Thursday, November 24, 2016

CS Wealth Report 2016: Pakistanis 20% Richer Than Indians

Average Pakistani adult is 20% richer than an average Indian adult and the median wealth of a Pakistani adult is 120% higher than that of his or her Indian counterpart, according to Credit Suisse Wealth Report 2016. Average household wealth in Pakistan has grown 2.1% while it has declined 0.8% in India since the end of last year.

Source: Credit Suisse Wealth Report 2016

Here are the key statistics reported by Credit Suisse:

Total Household Wealth Mid-2016 :

India $3,099 billion Pakistan $524 billion

Wealth per adult:

India Year End 2000 Average $2,036 Median $498.00

Pakistan Year End 2000 Average $2,399 Median $1,025

India Mid-2016 Average $3,835 Median $608

Pakistan Mid-2016 Average $4,595 Median $1,788

Average wealth per adult in Pakistan is $760 more than in India or about 20% higher.

Median wealth per adult in Pakistan is $1,180 more than in India or about 120% higher

Inequality: 

Median wealth data indicates that 50% of Pakistanis own more than $1,180 per adult which is 120% more than the $608 per adult owned by 50% of Indians.

The Credit-Suisse report says that the richest 1% of Indians own 58.4% of India's wealth, second only to Russia's at 74.5%. That makes India the 2nd biggest oligarchy in the world.

The CS wealth data, particularly the median wealth figures,  clearly show that Pakistan has much lower levels of inequality than India.

World Bank Report:

A November 2016 World Bank report says that Pakistan has successfully translated economic growth into the well-being of its poorest citizens. It says "Pakistan’s recent growth has been accompanied by a staggering fall in poverty".

Rising incomes of the poorest 20% in Pakistan since 2002 have enabled them to enhance their living standards by improving their diets and acquiring television sets, refrigerators, motorcycles, flush toilets, and better housing.

Another recent report titled "From Wealth to Well Being" by Boston Consulting Group (BCG) also found that Pakistan does better than India and China in translating GDP growth to citizens' well-being.

One particular metric BCG report uses is growth-to-well-being coefficient on which Pakistan scores 0.87, higher than India's 0.77 and China's 0.75.

Big Poverty Decline Since 2002:

Using the old national poverty line of $1.90 (ICP 2011 PPP) , set in 2001, the percentage of people living in poverty fell from 34.7 percent in FY02 to 9.3 percent in FY14—a fall of more than 75 percent. Much of the socioeconomic progress reported by the World Bank since 2000 has occurred during President Musharraf's years in office from 2000-2007. It has dramatically slowed or stagnated since 2010.

Source: World Bank Report Nov 2016

Using the new 2016 poverty line of $3.50 (ICP 2011 PPP),  29.5 percent of Pakistanis as poor (using the latest available data from FY14). By back casting this line, the poverty rate in FY02 would have been about 64.3 percent.

Pakistan's new poverty line sets a minimum consumption threshold of Rs. 3,030 or $105 (ICP 2011 PPP) per person per month or $3.50 (ICP 2011 PPP) per person per day. This translates to between Rs. 18,000 and Rs. 21,000 per month for a household at the poverty line, allowing nearly 30% of the population or close to 60 million people to be targeted for pro-poor and inclusive development policies—thus setting a much higher bar for inclusive development.

Multi-dimensional Poverty Decline:

UNDP report released in June 2016 said Pakistan’s MPI (Multi-dimensional poverty index) showed a strong decline, with national poverty rates falling from 55% to 39% from 2004 to 2015. MPI goes beyond just income poverty.

The Multidimensional Poverty Index uses a broader concept of poverty than income and wealth alone. It reflects the deprivations people experience with respect to health, education and standard of living, and is thus a more detailed way of understanding and alleviating poverty. Since its development by OPHI and UNDP in 2010, many countries, including Pakistan, have adopted this methodology as an official poverty estimate, complementing consumption or income-based poverty figures.

Rising Living Standards of the Poorest 20% in Pakistan:

According to the latest World Report titled "Pakistan Development Update: Making Growth Matter" released this month, Pakistan saw substantial gains in welfare, including the ownership of assets, the quality of housing and an increase in school enrollment, particularly for girls.



First, the ownership of relatively more expensive assets increased even among the poorest. In the bottom quintile, the ownership of motorcycles increased from 2 to 18 percent, televisions from 20 to 36 percent and refrigerators from 5 to 14 percent.

In contrast, there was a decline in the ownership of cheaper assets like bicycles and radios.



