Gallup Poll: Resilient Pakistan Happier Than India and China

[Riaz Haq]

You wouldn't know from the headlines what Gallup global poll on wellbeing found through its recent survey: More Pakistanis say they are thriving than do Indians or Chinese.

The results of the 2010 global wellbeing survey of 124 nations conducted by Gallup reveal that Pakistan ranks 40th with 32% of Pakistanis saying they are thriving. By contrast, India ranks 71st with 21% of the Indians thriving and China ranks 92nd with only 12% of the Chinese considering themselves “thriving,” the highest level of wellbeing.

Pakistanis are a resilient people. But the only tangible explanation for Pakistanis ranking ahead of their neighbors in the wellbeing Gallup survey can be found in the strength of Pakistan's rural economy. It is being spurred by the higher food and commodity prices resulting in the transfer of additional new tax-free farm income of about Rs. 300 billion in the current fiscal year alone to Pakistan's ruling party's power base of landowners in small towns and villages in Southern Punjab and Rural Sindh, from those working in the the economically stagnant urban industrial and service sectors who pay bulk of the taxes. The downside of it is a bigger hole in Pakistan's pubic finances which is being funded with increased foreign aid and loans.



Moazzam Husain, the Director General of the Punjab Board of Investment and Trade, describes the current rural resurgence as follows in a recent blog post titled "The Other Pakistan":

"GLORIOUS countryside lies between Rahim Yar Khan and Bahawalpur. Travelling across six districts in Punjab, before a blazing summer sets in, I experienced endless fields of wheat waiting to turn golden, of freshly harvested mustard, acres of ripe sugarcane and sprawling mango orchards. Far from the drudge and gloom of metropolitan Pakistan, economic privation, traffic snarls, extreme religion and the cricket World Cup agony, this is another Pakistan. Over a quarter of a century after the green revolution ended the rural economy is back in boom, this time on the back of rising prices. The feel-good factor is all around.

Burgeoning commodity prices are churning unprecedented amounts of cash through the farm sector. I pass tractor-pulled trolleys laden with sugarcane waiting outside sugar mills. The crushing season is in full swing. Meanwhile, the flour mills are still grinding away at last year’s surplus crop. This is an agro economy at serious work.

Alongside the cash economy, the place is also brimming with ideas, and with an entrepreneurial spirit. A young man I meet at Rahim Yar Khan’s chamber of commerce has an IT degree and owns an ice cream distribution business spawning an elaborate cold chain across three districts. He tells me that sales are surging because rural society is transitioning to modern desserts which are now more affordable than traditional sweets like mithai and khoya.

Meanwhile, he’s toying with the bigger vision of an electronic marketplace for agricultural produce. Live connectivity to grain mandis and markets for fresh produce and milk will empower farmers to obtain prices online and through their cellphones. He wants to materialise this and wants tips. I give him my two cents worth: study similar models, write a concept paper, galvanise partners around it, put in seed money and get the venture to mezzanine level."

In 2008, the government pushed the procurement price of wheat up from Rs. 625 per 40 kg to Rs. 950 per 40 kg. This action immediately triggered inflationary pressures that have continued to persist as food accounts for just over 40% of Pakistan's consumer price index. According to State Bank of Pakistan (SBP) analysis, cumulative price of wheat surged by 120 per cent since 2008, far higher than the 40 per cent between 2003 and 2007. it is also many times greater than the international market price increase of 22 per cent for wheat in the same period. Similarly, sugar prices have surged 184 per cent higher since 2008, compared with 46 per cent increase during 2003-07.

Bumper crops and exports at higher prices are also contributing to the rural prosperity in Pakistan. For example, the Wall Street Journal reported increased Pakistan's wheat exports in a recent story as follows:

"Asia's immediate wheat demand is being met by ample supply from Pakistan, which is exporting existing inventories to make way for the new harvest, trading executives said Monday. "Pakistan has filled a crucial gap in Asian wheat trade due to the absence of supply from the Black Sea region," said a Singapore-based executive with a global trading company.

