-Illustration by Dawn.com

If electoral democracy were a cake, Pakistanis would be coming off of a five-year binge. Instead, the nation is poorer, hungrier, and more deprived today than it was in March 2008.

For the first time since independence in 1947, democratically elected legislatures are completing their constitutionally mandated tenures in Pakistan without being summarily uprooted by a military regime or its civilian proxy.  This is indeed a significant landmark in Pakistan’s democratic journey.

Despite the historic achievement, the sorry state of the federation where law and order has disappeared and corruption is ubiquitous, and where economy and utilities have faltered, would prompt the electorate to question the real value of electoral democracy. Has electoral democracy been able to deliver jobs to the unemployed, and food to the poor? A quick economic recap of the past five years is in order.

The Zardari government took over from General Musharraf who reluctantly relinquished control after it became apparent that a showdown between the General and political forces was imminent. What started with a great promise turned quickly into a major disappointment? Within months, the naïveté of the new government was evident as one sector of the economy was mismanaged after the other. While the Musharraf regime posted 6 per cent to 8 per cent economic growth rates, the Zardari government couldn’t muster even a 4 per cent GDP growth.

It is, however, true that the good fortune did not favour the elected governments. Whereas, the Musharraf regime enjoyed the dividends of a rapidly growing global economy in which the Americans and the Europeans were keen to shower cash for Pakistani mercenaries and bounty hunters, the Zardari government came to power in 2008 when the global economies experienced the worst economic recession since the great depression of the 30s. The demand for Pakistani goods declined and investment flows dried up, thus starving Pakistani industries.

And while the economic growth was dismal at best, the stock markets in Pakistan continued to reach new heights. Even with the worsening of law and order and a near complete collapse of the power sector that crippled the manufacturing sector, the KSE 100 index continued to grow, fuelled most likely by ‘irrational exuberance.’

Source: Tradingeconomics.com (2013). KSE 100 Index.

The lackluster economic growth resulted in a sustained higher than usual unemployment rate that lasted throughout the five year democratic rule. The per capita GDP (measured in US$ in constant 2000 prices) during the same period grew by mere $30. At the same time, the economic managers fail to arrest the sharp increase in consumer prices that grew by 80 per cent in a short span of five years. The result was catastrophic for low to mid-income households who faced limited opportunities to earn a living, while the cost of living continued to climb.

Good governance, amongst others, is as much a part of democracy as electioneering is. However, governance has not been a core value of the political parties that controlled legislatures in Pakistan. We are indeed indebted to the Zardari government in the centre and the four provincial governments to have the fortitude and ability to complete their constitutional tenures. However, the same left the nation buried under a mountain of foreign debt that ballooned from $45 billion in 2008 to over $65 billion in 2012. The government debt to GDP ratio, which was down to 55 per cent in 2008, rose to 60 per cent in 2012.

The economic scorecard of the democratically elected government in Pakistan suggests that the past five years have been a major disappointment for the electorate. The government failed to recognise its responsibility to create the necessary environment in which commerce could flourish and the private sector could create jobs for the rapidly expanding younger cohorts.

The past five years have left the nation poorer and hungrier. A 2011 national survey revealed that widespread malnutrition in Pakistan has caused 44 per cent of the children under 5 years of age to have stunted growth. In Sindh, the power base of the Zardari government, three in four households were food insecure.

Democracy is all about the fulfillment of physical and spiritual needs of a people. For Pakistanis though, the democratic rule has meant darkness, hunger, and violence. Surely, Pakistanis deserve much better and are justified in expecting improved governance from the next cadre.

Murtaza Haider, Ph.D. is the Associate Dean of research and graduate programs at the Ted Rogers School of Management at Ryerson University in Toronto. He can be reached by email at murtaza.haider@ryerson.ca

The views expressed by this blogger and in the following reader comments do not necessarily reflect the views and policies of the Dawn Media Group.

The Karachi Stock Exchange (KSE100) lost 525 points (3.2 per cent decline) Tuesday after the news of the Supreme Court ordering the arrest of the Prime Minister flashed across news channels. The dubiously timed Supreme Court’s order, whose particulars are now in question, further fueled the uncertainty in the federal capital Islamabad where Dr. Tahir-ul-Qadri had staged a sit-in along with thousands of his followers.

Dr. Qadri and the Supreme Court have targeted the government at the same time, causing the uncertainty to reign supreme in the political and financial spheres of the country. The 2.5 per cent drop on January 2nd and the 3.2 per cent decline on January 15 show the bears scaling bourse’s walls as investors abandon the market in a hurry.  Dr. Qadri’s long march, which has turned into a short stay, has also caused suspension of business activity in Islamabad. The Federal Board of revenue estimates a daily loss of one billion rupees from the suspension of commerce in Islamabad alone.

Markets hate uncertainty of all types, particularly political chaos, which creates uncertainty about government’s longevity, and in the case of Pakistan such chaos is accompanied by extreme violence and destruction.

Research in stock market performance has revealed that markets react sharply to both good and bad news. However, the impact of bad news is often more pronounced than that of the good news. Helinä Laakkonen and Markku Lanne researched the impact of good or bad news on the exchange rate between the US dollar and Euro. They found that bad news often increased volatility more so than good news.  Another interesting finding was that the adverse impact of bad news was more severe during good economic times than in bad economic times. At the same time, the impact of good news did not differ between good and bad economic times.

In a recent paper, Muhammad Tahir Suleman reported his findings about the impact of political news on the Karachi Stock Exchange (KSE100 Index) returns. He found that good political news had a positive impact on stock returns and at the same time it reduced volatility. Bad news, on the other hand, decreased returns and increased volatility.

If one were to agree with the arguments made in the academic and professional literature that good news generally has a positive impact on returns and the bad news exerts a negative impact, one then wonders what positive news caused the 49 per cent increase in KSE100 Index during 2012. While the country limped from one crisis to another, the stock market continued its upward climb.  Last year witnessed the tug-of-war between the government and the Supreme Court that ended with the court ousting Prime Minister Yousaf Raza Gilani in June. KSE 100 reacted at the news of the prime minister’s dismissal with a decline of mere 71 points. However, in a short span of eight days the stock market recovered all losses since the day the prime minister was sacked.

It is rather interesting to note that the volatility in returns declined after the departure of Prime Minister Gilani (see the graph below). During late June and late December 2012, the KSE100 Index reveals significantly less volatility than the one observed for earlier periods. This again is an interesting trend because the first few months of Prime Minister Raja Pervez Ashraf’s tenure were spent playing hide-and-seek with the Supreme Court over the draft of the letter to be sent to the Swiss Magistrate to re-open cases against President Asif Zardari. Those uncertain times are not reflected in high or low stock returns (in percentage terms).

