Sunday, August 7, 2022

Pakistan Plans to Convert Coal-Fired Power Plants to Domestic Thar Lignite

With a new 330 MW mine-mouth coal-fired power plant in Tharparkar, Pakistan has now reached 990 MW of power fueled by the local lignite. Thar coal production is being expanded and plans are in place to convert three more coal fired plants to burn domestic lignite as soon as a rail link is completed to transport the fuel to the rest of the country.  It is worth noting that Pakistan contributes less than 1% of the global greenhouse-gas emissions. Using the higher polluting domestic Thar lignite is crucial to Pakistan's desperate need for cheap energy to spur industrialization for economic growth without running into recurring balance of payments crises. 

Pakistan Electric Power Generation Fuel MiX. Source: Arif Habib

 Last year, hydroelectric dams contributed 37,689 GWH of electricity or 27.6% of the total power generated, making hydropower the biggest contributor to power generated in the country. It was followed by coal (20%), LNG (19%) and nuclear (11.4%).  Nuclear power plants generated 15,540 GWH of electricity in 2021, a jump of 66% over 2020.  Overall, Pakistan's power plants produced 136,572 GWH of power in 2021, an increase of 10.6% over 2020, indicating robust economic recovery amid the COVID19 pandemic. 

Lucky power plant in Karachi has been designed to use Thar Lignite Coal when it is available in sufficient quantity.  Until that time, it will operate on imported lignite coal. Domestic lignite production is being expanded in a bid to replace costly fossil fuel imports that are depleting Pakistan's foreign exchange reserves and exacerbating circular debt in the power sector, according to Nikkei Asia.  

SECMC (Sindh Engro Coal Mining Company) has commissioned a study for converting the China-Pakistan Economic Corridor coal plants in Hub, Jamshoro and Sahiwal to indigenous lignite. A 105km long Thar Rail project is being planned to connect Thar coal fields with Main Line (ML-1) at the New Chhor Halt Station to transport lignite to the power plants in the rest of the country. The transportation of lignite by trucks to Karachi and Kallar Kahar shows its movement by road and rail is feasible and safe despite higher moisture.


Pakistan Electric Power Generation. Source: Arif Habib


Cost Per Unit of Electricity in Pakistan. Source: Arif Habib


Nuclear offers the lowest cost of fuel for electricity (one rupee per KWH) while furnace oil is the most expensive (Rs. 22.2 per KWH). 
 

Construction of 1,100 MW nuclear power reactor K2 unit in Karachi was completed by China National Nuclear Corporation in 2019, according to media reports. Another similar reactor unit K3 is now in operation. It will add another 1,100 MW of nuclear power to the grid in 2022. Chinese Hualong One reactors being installed in Pakistan are based on improved Westinghouse AP1000 design which is far safer than Chernobyl and Fukushima plants.  

The biggest and most important source of low-carbon energy in Pakistan is its hydroelectric power plants, followed by nuclear power. Pakistan ranked third in the world by adding nearly 2,500 MW of hydropower in 2018, according to Hydropower Status Report 2019.  China added the most capacity with the installation of 8,540 megawatts, followed by Brazil (3,866 MW), Pakistan (2,487 MW), Turkey (1,085 MW), Angola (668 MW), Tajikistan (605 MW), Ecuador (556 MW), India (535 MW), Norway (419 MW) and Canada (401 MW).

New Installed Hydroelectric Power Capacity in 2018. Source: Hydroworld.com


Hydropower now makes up about 28% of the total installed capacity of 33,836 MW as of February, 2019.   WAPDA reports contributing 25.63 billion units of hydroelectricity to the national grid during the year, “despite the fact that water flows in 2018 remained historically low.” This contribution “greatly helped the country in meeting electricity needs and lowering the electricity tariff for the consumers.”

Pakistan's Current Account Balance vs International Oil Prices. Source: Arif Habib


Recent history shows that Pakistan's current account deficits vary with international oil prices.  Pakistan's trade deficits balloon with rising imported energy prices. One of the keys to managing external account balances lies in reducing the country's dependence on foreign oil and gas. 