Housing quality in the bottom quintile also showed an improvement. The number of homes constructed with bricks or blocks increased while mud (katcha) homes decreased. Homes with a flushing toilet almost doubled in the bottom quintile, from about 24 percent in FY02 to 49 percent in FY14.

Dietary Improvements for the Poorest 20% in Pakistan:

Decline in poverty led to an increase in dietary diversity for all income groups.

For the poorest, the share of expenditure devoted to milk and milk products, chicken, eggs and fish rose, as did the share devoted to vegetables and fruits.

In contrast, the share of cereals and pulses, which provide the cheapest calories, declined steadily between FY02 and FY14. Because foods like chicken, eggs, vegetables, fruits, and milk and milk products are more expensive than cereals and pulses, and have lower caloric content, this shift in consumption also increased the amount that people spent per calorie over time.

For the poorest quintile, expenditure per calorie increased by over 18 percent between FY02 and FY14. Overall, this analysis confirms that the decline in poverty exhibited by the 2001 poverty line is quite credible, and that Pakistan has done remarkably well overall in reducing monetary poverty based on the metric it set some 15 years ago, says the World Bank.

Summary:

In spite of Pakistan's many challenges on multiple fronts, the country has successfully translated its GDP growth into the well-being of its poorest citizens. "Pakistan’s recent growth has been accompanied by a staggering fall in poverty", says a November 2016 World Bank report.  An earlier report by Boston Consulting Group reached a similar conclusion.

Related Links:

Haq's Musings

Pakistan's Middle Class Larger & Richer Than India's

Pakistan Translates GDP Growth to Citizens' Well-being

Rising Motorcycle Sales in Pakistan

Depth of Deprivation in India

Chicken vs Daal in Pakistan

China Pakistan Economic Corridor

Wednesday, November 23, 2016

Internet Data Usage Soars in Pakistan

Soaring broadband subscriptions in Pakistan have helped drive a whopping 35X increase in Internet data usage since January 2014.

Rapid Rise in Broadband Subscription in Pakistan

As the number of broadband subscriptions in Pakistan crossed 38 million in October 2016,  the internet data usage jumped from 1,243 terabytes in January 2014 to 45,672 terabytes in September, 2016, according to Pakistan Telecommunication Authority.

A lot of new data traffic is being driven by 3G/4G equipped smartphones running a variety of applications ranging from social media to consumer and business apps.


Mobile Broadband:

Mobile broadband (3G/4G) subscriptions have jumped from almost zero in 2014 to 34 million as of September, 2016.  It has been accompanied by corresponding increase in the number of smartphones which is expected to cross 40 million mark this year.

Applications:

Growth of 3G/4G networks and smartphones has spawned a variety of applications from social media apps to business, education and entertainment apps. Use of Facebook, Twitter and Youtube has soared.  E-commerce is growing. Taxi-hailing service Uber has arrived in the country. Netflix has entered the Pakistani market. Government is making use of the Internet applications to deliver services.

Digital Cable, DTH:

Pakistan Electronic Media Regulatory Authority (PEMRA) is pushing all cable service providers to support digital television. PEMRA is also auctioning Direct-to-Home (DTH) service which is digital. Both of these mediums will help increase internet broadband penetration in the country and bring more and more people on line.

Internet Infrastructure:

Rapid growth of data is driving infrastructure improvements in Pakistan. Tens of thousands of kilometers of fiber is being laid to cope with rising Internet traffic.  Universal Service Fund (USF) alone has installed 5,500 kilometers of fiber in underserved areas of the country to increase digital inclusion.

Pakistan currently has 16 data centers: 8 in Karachi, 5 in Lahore and 3 in Islamabad. The numbers are expected to grow significantly with growing demand.

Pakistan Telecommunications Authority (PTA) has set up the first Internet Exchange Point (IXP) in Islamabad and more are planned for other major cities. IXPs connect Internet Service Providers (ISPs) with Content Delivery Networks (CDNs) like Amazon and Akamai to facilitate faster delivery of web pages and other content to users.

Digital Inclusion:

Beginning in October 2016,  Pakistani government is giving away five million smartphones to farmers in the country in an effort to improve knowledge of modern farming techniques, according to the BBC. Large numbers of farmers in countries such as India and Kenya have also recently experimented with smartphone technology.

In addition, the Benazir Income Support Program (BISP) has announced plans to give away 30,000 smartphones with 3G subscriptions funded by Universal Service Fund (USF) to low income Pakistanis on BISP.  Each smartphone will have Rs. 250 balance per month. It is intended to enhance digital and financial inclusion, according to a report in Pakistan Observer.