While the political crisis kept unfolding in Pakistan as weekly episodes of high drama between the government and the superior courts, terrorism continued to destroy the social fabric of the country. In 2012 alone, 3007 civilians and 732 members of the security forces lost their lives to terrorist violence. At the same time, Karachi, Pakistan’s largest city and its economic engine, witnessed communal violence resulting in the death of hundreds. However, this did not deter the KSE100 from reaching new highs.

Add to this the infrastructure failures resulting in the suspension of gas supplies to the industry, shortage of fuels for ordinary customers, and intermittent supply of electric power to domestic and commercial customers. One wonders why and how the stock market has been able to post such gains last year when one could not find much good news or development in Pakistan or abroad where more advanced European economies were defaulting on their debts.

The Punjab administration sent an invoice of 500,000 rupees to Dr. Qadri for the damage caused by his December 23 rally in Lahore. Dr. Qadri’s team though refuses to pay a “single penny” and claims that it is an attempt to embarrass Dr. Qadri and his movement.

If the Punjab government fails to recover even a small amount from Dr. Qadri, the investors and others, who have lost millions in the past two weeks due to the long march, should be prepared to absorb all losses. Or they may embark on a long march of their own!

Murtaza Haider, Ph.D. is the Associate Dean of research and graduate programs at the Ted Rogers School of Management at Ryerson University in Toronto. He can be reached by email at murtaza.haider@ryerson.ca

The views expressed by this blogger and in the following reader comments do not necessarily reflect the views and policies of the Dawn Media Group.

Illustration by Abro

Given the opportunity, one in five highly-educated Pakistanis would emigrate from Pakistan. This is in addition to the two million-plus Pakistanis who have already left their homeland.

Given the large population base of 175 million, 2 million emigrants (2000 estimate) does not seem to be an exodus. However, amongst the highly educated Pakistanis, almost 22 per cent are ready to jump the ship. This does not bode well for the skill-deprived nation where scarcity of qualified doctors, managers, professors and more importantly, entrepreneurs, is impeding the economic growth.

A recent report by the Organization of Economic Co-operation and Development, an organisation with 34 (mostly western) member states, analysed the role of diasporas in improving social and economic conditions in countries of their origin*.  Based on results derived from a Gallup Survey conducted in 146 countries (including Pakistan) during 2008-10, the OECD report revealed that given an opportunity, 11 per cent of Pakistani adults would emigrate.

While the flight of highly-skilled talent hurts Pakistan’s soc

ial and economic prospects, the emigrants can hardly be blamed for losing faith in their homeland. The economic hardships alone are sufficient to force the skilled to leave. Pakistan ranks 145 out of the 187 countries ranked in the Human Development Index. On a per capita GDP basis, Pakistan ranks 152 out of 194 countries. While the economic woes continue to persist in Pakistan, the country has also plunged into several civil wars that manifest as sectarian, ethnic, and nationalist conflicts, which have deprived Pakistanis of any sense of security. Thus those who could, have already left, and those who can, are planning to leave.

Globalising emigrants sending billions back home

The two million-plus Pakistanis and their children who live outside of Pakistan are part of the global emigrant nation, which in 2010 was 214 million strong. Almost 89-million migrants live in the OECD countries alone. Mexico provides 20-million emigrants, most of whom reside in the United States. While the emigration rates have picked up over the past 20 years, the increase in the number of female migrants has been significantly higher than that for men. Women now account for 60 per cent of the emigrants from Thailand, Japan, and Philippines.

The global remittances from emigrants are estimated at around US$440 billion. The World Bank estimates that US$325 billion in remittances are headed to developing countries alone.  Remittances from OECD countries to India are estimated at US$54 billion. Another US$53 billion in remittances are destined to China. For at least 10 countries, remittances represent more than 20 per cent of their GDP.  For instance, remittances account for 35 per cent of the GDP in Tajikistan, 23 per cent in Nepal, 22 per cent in Lebanon, and 21% in Kyrgyzstan. Remittances account for 5.5 per cent of the GDP in Pakistan.

The brain drain in the medical profession poses unique challenges. It is estimated that 164,000 foreign born doctors from Asia are working in OECD countries. Of those, Indian-born doctors are estimated at 56,000.  At the same time almost 110,000 Filipino nurses have also been working in OECD countries. The 56,000 Indian doctors represent 8 per cent of all Indian born doctors, whereas 110,000 nurses represent 46 per cent of the nurses in the Philippines.

The OECD report lists several other countries that contribute a large number of medical professionals to the OECD countries. More than one in five Algerian and Philippines born doctors is working in the OECD countries. This raises the question about how these countries can meet the healthcare needs of their masses when a large number of medical professionals leave for elsewhere.

A higher calling for Pakistani emigrants

The very definition of diaspora refers to those emigrants and their children who share a sentimental link or hold a collective memory of the origin country. This sentimental link can be put to good use to address the adverse impacts of brain drain.

The OECD report cites examples of diaspora entrepreneurship that enables the emigrants to help the country of origin. Consider for instance GlobalScot, which is a group of 750 Scottish emigrants dedicated to help Scottish enterprises to expand globally. “GlobalScot seeks to develop and expand Scotland’s standing in the global business community by utilising the talents of leading Scots, and of people with an affinity for Scotland, to establish a worldwide network of individuals who are outstanding in their field. Scottish companies can freely draw on this network for advice, contacts, assistance and support.”

GlobalScot is one example of Diaspora Knowledge Networks (DKN) where emigrants can pool resources to provide expert advice to businesses, government agencies, academic institutions and not-for-profit organizations. The South African Network of Skills Abroad (SANSA) is another DKN based out of the University of Cape Town that assists researchers and academics in South Africa. Advances in Information Technology enable emigrant doctors to assist patients in their country of origin, thus giving birth to telemedicine.

Highly-skilled Pakistani emigrants have the opportunity to play a much larger role in improving the plight of those they have left behind. While Pakistani emigrants are already playing a very significant role in providing over $10 billion annually in remittances, the emigrants can also assist in creating the much needed enterprising culture in Pakistan.

By creating DKNs, the emigrants can help revive the stagnant economic environment in Pakistan so that enough opportunities are created domestically to absorb the highly skilled labour in Pakistan.
 
* The numbers cited in this essay are obtained from Connecting with Emigrants: A Global Profile of Diasporas. OECD, October 2012.

Murtaza Haider, Ph.D. is the Associate Dean of research and graduate programs at the Ted Rogers School of Management at Ryerson University in Toronto. He can be reached by email at murtaza.haider@ryerson.ca

The views expressed by this blogger and in the following reader comments do not necessarily reflect the views and policies of the Dawn Media Group.

Given the widespread violence in Pakistan, which has caused at least 40,000 violent deaths in the past few years alone, many wonder about its root causes. People ask how Pakistanis could commit such barbaric acts. The scapegoating kicks right in. Most readily blame India for hatching violent conspiracies against Pakistan. Polls after polls show that Pakistanis believe India poses the greatest threat to their security. Others blame the great Satan, the United States, for masterminding terror in Pakistan’s streets and squares. And then there are others who blame Saudi Arabia and Iran for the same. Almost no one finds fault with Pakistanis.

