Download Importance of Saving

July 3, 2000
Importance of Saving
(News July 6/ 2000)
There are statistics on which quite a few countries should get worried as well as ashamed.
Some of them are not discernable so the public do not know about them. They relate to
phenomena, which like chronic diseases, eat up the body but do not show any visible
symptoms – they can be found only by an expert. Pakistan suffers from one such malady
which is known and has been showing signs but it is neglected – sometimes even
exacerbated by exigencies. It is our rate of saving. Our savings are so low and record so
dismal that no government document spares more than a few lines to discuss the issue.
And many a time governments exact laws which would discourage thrift and promote
consumption and ostentation. With low saving, the investment also remains lack lustre.
Gross domestic saving rate as a percentage of GDP, was 7 in 1980 (World Bank).
According to UNDP/Human Development Report, it had risen to 10 per cent in 1997.
Economic Survey of Pakistan (1999-2000) the National Savings Rate in the 1980’s had
been 14.7 which declined to 11.1 per cent in the second half of 1990’s. The National
Savings Rate in 1999-2000 is estimated to be 12.2 while the Domestic Savings are stated
to be 14.0 per cent of GDP. These are very low rates of saving. Hypothetically the
Savings should be around 20 per cent of GDP. A comparison with other countries within
and beyond the region confirms our poverty in this regard: Tunisia 24 per cent; Algeria
35 per cent; Indonesia 31 per cent; Thailand 36 per cent; India 20 per cent. Even the
countries from Trauma like Vietnam and Sri Lanka have savings rates higher than
Pakistan (21 and 17 per cent respectively). Since the investment, to a great extent, is
dependent upon savings, we also have low investment rates as compared to other
countries; it was only 13.4 per cent of GDP in 1999-2000 – 5.3 per cent of public and 8.1
per cent of private investment.
Nobody has ever denied the importance of savings for the economy. But very little has
been done to encourage savings. Savings, in many ways, are the opposite of
consumption. The individuals and the nation have to restrict their expenditure to save.
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The application of this action can take many forms can forego the expenditure by
sacrificing the possession of an item or denying a service. Suppression of the desire to
own something is another method of avoiding expenditure. Choosing less expensive
goods and services instead of expensive items is a standard way of saving. Basically,
consumption is closely related to attitude of individuals – in their personal capacity and
collectively. A people indulging in ostentation and show-off cannot save; they rather get
entangled in debt incurred to fulfil their expensive habits. This frame of mind also leads
to gross wastage of resources and indifference to the present and the future.
Gross indifference produces queer habits and routines which can be costly and sometimes
harmful. The habit of saving is, in fact, stems from a consideration for the future – old
age, children and one’s name for posterity. Apathy towards the future kills this incentive
and make a person oblivious to the desirability of cutting current needs to same for the
future or conserve to meet emergencies.
The Pakistani nation, in fifty three years, has distinguishing itself by its ruthlessness,
indifference and disregard for the future. If one has the money, one would eat to kill
himself; dress himself uncomfortable and tasteless clothes; walk in most weird shoes;
travel in vulgarly expensive vehicles. We have gotten into every bad habit that we cannot
afford. Palatial homes and gaudy decorations have become our symbols of distinction.
Wastage has become so rampant that we no longer believe in conserving anything. We
have denuded our mountains, cut down jungles, devoured wildlife or destroyed it. Water
courses and reservoirs have been polluted. The list goes on and on. The situation has been
worsened by lack of education and a destruction of values and norms which regulated
consumption and prompted saving. The irony is that even our religious leaders are not
prepared to address the issue of extravagance as they are a beneficiary of expansive
spending habits and generosity.
This state of affairs may provide an explanation of our stubborn rates of saving. But it
still leaves some important factors. The policy making and executing elite, the rich and
the influentials indulge in ostentation the most. They are not prepared to adopt austere
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ways of living: many of them are not aware of the vulgarity contained in their overspending. As a result, they neither formulate policies, nor exact laws which would
encourage frugality and savings. The common man, instead of adopting a balanced life,
tends to emulate the attitudes and habits of the elite. In the rural areas, the age old social
structure continues to persist with the feudals – or their ilk – dominating the life of the
villager. They set the way and the pace of spending and saving.
The second cause of inaction is partly the indifference and partly the pressure of the
vested groups on bureaucracy and the government functionaries to make policies which
‘encouraged economic activity’ with any consideration for the health of the society –
mental and physical. We allow the import of goods which we cannot afford as a nation
suffering from chronic shortage of foreign exchange. The luxury cars, the superlative
editions of electronic goods whose alternatives are manufactures in Pakistan, and gadgets
which are not needed due to our climate, large labour force and our stage of
sophistication. We spend on the import of food items whose use can be curtailed through
the adoption of substitutes or simply scaling down their consumption. In 1998-99 spent $
223 million on the import of tea; spent $ 824 million for edible oils; $ 36 million on the
import of milk and milk products. Worst, in 1996-97 we incurred Rs. 431 million on the
import of cosmetics, and Rs. 383 million on the import of betel leaves!
The big questions are two in number. First, are these commodities essential? Wheat,
edible oils and sugar and infant milk are items of daily use. But has anybody tried to
assess the extent of their wastage? We, instead of preventing their excessive use have
encouraged their consumption by varied incentives, prizes, and all provocative
advertisements. A highly injurious item of consumption like cigarettes is almost officially
encouraged gripping adolescent populations. Major national games are sponsored by
tobacco companies. Tea is also hawked aggressively in the same manner. I am not
prepared to buy the argument that it is the social drink and much less injurious than other
drinks. I wonder, if the whole issue has ever been discussed coolly and in depth. The fact
is that the examination has been rather sketchy. Suggestions like discouraging smoking
and tea drinking had been taking funny forms. Cut the number of cups of tea in a day: do
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not serve tea in official meetings; do not smoke in the office buildings. These weird steps
only attracted laughter and blatant flouting of orders (or rejection of suggestions). I hope
more innovative advice would not come our way again. If one has to ban some bad habit,
he should learn from Thailand, where, by a single order betel leaf and nut chewing was
banned in the 1930’s; now only some very old Thais and some Indians are left to indulge
in this habit.
The second questions is what have we done to produce these imported items locally? We
have failed to cultivate tea in viable quantities. We have not been able to grow oilseeds in
quantities required to meet the demand. We have not established any dairy industry worth
the name. Even to quench our craving for leaves and betel nut, we have not been able to
have sufficient quantity of the leaf, and practically any nuts in spite of favourable
environment in the Indus Delta and the coastal region. This applies to a large number of
imported luxury items – our effort at their production in Pakistan has resulted only in
sub-standard goods in the market. Quality has never been a strong point of our
manufacturers.
One should be clear that saving involves a basic change in attitudes in life. But
governments can help in creating directions. Fiscal measures, setting of examples, and
giving a lead should help.
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