Wednesday, May 19, 2010

Opportunity Cost of Jihad

After Mumbai attacks......Pakis got 23 billion dollars including latest IMF aid of 7.xx billion       dollars{Japan??}.....don't know what India's foreign desk is doing :evil:

Question - what is the opportunity cost for Pakistan of its terrorism-sponsoring policies?

Just to set a baseline: Suppose in each year since 2000, Pakistan grew at the same percentage rate as India. Then we'd have a theoretical GDP each year which we can compare to their actual GDP. How much have they lost?

Remember IMF aid, etc., is repayable. And there are interest payments to be made. Even without counting that, I expect Pakistan has over the years lost much more than this $23 billion.

Here is an answer. I used the IMF figures from ... _rate.html ... _rate.html
Year    Pakistan India   P        I        Loss   
2000   4.26%    5.693%  104.26   105.69    1.43
2001   1.865    3.885   106.20   109.80    3.59
2002   3.195    4.558   109.60   114.80    5.21
2003   4.86     6.852   114.92   122.67    7.75
2004   7.382    7.897   123.41   132.36    8.95
2005   7.672    9.211   132.88   144.55   11.67
2006   6.147    9.817   141.04   158.74   17.70
2007   5.638    9.372   149.00   173.62   24.62
2008   2.038    7.346   152.03   186.37   34.34
2009   1.966    5.355   155.02   196.35   41.33
         Cumulative loss                 156.59

For 2000-2009, the GDP growth rate in constant prices from the IMF for both countries is displayed. Then the numbers under P and I show how a baseline GDP of 100 would have grown at the Pakistani and Indian growth rates.  Finally, the difference in each year is shown.

Now, it is a big IF, but IF Pakistan could match India's growth rate (a proposition quite acceptable to Pakistani Honor&Dignity) then for each 100 units of GDP in 2000, it would have cumulatively 156.59 units of extra GDP over the 9 years.

Remember, these numbers are at ***constant prices***.

Is it plausible? Well, Pakistan, even today according to the World Bank is an easier place to do business than India or even China. Their infrastructure is not behind. Their education system is underperforming, from primary school to university, but presumably if they weren't concentrating in Jihad, they'd have repaired it to a good extent. So it is somewhat plausible.

Now, Pakistan's GDP in 2000 was $73 billion (exchange rate, not PPP).

So Pakistan has cumulatively lost 1.56 * $73 billion = $114 billion of constant price GDP over the period 2000-2009.

Admittedly, this is a very iffy calculation. But it shows you how little the 3.5 friends can patch up for Pakistan, their $23 billion or whatever is peanuts. {3.5 friends is BRF terminology for the US, China, Saudi Arabia and UK, that finance and support Pakistan no matter what.}

I wonder when Pakistanis will wake up, if ever.