But Pakistan does have a J for Jihad problem that begins with what is taught to children even when they are in the cradle. Even from a young age, Pakistanis are bombarded with tales of warriors, of whom not a single one being indigenous, who arrived from foreign lands to protect Muslims or to spread Islam. These holy warriors seldom built schools or hospitals in the invaded lands, but their conquests are celebrated nevertheless. And when Pakistanis could not find any contemporary warriors to sing praise for, they turned to militarising even the alphabet. Toddlers are being taught J for Jihad in Pakistan!

J is for Jobs

I wonder whose job it is in Pakistan to create jobs. The socio-political discourse in Pakistan is devoid of any meaningful discussion of growing the employment base. Even those who are supposed to be the economic gurus talk only of GDP growth and inflation rates, but are mum about growing the employment base. Ask any expert about how many workers are gainfully employed in Pakistan and they may not have an answer.

Lack of sustenance providing jobs and the increase in violence are intrinsically coupled. A quick glance of the age pyramid in Pakistan would reveal that the largest cohorts in Pakistan comprise the youth and young adults in their prime working age. While the economy fails to create jobs in urban centres that are required to absorb the growing tide of the young and restless cohorts, the militants and other outlawed outfits handsomely reward those who are willing to join their ranks and pick up arms against the civilian and military elite that hoard resources from the rest. If the economic engine spits out enough jobs in Pakistan’s urban centres and small towns, the youth may decide not to join the dark side. Don’t take my word for it. David Foot, Canada’s renowned demographer and a former professor at the University of Toronto, has been arguing the same in the Middle Eastern context. If the Palestinian kids had jobs, they wouldn’t be throwing stones, argued David Foot.

Source: http://www.finance.gov.pk/survey/chapter_10/16_Population.pdf

Earlier when I worked as a junior analyst on the fixed income derivatives desk on Canada’s largest trading floor, I learnt that the most important day of the month was the first Friday of every month when the US government releases the non-farm payroll statistics. The number of jobs created would determine the expected change in interest rates, yields and several other major aspects of finance. The same payroll statistics fuelled recent controversy when Jack Welch, GE’s former CEO, suggested that there was something funny about the latest release of non-farm employment numbers. Despite the recent controversy, economists and traders around the globe point their antennas towards the US every first Friday of the month to review the payroll numbers released by the US government.

When was the last time the government of Pakistan released employment figures for public consumption?

The reality is that the government of Pakistan (the political apparatus and the civilian bureaucracy) is least prepared to create the environment necessary for growing an employment base in Pakistan. Many experts argue that the government is in fact more of a drag than a facilitator for job creation.  The government in fact cannot even collect owed taxes, let alone help create jobs. Why else would the recently released report on doing business reveal that Pakistan ranked 162 out of 185 countries in ease for paying taxes?

Source: http://www.doingbusiness.org/data/exploreeconomies/pakistan

The public sector discourse on economy is too abstract, and at times meaningless, when it comes to job creation. Consider Pakistan government’s primary text on the state of economy, The Economic Survey of Pakistan, which struggles to say a word or two about employment statistics. And even those numbers are highly suspect. The government claims that in a country where a large number of children are so malnourished that they are categorised as wasting or having stunted growth, the unemployment rate in 2010-11 was only 6 per cent. What does this number imply? Does it mean that only 6 per cent of the labour force is unemployed, while the rest are gainfully employed?

The government further claims that 53.84 million of the 57.24 million comprising the labour force in 2010-11 were employed. In fact, the government believes that the unemployment rate in Khyber Pukhtoonkhwa (KPK) decreased during the same time period. This may suggest to some that Pakistan has resolved its economic woes, which is hardly the case. Let’s first look at the situation in KPK. With devastating floods that displaced millions from the province and the armed insurgency that further forced millions to leave the province, it should come as no surprise that, even if the numbers are suspect, unemployment may have declined because those without jobs and sustenance have most likely migrated to Punjab and Sindh.

But what does the government mean when it counts someone as employed. Does the government truly believe that the 53.8 million were gainfully employed in Pakistan? The government has set the minimum wage, which it cannot enforce even in the capital Islamabad, to 8,000 rupees. I think that the government counts any one earning the minimum wage as employed, regardless of the fact if 8,000 rupees were insufficient to support an average sized household that often struggles to feed six to seven individuals. Obviously those earning minimum wage cannot sustain a household, suggesting that a large number of Pakistanis are underemployed, thus earning less than sustenance wages, thus resulting in massive food insecurity.

One wonders if the government has a plan to boost employment? Yes it does. However, the plan does not work for workers in Pakistan. In the government’s own words: “The Government of Pakistan is making sincere efforts to boost overseas employment.” The government of Pakistan sounded extremely pleased in reporting that the number of expatriate workers had increased to 0.45 million in 2011. The government even offers a breakdown of expatriate workers by skill level, which it fails to do for workers employed within Pakistan.

J is for Jamat-i-Islami

The political and religious parties in Pakistan are also without a plan. Jamat-i-Islami (JI) is a classic spoiler when it comes to the party’s economic policy. Knowing that JI will never be in power, the party makes the most ridiculous claims about raising the minimum wage to levels that neither the economy can sustain, nor the government could enforce. But that hardly concerns JI because they know whoever makes the government will have to answer the electorate for the minimum wage promises made by the likes of JI.

Imran Khan’s Pakistan Tehreek-i-Insaf (PTI) is no different. It also lacks a real economic tsunami. PTI’s PowerPointed, typos ridden economic policy is hardly a policy document. Similar to JI it makes tall claims but fails to offer even short details about how those plans will be implemented. PTI claims to grow the economy at 6 per cent annually and promises to bring the inflation down to 7 per cent. First, without logistical details, no self-respecting economist will buy these numbers, which are almost impossible to achieve under the current global economic situation. Secondly, with the inflation rate leading the GDP growth rate, as claimed by PTI, the workers will continue to chase goods and services in vain.

Nation building demands that Pakistanis should revisit how the key messaging glorifies violence even for toddlers. The folklores have to abandon the unnecessary and irrelevant praise for warriors and mercenaries. Instead, parents have to develop a new narrative that praises living legends of the likes of Eidhi and Hussain Dawood.

Murtaza Haider, Ph.D. is the Associate Dean of research and graduate programs at the Ted Rogers School of Management at Ryerson University in Toronto. He can be reached by email at murtaza.haider@ryerson.ca

The views expressed by this blogger and in the following reader comments do not necessarily reflect the views and policies of the Dawn Media Group.

