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By, Afreen Baig

The World financial crisis of 2008 – 2010, exposed the weaknesses in the several of the first world economies, which were earlier considered to be the paradigm of economic success. Failure of the banking system, collapse of sub-prime mortgage business, ascending debt-to-GDP ratio, unpredictable unemployment and bankruptcies declared by several established businesses, raised serious doubts regarding the foundations of those economies.

Pakistan and most of the Middle Eastern economies have remained safe from the domino effect of the world financial crises, both for entirely separate reasons. The problems confronting Pakistan’s economy are due to economic mismanagement, living in quandary regarding policies, misplacement of priorities and corruption – not worldwide recession.

While the first world countries continue to have the resources and finances to deficit finance their economies out of recession, to push start the cycle and to increase the aggregate demand – third world and smaller economies like Pakistan have few viable options to exercise, these options being more functional and realistic. 

Over the years, the first world or developed countries have converted their economies into well-documented ones, bringing an end to leakages and corruption. This documentation along-with the checks & balances of financial institutions, helps them to measure and record, the consequences of various modes of quantitative easing or deficit financing. Although the outcome may not be as perfect, however, it allows the economy some breathing space and the government to implement long term structural reforms.

Foreign reserves are one of the best resources, in times of financial crunch, to shore up liquidity in banks and markets, to protect investments and support government spending. Concurrently, a reserve is an important indicator signifying the ability of any nation to repay foreign debt. Consumption of reserves is also a form of deficit financing. If a country has enough foreign reserves, it doesn’t need to borrow from other countries and monetary institutions to finance its national budget or overall economy, owing to its inability to generate revenue. Those developed or sensible countries that skipped facing the harsh effects of the recession were mainly those that held foreign reserves in abundance in ratio to their GDP, fiscal deficit and external debt.

Unfortunately, Pakistan saw a loss in its foreign reserves that declined to $6 billion by November 2008, from $16.5 billion in November 2007, and a trade deficit that exceeded $18 billion. This imbalance led to devaluation of Pakistani currency, which in return also multiplied our foreign debt and debt servicing. Since, revenue generation was not sufficient enough to compensate the imbalance produced by this negative chain reaction, therefore, various modes of deficit financing were applied as short-term strategy.

Deficit Financing

Deficit Financing is a strategy where, usually the government deliberately spends more money than it accumulates through revenue collection. While deficit financing may be applied for various reasons, one of the main purposes is to stimulate the economy in order to bring an end to a phase of recession. However, in third world or emerging economies, like Pakistan, deficit financing may also become a requirement due to inefficient governance, extravagant and unplanned spending, corruption, tax evasion or insufficient tax collection.

Some of the popular formats of deficit financing are; seignorage (deficit monetization), floating sovereign bonds or treasury bills, sale of fixed assets, utilization of foreign reserves, borrowing from citizens abroad, borrowing from international financial institutions or other countries.

If applied properly for a short term period, deficit financing facilitates to launch that positive chain reaction, which in return enhances the economic condition rather just creating public debts. However, if the objectives are not accurately chalked out, monitored and controlled – the economy may end up witnessing excessive and unwarranted burden of public debt and increased debt servicing – placing the governments in debt to foreign creditors, raising the chances to default, and become the cause for a double-dip recession.

The Developed World Case

How successful have the western economies been in deficit financing their economies towards long term stabilization?

USA – the world’s largest economy, with a GDP estimated at $14.3 trillion, saw unemployment that was at decade’s high rate of 9.5%, during this recent recession; which is being considered as one of the worst downturn since the Great Depression of the 1930s, with businesses shedding approximately 8.5 million jobs.

The US government responded with unprecedented bank bailouts worth $700 billion and a further $787 billion fiscal stimulus package. According to data compiled by Bloomberg, the US has spent or guaranteed bailouts worth $11.6 trillion, only little less than the worth of their total GDP. With Interest rates lingering around zero percent and around $300 billion already given in tax cuts – this had to be the best possible approach.

Useless wars only trigger further the domino effect causing national debts to multiply.   Subsequent to the revolutionary war of the 1770s the government of USA first found itself in debt of $75 million in 1790, due to the war expenses. Their national debt crossed $1 billion for the first time in 1863, during the American Civil War. After the outbreak of the First World War in 1914 and the USA joining the Allies in 1917, the US national debt once again witnessed an enormous jump from $5 billion to $14.5 billion in 1918. In 1930, the world faced the Great Depression. An attack initiated by Japan on Pearl Harbor in 1941, threw the USA into the Second World War, which once again escalated the US national debt in 1943, when it leapt from $72 billion to $136 billion. A brief recession was seen in 1949, followed by a period of monetary tightening by the Federal Reserve. Wars with China and Korea, in 1950 to 1953, led to another period of recession that cost approximately $55 billion. The 1973 oil embargo along-with the 1979 energy crisis, led to recessions in between, triggering the US national debt to cross $1 trillion in 1982.

The wars after 911, in Afghanistan and Iraq, forced the national debt to swell from $5 trillion to $13.5 trillion today. Since 1770s, the US national debt has been soaring higher – fueled by wars, economic recessions and accumulated budget deficits. The USA had to deficit finance their economy out on every occasion, consequentially raising the debt to about 100% of their GDP.

Today, USA’s GDP is $14.3 trillion and a public debt of $13.92 trillion. Additionally, the USA has a trade deficit of $0.501 trillion and budget deficit of $1.409 trillion. Their reserves are a negligible $129 billion in comparison to their national deficits, inadequate to support the imbalances created in the overall economy.

For USA – Deficit financing has not helped produce that positive chain reaction, to generate sufficient revenues, in order to overcome the annual deficits or lessen their public debt. The economy shall continue to heat up, unless the guiding principle adopted is that of long term revenue generation and balance in the macro-economic indicators with respect to their GDP. However, since Dollar is the reserve money in the world, there are lesser chances of US sovereign default.

Similarly, the Economy of UK has not been that ideal, and years of deficit financing, including the current tranche of bailouts and quantitative easing, worth around £1.122 trillion and interest rates cut as low as 0.5%, for the past two years months, from 4.5% in 2008 – has not provided an alternative model for long lasting economic growth and sustainability.

Today, UK – the world’s 5th largest economy, has a GDP of around $2.15 trillion and a public debt of $9.12 trillion. Additionally, they have a trade deficit of $123 billion and a budget deficit of $312 billion, complimented by their pitiable foreign reserves of $53 billion. UK’s external debt as percentage of their GDP has rocketed to 424% and the outlook to 2011 is as perturbing, as throughout the recession period of 2007-2010, even after the various modes of deficit financing. However, again the value of pound as a reserve currency makes it easier for UK.

Despite whatever improvements the economists anticipate, most of the European economies keep heating up, are susceptible to the smallest indication of financial downturn and the recovery starts flagging in any case, in spite of all attempts at deficit easing. The sole reason for this heating up is that they have become amongst the world’s highest indebted nations, due to years of deficit financing, with their revenue generation not ample to support their growth on their own.

Ireland’s external debt as a percentage of GDP rises to 1,305%; Switzerland’s external debt as percentage of GDP rises to 378%; Belgium’s external debt as a percentage of GDP rises to 326%; Denmark’s external debt as percentage of GDP rises to 307%; Sweden’s external debt as a percentage of GDP rises to 269%; France’s external debt as a percentage of GDP rises to 244%; Norway’s external debt as a percentage of GDP rises to 208%; Spain’s external debt as a percentage of GDP rises to 176%; Germany’s external debt as a percentage of GDP rises to 176%; Greece’s external debt as a percentage of GDP rises to 167%; Italy’s external debt as a percentage of GDP rises to 141%; including countries like Australia and Hong Kong.

Most of these European economies have become disaster-prone, unless they make resolute attempts to lower their debt to GDP ratio, and further make every effort to bring about equilibrium in their major economic indicators, even if they are unable to achieve budget surplus.

The Case of China  

China – on the other hand, has been in a fairly better position, primarily due to its balanced macro-economic indicators and prudent policies. Pragmatic and calculated economic reforms of late 1970s set the stage for steadiness in – investment, industrialization, local consumption, exports and revenue generation.

Today, China – an economy with GDP of above $5 trillion has a constrained public debt of merely $347 billion, a favorable trade surplus of $190 billion, and a minimal budget deficit of $109 billion. Remarkably, China also maintains the world’s largest accumulated sovereign funds, foreign reserves of $2.648 trillion. These encouraging set of macro-economic indicators enabled China to ward off global effects of financial crisis easily, alternatively catering to its local consumption, in wake of low export targets. Deficit financing worked for China – it shored up on extra public spending, as its public finances remained stable throughout. The stimulus measures or deficit financing, expects to increase China’s public debt barely by 3% of their GDP, without creating any burden.

China’s efforts to overcome the effects of economic downturn are much more commendable and sensible, than any other country in the world. While most countries spend billions on bailing out banks and financial institutions to improve indirect liquidity for markets, China has offered direct employment and money circulation in the markets. China embarked upon the most sensible of deficit financing.

Pakistan

Learning from economies that have led the world, Pakistan still has an opportunity for introspection; to strive to balance the macro-economic indicators, instead of leaning towards unnecessary deficit financing and with overall reliance on our own revenue generation.

From mid 2008, Pakistan started registering an imbalance in its overall economy, a trend that kept up till 2nd quarter of 2010. By end of 2008, Pakistan’s fiscal deficit increased from $5.6 billion to exceed $8 billion. Trade deficit increased from $13 billion to exceed $18 billion. By November 2008, the foreign reserves had fallen to $6.5 billion. Instead of taking stock of the situation and implementing concrete measures, the government of Pakistan took the easy option, shoving the country towards adversity.

Pakistan was forced to approach IMF in a bid to help bail out its finances – to deficit finance the economy. The initial package with IMF was of $7.6 billion, which was later increased to $11.3 billion in 2009. Other than the IMF tranches, Pakistan sought the help of several Multi-lateral and Bi-lateral financers, which in return, increased its external debt & liabilities (EDL) to $54 billion by mid of 2010, from $41 billion in January 2008.

Pakistan also tried floating sovereign bonds, another form of deficit financing – the Euro and Saindak bonds worth $2.2 billion in FY09. Countries that have unpredictable inflation and varying exchange rates, with respect to their own currencies, often issue sovereign bonds in foreign currencies. This then creates the grave danger that in case the countries are unable to afford or repurchase the foreign currency bonds according to the specified timetable, chances of sovereign default become high. Such countries are further shunned by investors and as a double whammy, the foreign debt increases.

In the view of the fact that both of the above measures taken with international capital markets, were not sufficient to overcome Pakistan’s self-created economic woes, the government was compelled towards deficit monetization, the third form of deficit financing. Pakistan’s current government has relied heavily on domestic borrowings, the result of which has been, yet again, disparity in the debt dynamics. Moreover, this domestic borrowing stimulated record-high inflation of 24% in mid of 2008.

Pakistan’s domestic debt multiplied, from Rs.2,610 billion in FY07 to become Rs.4,490 billion by end of March 2010. This augmentation in the total domestic debt stock took place mainly in the ‘Floating Debt’, secondly in the ‘Unfunded Debt’ and thirdly in the ‘Permanent Debt’. By the end of March 2010, Pakistan’s domestic debt stood at $53.2 billion, which was approximately 30.6% in percent of GDP.

All this deficit financing has turned out to become a futile exercise, unsuccessful in bringing about the desired results and unable to stimulate the economy towards any positive direction. By mid 2010, Pakistan had a total Public debt of around $100 billion; is already paying annual Interest Payments of $5.6 billion and total Debt Servicing has exceeded $7.6 billion annually – expected to exceed $10 billion after the 2010-11 fiscal year.

The situation now is that in essence, Pakistan is raising debt to repay debt, with little or no impact on the overall condition of the economy.

It’s amusing to notice that the first IMF loan tranche was of $3.1 billion and during that same quarter, the government had to repay $3.65 billion as debt servicing. In the 2010-11 budgets, an amount of $10.3 billion has been kept for debt-servicing purposes, with an increase of 7% compared to previous year’s estimates. This again contributes to Pakistan’s budget deficit.

The government has to pay $10 billion every year till 2015 under the loan segment. Pakistan’s ‘clever’ Finance Manager Mr. Abdul Hafeez Sheikh has already announced that further IMF follow-up programs can be subscribed to, in order to repay the original sought debt. What does it concern him or anyone else in the government. In all likelihood, they will be gone ensconced somewhere abroad, while the Pakistani Awaam will continue to pay the price.

For Pakistan, this seems to be a never ending vicious cycle. Deficit Financing is never an ideal approach, nor to be dragged on unnecessarily.

Deficit financing – works only if there are concrete plans and sounds policies, with a long term vision of how to spend the money that is raised through debt, generate revenues and with an  actionable plan as to how to repay that debt. To achieve these aims – honest, sincere, competent and committed governors are required, which Pakistan does not have. Under these circumstances, all we are doing is increasing our debt and raising the liabilities for our future generations to pay off. The money that should have been used to invest in the people and future of Pakistan has been and continues to be used to serve state expenditure on burgeoning and bloated bureaucracy, foreign visits, corruption, and extravagant personal expenses of the government functionaries.

Today, Pakistan’s debt situation is alarming. We have no viable plans to raise sustainable and steady revenue, and no viable specific plan to reimburse and settle off the accumulated external and domestic debts. There are very few choices to make – hard and purposeful decisions.

What can be done?

To initiate that positive chain reaction and kick-start the economy, with the intent to bring constancy to its macro-economic indicators, Pakistan has to formulate policies that are consistent and productive. Few strategies that Pakistan could adopt shall be discussed below. However, without some fundamental reforms the technical strategies may not work.

The Socio-Behavioral Change in the Governance Culture

Of all the things that need to happen, this is the most urgent, fundamental, and foremost. No strategy, no tactic, no policy will work or be implemented in earnest, until either our governing class stops its rent seeking behavior, where they are always looking at short term personal gains without any regard to the country or its people. Alternatively, we get new a class of governors who are selfless, honest, and dedicated to the country and its people. Personal greed, nepotism and financial corruption that have become the hall mark of our governing elite will never let any meaningful strategy and policy to be either developed or implemented. Therefore, nothing that we suggest below will not happen – can happen – without the personal example of our governors.

Rule of Law

This is the second most fundamental change that needs to happen. This is also the litmus test for the changing behavior of our governing elite. Without the proper implementation of rule of law, no economy can thrive. Our governing class needs to lead by example. Only the rule of law will ensure that business and economy thrives, policies and procedures are implemented, security and peace returns to this country, the justice is delivered which shall cut the root basis of extremisms and terrorism. Above all, there is no better way to attract the investors from world over than to build their confidence with proper policies and procedures, enforced by the will of people through rule of law.

If the world knows we are law abiding nation, it will be easier to even raise debt, reschedule it, attract foreign investment, attract direct business with Pakistani entrepreneurs, facilitate business, reduce inflation and hence make the living much easier.

After these two fundamental reforms have taken place, the rest will follow. Nevertheless, being honest and proper is not enough. To reverse the decline we are in, following strategies and actions will provide a starting point.

Curtailing of Expenditure

All unnecessary expenditure should be frozen and fiscal strictness should be enforced. Austerity measures have to be strictly adopted by all and sundry. The total outlay of budget for 2010-11 is Rs3,259 billion that has risen from the budget of Rs1,874 billion in 2007-08. In 2007, the federal government expenditure was estimated at Rs1,353 billion. This rise in expenditure is neither justified nor complimented by the dismal performances of the various government ministries, divisions and commissions. Their contribution towards enhancement of exports or local consumption has not registered any improvement or significant growth. All such augmented government expenditure should be curtailed. Severe pruning of the highest order is needed.

Accountability and Transparency

According to Transparency International 2010, corruption in Pakistan has increased to a level of Rs223 billion compared to Rs195 billion in 2009. Pakistan’s rank has moved up in list of most corrupt countries to rank at 42. Transparency, elimination of corruption and sincere intentions to overcome challenges – are present day requirements for Pakistan.

Unfortunately, Pakistan currently faces mismanagement, misplacement of economic priorities and corruption.

Implementation of Tax Reforms and Immediate Broad based Tax Collection

In Pakistan, the most unfortunate culture that has taken precedent, is that no one wants to pay taxes, leading to a stifled economy. While this is true throughout the world that everyone wants to pay as little tax as possible, there are two established traditions in the developed world. First, Taxation is recognized as a social responsibility with public imperative. Second, while Tax minimization techniques are used within the ambit of law, Tax avoidance is looked upon with disdain, considered a social and state crime.

In Pakistan, the situation is reverse, where tax avoidance culture is not unique to a certain class. The Prime Minister, the chief ministers, top politicians, bureaucrats, including its finance minister, and its elected parliamentarians are those that dodge their national duty.

It’s quite unfortunate that only 3.34 million out of the 170 million nationals are registered taxpayers, from which 2.7 million are active tax payers, which makes it 1.5% of the population. In India, around 4.7% of the population; in developing countries like Argentina, around 16.5% and in first world countries like France, 58% of the population pays taxes.

In the 2010-11 budgets, the targeted tax revenue is Rs1.78 trillion and non-tax revenue is targeted at Rs632.2 billion. Pakistan needs to increase the revenues by atleast twice the amount being collected, by broadening of tax base and uniformly implementing it over all provinces.

The government did initiate several measures to increase the tax base, but superficial and selected implementation, failed to achieve the preferred base. Political influence, insincerity of the audit firms, corruption within the taxation department and pressurizing tactics by influential citizens leaves very little space for potential improvement.

The new taxes under discussion are the ‘Flood Tax’ and the VAT. Flood tax should not be considered as an unpleasant proposal, provided that it too is implemented on a uniform base, across board and the aim is well defined. It should however, not be applied on properties of 500 sq yards and the basic limit for taxation should be set on properties of 2000 sq yards and above, in order to shield ordinary residential houses and the middle class. Similarly, VAT if replaced by GST, with proper documentation and objectives, should be welcomed; however, the conditions should be formulated by the Pakistani government and not through IMF.

The most important should be the imposition and collection of Agriculture tax in Pakistan, if we need to collect revenues on large scale basis. Agriculture contributes around 25% to the GDP and pays tax of around 1%.

Lastly, swift reforms within the taxation system should be encouraged – practices established, documentation perfected, multiple taxation system terminated, self assessment schemes promoted and leakages rectified – for long term economic revival. Tax administration should be organized, corruption eliminated, and proper audit persuaded.

Exploration of Large Natural Resources and attract Foreign Investment

Large scale projects related to exploration of natural resources in collaboration with foreign governments, potential investors and trans-national programs are crucial to uplift the economy, when capital is required to fund the economy. This one of the best options to invite capital, create jobs, alleviate poverty and accrue long term benefits from the natural resources. Foreign Investment is one of the essential channels needed to attain durable and sustained growth for any economy.

The most promising aspect of Foreign Investment, other than the requisite capital, is its capability to mobilize foreign expertise, organizational management, knowledge based resources, technological superiority and utilization of established quality and security practices.

Pakistan has confirmed 185 billion tons of reserves of Coal – equivalent to atleast 850 trillion cubic feet (TCF) of Gas and 500 billion barrels of Oil – confirmed by Chinese and Russian feasibility studies. These reserves compete the riches of Saudi Arabia, are world’s second largest reserves after USA’s 250 billion ton reserves. Using only 2% of these reserves Pakistan can generate 20,000 MW of electricity for around 40 years.

Pakistan also has major reserves of Copper and Gold, discovered in Rekodiq in early 2006 which ranked Rekodiq amongst the world’s top seven copper reserves. Pakistan has proven reserves of Iron ore around 1000 million tons.

Pakistan may have to allow access and grant rights to foreign companies and to those potential investors initially. Carefully crafted agreements with binding clauses for social and infrastructure development plans can ensure benefits for the future generations. Corporate social responsibility is the buzz word in the developed countries. There is no reason that corporations seeking to make billions will not invest millions in the education, healthcare, transportation and telecommunication sectors of the region they are working in. A renowned case in study, Saudi Aramco, the world’s largest producer and refiner of petroleum, was American owned in 1933 and remained so till 1980. Ultimately, Saudi Arabia benefitted from its exploration activities and today stands to shine out amongst the OPEC. Pakistan’s deliberate initial initiatives shall have to be similar.

Privatization Process

Pakistan should immediately sell off its loss accumulating Public sector enterprises or curtail their expenditures, unless an improved, reorganized and restructured program is launched. These loss making enterprises causes an additional burden on our budget of Rs235 billion ($2.78 billion) and contributes towards the $8.1 billion fiscal deficit.

Subsidies Limited or Specifically Targeted

Subsidies provided in the annual budget of 2010-11 are to a tune of Rs229 billion ($2.71 billion) which were Rs114 billion ($1.35 billion) in the budget of 2007-08. In ordinary circumstances, subsidies support. However as a short term measure, due to the current deficit and debt crisis Pakistan is enduring, targeted withdrawal can be considered. Once Pakistan emerges out of the looming circumstances, subsidies could be bestowed targeted to the poor classes. However if the expenditures are reduced this measure may not need to be taken at all.

Debt Rescheduling or Writing Off

Pakistan should request the friendly countries (FoP), financial institutions, Paris Club and Multi-lateral financers to write off the debts or reschedule them to another 30 years. This shall allow Pakistan some fiscal space to reorganize and put into practice reforms. Alternatively, it could also be requested that the interest on the principal amount is written off. Rescheduling is always better than begging!

Debt servicing of external debt & liabilities (EDL) till March 2010, of FY10 amounted to $4.3 billion, from which $335 million was paid to FoP. This payment to FoP is more than a third of the amount received from them (FoP) in post-floods humanitarian assistance. Some help!

Overseas Pakistani contribution

Pakistan should seek the immediate help of overseas Pakistani, requesting them to come forward and donate generously – other than the foreign remittances they are officially contributing. However, this trump’s card could be played by leadership that has credibility and reputation, which unfortunately, most of our leaders lack. Unaccountability and fraud in ‘Qarz Utaro Mulk Sanwaro’ and freezing of Pakistan’s $10 billion foreign reserves, under the government of PML-N were examples of day-light robbery – a depressing demonstration.

Conclusion

Moving on – an effort should be made to acknowledge and learn from the positive economic decisions undertaken by the developed countries. Perhaps, the scale and years of deficit financing did not bring about the fruitful results, nevertheless, economic decisions to invest in targeted programs, did reduce unemployment to a large extent. When President Obama announced his stimulus package of $800 billion, he promised to seek additional funding from the Congress to fund some $50 billion infrastructure plans, in a bid to build roads, railways, and airports – in addition to the initial investments. This plan would see 150,000 miles of roads and 4,000 miles of railways built in the next six years.

Similarly, China’s stimulus programs boast of a gigantic infrastructure spending program that would cover 10 major areas, including projects aimed at environmental protection and technological innovation. As announced in 2008, stimulus spending worth $600 billion was directed largely at funding bullet trains, nearly 100 airports, wind turbines, dams, highways, and bridges. About $54 billion were dedicated towards rural infrastructure projects to create employment. According to The Wall Street Journal, China’s road system will stretch 53,000 miles by 2020, topping the 47,000 miles of roadways in USA.

The most wise of all men, has been the newly elected Prime Minister of Japan, Mr. Naoto Kan, who in his first major speech acknowledged that unless a major financial restructuring was carried out and if Japan does not tackle its colossal debt, it may face a financial crisis and collapse like that of Greece. He admitted that it’s difficult to sustain a policy that relies too heavily on issuing debt. Years of borrowing has increased Japan’s Public debt to $9.7 billion, almost twice its GDP.

Deficit financing should never be the cause to multiple public debts, without causing equal stimulus to generate revenues.

Saudi Arabia another aspiring nation and an inspiring example, pumped up money from its huge foreign reserves of $443 billion, to keep up growth in the economy, maintain liquidity in banks and increase government spending. Saudi Arabia has also initiated new infrastructure projects – roads totaling 6400 km added to 35,000 km of roads under construction, ports, airports, railroads and postal services. In health care, above 92 hospitals are being built. For education system, new projects include 1,200 new schools in addition to some 3112 schools under construction, and rehabilitation of some 2,000 existing schools.

Similarly, UAE has the world’s largest investment authority, created out of its own foreign reserves, for any future bailouts – some were applied to bailout Dubai’s conglomerates.

An emerging economy like Pakistan, unless sufficient in foreign reserves and revenue generation, in addition to a stable currency, in relation to trade deficit and fiscal deficit, will unfortunately face serious imbalances in macro-economic indicators, obstructing stable growth opportunities.

Deficit financing is always a short term solution, to give life support to economies for a brief period. They should never be considered durable, nor prolonged beyond a measured end product, unless certain that recoveries plan shall be as effective and enable the economy to strive back. Conversely, long term solutions to balance the macro-economic indicators should be drawn up and implemented. Reforms should be practical, long-standing and effective.

(Afreen Baig – is an economic analyst. Here she presents an analysis on the current fiscal policies and economic guidelines being pursued in Pakistan, with an emphasis on deficit financing, and why these continue to fail. Some alternatives are suggested. She can be reached at afreenbaig@gmail.com )

Compiled by: Mirza Rohail B and Afreen Baig

Pak Economy in 1999 was: $ 75 billion (Source)
Pak Economy in 2007 is: $ 160 billion (Source) and (Source)
Pak Economy in 2008 is: $ 170 billion (Source) and (Source)

GDP Growth in 1999: 3.1 % (Source)

GDP Growth in 2005: 8.4 % (Source)

GDP Growth in 2007: 7 % (Source) and (Source)

GDP Growth in 2009: 2 % (Source) and (Source)

GDP Purchasing Power Parity (PPP) in 1999: $ 270 billion (Source)
GDP Purchasing Power Parity (PPP) in 2007: $ 475.5 billion (Source)
GDP Purchasing Power Parity (PPP) in 2008: $ 504.3 billion (Source)

GDP per Capita Income in 1999: $ 450 (Source)
GDP per Capita Income in 2007: $ 926 (Source)

GDP per Capita Income in 2008: $1085 (Source)

Pak revenue collection 1999: Rs. 305 billion (Source)
Pak revenue collection 2007: Rs. 708 billion (Source) and (Source)

Pak revenue collection 2008: Rs. 990 billion (Source)

Pak revenue collection 2009: Rs. 1150 billion (Source) and (Source)

Pak Foreign reserves in 1999: $ 1.96 billion (Source)
Pak Foreign reserves in 2007: $ 16.4 billion (Source) and (Source)

Pak Foreign reserves in 2008: $ 8.89 billion (Source)

Pak Foreign reserves in 2009: $ 14.3 billion (Source)

Pak Exports in 1999: $ 8 billion (Source) and (Source)
Pak Exports in 2007: $ 18.5 billion (Source)

Pak Exports in 2008: $ 19.22 billion (Source) and (Source)

Pak Exports in 2009: $ 17.78 billion (Source) & (Source) & (Source)

Textile Exports in 1999: $ 5.5 billion
Textile Exports in 2007: $ 11.2 billion (Source)

KHI stock exchange 1999: $ 5 billion at 700 points
KHI stock exchange 2007: $ 75 billion at 14,000 points (Source)
KHI stock exchange 2008: $ 46 billion at 9,300 points (Source) and $ 20 billion at 4,972 points (Source)

KHI stock exchange 2009: $ 26.5 billion (Source) at 9,000 points (Source)

Foreign Investment in 1999: $ 301 million (Source)
Foreign Investment in 2007: $ 8.4 billion (Source)

Foreign Investment in 2008: $ 5.19 billion (Source)

Large Scale Manufacturing (LSM) in 1999: 1.5% ( Source)

Large Scale Manufacturing (LSM) in 2005: 19.9% (Source)

Large Scale Manufacturing (LSM) in 2007: 8.6% (Source)

Large Scale Manufacturing (LSM) in 2008: 4.8%  (Source)

Large Scale Manufacturing (LSM) in 2009: (-8.2 %) (Source)

Debt (External Debt & Liabilities) in 1988: $ 18 billion

Debt (External Debt & Liabilities) in 1999: $ 39 billion (Source)  (Source)  (Source)

Debt (External Debt & Liabilities) in 2007: $ 40.5 billion (Source) and (Source)

Debt (External Debt & Liabilities) in 2009: $ 52 billion (Source) & (Source)

Debt servicing 1999: 65% of GDP (Source) and (Source)
Debt servicing 2007: 28% of GDP (Source) and (Source)

Debt servicing 2008: 27% of GDP (Source)

Debt servicing 2009: 32% of GDP (Source)

Poverty level in 1999: 34% (Source) and (Source)
Poverty level in 2007: 24% (Source) and (Source)

Literacy rate in 1999: 45% (Source)
Literacy rate in 2007: 53% (Source) and (Source)

Pak Development programs 1999: Rs. 80 billion (Source)
Pak Development programs 2007: Rs. 520 billion (Source)
Pak Development programs 2008: Rs. 549.7 billion (Source)

Pak Development programs 2010: Rs. 300 billion (Source)

 ©Our leader – Musharraf

Referenced:

1- Final Term Project Marketing 2010 – Case Study Dubai Internet City

By, Afreen Baig

Budget 2010-11 has come with many promises to reform the economy. The government has set forth few objectives for it to achieve. The 7^th objective is a resolve to make the country ‘fertile for investment’, with whatever limited resources available.

If an economy runs towards economic imbalance, stagnation or recession, or if one has to kick start a new economy, there are two main options any government has. First, the government along-with the Central bank pledges to pump in direct money to start the circulation cycle. Recent examples of this are the US government’s pledge for the ‘rescue package’ worth roughly $12 trillion towards the economy. Similarly UK government spent nearly a trillion Pound to bail out and refinance its bank through ‘Quantitative Easing’. Likewise, Japan also launched above $350 billion stimulus packages, to lift its economy out of the recent recession and over the past decade of its economic stagflation it has taken several such smaller initiatives to stimulate the economy. All these measure will fall under what is termed as Keynesian thesis after J M Keynes. Alternatively, one may call these Deficit financing. The idea is that the government uses its resources to increase consumption and liquidity which in turn increases demand and economic activity resulting in increased jobs and employment.

Alternatively, a government announces large scale projects, with help of investors or transnational programs, to uplift the economy. This means that outside capital is attracted to fund the economy. For a developing country like Pakistan, the second option is more practical and viable. That is to seek the involvement of friendly governments and foreign investors, to help circulate capital and avail advantage of their expertise. This will create job opportunities, alleviate poverty and Pakistan will benefit from its natural resources.

Investment is the essential channel needed to attain the long term and sustained growth of an economy.  Along with Consumption and Export it provides the pillars that determine the overall GDP of any economy and is instrumental in driving the Economic growth. The most promising aspect of Foreign Investment, other than the requisite capital – is its capability to mobilize – foreign expertise, organizational management, knowledge based resources, technological superiority and utilization of established quality and security practices. In other words foreign investment, through its multi dimensional linkages, uplifts the country’s status in different fields of development. Enhancing Investment is also one of the most vital links to the poverty reduction, which is a greatest challenge, faced by humanity in the present times. Therefore attracting and maintaining investment is crucial to growth of an economy and development of a country.

For a developing country like Pakistan, foreign investment helps maintain that circulation of money in the economy, which otherwise, the country is forced to seek from donors and IMF, which not only increases the overall debt but also increases the debt servicing. Increased debt servicing then forces the government to make cut backs. Moreover, it is well known that Pakistani governments, instead of reducing wasteful and unnecessary expenditure, axe Public Sector Development Programs (PSDP). The result is wounded economic development and increased poverty and misery for millions.

Most of the IMF fund that GOP sought recently were initially to help boost Foreign Reserves that had depleted, one of the reasons being outflow of investment – and later, to support the budget deficit. Unfortunately, deficit financing has not helped Pakistan, as productivity was not increased to cater consumption; rather most of the financing went towards debt repayment. Readers may find it interesting and disappointing to note that the first tranche of IMF loan was $3.1 billion and debt repayment paid during that same period was $3.65 billion. This clearly means that the government is raising debt to repay debt. It is also clear and certain that the government will further require foreign assistance to cover the recent budget deficit of around $8 billion. Current economic policies have proven to be futile and ineffectual.

A combination of World financial meltdown, to a certain level, and a change of government in 2008, did not augur well for Pakistan, which was predicted as having ‘high potential’ for growth. The newly elected government failed to reassure the investors and displayed inconsistency and ambiguity of policies. Its actions such as harassment of members of Forex Association of Pakistan (FAP), and Rupee devaluation dragged on unchecked, depicting ignorance. Pakistan’s macro-economic indicators started registering imbalances, and the investors were forced to withdraw their investment and divert their capital to Middle East, India and Southeast Asian countries.

Pakistan has thus entered a ‘trust deficit’ zone with regard to investment. It is a horrifying prospect for a poor and developing country. Net foreign investment has fallen by 50% since FY2007-08. KSE market capitalization fell from $75 billion to $20 billion in 2009 and the government’s income from KSE alone reduced by at least 90%, further adding to the budget deficit. The effect of falling investment was felt in the overall GDP as well, as shown by the following figures.

2005-06: Foreign Investment $4.485 bn and GDP was 5.8%

2006-07: Foreign Investment $8.428 bn and GDP was 6.8%

2007-08: Foreign Investment $ 5.475 bn and GDP was 4.1%

2008-09: Foreign Investment $ 2.665 bn and GDP was 1.2%

In 2009-10, Foreign Investment decreased further to $1.896 bn.

Fundamental pre requisites for investment

Therefore, what are the fundamentals for attracting investment and getting the maximum out of it? First and foremost, it is important to remember that Foreign Direct Investment (FDI) is only one part of the equation and any analysis of its contribution to economic growth needs to be set into a wider context.  In reality, the government has a much more profound role to play when it comes to unlocking Pakistan’s investment potential than outside investors do. Unless we address the fundamentals that continue to hamper Pakistani businesses, especially at an SME level – namely, practical struggles with bureaucracy, regulation, red tape and infrastructure -long-term economic growth will continue to elude us. We will briefly outline some of these fundamentals that encourage people to invest and ensure them that their investment is not only productive but will generate those returns.

1. The government must create a healthy investment climate. To achieve this there should be stable macro-economic climate and better security structure in the country. Access to justice must be ensured both for local and foreign investors to build an environment of trust and fairness. Judicial and legal reforms that better the governance and administration system related with investment issues better should be implemented. These include from mundane matters such as business registration and licensing, to taxation and customs and property rights. The rights and intellectual property of the investors should be protected.

2. The infrastructure provision is another fundamental prerequisite. Works to resolve critical infrastructure challenges in the power and financial sectors should be prioritized. The government should aim to reduce investment costs in target economic sectors by developing human resource and basic infrastructure to accommodate the expansion of target/potential sectors of economy.

3. Building the environment of trust is crucial for Investment. Trust is the whole sum of all political, economic, socio-cultural and technological strengths and attractiveness. Moreover, perception sometimes matters more than reality, as it is the game of psychology. The damage that has been done to the image of Pakistan is far worse than the actual economic and material loss we have suffered from the recent spate of terrorist attacks. The provincial quarrels and various verbal spates between the high ups of various political parties only add to the image of an unstable country.

Pakistan must remember that we are multi-ethnic society and in a globalised world, we live with all other races and nationalities. Any signs of discrimination within the country are message for outside investors that they may be discriminated against too and it does not inspire confidence. By treating our own citizens in an equal and fair manner we tell the outside investors that we as a society will treat them fairly too and that there will be no distortions natural or otherwise.

4. Political Stability: Political Institutions and Foreign Direct Investment in Developing Countries have a significant relationship. Studies have shown that democracy, property rights, and credible commitment (via veto players) to stable, FDI-friendly policies all have a positive effect on foreign direct investment (FDI). Of these, the policy stability is the most important. It has the most powerful role in determining the investment level in a country, because it provides the overall structure of governance, which gives an ultimate framework for the policies.  There is a guarantee that investor friendly policies will continue and it is easier for the investors to assess their risks properly and calculate the returns they seek.  

In addition, there are studies that show that even under the conditions of economic sanctions FDI increases under certain conditions, of which political stability is most important. Especially the unexpected sanctions increase FDI in the target countries than the expected economic sanctions.

Another study by Michael J. Harrison has shown that despite the overall inverse relationship between the level of corruption and FDI inflows, in stable countries these inflows are still greater than anticipated based on UNCTAD’s Inward FDI Performance Index.

We can safely conclude that when it comes to making a capital investment, political, economic, and financial stability is the stronger attraction because it ensures the certainty of reward and future growth.

5. Human Capital and FDI

Finally, to attract any type of FDI or Domestic Investment the country human capital is essential. Bothe China and India are prime examples. When globalization forced the MNCs to outsource, both countries offered well developed Human capital in the form of educated and skilled workers. The rest as they say is history.

Human capital not only attracts the capital it adds value to it. Therefore, one can use MNCs to help develop the tertiary education sector as well as to contribute to the HRD by providing training and supporting formal education.

It is the job of the government that it emphasizes flexible and demand-driven human resource strategies; target the foreign investors in high value-added areas, and co-ordinate education and
training policies.

