she discusses that the contemporary Pakistani elite are closer to their colonial predecessors in their abuse of power and moral grounds than they would like to acknowledge.

Armytage sees food insecurity, climate change, and uneducated youth population as serious challenges for Pakistan and she hopes that the country would increase its wealth base and that as a result of moving into middle-income status, there could be more wealth available and less people living in poverty. She believes that good policy making can transform people’s access to resources, their ability to grow their own income and to improve the lives of a larger number of people, which has happened to some degree in each of the decades post-partition.