Recent research revealed that “stock returns during Ramazan are significantly higher and less volatile than during the rest of the year.” The authors studied stock market returns in 14 Muslim-majority countries (including Pakistan) during 1989 and 2007 and found that the mean annualised return during Ramazan was significantly higher (38 per cent) than the mean return during the rest of the year (4.3 per cent).  They also discovered that stock markets were less volatile during Ramazan. The authors called the phenomenon the ‘Ramazan Effect’.

These findings should be of interest to academics studying behavioural finance and institutional investors who are searching for ways to earn higher returns. These findings also challenge one of the fundamental tenants of finance, the efficient market hypothesis, which posits that it is impossible to earn higher returns than the equilibrium returns in the stock market. Put simply, the market cannot be beaten. However, the Ramazan Effect suggests that investors in the 14 Muslim-majority countries may enter the market at the start of Ramazan and hold on to the securities until only the end of the month to make higher than expected returns.

Research in finance documents several ‘violations’ of the efficient market hypothesis. For instance, Michael Dowling and Brian Lucey have found that stock returns in Ireland were correlated with weather patterns, changes in biorhythms (sleep patterns) due to daytime savings, and religious beliefs.  Similarly, Frieder and Subrahmanyam discovered that stock returns were correlated with Jewish High Holidays in the US equity markets. For instance, the trading volumes on Rosh Hashanah (a festive day also known as the Jewish New Year) were down, but the equity market returns were positive “again to an extent eight times greater than the average return for the entire sample.” On the other hand, Yom Kippur, which is a day of atonement in the Jewish calendar, both the trade volume and stock prices declined.

The investors’ mood or the state of mind is assumed to have an impact on the way they act or behave. While being elated, investors are less critical and hence are willing to take risks. On the other hand, if the investors are overcome by grief or gloom, they are more likely to suspect all news and trends and may decide to either stay out of the market or be bearish.

In the United States, other departures from efficient markets have also been reported.  The January Effect, for instance, accounts for higher than usual rise in stock prices observed from December to January. Similarly, stock prices are often found to be lower on Mondays than otherwise.

The Ramazan Effect was observed for all except Saudi Arabia in the study. Higher Effect was observed for markets in Turkey, Oman, Kuwait and Pakistan. Other research in the past also failed to notice any significant difference in returns during Ramazan in Saudi Arabia. However, the researchers indeed find a significant decline in volatility during Ramazan in the Saudi stock market.

Source: Journal of Banking & Finance, Volume 36, Issue 3.

Given that Saudi Arabia is the only Muslim majority country in the sample that uses the Muslim (Hijra) calendar (the rest use Gregorian calendar), the lack of support for Ramazan Effect raise several questions about why such an Effect takes place. The academic literature suggests that since Muslims fast from dawn to dusk during Ramazan and abstain from other physical comforts, the resulting physiological changes accompanied by the desire to atone and be charitable put investors in a state of mind that promotes optimism. If this were to be true, why one does not see higher returns in Saudi Arabia, which happens to be the birthplace of Islam.

Even in countries where higher returns have been reported during Ramadan, published research offers conjecture rather than tangible evidence to explain the Ramazan Effect. After all, firms do not necessarily report higher than usual earnings during Ramadan that may explain the discrepancy in the stock market returns. Instead, the manufacturing, construction, and agriculture output often declines during Ramazan in several Muslim-majority countries. Could it be that religiosity and/or spirituality is indeed behind the higher stock market returns during Ramazan and somehow Saudi Arabia is an exception to the rule.

I have a competing explanation for the higher than usual stock returns during Ramazan in Muslim-majority countries. I base my explanation on the fact that most of these countries have large services sector, which employ millions of workers, but it is still not part of the formal economy. I would argue that the informal sectors come to life during Ramazan and generate sufficient economic output to jolt the entire national economy. The start of Ramazan is akin to Black Friday in the last week of November in the United States that marks the beginning of Christmas shopping season.

The long queues outside of tailoring shops, the post mid-night shopping for gifts in preparation of the Muslim festival of Eid at the end of Ramazan, the significantly higher spending on food during the holy month, and the intercity travel at the end of Ramazan, which puts hundreds of millions on the move, and several similar activities produce considerable and intense economic activity capable of generating higher than usual returns in the stock market.

Let me offer some evidence in support of my abovementioned theory. In the following graph I present the result of Google Searches conducted for the word ‘gift’ (blue line) in Pakistan. The search volume has been normalised to fall between 0 and 100. Also marked on the graph are Christmas/New Year, Valentine’s Day, and Ramazan (in green). Notice that the search for ‘gift’ peaks in Pakistan around Christmas, Valentine’s Day, and Ramazan. Also notice the increase in searches for the word ‘gift’ at the beginning of Ramazan and continuing throughout the holy month suggesting that there is a more sustained focus on gift buying  that lasts the entire month rather than peaking for a day or a week. The multiplier effect of the intense activity in the retail and services sectors during Ramazan would be felt in other sectors (e.g., manufacturing, banking, etc.) thus, lifting the stock markets as a consequence.

I can try to explain the lack of Ramazan Effect in Saudi Arabia with the same theory. Given that Saudi economy is driven by petro-chemicals, its stock market (Tadawul) is also weighted heavily by economic sectors that support the oil and gas industry, which relies heavily on immigrant workers from South Asia. During Ramazan many immigrant workers would return to their homelands to celebrate Eid with their families. This may contribute to a decline in industrial production and commerce in Saudi Arabia during Ramazan. The following graph in fact shows a decline in Saudi oil production (millions of barrels per day) around Ramazan/Eid during 2008 and 2011.

Source: Ycharts.com

It could be religiosity or self interest driving the higher than usual stock market returns in Muslim countries. Regardless of what causes the higher returns, Muslims do have more blessings to count during Ramazan than otherwise.

References

Dowling, Michael & Lucey, Brian M., 2005. “Weather, biorhythms, beliefs and stock returns — Some preliminary Irish evidence,” International Review of Financial Analysis, Elsevier, vol. 14(3), pages 337-355.

Fazal J. Seyyed, Abraham Abraham, Mohsen Al-Hajji, Seasonality in stock returns and volatility: The Ramadan effect, Research in International Business and Finance, Volume 19, Issue 3, September 2005, Pages 374-383.

Frieder, Laura & Subrahmanyam, Avanidhar, 2001. “Non-Secular Regularities in Stock Returns: The Impact of the High Holy Days on the U.S. Equity Market, Forthcoming in the Financial Analysts Journal,” University of California at Los Angeles, Anderson Graduate School of Management, Anderson Graduate School of Management, UCLA.

Heitham Al-Hajieh, Keith Redhead, Timothy Rodgers, Investor sentiment and calendar anomaly effects: A case study of the impact of Ramadan on Islamic Middle Eastern markets, Research in International Business and Finance, Volume 25, Issue 3, September 2011, Pages 345-356.