Challenge for Pakistan

Pakistan faces two main challenges before it is able to attract the required investment back. First, stabilizing the macro-economic indicators, as these serve as the foundation stone and broadening of the tax base to generate revenue. Debt to GDP ratio should be lowered, to save our revenue generation. This means cut down the wasteful expenditure and trim the public waste particularly by the over bloated (and pretty useless) cabinet and presidency as well as provincial governments. 

As noted above investors look for stable politics, stable currencies and availability of energy and other infrastructure. In 1970s, when the US inflation spiraled out of control and the dollar plunged, the investors were forced to transfer their investments to Switzerland. Pakistan’s currency devalued from Rs.61 per dollar in 1999 to Rs.84 per dollar in 2009. This was scandalous and inept, to say the least. However, government seemed too busy in its own political shenanigans quite oblivious of what was happening to the economy. Foreign Reserves need to exceed the Trade Deficit to stabilize the currency. However, no effort was undertaken to stem the rot.

Secondly, we talked about the Trust and the importance of perceptions, above. The other effort therefore has to be, countering the negative perception that has developed around the world, due to current government’s reputation for corruption, as indicated by international organizations. In a state afflicted with terrorism and at various times being termed ‘a failed state’ and ‘most dangerous country in the world’, the last thing one needs is to have corrupt and inefficient government. That is precisely what we seem to have.

Recently, Transparency International’s ‘National Corruption Perception 2010’ revealed that corruption has increased to a level of Rs.223 billion as compared to Rs.195 billion in 2009. They further point out that the credibility of Pakistan is at the lowest levels, since there has been no funding over 1.5 years from the Friends of Pakistan Trust Fund, being managed by the World Bank. Pakistan’s rank has moved up in the list of the most corrupt countries to rank at 42. These rankings are based on data collected from 10 independent international institutions, including the World Bank and World Economic Forum.

According to Global Peace Index (GPI) recently, Pakistan has become the world’s fifth most unstable country. Pakistan’s overall rank now is 145 out of 149 countries. While the Foreign Policy Magazine and Fund for Peace ranks it at #10 amongst Failed States.

Similarly, a report released by the World Economic Forum, as ‘The Global Enabling Trade Report 2010’ – ranks Pakistan at 112^th position amongst the 125 countries. Pakistan held a secure position of 88^th in 2008 and in 2009 fell to 100^th, which signifies that it’s been losing its global trade competitiveness.

Further eroding investor confidence, in May 2010, Pakistan’s credit ratings were cut by both Moody’s and Standard & Poor (S&P), the former slashing it to B3 and the latter to CCC-plus. Recalling that in 2007, Pakistan’s credit ratings according to S&P were a healthy B+ only four levels below investment grade.

Governance Conundrum

Good governance is not connected to or the result of any particular system. Honest intentions, defined directions, setting of priorities, banking on our strengths and natural resources, and elimination of corruption can be achieved through any wise mode of governance. National Interest should be held above any system, first and foremost, without compromise! World examples prove, the determination of leaders and governments through any system, be it, Autarky or Autocracy, Monarchy, Democracy, or Centralism, etc – all have thrived, delivered & achieved in their respective countries through wisdom and visionary policies.

We have prime examples of countries like South Korea, China, Malaysia, Saudi Arabia, UAE and Turkey. The leaders and governments, irrespective of the mode of governance in these countries, succeeded in rapid reforms and modernization – improving of infrastructure, providing basic health, utilities and education to masses. The system responded inevitably and these countries transformed into regional economic zones, manufacturing hubs, financial, tourism, and telecommunication centers.

South Korea during the 1960s and 1970s, under Park Chung Hee – depended on investment oriented policies, guiding the investment towards infrastructure development and heavy industries. It acquired technology and much investment from Japan, after normalizing relations and established the solid base for industrialization. In 1997, Malaysia under Mahathir Mohamed, resisted the prescribed IMF package and centered its recovery through its own limited resources. Saudi Arabia availed the recent boom in oil prices and the King inaugurated some six Economic cities and numerous schools, colleges and world class Universities. UAE’s transformation from an oil based economy into fortifying its non-oil economy has won accreditations. China under Mao Zedong transformed from an agriculture country into an economic super power.

Our current government never set forward its priorities, after taking charge, knowing that the world is facing an economic meltdown and that Pakistan has to protect the capital it had been entrusted with. Pakistan’s macro-economic indicators were strong when the PPP government took over and as admitted by them in its letter of intent (LoI) to the IMF in 2008. In a small period of TWO years, we have had FOUR Finance Ministers, and none has been held responsible for the economic decline. There never seemed any purpose to protect the existing investors nor any efforts were visible, rather more focus was being paid on election jubilations. Corruption reporting on media followed, further eroding investor confidence. Massive disinvestment and outflow of capital took place, amidst rupee devaluation, effecting the business environment. Recent media reporting, on one of the biggest Custom’s frauds in history of Rs. 220 billion and the Supreme Court’s remarks pertaining to Pakistan Steel Mill’s corruption of Rs. 22 billion, considering it as the biggest dacoity of history – has painted a bleak picture.

In general, governance can be used to describe a change in the nature of the state or nation. Unfortunately, in Pakistan, there never is a change in the overall status of the nation. The intention of our rulers has become to complete the tenure, favoring well known corrupt people, protecting fake degree holders, stuffing up Public sector enterprises with political affiliates, and heaping IMF & World Bank debt upon debt for future generations to pay off. In such a quagmire, where there is no determination, governance can never succeed. Serious efforts shall have to be taken to attract back the investment and capital and systematize priorities to develop the basic infrastructure, security, maintain peace and effective law enforcement. World renowned financial institutions like the WEF, WB, IMF, ADB, Goldman Sachs, Moody’s, Standard & Poor’s, J.P.Morgan, Merrill Lynch, UNCTAD, and several others have been monitoring and recording the economic situation of Pakistan and no sitting government can escape accountability.

Potential and Possibilities

While international skepticism has grown owing to reports as mentioned above, nevertheless, Pakistan could always capitalize from the few advantages it still has, to attract foreign and generate local investment. With a population of 170 million and large consumption to drive its growth, Pakistan has the capability to become self reliant.

Pakistan is strategically located in South Asia, a corridor to Central Asian states, with cheapest labor available compared to regional countries and perhaps one of cheapest in world. According to approximations, labor in Pakistan is $ 0.36 an hour; in India, it is $ 0.58 an hour and in China, it is $ 0.70 an hour.

From the regulatory point of view, it’s still feasible to establish business in Pakistan compared to neighboring countries. However, there is a need to cut down on procedures, registering with various government departments. It takes some 20 days to start a business with 10 procedural steps; 50 days to register property with 6 procedures and 223 days to build a warehouse with 12 registration procedures. Dealing with construction permits, employing workers, getting credit, and trading cross border is easier. Paying taxes and enforcing contracts takes longer time than regional countries.

Therefore, the essence of the strategy of sustained and pro poor growth, in a developing country like ours is to develop and maintain an environment conducive to investment.  In this regard the development of an investment friendly climate, legal framework, and above all a system of good governance are the ultimate pre- requisites.

Pakistan is sufficient in several of natural minerals – a reason to draw foreign investment, commence exploration, local job opportunities in provinces and export of raw & finished products. Coal, Copper, Gold, Silver, Dolomite, Gypsum, Lime stone, Natural Gas, Iron core, Rock salt, Bauxite, Marble, Gems, China Clay, Zinc, Lead and Chromite are some of Pakistan’s potential.

World tendency indicates that exporters of oil, gas and mining products experienced expansion and progress in economies, by and large in trade as well, witnessing windfall revenues. Conversely, exporters of manufactured goods endured a persistent decline and stagnation in their trade, particularly those who were importers of oil and gas.

Pakistan has confirmed 185 billion tons of reserves of Coal – equivalent to atleast 850 trillion cubic feet (TCF) of Gas and 500 billion barrels of Oil – confirmed by Chinese and Russian feasibility studies. These reserves are world’s second largest reserves after USA’s 250 billion ton reserves, much higher than Chinese and Russian reserves. Using only 2% of these reserves Pakistan can generate 20,000 MW for around 40 years, other than producing endless electricity.  Coal will also contribute towards boosting steel production at much lower costs.

World coal prices average $59.28 a ton in 2010, predicting to rise to $70 per ton next year. 78% of China’s and around 60% of India’s electricity is generated from coal. In December 2009, China imported 16.4 million metric tons from South Africa to meet its demands. Pakistan’s large reserves could serve as cheapest source of availability to China, India and the world. The government must strive to make use of these proven reserves by inviting investors with expertise which will generate thousands of jobs and lower poverty – a blessing for our future.

For several of the products, like Gems, the government should setup certification laboratories, refine the products and export finished goods. With the right investment, export of jewellery has the potential to grow from $397 million to above $1.5 billion annually.

Major reserves of Copper and Gold were discovered in Rekodiq in early 2006. It has ranked Rekodiq among the world’s top seven copper reserves. The Rekodiq mining area has proven estimated reserves of 2 billion tons of copper and 20 million ounces of gold. Investment in this sector will help reduce our import bill of gold of around $130 million.

Pakistan has proven reserves of Iron ore around 1000 million tons. It’s an irony that Pakistan has to import Iron and Steel worth $1.62 billion.

Usually the investment required for exploration, mining and extraction of natural resources, being implemented on extra large-scale, thereby contain more scope for multi-national corporations (MNCs) or dependence upon collaborations on intergovernmental levels – with those willing to circulate capital, looking for long term strategic partnerships.

An economy works in a chain reaction. If the macro-economic indicators strengthen over a period of time, the links keep connecting and the economy grows. Large scale job creation improves the purchasing power of the overall nation and lowers poverty. Increased purchasing power encourages the nation to spend more, which increases consumption, demand of goods and services soar, raises manufacturing of items, money circulates in markets again and subsequently, people benefit from lucrative job opportunities.

Agriculture is another sector that has the potential to deliver for Pakistan and has been one of the major contributors to GDP. While it contributed 71% in 2008-09, that contribution fell to 11% in 2009-10. It must be kept in mind that Pakistan’s consumption of agriculture related and food items has grown by around 50% in major sectors, since 1999. Exports should be prompted AFTER satisfying local consumption; otherwise, it leads to shortage and inflation.

Investment should be guided towards Cotton, Sugarcane, Rice, Maize and Wheat production – learn to enhance growth through latest NH4 and UV-B  treatment of plants for maximum capacity.  Proper investment in agriculture sector will put into effect poverty alleviation in villages and expedite consumption led growth.

India produces 75 million tons of milk and employs around 70 million dairy farmers. Dairy cooperatives have already created direct employments for 13.4 million households in rural India, across 130,000 villages. ‘Amul’ – just one Indian brand has crossed exports worth Rs. 3000 million.

Pakistan is the 4^th largest producer of milk, currently producing around 45 million tons, but unfortunately has to import milk and milk food worth $68 million. Pakistan has every potential to grow as India gained. Investment should be encouraged to establish value-added, chilled, long-life, finished and processed products. Pakistan could start exporting cheese, cream, powder milk, tetra packs, ghee and butter – after meeting local consumption of 36,300 thousand tons. Revenue inflow from dairying has contributed towards strengthening rural purchasing power all over the world. Pakistan should learn from leading examples.

Fruit and agriculture processing is another specialized area where local investors could direct their attention. Processing agriculture produce is around 40% in China, 30% in Thailand, 70% in Brazil, 78% in the Philippines and 80% in Malaysia.

Pakistan exports fruit worth $209 million and 533 tons of fruit. If a fruit sells for $4 per kilo, then canned fruit sells for 3 times the value in international markets. Mango pieces, Apricot, Grapes, Guava, Banana, Citrus and Fruit Cocktail – all sell better canned. Jams and fruit concentrates. Similarly, meat and fish processing units require average investment and have large local and international markets for consumption.

In 2009-10, SMEs jointly contributed approximately 30% to GDP, 25% to total exports and 35% to manufacturing value addition. Small Medium Enterprises of Pakistan and small scale cottage industries are in better positions to avail advantage in food and vegetable processing, as these do not require large amounts of capital. Further, their native and market based knowledge gives them an edge to better understand the chain of supply – from producers, involvement of middlemen, storation and delivery. The government did allocate Rs.10 billion fund for SMEs in the 2009-10 budget, however, proper incentives and classification is required to avail fruitful realization.

International trend indicates that investment flows towards resourceful areas and with higher literacy rates. Technical know-how, skilled workers, information technology and education supports industries and the government must promote that through vocational courses conducted throughout all provinces. Additionally, the government should guarantee safety of capital, property protection and above all, law enforcement. Disturbed or tense situation affects production, sales and profitability – which no investor – foreign or local – would like to endure. Safety and Security of foreign nationals is further crucial to MNCs or intergovernmental initiatives.

Before trying to attract investment, the government must ponder – what incentives have they to offer to genuine investors that could not be found in neighboring India, Bangladesh or China?

Fundamentally, there are two main reasons for any investor or intergovernmental assistance to employ their capital. For governments, it may be to gain strategic foothold in the region and for private investors, without doubt, it is profitability. Unanticipated and astronomical rise in cost of power, gas and petrol utilities has impacted business viability.

International investors look favorably upon countries that offer low tax rates and accelerated rates of depreciation on assets. 100% tax exemptions should allowed by the government atleast for the first few years. Existing corporate tax rates should be lowered from 35% to match regional taxation rates. 10% WHT on commercial power consumers should be lowered to decrease the cost of production. CVT of 4% on property must be relaxed. Imposition of 0.3% WHT on all modes of banking transactions in excess of Rs. 25,000 per day is unnecessary. Commitment to IMF over VAT will only be detrimental. Import duties must be lowered for those sectors that will help boost exports and on machinery mobilized for exploration of natural resources. Microcredit schemes should be initiated to provide easy lending credit loans to small farmers, free of tax and mark ups.

The federal government must ensure equal distribution of incoming investment so that economic disparities amongst the provinces decline.

After 2002, following non-interventionist and productive policies, Pakistan did witness an inflow of investment, both foreign and local, that rose to a record $8.4 billion in 2006-07, directly contributing towards a healthy GDP growth of 7%. Total investment in Pakistan rose by almost 100% since 1999 to become 21% of total GDP. A World Bank group, released an international ranking of 175 economies of that year under ‘Doing Business 2007’ and Pakistan proved to emerge as a reformer in South Asia to rank internationally at #74 beating regional competitors like India (134), Bangladesh (88) and Sri-Lanka (89). Pakistan’s emerging economy was being called the Next-11 after BRIC, as predicted by Goldman Sachs after evaluating Pakistan’s macro-economic stability, lucrative markets for investment and liberal trade policies. Pakistan marked its presence amongst the world’s prominent economies and potential investors, accredited by international institutions like the World Bank, IMF, J.P Morgan, Merrill Lynch and ADB.

Developing economies like Pakistan will unquestionably benefit from intergovernmental collaborations, transnational companies, multi-national corporations (MNCs), and investors. Pakistan needs to attract and secure these investments, till it develops itself as knowledge based Economy, develops a solid manufacturing foundation to support local industries and builds an infrastructure that compliments internal trade. More importantly, develops the capacity to self finance growth and generate sufficient revenue. Leadership, if it can, comprehends these economic realities and lead Pakistan towards proper economic reforms and revolution.

Policy Aims

Investment always bring home an opportunity to take advantage and remove shortcomings from the economy. Investment Policies should be futuristic to enable consumption led growth, boost exports, minimize imports, cause income generation through exploitation of natural resources and develop human capital further.

Aramco – world’s largest oil corporation with largest crude oil production in Saudi Arabia came with investing prospects in 1933 and discovered oil for Saudi Arabia. In 1973, Saudi government acquired 25% interest in Aramco. Over a period of time, Aramco became 100% Saudi owned, a major revenue generator for a modern Saudi Arabia and with the best of systems. Pakistan must learn from such examples around the world and make proper utilization of its natural resources encouraging proper investment.

So how should we develop our policies? First and foremost, and it may be so obvious that it may sound silly to say it but nevertheless our policies should be Pakistan Centric and Pakistan specific Policies. Secondly there should be formal linking of Human capital and investment policy as a matter of strategy and policy. As we have noted above, human development is essential to pull in investment [both domestic and foreign] and generating the capacity for future sustainable growth. Human development is, concurrently, both the means and the end of the investment. Therefore while the social profile of a country [health, education, skill development etc.] is a precondition for a suitable environment to draw more investment, the investment should be a major contributor to the improving social and human indicators.   

In other words there should be a coordinated policy planning for socio economic development through investment. Investor returns should not be taxed but rather they are encouraged and incentivized to contribute to the education, health and infrastructure of the communities and i.e. education and health provision with relief in taxes. The policies should aim to achieve transfer of technology and management techniques and therefore to reduce dependency on aid in the long run.

The policies should consciously aim for Upstream and downstream sectors linkages. Each investment should develop its own supply chain so associated human capital development should promote its own supply chain capital development. Education, health, housing and employment generation should flow smoothly with investment projects.  

The policies should aim for reduction of regional and social disparities. For Pakistan we should make region specific policies to take advantage for the differing strengths of the regions e.g. in Punjab agriculture & cottage industry, in Sind Thar coal, Karachi as financial capital, and cottage industry, in Balochistan mineral and cottage industry and in Khyber Paktunkhwah  tourism capacities can be built.

The policies should also explicitly set out to balancing excessive foreign influence and protection of indigenous entrepreneurship and workers. To repeat the policy ultimately should be Pakistan centric and Pakistan specific.

Investment Strategy

With the above policy aims in mind, we recommend that following measures provide an outline for a successful strategy that needs to be taken in order to build favorable settings for the prospects of investment.

1. All and every measure that brings political stability and a climate of Trust for potential investors.
2. Prioritizing policies and measures that capitalize the natural and human resources.
3. A Liberal investment policy that incentivize investors.
4. Normalizing relationships and speeding up trade liberalization with neighboring countries to expand market size. For Pakistan, Iran, Afghanistan, Central Asia and Western China and last but not the least India itself offer themselves as markets. That is nearly a billion human beings needing food, clothing, health, education, energy and other creature comforts.
5. Enhance domestic and local investment by increasing national savings. Rule of law rings aloud when cooperative scandal and written off loans come to mind.
6. Alignment of Federal and Provincial Investment policies. 
7. Liberal and transparent access to assets and institutional and human capacity building.
8. A reorientation of the government’s role from owner-operator to administrator-regulator.
9. Investment diversification: exploiting new potential areas

1. Food processing: The US, Brazil and Philippines process 70% of the food they grow. This is an attractive sector for Pakistan as well for exports and therefore can attract both local and foreign investment.

1. Boosting tourism to encourage investment: according to the experience of several other countries it is seen that the increase in government spending on building prospects for tourism has helped the economy grow at impressive rates. In Morocco for example, this impact was estimated to be as five per cent growth in 2009. Meanwhile the tourism industry can boost several other linked industries such as transportation, hoteling and food etc.

1. Mining: Pakistan has deposits of numerous solid minerals. The federal government should prioritize the development of the strategic minerals such as coal, keeping in view the rising energy needs.  Mining as a prospect of investment has a unique feature that the investor can’t pick the investment up, so they are married to their investment in a way. Consequently, the lead time for a mine is measured in many years, so they remain in for a significant time period. Nevertheless, the minimal risk certainty of the investor about the reward is the must factors for putting their capital in this sector. Therefore, the host country must strengthen institutional and human capacity building to ensure the rewards.  Another important element of investment in this sector is the communities, which are the big stakeholders in this regard. The communities there must be educated about various process involved in mining and it should be discussed with them as to how it benefits them.

1. Clean Development Mechanism (CDM) projects are a mechanism where companies in developed countries can invest in developing countries to achieve carbon reduction objectives. Pakistan has approved 25 CDM projects. As for direct benefit of approved CDM schemes, these have led to a direct investment worth US $742 million and reduction in the emission of four million tons of carbon. The Global CDM investment flows are between $5.2-17.4 billion per year. Pakistan can benefit by activation of more CDM projects in highest Green House Effect abating sectors in the country.

1. Certainty of rewards or incentives: These rewards cannot be generated by giveaways or simple incentives, but from the readiness of economic infrastructure, the quality of manufacturing factors, and the environments that are conducive to quality investment accompanied by market development and healthy competition.

1. Marketing in a global world and image building: How well does your country market itself? Are the Pakistan embassies doing enough to promote their country’s image abroad? A group within the Finance Ministry should be formed exclusively for branding and image building for enabling environment. In addition, they should be sitting together with their foreign ministry compatriots to devise and implement such a marketing strategy.

 (Afreen Baig is an economic analyst.  She can be reached at afreenbaig@gmail.com )

Economic Pakistan would like to deviate from its regualr articles to cherish alongside their Arab brothers, an accomplishment worth mentioning. A Muslim Country UAE has marked History, by erecting the    World’s tallest icon, 828 meters or 2717 feet, probably the only superscraper, giving the Muslims a reason to celebrate.

In January 2004, Dubai announced Burj Dubai to the world with the claim, ‘History Rising’. Six years on and history has most certainly ‘risen’.    

 Burj Dubai will soon be transformed into a vibrant community for thousands of residents, employees, hotel guests and tourists. Up to 12,000 people will live, work and play inside the world’s tallest building.     

Fire Works Burj Khalifa Dubai

The tower is the focal point of the 500-acre master planned community Downtown Burj Dubai, which is widely described as the most prestigious square kilometre on earth.      

Burj Dubai is the development’s crowing glory in every sense, a building that has pushed the boundaries of design and engineering further than many thought possible.     

Excavation work for the tower began soon after the announcement of its launch, with more than 60 contractors and consultants joining forces on a project of unprecedented scale and ambition.     

When construction work was at its most intense, more than 12,000 people from over 100 countries were working every day at the Burj Dubai site. In total, Burj Dubai took 22 million man hours to build.     

Mr. Mohamed Alabbar, Chairman, Emaar Properties, said Burj Dubai was a shining example of global collaboration. “Burj Dubai shows just what can be achieved when people from all over the world come together to strive for a common purpose.”     

Strong foundations

Standing at more than 800 metres (2,625 ft), Burj Dubai captivates audiences with its height. But its construction  underground is equally worthy of fascination. More than 45,000 cubic metres (1.59 million cubic ft) of concrete, weighing more than 110,000 tonnes, make up the tower’s steel-reinforced foundations with 192 piles running to a depth of over 50 metres (164 ft).     

Inspired by nature

Work on Burj Dubai’s superstructure began in March 2005, with the foundation work alone taking 12 months. The distinctive triple-buttressed outline of the Burj Dubai was inspired by the desert lily Hymenocallis.     

Wind factor

Extensive seismic and wind tunnel testing was carried out to perfect the design of the tower. The triple-buttressed shape of Burj Dubai allows it to manage the effect of wind vortices generated around the tower, as well as changes in atmospheric pressure between its base and spire.     

Rock solid    

The main construction material of Burj Dubai is reinforced concrete, specially designed to withstand the staggering pressures inherent in the world’s tallest building. In total, Burj Dubai employs a record-breaking 330,000 cubic meters (11.6 million cubic feet) of concrete; 39,000 metric tonnes of reinforced steel; 103,000 sq m (1.1 million sq ft) of double glazed glass; and 15,500 sq m (166,800 sq ft) of embossed stainless steel.     

Climbing to the sky

Once the lengthy construction work of its foundation was complete, the vertical ascent of Burj Dubai was surprisingly fast. The first 100 levels of the tower were completed only 1,093 days after excavation started. A level was added every three days before the uppermost levels of the tower were reached.     

In November 2007, the concrete for the highest reinforced core walls of Burj Dubai was pumped from ground level to a height of 601 metres (1,978 ft), breaking the previous record for concrete pumping held by Taipei 101. The pressure generated during the pumping work reached nearly 200 bars.     

A glass act

Work on the glass and aluminium exterior cladding of Burj Dubai started in May 2007 and was completed in September 2009. Nearly 400 skilled engineers were assigned to the project. At the outset, around 20-30 cladding panels were installed each day. The daily rate of installation reached 175 panels as the project neared completion. Burj Dubai has set a new world record for the highest installation of an aluminium and glass façade, at 512 metres (1,679.8 ft).     

A staggering total of 24,348 panels cover a curtain wall area of 132,190 square metres (1.4 million sq ft). But the Burj  Dubai’s shimmering exterior is designed to minimise heat transmission into the building itself, therefore saving energy. Condensation from the panels is also collected and used for landscape irrigation.     

Pinnacle of achievement

Burj Dubai’s spire may resemble a needle at ground level, but in reality it is a colossal structure made up of 4,000 tonnes of structural steel. Nor is it exclusively ornamental, housing as it does communications equipment for the tower.     

Community spirit

With a total built up area of around 6 million square feet, Burj Dubai is set to become a living, vibrant community in the heart of Dubai. Around 2 million square feet inside the tower is dedicated to luxury residential apartments, while more than 300,000 square feet is allocated for office space. That’s in addition to the sections of the tower taken up by the world-first Armani Hotel Dubai and the Armani Residences Dubai.      

Countless artworks by prominent Middle Eastern and international artists, including sculptures and various contemporary installations, adorn the interiors of Burj Dubai and line Emaar Boulevard throughout Downtown Burj Dubai.     

Life of luxuryA total of 57 elevators and eight escalators serve people living, working and enjoying their leisure time inside the tower. Burj Dubai has four swimming pools, a cigar lounge, residents’ lounge, the fine dining restaurant ‘At.mosphere’, and a variety of health and fitness facilities.     

Moreover, the tower’s 124^th floor observation deck, ‘At the Top, Burj Dubai’, offers 360-degree views of the city and is open to the public.     

Burj Dubai features ‘The Offices’, a 12-storey annex of prime office space; ‘The Club’, a four-storey health and fitness centre; and ‘Armani/Pavilion’, an outdoor entertainment venue that opens onto the Burj Dubai Lake and The Dubai Fountain, described as the world’s tallest ‘performing fountain’.      

Heart and soul

Demonstrating that Burj Dubai is more than just a building, its creators have perfected a written narrative that evokes the tower’s soul.     

Visitors to the ‘At The Top, Burj Dubai’ observation deck can read the ‘I am Burj Dubai’ legend once they reach the ‘From the earth to the sky’, section of the tour.     

Its opening stanza reads: “I am the power that lifts the world’s head proudly skywards, surpassing limits and expectations. Rising gracefully from the desert and honouring the city with a new glory, I am an extraordinary union of engineering and art, with every detail carefully considered and beautifully crafted…”     

“I am the heart of the city and its people, the marker that defines Emaar’s ambition and Dubai’s shining dream. More than just a moment in time, I define moments for future generations…”     

From the ‘‘From the earth to the sky’’, one can view Level 124 and the summit of Burj Dubai at a near vertical angle. 

Bringing Burj Khalifa to life required a combination of visionary ideals and solid science. In the process, the project amassed an awe-inspiring number of facts, figures, and statistics.

World Records

At over 828 metres (2,716.5 feet) and more than 160 stories, Burj Khalifa holds the following records:

•  Tallest building in the world

•  Tallest free-standing structure in the world

•  Highest number of stories in the world

•  Highest occupied floor in the world

•  Highest outdoor observation deck in the world

•  Elevator with the longest travel distance in the world

•  Tallest service elevator in the world 

Tallest of the Supertall

Not only is Burj Khalifa the world’s tallest building, it has also broken two other impressive records: tallest structure, previously held by the KVLY-TV mast in Blanchard, North Dakota, and tallest free-standing structure, previously held by Toronto’s CN Tower. The Chicago-based Council on Tall Buildings and Urban Habitat (CTBUH) has established 3 criteria to determine what makes a tall building tall. Burj Khalifa wins by far in all three categories.  

Height to architectural top

Height is measured from the level of the lowest, significant, open-air, pedestrian entrance to the architectural top of the building. This includes spires, but does not include antennae, signage, flagpoles or other functional-technical equipment. This measurement is the most widely used and is used to define the Council on Tall Buildings and Urban Habitat rankings of the Tallest Buildings in the World.

             

Highest occupied floor

Height is measured from the level of the lowest, significant, open-air, pedestrian entrance to the highest continually occupied floor within the building. Maintenance areas are not included.

           

Height to tip

Height is measured from the level of the lowest, significant, open-air, pedestrian entrance to the highest point of the building, irrespective of material or function of the highest element. This includes antennae, flagpoles, signage and other functional-technical equipment.

 

 

Inspired Design

While it is superlative in every respect, it is the unique design of Burj Khalifa that truly sets it apart. The centrepiece of this new world capital attracted the world’s most esteemed designers to an invited design competition.

Ultimately, the honour of designing the world’s tallest tower was awarded the global leader in creating ultra-tall structures, the Chicago office of Skidmore, Owings & Merrill LLP (SOM) with Adrian Smith FAIA, RIBA, consulting design Partner. The selected design was subject to an extensive peer review program to confirm the safety and effectiveness of the structural systems.

Architecture

Wind Testing

Floor Plan

Interiors

Artwork

Architecture

The architecture features a triple-lobed footprint, an abstraction of the Hymenocallis flower. The tower is composed of three elements arranged around a central core. The modular, Y-shaped structure, with setbacks along each of its three wings provides an inherently stable configuration for the structure and provides good floor plates for residential. Twenty-six helical levels decrease the cross section of the tower incrementally as it spirals skyward.

The central core emerges at the top and culminates in a sculpted spire. A Y-shaped floor plan maximizes views of the Arabian Gulf. Viewed from the base or the air, Burj Khalifa is evocative of the onion domes prevalent in Islamic architecture.

Wind Tunnel Testing

Over 40 wind tunnel tests were conducted on Burj Khalifa to examine the effects the wind would have on the tower and its occupants. These ranged from initial tests to verify the wind climate of Dubai, to large structural analysis models and facade pressure tests, to micro-climate analysis of the effects at terraces and around the tower base. Even the temporary conditions during the construction stage were tested with the tower cranes on the tower to ensure safety at all times.

Stack effect or chimney effect is a phenomenon that effects super-tall building design, and arises from the changes in pressure and temperature with height. Special studies were carried on Burj Khalifa to determine the magnitude of the changes that would have to be dealt with in the building design.

Floor Plan

Concourse level to level 8 and level 38 and 39 will feature the Armani Hotel Dubai. Levels 9 to 16 will exclusively house luxurious one and two bedroom Armani Residences.

Floors 45 through 108 are private ultra-luxury residences. The Corporate Suites occupy fill most of the remaining floors, except for level 122 which houses a restaurant and level 124, the tower’s public observatory.

For the convenience of home owners, the tower has been divided in to sections with exclusive Sky Lobbies on Levels 43, 76 and 123 that feature state-of-the-art fitness facilities including a Jacuzzis on Level 43 and 76. The Sky Lobbies on 43 and 76 additionally house swimming pools and a recreational room each that can be utilized for gatherings and lifestyle events. Offering an unparalleled experience, both pools open to the outside offering residents the option of swimming from inside to the outside balcony.

Other facilities for residents include a Residents’ Library, and Burj Khalifa Gourmet Market, a gourmet convenience store and meeting place for the residents. Valet parking will be provided for guests and visitors.

Interiors

The interior design of Burj Khalifa public areas was also done by the Chicago office of Skidmore, Owings & Merrill LLP and was led by award-winning designer Nada Andric. It features glass, stainless steel and polished dark stones, together with silver travertine flooring, Venetian stucco walls, handmade rugs and stone flooring. The interior were inspired by local cultural while staying mindful of the buildingís status as a global icon and residence.

Artwork

Over 1,000 pieces of art from prominent Middle Eastern and international artists will adorn Burj Khalifa and the surrounding Emaar Boulevard. Many of the pieces were specially commissioned by Emaar to be a tribute to the spirit of global harmony. The pieces were selected as a means of linking cultures and communities, symbolic of Burj Khalifa being an international collaboration.

What’s Inside

At the Top, Burj Khalifa 

Observation deck on level 124

 

At.mosphere, Burj Khalifa

Fine dining restaurant on level 122

 

The Residence

900 Burj Khalifa residences

 

The Corporate Suites

37 office floors

 

Armani Hotel Dubai

160 guestrooms and suites

 

Armani Residences Dubai

144 private residences

 

The Park

11 hectares park, 6 water features

3000 underground parking spaces

 

The Club

4-storey fitness and recreation annex

Emaar Says to Realise Burj Khalifa Revenues in 2010

7 January 2010

DUBAI – The Middle East’s largest listed developer Emaar Properties said on Thursday that it will realise revenues from the sale of properties at the world’s tallest tower, Burj Khalifa, formerly called Burj Dubai, in the financial year of 2010. Emaar, 31.2 percent owned by the Government of Dubai, had posted revenue of Dh1.95 billion in the third quarter of 2009. The company last year had tweaked its accounting system and said that it will recognize revenues from its projects only after successful delivery.

“As Emaar recognises revenue and profits on delivery of the project, the revenue relating to the units sold in Burj Khalifa will be recognised in 2010 on delivery. This will positively impact the results of the company due to the large size of the project,” it said in a statement posted on the website of the main stock market operator Dubai Financial Market, or DFM.

The statement said that revenue boost in 2010 will also come from hospitality undertakings in Burj Khalifa such as the world’s first Armani Hotel, a joint venture of the developer’s unit Emaar Hotels & Resorts with Italian luxury company Georgio Armani, and retail operations such as Over the Top.

“This additional revenue will also positively affect the company’s performance,” the statement said.

Burj Khalifa, renamed after the President of the UAE and ruler of Abu Dhabi His Highness Shaikh Khalifa bin Zayed Al Nahyan, opened to much fanfare on January 4, to coincide with the day when His Highness Shaikh Mohammed bin Rashid Al Maktoum took office four years ago as Ruler of Dubai. The $1.5-billion landmark glass-and-metal clad superscraper, which stands at the heart of a $20-billion downtown development close to Dubai’s main business district, is 90 per cent sold in a mix of residential units, offices and other space, the company’s Chairman Mohamed Ali Alabbar had told Khaleej Times in an exclusive interview earlier this week. Alabbar ahead of the official opening ceremony had said that the tower was expected to yield a surprisingly higher return of about 10 per cent for Emaar.

Emaar executives were bullish at the opening of the over 160-storey tower, which include 37 floors of office and retail space, saying that Dubai’s property prices have stabilised and than that new property completions would continue to increase over the next 18 months. Designed by Chicago-based Skidmore, Owings and Merrill, the structure overtook Taipei 101 as the world’s tallest in February. Emaar aims to make the Downtown Burj Dubai area the city’s new centre, benefiting from the development’s proximity to the Dubai International Financial Centre, or DIFC, a tax-free business park that houses hundreds of international companies.

Emaar will start handing keys to its first residents of the 828-metre tower’s apartments and offices as early as February 2010. They will be the first of over 12,000 people who will live and work in the mixed-use tower comprising luxurious apartments, prime office space and exclusive hotels and restaurants. Emaar had sold most of the properties in the tower prior to its completion and much before the global financial crisis began. Many buyers in the residential part of the tower are wealthy individuals from the Middle East and the sub-continent who bought apartments as vacation homes or as an investment.

Dubai Does Not Need Branding’

6 January 2010

DUBAI — The naming of Burj Khalifa sends a clear message — of a united country, said the CEO of Brand Dubai. Mona Al Marri, of Brand Dubai — which was created after the city and the state of its economy attracted negative exposure in the foreign media during the global financial crisis — said the unwarranted bad publicity had damaged the city’s 
reputation. However, she said the naming of the tower as Burj Khalifa, which she said was a surprise for everyone, settled any questions. “It’s a good surprise – His Highness always likes to surprise us,” Al 
Marri said. “We are one country… Sometimes the international media don’t understand that. That’s the message Shaikh Mohammed has simply sent.” Al Marri said Dubai’s ‘brand’, as such, remained strong. “It does not need protecting – it needs somebody to keep an eye on it,” Al 
Marri said. “The response (Shaikh Mohammed’s message) is clear. Brand Dubai does not need to respond, but by really doing something, like these forums, by being active.” Al Marri hosted The Dubai Forum on Tuesday, focused on sustainable architecture, the day after the inauguration of the 828-metre tower.  “We’re focused on coming up with initiatives that will help the city,” 
she said. “Dubai does not need branding… it needs content and good strong initiatives.

Burj Khalifa Design a Case Study in Varsities

6 January 2010

DUBAI — How does an 828-metre tall tower withstand the force of wind at that height? How does one evacuate people from such heights during emergencies? What trend in urban architecture does Burj Khalifa signify?

The tallest tower in the world not only entered record books on Monday but now will make its way into many architecture and management classes as a case study. In fact universities in the UAE have already planned to incorporate it into their course modules.

“Burj Khalifa is a piece in the developing trajectory of tall buildings,” Professor Peter A. Di Sabatino, Dean of the  School of Architecture and Design at American University of Sharjah (AUS), said. “With material and design advancement, buildings have increased in height and dimension over time. The Burj Khalifa is currently the tallest and it is important to understand it from a historical perspective as well as a new piece in the trend,” he said.