Pakistan Power Generation Fuel Mix. Source: Third Pole

It is true that Pakistan has relied on imported fossil fuels to generate electricity. The cost of these expensive imported fuels like furnace oil mainly used by independent power producers (IPPs) has been and continues to be a major contributor to the "exaggerated external demand driven by its rentier economy" referred to by Atif Mian in a recent tweet. However, Pakistan has recently been adding hydronuclear and indigenous coal-fired power plants to gradually reduce dependence on imported fossil fuels. 

Related Links:


Haq's Musings

South Asia Investor Review

Pakistan Among World's Largest Food Producers

Naya Pakistan Housing Program

Food in Pakistan 2nd Cheapest in the World

Indian Economy Grew Just 0.2% Annually in Last Two Years

Pakistan to Become World's 6th Largest Cement Producer by 2030

Has Bangladesh Surged Past India and Pakistan in Per Capita Income?

Pakistan's Computer Services Exports Jump 26% Amid COVID19 Lockdown

Coronavirus, Lives and Livelihoods in Pakistan

Vast Majority of Pakistanis Support Imran Khan's Handling of Covid19 Crisis

Pakistani-American Woman Featured in Netflix Documentary "Pandemic"

Incomes of Poorest Pakistanis Growing Faster Than Their Richest Counterparts

Can Pakistan Effectively Respond to Coronavirus Outbreak? 

How Grim is Pakistan's Social Sector Progress?

Double Digit Growth in Pakistan's Energy Consumption Confirms Economic Recovery


Trump Picks Muslim-American to Lead Vaccine Effort

COVID Lockdown Decimates India's Middle Class

Pakistan to be World's 7th Largest Consumer Market by 2030

Pakistan's Balance of Payments Crisis

How Has India Built Large Forex Reserves Despite Perennial Trade Deficits

Conspiracy Theories About Pakistan Elections"

PTI Triumphs Over Corrupt Dynastic Political Parties

Strikingly Similar Narratives of Donald Trump and Nawaz Sharif

Nawaz Sharif's Report Card

Riaz Haq's Youtube Channel

Thursday, August 4, 2022

Pakistan's Biggest Food Import: Edible Oil Worth $4.5 Billion Worsens Trade Deficit

Rising demand and soaring prices of cooking oil raised Pakistan's edible oil import bill to $4.5 billion in fiscal year 2021-22, according to government sources. Pakistan is the world's third largest importer of palm oil after India and China. Total cooking oil imports add up to 3.7 million tons while the total annual edible oil consumption is about 5 million tons. Pakistan's palm oil imports are the second biggest commodity import after more than $20 billion in energy imports, accounting for a significant chunk of Pakistan's growing trade and current account deficits.  

Sources of Palm Oil Imports in Pakistan. Source: Dawn

Pakistan Palm Oil Consumption Growth. Source: NationMaster

Pakistan's edible oil consumption has been rising over the years. It is now about 24 Kg per person which is among the highest in the world, according to analysts quoted by Dawn newspaper.  Combined with rising prices, the total imports of palm oil could exceed $6 billion next year. It could further worsen the country's balance of payments problems. Is Pakistan doing anything to try to grow oil palms in the country? Researchers at the Institute of Business Administration (IBA) in Karachi have studied it and reported the following: 

"Based on our research, visits and interviews it was determined that in Pakistan there are ample opportunities and favorable conditions for growing oil-palm trees. Report findings suggest that the coastal belt of Sindh has proven capability of growing oil-palm trees with a per acre yield comparable to that in major oil palm growing countries due to plenty of fertile land, irrigation water courses, supply of fertilizers, and skilled farmers available in this part of land".  

Pakistan Food Imports. Source: TDAP

Sindh Coastal Development Authority (CDA) has recently announced plans to plant 60,000 oil palm trees on an area of 1,000 acres in the current fiscal year.  An earlier project in 2020 showed that the oil content of palm fruit from Sindh's plantation in Thatta is 2% higher than the world average. 

Southern Indian state of Telangana has launched a much more ambitious project to plant palm oil trees on 2 million acres of land in the next four years.  To achieve this goal, the state has plans to build large dams and irrigation canals and import millions of germinated sprouts.