Jędrzej Białkowski, Ahmad Etebari, Tomasz Piotr Wisniewski (2012). Fast profits: Investor sentiment and stock returns during Ramadan, Journal of Banking & Finance, Volume 36, Issue 3, March 2012, Pages 835-845, ISSN 0378-4266.

Murtaza Haider, Ph.D. is the Associate Dean of research and graduate programs at the Ted Rogers School of Management at Ryerson University in Toronto. He can be reached by email at murtaza.haider@ryerson.ca

The views expressed by this blogger and in the following reader comments do not necessarily reflect the views and policies of the Dawn Media Group.

-Photo by Sara Faruqi/Dawn.com

It may sound odd, but it is likely to work. End bribery by legalising it.

If you find the proposal preposterous, you may want to continue reading. The idea is to legalise bribery, but only partially, i.e., giving bribes should be legalised, but accepting bribes should remain a crime.

For those who live in South Asia, where bribery is ubiquitous, it is almost impossible to escape it. Even when you seek a service that you are legally entitled to, such as a connection for gas or electricity, many a palms have to be greased before the blades of your fan will start turning. In such cases of ‘harassment bribes’ giving bribe should be deemed a legitimate activity.  This is necessary to separate the interests of the briber (bribe giver) and the bribee (bribe taker). Once the bribe is paid to obtain a legally entitled service, the interests of the two transacting agents differ because the briber would have the service she needed, and given the legal cover, she may now be willing to report the incident to authorities for an action against the bribee.

Dr. Kaushik Basu, a professor of economics at Cornell University, is the man behind the idea. He is also the designate chief economist of the World Bank. Casual reviewers of his bribery paper erroneously assumed that Prof Basu was arguing to legalise corruption. They are mistaken. Professor Basu has in fact posited a novel idea of separating the interests of the briber from bribee only in the case of harassment bribes. Those who are forced into bribing to get what is legitimately theirs are not criminals. Even my mother had to bribe the staff in the education department to get her pension. Retiring after decades of service as a professor, she waited for months to have her pension started. My family is not without means or connections, but it hardly mattered. The bribery mafia is deep rooted in Pakistan and thus no one was able to help. In the end, she paid a clerk to receive her pension. The clerk’s daughters were my mother’s former students!

What’s up with the Indian economists?

Professor Basu is one of several accomplished Indian economists who are recognised globally as thought leaders. Professor Amartya Sen at Harvard University, Professor Jagdish Bhagwati at Columbia University, Professor Raghuram Rajan at the University of Chicago, and Professor Abhijit Banerjee at MIT are examples of several Indian economists whose research is celebrated and respected throughout the world. Professor Rajan has served as the ‘chief economist’ at the IMF where he was able to influence macroeconomic policies in several countries. Professor Bhagwati is a foremost expert in globalisation. Professor Banerjee is a leading scholar in poverty studies. Professor Sen, who received the 1998 Nobel Memorial Prize in Economic Sciences, has influenced several streams of research in economics.

One wonders why so many economists from India, especially Bengalis, have been able to rise to the top in economics. Professors Sen, Basu, and Banerjee are Bengalis. And while Dr. Muhammad Yunus is not an Indian national, he is a Bangladesh-based economist who received the Nobel Peace prize for his pioneering work in micro finance.

Unlike the rest of South Asia, social scientists have fared much better in India. Economists particularly are held in great esteem by the Indian masses and governments and have been entrusted with the prestigious responsibility of policy making. India has continued to be well-served by some brilliant economists. The current Indian Prime Minister, Dr. Manmohan Singh, himself an economist, headed the Planning Commission in India during 1985-87. Before becoming the Prime Minister. Dr. Singh served as the chief economic advisor, the governor of the Indian Reserve Bank, and the finance minister in Prime Minister Narasimha Rao’s cabinet. Professor Basu until recently has served as the chief economic advisor to the Ministry of Finance in India. As Professor Basu heads to the World Bank, Professor Raghuram Rajan is taking over the chief economic advisor’s role in his place.

On the other side of the Wahga border in Pakistan, nuclear scientists and metallurgists focused on weaponisation, instead attained the celebrity status. The masses and the governments in Pakistan have failed to recognise the need for a larger role for social scientists. Instead of economists, engineers and metallurgists took over policymaking in Pakistan. Consider that even Pakistan’s Planning Commission in the recent past was steered by engineers without any intervention from social scientists, especially the economists.

Recognising Pakistani economists

It will be erroneous to assume that Pakistan has not produced leading economists. The most celebrated name amongst Pakistani economists is that of Dr. Mahbub ul Haq who was instrumental in devising the human development index. The first Human Development Report was published in 1990 and since then, the annual publication has been recognised globally as an alternative and more holistic metric of development than the gross national product. Today more than a hundred countries have established their own human development centres, following in the intellectual tradition of Dr. Haq.

The deputy chairman of Pakistan’s Planning Commission, Dr. Nadeem Haque, is another leading economist whose tenures at IMF and at PIDE have resulted in significant contributions to macro economy. Dr. S. Akbar Zaidi, until recently a visiting faculty at Columbia University, is the author of the most informed and rich resource text on Pakistan’s economy.  Dr. Zaidi’s op-ed pieces have been instrumental in promoting economic literacy in the masses. Shahid Javed Burki, a former vice president at the World Bank and a former finance minister, is the author of several well received books and also contributes to the popular press on economic affairs in Pakistan.

The above-mentioned names are representative from a long list of Pakistani economists who have made notable contributions to the economic thought. And then there are others who have been shouldering the responsibility of training the next generation of economists in Pakistan. Dr. Ishrat Hussain at IBA in Karachi, and Professors Ali Cheema and Faisal Bari at LUMS are training future economists, as well as contributing to economic literacy in Pakistan through their writings.

It will, however, take more than celebrated economists to put the economy on the right track in Pakistan and India. Even in India, where until recently the talk was of double-digit growth, early signs of economic pessimism are visible. A recent survey by Pew Research Center revealed that only 38 per cent of Indians were satisfied with where the direction was heading. In 2011, over 50 per cent believed India was heading in the right direction. Only 45 per cent in 2012, compared to the 60 per cent in 2011, are hopeful of seeing economy improve in the next 12 months.

As Dr. Raghuram Rajan recently landed in New Delhi to assume his role as the chief economic advisor, he may be concerned about the sudden dose of pessimism that looms over India’s economic horizon. He would certainly have to think beyond legalising bribery to reignite the Indian economic engine.

Murtaza Haider, Ph.D. is the Associate Dean of research and graduate programs at the Ted Rogers School of Management at Ryerson University in Toronto. He can be reached by email at murtaza.haider@ryerson.ca

The views expressed by this blogger and in the following reader comments do not necessarily reflect the views and policies of the Dawn Media Group.