George Katodrytis, Associate Professor at AUS points out the urban evolution, marked by high rise buildings in Dubai. “In 1969 the master plan that was developed for the emirate extended from the Bastakiya area into the desert,” he said. “In 1978, Trade Center was the tallest building in the Gulf, seeing a shift from the traditional fishing sector. “Then came the Emirates Towers and it is now interesting to see, in 2010- Burj Khalifa follows on the same lines. It is a  symbol of that series.”

The tower that has been constructed by Emaar Properties is a catalyst that has created a vertical neighbourhood and beyond — including the 500-acre development at its base including Dubai Mall, according to the professor. Adrian Smith, designer of the Burj Khalifa said he tried to blend the Islamic and modern Western architecture for the tallest tower. Steps that move in an upward spiral and the view from the top or the base that evokes a shape like onion domes are influenced by Islamic architecture. The triple-buttressed outline of the Burj Khalifa was inspired by the desert lily Hymenocalli. The building was rotated 120 degrees by engineers, a deviation from the original design, to reduce stress from winds at such great heights. The tower also has a unique ‘intelligent elevator’ mechanism that marks the highest installation in any building and also provides a streamlined and speedy journey across floors.

Historically, high rise structures have served as office spaces or monuments but the Burj Khalifa has moved away from the conventional and made the tower residential as well. “The fact that it is residential is fascinating and is an amazing strategy, that makes it popular,” Katodrytis said.

Nabyl Chenaf, Chair of Architecture and Associate Professor of Architecture and Interior Design at the American University in Dubai, said the emirate is a paradise for architects. Building designs that do not follow a certain pattern or style make them remarkable case studies. Chenaf said the university plans to have workshops where students can interact with the specialist who worked on the Burj Khalifa. “It is quite an achievement in terms of civil engineering, dynamics and technical solutions,” he said.

Bringing together the thousands of workers to design and construct the tallest tower in the world is no easy feat and understanding how developers coordinated the project will be a lesson for management students at the British University in Dubai. “In case of a project like the Burj Khalifa, packaging is essential which means you get the best people to do different aspects of the project,” said Mohammed Dulaimi, Senior Lecturer for Project Management at the university.

Burj Khalifa wows thousands

6 January 2010

A day after its historic inauguration, the tallest building in the world — Burj Khalifa — received thousands of people at  the observatory on its 124th floor on Tuesday. People started queuing up from early morning in Dubai Mall to buy tickets to catch the views from ‘At The Top’ observatory desk. Scheduled tickets for the first day visit, the sale of which started on Monday, were sold out before the first batch of visitors entered around 3pm. Many people purchased the tickets for immediate entry at more than double the price.  Some tourists who had just one day left in Dubai said they were upset that they would not get a chance to go up to the observatory.

Burj Khalifa general manager Thomas M. Dempsey told Khaleej Times that several thousand people visited the tower on Tuesday.  “As of now, we are almost fully booked for tomorrow too,” he said as more people started lining up at the counter in the evening.

The tallest man-made structure was not without a few teething problems. Visitors spotted a crack on a glass pane near the rest rooms which, Dempsey said, might have occurred when workers hit the glass pane with a ladder. “It’s not because of the wind. It’s something small. We’re getting it replaced tomorrow,” Dempsey said. The observatory restrooms were closed around 5 pm due to plumbing problems which were still being repaired at 6.30 pm.

Despite the hiccups, crowds, including children and the elderly, enjoyed the panoramic view of Dubai, spending time looking through the digital telescopes and marvelling at the sight from the open deck at the observatory. Many did not mind purchasing the highly priced souvenir items with the more familiar former name of the tower, ‘Burj Dubai’,  engraved on them. “I don’t mind buying something from here as a memento even with the name of Burj Dubai. It’s for our memory, you know,” said Anita Vaswani from London. Dempsey said changing the name of the tower in the souvenirs and in the building itself will be a “slow process”. “But, we are happy to do it. It’s an honour and a pleasure to name the tower after the President. It shows the tower is not just about Dubai, it is about the whole UAE,” he said.

Aerobatics stage fly-past over Dubai, Abu Dhabi

28 January 2010

Two aerobatics teams have made a spectacular fly-past over the southern emirates at the start of the second day of  the internationally acclaimed event. The four-day show, which is being held at Al Ain International Airport every afternoon until Saturday, is the world’s only aerobatic spectacle that combines military and civil aircraft, stunt displays and competitions.

At 9.50am, the seven L-39 Albatros Breitling Team jets joined forces with the four BAC 167 Strikemasters of Team Viper, flying over Al Ain before heading towards Dubai. They passed over Burj Khalifa and Atlantis Hotel and then headed to the coast of Abu Dhabi, circling over the Emirates Palace Hotel and Grand Mosque and finally returning to Al Ain.

Although the Breitling Team has performed before at the Al Ain Aerobatic Show, this is the first time it has done so with seven member aircraft. Coincidentally, this will be the last year that they will be flying in this livery. Vipers also made their debut appearance this year. Faisal Al Sheikh, manager of the Major Event’s Division of Abu Dhabi Tourism Authority (ADTA), which is organising the event in coordination with the UAE Armed Forces, said a record 23 international teams from 15 countries are taking part in the show this year.

“Since its inception eight years ago, the show has gone from strength to strength. Not only are more teams from more countries competing, but there is also ever-growing interest from around the world, with visitors coming from as far away as Canada, the USA, Australia and Chile,” he said.

“Among the many highlights are a number of other firsts. For instance, the South African Goodyear Eagles Aerobatic Team are attempting a never-before-seen triple synchronised inverted parachute drop, while three aircraft perform a formation loop.

“For the first time, we also have on display an AH-64D Apache, four-blade, twin-engined attack helicopter belonging to the UAE’s Air Force and Air Defence, whilst the Royal Bahraini Air Force (RBAF) is making its international debut with two RBAF F16s demonstrating daily. Crowd favourites the Saudi Hawks — the Royal Saudi Air Force Aerobatics Team — are also performing a new, tight-formation flying routine

After Burj Khalifa, World’s Tallest Hotel Opens in Dubai

7 January 2010

DUBAI – Rose Rayhaan by Rotana is Dubai’s latest landmark as it entered the Guinness Book of World Records as the tallest hotel in the world on Wednesday, just two days after the inauguration of Burj Khalifa, the world’s tallest building. It also is one of the first major hotel brands to open in Dubai as alcohol-free, a pitch aimed at catering to Middle Eastern families.

Towering near the Dubai International Financial Centre Metro Station, Rose Rayhaan is located on Shaikh Zayed Road, soaring up to 72 floors and to a height of 333 metres (1,093 feet). It has beaten the 330-metre Ryugyong Hotel in Pyongyang (1,083 feet) and Dubai’s own Burj Al Arab, which is 321 metres (1,035 feet) in height.

Omer Z. Kaddouri, senior vice-president, UAE Operations for Rotana, said the hotel had a Dh400 room rate and an occupancy rate of 65 per cent on the opening day. He expects the hotel to be full in the coming days, like its other hotels in the area during the New Year period. “We have four hotels operating near each other in this area, but they are not hurting each other,” 
Kaddouri said. Instead, they are feeding each other because each serves different clients, as they did during New Year and the opening of Burj Khalifa. “All of them 
are full.”

Dubai hotels have traditionally had high occupancy rates but in the past year, many reports have noted 
a decline.  The Department of Tourism and Commerce Marketing maintains that during mid-last year, five-star beach hotels recorded 97 per cent occupancies, while five-star and four-star hotels in the city recorded 81 per cent 
occupancy rates.

However, STR Global, a research body, recorded a drop of 4.5 per cent compared with the 2008 occupancy rates in Dubai hotels — still the highest in the world. The group also found that Dubai had the highest average room rates at $361 compared with $295 in New York.

Naeem Darkazally, Rotana’s area director of Sales and Marketing for Dubai and Northern Emirates, told 
Khaleej Times that in 2009, there was only a 5 per cent across-the-board reduction in the market amidst the economic downturn. “But, hotels started correcting room rates to suit the demand for travellers leading to normal room rates that again saw the inventory increase in Dubai’s tourists,” 
Darkazally said.

“Rotana has reached out to guests from new markets in Eastern Europe, South America, Far East — like China and Malaysia and Hong Kong.” Darkazally said the hotel’s other USP was its panoramic view, which guests can see from the 65^th floor. From there, the view goes beyond The Palm and Burj Khalifa, the Dubai Metro and the entire city on the other side.

“This is on top of the strategic location of the tallest hotel,” he said, referring to its proximity to Dubai Mall and the airport. Daniel Mathew, general manager of Rose Rayhaan, said it would be marketed as a hotel catering to GCC families and families looking for an 
alcohol-free hotel.

“With research indicating this category’s huge potential due to its inherent appeal in the Middle East, Rose Rayhaan is set for incredible growth in the coming years,” Mathew said. Although the hotel said it was the first to push this concept, at least one other company had caught on to the idea of “halal tourism”.

The Al Jawhara Hospitality Group, based in Dubai, has several hotels in the country that do not serve alcohol nor allow it on their premises and offer separate areas for men and women. Its general manager earlier told Khaleej Times that 60 to 70 per cent of its clientele were non-Muslims.

The construction of the $180 million Rose Rayhaan started in 2004 with Bonyan International Investment Group as its developer. The building was officially completed in 2009 with 482 rooms, suites 
and penthouses.

Many thanks to Sky Scraper City for their wonderful photos and Flicker

http://www.skyscrapercity.com/showthread.php?t=534013&page=1288

http://www.flickr.com/photos

Watch Video

ISLAMABAD: Pakistan on Monday formally joined the international community of fighter aircraft manufacturers as JF 17 Thunder, the first ever multi role state of the art rolled out of Pakistan Aeronautical Complex, Kamra and was included to the fleet of Pakistan Air Force. Prime Minister Syed Yusuf Raza Gilani was the chief guest at the ceremony that marked a milestone in the Sino Pak joint venture in air defence system. Senate Chairman Farooq H. Naik, Federal Minister for Information Qamar Zaman Kaira, Defence Minister Ch Ahmed Mukhtar, Chinese ambassador to Pakistan Luo Zhaohui, Pakistan’s ambassador to China Masood Khan and three services chiefs attended the ceremony.

The sophisticated JF 17 Thunder, painted green in the colour scheme of national flag appeared with grandeur as the Prime Minister unveiled the fighter jet before the audience. Manufactured with the cooperation of China, the event has been termed as a beginning of new era of Pak China friendship. Addressing a select gathering of local and foreign dignitaries and PAF officials, the Prime Minister said the goals of progress and prosperity could not be achieved without achieving self reliance in the defence production.

He termed the manufacturing of JF 17 Thunder aircraft as the “achievement of an

JF-17 Roll Out Ceremony

important milestone” in the government’s ongoing efforts to attain self reliance.

The Prime Minister assured full cooperation, support and patronage to the PAF in its projects and congratulated the entire nation, adding the national project would be remembered as a landmark in the country’s history.
Referring to present challenges, the Prime Minister said the fast changing technology intensive battle arena required intense involvement of air power which had emerged as a major player in conflict scenarios. He said the role of air force also becomes vital in tackling the threat posed by the forces of extremism and militancy.

Under these circumstances, he said, a modern air force was a national requirement adding the government was making sincere efforts for a strong and well equipped Pakistan Air Force. He said the PAF had repeatedly proved equal to the task even in most challenging times, measuring up to the expectations of the nation in safeguarding the sacred soil and skies of the country. In the recent drive against militants, PAF side by side with Pak Army was endeavouring to root out terrorism from the country, he added.

The Prime Minister said, “The PAF has been able to achieve, both in the form of meeting its operational requirement by co developing a fighter aircraft and developing Pakistan’s Aviation Industry.”

He said following the example of Kamra, there should be more similar centres of excellence in other fields, to attract youth towards a more constructive approach to life that leads to a better and more prosperous future.
He appreciated that the JF 17 programme had provided employment to about 5,000 people.

The Prime Minister also reiterated the government’s firm resolve in eradicating ignorance, illiteracy and backwardness to carve a respectable place for the country in the comity of nations.

Referring to long and trust worthy relations between Pakistan and China, the Prime Minister said, “It is not trade or economics that we collaborate and cooperate for, but our association and fraternal ties bind us in the everlasting embrace of friendship.” He said, “China has always stood by us in our hour of need its unflinching support and willingness, to go an extra mile for Pakistan, has been a source of great strength for the people of Pakistan.”

Chief of the Air Staff Rao Qamar Suleman highlighted the efforts of Pakistan Aeronautical Complex Kamra in establishing itself as a hub of aviation industry. He lauded the support of Chinese government and Aviation Industries of China without which, he said the project would not have succeeded. He said that 40 JF 17 Thunder aircraft would be produced by PAC Kamra within next three years and would be inducted in PAF replacing the existing aircraft. He added that the first JF 17 Squadron would be established shortly.

China’s ambassador Luo Zhaohui on behalf on the Chinese government appreciated the technical acumen of PAC Kamra in acquiring complex skills and expertise in fighter aircraft manufacturing. He said the collaboration between the two peace loving countries in air defence was a major step for the region’s peace.

Earlier Air Marshal Farhat Hussain Khan, Chairman PAC Board Kamra in his welcome address gave an overview of the JF 17 project and highlighted the benefits of co production in terms of incorporation of modern technologies of manufacturing and skill enhancement of personnel. 

Technical Specifications

Role: Multi-role fighter-bomber 

Builder: Chengdu (CAC), Pakistan Aeronautical Complex (PAC)
Variants: FC-1, JF-17
Operators: China, Pakistan

Originally known as Super-7, the FC-1 Xiaolong was developed by the Chengdu Aircraft 

JF-17 Thunder

Industry Corporation under a joint venture of China and Pakistan. The FC-1 is a lightweight multi-role fighter powered by a single Klimov RD-93 (derivative of the RD-33) turbofan. It is capable of beyond-visual-range (BVR) air-to-air combat, as well as laser-guided weapons delivery. Because the FC-1 has been developed primarily for the PAF and export market, it provides a low-cost replacement for many developing countries that are currently operating the ageing MiG-21/F-7 Fishbed and Northrop F-5 series. The unit price is estimated to be US$15 million.

Origins
The origins of the ‘Super-7′ can be traced back to 1986 when Pakistan and China wanted to modernize the J-7 with western avionics and engine. The project was named ‘Saber II’ by the PAF and would replace its F-6s. In January 1987, Grumman Aerospace was selected as primary contractor and several other western firms competed to provide the engine and avionics. By 1989 the projected costs had significantly increased (some sources say 40%) and was deemed a highly financial risk by the Pakistan Air Force. On top of that, Chinese relations with the west broke down. Subsequently the contract was cancelled.

Fighter China-1
Chengdu continued the development under the new designation FC-1 (Fighter China-1) aimed at creating an affordable fighter for the export market. In 1995 Pakistan regained interest in a joint development with China. The 1993 US sanctions prevented the PAF from acquiring Western technology or weapons. In June 1999, China and Pakistan signed the joint development and production agreement to co-develop the FC-1. Chengdu was selected as primary contractor and the Russian Mikoyan Aero-Science Production Group (MASPG) was contracted to provide the Klimov RD-93 turbofan engine and design assistance too. The FC-1 design of today has little in common with the J-7 and is believed to be based on Mikoyan’s concept for a single-engine fighter based on the MiG-29. The FC-1 also shows features from the F-16 design, although the layout is somewhat more conventional.

Pakistan
In Pakistan the new fighter received the designation JF-17 (Joint Fighter-17) and is planned to replace the F-7, Mirage III/5 and Q-5. The Pakistan Air Force will probably be the biggest customer and thus is strongly involved in the development of the aircraft. However Chinese avionics were not meeting the PAF requirements and introducing Western avionics still proved to be a problem with the sanctions in place. It was not until the platform development and avionics system were de-coupled in early 2001, that the program started making progress. Also progressing was Chinese technology. PAF agreed to the use of Chinese avionics, although it still have to made its mind up regarding the fire-control radar. The most likely contender being the Italian-built Grifo S7 radar, PAF F-7P, F-7PG and Mirages are also equipped with Grifo radars.

Progress
The first FC-1 was rolled out on 31 May 2003. It made its first flight on 24 August 2003, although some say 2 or 3 September 2003. It was quickly followed by a second airframe (PT-2) for static tests and two more flying prototypes. The third prototype PT-3 has joined PT-1 in the flight testing program on 9 April 2004 and PT-4 is scheduled to fly later in 2005. PT-4 will be testing integration of the Chinese radar and PL-12/SD-10 BVR missile.

Production
The PAF has comitted to the acquisition of 150 JF-17, whilst China is expected to buy 250 for the PLAAF depending on the outcome of the evaluation. Pakistan will initially produce 50% of the aircraft locally, progressively increasing to 100%. Pakistan Aeronautical Complex (PAC) formally opened their JF-17 production facility at PAC Kamra factory on 6 April 2005. Production will start in 2005 and the first four locally-built aircraft will be handed over to the PAF in December 2006, another four will be delivered by March 2007. Full rate production is planned to start in 2007 turning out 20 aircraft per year. Earlier news reported 16 aircraft to be delivered in 2006, if this is still true, 12 will be produced by CAC of which four will be delivered to Pakistan.
The initial production aircraft will probably feature a Chinese radar which would enable use of the Chinese BVR SD-10 missile. But Pakistan plans to put the GRIFFO radar in the initial production aircraft for evaluation and testing of the avionics with the GRIFFO.

Future

The Pakistan Air Force have offered the FC-1/JF-17 to the Royal Malaysian Air Force. China Aviation Import and Export Corporation (CATIC) and CAC are marketing the FC-1 to potential customers currently including Bangladesh, Egypt and Nigeria, more are likely to follow soon. Future variants will include a two-seat fully combat-capable training version, which is scheduled to begin flight testing in 2006. It features a lengthened fuselage to accommodate the additional cockpit. China may also develop its own power plant for the FC-1, although it is also possible that the co-produced version of the Klimov RD-93, called the WS-13, will equip future FC-1s. Also there are plans to include air-to-air refueling probes and modifications incorporating modern avionics. Pakistan is also looking at adding advanced Western weapons and avionics in the future. It is also looking at the possibility of acquiring anti-radiation missiles, which could be the same as the BVR missile with a different seeker head.

Technical Specifications FC-1/JF-17

Powerplant: one 49.4 kN (11,103 lb st) dry or 84.4 kN (18,969 lb st) with afterburner Klimov RD-93 turbofan or equivalent co-produced WS-13 turbofan.

Dimensions: length 14.97 m (49 ft 1 1/2 in); height 4.77 m (15 ft 8 in); wing span 9.46 m (31 ft 1/2 in)

Weights: empty 6,411 kg (14,136 lb); Normal Take-Off Weight 9,072 kg (20,000 lb); Max Take-Off Weight 12,474 kg (27,500 lb)

Performance: max level speed ‘clean’ at altitude Mach 1.6 or 1,909 km/h (1,186 mph); service ceiling 15,240 m (50,000 ft); ferry range 2,037 km (1,266 miles); operational radius 1,352 km (840 miles); G-limit: +8.5

Armament: one internal GSh-23-2 twin-barrel 23mm cannon; up to 3,629 kg (8,000 lb) of ordnance including PL-7, PL-10, R550 Magic-2, A-Darter, PL-5C, AIM-9L/P, Mica, Aspide, air-to-air missiles, AM-39 Exocet anti-ship missile, Mk.82 Mk.84 GBU-10, GBU-12, Durandel, Rockeye, and Chinese equivalent air-to-ground weapons, unguided rockets, auxiliary fuel tanks, carried on up to 7 external stations. Two wingtip station, four underwing and one centerfuselage.

JF-17 Airframe Diagram

JF-17 Airframe Design

• ·         1. Aerodynamic Configuration
  • Bifurcated side air inlet.
  • New wing with ability of high angle of attack
  • Leading edge maneuvering flap
  • Trailing edge flap
  • Tip missiles
  • Twin Ventral Fin

Aerodynamic Changes in PT-4

2.      New Landing Gear

• Nose gear with steering
• Main gear with paddle controlled hydraulic brakes and automatic anti-skid braking system

3.      Comfortable Cockpit and Safe Escape System

• Cockpit geometry conforming to US MIL Standard, suitable for 3% to 98% pilot anthropometrics
• Single Piece stretch acrylic transparent canopy providing a good all around Field of View
• Ejection Seat

1. Martin Baker high performance ejection seat
2. Canopy severance system for additional safety
3. French oxygen regulation system

4.         New Environment Control System, providing:

• Air supply to control cockpit pressure and temperature
• Air supply for cooling Avionics
• Air supply to pilot pressure suit
• Air supply for windscreen defogging
• Oxygen supply duration three hours

5.         New Designed Flight Control System

• JF-17 has composite flight control system comprising conventional controls with stability augmentation in roll and yaw axis and fly by wire in pitch axis.
• Simple autopilot
• Control system of lift increasing device, leading edge slats / flap and trailing edge flaps will be an automatic control system referring to air speed and angle of attack for improving aircraft maneuvering

6.         New Electrical Power Supply System

• Main power supply system will be 115V, 400Hz three phase AC and 27V DC combined system.
• Essential power will be provided by a hydraulic driven AC / DC combined generator in case of Main System Failure
• Emergency power will be provided by a set of batteries, in the event of engine flameout, for engine restarting, communication and navigation

7.      Fuel System

• Total internal fuel 5130 lb
• Single point pressure refuelling system
• External Fuel
  • One center line drop tank 800 liters
  • Two under wing drop tanks 800/1100 liters

8.      Strength and Fatigue Life

• JF-17 airframe is made of semi-monologue structure
• High strength steel and Titanium alloy adopted partially at some critical places.
  Max speed: 1350 KPH (Mach 1.8)
• JF-17 aircraft would be designed, tested and proofed against the requirement tailored for MIL-A-8860 and Chinese National Military Specification GJB67-85
• The desired fatigue life of the JF-17 airframe is 4,000 flight hours or 25 years
• The period to first overhaul would be 1,200 flight hours

Avionics Suite

Weapons Capability

1. The aircraft would be fitted with modern Stores Management System incorporating accurate weapons delivery modes and solutions involving minimum pilot work load
2. The system would be based on Mil-Std-1760 architecture for all stations including the wingtip stations
3. The aircraft would be capable of carrying some of the most modern as well as conventional weapons, including:
   1. 70-100 Km range beyond visual range active missiles
   2. Highly agile Imaging infra red short range missiles
   3. Air to sea missiles
   4. Anti radiation missiles
   5. Laser guided weapons
   6. Programmable delays cluster bombs
   7. Runway penetration bombs
   8. General purpose bombs
   9. Training bombs
   10. 23 mm double barrel gun

Foreign Investment: 

2001-02: $475 million

2002-03: $820 million

2003-04: $922 million

2004-05: $ 1.677 billion

2005-06: $ 3.872 billion
2006-07: $ 8.417 billion
2007-08: $ 5.193 billion

Exports – Imports = Trade deficit/surplus 

2001-02: $ 9.13 bn — $10.34 bn = $1.2 billion

2002-03: $11.16 bn — $12.22 bn = $1.06 billion

2003-04: $12.31 bn — $15.59 bn = $3.28 billion

2004-05: $14.39 bn — $20.6 bn = $6.21 billion

2005-06: $16.47 bn — $28.58 bn = $12.11 billion

2006-07: $17.01 bn — $30.54 bn = $13.53 billion

2007-08: $19.22 bn — $39.96 bn = $ 20.74 billion

Rupee Valuation against Dollar

2001-02: Rs. 61
2002-03: Rs. 57.7
2003-04: Rs. 57.92
2004-05: Rs. 59.66
2005-06: Rs. 60.16
2006-07: Rs. 60.5
2007 (Dec): Rs. 61

Foreign Reserves:

2001-02: $ 6.43 billion

2002-03: $10.72 billion

2003-04: $12.33 billion

2004-05: $ 12.61 billion

2005-06: $ 13.14 billion
2006-07: $ 15.18 billion
Oct 2007: $ 16.4 billion (under Shaukat Aziz)
Feb 2008: $ 14.5 billion (PPP govt)
Oct 2008: $ 8.5 billion

Pakistan is on the verge of Telecom revolution. Pakistan Telecommunications Authority (PTA) in 2004 introduced  two types of license for ISPs – regional and nationwide, and also exempted them from Central Excise Duty. Since liberalization, over the past four years, the Pakistani telecom sector has attracted more than $9 billion in foreign investments. During 2007-08, the Pakistani Communication sector alone received $ 1.62 billion in Foreign Direct Investment (FDI) – about 30% of the country’s total foreign direct investment. 

By March 2009, Pakistan had 91 million mobile subscribers – 25 million more subscribers than reported in the same period 2008. In addition to 3.1 million fixed lines, while as many as 2.4 million are using Wireless Local Loop connections.

Pakistan is ranked 4th in terms of broadband Internet growth in the world, as the subscriber base of broadband Internet has been increasing rapidly with the total base crossing 170,000 in the country. The rankings are released by Point Topic Global broadband analysis, a global research centre.

Pakistan according to PC World was amongst those top five countries with the highest SMS traffic processed with 763 million SMS during 2008-09. In terms of year-on-year growth, Pakistan traffic volume grew by 253 percent compared to last year during the same period.

The contribution of telecom sector to the national exchequer increased to Rs 110 billion in the year 2007-08 on account of general sales tax, activation charges and other steps as compared to Rs 100 billion in the year 2006-07.

According to Government Board of Investment, Cellular Phone Subscribers:

 2001-02 –  1,698,536

2002-03 –  2,404,400

2003-04 –  5,022,908

2004-05 –  12,771,203

2005-06 –  34,506,557

2006-07 –  63,159,857

2007-08 –  88,019,812

2008-09 –  91,400,000

The country imported cell phones worth $139.480 million during July 2008 to March 2009 period of the current fiscal year against the phones import of $581.807 million during the same period of last FY2007-08, according to Federal Bureau of Statistics.

The main mobile operators in the country and their market shares are Mobilink (36 per cent), PTCL- owned Ufone (21  per cent), Telenor (21 per cent), Warid International (18 per cent), Zong-Paktel (2 per cent) and Instaphone (1 per cent).  According to Telecom Quarterly Review (TQR) released by Pakistan Telecommunication Authority (PTA), investment worth $833.2 million was made by these cellular operators during the first half (July-December 2008) of the current financial year.

The World Bank estimates that it takes about 50 days only to get a phone connection in Pakistan.

PTCL is the incumbent operator in Pakistan, which launched Internet services in 2000. The company started offering DSL in June 2007, prior to which it offered DSL services via its subsidiary Paknet. PTCL claims to have the largest reach in broadband service availability. When it started out in June 2007, broadband services were only available in three major cities. By late October 2008, PTCL offered services in 108 cities and communities.

Telecom sector in Pakistan has tremendous potential to grow despite world economic recession, which was concluded at the 2009 Global Tele-Com Pakistan conference held by Shamrock Conferences International. Chairman, Pakistan Telecommunication Authority (PTA), Dr Muhammad Yasin stated this while addressing the conference.

The PTA has done great job in the last four to five years and achieved the most important ingredients of deregulation, which is a state of the art infrastructure and low cost access to services. He said the regulations and government intervention by introducing the policies have played their role and now the businesses and entrepreneurships need to continue by using the ICT services of communication and internet.

Broadband Internet Growth

Pakistan is ranked fourth in terms of broadband Internet growth in the world, as the subscriber base of broadband  Internet has been increasing rapidly with the total base crossing 170,000 in the country.
The rankings are released by Point Topic Global broadband analysis, a global research centre.

In Pakistan, operators are offering wide range of technologies like DSL, Cable, FTTH and Wi-Max. They have added 25,500 new broadband connections in the financial year 2007-08, which is around 150 percent increase compared to the previous financial year, Pakistan Telecommunication Authority (PTA) statistics reported.

The Internet Protocol (IP) traffic through high-speed access link has become the success factor that have made rapid the transfer of online information and communication services, data, voice and video footage. The easy way of communication owing to highly competitive market of service providers has been penetrating in the country with modest acceleration in the metropolis.

At present Digital Subscriber Link (DSL) is the leading broadband service in the county with 65 percent of the market share. Major DSL providers in Pakistan are Micronet, LinkDotNet, CyberNet, MultiNet and PTCL.

Hybrid Fibre-Coaxial (HFC) is the second largest broadband technology in terms of the market share. Approximately 25 percent of the total broadband subscribers are using HFC technology. WorldCall (Pvt) Ltd is the largest provider of Cable Modem Broadband in Pakistan through its widespread HFC network in Karachi and Lahore. Wateen Telecom is another service provider which is providing HFC service in the country.

Global broadband market analysis has shown that subscribers base for FTTH technologies is increasing sharply with the emergence of innovative applications and services such as IPTV. These new services require very high access connectivity that can only be provided through FTTX technologies.

According to the PTA annual report 2008, operators have started offering FTTH and WiMax services in metropolitan cities. At present, there are approximately 2,800 FTTH and 2,000 WiMax subscribers.

A significant reduction in subscription and services charges has been witnessed in the country. The DSL subscription rate has declined to $15 (nearly Rs1200) per month from $55 (above Rs 4,000) per month for 512Kbs connection. Subsequent to the introduction of high-speed broadband access in early 2000, telecommunication companies have started offering a whole new variety of services.

Local Loop Sector

PTCL is the incumbent operator in Pakistan, which launched Internet services in 2000. The company started offering  DSL in June 2007, prior to which it offered DSL services via its subsidiary Paknet. PTCL claims to have the largest reach in broadband service availability. When it started out in June 2007, broadband services were only available in three major cities. By late October 2008, PTCL offered services in 108 cities and communities.

The local loop sector also witnessed significant development following the investment and it is expected that the investment trend will continue during the next five years due to the high growth potential of the Pakistani telecoms market. In mid-2008, the Local Loop installed capacity reached around 5.5 million, but it is predicted that DSL technology may not be able to cater for future broadband needs. This leaves a huge investment potential in optical fiber and wireless broadband access technologies.

According to the regulator, fixed line operators including wireless local loop (WLL) covered only 6.6 per cent of the potential customer base by 2008 and is expected to reach 100 million by 2010. Furthermore, since 66 per cent of potential customers live in rural areas, this offers high growth opportunities for WLL and mobile operators. Market potential is also reflected in the telecoms sector revenues which grew by 21 per cent during 2006-07.

Telecom operators in Pakistan

Pakistan Telecommunication Company Ltd has emerged as a successful Forbes 2000 conglomerate with over $1 billion in sales in 2005. In addition, there are over 3.5 million landlines in the country. As a result, Pakistan won the prestigious Government Leadership award of GSM Association in 2006. PTCL launched Internet services in 2000 and the company started offering DSL in June 2007.

In Pakistan, following are the top mobile phone operators:

1. Mobilink (Parent: Orascom, Pakistan/Egypt)
2. Ufone (Parent: PTCL, Pakistan/UAE)
3. Telenor (Parent: Telenor, Norway)
4. Warid (Parent: Dhabi Group, UAE)
5. Zong (Parent: China Mobile, China)
6. Instaphone

Mobilink

Mobilink GSM is the brand name used by Pakistan Mobile Communications (Pvt.) Ltd, a joint venture of Motorola Inc (USA), IWC (International Wireless Communications) and Saif Telecom. Mobilink provides the widest coverage network, covering more than 10,000+ cities, towns, and villages across Pakistan. Mobilink also provides true International Roaming in over 130 countries with more than 300 partner operators worldwide. Mobilink GSM – Pakistan’s first and only digital mobile network operator – has standardized on Team-POINT customer relationship management (CRM) software for a newly-enhanced, multi-million-dollar call centre. The software – from Dublin-based CRM pioneer POINT Information Systems – is part of a major upgrade and integrates Mobilink’s sales, billing, credit, helpline and technical support services. Mobilink further intends to invest $500 million in infrastructure development and service quality improvements. Mobilink subscribers increased to become 28.2 million. TQR reports that Mobilink made an investment of $111 million in Q1 (1^st Quarter) and $104 million in Q2 (2^nd Quarter) of 2008-09.

Ufone

The company commenced its operations, under the brand name of Ufone, from Islamabad on January 29, 2001. As a consequence of PTCL’s privatization, 26% of its shares were acquired by Emirates Telecommunication Corporation (Etisalat). Being part of PTCL, the management of Ufone has also been handed over to Etisalat. Ufone has network coverage in more than 5885 locations and across all major highways of the country. Ufone currently caters for International Roaming to more than 230 live operators in more than 130 countries. GPRS Roaming facility is available with more than 115 Live Operators across 85 countries. The company has also been awarded a new License for providing cellular services in Azad Jammu & Kashmir and Northern Areas. It has a subscriber base of 19.4 million. TQR reports that Ufone made an investment of $3.2 million in Q1 and $72 million in Q2 of 2008-09.

Telenor

Telenor Pakistan is a wholly-owned subsidiary of Telenor Norway. On 14 April 2004, Telenor was awarded a GSM license to build and operate a mobile network in Pakistan. On 15 March 2005, a full multimedia platform for commercial mobile services was launched under the name of Telenor Pakistan. As at 01 January 2008, Telenor Pakistan had 19.8 million mobile subscriptions. TQR reports that Telenor made an investment of $83.8 million in Q1 and $233 million in Q2 of 2008-09.

Warid

Warid Telecom is a joint venture between Abu Dhabi Group & SingTel Group. Abu Dhabi Group entered into a strategic alliance with Singapore Telecom. Subsequent to this transaction in July 2007, telecom giant SingTel acquired 30% percent equity stake in Warid Telecom, Pakistan, for US$758 million. Warid Telecom (Pvt.) Ltd. has confirmed the injection of $250million equity by its joint shareholders Abu Dhabi Group and SingTel. Warid has aggressively penetrated the Pakistan mobile communication services market with huge capital expenditure, which has enabled it to capture market share of 18.8% (as of Dec 08’) and coverage in over 450 cities and 7200 towns across Pakistan. Warid is providing voice and data communication services through its premier GSM and GPRS/EDGE network with the best voice clarity and connectivity since May 2005. Warid has a subscriber base of 17.2 million. TQR reports that Warid made an investment of $124 million in the Q1 of 2008-09.

Zong

China Mobile Pakistan (CM-Pak) is a 100% subsidiary of China Mobile. The pioneering overseas set up of China Mobile came through acquisition of a license from Millicom to operate a GSM network in Pakistan. In February 2007, Paktel was acquired by China Mobile Communications Corporation (China Mobile), for US$ 450 million, and which has aggressive development plans for the Pakistani telecoms market. CM-Pak has invested more than US$ 700 million in the telecom sector in Pakistan and an additional US$ 800 million will be invested till the end of year 2008. CM-Pak’s edge comes from the experience and expertise of running the world’s largest telecom service – China Mobile in China – which is the world’s largest telecom operator, having a customer base of over 300 million customers, its network routes 700 million text messages every day and handles 250 million calls every hour. CM-Pak is geared to offer neatly packaged VAS products that will benefit the individuals, corporate as well as small businesses. Led by a team of professionals from the field of cellular communication, CM-Pak already has a subscriber base of 5.97 million.

Instaphone

Instaphone introduced Pakistan to mobile telephony in 1991. Instaphone’s cellular infrastructure is based on TDMA technology to an ever expanding network of 185 Cities.

Revenues of PTCL and Cellular Phone Operators

Pakistan Telecommunication Company Limited (PTCL) earned Rs 9.151 billion net profit for the year ended June 30, 2009 against Rs 2.824 billion in 2008.

Cellular mobile operators have earned Rs 104.090 billion revenue during the first half (July-December) of the  current  financial year 2008-09. According to Telecom Quarterly Review (TQR) released by Pakistan Telecommunication Authority (PTA), investment worth $833.2 million was made by these cellular operators during the first half (July-December) of the current financial year.

The companies although suffered lower profits during the 2nd and 3rd quarter of 2008, however, the year ended with much stability and growth in the industry’s total revenue. The dip was actually due to the price was sparked by ZONG in 2nd quarter of 2008, where the incumbent operators Mobilink, Telenor and Warid revenues showed negative trend in the very next quarter. Mobilink attributes its decline to increased taxes, inflation in the market and intense marketing activities of competitors. Telenor also described drop in revenues in the 3rd quarter to increased network cost and higher sales and marketing due to intensified competition in the market.

Although, the aggressive entry of ZONG in local market had pushed the profit margins of incumbent operators down to some extent, but the mobile companies actually faced major dip in the ARPU’s after Pakistani Rupee was depreciated up to 26 percent in Jul-Sept, 2008 and the tax rate was increased from 15 percent to 21 percent. Mobilink and Telenor turned out to be the only companies that are maintaining their ARPU’s at around $3, whereas the rest of the companies could not maintain their ARPU over $2. The consolidated industry ARPU in the reported period Sept, 08 to Dec, 08 was around $2.5 as compared to around $3 in the same period of 2007.