Related Links:

Tuesday, August 2, 2022

Pakistan: The Next Electronics Manufacturing Hub?

Soaring demand for consumer electronics and low labor costs are attracting major global smartphone manufacturers like Samsung to Pakistan. In 2021, local manufacturers produced 25 million handsets, up a whopping 88% increase from 13 million produced in 2020. A key factor credited for this rapid production ramp-up is the new Mobile Device Manufacturing Policy announced and implemented by former Prime Minister Imran Khan's government in 2020. It imposes high tariffs on the import of mobile phone sets and offers tax rebates for local manufacturing. The policy set a 49% localization target by June 2023, including 10% localization of components on the motherboard and 10% localization of batteries.  Pakistan is forecast to be the world's 7th largest consumer market by 2030. The key to attracting more manufacturing in Pakistan lies in continuation of pro-investment policies and a measure of political stability. 

Pakistan Going From Imports to Exports of Mobile Handsets. Source: PIDE

The local manufacturing plants have assembled 14.08 million mobile phone handsets in the first six months (January-June) of 2022, while imports declined to 1.14 million handsets, according to the Pakistan Telecommunication Authority (PTA). Implementation of Device Identification Registration and Blocking System (DIRBS) and conducive government policies including the Mobile Device Manufacturing Policy 2020 have created a favorable environment for mobile device manufacturing in Pakistan.

Pakistan Mobile Phone Market. Source: PIDE

In addition to Samsung, a number of Chinese mobile handset manufacturers are investing in Pakistan to ramp up local production. Itel has manufactured 3.91 million mobile devices followed by VGO Tel's 2.97 million, Infinix 2.65 million, Vivo 2.45 million, Techno 1.87 million, QQMEE 0.86 million and Oppo 0.67 million. After the export of the first lot of 4G smartphones to the UAE in 2022, Pakistan has now set $1 billion target for mobile phone exports for the current fiscal year. 

Pakistan Telecom Indicators. Source: PTA

Pakistan wants to emulate Vietnam which has emerged as one of the leading countries in the assembly and export of smartphones and other consumer electronics devices in the past decade. Apple has recently moved part of its iPad manufacturing to Vietnam from China, where Covid lockdowns have disrupted supply chains.  TRT World has recently quoted Quentin D’Silva, the head of Lucky's smartphone division in Pakistan, as saying, “It’s only in the last five to seven years that the smartphone business has mushroomed in developing countries like ours". 



Friday, July 29, 2022

Pakistani Tech Startups Attract Record VC Funding in First Half of 2022

Technology startups in Pakistan received record $249 million funding during January-June 2022, up a whopping 171% from the same period last year. A total of 35 deals closed, up 6% from the first half of 2021. July 2022 saw a maiden investment from Sequoia Capital which is considered among the top venture capital firms headquartered in Silicon Valley, California.  Last year was a banner year for Pakistani startups with $310 million venture capital investments. 


Venture Capital Investments in MENAPT Region 1H/22. Source: Magnitt


Sequoia Capital and Kleiner Perkins co-led $17.6 million seed round in Islamabad-based fintech startup DBank this month. DBank has been founded by Tania Aidrus and Khurram Jamali, both of whom have studied the challenges the unbanked population faces closely at their previous stint at Google, where they worked on payments rails for the company’s Next Billion Users initiative, according to Tech Crunch

Soaring VC Investments in Pakistani Startups. Source: Bloomberg


Pakistani startups set a record in 2021 with $310 million venture capital investments, more than the previous six years combined, according to Bloomberg.  The South Asian nation has seen a wave of investments from many global venture capital firms, including Sequoia Capital and Kleiner Perkins -- early investors in Google and Amazon.com Inc.

Venture Capital Investments in MENAPT Region 1H/22. Source: Magnitt


Pakistan's technology sector is in the midst of an unprecedented boom. It is being fueled by the country's growing human capital and rising investments in technology startups. A tweet by Swedish fund manager Mattias Martinsson captured it well when he wrote, "Have followed Pakistan for 15 years. Can't recall any time time when VC activity was anywhere near we've seen in the last few months. Impact of reforms kicking in?".  New laws have made it easier to create startups and offered greater protection to investors.  Digital infrastructure has expanded with over 100 million smartphones and an equal number of broadband subscriptions. 

