On 11th May 2014, Dr. Qadri announced his 10 point agenda for the prosperity of Pakistan. The agenda is quite simple and easy to understand and every sane person would agree with all the points of the agenda. However some people raise questions as to how Dr.Qadri will generate the resources which are required to implement his agenda. In this article, we will objectively try to look at the first 5 points of the agenda and attempt to find out how the said resources will be generated.
Home for every homeless
Dr. Qadri stated that every homeless will be given a 4/5 marla plot, further they`ll be given house building loans free of interest,if they cannot pay it off then the government will bear the cost of construction.
Pakistan, ranked 141 of 182 in the United Nation’s Human Poverty Index, faces complex development challenges and is characterised by major inequalities in income and access to basic services. A high proportion of people in Pakistan live in slums and the country is facing rapid, sustained slum growth rates. Urgent action is required to slow down or reverse these trends. A significant proportion of Pakistan’s population lack access to basic infrastructure (90% of the population has access to improved water, and only 45% to improved sanitation), suffer from ill health and illiteracy, with 60% living on less than two US dollars a day.
According to estimates, there are approximately 15 million homeless in Pakistan. The cost for providing accommodation to all of them will be roughly Rs 700 billion.
This is roughly the total cost of providing accommodation . Those families who will be able to afford the housebuilding loan, will use the amount of loan for construction. For the remaining amount, the resources can come from multiple resources. I am a humble student of economics and from my analysis, the amount can quite easily be generated internally. The current finance bill has outlined Rs 2, 012, 000, 000 for housing and community amenities .
This amount is solely for the purpose of house building, but due to corruption, the allocated amount is never fully used. Under the new system this amount can be directed on priority bases towards the construction of houses for the homeless. The mass scale construction will also open up employment opportunity for the skilled labour. This will effect the rate of influx of population in major urban centres. The urban centres will see a reduction in population as skilled labourers of rural centres are redirected at construction sites.
Furthermore, according to the former Chairman NAB, monthly Rs 100 billion are lost in corruption that makes an annual Rs 1200 billion loss to the National Exchequer. If in the first 6 months of the new setup, this amount is reduced by only 25% then the country will get Rs 300 billion in first six months, this additional amount can also be directed towards the construction of the homes. In the long run, the corruption levels will be brought down to 10%, which will result in an increase of almost Rs 1080 billion in the National Exchequer. This amount is far more than what is required to build homes for the homeless.
Therefore, it is just a matter of good governance and control. Raising the funds is not an extra ordinary task, it only requires honest and efficient leadership. Those who say that Dr. Qadri`s agenda sounds Utopian, should objectively analyse the fund generation capacity of our economy.
Employment or Unemployment allowance
Every year approximately 2 million people enter the workforce, however current levels of unemployment indicate much higher figures.According to ILO [International Labour Organization] the rate of unemployment for Pakistan in 2014 is set to be 5.14%. To solve the problem of unemployment, one must first look at the reasons for unemployment.
There are multiple reasons, the most important reason is the lack of jobs, which is mainly because of poor planning and lack of public policy experts, secondly the culture of corruption and nepotism has resulted in unfair distribution of jobs. The undeserving are awarded jobs whereas the qualified students are forced to look for jobs abroad.
The figure for unemployment can be brought down significantly by curbing corruption and awarding jobs on merit. Unemployment rate is inversely proportional to the economic condition of the country. If the economic condition of the country improves, then jobs will automatically be created and local trained and untrained workforce will be employed. But it must be remembered that reducing the rate of unemployment is not a short term task. The policies of the new system will take minimum 6 months to register their effect and a substantial result will only be seen after 12 months.
The funds for unemployment benefits can be internally generated. In addition to daily corruption , FBR has also stated that there is an annual tax leakage of approximately Rs 2000 billion. You can have a look at one example of the above mentioned tax leakage on the Pakistan Customs Website . Even if 25% of this tax leakage is stopped in the first few months, then resultant revenue would go up by Rs 500 billion. According to rough estimates there are almost 3 million people who are unemployed. If after providing employment opportunities and merit based jobs, we are left with 1 million unemployed left.Paying then monthly Rs 20000 would only require Rs 20 billion. Which is not such a big amount.