According to independent analyst firm Research and Markets Report “Pakistan Mobile forecast 2008-10, the ARPU of Pakistan mobile industry would continue to see reductions in ARPUs over the forecast period of 2008-2010. In 2010, we forecast that Pakistan will have the average ARPU level of $2.66, however, the country would keep increasing the penetration levels and would become most highly penetrated market in South Asia.” Review said.

Import of Mobile Phones

The country imported cell phones worth $139.480 million during July 2008 to March 2009 period of the current  fiscal year against the phones import of $581.807 million during the same period of last fiscal year, depicting a decline of $442.327 million or 76 percent, according to Federal Bureau of Statistics.

Manufacturers of mobile handset have proposed policymakers to reduce duties on the cell phones in order to minimize the burden on customers and to increase business in the country. They were of the view that invariably high taxes are impeding the growth of this market. The teledensity in Pakistan has reached 60 percent but the high taxes are proving to be a hurdle in its further growth. However, they were not interested to build up their manufacturing units in Pakistan as majority of them have been facing tough financial setback on the slump in demand all over the world.

The drop is attributed by the industry to Rs 500 customs duty per set imposed in the last budget and a regulatory duty of Rs 250 introduced in August 2008.

It has been suggested by the concerned in the Industry that duties on the mobile handset should be fixed on different slabs and small and cheap handsets should be exempted.

World Internet Growth

Point Topic Global broadband analysis, a global research centre, released its rankings. According to the statistics,  there are around 382. 4 million broadband subscribers worldwide by the end of August 2008 as compared with 317 million in August 2007, showing 17 percent growth.

Regional Broadband trend revealed that Western Europe has the largest share of broadband users with 26 percent followed by North America at 22 percent. South and East Asia regional is in the third place with 22 percent share.

Pakistan is ranked fourth in terms of broadband Internet growth in the world, as the subscriber base of broadband Internet has been increasing rapidly with the total base crossing 170,000 in the country.
 
Related Links:

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Future IT Tower KHI

The Government of Pakistan has been proactively developing the IT sector in Pakistan since the last few years. A few of the incentives offered include tax exemption till 2016, establishment of IT Parks with low rent, foreign ownership of equity invested in IT and 100% repatriation of profit allowed to IT companies.

Pakistan’s IT industry has been rising steadily since the last three years. A marked increase in software export figures are an indication of this booming industry’s potential.

STATISTICS OF THE PAKISTANI IT/ITES INDUSTRY (Link)

PAKISTAN’S IT EXPORTS

The World Trade Organization (WTO) lists Mode 3, revenue generated by commercial offices overseas, and Mode 4, compensation received by temporary workers who have traveled abroad, as export revenue streams which must be included in trade revenue calculation. There is also strong evidence to suggest that other countries, such as India, in fact employ global services export figures when reporting or estimating revenue.

The following table describes the four WTO modes for export-in-services recognition. The need for the four-mode model arises because trade in services is much harder to monitor than trade in physical goods. Physical goods pass through air, sea or land ports, and are accompanied by detailed financial and other documentation. Services trade, on the other hand, can be transacted over the Internet, through post, or through travel of personnel, with revenue flowing into company or personal accounts, which can exist anywhere in the world.

Following are some of the renowned IT associations of Pakistan:

 PAKISTAN SOFTWARE HOUSES ASSOCIATION (PASHA)

Pakistan Software Houses Association (PASHA) was formed in the last quarter of 1992 by nine software houses. By 2003, PASHA had grown to over 200 members. Its main objective is to promote and develop the software and services industry in Pakistan and to protect the rights of its members.

The software and services industry is growing at an enormous pace in Pakistan and PASHA, along with its members, is playing an important role in making their presence felt, both nationally and internationally.

COMPUTER SOCIETY OF PAKISTAN (CSP)

The Computer Society of Pakistan (CSP) is the national organization of Information Technology professionals in the country. It was established in 1973 to promote the use of computers, increase general awareness among the public and to look after the professional interests of the IT personnel in the country.

The Computer Society of Pakistan sponsors students to take part in the international software competitions in various countries as well as organizes various programs for the youth. The current membership of the Society is over 2000 professionals working in over 350 public and private sector organizations.

OPEN Chapters have boards comprising the most successful Pakistanis in the areas of finance, technology, telecommunications, biotech and consulting in North America. OPEN regularly organizes events pertaining to current issues in business and entrepreneurship. In addition to OPEN’S highly successful Board of Directors, OPEN is comprised of executive committees of seasoned entrepreneurs and professionals from a multitude of industries and professions that help plan, coordinate, and execute OPEN’s mission.

THE INDUS ENTREPRENEURS (TiE)

Founded in 1992, in Silicon Valley by a group of successful entrepreneurs, corporate executives, and senior professionals with roots in the Indus region, the organization today has over 10,000 members across 44 chapters in 9 countries.

Dedicated to the virtuous cycle of wealth creation and giving back to the community, TiE’s focus is on generating and nurturing our next generation of entrepreneurs. In order to achieve this, the organization has built programs to energize and inspire its constituencies. Prime example of this is their flagship event TiEcon, the largest conference for entrepreneurs worldwide.

The one constant guiding the evolution of TiE has been its philosophical framework. It has kept the vision and decisions of TiE’s leadership true to its basic beliefs that wealth creation and giving back to society are invaluable human endeavors, and that an open, inclusive and forward-looking organization is the right vehicle in which to reach their objectives.

ACCO provides valued services, at both individual and organization level, encouraging the promotion of best practices and professional standards.

ACCO is established as a pivot for building new memberships with other professional bodies, government departments, overseas organizations and other agencies who have an interest in the successful development of contact centers, organizing the said conference is evidence to this commitment.

PAKISTAN COMPUTER ASSOCIATION (PCA)

Pakistan Computer Association (PCA) was established in December 2000 as an autonomous, non political, non partisan, non-profitable and service oriented organization. The Computer Association has been formed with the involvement of professionals, specialists, manufacturers, institutions and the related organization of Computer and Information Technology within the country.

 Growth of cement industry is rightly considered a barometer for economic activity. In 1947, Pakistan had inherited 4 cement plants with a total capacity of 0.5 million tons. Some expansion took place in 1956-66 but could not keep pace with the economic development and the country had to resort to imports of cement in 1976-77 and continued to do so till 1994-95. The industry was privatized in 1990 which led to setting up of new plants. Although an oligopoly market, there exists fierce competition between members of the cartel today.

The industry comprises of 29 firms (19 units in the north and 10 units in the south), with the installed production capacity of 44.09 million tons.  The north with installed production capacity of 35.18 million tons (80 percent) while the south with installed production capacity of 8.89 million tons  (20 percent), compete for the domestic market of over 19 million tons. There are four foreign companies, three armed forces companies and 16 private  companies listed in the stock exchanges. The industry is divided into two broad regions, the northern region and the southern region. The northern region has around 80 percent share in total cement dispatches while the units based in the southern region contributes 20 percent to the annual cement sales.   

Cement industry is indeed a highly important segment of industrial sector that plays a pivotal role in the socio-economic development. Since cement is a specialized product, requiring sophisticated infrastructure and production location. Mostly of the cement industries in Pakistan are located near/within mountainous regions that are rich in clay, iron and mineral capacity. Cement industries in Pakistan are currently operating at their maximum capacity due to the boom in commercial and industrial construction within Pakistan. 

The cement sector is contributing above Rs 30 billion to the national exchequer in the form of taxes.

Cement industry is also serving the nation by providing job opportunities and presently more than 150,000 persons are employed directly or indirectly by the industry.

 The industry had exported 7.716 million tons cement during the year 2007-08 and had earned $450 million, while is expected to export 11.00 million tons of cement during 2008-09 and earn approximately $700 million.

Fiscal Performance 2008-09

Business Recorder reported that Pakistan’s cement exports witnessed a healthy growth of 65%, to over 6 million tons during 7 months of the current fiscal year mainly due to rise in international demand. The exports may reach to 11 million tonnes and earn approx $ 700 million during 2008-09.

The statistics of All Pakistan Cement Manufacturers Association also showed that cement exports had mounted to over 6 million tons in 7 months as compared to 3.62 million tons of same period of last fiscal year, depicting an increase of 2.38 million tons. Cement exports during January 2009 went up by 30% to 0.81 million tons as compared to 0.623 million tons in January 2008.

However, slow construction activities in the country during the period badly upset domestic sale of cement, which depicted decline of 15%, to 10.77 million tons as compared to 12.59 million tons of last fiscal year.

On MoM basis, local dispatches of cement during January 2009 showed a decline of 8%, to 1.51 million tons from 1.65 million tons of January 2008. Overall dispatches, including export and local sales, reached 16.77 million tons during July to January of 2008-09 as against 16.20 million tons of last fiscal year, depicting an increase of 3%.

By September 2009, after witnessing substantial growth in all three quarters of fiscal year (FY) 2008-09, cement sector concluded the fourth quarter with a handsome growth of 1,492 percent on yearly basis, All Pakistan Cement Manufacturers Association’s report revealed on 29th September 2009.

He said that cumulative profitability of companies in FY09 stood at Rs 6.2 billion or $78.2 million as compared to Rs 386 million or $6.2 million depicting a massive growth of 1,492 percent. Companies with profits in both the years posted 109 percent earnings improvement.

Though total dispatches were down 2 percent, net sales grew by 55 percent to Rs 101.4 billion or $1.3 billion on the back of higher net retention prices (up 59 percent) and improved export based revenues. Cost of sales/tonne also rose by 33 percent on yearly basis amid higher realised coal prices and inflationary pressures, the analyst maintained. 

Production Capacity

In Pakistan, there are 29 cement manufacturers that are playing a vital role in the building up the country’s economy and  contribution towards growth and prosperity. After 2002-3, most of the cement manufacturers expanded their operations, and increased production. This sector has invested about  $1.5 billion in capacity expansion over the last six years.

The operating capacity of cement in 1991 was 7 million tons, which increased to become 18 million tons by 2005-06 and by end of 2007 rose to above 37 million tones, and currently the production cpapacity is 44.07 million tonnes.

Cement production capacity in the north is 35.18 million tons (80 percent) while in the south it is only 8.89 million tons (20 percent).

The cement manufacturers in 2007-08 added above eight million tons to the capacity and the total production was expected to exceed 45 million tons by the end of 2010. It may result in a supply glut of seven million tons in 2009 and 2010.

Actual Cement Production (in million tons)

According to Government Board of Investment,
2001-02 – 9.83
2002-03 – 10.85
2003-04 – 12.86
2004-05 – 16.09
2005-06 – 18.48
2006-07 – 22.73
2007-08 – 26.75
2008-09 – 20.28

Exports & International Markets

The cement industry of Pakistan entered the export markets a few years back, and has established its reputation as a good quality product. Deregulation after accession of Pakistan to WTO is expected to open the window of competition from cheaper markets.  The recent acquisition of Chakwal Cement by an Egyptian giant, Orascom may be a beginning of such an entry in Pakistan by multinationals.

New avenues for export of cement are opening up for the indigenous industry as Sri Lanka has recently shown interest to import 30,000 tons cement from Pakistan every month. If the industry is able to avail the opportunity offered, it may secure a significant share of Sri Lanka market by supplying 360,000 tons of cement annually.

In 2007, 130,000 tons cement was exported to India.

In 2007, the exports to Afghanistan, UAE and Iraq touched 2.13 million tons.

At present, the economies of major countries are facing recession, but Pakistan’s cement sector is still maintaining a healthy growth. Cement export to India has already slowed after imposition of duty by Indian authorities.

Pricing

Another problem faced earlier by the Industry was the high taxation. The general sales tax (GST) was 186% higher than India. The impact of this tax and duty structure resulted in almost 40% increase in the cost of a cement bag (50 Kg). A bag in India earlier cost Rs. 160 as compared to Rs. 220 in Pakistan. In the budget of 2003-04, a duty cut of 25% was permitted to the cement sector with assurance from the cartel to pass on this benefit to the consumers. In 2006, the price of a bag went up to Rs. 430 however in 2007 it has stabilized at Rs. 315 per bag. In mid 2008, cement prices stabilized further at Rs. 220 per bag.

The Government has reduced central excise duty (CED) on cement in the budget for 2007-08 in order to boost construction activity.

Average industry cost of cement bag/50Kg = Rs.193

Average industry price of cement bag/50Kg = Rs.235

Domestic Demand

Local demand in the country for the year 2008-09 is expected to be around 20 million tons. Domestic demand is expected to grow at 13% Capacity growth rate (CAGR) during next five years. Certain factors will also affect the growth of cement industry as well. These are as follows:

Strong GDP growth

Ø  Higher GDP growth has positive impact on cement demand.

Ø  Cement demand growth rate was double the GDP growth rate in last three years.

Housing sector growth

Ø  Housing projects consume roughly 40% of cement demand.

Ø  Low interest rates, post 9/11 remittances’ inflow, and real estate boom have helped housing sector growth.

Government Development Expenditures

Ø  Government development expenditures count for one third of total cement consumption.

Ø  Increase in PSDP – from Rs.80 bn in 1999 to Rs.520 bn in 2007.

Ø  Infrastructure development in a region triggers private development projects having even positive impact on cement demand.

Earthquake Rehabilitation

Ø  Earthquake losses of October 8^th  are estimated at $ 5.2bn

Ø  Reconstruction work will boost construction material demand

Ø  Reconstruction work is expected to generate cement demand of 4mn tons over next 3-4 years

Announcement of large Dams

Ø  Construction of four large dams will generate demand of 3.7mn tons. Bhasha Daimer Dam, Munda Dam, Akhori Dam and Neelum Jhelum.

Per Capita Cement Consumption

Pakistan currently has a per capita consumption of 131kg of cement, which is comparable to that for India at 135kg per capita  but substantially below the World Average 270kg and the regional average of over 400kg for peers in Asia and over 600kg in the Middle East.

Cement demand remained stagnated during 90’s owing to lack of development activities. In 1997, per capita consumption was 73 kg in both Pakistan and India. By 2005-06, consumption in India rose to become 115 kg/capita whereas ours rose to 117 kg/capita. A comparison of few countries in 2005:

Bangladesh      50 kg/capita

Pakistan           117 kg/capita

India                115 kg/capita

USA                  375 kg/capita

Iran                  470 kg/capita

Malaysia           530 kg/capita

EU                    560 kg/capita

China                625 kg/capita

UAE                  1095 kg/capita

Challenges to Cement Industry

The cost and exports may be affected due to weakness of the US dollar causing coal, electricity charges and freight prices, comprising 65 to 70 percent of the cost. The PSDP allocation for 2009 has been cut by Rs 75 billion and feared further cuts would curtail cement demand.

Major capacities of countries like India and Iran are expected to come online by FY10 and onwards which are likely to convert these countries from dependent importers to potential exporters.

Moreover, this current rising trend is expected to be short-lived due to higher interest rates and inflationary concerns are likely to make it disadvantageous for investors to enter the construction industry. In addition to this, to control real estate prices the government is considering imposing a tax on it.

Major General Rehmat Khan, Chairman of All Pakistan Cement Manufacturers Association (APCMA), told Business Recorder, “cement industry is getting Rs 24 per ton as day dutydrawback for export of cement which needs to be revised. In view of today’s calculation for duty drawback, which works out to Rs 130 per ton, he proposed that duty drawback be increased to Rs 130 per ton ,instead of Rs 24 per ton.”

Important Links:

Cement Industry potential to meet Economic challenges

Pakistan Cement export up by 65%

Cement Profits up 16 times in FY09

Compiled by: Mirza Rohail B

Compressed Natural Gas (CNG) is a substitute for gasoline (petrol) or diesel fuel. It is considered to be an   environmentally “clean” alternative to those fuels. It is made by compressing methane (CH4) extracted from natural gas. Argentina and Brazil are the two other countries with the largest fleets of CNG vehicles. As of 2005, Pakistan is the largest user of CNG in Asia, and  as of 2010, the largest in the world, according to the The International Association of Natural Gas Vehicles (IANGV).

The Compressed Natural Gas (CNG) sector of Pakistan by end of 2007 has attracted over Rs 70 billion investments during the last few years as a result of liberal and encouraging policies of the government.  Presently, around 3,105 CNG stations are operating in the country in 85 cities and towns, and 1000 more would be setup in the next three years. It has provided employment to above 30,000 people in Pakistan.

Over 2.4 million vehicles were converted to CNG as of end 2009, showing an increase of 35 percent yearly. On average 29,167 vehicles are being converted to CNG every month. All Pakistan CNG Association (APA) Sana-ur-Rehman confirms that CNG stakeholders have invested Rs.90 billion in this sector and another Rs 20 billion investment is in pipeline. The CNG consumers had invested around Rs 60 billion in converting their vehicles to CNG.

The CNG was replacing at least 6.12 billion liters of petrol every year and saving foreign exchange to the tune of billions of dollars. The CNG sector pays 24 percent sales tax and 4 percent withholding tax to the government.

Moreover, the CNG is contributing tremendously towards maintaining the air pollution level lower since it emits almost 85 percent less harmful gasses, zero lead and zero particulate matter.

 Compressed Natural Gas (CNG)

Compressed Natural Gas (CNG) is a substitute for gasoline (petrol) or diesel fuel. It is considered to be an  CNG has grown into one of the major fuel sources used in car engines in Pakistan, Bangladesh and India. The government of Punjab, Pakistan, the most populous province of that country, has mandated that all public-transport vehicles will use CNG by 2007.

CNG conversion 3rd generation

environmentally “clean” alternative to those fuels. It is made by compressing methane (CH4) extracted from natural gas. It is stored and distributed in hard containers, usually cylinders.

Conversion has been facilitated by a substantial price differential with liquid fuels, locally-produced conversion equipment and a growing CNG-delivery infrastructure. A ‘Blue-network’ of CNG stations is being developed on the major highways of the Southern Cone (including Chile and Bolivia) to allow for long-haul transportation fuelled by CNG.

According to the International Association for Natural Gas Vehicles, Pakistan has the third-largest number of natural gas vehicles. In the Middle East and Africa, Egypt is a top ten country in the world with more than 63000 CNG vehicles and 95 fueling stations nationwide. Egypt was also the first nation in Africa and the Middle East to open a public CNG fuelling station in January 1996. Brisbane Transport and Trans-Perth in Australia have both adopted a policy of only purchasing CNG buses in future; the former purchasing 216 Scania L94UB and 180 MAN 18.310 models, with the latter purchasing 451 Mercedes-Benz OC500LE buses, including 58 articulated buses. Brisbane Transport has also ordered up to 30 articulated CNG buses on MAN chassis’.

During the 1970s and 1980s, CNG was commonly used in New Zealand in the wake of the oil crises, but fell into decline after petrol prices receded. 

Volvo

Technology

CNG can easily be used in Otto-cycle (gasoline) and modified Diesel cycle engines. Lean-burn Otto-cycle engines can   achieve higher thermal efficiencies when compared with stoichiometric Otto-cycle engines at the expense of higher NOx and hydrocarbon emissions. Electronically-controlled stoichio-metric engines offer the lowest emissions across the board and the highest possible power output, especially when combined with EGR, turbo charging and inter-cooling, and three way catalytic converters. The octane rating of CNG is far greater than Petrol and if handled correctly it can produce same or more power output from an engine provided the Compressed Natural Gas is compressed properly and accurate amounts of BTU Figures attained.CNG cylinders can be made of steel, aluminum, or plastic. Lightweight composite (fiber-wrapped plastic) cylinders are especially beneficial for vehicular use because they offer significant weight reductions when compared with earlier generation steel and aluminum cylinders, which leads to lower fuel consumption.

CNG may be refueled from low-pressure or high-pressure systems. The difference lies in the cost of the station vs. the refueling time. There are also some implementations to refuel out of a residential gas line during the night, but this is forbidden in some countries.

CNG compared to LNG and LPG

CNG is often confused with LNG. While both are stored forms of natural gas, the key difference is that CNG is in compressed form, while LNG is in liquefied form. CNG has a lower cost of production and storage compared to LNG as it does not require an expensive cooling process and cryogenic tanks. CNG requires a much larger volume to store the same mass of natural gas and the use of high pressures.CNG is also often confused with LPG, which is a compressed blend of propane (C3H8) and butane (C4H10).

The Advantages of Compressed Natural Gas

The Environmentally Clean Advantage

• Compressed natural gas is the cleanest burning fuel operating today. This means less vehicle maintenance and longer engine life.
• CNG vehicles produce the fewest emissions of any motor fuel.
• Dedicated Natural Gas Vehicles (NGV) has little or no emissions during fueling. In gasoline vehicles, fueling emissions account for at least 50% of a vehicle’s total hydrocarbon emissions.
• CNG produces significantly less pollutants than gasoline.
• Tailpipe emissions from gasoline operated cars release carbon dioxide, which contributes to global warming. This is greatly reduced with natural gas.

The Maintenance Advantage

• Some fleet operators have reduced maintenance costs by as much as 40% by converting their vehicles to CNG. 
• Intervals between tune-ups for natural gas vehicles are extended 30,000 to 50,000 miles.
• Intervals between oil changes for natural gas vehicles are dramatically extended–anywhere from 10,000 to 25,000 additional miles depending on how the vehicle is used.
• Natural gas does not react to metals the way gasoline does, so pipes and mufflers last much longer.

The Performance Advantage

• Natural gas gives the same mileage as gasoline in a converted vehicle.
• Dedicated CNG engines are superior in performance to gasoline engines.
• CNG has an octane rating of 130 and has a slight efficiency advantage over gasoline.
• Because CNG is already in a gaseous state, NGV’s have superior starting and drivability, even under severe hot and cold weather conditions.
• NGV’s experience less knocking and no vapor locking.

The CNG Cost Advantage

• Natural gas is cheaper per equivalent gallon than gasoline (an average of 15% to 50% less than gasoline).

The Safety Advantage

• Surveys indicate that NGV’s are as safe or safer than those powered by other fuels. A 1992 AGA survey of more than 8,000 vehicles found that with more than 278 million miles traveled, NGV injury rates per vehicle mile traveled were 34% lower than the rate for gasoline vehicles. There were no fatalities reported–even though these vehicles were involved in over 1,800 collisions.

The Financial Incentive Advantage

• Some States offers a 50% investment tax credit for each vehicle converted to natural gas. This 50% credit on state income tax features a three-year, carry-forward option.
• A federal tax deduction is also available for the cost of conversion.

Apprehensions in Industry

The CNG Stations Owners Association of Pakistan (CSOAP) in January 2009 demanded the government to introduce a separate tariff for CNG to protect the investment by CNG station owners. An executive committee members meeting of CSOAP Thursday urged the Ministry of Petroleum and OGRA to keep the CNG policy 1992 enforced.

The recent steps by the government to increase gas price would damage the CNG industry and would put additional burden on the common man. The current increase of 10 percent in gas prices is unjustified and uncalled for when the fuel prices all over the world have plunged. The 33 percent steep increase of gas prices in July 2008 by SSGCL and SNGPL was fully absorbed by CNG station owners and dealers by reducing their profit margins.

He said the CNG sector as a whole consumes less than 6 percent of total gas output from SSGCL and SNGPL. The investments of more than Rs 60 billion of middle and lower middle class people who converted their vehicles to use cheap and environmental friendly CNG would go waste if the government does not revert the recent increase of gas price immediately.

The CNG industry’s efforts to reduce government’s burden of foreign exchange payments and huge savings of Forex reserves resulted from shift to CNG use in vehicles. He claimed CNG has resulted in savings of more than $250 million per annum of foreign exchange for Pakistan.

The recent increase of gas prices would force the CNG vehicle owners to buy CNG at a higher rate forcing CNG stations to close down their businesses leaving 2.1 million vehicle owners including rickshaws and taxis prone to inflation. He said if the government did not meet their genuine demands, they would be forced to shut down their businesses and would not be able to pay their leasing payments and other loans.

All Pakistan CNG Association (APA) in 2008 had also expressed resentment over the government’s plan to increase CNG prices equalizing petroleum prices so as to resolve ongoing gas crises in the country. The APA has contacted the planning division for holding a meeting on the issue but the concerned officials have refused to meet the stakeholders, he claimed. The APA chairman Sana-ur-Rehman claimed that there is an anti-CNG lobby in the planning division. He said that the CNG stakeholders have invested Rs 90 billion in this sector and another Rs 20 billion investment is in pipeline. He expressed apprehensions that the industry would totally collapse if the CNG prices were equalized with petroleum prices.

According to APA Chairman, the CNG sector accounts only for 6 percent of the national gross consumption of the natural gas, where as it is being portrayed as the cause for present gas shortage crisis. The domestic sector consumes 21 percent gas during summer, which rises to 69 percent in winter and that was actually responsible for the gas shortage every winter season. He informed journalists that gas was provided to industrial sector for a contract of 9 month in a year. The industries were required to arrange for alternate energy source during the remaining three months of winter, he maintained. However, he regretted that the government machinery wanted to provide supply of gas to industrial sector throughout the year for the last several years against the contractual obligations.

CNG Conversions  

Converting a gasoline-powered car to CNG requires only minor engine modifications. To learn more about converting  your car, please contact a certified CNG conversion company.

Related Links:

Hydrocarbon Institute of Pakistan 

Pakistan tops countries running CNG Vehicles

Pakistan Petroleum Ministry

CNG Sector attracts investment of Rs 70 bn

CNG Pump Association demand separate tariff

PAK CNG

Pakistan is an emerging market for automobiles and automotive parts offers immense business and investment  opportunities. The total contribution of Auto industry to GDP in 2007 is 2.8% which is likely to increase up to 5.6% in the next 5 years. Total gross sales of automobiles in Pakistan were Rs.214 billion in 2006-07 or $2.67 billion. The industry paid Rs.63 billion cumulative taxes in 2007-08 that the government has levied on automobiles.There are 500 auto-parts manufacturers in the country that supply parts to original equipment manufacturers (PAMA members). Auto sector presently, contributes 16% to the manufacturing sector which also is expected to increase 25% in the next 7 years, as compared to 6.7 percent during 2001-02.Vehicles’ manufacturers directly employ over 192,000 people with a total investment of over $ 1.5 billion. Currently, there are around 82 vehicles’ assemblers in the industry producing passengers cars, light commercial vehicles, trucks, buses, tractors and 2/3 wheelers. The auto policy is geared up to make an investment of $ 4.09 billion in the next five years thus, making a target of half a million cars per annum achievable.

Government of Pakistan had undertaken two major initiatives in the form of National Trade Corridor Improvement Program (NTCIP) and Auto Industry Development Program (AIDP) for the development of the automotive industry in Pakistan.

Engineering Development Board (EDB) is actively implementing the AIDP to increase the GDP contribution of the automotive sector to 5.6%, boost car production capacity to half a million units as well as attract an investment of US$ 3 billion and reach an auto export target of US$ 650 million.

Automotive engineering is a driving force of large scale manufacturing, contributing US$ 3.6 billion to the national economy and engaging over 192,000 people in direct employment.

The Auto parts manufacturing is $ 0.96 billion per annum. The demand for auto parts is highest in the motor cycle industry which is 60%, then is for cars which constitutes to 22% and the rest 18% is consumed by trucks, buses & tractors. This demand is met by Imports which caters 22% while the remaining 78% is supplied by the local manufacturers.

Due to the increase in demand for sophisticated machinery, the government has allowed duty free import of raw 

Honda Civic

material, sub components, components assemblies for manufacturers & assemblers. Total import bill of machinery stands at $2.195 billion in the current fiscal year of 2007-08 which is 12.77% higher than that of the preceding year.

The impressive growth in the machine tools and automation sector is directly proportional to the growth of the automotive industry which has become the fastest growing industry of Pakistan and contributes $3.6 billion annually to the country’s GDP.

 The aftermarket for spares has also witnessed immense expansion over the same period, with imported parts playing an important role in meeting local demand. The spare parts market is given further impetus by a total vehicle population of approximately 5.4 million

Pakistan has the second highest number of CNG-powered vehicles in the world with more than 1.55 million cars and passenger buses, constituting 24% of total vehicles in Pakistan with improved fuel efficiency and conforming to the latest environment regulations.

 According to Government Board of Investment,

VISION 2012: The Future of Pakistan Auto Industry

Decline in Sales and Revenue

Unfortunately, the recent downward trend in auto sales (cars + LCVs) continued as auto sales stood at 27,034 units for July-September 2008, showing a decline of 44 percent year-on-year, the data released by Pakistan Automobiles Manufacturers Association (PAMA) shows. (Link) 

Automobile grew from 2001-2007, the industry and the government of Pakistan fixed a target of over half million units’ production by the year 2011-12 that now seems out of reach. The industry slightly fell short to achieve the targeted productions in 2006-07 when 1,95,688 cars were manufactured against a target of 2,26,620 units. However, there was some growth in production that year. In 2007-08 the production declined to 1,87,634 units against a projected target of 2,66,543 units. In the current fiscal year they said the production is expected to decline to 1,50,107 units that are half the projected target of 3,13,486 units.

Automobile manufacturers and auto-parts’ vendors have warned the government that despite an additional levy of 5

Chevrolet Assembly Port Qasim

 per cent excise duty, the revenues from automobile sector would decline by over 25 per cent this year due to declining demand.

The Pakistan Association of Auto Parts and Accessories Manufacturers (PAAPAM) and Pakistan Automobile Manufacturers Association (PAMA) in a joint presentation have suggested various steps that should be taken by the government to arrest the slowdown in sales. The two associations appealed to the government to withdraw the 5 per cent excise duty on cars and impose a ban on import of used parts instead of allowing their import after imposing 30 per cent redemption duty.

They asked the government to place stringent checks on auto-parts imported commercially or as semi knock out kits. They proposed the introduction of non-tariff measures to curb the import of parts that are being manufactured in Pakistan. They pointed out that the 50 per cent duty has failed to stop the import of these parts as the import prices are easily manipulated by the importers. Moreover, import under SRO 63 attracting 50 per cent duty should not be allowed under FBR’s CARE system. They have also appealed for special incentives for the auto sector including lower mark-up on loans and a waiver of 35 per cent L/C margin.

The two associations pointed out that investment in the automobile sector has frozen at Rs98 billion and is expected to remain at the same level by 2011-12.
 

Honda Atlas Cars Pakistan Ltd

Honda Atlas Cars Pakistan Limited is a joint venture between Honda Motor Company Limited Japan, and the Atlas   Group of Companies, Pakistan. The company was incorporated on November 1992 and joint venture agreement was signed on August 1993. The ground breaking ceremony was held on April 17, 1993 and within a record time of 11 months, construction and erection of machinery was completed. The first car rolled off the assembly line on May 26, 1994. Official inauguration was done by President of Pakistan, Sardar Farooq Ahmad Khan Leghari. Mr Kawamoto, President of Honda Motor Company Limited Japan was also present to grace the occasion. The company is listed on Karachi, Lahore and Islamabad Stock Exchanges. In July 1994, car bookings started at six dealerships in Karachi, Lahore, and Islamabad. Since then the Dealerships Network has expanded and now the company has sixteen 3S (Sales, Service and Spare Parts) and thirty 2S (Service and Spare Parts) Pitstops network in all major cities of Pakistan. Since the commencement of production in 1994, the company has produced and sold more than 150,000 cars till Oct, 2008. All dealerships are constructed in accordance with the standards defined by Honda World over.  

Indus Motor Company

Indus Motor Company (IMC) is a joint venture between the House of Habib, Toyota Motor Corporation Japan (TMC),  Daihatsu Motor Company Ltd vehicles in Pakistan through its dealership network. The company was incorporated in Pakistan as a public limited company in December 1989 and started commercial production in May 1993. The shares of company are quoted on the stock exchanges of Pakistan. Toyota Motor Corporation and Toyota Tsusho Corporation have 25 % stake in the company equity. IMC’s production facilities are located at Port Bin Qasim Industrial Zone near Karachi in an area measuring over 105 acres. Indus Motor company’s plant is the only manufacturing site in the world where both Toyota and Daihatsu brands are being manufactured. IMC’s Product line includes 6 variants of the newly introduced Toyota Corolla, Toyota Hilux Single Cabin 4×2 and 4 versions of Daihatsu Cuore.

Altis

Toyota Tsusho Corporation Japan (TTC) for assembling, progressive manufacturing and marketing of Toyota vehicles in Pakistan since July 01, 1990. IMC is engaged in sole distributorship of Toyota.

Pak Suzuki Motor Company

Pak Suzuki Motor Company Ltd (PSMCL), established as a joint venture between Suzuki Motor Corporation of Japan (SMC) and Pakistan Automobile Corporation (PACO) Govt. of Pakistan in 1983. Started commercial operations with production (S.O.P.) of Suzuki FX in 1984. In 1992, started production of MARGALLA at new Plant. In 1997, started production of 1300cc BALENO replacing Margalla. In 2001, launched the CNG version of MEHRAN, RAVI and BOLAN. By 2005 capacity expansion up to 80,000 vehicles per year were completed. In 2006, capacity expansion up to 120,000 vehicles per year was completed and production of 1300cc/1600cc car LIANA and BALENO commenced. In 2007, the third  phases of capacity expansion up to 150,000 vehicles per year were completed. Amalgamation of Suzuki Motorcycle Pakistan Ltd into Pak Suzuki Motor Company Ltd took place and new land of 120 acres was acquired for further expansion adjacent to current plant. In 2008, the company started exporting Suzuki LIANA to Bangladesh. Pak Suzuki acquired a land of 25.22 acres at Lahore for setting up PDI centre, Spare Parts Ware-house, Regional Office and other related facilities.

Nexus Automotive

Chevrolets were sold in Pakistan well into the 1970s, after which the automotive regime was changed and Chevrolet  gradually withdrew to its home market in the United States. In 2004, after an absence of three decades, Chevrolet was re-introduced in Pakistan. Once again, a global brand with a product line-up suited to developing markets such as Pakistan, Chevrolet has made a successful return to the country. Working with Nexus Automotive, General Motors’ partner in Pakistan , Chevrolet can once again be seen on roads all over the country. Today, Nexus Automotive assembles the 1000cc Chevrolet Joy at Port Qasim (Sindh), and imports a broader line-up of cars, including Aveo, Optra, and Colorado (coming soon) from the General Motors global network.

Al-Ghazi Tractors

Al-Ghazi Tractors Limited (AGTL) was incorporated in 1983. In 1991 the project was offered for privatization, and

Al Ghazi Tractors

acquired by Al-Futtaim Group of Dubai who took over the management control of AGTL in December 1991. Ever since  AGTL is a case study of rollicking corporate success. 50.02% shares of the company are held by Al-Futtaim Industries Co. LLC and 43.17% shares are held by CNH Global NV, with whom Al-Ghazi Tractors Limited has signed an Industrial Collaboration Agreement for manufacture of New Holland brand tractors. The Agreement is valid till April 2016. With expansions carried out in 2005, the plant is now capable of producing 30,000+ tractors per year in a single shift – the most enduring competitive edge being the quality of our tractors, which are robust
and sturdy and carry a local content as high as 92%. AGTL was the first automobile company in Pakistan to earn the ISO-9002 Certificate.

Dewan Motors

Dewan Farooque Motors Limited has one of the most advanced automobile assembly plants of South Asia. Located at

Dewan Motors

Dewan City, Sujawal, Thatta, with a total project cost of Rs. 1.8 billion, the plant is built on an area of 42,000 square meters. Selection of the site reflects the commitment of Dewan Group towards building of a prosperous Pakistan and its contribution to national wealth. The project has provided direct employment to over 700 personnel. The plant is the first automobile manufacturing unit in Pakistan to be independently invested by 100% Pakistani investors. The annual capacity of the plant is 10,000 units on a single shift basis. The groundbreaking ceremony for the plant was held in June 1999, and the first Kia Classic rolled-out in a record time of six months. Today the modern state-of-the-art plant is rolling-out cars every day. This is the first and only automobile assembly plant in Pakistan with state of art robotic equipment. Dewan Farooque Motors Limited has technical collaboration and license agreements with the following Korean companies:
Hyundai Motor Company – December 25th 1998
Kia Motors Corporation – July 27th 1999

Ghandhara Industries

The Ghandhara Industries Limited is a public limited company quoted on the Stock Exchanges and registered under the Companies Act, 1913 (now companies Ordinance, 1984). It was established in Karachi by General Motors Overseas Distribution Corporation U.S.A. in 1963 Lt. Gen. M. Habibullah Khan Khattak acquired these facilities from General Motors and renamed it Ghandhara Industries Limited. The Government of Pakistan nationalized Ghandhara Industries Limited in 1972 and renamed it National Motors Limited. In 1992 M/s. Bibojee Services (Pvt) ltd. acquired it under Privatization Policy of the Government, and adopted its original name Ghandhara Industries Limited w.e.f. 27-11-1999. The major business activities of the company comprise of progressive manufacture, assembly and marketing Isuzu truck and bus chassis and fabrication of Bus and Load bodies.  Ghandhara industries Ltd have a product range of ISUZU medium-duty vehicles (F-Series) & light-duty Vehicles (N-Seies) in Pakistan.