If Pakistan hadn't permitted wheat exports during this period of tight overall global supply, price conscious buyers in South Asia and Southeast Asia would have had to turn to costly alternative supply from Canada, the U.S. and Europe.

The absence of Pakistan would have also increased demand pressure in Australia, where ports are already facing congestion and there are logistical delays in moving wheat from upcountry warehouses.

Pakistan approved wheat exports in December and shipments began the following month.

In less than four months it has shipped out an estimated 1.16 million metric tons of wheat.

The International Grains Council has projected Pakistan's wheat exports in the year ending June 30 at 1.6 million tons, the highest in at least four years."

The steps such as the increased exports, the transfer of additional Rs. 300 billion to Pakistan's agriculture sector during the current fiscal year 2010-2011 by higher prices of agriculture produce, and direct flood compensation to 1.6 million affected families at the rate of one hundred thousands rupees each are boosting economic confidence in the countryside. This infusion of money is also generating rural demand for consumer items including consumer durables such as fans, TVs, motorcycles, cars, refrigerators, etc.

The big feudal landowners have been the biggest beneficiaries of the PPP's gift of high crop prices. However, the policy has helped small farmers as well, as shown by a recent survey reported by The Nation newspaper. The survey of 300 farmers in Sind's Sukkur district was conducted by Sukkur Institute of Business Administration for the State Bank of Pakistan (SBP). It has highlighted the following about district's rural economy:

1. In Sukkur district, majority of the farmers are subsistence farmers. 31 percent of them own less than 5 acres of land, and another 34 percent own up to 12.5 acres of land.

2. They spend an average of Rs. 1,611 a month on their children's education, with some of them spending up to Rs. 12,000 a month.

3. Wheat, rice, cotton and sugarcane are the major crops being cultivated by 93 per cent, 58 percent, 37 percent and 12 percent of the respondent farmers in that order.

4. 24 percent of them are also growing fruits including dates, mangoes and bananas.

5. 22 percent of the respondent own livestock.

6. About half (49 percent) use privately purchased seeds for wheat cultivation, 33 perecent use their own retained seed and 18 perecent use the seed purchased from Public Sector Seed Corporations.

7. On average, a farmer uses 96.73 Kg chemical fertilizer per acre with the maximum and minimum of 350 Kg and 40 Kg respectively. The average per acre cost of wheat production is Rs. 10,670.

8. All 300 farmers are using tractors for cultivation and preparing land for crops, and some are using tractors for fetching their crop produce to market.

It appears from the economic data and anecdotal evidence that bulk of the 32% of the Pakistani poll respondents who say they are thriving have income from the rural sectors of Pakistan's economy.

As expected, the people in the developed world report higher state of wellbeing than those in the developing nations. With Danes ranked the most satisfied people with 72 percent of respondents considering themselves “thriving,” people in Sweden and Canada follow close behind, each at 69 percent in Gallup’s 2010 Global Wellbeing Survey. The US came in somewhat near the bottom among developed western nations, with 59 percent of Americans thriving.

A median of just 21 percent were found to be “thriving” in the Gallup survey polling 1,000 adults, age 15 and older, in both face-to-face and telephone interviews in each country throughout 2010.

African nations show up near the bottom of the list, with only 12 percent of the respondents considering themselves to be thriving in Egypt, followed by 6 percent in Kenya and Chad with 1 percent ranking it dead last at 124.

Related Links:

Haq's Musings

Pakistan's Rural Economy

Resilient Pakistan Defies Doomsayers

Agriculture, Textiles Employ Most Indians and Pakistanis

New Index Finds Indians Poorer Than Africans, Pakistanis

Pakistan's Exports and Remittances Rise to New Highs

Sugar Crisis in Pakistan

Agricultural Growth in India, Pakistan and Bangladesh

Pakistan's Rural Economic Survey

Pakistan's KSE Outperforms BRIC Exchanges in 2010

High Cost of Failure to Aid Flood Victims

Karachi Tops Mumbai in Stock Performance

India and Pakistan Contrasted in 2010

Pakistan's Decade 1999-2009

Musharraf's Economic Legacy

World Bank Report on Rural Poverty in Pakistan

Copper, Gold Deposits Worth $500 Billion at Reko Diq, Pakistan

China's Trade and Investment in South Asia

India's Twin Deficits

Pakistan's Economy 2008-2010

[Riaz Haq]

