Income Inequality: Elite Capture in Pakistan
A recent United Nations report on inequality reveals that the richest 1% in Pakistan take 9% of the national income. A quick comparison with other South Asian nations shows that 9% income share for the top 1% in Pakistan is lower than 15.8% in Bangladesh and 21.4% in India. These inequalities result mainly from a phenomenon known as "elite capture" that allows a privileged few to take away a disproportionately large slice of public resources such as public funds and land for their benefit.
|Share of Income of Richest 1% in South Asia|
Elite capture, a global phenomenon, is a form of corruption. It describes how public resources are exploited by a few privileged individuals and groups to the detriment of the larger population.
A recently published report by the United Nations Development Program (UNDP) has found that the elite capture in Pakistan adds up to an estimated $17.4 billion - roughly 6% of the country's economy.
Pakistan's most privileged groups include the corporate sector, feudal landlords, politicians and the military. UN Development Program's NHDR for Pakistan, released last week, focused on issues of inequality in the country of 220 million people.
Ms. Kanni Wignaraja, assistant secretary-general and regional chief of the UNDP, told Aljazeera that Pakistani leaders have taken the findings of the report “right on” and pledged to focus on prescriptive action. “My hope is that there is strong intent to review things like the current tax and subsidy policies, to look at land and capital access", she added.
|Inequality in Pakistan. Source: UNDP|
The richest 1% of Pakistanis take 9% of the national income, according to the UNDP report titled "The three Ps of inequality: Power, People, and Policy". It was released on April 6, 2021. Comparison of income inequality in South Asia reveals that the richest 1% in Bangladesh and India claim 15.8% and 21.4% of national income respectively.
In addition to income inequality, the UNDP report describes the inequality of opportunity in terms of access to services, work with dignity and accessibility. It is based on exhaustive statistical analysis at national and provincial levels, and includes new inequality indices for child development, youth, labor and gender. Qualitative research, through focus groups with marginalized communities, has also been undertaken, and the NHDR 2020 Inequality Perception Survey conducted. The NHDR 2020 has been guided by a diverse panel of Advisory Council members, including policy makers, development practitioners, academics, and UN representatives.
Savings, Investments and Exports:
It is generally accepted that the rich save a much bigger portion of income than the middle class and the poor. The effect is strongest among those in the top quintile of the lifetime earnings distribution—they have substantially greater wealth relative to their earnings than those in the bottom 80% of the distribution, according to published research.
|Savings Rate in Pakistan. Source: Dawn|
Pakistan's exports doubled from $10 billion to $20 billion in years 2000-2010. In the last decade 2010-2020, the nation's exports have grown only about 25% to $25 billion. Exports have declined in terms of percentage of the country's GDP from 13% to 10% in the most recent decade.
Pakistan FDI inflows have significantly lagged behind those of the rest of South Asia.
|FDI Inflows in Pakistan. Source: World Bank|
Pakistan saw rapid economic growth in the 1960s in spite of low domestic savings rate. This can be explained by foreign development aid of as much as 10% of GDP that Pakistan received in that decade. .
|Foreign Aid to Pakistan as Percent of GDP Source: World Bank|
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