Hino-Pak Motors Ltd

Hino Motors Japan and Toyota Tsusho Corporation in collaboration with Al-Futtaim Group of UAE and PACO Pakistan formed Hinopak Motors Limited in 1986. In 1998, Hino Motors Ltd., and Toyota Tsusho Corporation obtained majority shareholding in the company after disinvestments by the other two founding sponsors.

Adam Motor Company

We would do great injustice if we fail to mention, the only large scale effort made by a Pakistani to achieve what others  failed to implement or even envision. Mr.Feroz Khan, founder of the Adam Motor Company, Ltd. was an automobile assembler based in Karachi, Pakistan. They were notable for producing the Revo, which was Pakistan’s first homegrown company to assemble a decent car. Together with styler Mehmood Hussain, Chief Engineer N. A. Salmi and two fresh graduates from NED, Khan designed and manufactured Pakistan’s first car. In fact, Khan invested in the latest software programs to train his team using Computer Aided Design (CAD) and Computer Aided Manufacturing (CAM). Khan is also Chairman and CEO of Omar Jibran Engineering Industries and has twice been Chairman of Pakistan Association of Automotive Parts and Accessories Manufacturers. All their vehicles used Made in China components due to lack of a modern manufacturing industry in Pakistan. Initially Adam Motor was involved in assembling cheap Made in China light trucks, followed by a Made in China four-wheel drive off-road vehicle. Later they started manufacturing the Revo. The 800CC version of the Revo costs Rs. 269,000 (about $4,500) and the 1050 model is Rs. 369,000 (about $6,200). The Revo has also been built in accordance with EU safety regulations. Mr. Feroz Khan blames the politicians for the company’s failure.

Related Links

Auto Pakistan 

Pakistan Automobile Industry Statistics

Automobile sector Revenue declines by 25%

Government attaches importance to Automobile Industry: PM Shaukat Aziz

This Article has been Referenced in:

1- Automobile Industry – OPPapers.com

2- EMESAP International Management

3- Final Term Paper – Robert Kennedy College (Scribd)

Historically, Pakistan’s textile industry and clothing sector has always been a major contributor to the foreign exchange  earner and still contributes about 55% to the total export proceeds.

The Economist reports that Pakistan is the 4th largest producer of cotton in the world and the 6th largest importer of raw cotton, the 3rd largest consumer of cotton, and the 1st largest exporter of cotton yarn. Over 1.3 million farmers, out of total of 5 million are involved in cultivation of this crop.

Textile exports in 1999 were $5.2 billion and rose to become $10.5 billion by 2007. Textile exports managed to increase at a very decent growth of 16% in 2006. In the period July 2007 – June 2008, textile exports were US$ 10.62 Billion.  Textile exports share in total export of Pakistan has declined from 67% in 1997 to 55% in 2008, as exports of other non-textile sectors grew.

UN reports 102 countries import textile and apparel products and 104 countries export these products. Global trade in textile and apparel products account for an approximately $440 billion. Pakistan is bogged down in the 5% textile requirement of the world, by dedicating 62% of its GDP share for textile. An anti-dumping of 5.8% has been imposed by the European Union, which has put Pakistan in a desperate position to match competitiveness posed by Bangladesh, India, China, Sri-Lanka and Vietnam.

The top buyers of Pakistani textile goods are: USA, EU, Gulf region, UK, Hong Kong, Japan, Korea, Saudi Arabia, Italy, Turkey, Germany, Norway, France, Canada, Sweden, Australia, etc.

Government vision 2005-2010

To overcome global competition, the Pakistani government in 2006 approved a “Technology-based Industrial vision and strategy for socio-economic” which called for technology up-gradation, human resource development, and establishment of a fully integrated chemical industry in the country.

Investment Policy & Incentives for Vision 2005-2010:

·         Whole of textile sector is included in list of value added industries.

·         5% custom duty on imported machinery if not manufactured locally.

·         Tax relief: Initial Depreciation allowance (IDA) at 50% of machinery & equipment cost.

Export plan 2006-13 seeks to increase textile and garment’s sector exports to $24.36 billion.

There is a need to engage young qualified generation as roving ambassadors of marketing caliber, diplomacy and professional approach. Pakistan commerce intelligence may chalk out plans to reach every region bloc with in-depth study of regional trade bloc.

2009-10 Performance

 The share of textile exports in total exports of the country shrunk to 55 percent so far in the current financial year from well above 60 percent in the past years.

As the overall export volume remained stagnant in the first seven months of the current financial year, the shrinking share of textile goods in exports has been adversely impacting the export sector. During July-January 2009-10, total exports came to $10.870 billion as against $10.820 billion in the corresponding period of last year. In the months under review, textile export proceeds totalled to $5.981 billion over $5.849 billion in the same months of previous year.

2008-09 Performance

According to data by Federal Bureau of Statistics, Textile exports during the first eight months of current financial registered negative growth of 5.6% as against the exports recorded corresponding period of the last financial year. Exports during July-February (2008-09) totaled $ 6.47 billion against the exports of $6.85 billion recorded during July-February (2007-08). [Link]

During the time under review, the highest negative growth of 51.24 percent was recorded in the exports of yarn (other than cotton yarn) while exports of art, silk and synthetic textile were decreased by 23.45 percent.

Similarly, exports of cotton yarn declined by 15.28 percent, cotton (carded or combed) by 13.81 percent, knitwear by 2.66 percent, bed wear by 10.44 percent, tents, canvas and tarpaulin by 21.18 percent, readymade garments by 12.43 percent, made up articles by 0.3 percent while the exports of other textile materials declined by 15.28 percent during the period.

However, the exports of raw cotton witnessed increase of 154.5 percent during the time under review while exports of cotton cloth increase by 5.57 percent and towels by 10.02 percent.

According to official statistics released by Federal Bureau of Statistics (FBS), country’s total textile machinery imports  declined to $438.270 million during the last fiscal year of 2008, over the import of $502.898 million in fiscal year 2007, depicting a decrease of $64.6 million in the fiscal year 2008. [Link]

Industry – Spindles, Rotors and Looms   

In 1999-00: Units 443 and Spindles 8,477,000 and Rotors 149,780 and Looms 9944.

In 2003-04: Units 456 and Spindles 9,590,000 and Rotors 146,640 and Looms 10,646.

In 2005-06: Units 461 and Spindles 10,437,000 and Rotors 155,104 and Looms 8747.

In 2006-07: Mills 567 and Spindles 11,809,000 and Rotors —– and Looms 9000.

The least developed sector is weaving which mostly comprises of smaller, fragmented and inefficient units. These units are called inefficient as they mostly use power looms, which are capable of producing narrower width fabric s and mostly use coarse counts of yarn. Therefore, the quality is much inferior to fabrics produced on shuttle-less looms. For decades, the government continued to charge import duty at fabulous rates on shuttle-less looms. Income from power looms was tax exempt but income of units using shuttle-less looms was taxable.

The knitwear segment of Pakistan has always focused on achieving higher volume rather than concentrating on quality, price and terms of delivery.

A spinning unit of 14,400 spindles employs around 100 persons.  

Global financial crisis

As the economies in the US and Europe slow down, Pakistan’s key exports of textiles and leather products are experiencing a slowdown in growth as well. According to APTMA, textile exports have declined by about 20 percent in 2008. The industry is bracing for more trouble ahead with continuing crises of electricity and gas, international market access, global economic slow-down, and adverse travel advisories.

Pakistan’s share of the US textile market is dropping. China tops the US market with a share of 36 per cent followed by Bangladesh 21 per cent, India 18 per cent, Morocco 19 per cent and Pakistan 13 per cent. South Korea has lost 20 per cent of the US market.

Setbacks for Pakistan Textile Industry

·         Recently, the government has also abolished research and development (RandD) support program for the textile sector from July 1 2008. [Link]

·         The Pakistani government had recently proposed to implement 18 percent Value Added Tax (VAT) on the textile sector in the upcoming budget. [Link]

·         Decline in the machinery imports, is also due to the enhanced interest rates on loans, which have not been decreased by the new State Bank governor.

• Recent substantial hike in gas tariff also hurt the growth of the textile industry.

Dye Process

Textile Value Chain

Newspaper Updates 

  Pakistan’s total exports: Share of textile exports shrinks to 55% from 60%

4 Mar 2010: The share of textile exports in total exports of the country shrunk to 55 percent so far in the current financial year from well above 60 percent in the past years.

As the overall export volume remained stagnant in the first seven months of the current financial year, the shrinking share of textile goods in exports has been adversely impacting the export sector. During July-January 2009-10, total exports came to $10.870 billion as against $10.820 billion in the corresponding period of last year. In the months under review, textile export proceeds totalled to $5.981 billion over $5.849 billion in the same months of previous year.

Government claims to diversify the export base by focusing on the sectors other than the traditional ones, however the figures available on the exports tell a different story. “No new product or new market has significantly contributed to the exports and it is the same old and traditional items that have been making the total export volume,” according to textile exporters.

Textile products remained the mainstay of the country’s export sector over the years and being the largest industrial and export-oriented sector, it caters to the employment of a major part of industrial labour of the country.

Textile exporters said that the most worrisome factor is the stagnant export of textile goods and whatever is being exported in this category largely comprises of raw cotton, cotton yarn and low valued textile goods.

The value-added sector, they pointed out is under intense pressure due to a host of domestic and international issues, which have been making the country’s products uncompetitive in the foreign markets from its international competitors.

The prolonged power outage, gas shortage, high financing cost and infrastructure problems are some of the major issues, which have been hampering the growth of the value-added textile sector.

Also, the high tariffs on the textile goods in EU and US markets have given leverage to its competitors like Bangladesh and Vietnam to kick out Pakistani products from these lucrative and high-priced markets.

“It will be a wishful thinking to increase the export of value-added sector in the present situation when even raw materials are not available in adequate quantity to run the industrial units in this sector,” a value-added textile exporter felt.

He noted that revival of textile sector is not possible without the growth in value-added sector because it is the one, which would fetch better prices of cotton instead of raw cotton and cotton yarn, which is presently being exported in huge quantity.

“The share of textile products in the total exports could only be achieved through focus on the value-added textile chain and if remedial steps are taken, the textile’s share jumping to 60 percent is not a hard target to achieve,” he added

 ’70 percent of spinning mills left with stock for 15 days’

LAHORE (March 05 2010): Majority of the spinning mills are left with 15 days cotton stock, as the abysmal condition of the sector arising out from the myopic policies of the textile ministry has set to leave 3 million spinning industry labourers as jobless by April.

Gohar Ejaz, Chairman All Pakistan Textile Mills Association (Aptma) told Business Recorder that 70 percent of the spinning mills are carrying only 15 days cotton stock due to the abnormally high cotton prices internationally and anti-industry policies of the textile ministries locally.

According to him, the hasty decision of the textile ministry of restricting exports of cotton yarn is soon going to result into closure of many spinning mills in the country as these spinning mills can not provide subsidised yarn to the local apparel sector.

It may be noted that the textile ministry has further tightened quantitative restrictions on export of yarn at 35,000 tones per month from 50,000 tones, effective from March 01 to June 30, 2010. This decision of the textile ministry has gathered dismay on the part of the spinners and they have criticised the Ministry of Textile’s failure to play a non-partisan & balanced part in the decision making.

Interestingly, the latest exports figures suggest the exports of all sub-sectors of textile industry have increased impressively in January 2010 comparing with December 2009, barring the exports of raw cotton and cotton yarn that have declined by 31.27 percent and 19.18 percent respectively.

The exports of yarn other than cotton yarn (17.08 percent), cotton cloth (8.50 percent), knit-wear (13.56 percent), bed wear (10.66 percent), towel (61.63 percent), tents, canvas & tarpaulins (1.89), readymade garments (25.25 percent) and art, silk & synthetic textile (7.12 percent) are on the rise in January 2010 comparing with December 2009.

Gohar said the latest figures suggest that the apparel sector’s hue and cry is entirely baseless. According to him, the spinning mills are failing in meeting with their foreign buyers’ commitments and the foreign customers have threatened to claim damages due to loss of production if they do not receive yarn well in time.

Chairman Aptma said Pakistan’s spinning industry is being viewed as unreliable supplier and the foreign customers are planning to move away forever. Similarly, the annual production plans of spinning mills, followed by purchase of machinery and raw materials are likely to incur heavy losses due to the imposition of export quota, he added.

Furthermore, he said, a sheer negation of the Free Market Mechanism may make huge investments by spinners as redundant and the volume of Non Performing Loans is likely to increase manifold. A good number of spinning mills have consumed inventories of cotton and are buying/importing cotton on existing escalating price trends.

He said the imposition of quota would force the closure of at least 100 mills in the first instance as the mills would be unable to sustain provision of cheap yarn to a few opportunists in the value added sector by importing costlier cotton themselves.

Chairman Aptma urged the government to lift the ban on exports of quota immediately in the larger interest of the industry and country’s exports. The textile industry should not be deprived of the right of free market mechanism by the pressure exerted by the apparel sector in any case, he added.

Textile exports decline sharply

April 18, 2009: Textile exports are not generating enough revenue for millers, causing an alarming decline in exports both in terms of value and quantity since exports peaked in 2006-07.

Data collected from different textile associations by The News revealed that the fall in exports is across the board in all sub-sectors of textile, from yarn and fabric to clothing, bedwear, towels and tents and canvas, both in quantity and value. The decline in terms of quantity ranges from 10.30 per cent in towels to 42.71 per cent in readymade garments.

The decline in quantity, according to industry experts, is due to a drop in productivity and availability of surplus capacities. They say this is also indicative of the number of jobs that have been lost in the textile sector since 2006-07.

It has been found that average monthly yarn sales in 2006-07 were 55,460 kg while yarn exports from September 2008 to February 2009 varied between 38,738 kg and 43,464 kg. On average, exports in quantity terms declined by 21.63 per cent since attaining their peak two years ago. Many spinning units have closed down due to the decline in yarn purchase.

The decline is not restricted to quantity only, per unit prices of yarn have dropped appreciably during the current fiscal year. In value terms, Pakistan exported 43,054 kg of yarn for $102.66 million while in February 2009 43,464 kg of yarn fetched only $78.151 million, indicating a fall of 24 per cent.

In case of fabric, the situation is worse. In 2006-07, Pakistan exported an average of 184,320 square metres of cotton cloth. However, it exported 188,875 square yards of fabric in September 2008, 165,934 square yards in October 2008, 166,545 square yards in November 2008, 132,868 square yards in December 2008, 122,650 square yards in January 2009 and 108,635 square yards in February 2009. There has been a constant decline in fabric exports even during this fiscal.

Average monthly fall in fabric exports in terms of quantity since the reference year of 2006-07 comes to 41.06 per cent.

In value terms, the decline in fabric exports since September 2008 is 37 per cent. In September 2008, Pakistan fetched $183.576 million from fabric exports that were reduced to $116.226 million in February 2009. The huge decline in quantity means that large number of lay offs and reduced value has definitely impacted the viability of weaving mills.

Knitwear industry resisted bravely against export pressures, but has caved in since January 2009. In the year 2006-07, average monthly knitwear exports were 7852000 dozen. The knitwear exports were 9942000 dozen n September 2008, 8738000 dozen in October 2008, 9037000 dozen in November 2008, 6525000 dozen in December 2008, 6899000 dozen in January 2009 and 5617000 dozen in February 2009. The decline since 2006-07 is 28.46 per cent in quantity terms but the decline since September 2008 is more than 42 per cent.

The decline of knitwear exports in quantity terms is reflected from the closure of over 40 per cent of the knitwear industry, including some big state-of-the-art units. In value terms, knitwear exports have declined by 34 per cent since September 2008.

Readymade garments have recovered the loss from the 42.71 per cent drop in exports in quantity terms since 2006-07 by increasing per unit value of exports. But reduction in quantity certainly means pruning of a large number of employees. In value terms, exports of the readymade garment industry declined by only 3 per cent since September 2008.

In September 2008, readymade garments fetched 99.952 million on the export of 3704000 dozen garments. In February 2008, exports worth $96.692 million came from the export of only 2122000 dozen garments.

Average monthly towel exports declined by 34 per cent in quantity terms since 2007-06, tents and canvas exports reduced by 29 per cent and art silk and synthetic textile exports by 58 per cent.

Pakistan has an estimated population of 170 million, above two per cent of the world’s population and it’s the 6^th  largest country of the world.

Pakistan’s literacy rate was currently estimated at about 50% according to the United Nations Development Program 2009. As per the PSLM Survey 2004-05, the literacy rate of population 10 years and above was 53% showing an annual growth ratio of 1.5% since the 1998 census. As such, the estimated Literacy Rate comes to 56% in 2007. According to the statistics, Pakistan has made some steps forward trying to educate its children, but still there are around some 13 million children that do not receive any education and instead work or hard labor jobs or even in the streets, being completely or almost illiterate. Statistics indicate that India with 61%, Sri-Lanka with 90%, Iran 82% and China 93% are the few Asian countries with much faster development rate than Pakistan.

According to statistics by the Ministry of Education, there are 256,088 educational institutions of all categories in Pakistan, with a total enrollment of 37,462,884 students. 

 There are 182,477 (71%) education institutions in the public sector and 73,611 (29%) in private sector. Enrolment wise, public sector has an enrollment of 25,213,894 (67%) in various categories of educational institutions whereas 12,248,990 (33%) enrolment is in the private sector. The total male student enrolment is 21.133 million (56%), whereas the total female student enrolment is 16.329 million (44%). The total teaching staff is 1,363,501, out of which 0.756 million (56%) is in the public sector and 0.606 million (44%) in the private sector. Out of the total 1.363 million teachers, 0.617 million (47%) are male and 0.695 million (53%) are female teachers.

Introduction

Pakistan has an estimated population of 170 million, above two per cent of the world’s population and it’s the 6^th largest country of the world. Education remains inequitably distributed among various income groups and regions in the country. Literacy and participation rates are below those in other South Asian countries with similar level of economic development. Access of education to children of relevant age group is still inadequate. Educational institutions lack physical facilities.

All basic education targets for primary schooling, adult literacy and gender equality are within the framework of Dakar Declaration and the Millennium Development Goals. Challenges in the planning of Education Sector include inter-district and inter-provincial disparity and the need to reach disadvantaged groups who are discriminated on account of gender, cast and socio-economic status.

In Pakistan, the definition of literate was structured at the time of Population Census. In the 1998 Population Census, a literate person has been defined as “One who can read newspaper and write a simple letter in any language.”

Pakistan’s literacy rate was currently estimated at about 50% according to the United Nations Development Program 2009. As per the PSLM Survey 2004-05, the literacy rate of population 10 years and above was 53% showing an annual growth ratio of 1.5% since the 1998 census. As such, the estimated Literacy Rate comes to 56% in 2007. According to the statistics, Pakistan has made some steps forward trying to educate its children, but still there are around some 13 million children that do not receive any education and instead work or hard labor jobs or even in the streets, being completely or almost illiterate. Statistics indicate that India with 61%, Sri-Lanka with 90%, Iran 82% and China 93% are the few Asian countries with much faster development rate than Pakistan.

Ideally, the governments of Federal and all Provinces, as their combine strategy should declare a “National Educational Emergency Program” – similar to the emergency rule that was kept in Pakistan from 1965 to 1985 – however, this time, with the sole intention to provide basic access to education all over Pakistan and raise the standard of education.

Government Mismanagement

Governments could easily be blamed for not supporting the evolution of a genuinely beneficial educational system, as successive polices were geared towards the short-term, rather than a long-term solutions, which in return were responsible for the decline in the quality of education throughout the country.

• The policies keep on changing with every new government that comes, being more of a political matter rather rendering a social service for the whole country, without discrimination.
• Every government has prioritized different sectors within even the educational system, which means that there is no continuum within the education cycle
• The government does not keep in view the economic growth requirement, while establishing technical institutes or Universities, to compliment the natural resources in that particular region.
• Policies are not adhered upon sincerely or there seems no accountability process to measure those targets.
• Limited capacity of ministers and advisors to plan properly. Even if they are well-intentioned, the people in the process are usually not technically knowledgeable or equipped.

Basic Statistics 2007-08

To determine the future scope of budget allocation and the determination to implement a practical viable strategy in order to raise the standard of education with parity and consistently – a thorough study of statistics is of vital importance. These statistics are instrumental in determining and highlighting the categories that need additional attention and further budget to support their development.

For example, there are 173 teacher training institutes in Pakistan and only 15% in the private sector. This translates into a requirement and promotion that is much desired in the private sector. On the other hand, we see that the total enrollment of students in NWFP comes out as, Boys 3,323,715 and Girls 1,978,890 – indicating that special attention and extra budget allocation should be made for Girls education in NWFP.

There are 256,088 educational institutions of all categories in Pakistan, with a total enrollment of 37,462,884 students.

Percentage Share of Public Sector and Private Sector

There are 182,477 (71%) education institutions in the public sector and 73,611 (29%) in private sector. Enrolment wise, public sector has an enrollment of 25,213,894 (67%) in various categories of educational institutions whereas 12,248,990 (33%) enrolment is in the private sector. The total teaching staff is 1,363,501, out of which 0.756 million (56%) is in the public sector and 0.606 million (44%) in the private sector.

Gender-wise Enrollment and Teachers

The total male student enrolment is 21.133 million (56%), whereas the total female student enrolment is 16.329 million (44%). Out of the total 1.363 million teachers, 0.617 million (47%) are male and 0.695 million (53%) are female teachers.

Categories of Educational institutions

1. Pre-primary:

The total enrolment at pre-primary stage is 7.402 million. Public sector has an enrollment of 4.610 million (62%), whereas the private sector has 2.792 million (38%) enrolment.

2. Primary:

Out of the total of 156,592 primary schools, 139,342 (89%) are in the public sector, whereas, 17,250 (11%) are in the private sector. The total enrolment at primary stage is 17.288 million, out of which 12.155 million (71%) is in public sector and 5.072 million (29%) is in private sector. Gender wise, 9.692 million (56%) are boys and 7.535 million (44%) are girls. The total number of primary teachers are 435,351, of which 347,156 (80%) are in public sector, whereas, 88,195 (20%) are in private sector. The number of male primary school teachers is 233,299 (54%) and the number of female primary teachers is 202,052 (46%).

3. Middle:

There are total 320,611 middle schools of which 121,052 (38%) are in public sector, whereas 199,259 (62%) are in private sector. The total enrolment at middle stage is 5.362 million, of which 3.694 million (69%) is in public sector, whereas, 1.668 million (31%) is in private sector. The total boys enrolment at middle stage is 3.106 million (58%), whereas, the girls enrolment is 2.256 million (42%). The total teachers at middle level are 320,611, out of which 121,352 (38%) is in public sector and 199,259 (62%) are in private sector. There are 112,375 (35%) male teacher and 208,236 (65%) are female teachers.

4. Secondary / High:

There are total 23,964 high schools, of which 9,911 (41%) are in public sector, whereas 14,053 (59%) are in private sector. The total enrolment at high stage is 2.426 million, of which 1.723 million (71%) is in public sector, whereas, 0.702 million (29%) is in private sector. The total boys enrolment at high stage is 1.428 million (59%), whereas, the girls enrolment is 0.997 million (41%). The total teachers at high level are 374,252, out of which 175,159 (47%) is in public and 199,093 (53%) are in private sector. There are 167,252 (45%) male teacher and 207,000 (55%) are female teachers.

5. Higher Secondary / Inter Colleges:

There are total 3,213 higher secondary schools/ inter colleges of which 1,299 (40%) are in public sector, whereas 1,914 (60%) are in private sector. The total enrolment at higher secondary schools/ inter colleges stage is 919,543 of which 750,552 (82%) is in public sector, whereas, 168,991 (18%) is in private sector. The total boy’s enrolment at higher secondary schools/ inters colleges stage is 457,443 (50%), whereas, the girls enrolment is 462,100 (50%). The total teachers at higher secondary schools/ inter colleges level are 74,223, out of which 33,229 (45%) is in public and 40,994 (55%) are in private sector. There are 38,061 (51%) male teacher and 36,162 (49%) are female teachers.

6. Degree Colleges:

There are total 1,202 degree colleges of which 826 (69%) are in public sector, whereas 376 (31%) are in private sector. The total enrolment at degree colleges stage is 352,303 of which 320,786 (91%) is in public sector, whereas, 31,517 (9%) is in private sector. The total boys enrolment at degree colleges stage is 138,097 (39%), whereas, the girls enrolment is 214,206 (61%). The total teachers at degree colleges level are 20,971, out of which 15,763 (75%) is in public and 5,208 (25%) are in private sector. There are 10,281 (49%) male teacher and 10,690 (51%) are female teachers.

7. Universities:

There are total 124 universities of which 68 (55%) are in public sector, whereas 56 (45%) are in private sector. The total enrolment in the universities is 741,092 of which 637,037 (86%) is in public sector, whereas, 104,055 (14%) is in private sector. The total male enrolment in the universities is 398,967 (54%), whereas, the female enrolment is 342,125 (46%). The total teachers in the universities are 46,893, out of which 38,266 (82%) is in public and 8,627 (18%) are in private sector.

8. Technical and Vocational Institutions:

There are total 3,125 technical and vocational institutions of which 936 (30%) are in public sector, whereas 2,189 (70%) are in private sector. The total enrolment in the technical and vocational institutions is 255,636 of which 111,119 (43%) is in public sector, whereas, 144,517 (57%) is in private sector. The total male enrolment in the technical and vocational institutions is 159,623 (62%), whereas, the female enrolment is 96,013 (38%). The total teachers in the technical and vocational institutions are 14,914, out of which 7,501 (50%) is in public and 7,413 (50%) is in private sector. There are 10,144 (68%) male teacher and 4,770 (32%) female teachers.

9. Teachers Training Institutions:

There are total 173 teachers training institutions of which 147 (85%) are in public sector, whereas 26 (15%) are in private sector. The total enrolment at teachers training institutions stage is 632,684 of which 628,207 (99%) is in public sector, whereas, 4,477 (1%) is in private sector. The total male enrolment in the teachers training institutions is 420,497 (66%), whereas, the female enrolment is 212,187 (34%). The total teachers in the teachers training institutions are 3,533, out of which 3,264 (92%) is in public and 269 (8%) are in private sector.

10. Non-Formal Basic Education:

The total numbers of non-formal basic education centers are 13,603. The total enrolment in these centers are 537,477 out of which 236,446 (44%) is boys and 301,031 (66%) is girls. There are 13,603 teachers in the non-formal basic education centers out of which 2,712 (20%) is male teachers and 10,891 (80%) is female teachers.

11. Deeni Madaris:

There are total 12,448 Deeni Madaris of which 363 (3%) are in public sector, whereas 12,085 (97%) are in private sector. The total enrolment in the Deeni Madaris is 1.603 million of which 0.454 million (3%) is in public sector, whereas, 1.558 million (97%) is in private sector. The total male enrolment in Deeni Madaris is 0.999 million (62%), whereas, the female enrolment is 0.604 (38%). The total teachers in Deeni Madaris are 55,680, out of which 1,694 (3%) is in public sector and 53,986 (97%) are in private sector. There are 42,997 (77%) male teacher and 12,683 (23%) female teachers.

Parent –Child Educational Interaction

The latest research on the human brain and its development confirms what we have known for decades – the early years of children’s lives are critical to their cognitive, emotional and physical development. Parents are the first learning seat of the future generations and need to be their children’s first teacher if their children are to start at school ready to learn. Parents should be offered trainings in order to help them be involved in their children’s education and to help them be their children’s first teacher.

• Parents should be taught, through government advertisements and media, the importance of reading to their children. This practice will not only assist them to become better parents but also to become contributing members of the Pakistani community.
•   After-school and summer tutoring for children that have still to reach higher secondary, along with their parents, will bring about the development and cultivating process. 
• Constructive and timely interaction between the Teachers and Parents help in defining any student’s career. While there is also a consensus as to how to proceed, understanding the personal capacity of the student and his abilities; there is also a development with respect to the refinement of education system due to the valuable input from Parents. 
• Parents must also encourage their children to adopt independent reading habits.

Schools Modes of informing the Parents regarding the Parent-Teacher meeting include sending SMS on the mobiles of Parents. Parent Teacher meetings should be conducted on time slots that are feasible to the Parents – Mothers and Fathers alike.

Strategy and Policy Structure to promote Education and raise Standard

Sustained education and social economic development is not possible by mere capital investment unless it is re-enforced with proper supply of adequate trained and scientific manpower. Public policy should be amended to mobilize the private sector and civil society organizations (CSOs) in the financing, management and delivery of education services in Pakistan.

The strategies should be implemented through; a more transparent and proactive manner of engaging the private sector for improving access and quality of education; enhanced managerial performance, entrepreneurial spirit, through capacity building; access to proven leading knowledge technologies; improved transparency through involvement of local community from design, implementation through to the operation; and support to local knowledge and employment generation at local levels.

Better Governance

We all know, some of the major problems in public schools and few private unchecked schools include – limited financial resources, lack of labor to execute up gradation, lack of motivation to maintain school’s standard, poor quality of study material, over-crowded classes, underfunding, political differences, teacher ignorance and absenteeism, and to top this all, a crumbling infrastructure. These issues have largely aggravated the situation and the hope to revive the quality of Education in Pakistan has gone down. Whereas, Pakistan did witness an era of hope and optimism during the last few years, where the literacy rate improved from 45% in 1999 to 53% in 2007 and so did the overall education system, especially the Higher Education one.

Nonetheless, in order to achieve a literacy rate of above 80% and an education system that could be matched to any international standard and be a source of pride, there is an immediate need to enforce a national policy designated as something similar to “National Educational Emergency Program”.

Expertise in core areas such as, strategic planning, budgeting, personnel development, management of funds, education leadership, information collection and analysis, monitoring and assessment and accountability, is not evenly extended and is lacking in most districts all over Pakistan.

Modernization of planning and management, shifting the focus of the Curricula from disciplines to basic learning needs, building new alliances for basic education, diversification of the financial resource base, introduction of the Pre-School programs, employing of special programs aimed at the indigenous sectors in the rural areas are essential to moving ahead. Involvement of the roles of the family, schools, community, non-governmental organizations and the national media in the stipulation of basic education will be instrumental.

The phenomena of ‘ghost schools’ that receive government funds and grants are now common knowledge. In 1998, more than 1400 army teams were established, endeavoring to verify the existence of some 56,000 primary ‘ghost schools’ in the province of Punjab alone.  These ‘ghost schools’ should either be converted in full fledge schools or their grants be diverted to proper functioning schools.

Proper accountability process should be put in place to ensure the systematic organization chart and responsibility distribution. Few very important decisions that a government could take immediately, as solutions are,

• Ensuring proper utilization of education funds – failure to meet budget requirements, surrendering and lapsing of funds should be considered as incompetent,
• Setting up wireless broadband in all public schools for access to Students and Teacher networks,
• Hire ICT Specialists per school – to put into practice the international system, that have become integral part of most international curriculums,
• For research purposes, providing high tech computers labs, which could be booked by teachers to conduct their study along with the students in specific periods.
• Projectors and Smart boards for schools use so that teachers could show students, latest videos, PowerPoint presentations and students can have interactive learning through smart boards.
• The extra-ordinary efforts, put in place by the Government of Punjab under the PML-Q, with their slogan and implementation of ‘Parha Likha Punjab’ are highly commendable and should be extended to all over Pakistan.
• Put an end to ‘Ghost Schools’ phenomena.

Increase allocation as percentage of GDP or Budget

For 2005-06, the total Public budget, comprising current and development budget, was projected at Rs.6803 million and in 2006-07, the allocation of total budget was Rs.9556 million. As for the Private sector, National Education Census for 2005 measured, out of total 76,047 private institutions, 73,018 institutions reported their expenditure for the year 2004-05, which comes to Rs. 35,914 million.  

For the financial year 2007-08, the federal government allocated Rs 6,509 millions for development projects only to be implemented under the Education Division.

Further, efforts were made in 2007 to increase the budge to 4% of GDP. Comparing Pakistan to Saudi Arabia, another Muslim and a so-called third world country, we witness the difference in the priorities of the two nations. Since 2006, Saudi Arabia allocation of budget for education has been 25% of its budget.

Education sector has never been a priority for our nation or governments. Lack of seriousness and undefined priorities are aggravated by poor implementation machinery and complex rules. Education sector involving almost 200,000 educational institutions with about a million teachers and staff spread over vast geographical areas, involves complexity of problems which are unmatched by any other social sector. Low allocation of budget as percentage of GDP has all along been a major issue in the development of education in Pakistan. Allocation to education sector had usually been around 2% of Pakistan’s GDP.

Proper and Timely Utilization of Education Budget

 Another irony is the lack of utilization of funds, timely release and the subsequent lapses. For the financial year 2007-08, the federal government allocated Rs 6,509 millions for development projects to be implemented under the Education Division. However, the total amount released for development projects in the first quarter was only Rs 936 millions, out of which the Education Division could spend only Rs. 498 millions. This means that, in the first quarter, the Education Division could spend only 7.6% of the total budgetary allocation for the year 2007-08.

Education Division had equally failed in financial year 2006-07 to utilize the budget allocation, which was 33% at the end of the whole financial year. This translates into a fact that the Education Division is usually not able to ensure timely completion of development projects.

Few reasons that are attributed to the low utilization of allocations and lapses for development projects under the Education Division include,

• Releases by the Ministry of Finance that are not timely,
• Delays in site selection and acquiring land,
• Inter-departmental differences,
• Non-availability of technical staff,
• Failures in appointing full-time project directors,
• Delayed consultant reports,
• Late issuance of work orders or permits,
• Late submission of feasibility reports or requests for release of funds by the related implementing organizations.
• Budgetary allocations are made without completing the approval process, which results in delayed implementation work.

The portion of approved budget of a Ministry, Division, or Department, which it finally declares to Finance Division, normally before the budget planning of each financial year, beyond its capacity to utilize within the ongoing financial year, is usually requested to surrender. The amount of approved budget which is neither surrendered by the date specified by the Finance Division, nor utilized by 30th June of the year is termed as lapsed funds.

• The Education Division and other related departments/ ministries need to take immediate steps to improve their monitoring systems and fix problems that result in lapse of funds.
•  The Education Division must proactively share information about the progress on development projects as well as about the utilization of allocated funds after each quarter. 
• Maximum transparency in this regard can help in better monitoring, greater accountability, timely rectification of related problems and improved performance of the Education Division. 
• Another way of assessing any government’s performance is to examine whether it has efficiently planned and implemented development projects, during their tenures.

Inclusion of Pearson Scott Foresman Books

Pearson Scott Foresman Books are a popular medium for instructions and studies, in several countries across Middle East. Books by Pearson Scott Foresman have been included as an integral part of the education system in many parts of the Arab world. Saudi Arabia’s literacy rate has improved to become 83% – UAE’s 90% – Kuwait’s 94% and Qatar’s 93%.

These colorful books, featuring pictures of kids in a natural and relaxed manner, easy English and a fun to learn display – are attractive to kids. The learning process is more like a scientific discovering process, with the easiest approach, one that stimulates the thinking and brings about a confident response from the kids.

While it is understandable that these cannot be implemented suddenly, however, gradually starting from one such course book, like the ‘You and Your Health” and by targeting the primary section, the process could be started. The cost factor may be decisive factor therefore; similar books can be printed by the government printing press and further assistance may requested from international humanitarian agencies, education related NGOs and the Public under the ‘Educational Emergency” program. It should be made mandatory for the private sector to include a similar learning process or set of books.

• Science, Social studies and Maths could be taught through colorful books, workbooks, activities and projects.
• Subjects similar to ‘Reading Street’ by Pearson Scott Foresman could be incorporated in the primary and secondary levels, with the prime objective to encourage reading habits in our youngsters. It should be made mandatory for the private sector as well.
• “You and Your Health” – is one another very significant subject that highlight the advantages of a healthy mind, healthy human practices, clean environments and safety. Students are taught to remain clean, play safe, maintain friendly attitudes, respect traffic rules, learn to speak the truth, be honest, be helping, respect elders and maintain an overall positive attitude. Bottom line: Groom the morality of your nation!

Effective External Assistance

Mainly in Pakistan, there are two types of external assistances. These should be made further effective and instrumental in achieving higher reforms.

1. Multi-lateral Foreign Assistance. It covers assistance from the Banks and UN Agencies.
2. Bi-lateral Foreign Assistance. It comprises assistance from any country to Pakistan.

The Government of Germany and Canada have agreed to write off their remaining debt if the funds are spent by Government of Pakistan for improvement of education.

Joint Ventures among Countries and International Organizations

Various regional mechanisms, both intergovernmental and nongovernmental, promote co-operation in education and training, health, agricultural development, research and information, communications, and in other fields relevant to meeting basic learning needs. 