Rising per capita income and a growing, young population spending more time online and at Western movies are helping build a mass market in Pakistan, according to Businessweek:

One way to take a city’s economic pulse is to check out where locals shop. In Karachi, Pakistan, shoppers are flocking to Port Grand, which opened in May. Built as a promenade by the historic harbor for almost $23 million, the center caters to Pakistanis eager to indulge themselves. This city of 20 million has seen more than 1,500 deaths from political and sectarian violence from January to August. At Port Grand the only hint of the turmoil is the presence of security details and surveillance cameras. “The whole world is going through a new security environment,” says Shahid Firoz, 61, Port Grand’s developer. “We have to be very conscious of security just as any other significant facility anywhere in the world needs to be.”

Young people stroll the promenade eating burgers and fries and browsing through 60 stores and stalls that sell everything from high fashion to silver bracelets to ice cream. Ornate benches dot a landscaped area around a 150-year-old banyan tree. “Port Grand is something fresh for the city, very aesthetically pleasing and unique,” says Yasmine Ibrahim, a 25-year-old Lebanese American who is helping set up a student affairs office at a new university in Karachi.

One-third of Pakistan’s 170 million people are under the age of 15, which means the leisure business will continue to grow, says Naveed Vakil, head of research at AKD Securities. Per capita income has grown to $1,254 a year in June from $1,073 three years ago.

The appetite for things American is strong despite the rise in tensions between the two allies. Hardee’s opened its first Karachi outlet in September: In the first few days customers waited for hours. It plans to open 10 more restaurants in Pakistan in the next two and a half years, says franchisee Imran Ahmed Khan. U.S. movies are attracting crowds to the recently opened Atrium Cinemas, which would not be out of place in suburban Chicago. Current features include The Adventures of Tintin and the latest Twilight Saga installment. Mission: Impossible—Ghost Protocol is coming soon. Operator Nadeem Mandviwalla says the cinema industry in Pakistan is growing 30 percent a year.

Exposure to Western lifestyles through cable television and the Internet is raising demand for these goods and services. Pakistan has 20 million Internet users, compared with 133,900 a decade ago, while 25 foreign channels, such as CNN (TWX) and BBC World News, are now available. And for many Pakistanis, reruns of the U.S. sitcom Everybody Loves Raymond are a regular treat.

The bottom line: With per capita income rising quickly, Pakistan is developing a mass market eager for Western goods.

http://www.businessweek.com/magazine/pakistans-consumers-flex-their...

[Riaz Haq]

Here's an Express Tribune story on the opening of British Dept store Debenhams:

When Pizza Hut opened its first franchise in Pakistan in 1993, few were familiar with the concept of franchising. Soon it became a household name, and was followed by other fast food franchises. Many observers viewed these import-oriented luxuries in an underdeveloped country like Pakistan, with scepticism and considered it a waste of our precious foreign exchange. However, the trend of foreign retail outlets continues to expand into other products, services, and brands.

The press launching of the 200 years old British department store, Debenhams’ branch in Karachi earlier this month on 27,000 square feet space, at the upbeat Dolmen City Mall, was attended by important personalities, like, UK Minister of State for Trade and Investment, Lord Stephen Green and UK Cabinet Minister Baroness Sayeeda Warsi. It appears to have pushed the retail franchising business to another level. The skeptics are turning into fans.

This will be the first international department store in Pakistan offering a complete range of product categories synonymous with Debenhams, including a full range of women’s, men’s and children’s clothing, as well as, home, beauty and accessories. It is promised to be a truly world class shopping experience.

