Taking into account the rising trend of crimes in the country, it is need of the hour to open more industrial homes in the rural areas, as it will help create economic activities and also block the spate of urbanisation.
The paper titled "Urbanisation and Crime: A Case Study of Pakistan," presented here on Wednesday at the second day of the 26th annual general meeting and conference of the Pakistan Institute of Development Economics (PIDE) by Hafiz Hanzla Jalil and Muhammad Mazhar Iqbal Staff Economist, PIDE and Assistant Professor, Department of Economics, Quaid-e-Azam University stated that urbanisation is good for economic growth of any country, as it helps attain the economies of scale and thus promotes growth of industries and development, on the other hand it also causes rise in the crime.
A rapid increase in crimes was witnessed in Pakistan like other countries of the world, which is being attributed to urbanisation. The paper further stated that besides urbanisation there are four other socio-economic determinants causing rise in crimes that include unemployment, inflation, income inequality and lack of education.
Arguing his point the expert said that in 1950, 30 percent of world population was living in urban areas where as, in 2000 it reached 47 percent and it is estimated that the figure will be reached 60 percent till 2030. A basic feature of urbanisation is the shifting in employment from rural to urban or industrial sector. In other words, urbanisation is an indicator of industrial development in the economy.
In Pakistan urbanisation is a serious matter because in 2030 urban population will rise by 140 percent almost. The author argued that fast growth in urbanisation will create unemployment in youth, which would cause rise in crime ratio. Urbanisation is not bad in itself, because people have the right to improve their living standard by finding suitable jobs in urban areas.
Expert further opined that labour market pooling, trade of goods and services, knowledge spillover, high level of income and economic relations are the basic pillars of urbanisation. This type of development is helpful for employment creation, poverty reduction and planned local business development in the urban regions.
Theories suggest that urbanisation is good for promoting growth of industries and development in the economy. The other face of the urbanisation may be the encouragement of crimes as well, since, crimes normally occur in large cities and in urbanised areas.
In rural areas, due to lower population density, criminal persons have less chance of hiding themselves because people know each other. The opposite is true for urban areas.
He presented a model and argued that a person will commit crime if the expected utility of crime is more than the utility he could get from consuming his time in some other legal activities. Every criminal faces physical and psychological benefits from crime and also costs in terms of law-enforcement. He mentioned that unemployment is an indicator of income opportunities from legal sector. So if there is an increase in unemployment rate then the involvement of persons in legal sector also decreases. It is better to create opportunities for employment and this will work for reduction in crime.
Another paper presented by Ahmed Gulzar, Novaira Junaid, Adnan Haider PIDE, Pakistan National Transport Research Centre (NTRC), Ministry of Communications Beacon house National University (BNU), on "What is hidden, in the hidden economy of Pakistan? Size, causes, issues and implications", stated that there is a world-wide contemporary debate about the role of the hidden economy in achieving the goal of sustained and inclusive economic growth and development, especially in the context of its spillover effects on the formal economy.
According to the paper there is a consensus among the policy makers that a better macroeconomic policy formulation and its true implementation are subject to the proper management of the associated issues of the hidden economy with suitable policy measures.
In Pakistan, it is generally assumed that the hidden economy contributes about 30 percent to 50 percent to the overall GDP. The study investigates the potential determinants of the hidden economy and various interrelated socio-economic issues in perspective of achieving national goal of inclusive growth and development. Finally, policy implications are provided consistent with pervading facts of the hidden economy in Pakistan especially in the context of the 18th Amendment and the 7th NFC Award.
The illegal economic activities as part of the informal economy include; smuggling, theft, prostitution, narcotic/forbidden commodity trade, gambling etc. National Income Accounts (NIA) as per design also exclude many activities such as moonlighting, unregistered employment, unregistered income earned through Forex, under reporting of retail sales, illegal employment (child labour), suspect inventory evaluations, transfer of money through hundi, hidden rentals and barter business.
All these economic activities by their nature act as an attempt to evade huge amount of taxes, thereby causing burden on the public treasury. The persistent failure to manage economic system as reflected by a low tax-GDP ratio, an incredible increase in energy requirements, persistent upward inflationary movements especially in food items and consumer durables explains much of underlying truth of neglecting the quantification, causes and implications of the informal economy with in the public policy framework. Moreover, the informal economy appears to have great respect for geographical and geopolitical boundaries especially in the current phase of Pak-India and Pak-Afghanistan relations and Pakistan's logistic support to Nato forces in the wake of war against terrorism. The destruction of 2005 Earthquake and calamities of the recent flood in 2010 add a greater potential to the expansion of the hidden economy.
From socio-economic point of view, the unbridled price hike especially in food items and consumer durables, incessant increase in the prices of electricity and petroleum goods, the implementation of new GST/VAT system may give an informal attitude to the general living style.
High denomination currency notes are considered as one of the major causes of the existence and expansion of the informal economy in Pakistan. Significant size of the informal economy will restrict the effectiveness of VAT to increase the tax to GDP ratio. The basic constraint on the successful implementation of VAT lies in the fact that all the financial transactions will be made through banks. The difference among the estimates through different approaches enables us to analyse the behavioural as well as structural growth of the informal economy by capturing the impact of its legal and illegal parts, both separately and jointly.
On the basis of labour market approach and electricity consumption approach, the impact of cottage industry and small-scale manufacturing industries (generally not registered) on the growth of informal economy is highlighted. The labour market approach also helps conclude that the role of the informal economy is ambiguous in terms of alleviating poverty.
To achieve the objective of tax to GDP ratio up to 15-20 percent, the implementation policy of new GST/VAT must incorporate the informal sector through its identification and its operations to collect the taxes to the potential level. In order to eliminate the capital constraints from cottage industry and SMEs, thus bringing them under the umbrella of formal sector, there is a need to revamp the criteria of financial system to extend the loans on the basis of shake-hand rather than on collateral basis. It will certainly lead to significant expansion in the tax net.