There are many possible joint activities and ventures that may take place among countries, in support of national efforts to implement action plans for basic education. Joint activities should be designed to exploit economies of scale and the comparative advantages of participating countries. International organizations like the ISESCO, UNESCO, SEAMEO, EAIE, CONFEMEN (Conference of Ministers of Education) and others can be approached to undertake this mission. Six areas where this form of regional collaboration seems particularly appropriate are:

• Requesting them to setup or support brotherly schools,
• Training of key personnel, such as planners, managers, teacher educators, researchers, and others,
• Efforts to improve information collection and analysis,
• Support combine Research programs,
• Production of educational materials and providing free if possible,
• Use of communication media to meet basic learning needs,
• Management and use of distance education services.

 
Development of Facilities and Infrastructure Improvement Programs

According to the Human Development in South Asia’s 1998 report, 70 per cent of the schools in Pakistan had no toilets, 68 percent no drinking water, 92 percent no playgrounds, 60 per cent no boundary walls and 16 percent were without a building. A delegation from the UK to Pakistan has also noted a lack of desks, books, blackboards, electricity, doors, and windows, not to mention the problem of over-crowded classrooms. Even though the situation certainly improved since 1988, however, attention is still required especially in rural areas.

A major focus should be, to make primary schools more functional by providing missing facilities such as, electricity, drinking water, boundary walls and other basic amenities so that the children do not drop out on account of dysfunctional environment which is not conducive to learning. School up-gradation through conventional and non-conventional means is also a core area to narrow the gap between primary, middle and secondary provision for higher transition rates.

• The “National Educational Emergency Program” could request and involve various international marketing firms, construction companies, chartered accountant firms and donors, to enable smooth flow of funds and timely completion of such projects.
• These construction companies could fix and build free of charges, collapsing schools on themes similar to ‘One School One Guardian Company’.
• Marketing companies could donate and project their companies on the boundaries of schools.
• International companies could help on BOT basis, like the local government in Karachi operates on several of its projects.

Addressing Gender Disparity

Pakistan’s, gender development index (GDI) is ranked 131, exceeding the corresponding Human Development Index (HDI) rank of 138.  According to Gender Gap report 2006, Female literacy rate was 36% while male literacy rate was 63% and female to male ratio was 0.57%.The enrollment in primary education for female was 56% while for male was 76% and enrollment ratio of female to male was 0.73%. Similarly, enrollment ratio of female to male at secondary level was 0.73%. The enrollment in tertiary education for female was 3% while for male was 4% and enrollment ratio of female to male was 0.80%.

The situation is much alarming in NWFP and related adjoining areas. The government of Pakistan invests $11 per capita on development efforts in Federally Administered Tribal Areas (FATA) and $25 per capita in the rest of the country. The educational attainment of girls and women in the north is markedly lower than in other areas. The women’s literacy rate in FATA is only 3 percent and in the North-West Frontier Province, (NWFP) it is 18 percent. Further, in the areas of conflict, educational infrastructure has been destroyed, approximately 280 schools—70 percent of which were girls schools—were destroyed in Swat alone.

• Number of institutions of the female, in formal system of education, may be equalize to number of institutions of male to minimize gender gap in Pakistan 
• The number of Distance Learning institutions in Pakistan may be increased as at present there is only two public sector universities in the country to serve the large illiterate masses 
• The Distance Learning institutions may be established at provincial level to minimize the gender gap in education in Pakistan 
• Pay stipends to females that enroll in educational institutes

Public Private Joint Venture

Pakistan should deepen its commitment to partnerships with civil society organizations by placing an emphasis on working with a wider spectrum of civil society organizations including International and National Development NGOs through global partnerships to help deliver basic social services. Civil society organizations have become critical allies in designing innovative operations, implementing solution and monitoring results.

From initiating innovative programs to working in tandem with non-governmental organizations (NGOs) that manage public schools through formal adoption, the government should step up its efforts to include various other stakeholders in the delivery of education.

One Medium of Instruction

One medium of instruction should be introduced in the country over a period of time, extending gradually. It is understandable that this cannot be done immediately, in a country that is divided not just into rural and urban one, but also due to provincial languages. In the international competition scenario of today, English has assumed unprecedented importance. While Urdu can be taught as a single subject, the other subjects could be taught in easy English. English has been made mandatory from class one onwards in Pakistan, since 2006-07, which is appreciative. Practical steps should now be taken to put these measures into practice. Teachers should be trained at their respective training centers, networks, clusters or even during their graduation.  Fluency of spoken English translates into a better mode of communication with the rest of the world. Better command in English, will in the long-term benefit the social and economic conditions of Pakistan. Setting up English language media channels on government level to improve fluency and perfection in language is must.

Quality Education

International systems, programs, books and patterns must be examined and how they can be ideally implemented in Pakistan, with the view to enhance our standard of education. Pearson Scott Foresman books are one ideal example.

Quality improvement is a complex question. Unlike improvement in infrastructure, appointment of teachers or even of equipping schools with better academic facilities has become a large administrative setback for the government. The Education department seems in extreme shortage of the labor force through which these practical steps may even by implemented, despite being desired.

 Charter Schools

These schools can be created by teachers, parents, community groups, businesses, universities, museums, and others. If functioning properly, they can be tailored to meet the needs of their students and promote healthy competition within public education. State legislatures must enact solid charter school laws to support the creation of a sizable number of high-performing public charter schools, providing these schools with real flexibility while holding them accountable for reaching high standards for all children.

Military Schools

 The Pakistan military and its ex-servicemen can act as an important pillar, in lending a hand to put into action the “National Educational Emergency Program”. With their level of quality expertise in setting up Foundation Schools that have around 90 branches all over Pakistan and Foundation University, we could achieve the national bench marks set. Similarly, the PAF and NAVY must also be included in this strategy on a large scale. In addition, the Army Public Schools and Colleges are bright examples! Pakistan needs more of these military schools and also a joint strategy for the military in helping out the government of Pakistan. These military schools can allow enrollment of ordinary deprived students in their campuses.

Distance Learning

 Distance learning is any type of education that occurs while location, time, or both separate the participants. In distance learning, the teacher, through the use of technology, delivers instructions to a student at a separate location. Distance system of education in Pakistan was started with the establishment of Allama

Iqbal Open University in the year 1974. This system should be made top priority and promoted on provincial basis, not just federal level. Many international higher educational institutions offering distance education courses have started to leverage the Internet to improve their program’s reach and quality. Pakistan should adopt a policy similar to world’s leading institutes.

Higher Education Commission

With the establishment of HEC in Pakistan on 11the September’ 2002, under the ‘Law of Higher Education Commission Ordinance’ LIII – Pakistan witnessed an era of excellence in higher education enabling four Pakistani Universities to qualify in the world’s Top 600 Universities. As many as 47 new universities were established and 18 new campuses of universities were also set up during the period of six years, from 2002 till 2007-08. University enrolment almost tripled from 135,123 to 363,700 during the period, thereby providing far more opportunities of our youth to acquire higher education and seek access to international markets. No further policy is required for the HEC; the government only needs to keep the former policies consistent with market trends and demands.

Steps to Promote Pre-Primary and Primary Education

 Pakistan Montessori Council and its affiliates, that have been registered under section 32 of the Companies Ordinance, 1984 (XLVII of 1984) with the government of Pakistan and the non-profit organizations registered under section 42 of the Companies Ordinance, 1984 (XLVII of 1984) with the Securities and Exchange Commission, should be given full support and objectives to outline and achieve, in order to achieve a minimum literacy rate. Teachers training accreditations could also be availed for most of the teachers that have access to Pakistan Montessori Council in personal or through internet.

By simply paying attention to the Primary Education, Pakistan’s literacy rate could be accelerated.

q  In the public sector primary schools, especially in rural areas, children below 5 years of age should attend the schools in a relaxed manner, and learn basic concepts of literacy and numeracy – free of cost. Primary education should be made compulsory till age 6. No kid should be seen on roads during the school timings passing time idly.

q  In private sector schools, where pre-primary education is well organized, despite being costly for some, and has become an essential part of primary section education.

• Government should relax certain rules and regulations with view to promote primary education. This in return will encourage the private sector to come forward with force. 
• Government should facilitate the private sector by providing them availability of land at low costs. 
• The government should also allow exemption of taxes, for Primary Schools, that have yet not converted into Secondary schools.

 q  Day Care Centers and Nurseries is one scheme that should be promoted and opened by the Education Department, especially for children of working mothers.  A concept that is well established in foreign countries. This will also enable active participation by the other half of our population, which mainly remains dormant due to lack of facilitation.  At present, the combine family system has supported the requirement.

Facilitation that should be part of any primary or secondary education support, which includes:

• Safe and challenging play equipment for primary sections, where the floors are soft and spongy to make falls less harmful and the equipment itself is not iron that could rust or sharp plastic,
• Gender appropriate water and sanitation facilities,
• Recreation and psychosocial support materials, including for very young children,
• Colorful and attractive teaching and learning supplies,
• Hiring teachers with minimum qualifications and ensuring a three-day prep training,
• Financial compensation for school support staff,
• Healthy food should be provided or encouraged,
• Neighborhood or Community engagement,

Development of Teaching as a Profession

Teaching is that essential profession, the one that makes all other professions related to education possible. A national policy framework for teacher education including conditions of work must be finalized to fully professionalize the profession of teaching from early childhood to tertiary levels Merit based recruitment of teachers is urgently required so that teaching is recognized as a profession and professional development programs yield positive and lasting results. Resources for teacher education, continuous professional development (CPD), standards and research must be enhanced in national, provincial and district budgets to ensure sustainability of quality and innovations in teaching and learning practices. The National Curriculum must be readily accessible to teachers /educators in national, local languages and English through print and ICT modes. Municipal or local government schools must not be bypassed in training programs, ICTs and innovations. 

Dilemma of Teaching Profession

Teaching must be recognized as an established profession. It is clear that a formal strategy needs to be put in place to address teachers and the teaching profession while stressing and encouraging accountability and initiative. Otherwise, Pakistan’s children in primary schools, especially in the rural areas, will continue to suffer from illiteracy and a lack of education, leading to little hope for their future or Pakistan’s as a nation.

One of the main concerns is the lack of Teacher motivation, which leaves their efforts ineffective. This problem has and continues to lead to the erosion of standards in the nation’s schools. In practical terms, a teacher’s poor motivation translates into absenteeism, indifferent classroom practices and teachers leaving the profession. This high turnover in the profession is especially damaging for the whole system, because whatever the government’s investment in teacher training is lost. Replacing and training teachers who have left is another expense incurred.  Lack of motivation constitutes several factors.

The government and the private sector, alike, should pay attention and provide solutions, to these below mentioned problems. A system should be evolved at national level to evaluate and promote teachers according to their seniority, experience, degree, contribution to scientific and social development, extra time they invest, etc.

• Inadequate salary is one of the reasons of lack of motivation. In Pakistan, fresh school teachers start earning roughly between Rs 1,500 and Rs 3,000. In some places, this is even less than what a cook, gardener or driver often earns.  Financial security helps them concentrate on their jobs, where they are not forced to take on extra jobs to supplement their household income. Good pay is one incentive to encourage employees in any profession to work harder and in a more dedicated and enthusiastic manner. 
• Harsh working conditions, environments and lack of proper transport, the teachers must endure, further lessen their motivation. This discourages possible candidates from becoming teachers and often led to incumbent teachers leaving the profession. 
•  There is little opportunity for career advancement in the teaching profession in Pakistan, especially for primary school teachers. The only one available to most teachers is to move into secondary school teaching. This however, has negative effects on the primary school system, since it is often the most motivated teachers who leave teaching primary school for secondary school.  
• Teachers suffer due to poor evaluation systems managed by either overworked administrators or those who are not very effective at rating and distinguishing professionalism amongst the teachers. Incentives should be approved for Teachers who strive to improve their performance.  
• Teachers are not effective because their administrators force them to teach out of field – due to unavailability of teachers, tight schedules or pay-scale disagreements. An Urdu teacher may be forced to teach Social studies or Maths. Ensure better distribution and optimum utilization of Teachers.  
• Young college students take up jobs to elapse the time period, before they move on to take admission in professional colleges. There is a certain level of benefit to this system, being, the availability of teachers and the involvement of youngsters, in Education system formation and feedback. However, such short-lived contributions also create difficulty for administrators and students. However, relaxing age limit where there is no teacher available is also a good option.  
• In government schools, there is virtually no system of accountability for teachers. Teachers are often accountable to Pakistan’s education department which is far from their teaching milieu. This means they can get away with absenteeism. There is no local authority to ensure that teachers attend classes and teach their students. Head teachers have little authority to censure teachers who do not turn up for work. Even parents have no way to endure proper teaching.  
• Principals who do not cultivate and embrace teacher leadership. The school’s environment lacks tools for teachers to learn from the experience of their seniors.  
• Low level politics in schools.  
• Relaxation of qualification especially in rural areas where no female teacher is available.

 Direct Government Support

The government should give fast considerations to the teachers in all supporting government departments – be it further education enrollment, NADRA, passports, police, customs, taxation filing, access to hospitals and health care, etc. The transport sector should reduce the transport fees for Teachers and students. The way the country’s journalist, judiciary and politicians are awarded land due to their services – the teachers who have served all their lives in Public schools should be allowed a small piece of land and free health care all their lives.

Network for Teachers

A professional “Network for Teachers” should be supported on government levels, for providing opportunities to teachers to share their best practices, experiences, conversations, and resources in identifying problems. These networks should not become trade unions but remain self-motivated forums for professional development, social identity and support systems. Networks’ activities could be arranged after school timing, ensuring teacher presence in networking classes.  Partnerships between government and NGOs must be encouraged for promoting such “Networks for Teachers”.  Outstanding established examples of professional networks in education run by non-governmental and private sector could be set as an example and supported. For example, SPELT (Society for Promotion of English Language Teaching) and others. A network for Urdu can also be established on similar lines as SPELT, to encourage one language as means of communication and understanding. All networks must have access to the developed modules and informational CDs across the country, under various initiatives through the Ministry of Education at nominal charges, or free through internet. Networks need resources for coordination, infrastructure for information dissemination therefore, financial transparency is critical for ensuring reputation of networks.

 Clusters & Teachers Resource Centers (TRCs)

Multiple types of resource and cluster centers should be available across the country in public and private school systems need to be urgently recognized for their innovations made active and supported for creating communities of practice and for sharing vital information. 

• Teachers frequently need subject based top up training in local clusters for which TRCs must be supported as low cost accessible and efficient solutions 
• Monthly networking meetings need urgent revival for professional development as Professional Development Days in clusters at resource centers such as at a middle or high school to learn standards and new national curriculum, textbooks use, pedagogies and assessment systems.
• Proper equipment, teaching kits, learning materials, science and IT labs with connectivity must be  provided in cluster resource centers to allow optimum benefit to teachers and students
• Resource centers should be accessible for teachers, a maximum distance of 10 kms.
• All high schools and middle schools with good facilities must be converted into learning hubs for government and low cost area private schools.
• Resource centers must be converted into information libraries for the national curriculum.

Information Communication Technologies (ICTs)

ICTs stand for information and communication technologies and are defined, for the purposes of this primer, as a “diverse set of technological tools and resources used to communicate, and to create, disseminate, store, and manage information.”These technologies include computers, the Internet, broadcasting technologies (radio and television), and telephony.

ICTs are a potentially powerful tool for extending educational opportunities, both formal and non-formal, to previously underserved constituencies—scattered and rural populations, groups traditionally excluded from education due to cultural or social reasons such as ethnic minorities, girls and women, persons with disabilities, and the elderly, as well as all others who for reasons of cost or because of time constraints are unable to enroll on campus.

One defining feature of ICTs is their ability to transcend time and space. ICTs make possible asynchronous learning, or learning characterized by a time lag between the delivery of instruction and its reception by learners. Online course materials, for example, may be accessed 24 hours a day, 7 days a week.

Teachers and learners no longer have to rely solely on printed books and other materials in physical media housed in libraries (and available in limited quantities) for their educational needs. With the Internet and the World Wide Web, a wealth of learning materials in almost every subject and in a variety of media can now be accessed from anywhere at any time of the day and by an unlimited number of people. This is particularly significant for many schools in developing countries, and even some in developed countries, that have limited and outdated library resources.

Education policymakers and planners must first of all be clear about what educational outcomes are being targeted. These broad goals should guide the choice of technologies to be used and their modalities of use. The potential of each technology varies according to how it is used.

How can the use of ICTs help improve the quality of education?

Improving the quality of education and training is a critical issue, particularly at a time of educational expansion. ICTs can enhance the quality of education in several ways – by increasing learner motivation

and engagement, by facilitating the acquisition of basic skills, and by enhancing teacher training.

Technology then should not drive education; rather, educational goals and needs, and careful economics, must drive technology use.

• Motivating to learn. ICTs such as videos, television and multimedia computer software that combine text, sound, and colorful, moving images can be used to provide challenging and authentic content that will engage the student in the learning process. Interactive radio likewise makes use of sound effects, songs, dramatizations, comic skits, and other performance conventions to compel the students.  
• Facilitating the acquisition of basic skills. The transmission of basic skills and concepts that are the foundation of higher order thinking skills and creativity can be facilitated by ICTs through drill and practice. Educational television programs such as Sesame Street use repetition and reinforcement to teach the alphabet, numbers, colors, shapes and other basic concepts.  
• Enhancing teacher training. ICTs have also been used to improve access to and the quality of teacher training. For example, institutions like the Cyber Teacher Training Center (CTTC) in South Korea are taking advantage of the Internet to provide better teacher professional development opportunities to in service teachers. In China, large-scale radio and television-based teacher education has for many years been conducted by the China Central Radio and TV University,16 the Shanghai Radio and TV University and many other RTVUs in the country.  At Indira Gandhi National Open University, satellite-based one-way video- and two-way audio-conferencing was held in 1996, supplemented by print-materials and recorded video, to train 910 primary school teachers and facilitators from 20 district training institutes in Karnataka State.

National Level Policy

For developing countries, ICTs have the potential for increasing access to and improving the relevance and quality of education. It thus represents a potentially equalizing strategy for developing countries. However, the reality of the Digital Divide—the gap between those who have access to and control of technology and those who do not—means that the introduction and integration of ICTs at different levels and in various types of education will be a most challenging undertaking. Failure to meet the challenge would mean a further widening of the knowledge gap and the deepening of existing economic and social inequalities.

• Develop a national consensus on the strategic policy and plan for ICT and learning technologies,   their integration in national curriculum and  its modes of operation through partnerships
• Nationwide initiatives in computer or IT Literacy and awareness must be compulsory and are urgently needed  in schools and training institutions  to enable  teachers/trainers to  become producers of knowledge and learning, to develop standards and learning solutions, and  improved interface with the education management information systems (EMIS) 
• Internet and e-mail access should be available at schools,  district, provincial, national level, across government offices and training  teacher education institutions 
• The content is aligned to the National Curriculum and local contexts. 
• Key research, national curriculum, information documents and training modules should be available on the Department of Education’s  s training institutions’ websites, with full time webmaster
• Materials developed in human rights and citizenship education, environment, indigenous ecological systems, heritage and culture must be available on CDs and inter-active learning tools.
• Low cost computers in schools, colleges and training institutions to be arranged
• ICTs in education must be aggressively introduced from Grade VI instead of Grade IX as per the new curriculum and policy and where resources permit even in primary grades  
• E- learning requires support for reliable technological infrastructure, synergies and partnerships
• Government or private sector need to develop two or three ICT learning technologies pilot projects and evaluate them thoroughly through well documented research  to influence policy 
• Government or projects  providing libraries to schools must include  ICT based software such as Microsoft Encarta, Oxford Talking Dictionary, Teacher PowerPoint Presentations, Typing Tutor etc, In-page, Educational games & Web resources

Role of ICT Specialist

• Technology and its use for development in the areas of education and community development. A good understanding of computer and communication (connectivity) systems and applications is required.
• A general understanding of educational concepts and issues related to pedagogy, curriculum, content design, use of various media for teaching and learning and e-learning in the basic education (primary and secondary) or tertiary (post secondary) or professional training sectors
• Knowledge of technical, financial and policy issues related to ICTs in developing countries.
• Analysis and selection of optimal choices of ICT platforms, connectivity, applications and systems.
• Large scale (national or regional) ICT project design, implementation management, appraisal, evaluation, and familiarity with design and implementation approaches such as participative approaches, local ownership, local capacity building and promotion of local content and applications.
• Procurement of complex ICT systems
• Design of policy environments that enable and encourage the use of ICTs in education and development.

General Bulleted Recommendations to improve Education in Pakistan

• The “National Educational Emergency Program” must be promulgated and implemented without delays or failure and it must involve the whole nation.
• Declare education as the highest priority of the government. Illiteracy or lacks of education are the largest obstacle to the road towards a functioning system, in our case democracy. The road to democracy will remain burdened with the danger of exploitation by few family controlled political parties.
• A government level television channel could be devoted to just promote education. Similar examples exist in Cairo and Riyadh. Education channels for Parent education, Primary, Secondary and Higher education sector.
• The involvement of Pakistan army in fighting illiteracy will be highly beneficial, utilizing their experience from Army Public and Foundations Schools and Universities.
• Make it mandatory for government and army officers at all levels to do shifts at various educational institutions in relation to their skills and national requirements.
• Make it a mandatory requirement for various degree programmers that the candidates, after taking their exams, shall spend a specified period of time, in teaching at assigned institutions. Like NCC is conducted in colleges.
• Ask for retired volunteers with specified qualifications to contribute their services in their areas of work or residence under organized bodies that can be formed for this purpose by the government.
• Ask the public to contribute financially for this purpose. Modern marketing and fund raising techniques can be adopted for this task. If he Public can donate for ‘Qurz Utaro Mulk Sunwara’ – they’ll definitely contribute towards the “National Educational Emergency Program”
• Many government school buildings can be converted into commercial schools of good level. The government can consider offering many of these schools to private sector organizations in the field of education on the condition that a specified percentage of bright students from the lower and middle classes will be granted admission and scholarships.
• If school building cannot be constructed, single rooms should be given the status of the ‘School’ and a teacher appointed, atleast for basic primary education in rural areas.
• Tax benefits and exemptions along with other such incentives to private sector groups to invest in education in rural and less developed areas.
• Make it mandatory for industrial units and agricultural estate of an area above a specified limit to provide for a school within the premises. Otherwise, the owner can be asked to share costs with the government for setting up such school.
• Introduce standardization of curricula and licensing and certification of teachers to improve standards.
• Computer education should also be introduced gradually right from the elementary stage in education.
• Some emphasis could be given to the development of educational institutions for some unconventional disciplines as fashion designing, art, music and literature.
• Introduce high quality selection procedure for higher level teachers and offer the candidates better government support incentives.
• Provide people with incentives to educate their children. This can be done in various ways. The government of Australia, increases stipends for parents, according to the number of kids they send to schools.
• Link agricultural loans or tax benefits to feudal landlords could be considered, judging their contribution in setting up schools and raising literacy.
• Link Industrial loans to promotion of education.
• Starting a second shift of classes during the afternoon, in all government schools. Encouraging the private sector to do the same.
• Vocational training should also be introduced for workers in different government offices or project executions.

Allocation of Budget

There are total 37,462,884 students in Pakistan and a total of 1,363,501 teachers. Meaning, for every 27 students there is a teacher. While this overall average seems reasonable, however, if we visit the break-up statistics of different sectors of education, we’ll observe extreme disproportionate results. The Pre-Primary, Primary and Secondary sections are the most unbalanced due to lack of teachers and as was pointed above, every government prioritized different sectors within the educational system. This imbalance was seen to improve from Intermediate colleges onwards to the University level.

1. In the Pre-primary section the total teachers are 3470 and total Pre-Primary schools are 815, meaning, 4.25 teachers for every Pre-primary school.
2. In the Primary section, there are a total of 435,351 teachers and a total of 156,592 Primary schools, meaning, for every primary school there are 2.7 teachers.
3. In the Middle Schools, there are a total of 320,611 teachers and 40,829 schools, meaning, there are 7.85 teachers for every Middle School.

As we can observe from the above statistics, the most attention should be paid to these three levels of education, which will also indirectly raise the overall literacy rate of Pakistan.

While several solutions for allocation of budget have been given above in various places, few basic are mentioned here under,

• Before the budget allocation season, the education sector, should prepare proposals with respect to their requirements, describing the support they desire from the government, in order to meet the government’s bench marks. This budget allocation must then be followed up by each school who has received a funding to submit an accountability report followed by a routine inspection.
• Similarly, the Ministry for Education must advertise and seek proposals from all Public schools, categorized by areas, districts, regions or constituencies. Budgets should be approved as per the requirements set and envisioned by the government.
• Introduce programs like “One Teacher per class of 25 students” – allocate budget for each school that meets this demand.
• For the Pre-Primary, Primary and Middle School level the ratio should atleast be 25 teachers per school.
• Introduce programs like “One Wireless Broadband per School” – allocate dedicated budget for this specific purpose.
• Each school should have an independent Library, however small, yet independent.
• Basic utilities like water, toilets and electricity – should be available in all schools. The principal should be held responsible if the infrastructure deteriorates.
• For Universities, research based projects, should be encouraged and allocation as essential.

Conclusion

Comparing beloved Pakistan to Saudi Arabia and other so-called third world Muslim countries, we witness the difference in the priorities of these nations. How have these countries been able to modernize themselves and establish an admirable functioning educational system despite not being democratic countries? Since 2006, Saudi Arabia allocation of budget for education has been 25% of its budget. Special educational projects like the King Abdul Aziz Center for Entertainment and Knowledge and the $11 billion Princess Noura University for Women have projected countries like Saudi Arabia as the futuristic ones. This special dedication towards education in Saudi Arabia has enabled the literacy rate to improve to become 83% – UAE’s 90% – Kuwait’s 94% – Qatar’s 93% – Bahrain’s 88% and Libya’s 84%.

Let’s learn and adopt from these leading innovators – to deposit our priorities as an optimistic nation!

Let’s move forward as a Nation that believes in Unity, Faith and Discipline – to achieve a landmark of 100% literacy rate!

Pakistan First!

U.S. Army Gen. William Westmoreland is reported to have said: “On the battlefield of the future, enemy forces will be located, tracked and targeted almost instantaneously through the use of data links, computer-assisted intelligence and automated fire control. … I am confident the American people expect this country to take full advantage of its technology–to welcome and applaud the developments that will replace wherever possible the man with the machine.” It seems that this vision from the 1970s is being realized today. One manifestation of it is the development and deployment of unmanned aerial vehicles by many nations, including Pakistan.

Pakistan’s indigenously developed unmanned aerial vehicle, Uqaab, whose final flight was tested and successfully conducted in March 2008. All design parameters were successfully validated, and the performance of Uqaab can be compared to any modern state of the art UAV, according to an army statement. Flight test was preceded by a series of trials in 2007 and is a reflection of Pakistan’s technical prowess in the field of UAV technology.

The Pakistan Aeronautical Complex (PAC) has handed over one dozen Predator-type unmanned aerial vehicles (UAVs) to the Pakistan Air Force (PAF), PAC Chairman Air Marshal Khalid Chaudhry said in January 2009. He said Pakistan had acquired the capability to manufacture UAVs and had initiated indigenous production.  “We will manufacture more UAVs indigenously, keeping the PAF’s requirements in mind”. [Link]

The growing reliance on armed drones (aka predators) by Americans in Afghanistan and Pakistan’s FATA region to target militants has been making headlines with increasing casualties. Unmanned Aerial Vehicles or Drones designed and manufactured in Pakistan have also been making news since IDEAS 2008 event in Karachi, Pakistan held in November of last year. Integrated Dynamics, a privately held Pakistani company that drew attention at IDEAS 2008 expo, is a developer and manufacturer of unmanned aerial vehicles.  

Integrated Dynamics is a full-service UAV systems provider based in Karachi, Pakistan. The company has been in business since 1997 and designs and integrates UAV systems primarily for the Government of Pakistan, the Pakistan armed forces and export. The company says they are committed to the use of the UAV system as a scientific and defensive tool that can be used to save lives and monitor potentially hostile environments for human personnel. The company also makes drones such as the turbojet-powered Tornado decoy, which can fly up to 200 kilometers, and emit false radar signals to “confuse enemy air defenses into thinking they are attacking aircraft,” according to Defense News of Pakistan.

In addition to supplying drones to Pakistani military, the company exports its products to Australia, Spain, South Korea and Libya and the United States. The US homeland security department uses its Border Eagle surveillance drone for border patrol duties. Integrated Dynamics’ products cost only a fraction of the cost of comparable products made in the United States and Europe. ID UAV prices start from about $ 20,000 while comparable UAV products made in the West start from about $ 200,000, according to the Karachi-based company. The ID models have operational range of 20 to 1600 kilometers.

Integrated Dynamics began developing the Firefly mini-rocket UAV in late 2004 in response to Pakistani army operational requirements for a high-speed, short-range observation system that could be used in the high-altitude environments of northern Pakistan. A basic system costs around $3,000 and comprises four rockets, a launcher, a carry case, datalink and a PDA-based ground control station.The UAV company is an example of a new generation of private defense companies in Pakistan that have grown with the emerging needs of Pakistani military and export opportunities to both military and civilian sectors abroad.

Arms as Pakistan’s Cottage Industry

Pakistan has a long history of arms manufacturing as a cottage industry. The dusty little town of Darra Adam Khel,only a half-hour drive from Peshawar, reminds visitors of America’s Wild West. The craftsmen of this town are manufacturers and suppliers of small arms to the tribal residents of the nation’s Federally Administered Tribal Areas who carry weapons as part of their ancient culture. The skilled craftsmen of FATA make revolvers, automatic pistols, shotguns and AK-47 rifles. Until five years ago, the list also had items such as anti-personnel mines, sub-machine guns, small cannons and even rocket launchers. Pakistani government has forced the tribesmen to stop making heavy assault weapons to try and prevent the Taliban and Al Qaeda from getting access to such weapons.

Pakistan’s arms industry has come a long way from making small arms as a cottage industry in the last few decades. The US and Western arms embargoes imposed on Pakistan at critical moments in its history have proved to be a blessing in disguise. In particular, the problems Pakistan faced in the aftermath of Pressler Amendment in 1992 became an opportunity for the country to rely on indigenous development and production of defense equipment.

Pakistan’s Military Industrial Complex

The country now boasts a powerful industrial, technological and research base developing and manufacturing for its armed forces and exporting a wide variety of small and large weapons ranging from modern fighter jets, battle tanks, armored vehicles, frigates and submarines to unmanned aerial vehicles and high tech firearms and personal grenade launchers for urban combat. Some of these items were on display at IDEAS 2008, the 5-day biennial arms show held November last year in Karachi, Pakistan.

Pakistan has become an increasingly important player in the world arms industry, a global industry and business which manufactures and sells weapons and military technology and equipment. Arms production companies, also referred to as Defense Contractors, produce arms mainly for the armed forces of nation states. Products include guns, ammunition, missiles, military aircraft, military vehicles, ships, electronic Systems, and more. The arms industry also conducts significant research and development. Pakistan’s major defense manufacturing companies are owned and operated by Pakistan’s military. According to Business Monitor, Pakistan’s defense industry contains over 20 major public sector units (PSUs) and over 100 private-sector firms. The majority of major weapons systems production and assembly is undertaken by the state-owned PSUs, while the private-sector supplies parts, components, bladed weapons and field equipment. Major PSUs include the Pakistan Ordnance Factory (POF), Heavy Industries Taxila (HIT), Pakistan Aeronautical Complex, Karachi Shipyard and Engineering Works (KSEW) and the Pakistan Machine Tool Factory. Multinational presence in Pakistan is limited, although joint production or engineering support in the development of certain armaments has recently occurred with companies such as DCN International and the Chengdu Aircraft Industry Group.

IDEAS 2000, Pakistan’s first major arms show, was organized after former President Musharraf assumed leadership of the country in the wake of the 1999 bloodless coup that toppled the Nawaz Sharif government. At the show, the former president emphasized the need to grow Pakistan’s defense industry and private sector involvement in R&D, manufacturing and marketing of arms. Held every two years since the year 2000, the show has become a runaway success. It has helped Pakistan and other friendly nations to show off their wares, find customers, share knowledge, build bilateral partnerships, encourage scientific innovation and learning among young people and made visitors and Pakistani citizens more aware of the role defense industry plays in national defense and economy. Held in November last year, International Defense Exhibition and Seminar 2008 attracted 256 companies including 162 foreign and 94 Pakistani companies. Among the largest foreign pavilions, Turkey had 28 companies and United States had 22. Other major exhibitors came from China, France, Germany, Italy, Russia, South Korea, South Africa, the Ukraine and the United Kingdom. Among other products, Pakistani companies showed off JF-17 fighter plane built by Pakistan Aeronautical Complex in partnership with China’s Chengdu Aircraft, Al-Khalid main battle tank, POF eye capable of shooting around corners and launching grenades in urban combat, and a variety of Unmanned Aerial Vehicles (UAVs) designed, developed and built in Pakistan.

World Arms Market

It is estimated that yearly, over 1 trillion dollars are spent on military expenditures worldwide (2% of World GDP). Part of this goes to the procurement of military hardware and services from the military industry. The combined arms sales of the top 100 largest arms producing companies amounted to an estimated $315 billion in 2006. In 2004 over $30 billion were spent in the international arms trade (excluding domestic arms sales). Many industrialized countries have a domestic arms industry to supply their own military forces. Some countries also have a substantial legal or illegal domestic trade in weapons for use by its citizens. The illegal trade in small arms is prevalent in many countries and regions affected by political instability.

Pakistan’s Arms Business

In a July 2008 interview with Pakistan’s Dawn newspaper, Major General Mohammad Farooq, Director General of the Defense Export Promotion Organization, indicated that collaboration with the United States had increased in manufacturing armored personnel carriers “with transfer of technology”. There have been unconfirmed reports that Pakistan is manufacturing Humvees for the US military in Afghanistan. General Farooq also claimed that Pakistan’s defense exports have tripled to around $300 million because of the quality of its ammunition, anti-tank guided missiles, rocket launchers and shoulder-fired surface-to-air missiles. He said exports to South Asian, Middle Eastern and African countries had increased significantly. It has been reported that Sri Lanka has purchased cluster bombs, deep penetration bombs and rockets and Unmanned Aerial Vehicles (UAV) from Pakistan.
General Farooq said optical instruments like night vision devices, laser range-finders and designators, laser threat sensors, artillery armor mortars and munition, mine detectors, anti-tank rifles, missile boats, different types of tear gases, fuses of unarmed vehicles, security equipment and sporting and hunting guns were also being manufactured in Pakistan. “The fuses are being purchased by countries like Italy, France and Spain,” he said.

In reply to a question, he said Pakistan’s military exports were higher than India’s. “Indians started working on Arjun tank but, they are yet to induct it in their army, while Pakistan has built and handed over Al Khalid tank to the army, although it started the program later,” he said.

Lately, Pakistan has come under severe criticism by human rights groups for being a leading manufacturer and exporter of land-mines, cluster bombs and depleted uranium munitions.

High-Tech Aerial Warfare

The three main branches of Pakistani military are evaluating UAVs made in Pakistan and the rest of the world for purchase and deployment. Pakistan has been eager to boost its capabilities for high-tech aerial warfare and restructure and reorient its military to respond to the new and emerging challenges of combating insurgents. A number of public and private sector companies have been engaged in research, development and manufacturing of unmanned aerial vehicles as a part of this initiative. The public sector companies include Pakistan Aeronautical Complex, Air Weapons Complex and National Development Complex.
Here’s a brief run-down of the status of Pakistan’s three military services as gleaned from Jane’s and other publications:

Pakistan Air Force

As part of its effort to go high-tech, Pakistan Air Force (PAF) will formally induct unmanned aerial vehicles (UAVs) into service for the first time in 2009, the chief of the PAF has told Jane’s. In addition to the Bravo+ UAV, which, according to PAF Chief Air Chief Marshal Tanvir Mahmood Ahmed, has been built indigenously by Air Weapons Complex, the PAF will also receive the Falco UAVs produced by Selex Galileo of Italy. The two systems will be used mainly for aerial reconnaissance and information gathering, although the PAF will later also induct UAVs equipped with weapon systems to carry out offensive operations. “This capability we are developing fairly rapidly; we are becoming mature. It is part of our operations now and I look forward to seeing this in real operations by [the] beginning [of] 2009,” ACM Ahmed reportedly told Jane’s.

Pakistan Army

The Uqaab, Pakistan Army’s drone designed and built by Pakistan Aeronautical Complex, is the first step towards the eventual mass production of a Pakistani UAV. Technical details shared by Pakistani officials suggest that the Uqaab can fly at an altitude of about 15,000 ft and is equipped with day- and night-vision equipment. There have been unconfirmed reports that Pakistan has discussed with China the possibility of further developing the Uqaab to carry a weapons payload, according to Jane’s.

Pakistan Navy

Pakistan Navy is reportedly interested in deploying vertical takeoff and landing UAVs on its ship. As a part of its plans to purchase and deploy UAVs, the Pakistani navy has completed trials of Austrian Schiebel Camcopter S-100 and Swedish made Cybaero autonomous VTOL UAVs from a Pakistani frigate in the Arabian sea in April 2008.

