For 2013-14, the total budget
of federal government of Pakistan was about 34 billion US$. Out of this budget,
about 4.7 billion $ is the share of debt servicing and about 12 billion US$ is
the share of provincial governments. Therefore about 17 billion $ is available
to the federal government for its expenditures.
From this US$ 17 billion, the government finances about 0.6 million active armed
forces, 0.5 million reserved forces, 0.3 million paramilitary forces, 0.6
million civilian federal government employees millions of pensioners, members of
senate and members of national assembly. In addition to that, government pays
huge amount as subsidy to different public utility services, runs hundreds of
hospitals, scientific centers and builds road and infrastructure throughout the
country. Lot of military equipment and equipment for civilian institution is
also purchased out of this budget. Millions of dollars are also provided to
universities through HEC.
Now look at the remittances received by Pakistan from the overseas working
Pakistanis. Pakistan received about US$14 billion as remittances which is more
than 80% of the federal government expenditures after debt servicing and payment
to provincial governments. A huge amount of remittances also enters the country
from informal channel which has no record. 20% of this amount is utilized for
the consumption needs of 7 million families of the remitters. What about
remaining 80% of these remittances? How much employment is generated by these
remittances? How many mills and factories have been established by these
remittances? How much amount is consumed for energy project which is the most
urgent need of the country? How much remittances are used for charity
organizations, for establishing the vocational training centers, educational
institutes and for provision of microfinance loans to the extremely poor rural
population of the country? How these remittances contribute to national economy,
nobody really bothers to look at.
The main benefit to Pakistan from the remittances is the help in management of
foreign exchange reserves. Net external trade of Pakistan is negative and
Pakistan faces a loss of about US$13 billion in the international trade. If
there were no remittances, it would not be possible to finance this huge
deficit. So hats off to overseas Pakistani that because of them Pakistan is able
to manage the balance between supply and demand of foreign exchange reserves.
However, when the State Bank pays rupees in return of the dollars, the huge
amount is again in the hands of families of remitters which is comparable with
budget of federal government. This amount is capable of providing millions of
jobs to the brothers of these remitters inside their homeland. But unfortunately
this is not happening.
So where does this huge amount go? This is the amount that if government and
public sincerely decide a suitable strategy, the unemployment problem from the
country could be eliminated. I was surprised to see number of studies on the
consumption of remittance and these studies agree that most of remittances are
used for real estate and lavish consumption. However, no one cares that is this
the optimal utilization of money?
The real estate business which attracts the largest share of remittances is
perhaps most capital intensive business with no labor or entrepreneurial
requirements. In addition to that, it is also risk free with heavy profit
margin. Therefore this becomes ideal investment for remitters. The remitters
residing outside their homeland are unable to look after a business in Pakistan,
therefore want these features in an investment out of their earning.
However, this is the most non-productive business which just causes an
accumulation of wealth without providing job opportunities. If you purchase a
plot worth 1 million US$, how much jobs will you create by this investment?
Some of the readers will say, yes jobs are created for construction. I also
agree but for how much time? And how much jobs? And how many plots are just left
idle for future sale at higher price without any construction?
I will explain by examples that how much capital intensive this business is; the
total worth of Bahria town as per statement of Malik Riaz in 2010 was US$ 2.5
billion (PKR 250 billion ) of which he was providing jobs to 15000 people. So,
average capital for one job is about PKR 16 million. And in Pakistan, average
cost of starting a business ranges between 20,000 to 1 million. This means the
Bahria town project is providing one job from the amount sufficient for creating
16-800 jobs. In some businesses like sericulture (silk worm rearing) you can
employee over 800 individuals with the average cost of one employee in Bahria
Town. This estimation is based on what was admitted by the owner of Bahria town
himself. My personal estimate about worth of Bahria Town exceeds US$ 40 billion.
With these remittances, the Bahria town authorities are successful to create
their own empire within state having control of all the services that are
responsibility of governments in a modern society. There are dozens of other
mega real estate absorbing billions of dollars and producing only few job
opportunities.
Anyhow, I do not blame Bahria Town or the remitters for this non-productive
business. It was the duty of economists to guide the government to create
alternate investment opportunities, and to discuss the pros and cons of the
business so that the public has some awareness about aftermath of the business.
Based on my personal experience with the remitters, I have no hesitation to say
that the remitters are patriot in the true sense. If they were being told about
investment for sake of employment, they will be happy to do that.
It is the need of time to utilize these remittances so that for solving energy
crisis and creation of job opportunities. I am mentioning here two options for
utilization of these remittances:
The easiest way of utilizing the remittances is to start the real estate project
in public sector and utilize the earning for mega project. Suppose government
wants to construct a solar park near Lahore. The government develops a new town
near the city and the earning is used for financing the project. Developing one
town with 5000 plots may give the government revenue of 25-50 billion which is
sufficient for creation of a good solar park with reasonable capacity. By
constructing the solar Park, thousands of jobs will also be created and the
provision of energy to industry will further enhance the job opportunities.
Government can motivate the remitters to create the energy parks by themselves
under supervision of an administrative board comprising the representative of
remitters and government. The government has to ensure purchase of products on
completion of project.
There are dozens of other option in which using public private partnership
approach, millions of jobs could be created and the problems of financing mega
projects of national importance could be accomplished. However, this is the time
to take steps in this direction.
Note: The remittances grew rapidly in last few years, in late ninties, the total
volume of remittances was slightly over 1 billion dollar which is now grown
above 14 billion dollars. Therefore the opportunity to bring a change using
remittances emerged recently. So this is appropriate time to think about
utilization of these remittances. In future, many mega projects are going to be
initiated in the destinations of Pakistani immigrants. For example the Expo 2020
in UAE will create million of jobs, therefore the immigrants to these
destinations is expected to increase further. Therefore it is important to
create awareness about the value of these remittances and planning to utilize
this great opportunity in a useful way.