The objective of giving away smartphones is to help increase farmers' productivity.  Digital access is is expected to reduce poverty in rural and semi-urban areas of Pakistan by supporting micro and small enterprises. Market access to the products of marginalized segments will improve their welfare and at the same time boost the national economy.

Lack of financial inclusion and the growing digital divide are known impediments to progress of the low-income and poor segments of the population. Any effort by the government to remove such impediments will help Pakistan's economy by making more people more productive.

 Summary:

Internet data usage is soaring with rapidly rising broadband penetration and smartphone ownership in Pakistan. Infrastructure is being improved to cater to the digital data explosion taking place in the country. Universal Service Fund (USF) is playing its part to support this effort in underserved areas.

Related Links:

Haq's Musings

Bridging Digital Divide in Pakistan

Fiber Connectivity in Pakistan

Pakistan Government Apps

Data Boom in Pakistan

Pakistan 2.0: Technology Driving Productivity

Uber in Pakistan

E-Commerce in Pakistan

Monday, November 21, 2016

Pakistan's Choice of Regional Economic Blocs: CAREC or SAARC or Both?

Pakistan sits between two economically very dynamic regions: Central Asia (and Western China) and South Asia. Which region is better suited for its economic connectivity and integration? Should Islamabad focus on CAREC (Central Asia Regional Economic Cooperation) rather than SAARC (South Asian Association of Regional Cooperation)?

Ideally, Pakistan should be a major player in both vibrant regions. However, Indian Prime Minister Narendra Modi's policy of attempting to isolate Pakistan has essentially forced it to choose.

First, Mr. Modi decided to boycott this year's SAARC summit that was scheduled to take place in Islamabad, Pakistan. Then, he unsuccessfully attempted to hijack the BRICS economic summit in India to use it as a political platform to attack and isolate Pakistan.  The signal to Pakistan was unmistakable: Forget about SAARC.

Central Asia Regional Economic Cooperation (CAREC):

CAREC is a growing group of nations that is currently made up of 11 members, including China and a list of STANs.   The current membership includes Afghanistan (joined CAREC in 2005), Azerbaijan (2003), People's Republic of China (1997), Georgia (2016), Kazakhstan (1997), Kyrgyz Republic (1997), Mongolia (2003, Pakistan (2010), Tajikistan (1998), Turkmenistan (2010) and Uzbekistan (1997).



The last ministerial meeting of CAREC nations was held in Islamabad in October, 2016. The conference theme was “Linking connectivity with economic transformation".

Welcoming fellow ministers, Pakistan's Finance Minister Ishaq Dar talked about the importance of the China-Pakistan Economic Corridor (CPEC) to improve trade flow within the region and with the rest the rest of the world.

Dar said CPEC offered a massive opportunity for connectivity between Central Asia, Middle East and Africa and was bound to play a defining role in economic development of the regions. Dar said improving the transport corridor was not an end in itself but it was an investment in establishing sound infrastructure and complementary frameworks for shared prosperity of the present and future generations in the region, according to a report in Pakistani media.

CAREC Corridors:

CAREC region is building six economic corridors to link Central Asian nations. Six multi-national institutions support the CAREC infrastructure development, including the Asian Development Bank (ADB), United Nations Development Program (UNDP), International Monetary Fund (IMF), World Bank,  Jeddah-based Islamic Development Bank and European Bank for Reconstruction & Development, according to Khaleej Times.

Out of the total $27.7 billion CAREC infrastructure investment so for, $9.9 billion or 36 per cent was financed by ADB, a senior officer of the Manila-based multinational bank told Khaleeej Times.

He said other donors had invested $10.9 billion while $6.9 billion was contributed by CAREC governments. Of these investments, transport got the major share with $8 billion or 78 per cent. Asian Development Bank Vice President Wencai Zhang said: "There are huge financing requirements in Carec for transport and trade facilitation, for which 108 projects have been identified at an investment cost of $38.8 billion for the period 2012-2020. Investment for the priority energy sector projects will be $45 billion in this period."

CPEC North-South Corridor:

China Pakistan Economic Corridor (CPEC) is a major part of the north-south corridor that will allow trade to flow among CAREC member countries, many of which are resource-rich but landlocked nations. The corridor will enable the group to access to the Pakistani seaports in Gwadar and Karachi as part of the new maritime silk route (MSR) as envisioned by China and Pakistan.

Pakistan's Finance Minister Dar says the CPEC would complement the regional connectivity initiatives of CAREC. "Once the six CAREC corridors and mega ports, now under construction, start operating, they will provide access to global markets. They will deliver services that will be important for national and regional competitiveness, productivity, employment, mobility and environmental sustainability. All of us should gear our national policies to achieve these targets."