Pakistan’s UAV Industry

Growing interest by Pakistani military and foreign companies and governments has helped spawn several private Pakistani UAV companies specializing in air-frames, launch and propulsion, flight control, tele-command and control systems, signal intelligence, training simulators, etc. Some of the private companies involved in UAV development and manufacturing include Integrated Dynamics, East-West Infinity, Satuma and Global Industrial Defense Solutions. Between the public and private sector UAVs developed in Pakistan, there is a long list of products including Bravo and Uqaab by Air Weapons Complex, Heliquad by East-West Infinity, Nishan Mk1 , Vision MK1 , Vision MK2 , Nishan TJ 1000, Tornado, Border Eagle, Hornet, Hawk, Hawk Mk1, Shadow and Vector by Integrated Dynamics Pakistan, Flamingo, Jasoos and Mukhbar by Satuma Pakistan , Bazz and Ababeel by Pakistan Aeronautical Complex. These products vary in payload type, size and weight, engine types, range, flying altitude, endurance and launch and recovery systems. Growing domestic and international demand and increasing competition among suppliers is expected to produce significant improvements in capabilities and quality of the UAV products offered by Pakistani companies. In addition to Integrated Dynamics described above, here are three more UAV companies in Pakistan:

East-West Infinity:
One of the companies at the forefront of UAV development is East West Infinity (EWI). EWI’s latest products are the Heliquad micro tactical UAV and the Whisper Watch signals intelligence (SIGINT) package.
The Heliquad was first displayed in prototype form at the IDEAS2006 defense exhibition. Equipped with a tiny camera, it can relay pictures back to troops or special forces in an urban environment or in the field, giving them a tactical reconnaissance capability. Being exceptionally small and powered by four electric motors, Heliquad is highly stealthy and represents the cutting edge of EWI’s electronics miniaturization. SIGINT has become more important with ongoing anti-terrorism operations on the western front and in the tribal areas. Designed for militaries unable to afford high-end, dedicated SIGINT platforms, the company says its Whisper Watch platform is most effective when aerostat-mounted, as the platform is stationary and airborne for longer.

Satuma:
Satuma (Surveillance and Target Unmanned Aircraft), founded in 1989, is small UAV specialist company based near Islamabad, Pakistan. Satuma products include Flamingo, Jasoos and Mukhbar UAVs. Its biggest customer is Pakistan’s military.

Global Industrial Defense Solutions:
GIDS, the largest of the private defense sector companies, has a UAV division, which produces a whole range of operational and training UAVs.Its biggest customer in Pakistan’s military. The UAVs developed by GIDS have been extensively flight tested by military. GIDS ground control stations have an interactive and user friendly interface, where flight parameters and auto-pilot mission planning, and execution is done in addition to reception of high-enbd crisp quality video transmitted over an encrypted digital link.
Headed by a retired PAF Air Vice Marshall, GIDS has emerged from a combination of 7 Pakistani private defense companies that include AERO (Advanced Engineering Research Organization), IDS (Integrated Defense Systems), MSL (Maritime Systems Pvt Limited), ACES (Advanced Computing and Engineering Solutions), IICS (Institute of Industrial Control Systems), ATCOP (AI-Technique Corporation) and SETS (Scientific Engineering and Technology Solutions). Other than UAVs, its major products include anti-personnnel, anti-armor, incendiary, anti-runway, electronic impact and time-based fuses, electronic warfare equipment, navigation systems, optical fiber and optical fiber cables. Anti-tank Wire Guided Missile System known as “Baktar Shiken” made by IICS, a component of GIDS.

Conclusion

Pakistan’s growing defense industry is going high tech to keep up with the challenges of a changing world that requires advanced weapons and new strategies to maintain peace and stability in a hostile neighborhood. At the same time, Pakistan’s defense industry is contributing to scientific, technological, industrial and economic development of the nation by training and employing thousands of citizens. The investments made in defense production are a good bargain for the companies, their investors and the taxpayers of Pakistan to help ensure the nation’s economic, political and national security against both internal and external threats.

Note: Abbreviated version of this article was first published by Dinar Standard.

Updated below! According to Pakistan Daily, written by Moin Ansari,

 Pakistan has made huge strides in the development of its UAVs–Mukhbir, Uqqab, Jasoos, Ubaabeel and others. Pakistani made UAVs: Uqaab & Jasoos. Up to now the technology was used purely for reconnaissance purposes, however since 2001, there is an impetus to emulate Predator and Reaper type of drones which has fire missiles and eliminate the targets without the effort of flying fighter jets. Pakistan is very close on building its own “Predator” which will have the ability to carry and use missiles.

The Pakistani UAV Burraq is a Predator equivalent. Pakistani UAC firms are working closely with Italian, Chinese and Turkish firms–all of which work with Israeli technology, borrowed heavily from American products. The recent Turkish-Israeli deal will help Turkey develop the next generation of Turkish drones. Pakistan’s indigenous UAVs: Uqaab, Jasoos, Mukhbar & Burraq ANKARA — Turkey and Israel appear to be on track to finalize a long delayed multi-million-dollar deal for the delivery of 10 drone aircraft for the Turkish air force, a Turkish official said Friday.

The project, launched in 2005, was under threat of cancellation amid delays and rising tensions between the two countries over Israel’s devastating offensive in the Gaza Strip last year.

“Turkish experts are currently in Israel to test the drones,” the defense ministry official told AFP on condition of anonymity.

Should the systems pass the tests, six aircraft will be brought to Turkey’s southeastern province of Batman, on the border with Iraq, for further tests, the official added.

“If there are no problems, we will take the drones. We expect the delivery to take place in the first six months of this year,” he said.

The announcement came ahead of a visit by Israeli Defense Minister Ehud Barak to Turkey on Sunday for talks on mending battered ties following the latest diplomatic row.

On Wednesday, Israel was forced to apologize after Ankara threatened to withdraw its ambassador over Israeli Deputy Foreign Minister Danny Ayalon’s public dressing down of the envoy.

The drone project had been expected to be completed in the second half of 2009, but it was delayed by technical problems, forcing Turkey to give the two contractors — Israel Aerospace Industries and Elbit — a deadline until early 2010 and threaten to cancel the tender.

Last week, Defense Minister Vecdi Gönül said that negotiations were under way on the compensation the Israeli companies would pay for the delay, but refused to give a figure.

Media reports have suggested that the compensation could be somewhere around 12 million dollars (8.2 million Euros).

The drone contract was part of a 185-million-dollar project that involved the manufacture of 10 aircraft, surveillance equipment and ground control stations, with Turkish firms providing sub-systems and services.

Under a 1996 military cooperation deal, Turkish-Israeli ties have flourished greatly until last year when the two countries fell out about Ankara’s almost daily criticism of the Jewish state over the Gaza war. Turkey, Israel on track to close drone deal: official (AFP).

When the war on terror began, Pakistan requested predator drones for the Pakistan Air Force (PAF) so that the Pakistanis could monitor the 2500 kilometer long Durand Line. The request was refused. Pakistan also requested helicopters, and asked the USA to launch a satellite for Pakistan. The requests fell on deaf ears. Pakistan also requested 80,000 M-16s or Kalashnikovs for the Frontier Corps who are still using WW2 vintage rifles. The guns have still not arrived. However, Pakistan was asked to “Do More.”

Pakistan as a Major Non-Nato Ally (MNNA) and a founding member of SEATO and CENTO has not been given a single Predator or Reaper. Pakistan has an indigenous UAV capacity, but its drones cannot fire armaments. At present the laser, guided technology helps it to identify targets and then relay that information to a helicopter gunship or a plane. Islamabad is in desperate need of UAV which can fire at the target. Need predicates development, and necessity is the mother of

invention. It is like being under sanction. Pakistan was under sanctions when it designed and built the JF-17 Thunder with the Chinese. Now the latest UAVs being built with Turkish and Chinese help. Pakistan’s latest UAV is called the Burraq named after a mythical flying horse.

ISLAMABAD — After years of watching U.S. drones operate along its Afghan border, Pakistan is working on its own Predator-like unmanned aerial vehicle to undertake the same mission, sources here said. The sources said the country’s air force and government-owned defense conglomerate, the National Engineering and Scientific Commission, are flight-testing a new-design aircraft to be equipped with a NESCom-designed laser designator and laser-guided missiles.

The Burraq UAV is named for a winged horse creature in Islamic tradition, similar to Pegasus.

According to local news reports, Pakistan is focusing its unmanned aircraft efforts on upgrading various older UAVs with Chinese help. But the sources note that no domestically produced UAVis large enough to heft both a missile and a targeting system. The military’s most capable UAV is the air force’s Selex Galileo Falco, which can laser-designate targets for other platforms but cannot deliver munitions.

Officials with the Ministry of Defence and Ministry of Defence Production here refused to confirm or deny the program’s existence. A spokesman for the military’s Inter Services Public Relations said it was “not ready to give a statement on the issue at this time.” One former air force officer said the notion of a Pakistan-developed hunter-killer UAV is credible. “You only have to see our track record,” said Kaiser Tufail, a retired air commodore. “We have some fantastic achievements in the field of defense.”

Tufail said Pakistan needs such a weapon. Anti-terror operations on the frontier require “hours and hours of round-the-clock reconnaissance,” married with the ability to strike quickly when a target is spotted, he said. Help from China? Analysts were more dubious about Pakistan’s ability to produce a laser-guided missile, but they noted that help might be found in China or Turkey. Turkey, with whom Pakistan has an agreement to cooperate on UAV development, is seeking an armed UAV, preferably the Predator or MQ-9 Reaper. This UAVmay someday be armed with the UMTAS infrared guided anti-tank missile being developed by the Turkish firm Roketsan to arm the T-129 attack helicopter.

Pakistan could simply produce China’s new CH-3 unmanned combat air vehicle, “or co-produce any number of Chinese components to assemble a unique UCAV,” said Richard Fisher, China specialist and senior fellow at the International Assessment and Strategy Center in Washington. “China has also developed the unique AR-1, a 45-kilogram, laser-guided attack missile, apparently designed specifically for light winged or helicopter UCAVs,” he said. Pakistan reported developing armed UAV By Usman Ansari – Staff writer, Saturday May 9, 2009 8:17:26 EDT The Burraq is based on the Falco – SELEX GALILEO technology. We produce information on the Selix Galileo so that an adequate comparision can be made with the Burraq.

The FALCO UAV System is a Medium Altitude Endurance & Tactical UAV designed for optronic and electronic surveillance roles. The basic mission is target detection, localization, identification and designation through its on-board sensors suite which typically include a thermal imager, a color TV Camera and a spotter, or a laser designator.

The best features of the FALCO System include automatic take-off and landing (with STOL performance), fully redundant and fault-tolerant control systems, digital buses and control link equipment, automatic area surveillance modes and near-real-time target image processing.

It really look very mush like the uqab or may be author is citing directly to uqab or if someone can tell they are using the Falco – SELEX GALILEO The Burraq also uses the design if the Pegasus HALE UAV. The information on the Burraq is similar to the information on the Hale.

Until today, the use of unmanned aircraft has been hindered by the sheer size of the wingspan needed to carry the weight of the payload. With payloads often weighing up to 100 kg, the wingspan required would extend to 60 or 70 metres, creating a total weight of as much as 1000 kg. Aircraft with this weight and wingspan will not become operational for the next couple of years due to issues of air traffic control, safety regulations and technological hurdles such as the development of appropriate fuel cell technology.

We bring you Pegasus, an integrated approach to mission-specific payload, aircraft, control systems and data processing technology. By developing a new generation of ultra light and extremely compact remote sensing equipment, we have been able to reduce the aircraft wingspan to just 16 metres and total flying weight to a mere 18 kg. Furthermore, because these aircraft are designed to be raised into place using the same kind of balloon that is used for weather sounding, no airstrips are required and air control regulations do not apply. The aircaft are taken up in an almost vertical position and reach their operational altitude within 90 minutes. Once in place, the solar powered engines are started and the

aircraft is ready to act on instructions received from ground control. The recorded images are then sent to the central database at the ground station from where they are sent on to the customer. Using highly sophisticated software technology, the data can also be processed and analysed, and delivered in a wide variety of graphical and mapped formats, as required.

Pakistan has been using its own drones which it has been manufacturing for a decade.

Pakistan is now the most investment-friendly nation in South Asia. Business regulations have been profoundly overhauled  along liberal lines, especially since 1999. Most barriers to the flow of capital and international direct investment have been removed. Foreign investors do not face any restrictions on the inflow of capital, and investment of up to 100% of equity participation is allowed in most sectors (local partners must be brought in within 5 years and contribute up to 40% of the equity in the services and agriculture sectors). Unlimited remittance of profits, dividends, service fees or capital is now the rule.

Business regulations are now among the most liberal in the region. This was confirmed by a World Bank report published in 2008 ranking Pakistan (at 76th) well ahead of neighbors like China (at 93rd), India (at 120th), Bangladesh (107^th) and Sri Lanka (101th) based on ease of doing business.  The ranking is based on 10 indicators of business regulation that follows the time and cost to meet government requirements in business start-up, operation, trade, taxation, and closure.

The tables below also negate arguments by those that accuse Pakistan of raising foreign investment by selling off state assets.  Fact is that only $6 billion were raised by selling state assets in the past 15 years. (News)

View Detailed (Country wise and Sector wise) Facts & Figures below. Keep reading

• The Federal Bureau of Statistics valued Marble Production sector at Rs.211,851 million in 2005 thus registering over 99% growth since 2000.

• The Federal Bureau of Statistics valued Large-scale Manufacturing at Rs.981,518 million in 2005 thus registering over 138% growth since 2000 while Small-scale manufacturing was valued at Rs.356,835 million in 2005 thus registering over 80% growth since 2000.

• The Federal Bureau of Statistics valued Construction sector at Rs.178,819 million in 2005 thus registering over 88% growth since 2000.

• The Federal Bureau of Statistics valued Major Crops yields at Rs.504,868 million in 2005 thus registering over 55% growth since year 2000.

• The Federal Bureau of Statistics valued Livestock sector at Rs.758,470 million in 2005 thus registering over 70% growth since 2000.

• The Federal Bureau of Statistics valued Fishery sector at Rs.18,290 million in 2005 thus registering over 10% growth since 2000.

• The Federal Bureau of Statistics valued Electricity, Gas and Water sector at Rs.215,662 million in 2005 thus registering over 62% growth since 2000.

• The Federal Bureau of Statistics valued Telecom & Communication sector at Rs.982,353 million in 2005 thus registering over 91% growth since 2000.

• The Federal Bureau of Statistics valued Whole Sale and Retail sector at Rs.1,358,309 million in 2005 thus registering over 96% growth since 2000.

• The Federal Bureau of Statistics valued Finance & Insurance sector at Rs.311,741 million in 2005 thus registering over 166% growth since 2000.

• The Federal Bureau of Statistics valued Ownership of dwellings sector at Rs.185,376 million in 2005 thus registering over 49% growth since 2000.

• The Federal Bureau of Statistics valued Public administration & defense sector at Rs.389,545 million in 2005 thus registering over 65% growth since 2000.

• The Federal Bureau of Statistics valued Social, community & personal services sector at Rs.631,229 million in 2005 thus registering over 78% growth since 2000.

The manufacturing sector grew at an average rate of 8 percent from the sixties to the eighties, but fell to 3.9 percent  during the nineties. This was mainly caused by reduction in investment levels due to lack of continuity and consistency in policies. Political instability law and order position in the major industrial centers, transport bottlenecks, as well as unreliability and inadequate availability of power supply at affordable rates were additional factors pulling down the sector.

The sector has shown impressive recovery recently and has grown at a compound rate of 10.9 percent per annum during 2001 – 05, with Large Scale Manufacturing (LSM) growing even faster, becoming 19.9% in 2005.

The contribution of Large-Scale Manufacturing at basic prices stand at Rs 844 billion as compared with Rs 264 billion in 2000-01, figures from the Census of Large-Scale Manufacturing Industries (CMI) 2005-06 show.

LSM contribution to GDP also called as Gross Value Added (GVA) at producers’ prices has been estimated at Rs 912 billion as compared with the previous Census 2000-01 amount of Rs 280 billion.Political and macroeconomic stability, rationalization of tariffs, increase in investments, improved utilization of productive capacity, and growth in demand for manufactured products, resulting from higher exports and consumer financing have been the major factors leading to this growth.

Large Scale Manufacturing

 1999 and 2000 – 1.5%

2000 and 2001 – 11%

2001 and 2002 – 3.5%

2002 and 2003 – 7.2%

2003 and 2004 – 18.1%

2004 and 2005 – 19.9%

2005 and 2006 – 8.7%

2006 and 2007 – 8.6%

2007 and 2008 – 5%

Census of Large-Scale Manufacturing Industries

The contribution of Large-Scale Manufacturing at basic prices stand at Rs 844 billion as compared with Rs 264 billion  in 2000-01, figures from the Census of Large-Scale Manufacturing Industries (CMI) 2005-06 show.

The CMI is conducted after every five years using the frame of Provincial Labour Departments .It is conducted by Federal Bureau of Statistics (FBS) in collaboration with Provincial Directorates of Industries and Bureaus of Statistics (BoS) under the Industrial Statistics Act 1942. The basic price is the amount receivable by the producer from the purchaser for a unit of a good or service produced as output minus any tax payable, and plus any subsidy receivable.

Census of manufacturing industries 2005-06 shows value of production at Rs 2929 billion depicting an increase of 165 percent over Rs 1104 billion in CMI 2000-01. LSM contribution to GDP also called as Gross Value Added (GVA) at producers’ prices has been estimated at Rs 912 billion as compared with the previous Census 2000-01 amount of Rs 280 billion. Capital stock or value of fixed assets amounted to Rs 1147 billion at the end of fiscal year 2005-06 as compared with Rs 428 billion at the end of fiscal year 2000-01.

CMI 2005-06 frame was enhanced using industrial directories provided by provincial directorates of industries as well as results of Economic Census 2001 conducted by FBS. The total number of industries surveyed in CMI 2005-06 was 13,146 establishments. Out of these 6417 establishments supplied requisite data (compared to 4528 units in CMI 2000-01). 2364 establishments were found closed and 3213 establishments gave no response. The results of CMI would be cornerstone for the forthcoming revision of Pakistan’s National Accounts.

Pakistan Manufacturing Industry

Pakistan’s manufacturing industry is heavily dominated by food, textiles and apparel, and leather industries to the

JF-17 Thunder

extent of over 50 percent. The share of textiles and its derivatives in exports was as large as 67 percent in 2003-04. Other major segments in manufacturing include chemicals and pharmaceuticals (15.2 percent), basic metal industry (7.7 percent), nonmetallic mineral products (5.1 percent), machinery (4.6 percent), cement (4.4 percent), automobiles (4.4 percent). Automobiles, electronics, cement, fertilizers and textiles have all showed cumulative double digit growth during the last three years. An important feature of the engineering sector is the level of competence reflected in local design and local content, (with deletion levels of 80 – 100 percent in electrical goods, 56-89 percent in automobiles and motor cycles, and 75-100 percent in domestic appliances).

Manufacturing Statistics Progressive Year

Initial data for Jul-Sep FY08 suggested a deceleration in the growth of LSM production to only 6.9 percent.

Further, Large Scale Manufacturing (LSM) growth has declined to 5.57 per cent during the first five months (July-November) of the current financial year due to economic slow-down and high interest rates and poor law and order situation.

Similarly, improved prospects in transportation & storage sub-sectors on the back of relatively better production in major crops, strong contribution by finance and insurance sector and augmented administrative and defence related spending will provide support to adequate level of growth in the services sector. These prospects of the services sector would be neutralized to some extent by negative growth in the LSM, imports contraction, shrinking profits in the telecommunication sector. Leading indicators pertaining to the major sector wholesale and retail trade points towards a reasonable growth in this sub-sector. The targeted growth of 4.1 percent is already almost half of last year’s actual 8.2 percent.

Related Links:

Planning &  Development Industry

State Bank Publication.

Census Of Manufacturing Industries 2005-06 (Daily Times News)

Ministry of Finance

LSM decines to 5.57% July to Nov

Foreign Reserves – a significant economic indicator and of vital importance to every expanding economy. Foreign Reserves is the first and basic economic indicator that transmits an air of confidence and trust, amongst the potential foreign & local investors and the nation. Foreign Reserves are held in abundance and accumulated – in order to sustain the confidence of a country’s capacity to carry out external trade confidently, to balance the momentum between demand & supply of foreign currencies, and also used as an intervention tool by the State Bank. Reserves also bail out the economy in times of financial crisis.

By October 2007, at the end of Prime Minister Shaukat Aziz’s tenure, Pakistan raised back its Foreign Reserves to a handsome $16.4 billion. His exceptional policies kept our trade deficit controlled at $13 billion, exports boomed to $18 billion, revenue generation increased to become $13 billion and attracted foreign investment of $8.4 billion.

Pakistan recently has seen a drastic drop in its Reserves by 50% and its currency devalued by 40%, which has left ordinary people confused and the usual cynics have started heaping the blame onto the policies of Mr. Shaukat Aziz, without even knowing the basic macro-economic indicators nor understanding the relationship b/w Foreign reserves, Trade deficit and Currency devaluation.

The Trade deficit (Exports minus Imports) is always managed in ratio to Revenue generation, Capital inflows and Reserves. Almost all developing economies face the dread of trade deficit but their abundant foreign reserves gives them the fiscal space to overcome those grievances.

Illustrating in mathematics for ordinary readers, on October 2007, when PM Shaukat Aziz left us:

Exports – $18 billion

Imports – $30.53 billion

Trade deficit – $12.53 billion

Foreign Reserves – $16.4 billion

What is to be seen above is that, Pakistan’s Foreign Reserves $16.4 bn exceeded the trade deficit $12.53 bn by a comfortable $3.87 billion and with an additional foreign investment of $8.4 billion – Pakistan’s currency stayed stable at Rs.61 per dollar.

Currency starts to devalue ONLY when the Trade deficit surpasses the Foreign Reserves.  This rare phenomenon occurred in PPP’s incompetent & dense minded government, which has led to devaluation of the currency by 40%. They failed to protect our Sovereignty – our Foreign Reserves!

In PPP’s inept government of eight months,

Trade deficit – $20.74 billion

Foreign reserves – $8 billion

Under PPP, the Reserves fell from $14 billion to $8 billion and the trade deficit increased from $12.53 billion to $20.74 billion.

The moment the foreign reserves ($8 bn) fell below the trade deficit ($20.74 bn), the currency starts to devalue. Under Mr. Shaukat Aziz, Rupee stayed stable till October 2007, because our Reserves $16.4 billion EXCEEDED our Trade deficit of $12.53 billion.

In 2007, when international oil prices reached an alarming level of  around $90 per barrel, predicting to exceed $140 per barrel, it hurt the Imports bill of many developing countries, by increasing the trade deficit. The experienced Mr. Shaukat Aziz gauged this situation and immediately started monitoring & controlling individual sectors that were importing. He allowed imports only in sectors that were export specific. His efforts resulted in decreasing our Import bill by 6.53% by September 2007 (one month before he left).

Rupee stayed stable throughout Mr. Musharraf’s supported governments. Trade deficit never exceeded the foreign reserves in the last eight years. The results were as follows – a stable rupee:

2001-02: Rs. 61
2002-03: Rs. 57.7
2003-04: Rs. 57.92
2004-05: Rs. 59.66
2005-06: Rs. 60.16
2006-07: Rs. 60.5
2007 (Dec): Rs. 61

What did the inefficient PPP do in these last eight months? They failed to monitor each sector of imports to control them individually. Pakistan’s economy started destabilizing because PPP could not guard our $14 billion reserves. Nor did they utilize any effort to increase the reserves from where Mr. Shaukat Aziz left it at $16.4 billion! The easier way out for them is to beg around the world barefaced or go back to IMF disgracefully.

What did the PPP further do? They increased the import bill by 55% in the months April to June 2008 and again increased it by 52.65% in the months July to September 2008 – though world oil prices fell from $140 per barrel to $70 per barrel.

Flight of capital takes place ONLY in economies where there is lack of trust and faith! Investors and endowing Public do not trust the government of PPP and are wary of PPP’s earlier corrupt reputation.

In the first four months of PPP, around $22 billion were withdrawn from the economy and KSE’s market capitalization fell by $29 billion. The State Bank was forced to place ban on transfer of dollar outside Pakistan.

Foreign reserves get hurt twice in this depletion process. First, when the investors and public pull back their money. Second, when macro-economic indicators witness imbalance and the government is forced to pay their external liabilities through these Reserves. This second stage occurs only when the government loses other means of regular income and is unable to control their imports.

Every country in the world is forced to make Imports. Imports help boost Exports. Even the world exporter China makes an import worth around $954 billion, to further promote their exports. But, Imports should be Export specific – scrutinized and restrained monthly – which was being done under the policies implemented by Mr. Shaukat Aziz.

Let’s analyze the steady India, as an example, with GDP growth of 9%.

Indian Imports – $188 billion (compared to Pakistan’s imports of $40 billion)

Indian Trade deficit – $63 billion (compared to Pakistan’s deficit of $20 billion)

The Indian currency is not devaluing because their Foreign Reserves $308 billion exceed their trade deficit of $63 billion.

Had Mr. Shaukat Aziz continued, the Trade deficit would have been kept controlled in accordance with Pakistan’s Revenue generation, Capital inflows and Foreign Reserves – which would have kept our rupee stable and economy booming at 7% GDP growth.

This latest IMF tranche of $7.6 billion, pre-arranged for a period of two years, will not help boost an economy whose foreign investment is declining, and where the trade deficit exceeds the total foreign reserves. This economic deception is yet another soothing drug given to us, by our unpopular democratic government of PPP.

If Pakistan wishes to remain free from influence of IMF, there is no better option than to assert our economic sovereignty and accumulate Foreign Reserves, from help of over-seas Pakistani. Additionally, attract foreign direct investment (FDI) and public & private portfolio investment.  Regrettably, PPP lacks the credibility and the reliability to attract back that trust and confidence!

Afreen Baig is an independent analyst majoring in International Relations and Economics. She can be reached at afreenbaig@gmail.com

http://presidentmusharraf.wordpress.com/2008/08/21/foreign-reserves-phenomenon-shaukat-aziz-versus-ppp/ 

Honorable Shaukat Aziz, ex-Prime Minister of Pakistan  

2009:  When I was asked to write a piece on the economic way forward, I hesitated at first because I felt that with a new government in place it is better that we leave the way forward to the new economic  managers, rather than play the role of back seat drivers and provide unsolicited advice. But the  mountain of criticism of the previous government policies from all sorts of arm chair critics, ranging from retired bureaucrats and economists of the cold war era, who still  believe in the supremacy of state management of the economy and for whom Venezuela and Bolivia are the new role models, to Islamists who  feel that the entire western global economic system is doomed and we need to chalk out a new paradigm – convinced me that perhaps the time  had come to analyze the past and set the record straight, assess the current situation and contribute to the debate on the way forward.

Now that we have the political parties of the nineties back in power it can be instructive to examine a few economic indicators of the nineties with the past eight years and draw inferences. Since the economic growth numbers have been challenged by the critics.  I will use numbers that are not subject to disagreement. So for example, if the GDP growth numbers are being challenged, than other growth indicators that the public can understand can show the reality. The official GDP growth from around US $ 65 billion in 1999-2000 to US$ 165 billion in 2007-08 (a factor of 2.5 times) is challenged as being fudged, but growth of credit to the private sector over the same time period from Rs 1 trillion to Rs 2.5 trillion, again a factor of 2.5 times, cannot be challenged.

The data shows that while electricity consumption grew by 1300 Gwh per year in the decade of the nineties it grew by 3750 Gwh per year from 2000 to 2008 a factor of 2.8 times. Gas consumption grew by 20 billion cft per year in the nineties compared with 80 billion cft per year from 2000 to 2007 a factor of four times. The revenue collection by FBR increased from Rs 300 billion in 1999 to over one trillion in 2008. Foreign investment that averaged around $ 500 million per year in the nineties touched over $ 8 billion in 2008 alone. Remittances that were around one billion in 1999 have crossed six billion in 2008.

Development spending that was US$ 1.5 billion in 1999 touched $7.5 billion in 2007. Exports that were $7.5 billion in 1999 reached $18 billion in 2007.  Foreign exchange reserves that were around a billion dollars in 1999 reached over 16 billion in 2007. Stock market index that was around 1300 in 1999 touched its highest level of 15700 in April 2008 a factor of 12 times that placed the KSE as one of the best performing stock markets of the world. The exchange rate showed remarkable stability over the past eight years. Credit rating improved from selective default in 1999 to B+ and B1 by 2007.

Since the February elections, and the advent of the new government economic indicators have sharply deteriorated. The Currency has fallen by 25 percent against the Dollar, the stock market index has fallen by 6700 points from its peak in April leading to an asset value loss of 43 percent amounting to loss of market capitalization of around US $ 40 billion; the largest loss in the history of Pakistan. This loss of confidence in the economy of Pakistan has been unprecedented. We can trace the loss of confidence by the foreign investor by examining the spread on the US dollar global bonds that we issued in May 2007. These bonds were issued at the start of the lawyers movement and its associated turmoil. The bond was a huge success with over subscription; of seven times amounting to $ 3.5 billion while we were seeking only $500 million. The spread was 180 basis points above US government ten year securities. As the lawyers movement continued to gain strength in mid 2007, the spread on the bonds jumped to 300 basis points in July and 400 basis points by November when the emergency was imposed.

In December when BB was assassinated the spread jumped to 600 basis points. However, after the elections, the investor community welcomed the peaceful transition by pushing the spread down to 500 points. The stock market also reacted favorably and reached its highest point of 15700 in our history in April, 2008. Since then our chaotic politics and lack of focus on economic issues has led to the collapse of the stock market to 9000 points and the spread has jumped to almost a 1000 points. So what events produced these results, between April and now.

In the previous government, we had been highly successful in crafting a very positive brand image of Pakistan as one of the fastest growing emerging economies in Asia. After our exit from the IMF program and successful reforms, investors favorably compared Pakistan to India, China and Vietnam. Every time we did a road show, we were highly successful in our endeavors whether it was the OGDC flotation or UBL GDR or Euro bonds or large privatizations, investors flocked to our offerings. We were a success story in the international financial markets and most of our issues became benchmark issues.

Unfortunately, this Government has not been able to maintain Pakistan Brand rather it has eroded considerably. In this erosion the first stone was foolishly cast by our erstwhile finance minister Mr. Ishaq Dar who displayed incredible irresponsibility and immaturity in lambasting the Pakistani economy in front of the global media; at a time when the global investment community was looking towards the new government for its economic vision and future strategy the new finance minister harangued them on how bad the Pakistan economy was. In spite of this onslaught, the rating agencies maintained their ratings until as in their words the new government comes up with its economic game plan. The new government was at this time caught up in utter confusion on the economic direction of the country with rapid changes in the finance setup and revolving finance ministers.

This lack of focus was disastrous for us as against this back ground our financing plan included a number of financial market transactions totaling around $ 4 billion that were ready for the road shows. These included the National Bank, Habib Bank, and KAPCO. The exchangeable bond issue of OGDC, and the strategic sale of PSO shares along with management control. With the stock market at an all time high the transactions would have been a great success and the road shows would have generated tremendous good will for the new government and would have highlighted the smooth transition that happened in Pakistan. It would have been a great opportunity to showcase Pakistan in front of the international investment community. Instead, in an inexplicable move the Government cancelled all the transactions. Pakistan directly lost desperately needed inflows of $ 4 billion and with the rising oil import bill, this loss placed a huge pressure on the reserves and the currency. Indirectly the loss was probably twice as much as foreign investors withdrew to the sidelines and domestic investors moved their investments overseas. It might be mentioned that while the government failed to take advantage of the window of opportunity, The MCB bank taking advantage of the great valuations on the stock market in April 2008 privately placed some 20% of their equity with a Malaysian bank for a cool sum of $ 850 million.

 If the Government had acted similarly, it could have generated sufficient flows to prevent the meltdown which ensued. Reserves drawdown would have been avoided, the spread on our international bonds would have narrowed down to May 2007 levels, borrowing from the State Bank would have been halved and the government would have had a stable environment for tackling the oil import bill and food inflation. Our current predicament is clearly a creation of our current economic miss-management. A few heads should have rolled because of this incredible lapse.

What could have been done in April/May 2008 with the market at 15700 points cannot be done in September/ October 2008 with the market at 9100 points. The international markets are closed to us. We have to wait until our markets get back to their historical levels and investor confidence is restored. How will this be achieved? The biggest challenge for President Zardari is to restore the eroded Pakistan Brand; back to its original luster and in the process revive the investment flows that can sustain our growth going forward.

First, while we should be on the right side of the world in the war on terror, the world should seriously help us in our endeavor to build a better economic & future for our people. The new president has to focus on the economic issues facing the country. His international trips to China, Saudi Arabia, Gulf, USA, UK, should promote Pakistan economic interests as a pivotal objective. He should not only promote government to government economic cooperation but also promote private sector to private sector interaction with these countries. We need strong, immediate and implement able commitments of around $5 billion balance of payment support from these countries. In addition, their leadership at the highest levels should support international moves to promote our economic growth and stability. Better and preferential access to EU and USA markets, greater quotas for labor and deferred payments for oil in Saudi Arabia and Gulf region. A full calendar of investment conferences and single country exhibitions need to be carried out under the direction of the president. The promotion of exports and investments has to be the major focus and objective of the President. If we can generate foreign investments greater than last year level of $ 8 billion and export growth is revived to healthy double digit levels we would start coming out of the current malaise.

Second, it is clear that Pakistan growing trade and current account deficit is being driven by ever escalating oil prices. With the oil bill crossing $12 billion a year there is no option other than passing the full prices to the consumers and eliminate the burden on the budget. This will also help in promoting conservation and improving energy efficiency. Unfortunately, the transition to a new government took place at a time of unprecedented increase in global fuel prices.

For example at the time of elections, oil prices were around $80 a bbl whereas by July 2008 it had reached $140 a bbl. While we had planned to limit the fiscal deficit to be under 6 percent and largely financing it from non state bank sources, including commercial bank borrowing and non debt sources. The new government ended up with a much higher deficit level and financed it totally from the state bank. We have now reached a stage where the issue is no longer energy availability rather it is energy affordability. We have almost 20000 MW of power generation capacity but we are only using 12000 MW because the Furnace oil used for thermal generation has become extremely expensive and beyond the ability of Pepco to pay for. As a result, available capacity is not being used leading to load shedding.

 The exorbitant power price increase can only be avoided in the short run if transmission and distribution losses are dramatically curtailed and in the medium term we substitute imported fuel with domestic sources. Thermal power based on imported oil costs around Rs 16 per unit (Kwh) whereas hydel power from Kalabagh would cost Rs 2 per unit. The power from Thar coal will cost around Rs 8 per unit. While Kalabagh can be completed in five years, Technical problems with Thar coal can delay its availability indefinitely. If the mega Kalabagh Dam is launched in 2008 it will not only jump start the economy; it will also be seen as President Zardari’s gift of Hydel Power to Pakistan just like PM Zulfiqar Ali Bhutto Gift of Nuclear Power to Pakistan thirty five years ago.

Third, as far as inflation is concerned it will start coming under control as global oil and food prices filter through the economy. Our Inflation index is heavily weighted in favor of food energy and commodity prices. So it is highly sensitive to these prices. Since global energy and food prices are easing the same should be felt in Pakistan in the days to come. Pakistan’s inflation is a supply side and cost push phenomenon and further monetary tightening would not help. Instead, a tighter fiscal policy with a lower deficit target and phasing out of borrowing from the state bank will help. At the same time in this period of great change we should ensure that the poor of the poorest are able to cope with the changes particularly higher food prices and social safety nets are made fool proof so that nobody in Pakistan stays hungry.

Fourth, for the first time after 2nd world war agriculture commodity prices have moved in favor of the farmers. We have to ensure that we pass on this benefit of higher global prices to our farmers by deregulating agriculture prices. The only other incentive our farmers need is predictable water supply. This can be ensured by building more water reservoirs and better water management so that farmers can move from unpredictable subsistence agriculture to commercial agriculture. Study after study in the sub-continent has shown that large multi-purpose dams are the quickest way out of poverty. With oil prices at $100 per barrel and destined to double over the next decade there is no way, other than developing our full hydel potential quickly to usher in a new green revolution and providing sustainable global advantage to our economy of cheap hydel power.

Fifth, we should stop cribbing about the Consumer economy. Pakistan is a large country with 160 million people and 100 million under the age of 25. With dependency, ratios going down we can reap a demographic dividend over the next several decades. While these youngster have to be prepared for the work force they are already becoming a huge engine of growth for our markets that are growing at fabulous rates to meet the demands of these Pakistani baby boomers, Just like in Europe and South Korea after the 2nd world war, our baby boomers will be the back bone of our middle class and will determine the growth of our economy over the next 40 years until they start to retire. This gives our businesses an historic opportunity to grow and produce the goods and services the population needs. In an era when world is facing a crisis of aging populations we are blessed with opportunities of a young and dynamic population. In this regard consumer financing which has become a butt of criticism has just scratched the surface.