With expanding Internet infrastructure and rapidly growing user base, Pakistan is now seeing robust growth in venture money pouring into technology startups. Pakistani startups have already attracted more than $310 million in funding in FY 2021-22, more funds than all the money raised by Pakistani startups in their entire history. A recent example is Kleiner Perkins, a top Silicon Valley venture capital investment firm, that led a series A round of $17 million investment into Pakistani start-up Tajir. The startup operates an online marketplace for small store merchants in Pakistan. The announcement came via a tweet by Mamoon Hamid, a Pakistani-American Managing Partner at Kleiner Perkins who led the investment. Last year, Tajir raised a $1.8 million seed round.  The company's revenue has increased by 10x since its seed round. Another example is Sequoia Capital's first investment in Pakistan this month. 

Pakistan Technology Exports. Source: Arif Habib


Pakistan's technology exports are experiencing rapid growth in double digits over the last decade. Total technology exports jumped 22% to $2.6 billion in fiscal year 2021-22, as reported by Arif Habib Securities

Pakistan University Enrollment Growth. Source: Encyclopedia of Higher Education

The foundation for Pakistan's digital transformation was laid with the higher education reform and telecommunications deregulation and investments starting in the year 2001 on President Musharraf's watch. With a huge increase in higher education funding, Higher Education Commission Chairman Dr. Ata ur Rehman succeeded in establishing 51 new universities during 2002-2008. As a result, university enrollment (which had reached only 275,000  from 1947 to 2003) soared to about 800,000 in 2008. This helped build a significant human capital that drove the IT revolution in Pakistan.      

Please watch the following video presentation for more details on Pakistan's technology startup ecosystem:

https://youtu.be/ePApXOM3vkQ



Tuesday, July 26, 2022

Pakistan Agriculture: Record Harvests Forecast After Heavy Monsoon Rains

In the first few months of 2022,  Pakistan has exported more rice to China than Vietnam, the historic top supplier, according to the United States Department of Agriculture (USDA).  Pakistan's total rice exports are forecast to jump by 450,000 tons to 4.8 million tons, almost 30% higher than the prior year. 

Women Farmers Planting Rice in Pakistan. Source: Reuters


Pakistan experienced broad-based economic growth across all key sectors in FY 21-22; manufacturing posted 9.8% growth, services 6.2% and agriculture 4.4%. The 4.4% growth in agriculture is particularly welcome; it helps reduce rural poverty.  The country is expected to have yet another record year for agriculture in 2022-23 after heavy monsoon rains. Rice is an important food crop in Pakistan  but wheat is the principal grain consumed domestically. Unfortunately, the same hot and dry planting conditions that delayed planting of the 2022 rice crop in Punjab and Sindh provinces have adversely affected Pakistan’s wheat production. This has forced the government to import wheat at a time of high prices amid the war in Ukraine, a major wheat exporter. 

A Cotton Field in Pakistan

The recent monsoon rains will help to kick-start the sowing of major Kharif (autumn) crops including rice, cotton, sugarcane and corn after about a month's delay.  “There was 40% less water available for the Kharif season (during May-June 2022),” an official of the Ministry of National Food Security and Research said while talking to The Express Tribune on Saturday. Earlier in March this year, Pakistan's Federal Committee on Agriculture (FCA) had said “for the Kharif year 2022, the water availability in canals head will be 65.84 million acre feet (MAF) against last year’s 65.08 MAF”. Recent rains have helped fill up major water reservoirs across the country.  About 150,000 cubic feet per second of water is being released from Pakistan's largest Tarbela dam which is more than the combined irrigation needs of the two provinces.  It is also generating over 3,000 MW of electricity, according to media reports

Heavy 2022 Monsoon Rainfall. Source: Pakistan Met Office 

“Cotton production is expected to improve to 9.5-10 million bales (one bale weighs 170 kg) in the wake of ongoing rainfall in cotton belts in Punjab and Sindh,” said Pakistan Central Cotton Committee Vice President Dr Muhammad Ali Talpur. “Cotton production will remain high, as farmers have improved crop management in the backdrop of higher prices in the domestic (and international) market.”