“I am very bullish on retail, not just for local but also foreign brands,” said Yasin Paracha, Managing Director, Team-A Ventures (Pvt) Ltd, which is the franchisee in Pakistan for Debenhams. “Foreign brands will perhaps give Pakistan that softer image we need; that we are normal people, with normal tastes and preferences and actually do drive in cars and wear western clothes! Furthermore, foreign brands will give the local brands the required positioning on the brand scene and will give customers the choice to decide where they want to spend their money.”

It is worth noting that before the fast food franchises, auxiliary industries like the home-delivery service and suppliers of quality poultry, meat etc, according to modern quality standards, hardly existed.

Paracha is very upbeat about the employment possibilities this presents. “This creates immense number of jobs; the average requirement per 1,000 square foot, of retail space is around six, which means Dolmen City, with a leasable area of 650,000 square feet will provide jobs to around 4,000 people! These will be mostly undergrads who might struggle to find good jobs in offices. Here they have the chance to work in a comfortable environment, look nice, and develop the discipline to deal professionally with customers. It also provides students the opportunity to work. Almost every teenager in the UK has worked in a retail environment.”

About government revenue and taxation, Mr. Paracha says, “This adds immense revenue, as most brands will progress towards declaring and paying taxes, they are too much ‘in your face’ to avoid it. Furthermore, instead of considering this as an outflow of foreign exchange, it actually saves it, as most people spend on shopping when they travel, they will convert to shopping within the country if they have the option and the right environment.”...

http://tribune.com.pk/story/325554/the-fast-track-growth-of-foreign...

[Riaz Haq]

Here's some info on Nestle's rural entrepreneurship program in Pakistan:

The Small Entrepreneur Development Project was launched in March 2009 from a partnership between Nestlé Pakistan Ltd. (as implementing partner) and the Swiss Agency for Development and Cooperation (SDC) which has co-funded the project. Its aim is to contribute to the improvement of economic opportunities, income generation and food security in rural areas of the country. Livestock and dairy farmers are provided with training and assistance to both enhance their skills as small entrepreneurs and improve their market linkages. Training is provided through the Nestlé Agricultural Services in the location of training farms specially dedicated to the project.

Current dairy farming constraints

The livestock and dairy sector represent 11% of Pakistan's GDP. There are 10 million farming families and 50 million cattle heads in Pakistan, out of which 7 million farming families (approx 35 million people) live in the Punjab Province. Many of them are landless farmers.

The lack of sustainability of dairy farming in Punjab is due to the lack of training and skills, poor infrastructure, poor breeds, lack of good fodder management, lack of support mechanisms for the farmers, lack of financial services and expertise in running small enterprises.

It is then no surprise that there are no commercial dairy farms or formal dairy farming structures in Pakistan. The majority of these farmers are domestic dairy farmers with only 2 to 3 cows or buffalos.

All this amounts to poverty driven farmers, no socio-economic growth in the dairy sector, poor living conditions and very low social standing, particularly for women. 48% of the farmers are women. As part of their domestic chores, they care for the livestock but are not socially acknowledged for these services and are kept out of the decision making processes. Hence there is a strong need to initiate a development programme targeted specifically at the women which the Nestlé-UNDP Partnership Programme tackles with great success (see specific project description).

While the demand for milk and meat is growing by 5%, the actual supply increase represents less than 2% per annum. There is a large potential for farmers to play a positive role in the development of the dairy sector in Pakistan's economy. Regretfully, very few initiatives provide farmers with livestock and dairy training at the grass root level which could strongly link rural development to economic growth....
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Nestlé Pakistan has established the training facility over 103 acres of leased land as an investment for the development of the dairy sector and to work towards sustainable farming and an improved rural economy - benefiting the farmers through increased prosperity and food security. Furthermore, this win-win community development model is designed to sustain itself in the following manner: Institutional linkages with the Government departments and financial institutions once established will sustain beyond the life of the project; capacities of the farmers once built shall yield economic benefits and further contribute to generate employment; training modules developed and tested by Nestlé Agri-Services will continue to be used beyond the life of the project.

http://www.community.nestle.com/rural-development/asia/pakistan/Pag...