In our country, consumer finance is around 5 % of GDP whereas in the developed world it is over 100% of GDP. Consumer financing has a long way to go and along the way it will continue to be one of the engines of growth for us. Any ill founded moves to curtail the consumer economy will hamper the growth of our businesses. We are now going beyond textiles into engineering, electronics, chemicals, food processing, construction materials, real estate and many other sectors based on our domestic markets as these markets continue to expand we will reach economies of scale that will make our producers and the large associated vendor industry competitive on a global scale and the same producers will be the base for diversifying our exports into more sophisticated and fast growing sectors of the world. Ultimately, if our law and order permits and our national psyche adopts rules of globalization, and globalization as our road to prosperity we will become one of the workshops of the world along with India and China.

Sixth, there are hundreds of infrastructure projects at various stages of implementation including the National trade corridor, Neelum Jhelum hydro power project, KKH upgradation, Urban renewal in Karachi and Lahore, mass transport projects, airports, Baluchistan road network, Gawadar port, industrial parks etc., these projects have to be completed on time and scope. The last government also created an Infrastructure project development facility (IPDF) that needs to be fully utilized so that we can bump up (almost double ) our expenditure on infrastructure particularly hydel projects through public private partnerships.

Seventh, the FBR has to continue generating revenues for the government to carry out the nation building programs. Last year a target of over 4 trillion rupees was set for FBR within the next ten years, four times the current levels reaching about 16 % of GDP. Along with a target of 4 percent of GDP for education expenditures with 1.5 % allocated to university education. The education strategy was based on providing universal access to primary education, retaining enrollments into secondary education and technical and vocational training and improving standards at the college and university levels. Nine new engineering universities in collaboration with European, Korean and Chinese universities were in the pipeline. Going forward we should focus on quality improvement through a big push forward in teacher training, curriculum development and public private partnerships at the primary and secondary schools level and continued efforts to upgrade the universities and hopefully achieving the setup of the new engineering schools. The national vocational and technical education commission (NAVTEC), has gone through its learning curve, and can now be used to upscale its programs to give technical and vocational training a quantum jump.

Eighth, in the financial sector we have created a world class banking system with our banks featuring amongst the leaders in Asia. The Quality of our bankers is second to none and can work in any global setting. The challenge is to further increase the reach and competitiveness of the financial sector with Microfinance playing a much greater role. Our microfinance frameworks are the best in the world and a strong base has been established which can grow manifold to bring financial services to the masses. The growth of the financial sector will continue at a sizzling rate as the financial sector expands into consumer and housing finance, rural and agriculture finance and development of debt and bond markets, growth of mutual funds, pension funds and other savings instruments.

Ninth, in the competitiveness area we must continue to deregulate and privatize the economy to create a vibrant and competitive economy. Second generation reforms in economic management have to be continued. An essential pillar of a private sector led market economy, the Competition Commission has to be given financial independence and allowed to work unhindered. The competitiveness support fund, business support fund, agriculture support fund, Khushal Pakistan fund, smeda etc. have to be used to implement reforms that help the market economy become more productive and competitive from the grass roots level up to the corporate level.

Finally, Pakistan needs to continue to grow at 7 to 8 percent to create the 3 to 4 million new jobs per year needed to accommodate our youth and create a dent in poverty in our lifetime. We cannot embrace isolationism, jihadism or any other form of global confrontationist movements. Instead, we have to build on our successes, unleash the potential of our people, exploit our competitive advantages, take advantage of global finance, integrate with global markets, and continue building a dynamic market economy with world class infrastructure to achieve our growth objectives. This is the recipe for the future and the way forward for Pakistan.

Is Shaukat Aziz to Blame? 

Former Prime Minister Shaukat Aziz is frequently blamed in Pakistani media and political and economic circles for the rapid decline of Pakistan’s economy during the last six months. The critics say the economic boom under Mr. Aziz was short-lived because it was achieved by easy, plentiful consumer credit, massive borrowing and construction spending in public and private sectors. They further charge that Mr. Aziz promoted the service sector while ignoring large infrastructure projects to enhance Pakistan’s agricultural and industrial sectors. They also claim that, if Mr. Aziz had done a good job, the economy would have continued to perform well in spite of all the changes that have transpired since he quit. Some go to the extent of claiming that there was no real economic boom and the whole boom story was a fabrication.

How Do Modern Economies Work?

To examine the validity of the charge sheet against Mr. Aziz, let us try and understand how modern economies work. Modern economies are all consumer driven and cyclical. To manage growth in modern economies, there are a number of tools and policy options deployed by economic leadership consisting of government and central bank officials. Controlling money supply is a key tool. When the economy is slowing, the governments resort to deficit spending, and central banks lower interest rates to encourage consumer borrowing. Government and consumer spending then produce increased demand for goods and services which encourage more investment in plant, equipment and real estate etc. These investments create jobs which further stimulate demand.

Can the Economy run on Autopilot?

There is no such thing as an economy on autopilot that continues to perform well by itself over long periods of time without competent human intervention. As the economy overheats, the inflation starts to become an issue which then requires the central banks to raise interest rates and tighten money supply to cool growth. The governments act in concert with the central banks to reduce spending and limit money supply in the economy. The monetary and fiscal policies must be coordinated. Pakistan’s latest 2008-2009 budget should not have massive deficits with 30% increase in spending to cancel the effects of the central bank raising interest rates to tighten money supply.

Wise stewardship by country’s economic leadership helps reduce the severity of the economic cycles. But it does require close monitoring and constant tweaking to keep the economy performing well.
The confidence of business and investor community in the economy also plays a significant role. If the businessmen and investors feel the government and central bankers are managing the economy well, they continue to play their role to maintain economic health. On the other hand, if they lose confidence in government’s economic team, they begin to slow or even withdraw their investments which hits the economy hard.

How Did Shaukat Aziz Do?

Unlike many of his critics, Shaukat Aziz is a banker by training and extensive experience in New York. He is not an academic. His credentials are similar to those of the successful US treasury secretaries such as Bob Rubin and Nick Brady who did well under Clinton and Reagan administrations. He understands the role of banking, finance, investment and consumer credit in economic growth of a nation. He focused on building strong banking, investment and finance sectors in Pakistan to underpin its economy. He strengthened capital availability, an essential and increasingly important economic input, in addition to labor and land improvements. With higher education budget up 15-fold and overall education spending up 36% in two years, he focused on education to improve the availability of skilled labor to fill new jobs. He pushed land development and public and private construction spending to improve infrastructure and facilities to attract greater business investment. Mr. Aziz was largely successful in his efforts.

Taking a leaf from the US housing policy to stimulate the economy, Mr. Aziz introduced low-rate mortgages in 2003. This initiative led to a construction boom and expanded housing for the growing middle class in Pakistan, contributing significantly to the GDP growth.

Pakistan’s tax base grew with rapid economic growth over the last 9 years. The Federal Board of Revenue’s tax collection surpassed Rs 1 trillion in 2007 from Rs. 500 billion in 1999. This effort was essential in managing the current account deficit during Shaukat Aziz’s term in office.

When Shaukat Aziz took over as finance minister and later as Prime Minister, Pakistani economy was in shambles. In 1999 Pakistan’s total debt as percentage of GDP was the highest in South Asia – 99.3 percent of its GDP and 629 percent of its revenue receipts, compared to Sri Lanka [ 91.1% & 528.3% respectively in 1998 ] and India [ 47.2% & 384.9% respectively in 1998 ]. Internal Debt of Pakistan in 1999 was 45.6 per cent of GDP and 289.1 per cent of its revenue receipts, as compared to Sri Lanka (45.7% & 264.8% respectively in 1998) and India (44.0% & 358.4% respectively in 1998). Read more about it here.
Most recent figures in 2007 indicate that Pakistan’s total debt stands at 56% of GDP, significantly lower than the 99% of GDP in 1999. It also compares favorably with India’s debt-to-GDP ratio of 59% and Sri Lanka’s 85% in 2007. From being the highest debtor nation in South Asia, Pakistan has, in fact, become the lowest debtor nation in its region and achieved economic growth rate of about 7% a year during the last 6 years.

The Economist magazine in its June 12 issue comments on Pakistan’s current and past Economic Performance as follows:” (The current) macroeconomic disarray will be familiar to the coalition government led by the Pakistan People’s Party of Asif Zardari, and to Nawaz Sharif, whose party provides it “outside support”. Before Mr Sharif was ousted in 1999, the two parties had presided over a decade of corruption and mismanagement. But since then, as the IMF remarked in a report in January, there has been a transformation. Pakistan attracted over $5 billion in foreign direct investment in the 2006-07 fiscal year, ten times the figure of 2000-01. The government’s debt fell from 68% of GDP in 2003-04 to less than 55% in 2006-07, and its foreign-exchange reserves reached $16.4 billion as recently as in October.”

The turn-around engineered by Shaukat Aziz was applauded around the world. A 2005 Bloomberg headline, as reported by China’s Peoples Daily, proclaimed as follows: “The world’s second-fastest growing economy after China is no longer India. It’s Pakistan.”

Here’s an excerpt from a UN Economic Survey 2008 report: “Pakistan’s economy maintained its momentum in 2007, growing by 7%, slightly more than the 6.6% for 2006. Agricultural sector growth recovered sharply, from 1.6% in 2006 to 5% in 2007, while the manufacturing sector growth continued at 8.4% in 2007, slightly more moderate than the 10% for 2006. Services grew at 8% in 2007, down from 9.6% in 2006. But exports were sluggish in 2007, with economic growth largely driven by strong domestic demand. Investment overtook consumption, helped by a surge in domestic private investment and record foreign direct investment (FDI) flows. In 2007, investment in real terms increased by over 20%.”

The strong consumer demand in Pakistan drove large investments in real estate, construction, communications, automobile manufacturing, banking and various consumer goods. Millions of new jobs were created. By all accounts, the ranks of the middle class swelled in Pakistan during Shaukat Aziz’s term in office. According to Tara Vishwanath, the World Bank’s lead economist for South Asia, about 5% of Pakistanis moved from the poor to the middle class in three years from 2001-2004, the most recent figures available.

The one sore spot that sticks out in Shaukat Aziz’s record is his lack of attention to the rising energy needs of the country. Appropriate planning should have comprehended new power plants to support growth forecasts. There were other mistakes as well, such as the decision to export wheat in 2007 that created shortages and price hikes that helped bring down the PML (Q) government.

What Comes Next?

As the PPP and PML leaderships continue their political posturing, the larger story is the massive loss of confidence by business and investment communities in Pakistan. There is no one in charge of the economy at the moment.

It is worrying to see a sudden halt to foreign investments and the flight of capital by Pakistani investors to investments elsewhere in the world. Foreigners bought just $97m-worth of Pakistani stocks in the first ten months of this fiscal year, compared with over $1.5 billion in the same period a year earlier. No amount of blaming and escape-goating of Shaukat Aziz can be a substitute for real action by a competent economic team to stabilize the economy. Instead of shifting blame, Shaukat Aziz’s critics should help fix the current mess Pakistan finds itself in. The first step toward fixing the economy is to put an experienced and competent leader in charge with a few smart technocrats on the team.

http://southasiainvestor.blogspot.com/2008/07/assessing-shaukat-azizs-economic.html

The Finance Ministry of Pakistan came out with the Annual Economic Survey last week, and it offered both a huge surprise, and an explanation for an economic mystery that had developed over the last seven years. The mystery was how did India’s economy, measured on a per person (commonly called per capita) basis, become so much larger than Pakistan’s?

After the first 45 years of growth, Pakistan had enjoyed a faster rate of growth resulting in a higher per capita GDP (gross domestic product) than India. Since 1991, India has grown faster than Pakistan, but it started from far behind. However, about 1998, India’s statistics surged past Pakistan, and widened their lead through the next several years. By 2003, India had a GDP per capita of 500 dollars, while Pakistan, depending on the source, was about 450. Measured using an alternative technique that takes into account the lower costs of services and labor in poor countries (i.e. a haircut in Pakistan does not cost 15 dollars) to more accurately reflect purchasing power, India was listed as being way ahead at 2800 dollars versus only 1900 for Pakistan.

This was an obvious statistical paradox as any visitor even today to Karachi and Mumbai can tell. How can Indians have a statistical standard of living that is 50% higher than Pakistanis, but on the ground there is no Pakistani equal to the miserable poverty of large segments of the Indian population? World Bank data on poverty shows that even today the proportion of the Indian population living on less than two dollars per day in purchasing power is much higher than in Pakistan. Consumption statistics on such mundane items like electricity and food show Pakistan as equal or better than India. And statistics on underweight and malnourished children favor Pakistan.

Calculating the size of the economy (the GDP) is in fact a very complex and difficult task. And then to calculate the growth from one year to the next is even more difficult. Throw into that such factors as inflation and technological changes and the picture can get very murky. Imagine a chess game that you photograph, and then someone tells you what each player does for the next 50 moves. If the information is totally accurate, 50 moves later will you be able to replicate the actual situation on the chessboard. But if the information is not accurate, if there are new pieces being introduced, and if you don’t understand some of the moves, you will quickly end up with a chessboard that does not resemble what has really happened. The best thing to do is to go back to the actual game, and take a new picture.

The economy is like that chess board but even more complicated. For example, let’s say that in a certain year 10 million tons of wheat are grown and sold at 200 dollars per ton. The next year 11 million tons of wheat are grown, but sold at 180 dollars per ton. Did the economy grow, or not? In dollar terms there was a 1% decline, but actual wheat production jumped ten percent. If a new car comes with air bags but costs the same in dollars as last year’s car that did not, is that growth? Measuring the economy is in fact quite complex.

The first step in measuring an economy is establishing a profile of the GDP. This is done by creating a base year. But as the economy changes and adds new products and services that never existed before, the base year must be updated to accommodate that. In many countries, the rebasing is done every five years, and no less than every 10 years. For a variety of reasons, this has not happened in Pakistan. Pakistan has only rebased twice, in 1969 to the 1960 base year, and in 1988 to the 1980 base year. Up till this year, the economic statistics were using the 1980 profile of the economy, a hopelessly out of date profile. In 1997, the Nawaz Sharif government began the technocratic process of rebasing. This process, which involved IMF representatives, was completed this year, and the economy was rebased to 1999 data.

The effect of rebasing was dramatic. In India’s case, they rebased in 1998 to 1994 as the new base year, and that is why comparative statistics show a huge leap forward for India in 1998. For Pakistan, the rebasing showed that the economy is actually a full 20% larger than previous statistics had shown. In fact, Pakistan’s economy is 95 billion dollars in size, with a per capita income of 650 dollars, which is about 15% above India’s. The purchasing power figures have not been generated yet, but should show Pakistan somewhat ahead.

In addition to the economy being larger, this statistical change means that other figures, like the amount of debt to the size of the economy, are better. The debt to GDP ratio is now 75%. And government spending (both education and military) and taxes are a smaller fraction of the economy than previously thought.

This rebasing doesn’t give a poor person a better job or send an illiterate girl to school. It does not bring credit to any single government, who should be judged more on the rate of growth than the size of the economy. But it does suggest that Pakistan, far from being a failed state, is much more successful at development than many realized or have given credit for. As Mark Twain said, there are three kinds of lies: Lies, damned lies, and statistics. Comments can reach me at nali@socal.rr.com.

http://www.pakistanlink.com/nayyer/06252004.html

Pakistan has been ranked 34 out of 52 countries in the World Economic Forum’s first Financial Development Report, which was released in Pakistan through the Competitiveness Support Fund (CSF) in December, 2008.

The report is a comprehensive analysis of financial systems and capital markets in 52 countries that explores key drivers of financial system development and economic growth in developing and developed countries and serves as a tool by which countries can benchmark themselves and establish priorities for financial system improvement.

Pakistan’s Banking sector turned profitable in 2002. Their profits continued to rise for the next five years and peaked to Rs 84.1 ($1.1 billion) billion in 2006.

Arthur Bayhan, Chief Executive of the Competitiveness Support, told the media: “I am very happy to see that financial system in Pakistan is well reformed and competitive vis-à-vis Asia and Europe. Pakistan is ranked ahead of the Russian Federation (35), Indonesia (38), Turkey (39), Poland (41), Brazil (40), Philippines (48) and Kazakhstan (45).”

The United States narrowly edged the United Kingdom to take the top position in the Financial Development Index. The United Kingdom was second while China ranked 24 and India 31.

The Financial Development Index is based on three main pillars – Factors, Policies and Institutions, Financial Intermediation and Capital Availability and Access. These are further divided into sub – pillars.

Under Factors, Policies and Institutions pillar, Pakistan ranks 49th in institutional environment, 50th in business environment and 37th in Financial Stability. In the Financial Intermediation Pillar Pakistan ranks 25th in banks, 42nd in non banks and 17th in Financial Markets. Under Capital Availability and Access, Pakistan ranks 33rd.

Indicators showed that in business environment Pakistan had development advantage in Cost to Export, ranking 6th, Cost of closing business 5th.

In Financial Stability Change in Real Effective Exchange rate ranked 20th, External debt to GDP 10th, Frequency of banking crises 1st, stability index 15th.

In corporate governance Pakistan ranked at the very top in shareholder rights index, 14th in strength of investor protection.

In the Non banks pillar, Pakistan ranked 9th in the Real growth of direct insurance premiums. In equity market movement Pakistan ranked at the top again in equity market turnover.

Importance of Financial Services Sector:

Banks are often described as a nation’s economic engine, in part because they provide financial intermediation functions between savers/investors who are looking for safety and growth and consumers/businesses who are looking for access to credit and capital.Banks also play a major role as instruments of the government’s monetary policy aimed at regulating interest rates and money supply in the economy. The current economic crisis in the United States and Europe, marked by the ongoing weakness of major banks and the resulting credit and capital crunch, underlines the critical importance of the banking sector in national and global economies. Recognizing the crucial importance of the financial sector in global economic recovery, the Obama administration is allocating the bulk of the stimulus money to restore the health of major U.S. banks.

Financial Stability Review 2007-08 released by the State Bank of Pakistan

Pakistan’s banking sector has remained remarkably strong and resilient, despite facing pressures emanating from weakening macroeconomic environment since late 2007, said the SBP report. While financial markets (money market and foreign exchange market) remained resilient to developments in the macroeconomic environment and functioned well in maintaining financial stability, the imposition of the floor of 9,144 points on the KSE-100 index in August 2008 has adversely impacted investor sentiments by effectively blocking the exit mechanism generally taken for granted in a market based system.

The review said the banking system is on strong footing and has long term potential – a feature which has served to attract a substantial amount of FDI in the sector, with established global financial institutions now active participants in the domestic financial sector. FDI increased from a mere $1 billion in 1999 to $8.4 billion in 2007.

Stress tests conducted on June-2008 data indicate that the large banks are relatively robust, with the medium and small-sized banks positioning themselves in niche markets, it added. Capital adequacy of the banking system is strong, 12.1% at end-June 2008, well above the internationally acceptable minimum requirement of 8.0%, it said and added core capital constitutes about 80.0% of the total capital, and Tier 1 to risk weighted assets ratio of the banking system is at 9.7%. [Link]

Profitability of Banking Sector

Profitability of the banking system continues to be impressive, largely emanating from the persistent growth in high-yield earning assets and expanded business volumes.

Banking sector turned profitable in 2002. Their profits continued to rise for the next five years and peaked to Rs 84.1 ($1.1 billion) billion in 2006. Apart from 2003 when profits were mainly generated through capital gains, the banks’ net earnings growth in rest of the years after 2003, were primarily driven by core business activities.

Net interest income of the 22 listed banks increased by 19 percent to Rs 206.6 billion, attributable to stable spreads observed during the years along with a 17 percent growth in advances that was spurred by banks’ lending for circular debt and commodity operations.

Unfortunately in 2008, Profitability of Pakistan’s banking sector declined sharply, owing to multiple reasons, reflecting the deteriorating economic conditions of the country. Profits of 22 listed banks, which have so far announced their results, declined by 21 percent to Rs 50 billion in 2008 from Rs 64 billion in 2007. The 22 banks represent 96 percent of the sector’s market capitalization and constitute 82 percent of the overall industry’s total assets. [Link]

Banking in Pakistan:

List of Banks in Pakistan

Between 2002 and 2007, Pakistan’s accelerated economic growth was underpinned by a strong banking sector. Classified as Pakistan’s and region’s best performing sector, the banking industry’s assets rose to over $60 billion, its profitability remains high, non-performing loans (NPLs) are low, credit is fairly diversified and bank-wide system risks are well-contained. Almost 81% of banking assets are in private hands. Likewise, the present foreign stake comes to 47% of total paid-up capital of all the financial institutions regulated by Pakistan’s central bank, the State Bank of Pakistan.

Pakistan’s foreign reserves hit a record high of $16.5 billion in October 2007 but fell to $6.6 billion in November, largely because of a soaring import bill. As the commodity prices rose and inflation in Pakistan reached near 25%, the State Bank of Pakistan was forced to raise its discount rates to as high as 15%. However, there has been a dramatic decline in the cost of imports such as oil during the last few months, spelling relief for Pakistan and other non-OPEC developing nations. The price of oil has dropped to about a quarter of what it was last summer.

Pakistan signed a $7.6 billion loan agreement with the International Monetary Fund in November to stave off a balance of payments crisis. It received its first tranche of $3.1 billion that month. In its first assessment since November, IMF has expressed satisfaction with Pakistan’s progress. “Initial developments under the program have been positive,” IMF spokesman David Hawley told a regular news briefing, according to Pakistan’s Dawn newspaper. “The foreign exchange rate has appreciated somewhat and preliminary information suggests that end-December targets for net international reserves and net domestic assets at the State Bank of Pakistan were met,” he added.

Pakistan’s economy deteriorated sharply over the course of 2008, as inflation surged, and the current account deficits jumped on the back of rising oil and food prices, according to a World Bank report.

The report titled ‘Global Economic Prospects 2009’ says political turmoil and ongoing security concerns have also taken a toll on Pakistan’s economy, while the global financial crisis added substantial downward pressures on its financial markets. Pakistan and the International Monetary Fund agreed to lower the target for the gross domestic growth this fiscal year to 2.5 per cent from 3.5 per cent but many analysts said even achieving this target would be very ambitious.

The general deterioration in regional trade balances has been offset by large remittance inflows, which represent a sizable, and generally increasing share of GDP: during 2007, 14 per cent in Nepal, 8 per cent in Bangladesh and Sri Lanka, 4 per cent in Pakistan, and 3 per cent in India.

Given strong underlying growth dynamics in South Asia, the negative feedback effects of the global financial crisis are expected to be temporary. A relatively rapid rebound is expected in 2010, with a projected revival of GDP growth to 7.2 per cent.

During 2001-2007, former Prime Minister Shaukat Aziz, a banker by training and extensive experience in New York, understood the role of banking, finance, investment and consumer credit in economic growth of a nation. He focused on building strong banking, investment and finance sectors in Pakistan to underpin its economy. He strengthened capital availability, an essential and increasingly important economic input, in addition to labor and land improvements. With higher education budget up 15-fold and overall education spending up 36% in two years, he focused on education to improve the availability of skilled labor to fill new jobs. He pushed land development and public and private construction spending to improve infrastructure and facilities to attract greater business investment and create jobs. Mr. Aziz was largely successful in his efforts.

In general, there are primarily two types of banks in Pakistan: Commercial Banks and Investment Banks. Both types of banks provide financial services essential for Pakistan’s economy to function and grow.

Most people and businesses pay their bills with bank checking accounts, placing banks at the center of our payments system. Banks are the major source of consumer loans — loans for cars, houses, education — as well as main lenders to businesses, especially small businesses. When banks are strong and the credit flows, it helps the overall economic growth. When banks are in crisis, the impact on business and consumers multiplies the weakness in the economy.

Investment Banks:

Investment banks provide four primary types of services: raising capital (private equity or public offerings of shares), advising in mergers and acquisitions, executing securities sales and trading, and performing general advisory services. Most of the major Wall Street firms are active in each of these categories. Smaller investment banks may specialize in two or three of these categories.

Finance Expo 2009:

Finance Expo Pakistan 2009 Exhibition was held last week in Karachi to showcase the most competent, dynamically growing and innovative companies that demonstrate the latest financial systems and methods stimulating the development of the banking and finance industry.

The Expo was an opportunity to network with decision makers, economists and experts of Banks, Takaful, Modaraba, Insurance Companies, Asset Management Companies, Stock Exchanges, Security Companies, Financial Education Institutes, & Leasing Companies and also of the fast growing industries like IT & Telecom, Oil & Gas, Alternative Energy & Power Industries, Agriculture, Pharma, Textile, Builders & Developers, Auto as well as Media.

The event is a platform for banking and financial institutions to come together and share ideas and the challenges presented to this rapidly growing industry.

The exhibition and conference highlighted the value that banking, financial institutions and other revenue generating industries bring to boost the economy of Pakistan. Moreover, the Event presents opportunities for displaying products, services and solutions towards the potential buyers.

Summary:

In spite of the international economic crisis, continuing political turmoil and rising militancy in Pakistan, the financial services sector has held up fairly well in the last year. Its future, however, remains tied to a measure political stability in the country that allows economic activity to occur unhindered. Let’s hope the nation’s political and ruling elites can find a way to find a peaceful way forward.

Banks State & Private 

• 1. State Bank of Pakistan
• 2. First Women Bank Limited
• 3. National Bank of Pakistan
• 4. Allied Bank of Pakistan, Karachi
• 5. Arif Habib Bank Limited, Karachi -
• 6. Askari Bank, Rawalpindi

• 7. Atlas Bank, Karachi
• 8. Bank AL Habib, Karachi
• 9. Bank Alfalah, Karachi
• 10. BankIslami Pakistan Limited, Karachi
• 11. Crescent Commercial Bank, Karachi
• 12. Faysal Bank, Karachi
• 13. Habib Bank, Karachi
• 14. Habib Metropolitan Bank, Karachi
• 15. JS Bank
• 16. KASB Bank, Karachi
• 17. Muslim Commercial Bank (MCB), Islamabad
• 18. Mybank Limited, Karachi
• 19. NIB Bank, Karachi
• 20. PICIC Commercial Bank, Karachi
• 21. Saudi Pak Non-Commercial Bank, Karachi
• 22. Soneri Bank, Karachi
• 23. United Bank, Karachi
• 24. Bank Of Punjab, Lahore

Foreign banks

• 1. Abn Amro Bank, limited Pakistan
• 2. Albaraka Islamic Bank BSC(EC), Lahore
• 3. American Express Bank Limited, Karachi
• 4. Mitsubishi Limited, Karachi
• 5. Citibank, Karachi
• 6. Deutsche Bank AG, Karachi
• 7. Habib Bank AG Zurich, Karachi
• 8. Hongkong and Shanghai Banking Corporation, Karachi
• 9. Oman International Bank SOAG, Karachi
• 10. Standard Chartered Bank Limited, Karachi
• 11. Barclay Bank, Karachi

Development financial institutions

• 1. Pakistan Industrial Credit and Investment Corp Limited, Karachi
• 2. Pak Kuwait Investment Company Limited, Karachi
• 3. Pak Libya Holding Company Limited, Karachi
• 4. Pak-Oman Investment Company Limited, Karachi
• 5. Saudi Pak Industrial and Agricultural Investment Company (Pvt) Limited, Islamabad
• 6. House Building Finance Corporation, Karachi
• 7. Investment Corporation of Pakistan, Karachi
• 8. National Development Finance Corporation, Karachi

Specialized banks

• 1. Industrial Development Bank
• 2. Punjab Provincial Cooperative Bank
• 3. SME Bank
• 4. Zarai Taraqiati Bank

Investment banks

• 1. Al-Towfeek Investment Bank Limited
• 2. Asset Investment Bank Limited
• 3. Atlas Investment Bank Limited
• 4. Crescent Investment Bank Limited
• 5. Escorts Investment Bank Limited
• 6. First International Investment Bank Limited
• 7. Fidelity Investment Bank Limited
• 8. Franklin Investment Bank Limited
• 9. Islamic Investment Bank Limited
• 10. Jahangir Siddiqui Investment Bank Limited
• 11. Orix Investment Bank (Pakistan) Limited
• 12. Prudential Investment Bank Limited
• 13. Trust Investment Bank Limited

Micro finance banks

• 1. The First Micro Finance Bank Limited
• 2. Khushali Bank
• 3. Karakuram Bank
• 4. Network Micro Finance Bank
• 5. Pak Oman Micro Finance Bank
• 6. Rozgar Micro Finance Bank, Karachi
• 7. Tameer Microfinance Bank Limited

Islamic banks

• 1. Dawood Islamic Bank Limited
• 2. Dubai Islamic Bank
• 3. Meezan Bank
• 4. AlBaraka Islamic Bank
• 5. BankIslami Pakistan Limited
• 6. Emirates Global Islamic Bank

I. Public sector 

• 1. National Insurance Corporation                                                         
• 2. Pakistan Reinsurance Company Ltd.
• 3. Postal Life Insurance
• 4. State Life Insurance Corporation Ltd.

II. Private sector

a) Incorporated in Pakistan

• 1. Adamjee Insurance Company Ltd.
• 2. Agro General Insurance Company Ltd.
• 3. Allianz EFU Health Insurance Company Ltd.
• 4. Alpha Insurance Company Ltd.
• 5. Amercian Life Insurance Company Ltd.
• 6. Asia Insurance Company Ltd.
• 7. Asian Mutual Insurance Company Ltd.
• 8. Askari General Insurance Company Ltd.
• 9. Beema Insurance Company Ltd.
• 10. Business & Industrial Insurance Company Ltd.
• 11. Capital Insurance Company Ltd.
• 12. Central Insurance Company Ltd.
• 13. Century Insurance Company Ltd.
• 14. Commercial Union Life Assurance Company
• 15. Co-operative Insurance Society of Pakistan Ltd.
• 16. Credit Insurance Company Ltd.
• 17. Crescent Star Insurance Company Ltd.
• 18. Dadabhoy Insurance Company Ltd.
• 19. Delta Insurance Company Ltd.
• 20. E.F.U.General Insurance Company Ltd.
• 21. E.F.U.Life Insurance Company Ltd.
• 22. East West Insurance Company Ltd.
• 23. Excel Insurance Company Ltd.
• 24. Gulf Insurance Company Ltd.
• 25. Habib Insurance Company Ltd.
• 26. Indus International Insurance Company Ltd.
• 27. International General Insurance Co. of Pak
• 28. Ittefaq General Insurance Company Ltd.
• 29. Jupiter Insurance Company Ltd.
• 30. Metropoliton Life Assurance Company Ltd.
• 31. Muslim Insurance Company Ltd.
• 32. National General Insurance Company Ltd.
• 33. New Jubilee Insurance Comapny Ltd.
• 34. North Star Insurance Company Ltd.
• 35. Orient Insurance Company Ltd.
• 36. Pakistan General Insurance Company Ltd.
• 37. Pakistan Guarantee Insurance Company Ltd.
• 38. Pakistan Mutual Insurance Company Ltd.
• 39. Platinum Insurance Company Ltd.
• 40. Premier Insurance Company Ltd.
• 41. Prime Insurance Company Ltd.
• 42. Raja Insurance Company Ltd.
• 43. Reliance Insurance Company Ltd.
• 44. Seafield Insurance Company Ltd.
• 45. Security General Insurance Company Ltd.
• 46. Shaheen Insurance Company Ltd.
• 47. Sliver Star Insurance Company Ltd.
• 48. Union Insurance Company of Pakistan Ltd.
• 49. United Insurance Company of Pakistan Ltd.
• 50. Universal Insurance Company Ltd.

b) Incorporated abroad

• 1. ACE Insurance Aid Pacific Ltd.
• 2. CGU Assurance Company Ltd.
• 3. New Hampshire Insurance Company Ltd.
• 4. New Zealand Insurance Company Ltd.
• 5. Royal & Sun Alliance Assurance plc.

Member List of “The Insurance Association of Pakistan”

Non Life

 1. ACE Insurance Ltd.
6th Floor, NIC Building
Abbasi Shaheed Road,
off: Shahrah-e-Faisal,
P.O. Box No. 4780
Karachi
Email: acepak@acegroup.com
Website: www.acelimited.com

 2. Adamjee Insurance Co. Ltd.
6th Floor, Adamjee House,
P. O. Box No 4850,
I. I. Chundrigar Road,
Karachi
Website: http://www.adamjeeinsurance.com

 3. Alfalah Insurance Company Ltd.
5, Saint Marry, Main Boulevard, Gulberg,
Lahore
Website: http://www.alfalahinsurance.com

 4. Alpha Insurance Co. Ltd.
State Life Building No 1B
2nd Floor State Life Square
Off: I.I. Chundrigar Rd. P.O. Box No 435
Karachi
Website: http://www.alphainsurance.com.pk

 5. Asia Insurance Company Limited
456-K Model Town,
Lahore
Email: info@asiainsurance.com.pk

 6. Askari Gen. Ins. Co. Ltd.
4th Floor, AWT Plaza
The Mall P.O Box No 843
Rawalpindi
Website: http://www.agico.com.pk/

 7. Atlas Insurance Limited,
3 – Bank Square, Shahrah-e-Quaid-e-Azam,
P. O Box 1219,
Lahore
Email: info@atlasinsurance.com.pk
Website: http://www.atlasinsurance.com.pk/

 8. Century Insurance Co.Ltd.
11th Floor, Lakson Square Building No. 3
Sarwar Shaheed Road, P.O. Box 4895
Karachi 74200
Email: info@cicl.com.pk
Website: www.cicl.com.pk

 9. Cooperative Ins. Society of Pak. Ltd.
Cooperative Ins. Building
23- Shahrah-e-Quaid-e-Azam
Lahore
Email: info@coinsopl.com

 10. Crescent Star Ins. Co. Ltd.
2nd Floor, Nadir House
P.O Box No 4616
I.I. Chundrigar Road.
Karachi
Email: info@cstar.com.pk
Website: www.cstar.com.pk

 11. East West Insurance Co. Ltd.
410- EFU House
M. A. Jinnah Road, P.O. Box 6693
Karachi 74000
Email: info@eastwestinsurance.com.pk
Website: www.eastwestinsurance.com.pk

 12. EFU General Ins. Ltd.
EFU House, M.A. Jinnha Road,
P.O. Box No. 5005
Karachi 74000
Email: info@efuinsurance.com
Website: http://www.efuinsurance.com

 13. Excel Insurance Co. Ltd.
38 C-1, Block – 6
P.E.C.H.S., Shaharah-e-Faisal
Karachi 75400
Website: http://www.globemanagements.com

 14. Habib Insurance. Co. Ltd.
1st Floor, State Life Building No. 6
Habib Square, M. A. Jinnah Road
P. O. Box 5217
Karachi
Email: info@habibinsurance.net
Website: http://www.habibinsurance.net/

 15. IGI Insurance Limited
7th Floor, The Forum, Suite 701-713, G-20,
Block 9, Khayaban-e-Jami, Clifton,
Karachi 75600
Website: www.igiinsurance.com.pk

 16. Jubilee General Insurance Company Limited
2nd Floor, Jubilee Insurance House,
P.O.Box No 4795,I.I.Chundrigar Road
Karachi 74000
Email: info@jubileegeneral.com.pk
Website: http://www.jubileegeneral.com.pk

 17. New Hampshire Insurance Company.
1st Floor, Dadex House,
34-A/1, Block 6, PECHS
Shahrah-e-Faisal,

Email: info-pakistan@aig.com
Website: http://www.chartisinsurance.pk

 18. PICIC Insurance Limited
8th Floor, Shaheen Complex
M. R. Kiyani Road,
Karachi
Email: info@picicinsurance.com
Website: http://www.picicinsurance.com

 19. Premier Insurance Limited
5th Floor, State Life Building No 2-A
Wallace Road, P.O. Box 4140
Karachi
Email: info@pil.com.pk
Website: http://www.pil.com.pk

 20. Reliance Insurance Co. Ltd.
Reliance Insurance House,
181- A Sindhi Muslim Cooperative Housing Society
P.O Box 13356,
Karachi
Website: http://www.relianceinsins.com

 21. Saudi Pak Insurance Company Ltd
2nd Floor, Nizam Chambers, 7-Shahra-e-Fatima Jinnah,
Lahore
Email: info@saudipakinsurance.com.pk
Website: http://www.saudipakinsurance.com.pk

 22. Security Gen. Ins. Co. Ltd.
SGI-House, 18-C/E-1,
Gulberg-III,
Lahore
Email: sgi@sgicl.com
Website:

 23. Shaheen Ins. Co. Ltd.
10th Floor, Shaheen Complex
M. R. Kayani Road
Karachi 74200
Website: http://www.shaheeninsurance.com