Pakistan's agriculture output is the 10th largest in the world. The country produces large and growing quantities of cereals, meat, milk, fruits and vegetables. Currently, Pakistan produces about 38 million tons of cereals (mainly wheat, rice and corn), 17 million tons of fruits and vegetables, 70 million tons of sugarcane, 60 million tons of milk and 4.5 million tons of meat.  Total value of the nation's agricultural output exceeds $50 billion.  Improving agriculture inputs and modernizing value chains can help the farm sector become much more productive to serve both domestic and export markets.  

Pakistanis are eating more and healthier foods, according to the Economic Survey of Pakistan 2021-22. Per capita average daily calorie intake in Pakistan has jumped to 2,735 calories in FY 2021-22 from 2,457 calories in 2019-20. The biggest contributor to it is the per capita consumption of fresh fruits and vegetables which soared from 53.6 Kg to 68.3 Kg, less than half of the 144 Kg (400 grams/day) recommended by the World Health Organization. Healthy food helps cut disease burdens and reduces demand on the healthcare system. Under former Prime Minister Imran Khan's leadership, Pakistan succeeded in achieving these nutritional improvements in spite of surging global food prices amid the Covid19 pandemic

Investments in modernization of the agriculture production process and farm-to-market value chain will require major reforms to ensure growers get a bigger share of the value. The extraordinary power of the middlemen (arthis) as financiers needs to be regulated. This can not happen without legislation in close consultation with the growers. Improving agriculture inputs and modernizing value chains can help raise the productivity of the farm sector for it to serve both domestic and export markets better.  

Related Links:


Haq's Musings

South Asia Investor Review

Chicken Cheaper Than Daal

Meat Industry in Pakistan

Bumper Crops and Soaring Tractor Sales in Pakistan

Meat and Dairy Revolution in Pakistan

Pakistanis Consuming More Calories, Fruits and Vegetables

Eid ul Azha: Multi-Billion Dollar Urban-to-Rural Transfer

Pakistan's Rural Economy

Pakistan Among World's Largest Food Producing Countries

Median Incomes in India and Pakistan

Thursday, July 21, 2022

My Family's Contribution to Climate Action: Rooftop Solar and Electric Vehicles

In response to growing reports of extreme heat and floods around the world, my wife and I are doing our part to reduce our carbon footprint: We now have rooftop solar panels as well as two electric vehicles. In fact, we have had rooftop solar since 2019. My wife Yasmeen traded in her Toyota Prius Hybrid car for an all-electric Chevrolet Bolt in 2019, and I have recently traded in my gasoline-powered Mercedes sedan for a Tesla Model Y 2022. Both of us see these actions as the least we can do to help our future generations. We all need to help bring about the clean energy revolution

My New Tesla Model Y 2022


Our rooftop solar panels have been generating enough electricity to power our home for the last three years. The SunRun solar app we have shows that our solar panels generated 8,500 kWh of electricity in the last 12 months, reducing CO2 emissions produced by 6,622 pounds of coal and 676 gallons of gasoline. 

Rooftop Solar Panels on Our House


Silicon Valley where I live is at the forefront of the nascent clean energy revolution led by Tesla. Tesla is more than an electric car company; the company also supplies solar panels and batteries. Other automakers are also taking their cues from Tesla.  China's BYD Auto has only recently been surpassed by Tesla in production volumes. Auto giants General Motors and BMW are both building electric cars and planning to build "gigafactories" like Tesla's to manufacture battery packs for vehicles and homes. Pakistan is building up renewable power generation capacity. The country has also recently announced its National Electric Vehicle Policy that offers incentives to transition to clean energy.

The global transportation sector is a major polluter and in 2020 produced approximately 7.3 billion metric tons of carbon dioxide (CO2) emissions. Passenger cars were the biggest source of emissions that year, accounting for 41 percent of global transportation emissions.