– File photo by AP

I have come across several well-educated, well-off people lately who seem to believe that the poor somehow “want to be poor” or are simply “too stupid” to escape poverty. Members of my own family, friends from school, colleagues at office, the so-called “development workers” and professionals who think the beggars they are surrounded by at the traffic signals and those lining up at charity handouts this Ramzan are outright lazy. The arguments forwarded seem to suggest as if there is a “culture of poverty” and the poor suffer from this culture.

As silly as it may seem to argue against this line of reasoning, I invariably get embroiled in exchanges, stressing that failed economic and social policies followed by successive governments in this country are creating poverty and act as barriers to poverty reduction. The result is persistently the same: these folks tend to switch off and find something better to do than listening to me. Perhaps it is not a “culture of poverty” which perpetuates poverty but instead this “culture of apathy.”

The rising poverty is a result of deepening societal apathy towards poverty and poor. It is indeed, a spectacular failure on part of so many people therein – voters, politicians and development experts and workers – that poverty exists and persists. However, those who are really responsible, would not even want to talk about it.

My middle-class compatriots have yet to come to grips with the reality that poverty in Pakistan is caused by myriad factors important amongst them a lack of real discourse on poverty. What we need to understand is: What constitutes poverty? How is it measured by the successive regimes whereby poverty figures always successfully make those primarily responsible for it looking good? What really are the causes of poverty? And the likes.

Counting poor
The government’s poverty figures do not count the poor living in katchi abadis (slums) and on the street. What figures are being missed out? There are over 3,000 katchi abadis in the country with a population approximating seven million. More than half of them – four million – live in Karachi. What are their living conditions? Between 10 to 15 persons live in one tin shed covering on an average three marlas (one marla is equal to 272.00 sft) plots having one to two rooms and no sanitation facility.

It amazes me how our poverty calculators, and indeed people like you and I who buy these figures without a wince, are isolated from reality and how little an idea do they have about poor, poverty or even how to count them. Whatever poverty figures the government economists may tell, I know when poverty is on the rise. There is more poverty when there is increased beggary, deprivation, suicides and lawlessness in the society

While economists describe poverty incidence as the percentage of poor compared to the total population, poverty cannot be described – it can only be felt. One knows about poverty when he is hungry and cannot purchase food, he and his children want new clothes but they can’t purchase them, he’s sick and doesn’t have money to have medicine, he wants to send his children to school but can’t bear educational expenditures.

We also need to focus on the nexus of poverty and human well being. As a health professional I am keen to look at the vicious cycle of poverty and ill-health which one would argue should necessitate health services to be addressed to the poor and needy. However, even a cursory look into health care system indicates that only one third of all those who need or seek care utilise public health services. The remaining two-thirds end up seeking care from private sector by paying from their own pocket.

Ayyaz Kiani is a public health specialist. He heads Devnet – a network of development consultants. Based in Islamabad, he has travelled around the world and continues to do so to meet fellow travelers.

The views expressed by this blogger and in the following reader comments do not necessarily reflect the views and policies of the Dawn Media Group.

Mining has propelled the land of Genghis Khan and nomadic herders to be one of the fastest growing economies in the world. While mining in Pakistan accounts for a meager 2.4 per cent of the GDP as of 2011, in Mongolia, mining is almost 16 per cent of the GDP. Mongolia’s vast deposits of coal, copper and gold has led an investment boom in mining, driving economic growth to an unprecedented 17 per cent last year. While China and India are suffering from growth fatigue and economic overheating, Mongolia could see the size of its economy double every three or four years. The chart below illustrates Mongolia’s economic growth relative to other emerging economies, including Pakistan.

Data: IMF

Mongolia’s economic growth is primarily attributed to a surge in foreign direct investment (FDI). The net FDI inflows reached about $1.5 billion in 2010, increasing threefold from previous year. Below are Mongolia’s net FDI inflows from the year 2000 onwards.

Data: World Bank

Though the nature of the boom is primarily capital-intensive, it has provided employment opportunities for Mongolian workers. This has motivated more and more people to flock to the mine-rich area of the Gobi desert in search of jobs.

But there is one worry which keeps economists and policymakers awake at night. The natural resource boom is prone to what is referred to as the “Dutch disease” in economic lexicon. The increase in the exploitation of natural resource base leads to a decline in sectors like manufacturing and agriculture. In other words, a natural resource boom causes a rise in demand for the currency of the resource-rich country. The subsequent appreciation of the exchange rates makes exports more expensive, and it becomes difficult for other sectors to compete domestically and abroad. The result, of course is the perpetual shrinkage of the manufacturing and agriculture sectors. There are ways to mitigate the impact of the Dutch disease. The most common method is to deposit the earnings from the sale of natural resources to an offshore investment fund, known as a sovereign wealth fund. This would limit the amount of foreign currency inflows into the country. The interest earned on the sovereign wealth fund could then be repatriated and spent in the annual budget.

The long-run sustainability of the Mongolian economy rests largely on how Mongolia addresses and deals with its policy challenges. This would dictate whether Mongolia could actually become the Saudi Arabia of north Asia. However, the more important question here is if Pakistan could imitate Mongolia with equal, if not greater, success. Unlike Mongolia, the challenges facing Pakistan are many and multipolar in nature. But the most immediate issue is the lack of internal stability, actuated by armed conflicts and rampant corruption. Pakistan needs to address its internal security and bureaucratic bottlenecks to permit the expansion of natural resource exploitation and attract more foreign investment. The mining sector can no longer be afforded to be kept at the periphery. We need careful road-mapping to insure that mining contributes its fair share to the future economy. There is no reason to believe that Pakistan cannot be the next Mongolia (or better) of south Asia.

The author is a PhD student in economics at the University of Utah, United States. His areas of interest are development economics, structuralist macroeconomics, and game theory.  He tweets @zainrsidd

The views expressed by this blogger and in the following reader comments do not necessarily reflect the views and policies of the Dawn Media Group.

Data, data, every where

The world today is awash with data. Corporations, governments, and individuals are busy generating petabytes of data on culture, economy, environment, religion, and society.  While data has become abundant and ubiquitous, data analysts needed to turn raw data into knowledge are in fact in short supply.

With big data comes big opportunity for the educated middle class in the developing world where an army of data scientists can be trained to support the offshoring of analytics from the western countries where such needs are unlikely to be filled from the locally available talent.

In a 2011 report, McKinsey Global Institute revealed that the United States alone faces a shortage of almost 200,000 data analysts. The American economy requires an additional 1.5 million managers proficient in decision-making based on insights gained from the analysis of large data sets. And even when Hal Varian, Google’s famed chief economist, profoundly proclaimed that “the real sexy job in 2010s is to be a statistician,” there were not many takers for the opportunity in the West where students pursuing degrees in statistics, engineering, and other empirical fields are small in number and are often visa students from abroad.