CPEC consists of transport and communication infrastructure—roads, railways, cable, and oil and gas pipelines—that will stretch 2,700 kilometers from Gwadar on the Arabian Sea to the Khunjerab Pass at the China-Pakistan border in the Karakorams.

China and Pakistan are developing plans for an 1,800 kilometer international rail link from the city of Kashgar in the Xinjiang Uygur autonomous region in Western China to Pakistan's deep-sea Gwadar Port on the Arabian Sea, according to Zhang Chunlin, director of Xinjiang's regional development and reform commission.



 "The 1,800-kilometer China-Pakistan railway is planned to also pass through Pakistan's capital of Islamabad and Karachi," Zhang Chunlin said at the two-day International Seminar on the Silk Road Economic Belt in Urumqi, Xinjiang's capital, according to China Daily.

"Although the cost of constructing the railway is expected to be high due to the hostile environment and complicated geographic conditions, the study of the project has already started," Zhang said. "China and Pakistan will co-fund the railway construction. Building oil and gas pipelines between Gwadar Port and China is also on the agenda," Zhang added.

Afghan Instability:

Pakistan is making a serious effort to stabilize Afghanistan, a member of CAREC. A trilateral conference of China, Russia and Pakistan is scheduled this month in Moscow as part of this effort. Afghan instability has prevented Pakistan from connecting with other STANs for commerce and trade. Now the development of CPEC will enable Pakistan to bypass Afghanistan, if necessary, to connect with Central Asia region through Western China.

Summary:

History shows that growth of regional and global trade in East Asia, Europe and North America regions has been a major driver of economic opportunity and prosperity.  Unfortunately, SAARC has been a huge disappointment for Pakistanis.  With the development of CPEC and CAREC, Pakistan can now begin to participate in the growth of regional and global trade that will benefit the people of Pakistan.  The path to Pakistan's participation in SAARC will open up if or when India-Pakistan relations improve.

Here's a National Geographic Documentary on CPEC:

https://youtu.be/q2lWYxbIBCs




Related Links:

Haq's Musings

1800 Km Pak-China Rail Link

China Pakistan Economic Corridor

CPEC to Create Over 2 Million Jobs

Modi's Covert War in Pakistan

ADB Raises Pakistan GDP Growth Forecast

Gwadar as Hong Kong West

China-Pakistan Industrial Corridor

Indian Spy Kulbhushan Yadav's Confession

Ex Indian Spy Documents RAW Successes Against Pakistan

Pakistan FDI Soaring with Chinese Money for CPEC


Friday, November 18, 2016

World Bank Reports Big Jump in Living Standards of Poor Pakistanis

A November 2016 World Bank report says that Pakistan has successfully translated economic growth into the well-being of its poorest citizens. It says "Pakistan’s recent growth has been accompanied by a staggering fall in poverty".

Rising incomes of the poorest 20% in Pakistan since 2002 have enabled them to enhance their living standards by improving their diets and acquiring television sets, refrigerators, motorcycles, flush toilets, and better housing.

Another recent report titled "From Wealth to Well Being" by Boston Consulting Group (BCG) also found that Pakistan does better than India and China in translating GDP growth to citizens' well-being.

One particular metric BCG report uses is growth-to-well-being coefficient on which Pakistan scores 0.87, higher than India's 0.77 and China's 0.75.

Big Poverty Decline Since 2002:

Using the old national poverty line of $1.90 (ICP 2011 PPP) , set in 2001, the percentage of people living in poverty fell from 34.7 percent in FY02 to 9.3 percent in FY14—a fall of more than 75 percent. Much of the socioeconomic progress reported by the World Bank since 2000 has occurred during President Musharraf's years in office from 2000-2007. It has dramatically slowed or stagnated since 2010.

Source: World Bank Report Nov 2016

Using the new 2016 poverty line of $3.50 (ICP 2011 PPP),  29.5 percent of Pakistanis as poor (using the latest available data from FY14). By back casting this line, the poverty rate in FY02 would have been about 64.3 percent.

Pakistan's new poverty line sets a minimum consumption threshold of Rs. 3,030 or $105 (ICP 2011 PPP) per person per month or $3.50 (ICP 2011 PPP) per person per day. This translates to between Rs. 18,000 and Rs. 21,000 per month for a household at the poverty line, allowing nearly 30% of the population or close to 60 million people to be targeted for pro-poor and inclusive development policies—thus setting a much higher bar for inclusive development.

Multi-dimensional Poverty Decline:

UNDP report released in June 2016 said Pakistan’s MPI (Multi-dimensional poverty index) showed a strong decline, with national poverty rates falling from 55% to 39% from 2004 to 2015. MPI goes beyond just income poverty.