CO2 Emissions by the Transport Sector. Source: Statista

Bloomberg estimates that batteries and electric transmission account for about 40% of passenger cars’ costs. European demand is met by mainly Japanese and South Korean battery makers like Panasonic, LG Chem Ltd. and Samsung SDI Co. In the U.S., Tesla has built its own battery cells at its Gigafactory to manage costs and satisfy demand for the cars it produces. Chinese demand for battery packs is met by BYD.

My wife and I have taken it to heart to think globally and act locally. Each of us can make our own modest contribution to helping fight global climate change for the sake of our future generations. We owe it to our children and grandchildren. The time to act is NOW!

Related Links:

Haq's Musings

South Asia Investor Review

Pakistan's Energy Imports

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Extreme Heat and Floods in Pakistan

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Sunday, July 17, 2022

UN Report: Last Decade Saw 16.5 Million Pakistanis Migrate Overseas

Among 10 countries with the estimated net outflow of migrants exceeding 1 million over the period from 2010 through 2021, Pakistan saw 16.5 million migrants move overseas, the highest in the world, according to a report titled "World Population Prospects 2022" released by the United Nations Department of Economic and Social Affairs (UN DESA). 

Pakistani Workers' Overseas Migration Data (2010-2021). Source: Bureau of Emigration


In many of these countries with more than one million people leaving, the outflows were due to temporary labor movements, such as for Pakistan (net outflow of 16.5 million), India (3.5 million), Bangladesh, (2.9 million), Nepal (1.6 million) and Sri Lanka (1.0 million).  The report also said that India's population will surpass China's in 2023. Over half of the global population increase up to 2050 will be in just 8 countries: Democratic Republic of Congo, Egypt, Ethiopia, India, Nigeria, Pakistan, the Philippines & Tanzania.

Population Sizes of China, India and Pakistan 1950-2099. Source: Our World in Data

The figure of 16.5 million migrants outflow from Pakistan is much higher than the numbers reported by the Bureau of Emigration & Overseas Employment of the Government of Pakistan. A possible source of discrepancy is the uncounted numbers of the family members who accompany workers going abroad for work.  

Between 2010 and 2021, 40 countries or territories have experienced a net inflow of more than 200,000 migrants; in 17 of those, the total net inflow exceeded 1 million people. In 2020, Turkey hosted the largest number of refugees and asylum seekers worldwide (nearly 4 million),followed by Jordan (3 million), the State of Palestine (2 million) and Colombia (1.8 million). Other major destination countries of refugees, asylum seekers or other persons displaced abroad were Germany,  Lebanon, Pakistan, Sudan, Uganda and the United States of America. 

Top Remittance Receiving Countries in 2021. Source: World Bank

Pakistan has received nearly $31 billion in worker remittances in 2021, up a whopping 20% from the prior year, according to the World Bank. This is a new record representing nearly 10% of the country's gross domestic product (GDP). This money helps the nation cope with its perennial current account deficits. It also provides a lifeline for millions of Pakistani families who use the money to pay for food, education, healthcare and housing. This results in an increase in stimulus spending that has a multiplier effect in terms of employment in service industries ranging from retail sales to restaurants and entertainment. 

Remittances from the European Union (EU) to Pakistan soared 49.7% in FY 21 and 28.3% in FY22, according to the State Bank of Pakistan. With $2.5 billion remittances in the first 9 months (July-March) of the current fiscal year, the EU ($2.5 billion) has now surpassed North America ($2.2 billion) to become the third largest source of inflows to Pakistan after the Middle East and the United Kingdom. Remittances from the US have grown 21%, second fastest after the EU (28.3%) in the first 9  months of the current fiscal year. 

Pakistan's share of the working age population (15-64 years) is growing as the country's birth rate declines, a phenomenon called demographic dividend. This dividend is manifesting itself in high levels of worker exports and record remittances pouring into the country. Saudi Arabia and the United Arab Emirates(UAE) are the top two sources of remittances but the biggest increase (58%) in remittances is seen this year from Pakistanis in the next two sources: the United Kingdom and the United States. 

