Sacrificing Our TODAY for the World's TOMORROW
FATA is "Federally Administered Tribal Area" of Pakistan; consisting of 7 Agencies and 6 F.Rs; with a 27000 Sq Km area and 4.5 m population.
MYTH: FATA is the HUB of militancy, terrorism and unrest in Afghanistan.
REALITY: FATA is the worst "VICTIM of Militancy”. Thousands of Civilians dead & injured; Hundreds of Schools destroyed; Thousands of homes raised to ground; 40% population displaced from homes.

Monday, May 16, 2011

How rich are the Pakistani rich? - By Shahid Javed Burki (Express Tribune, 16 May 2011)

Courtesy: Daily "Express Tribune, Pakistan", 16 May 2011
How rich are the Pakistani rich?
By Shahid Javed BurkiHow rich are the Pakistani rich? Incredibly so, or just what is expected in a country that has income distribution more skewed than is normal for a country at its stage of development? The questions are important since the answers to them matter for the making of public economic policy. The answers will also affect the course of political development. Some of those who are watching the explosion in the Arab streets realise that relative deprivation — a concept developed by political economists many decades ago — is playing a role in turning millions of people against the regimes that have governed them for so long. Growing income disparity and widening consumption gaps are often the source of great political alienation. The political and economic systems that give rise to them come under pressure and may — and sometimes do — collapse under the weight of political discontent. This is what we are seeing in the Middle East.

Alienation increases when the riches of the rich are seen as ill-gotten, rather that obtained through hard work and entrepreneurship. Each of the successful revolutions (Tunisia and Egypt), as well as those still unfolding (Bahrain, Libya, Yemen), in the Middle East acquired a symbol of hatred. In Tunisia, it was Leila Traboulsi, the hairdresser who became President Ben Ali’s wife and then a symbol of the extreme extravagance of the ruling family. In Egypt, it was Ahmed Ezz who was favoured by the state as he went on to acquire lucrative assets and then became a steel magnate. He had a taste for tight Italian suits and expensive neckties; he now faces trial in a white prison uniform. In Syria, it is Rami Makhlouf, first cousin and childhood friend of President Bashar alAssad and he also happens to be the country’s most powerful businessman. He used his contacts with the ruling family to acquire licenses for businesses that handed out rich rewards, including Syriatel — the country’s largest mobile phone operator. In Libya, the sons of Muammar Qaddafi have accumulated untold wealth, stashed away in bank accounts at home and abroad.
Another lesson we learn from the Middle East is that the poor normally don’t risk their lives by confronting those who constitute the political and economic establishment. They are too preoccupied with earning small amounts of money, needed to sustain life for them, to take time off for agitation. But the not-so-poor are different. While the poor don’t come in contact with the very rich, the not-so-poor do. They work in the kitchens of the rich and prepare their meals; they serve the rich at their dining tables, drive their children to school, tend their gardens and provide other services needed by the affluent.
But the question of how rich are the Pakistani rich, is not easy to answer since the country does not produce detailed data on household incomes and income distribution. We will, therefore, have to do with some derived measures using the information provided by the World Bank in World Development Indicators. The Bank’s data bank provides estimates of the shares in national income for various quintiles of the population for its member nations. Adjusting the estimates to reflect the deterioration in income distribution that has occurred in the last few years, it is safe to assume that some 42 per cent of the total national income is claimed by the top 20 per cent of the population. This means that 36 million people have a combined income of $75.6 billion, which translates into a per capita income of $2,100 or twice the national average. According to the Bank, 27 per cent of the national income goes to 18 million people, the 10 per cent who sit on top of the income pyramid. For them, the per capita income is $2,700.
Applying the same distribution for the top 10 per cent and top one per cent of the population as for the entire population, it would appear that the total income of the affluent 1.8 million people is $13.12 billion, or $7,300 per capita, and for the richest 180,000, it is close to $20,000. The super rich 18,000 people have a combined income of $1.31 billion or $72,700 per capita. Since the poorest 10 per cent of the population receives only four per cent of the total income, their income per head is only $400 per annum. These numbers begin to put some substance on the extent of relative deprivation in Pakistan. The richest 40,000 people in the country have combined income equal to that of the poorest 18 million people. The super rich — the 18,000 who make up 0.001 per cent of the population — earn 180 times as much as the poorest 18 million. Or, to put it in another way, the super rich earn in just two days what it takes the poor to earn in one year.
A significant part of the wealth from which the rich derive their incomes is unearned: It is either inherited or is obtained through graft and corruption, or has been built up on the basis of tax avoidance. The rich have found many ways to dodge the tax man. Some of their income comes from agriculture which, by law, cannot be taxed. Over the years, the tax code has been punctured with holes which the rich use to not pay their share to the state. In more progressive economic systems, the tax system is the main vehicle the governments have of introducing some income and wealth equality into the society. In the case of Pakistan the opposite is the case: The burden falls on the not-so-rich.
It is clear that for the ruling establishment to avoid the kind of upheaval that has struck the streets of the Middle East, ways will have to be found to cater to those the economic system is not serving well. The best way is to devise a tax structure that introduces some equality into a system that is highly unequal.

The writer is former vice-president of the World Bank and former finance minister of Pakistan

Note: The viewpoint expressed in this article is solely that of the writer / news outlet. "FATA Awareness Initiative" Team may not agree with the opinion presented.

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