The Multidimensional Poverty Index uses a broader concept of poverty than income and wealth alone. It reflects the deprivations people experience with respect to health, education and standard of living, and is thus a more detailed way of understanding and alleviating poverty. Since its development by OPHI and UNDP in 2010, many countries, including Pakistan, have adopted this methodology as an official poverty estimate, complementing consumption or income-based poverty figures.

Rising Living Standards of the Poorest 20% in Pakistan:

According to the latest World Report titled "Pakistan Development Update: Making Growth Matter" released this month, Pakistan saw substantial gains in welfare, including the ownership of assets, the quality of housing and an increase in school enrollment, particularly for girls.



First, the ownership of relatively more expensive assets increased even among the poorest. In the bottom quintile, the ownership of motorcycles increased from 2 to 18 percent, televisions from 20 to 36 percent and refrigerators from 5 to 14 percent.

In contrast, there was a decline in the ownership of cheaper assets like bicycles and radios.



Housing quality in the bottom quintile also showed an improvement. The number of homes constructed with bricks or blocks increased while mud (katcha) homes decreased. Homes with a flushing toilet almost doubled in the bottom quintile, from about 24 percent in FY02 to 49 percent in FY14.

Dietary Improvements for the Poorest 20% in Pakistan:

Decline in poverty led to an increase in dietary diversity for all income groups.

For the poorest, the share of expenditure devoted to milk and milk products, chicken, eggs and fish rose, as did the share devoted to vegetables and fruits.

In contrast, the share of cereals and pulses, which provide the cheapest calories, declined steadily between FY02 and FY14. Because foods like chicken, eggs, vegetables, fruits, and milk and milk products are more expensive than cereals and pulses, and have lower caloric content, this shift in consumption also increased the amount that people spent per calorie over time.

For the poorest quintile, expenditure per calorie increased by over 18 percent between FY02 and FY14. Overall, this analysis confirms that the decline in poverty exhibited by the 2001 poverty line is quite credible, and that Pakistan has done remarkably well overall in reducing monetary poverty based on the metric it set some 15 years ago, says the World Bank.

Summary:

In spite of Pakistan's many challenges on multiple fronts, the country has successfully translated its GDP growth into the well-being of its poorest citizens. "Pakistan’s recent growth has been accompanied by a staggering fall in poverty", says a November 2016 World Bank report.  An earlier report by Boston Consulting Group reached a similar conclusion.

Related Links:

Haq's Musings

Pakistan Translates GDP Growth to Citizens' Well-being

Rising Motorcycle Sales in Pakistan

Depth of Deprivation in India

Chicken vs Daal in Pakistan

China Pakistan Economic Corridor



Wednesday, November 16, 2016

Pakistani Banks Strong Performance

Pakistan's banks are showing strong performance with significant growth in deposits, assets and private sector credit.  All areas of banking, including commercial, mobile and Islamic banking, are contributing to it.

Karachi Financial District
Commercial Banking:

Pakistan's commercial banking industry grew by 16.1 percent during fiscal year 2015/16. Strong aggregate demand and improving business sentiments were seen in private sector credit growth of 12 percent, expanding by Rs. 461 billion in FY16 from Rs. 224 billion in the prior year, according to a World Bank report in the media.

Mobile Banking:

Mobile banking transactions in Pakistan grew to Rs. 1.5 trillion during 2015-16. The State Bank of Pakistan (SBP) has recorded Rs. 543.6 billion in branchless banking transactions in the latest quarter,  sequential growth of 6.8% over the previous quarter. It's a good sign of growing financial inclusion in the country.

Islamic Banking:

Islamic banking industry continued its double-digit growth during fiscal year 2015-16 (FY16) with 16.8% and 14.1% year-on-year (YoY) growth in assets and deposits respectively, according to the State Bank of Pakistan. Islamic banking share of banking in Pakistan has nearly doubled in the last 5 years. It now accounts for 13% of the overall banking industry, up from 7.8% five years ago.

Demand for Liquidity:

Pakistani banks have increased their deposits by over a trillion rupees since January 2016. However, strong demand for liquidity in a growing economy has forced the State Bank of Pakistan (SBP) to inject another Rs. 880 billion into the banking system just last week, according to news reports.

Summary:

Banks are a good barometer of a nation's economic health. Growth in banking in Pakistan is a good sign of accelerating economic growth in the country.

Related Links:

Haq's Musings

Mobile Banking in Pakistan

Financial Inclusion in Pakistan

Financial Services Industry in Pakistan

China Pakistan Economic Growth

ADB Raises Pakistan GDP Growth Forecast