Over 10 million Pakistanis are currently working/living overseas, according to the Bureau of Emigration. Before the COVID19 pandemic hit in 2020,  more than 600,000 Pakistanis left the country to work overseas in 2019. The average yearly outflow of Pakistani workers to OECD countries (mainly UK and US) and the Middle East has been over half a million in the last decade. 

Pakistan ranks 6th among the top worker remittance recipient countries in the world.  India and China rank first and second, followed by Mexico 3rd, the Philippines 4th, Egypt 5th and Pakistan 6th.  

Pakistan Demographics

About two million Pakistanis are entering the workforce every year. The share of the working age population in Pakistan is increasing while the birth rate is declining. This phenomenon, known as demographic dividend, is coinciding with declines in working age populations in developed countries. It is creating an opportunity for over half a million Pakistani workers to migrate and work overseas, and send home record remittances. 

Projected Population Decline in Emerging Economies. Source: Nikkei Asia

common myth about emigration is that it is driven by poverty. But the fact is that the poorest and least developed people tend to stay put where they are; they do not migrate. It's only people who have a certain level of income and skills who are more likely to migrate to other countries for better opportunities. This fact has been well-established by multiple studies conducted in Africa.

Here's an except of African Development Bank report on migration:

"Results show that despite increase in the absolute number of migrants, Africa, particularly SubSaharan Africa has one of the lowest rate of emigration in the world .... Poorer countries generally have lower rate of emigration ......Bad socio-economic conditions generally seem to lead to higher rate of emigration by highly skilled individuals. Generally, migration is driven by motives to improve livelihoods with notable evidence on changes in labor market status. Often, self-employed or unemployed émigré ended up in wage employment. The paper outlines policy issues emerging from the migration trend in Africa."

Migration vs Human Development Source: Hein de Haas











Data shows that increased human and economic development is initially associated with increasing emigration. Any form of development in the poorest countries of the world is therefore likely to lead to accelerating emigration. Such findings contradict conventional thinking and force us to radically change our views on migration. Such rethinking can be achieved by learning to see migration as an intrinsic part of broader development processes rather than as a problem to be solved, or the temporary response to development “disequilibria”, according to The Conversation, a US publication.

Sunday, July 10, 2022

India's Forex Reserves Fall As Foreign Investors Head For The Exits

India's foreign exchange reserves are falling rapidly as foreign investors flee and the country's trade and current account deficits widen. More than $267 billion worth of India's external debt of the total $621 billion is due for repayment in the next nine months. This repayment is equivalent to about 44% of India's foreign exchange reserves. This combination of investors' exodus, widening twin deficits and short-term debt repayments has caused the Indian rupee to hit new lows. Unlike China and other nations that have accumulated large reserves by running trade surpluses, India runs perennial trade and current account deficits. The top contributor to India's forex reserves is debt which accounts for 48%. Portfolio equity investments known as “hot” money or speculative money flows account for 23% of India's forex reserves, according to an analysis published by The Hindu BusinessLine

India's Declining Forex Reserves. Source: Business Standard


Investor Exodus: 

Foreign portfolio investors have pulled out a whopping $33.5 billion from equity and $2.1 billion from debt segments of Indian financial markets, for a total net outflow of $35.6 billion from October 2021 to June 2022,  according to data compiled by the National Securities Depository Limited. In the first half of this calendar year, the total net outflows were $29.7 billion. 

It's not just the FPIs leaving India; a number of multinational companies are also pulling foreign direct investment (FDI) from India. Several big names including German retailer Metro AG, Swiss building-materials firm Holcim, US automaker Ford, UK banking major Royal Bank of Scotland, US motorcycle manufacturer Harley-Davidson and US banking behemoth Citibank have chosen to pull the plug on their operations in India or downsize their presence in recent years. 

Widening Deficits: 

India's finance ministry has warned of a growing twin deficit problem, with higher commodity prices and rising subsidy burden leading to an increase in both the fiscal and current account deficits. India's June trade deficit widened to a record high of $25.63 billion, mainly due to a rise in crude oil and coal imports, from $9.61 billion a year earlier.  India's April-May fiscal deficit was $25.8 billion. 

