Government has committed an economic suicide. The recent decision of the government to take Saturday off is ill-conceived and preposterous. The economic managers and policy makers have no idea how to run the economy and drive the business without key stake-holders. They would now be working for 5-days only out of 7.
I was talking to some senior members of FPCCI/KCCI who were flabbergasted at this decision of GoP. It is the private sector that creates jobs, increases productivity; enhances living standards of the labor force. According to some trade experts, some government officials do not understand basic economics or finance; let alone evolving policies to reduce the country’s debt. They have increased debt in the last 3-years without analysing the basic problem at hand. What is the marginal productivity of this debt to GDP? In my humble opinion, it is negligible.
It is imperative that government should take all the stakeholders and decision makers on board before venturing into this disappointing action without realising the economic cost of the decision. Is it purely nonsensical without rationale? You decide.
If we carefully analyse the economic impact of this decision, it is quite precarious taking into account the position of our economy and geo-political and strategic challenges that Pakistan is confronting at this point in time. Pakistan’s economy is in stagflation i.e. low growth, high unemployment and high inflation. People in the country are financially repressed right now. So the question is what is the economic cost of a Saturday holiday?
To understand this let us make a strategic analysis of the economic cost, by making a few assumptions. Firstly we estimate one dollar to be Rs85, second assumption is that there are 300 working days in a year. Total revenue figure is Rs1.55 trillion and total trade export plus imports stands at $66 billion.
In order to calculate a single day’s loss of revenue, I have divided total revenue by number of working days divided by the rate of dollar to come to an approximate figure of $65 million revenue loss in a single day. Total trade loss is calculated using the same principle, which is estimated at approximately $220 million. Productivity loss to GDP is $57 million, International investment transfer and goodwill loss is estimated at $145 million, International/global economy share loss is estimated at $150 million therefore the total approximate cost of a holiday to Pakistan stands at a colossal $637 (approx) million per day. (** Assumption 1. These are international investment transfers – however, ignoring debt servicing for a moment, Sources: Economy Survey of Pakistan 2010 -2011, FBR Site, Wikipedia, Tradingeconomics.com, IMF / World Bank)
While the daily cost of a holiday is a mammoth $637 million, it also results in lost opportunities for entrepreneurs / GOP. These are approximate figures, which can go even higher if we work in an environment where we don’t have to bear the colossal cost of war on terror/strikes/rallies/extortion. More so, the intangible costs like social costs are not even estimated in my analysis. Government does not comprehend the long term impact of this suicidal decision. It will have to sincerely re-evaluate this decision for the economic prosperity and well being of the people.
Furthermore, this decision has a very deep rooted macro economic impact as well. Firstly, foreign buyers are critical of our policy makers since they feel that economic regimes are not drafted strategically. Moreover, the goodwill loss is huge in the international market which is expecting orders to be delivered on time.
Daily wage earners have to go without meals due to lack of work. The same people will eventually resort to criminal activities, in order to make ends meet. If we take the undocumented economy into account, using an arbitrary figure of 40 per cent not being disclosed and 300/280 days, we could easily say that a direct loss to the people of Pakistan approaches $1.17 billion. Another social cost.
The government needs to revise this suicidal decision and take the stake holders on board in order to remove all the misgivings and low confidence level among entrepreneurs. I sincerely hope that given the economic costs, good sense will prevail and our rulers would work for the betterment of the economy.
The writer is a financial economist and commodity expert. He is a graduate from university of Chicago and IBA with 12 years of financial market experience. He can be reached at [email protected] Blogs at www.economistshan.blogspot.com
wow, shan, good article. so our rulers have myopic insight.
imran afzal
lahore
Our economic cost is very high. We cant afford more holidays. great going shan
Feisal Saleem
Islamabad
Good article .
Aadil Jillani.
$ 35 billion every year? We can not afford the luxury of a billion! Shan, please share your views on strikes and unscheduled closures.
Dear Sir, Kudo's to you for raising such an important issue. Our rulers unfortunately lack foresight in decision making and while they beat the drum of democracy they work to limit consensus rather than enhancing it, a dilemma we have unfortunately inherited over the years in our limbless, gutless democracy.
Shan Saeed has done a marvelous job at highlighting the issue of how an extra holiday can effect Pakistan's economy. This is certainly a document of academic worth.
I would stick to the five-day work week but drastically cut the other useless holidays we enjoy during the year. You can't do both.
Pakistan must be the only country in the world where, for example, there are no newspapers for three/four days in a row due to Eid and other festivities whereas in western countries, the holiday newspapers are so extensive and bulky they are difficult to carry!
However, it does suprise me that all stakeholders were not taken on-board in making this decision. What further worries me in that Friday is a half day because of prayers. Are we therefore looking at three and a half days of holiday with zero productivity and huge economic losses?
I wish from his calculations the author had estimated the losses to the economy from only the power crisis. Estimates I have seen suggest that we are shaving-off some 2-3% off our annual growth rate.
Iwish from his calculation
Thanks for the comments. Will analyse it deeply for annual growth rate going forward
Shan,
Your article was discussed extensively at FPCCI yesterday. Excellent stuff
Shaukat
karachi
good analysis shan bhai, shan dar hai.
Great Article Sir!
Regards
Saad Ahmed Khan
Student of MAJU – Mr. M. Ali Shaikh's Class
Again, excellent job, Shan!
(Proud to call him my friend)
great shan we now we cant afford the cost of more holidys. thnx 4r taking big issu
It is my pleasure Dr. Izhar
thanx for letting us know about this great issue.may be our president will gonna take an action after publishing this article.
Everyone knows better who is real enemy of Pakistan, the civil and other officials. The Pakistani civil servents don't want to do work. They are so idle that they could damage the economy of any country. You see, whenever any government wants to save energy, the bloody bureaucrates always suggest to adopt two days holidays. People think politicians are corrupt, they are. I agreed but whatever our civil servents have been damaging the country, this is unaccountable…………………..
Shan
You are contributing alot to the economic literature..God bless you. Excellent
Fawad Hashmi
London
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