50% taxes will be reduced from basic necessities for the poor
( Points 3 & 4 combined )
Almost 108 million people are living under $2 or Rs 200 per day.It is imperative to provide the basic necessities of life to them at subsidized rates. The rich need to be taxed and the poor need to be given tax relief. Under the current setup, only the poor are taxed. Although Pakistan has a progressive taxation system, the amount of tax paid increases as the income increases, but one must also look at the minimum salary. It is only Rs 12000, in an economy which has an inflation rate of almost 8.5%, it becomes almost impossible for the poor to buy the basic necessities of life and then send their children to costly schools as government schools are used as makeshift stables and garbage dumps.
Furthermore,progressive taxation only exists on taxable income. When you move into the sphere of indirect taxation, for example sales tax is imposed on the sellers of goods, they in turn increase their prices to cover up for the tax paid to FBR. This increase in prices is equal for the rich and poor. Toothpaste is used by all, tea is used by all, therefore when a person earning Rs 50000/ month buys a tooth paste for Rs 100 inclusive of Rs 17 as tax, he isn`t bothered by the meagre amount of tax, whereas when a person earning Rs 12000 has to pay those extra Rs 17, a greater effect is registered in this case.
Therefore, all basic necessities should be provided at subsidized amount to those who cannot afford. Yes this will reduce the revenue generation but at the same time if income of the super rich is taxed justly, the revenue generation will show a significant increase.
Insurance scheme and free medical treatment for the poor
In the South Asian region, Pakistan is one of the few countries which covers all sorts of contingencies recognised by ILO conventions. The percentage of workers covered under these schemes is relatively high as compared to other countries of the region, but still very low as compared to developed countries of the world. The pension and social security coverage is limited to the formal economy workers whereas the informal or unorganised sector fall outside the purview of the statutory provisions usually administered through registered public and private enterprises. The structural adjustment policies have reduced social budgets, privatised public sector units and downsized Governments. These policies and programmes have in turn tended to reduce the number of individuals covered by the pension and social security schemes as incremental employment is generated in the informal economy. Pension and social security in the formal economy are currently provided through social insurance programmes and other employer benefit schemes.
The current schemes can be divided into two main categories: The first category consists of the “general” or “by default” schemes. These are the Government schemes that employers in firms of 10 workers or more are required to contribute to, unless they have been specially exempted by legislation. The coverage is voluntary for employees in firms of less than 10 workers. The Employees Old Age Benefits Institution (EOBI) is a federal body that provides age, disability and survivors pensions. The Employees Social Security Institutions are provincial bodies (ESSls) that provide health services and some cash benefits to retired and senior citizens. The EOBI covers approximately 1.3 million workers, while the ESSls cover only 850,000 (2007).
The second category consists of schemes that are specific to particular sectors or enterprises and are specifically exempted from membership of the general schemes. The main category exempted consists of Government workers, members of the armed forces, and some others. Besides, commercial and industrial establishments with 50 employees or more must provide group insurance for temporary and permanent disability and death benefits for employees earning less than 3,000 rupees a month.
The pension and social security coverage is thus limited to the formal economy whereas the informal or unorganised economy fall outside the purview of the statutory provisions usually administered through registered public and private enterprises. As mentioned before, the structural adjustment policies have reduced social budgets, privatised public sector units and downsized Governments. These policies and programmes have in turn tended to reduce the number of individuals covered by the pension and social security schemes as incremental employment is generated in the informal economy.
Thus, a basic structure for social security and insurance already exists within the country, but there is a need to widen it to include all the sectors so that the social security is not just limited to Government employees. Also current social security levels are no way near as compared to the Scandinavian countries, where some countries have rates as high as 30% of GDP for social security. My expertise does not lie in the field of public policy therefore I cannot comment on this at length, but I know for a fact that if handled honestly, our economy has enough capacity to become a total welfare state. It is a well known fact that by bringing in all the laundered money from foreign banks the economy can produce tax free budget for well over 15 years.
This was just my personal analysis of the first 5 points of Dr. Qadri`s 10 point agenda. The first 5 points require the most funds and from my humble analysis it appears that there are plenty of sources to generate funds. I focused the analysis around donations, aid and reduction in incompetence and corruption. But there are plenty of sources. The mineral deposits haven`t yet been exploited, trillions of dollars in the form of mineral reserves are waiting to be exploited. Dr. Qadri has a team of over 250 professionals who have carried out proper feasibility studies for the new system. Therefore those who raise questions about the fund generation capacity of the new system should go through this analysis. If you have any comments or rebuttals against this analysis, kindly post them in the comments section and if proved wrong, we`ll upload your rebuttal with our apology.
by Danial Ahmed
Team Operation Pakistan