Summary:

India's current level of forex reserves is enough for less than 10 months of imports projected for 2022-23. But the country has had a structural current account deficit which has been funded by large capital inflows. The accumulation of forex reserves has been due to surplus in the capital account. Since late February, the foreign exchange reserves have declined by $36 billion. India still has large forex reserves but its economy is in the same boat as other emerging markets that run large and worsening trade and current account deficits. With declining forex reserves, India is likely to face headwinds as the US Federal Reserves raises interest rates to fight inflation. 

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Haq's Musings

South Asia Investor Review

India in Crisis: Unemployment and Hunger Persist After COVID waves

Naya Pakistan Housing Program

Food in Pakistan 2nd Cheapest in the World

Western Money Keeps Indian Economy Afloat

Pakistan to Become World's 6th Largest Cement Producer by 2030

How Has India Accumulated Large Forex Reserves Despite Perennial Trade Deficits?

Pakistan's Computer Services Exports Jump 26% Amid COVID19 Lockdown

Coronavirus, Lives and Livelihoods in Pakistan

Vast Majority of Pakistanis Support Imran Khan's Handling of Covid19 Crisis

Pakistani-American Woman Featured in Netflix Documentary "Pandemic"

Incomes of Poorest Pakistanis Growing Faster Than Their Richest Counterparts

Can Pakistan Effectively Respond to Coronavirus Outbreak? 

How Grim is Pakistan's Social Sector Progress?

Pakistan Fares Marginally Better Than India On Disease Burdens

Trump Picks Muslim-American to Lead Vaccine Effort

Democracy vs Dictatorship in Pakistan

Pakistan Child Health Indicators

Pakistan's Balance of Payments Crisis

Panama Leaks in Pakistan

Conspiracy Theories About Pakistan Elections"

PTI Triumphs Over Corrupt Dynastic Political Parties

Strikingly Similar Narratives of Donald Trump and Nawaz Sharif

Nawaz Sharif's Report Card

Riaz Haq's Youtube Channel



Thursday, July 7, 2022

Theranos Trial: Pakistan-born Indian-American Tech Exec Convicted of Fraud

In yet another blow to Silicon Valley's "fake it till you make it" mantra, a federal jury has convicted former Theranos executive Ramesh "Sunny" Balwani on all 12 counts of fraud. Balwani was born in 1965 in Pakistan to a Sindhi Hindu family.  He attended Aitchison College, an elite prep school in Lahore that is also the alma mater of former Prime Minister Imran Khan of Pakistan. His family emigrated to India in 1984 and then to the United States in 1987. He studied at the University of Texas at Austin and University of California at Berkeley. His one-time girlfriend and partner Elizabeth Holmes, the founder of Theranos, was convicted on similar charges earlier this year. Both face up to 20 years in prison. 

Elizabeth Holmes (L) and Sunny Balwani of Theranos

"Fake it till you make it" is a well-known phrase in Silicon Valley. It means to consciously cultivate an attitude, feeling, or perception of competence that you don't currently have by pretending you do until it becomes true.  Holmes and Balwani claimed to have developed a proprietary blood-testing technology to produce results with just a few drops of blood from a finger prick, eliminating the need for large needles and vials of blood. They used this false claim to defraud unsuspecting investors, including VCs, of more than a billion US dollars. 

Balwani, 57, ran the company’s lab, where the blood testing occurred, and was quick to rebuff and sometimes fire employees who raised concerns about the performance of Theranos technology, prosecutors and witnesses said. He was responsible for the financial models given to investors that greatly exaggerated revenue, prosecutors said, and he managed the company’s partnership with Walgreens Boots Alliance Inc., in which the startup would offer its finger-prick tests inside the drugstore chain, according to the Wall Street Journal

Balwani is a technology industry veteran. He has worked in the software industry, including at Lotus Software and Microsoft Corp., but much of his wealth is derived from CommerceBid.com, an e-commerce startup that was acquired by CommerceOne, led by Pakistani-American entrepreneur Asim Abdullah, for $228 million. Karachi-born Asim Abdullah now owns the fashion house of Emmanuel Ungaro. 

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