A recent report by Statistics Canada revealed that two-thirds of those who graduated with a PhD in engineering from a Canadian University in 2005 spoke neither English nor French as mother tongue. Similarly, four out of 10 PhD graduates in computers, mathematics, and physical sciences did not speak a western language as mother tongue. Also, more than 60 per cent of engineering graduates were visible minorities, suggesting that the supply chain of highly qualified professional talent in Canada, and to a large extent in North America, is already linked to the talent emigrating from China, Egypt, India, Iran, and Pakistan.

The abundance of data and the scarcity of analysts present a unique opportunity for developing countries, which have an abundant supply of highly numerate youth who could be trained and mobilised en masse to write a new chapter in offshoring. This would require a serious rethink for thought leaders in developing countries who have not taxed their imaginations beyond thinking of policies to create sweat shops where youth would undersell their skills and see their potential wilt away while creating undergarments for consumers in the west. The fate of the youth in developing countries need not be restricted to stitching underwear or making cold calls from offshored call-centres in order for them to be part of the global value chains. Instead, they can be trained as skilled number-crunchers who would add value to otherwise worthless data for businesses, big and small.

A multi-billion dollar industry

The past decade has witnessed a major change in the sectorial evolution of some very large manufacturing firms known in the past for mostly hardware engineering and now evolving into firms delivering services, such as business analytics. Take IBM for example, which specialised as a computer hardware company producing servers, desktop computers, laptops, and other supporting infrastructure. That was IBM’s past. Today, IBM is focussed on analytics. It is spending hundreds of millions of dollars in advertising, trying to rebrand itself as a leader in business analytics. In fact, it has divested from several hardware initiatives, such as manufacturing laptops, and has instead spent billions in acquisitions to build its analytic credentials. For instance, IBM has acquired SPSS for over a billion dollars to capture the retail side of the Business analytics market. For large commercial ventures, IBM acquired Cognos to offer full service analytics.

In 2011 alone, the business analytics software market was worth over $30 billion. Oracle ($6.1bn), SAP ($4.6 bn), IBM ($4.4 bn), and Microsoft and SAS each with $3.3 bn in sales led the market. It is estimated that the sale of business analytics software alone will hit $50 billion by 2016.  Dan Vesset of IDC, a company specialising in watching industry trends, aptly noted that business analytics had “crossed the chasm into the mainstream mass market” and the “demand for business analytics solutions is exposing the previously minor issue of the shortage of highly skilled IT and analytics staff.”

In addition to the bundled software and service sales offered by the likes of Oracle and IBM, business analytics services in the consulting domain generated several billion dollars more worldwide. While the large firms command the lion’s share in the analytics market, the billions left at the bottom are still a large enough prize to take the analytics plunge.

Several billion reasons to hop on the analytics bandwagon

While the IBMs of the world are focused largely on large corporations, the analytics needs for small and medium-sized enterprises (SMEs) are unlikely to be met by IBM, Oracle, or other large players. Cost is the most important determinant. SMEs prefer to have analytics done on the cheap while the overheads of the large analytics firms run into millions of dollars thus pricing them out of the SME market. With offshoring comes the access to affordable talent in developing countries who can bid for smaller contracts and beat the competition in the West on price, and over time on quality as well.

The trick therefore, is to beat the IBMs of the world in the analytics game by not competing against them. Realising that business analytics is not a market, but an amalgamation of several types of markets focused on delivering value-added services involving data capture, data warehousing, data cleaning, data mining, and data analysis, developing countries can carve out a niche for themselves by focusing exclusively on contracts that large firms will not bid for because of their intrinsic large overheads.

Leaving the fight for top dollars in analytics to top dogs, a cottage industry in analytics could be developed in the developing countries that may strive to serve the analytics need of SMEs. Take the example of the Toronto Transit Commission (TTC), Canada’s largest public transit agency with annual revenues exceeding a billion dollars. When TTC needed to have a large database of almost a half million commuter complaints analysed, it turned to Ryerson University, rather than a large analytics firm. TTC’s decision to work with Ryerson University was motivated by two considerations. First the cost; as a public sector university, Ryerson believes strongly in serving the community and thus offered the services for gratis. The second reason is quality. Ryerson University, like most similar institutions of higher learning, excels in analytics where several faculty members work at the cutting edge of analytics and are more than willing to apply their skills to real life problems.

Why now?

The timing had never been better to undertake such an endeavour on a very large scale. The innovations in Information and Communication Technology (ICT) and the ready availability of the most advanced analytics software as freeware allows entrepreneurs in developing countries to compete worldwide. The Internet makes it possible to be part of global marketplaces with negligible costs. With cyber marketplaces such as Kijiji and Craigslist individuals can become proprietors offering services worldwide.

Using the freely available Google Sites, one can have a business website online immediately at no cost. Google Docs, another free service from Google, allows one to have a web server for free to share documents with collaborators or the rest of the world for free. Other free services, such as Google Trends, allow individual researchers to generate data on business and social trends without needing subscriptions for services that cost millions. The graph below is generated using Google trends showing daily visits to the websites of leading analytics firms. Without free access to such services, access to the data used to generate the same graph would carry a huge price tag.

Similarly, another free service from Google allows one to determine, for instance, which cities registered the highest number of search requests for ‘business analytics’. It appears that four of the top six cities where analytics are most popular are located in India, which is evident from the following graph where search intensity is mapped on a normalised index of 0 to 100.

The other big development of recent times is freeware that is levelling the playing field between haves and have-nots. In analytics, one of the most sophisticated computing platforms is R, which is available for free. Developers worldwide are busy developing the R platform, which now offers over 3,000 packages for free for analysing data. From econometrics to operations research, R is fast becoming the lingua franca for computing. R has evolved from being popular just amongst computing geeks to having its praise sung by the New York Times.

R has also made some new friends, especially Paul Butler, a Canadian student who became a worldwide sensation by mapping the geography of Facebook. While being an intern at Facebook, Paul analysed gigabytes of data to plot how Facebook’s friends were linked globally. His map (see the image below) became an instant hit worldwide and has been reproduced in publications thousands of times. If you are wondering what software Paul used to generate the map, wonder no more, the answer is R.

R is fast becoming the preferred computing platform for data scientists worldwide. For decades the data analysis market was ruled by the likes of SAS, SPSS, Stata and other similar players. R has taken over the imagination of data analysts as of late who are fast converging to R. In fact, most innovations in statistics are first coded in R so that the algorithms become available to all immediately and for free.

Source: http://r4stats.com/articles/popularity/

The fact R is freely available should not be taken lightly. A commercial license of a similarly equipped version of SPSS may cost up to US$7,500. The other big advantage of using R is the fact that thousands of training documents on the Internet and videos on YouTube are also available for free by volunteers.

Where to next

The private sector has to take the lead for business analytics to take root in developing countries. The governments could also have a small role in regulation. However, the analytics revolution has to take place not because of the public sector, but in spite of it. Even public sector universities in developing countries cannot be entrusted with the task where senior university administers do not warm up to innovative ideas unless they involve a junket in Europe or North America. At the same time the faculty in public sector universities in developing countries is often unwilling to try new technologies.

The private sector in developing countries may want to launch first an industry group that takes upon the task of certifying firms and individuals interested in analytics for quality, reliability, and ethical and professional competencies. This will help build confidence around national brands. Without such certification, foreign clients will be apprehensive to share their proprietary data with individuals hidden behind computer monitors thousands of miles away.

The private sector will also have to take the lead in training a professional workforce in analytics. Several companies train their employees in the latest technology and then market their skills to clients. The training houses would therefore also double as consulting practices where the best graduates may be retained as consultants.

Small virtual marketplaces could be setup in large cities where clients can put requests for proposals and pre-screened, qualified bidders can compete for the contract. The national self-regulating body will be responsible for screening qualified bidders from its vendor-of-record database, which it would make available to clients globally through the Internet.

The IBMs of the world see the analytics market to hit hundreds of billions in revenue in the next decade. The abundant talent in developing countries can be polished into a skilled workforce to tap into the analytics market to channel some revenue to developing countries while creating gainful employment opportunities for the educated youth who have been reduced to making cold calls from offshored call centres.

Murtaza Haider, Ph.D. is the Associate Dean of research and graduate programs at the Ted Rogers School of Management at Ryerson University in Toronto. He can be reached by email at murtaza.haider@ryerson.ca

The views expressed by this blogger and in the following reader comments do not necessarily reflect the views and policies of the Dawn Media Group.

Now, of course, when I talk about the mass transport system, I am referring to the large intra-city bus transit system. As unrefined, informal, and crass as it may seem, it is this system which supports the commuting needs of residents from various areas all over the city.

With the rising cost of fuel, vehicles and general transportation costs, it is this system which provides a cheap and reliable form of transport, which is largely managed in private hands.

However, the system is perceived very differently by residents of the city. For example, pedestrians, motorbike riders and car drivers will most definitely complain about the way they are driven on the road, having no regard for cars and bikes alike.

Many will even talk about the transport mafia that exists, making success impossible for new entrants in the industry. Some people may even call the overall system inefficient.
However, my view is formed upon by a certain incident that forced a deeper insight into the business model that exists.

A certain bus journey of mine got extended by a snooze call, the embarrassing details of which I would rather forgo to focus on the industry itself. But that journey took me across a major chunk of Karachi, some areas which I might not ever visit otherwise.

I sat on the route W-21, which basically begins its way from Qayyumabad, going through DHA and heading to its final stop near Manghopir, crossing areas such as Sharah-e-Faisal, Liaquatabad, and, most intriguingly for me, Qasba colony and Kati Pahari, a bully pulpit for ethnic and political violence in recent days.

To give a small overview of how the industry itself works, all buses follow a specific route (the W-21 in my case), which cater to certain areas of the city. These routes are largely owned privately, many being established for decades. When people state the transport mafia perception, it all starts off with barriers to entry in creating new transport routes. It involves permissions, approvals, participation of bus and terminal owners, and finally ongoing publicity and route adjustments to make it workable.

I, personally, would disagree with the transport mafia aspect as there have been cases stated where new entrants have established themselves successfully. However, it is the difficulty of the start-up tasks involved which undermine success more than any other factor.

After taking on an established route, two critical factors involved are the participation of bus-owners, whose vehicles will cater to the defined course, and the fleet management aspect of the terminals.

After some digging for the economics of it, I discovered that a used, operable bus can be purchased from starting prices of Rs 600,000 on which bodywork is done to suit the budget and required capacity for the route. Drivers and conductors are hired on daily wages, numbers dependent on their arrangement with the owner. While all vehicles come with the standard diesel engine, most operating on the roads have switched to CNG.

Originated in Lahore, a unique innovation allows the diesel engine to be converted to CNG which would otherwise require an engine replacement. This conversion helps operators save up to 50 per cent on fuel costs. Maintenance costs depend on the condition of the vehicle, and its upkeep. But summing up, one vehicle can provide an average return of up to 50 per cent a year.

One can understand the method to their madness at a closer look, but the general public perception of operators is not very positive, and they understand it is so.

Given the implications of a vehicles size, even the slightest hit incidents often bring out public wrath and fury upon drivers. Many bus drivers have fallen victim to being beaten by the public over the slightest of issues.

In addition, strikes in the city bring a lot of damage to these buses, which are set ablaze very frequently by strikers of different parties.

One of the drivers I met stated an incident where his bus was stopped by youths who tried to threaten him off the bus to set it on fire, but he resisted.

“I own the bus and it is my livelihood. I resisted getting off, even though they had a gun pointed at me. Eventually they just went away.”

That being said, not all his peers are so lucky. But on a more positive note, drivers and terminal operators assist and coordinate on such days when the risk factor is higher.

Also, it must be noted here that operating a bus on an established route has fewer barriers to entry and is a more possible enterprise than pursuing a new route.

The other critical aspect is the bus terminals and their fleet management. Referred to as ‘Adda’s’, bus terminals can be owned privately, or by the cantonment or district authority, such as the case in DHA, and they manage the flow of the vehicles on the road. Given the large size of land required to accommodate the vehicles, the cost of land involved is relatively high and makes the whole project more capital intensive.

As an observer, I saw a group of down-to-earth, pragmatic operators and drivers making the best of what they had. There were arguments, scuffles, jokes and laughter, but in the end they all went back to their respective tasks, all in one stable flow.

Although because of Ramazan, most of them were more aggressive towards each other than normal, but I guess that was largely acceptable to everyone there.

Contrary to what may be perceived, I saw a very efficient, although slightly informal, fleet management system. Every incoming and outgoing vehicle has tokens issued which determine its timing and position on the route, with specific time limits to reach stops. If a vehicle is late at a specific stop, it has to pay a penalty which goes to the terminal owner. This is what prevents buses from stopping at every few meters to pick up passengers, only going to specified stops on the route. Well, at least for the majority of it.

Terminal owners also manage their accounts with local traffic authorities, with traffic tickets and penalties being managed by them. For this service, terminal owners charge Rs 110 per vehicle every time it is parked at the stop.

There is no doubt that this business is overall a very profitable enterprise, and while the system still has major room for improvement, one must understand that for a privately-owned industry lacking educated human resource which is inhibiting its growth and upgradation, they are doing the best with what they have.

For what it’s worth and oft repeated, this sector lacks bureaucratic oversight, or more so government support, which can enable its evolution into a more modern Mass Rapid Transit system, which is the requirement of a strong city like Karachi.

However, in spite of all that may hold back progress, we must appreciate the system which helps the city’s residents not just commute, but also helps facilitate their livelihood on a daily basis.

Muhammad Shayan Lakdawalla is a Multimedia Content Producer at Dawn.com