Wednesday, April 18, 2018

Pakistan Daal Consumption Declines Sharply As Meat Consumption Rises

Pakistan's per capita daal (pulse) consumption has sharply declined to about 7 kg/person from about 15 Kg/person in 2000, according to data released by Food and Agriculture Organization and reported in Pakistani media. Meat has replaced it as the main source of protein with per capita meat consumption rising from 11.7 kg in 2000 to 32 kg in 2016. It is projected to rise to 47 kg by 2020, according to a paper published in the Korean Journal of Food Science of Animal Resources.

USDA Food Chart
Rising Incomes:

FAO report titled "State of Food and Agriculture in Asia and the Pacific Region" said rising incomes in developing nations are causing a shift from plant proteins — such as those found in pulses (daal) and beans — to more expensive animal proteins such as those found in meat and dairy.

According to the Household Integrated Surveys of Pakistan, the average monthly household income in the country jumped 15% from Rs. 30,999 in 2013-14 to Rs. 35,662 in 2015-16.

Pulses Consumption:

Per capita consumption of pulses in Pakistan has sharply declined from about 15 kg per person a year to about 7 kg per person a year, found a new report of the Food and Agriculture Organization (FAO) of the United Nations.

In neighboring India, too, the consumption of pulse declined from about 22kg per person per year to about 15kg per person per year. In Sri Lanka, however, pulse consumption seemed to have fluctuated between 5kg and 10kg per person per year since 1960, except for a sharp drop from 1970 to 1985, the report said.

Dairy Consumption: 

Economic Survey of Pakistan reported that Pakistanis consumed over 45 million tons of milk in fiscal year 2016-17, translating to about 220 Kg/person.

FAO's "State of Food and Agriculture in Asia and the Pacific Region" says that Mongolia and Pakistan are the only two among the 26 countries in Asia Pacific region where per capita milk consumption exceeded 370 grams/day.

Meat Consumption:

Pakistan's per capita meat consumption has nearly tripled from 11.7 kg in 2000 to 32 kg in 2016. It is projected to rise to 47 kg by 2020, according to a paper published by the United States National Library of Medicines at the National Institutes of Health (NIH).  Organization for Economic Development (OECD) explains that meat demand increases with higher incomes and a shift - often due to growing urbanization - to food preferences that favor increased proteins from animal sources in diets.


Meat Production in Pakistan. Source: FAO

The NIH paper authors Mohammad Shoaib and Faraz Jamil point out that Pakistan's meat consumption of 32 Kg per person is only a third of the meat capita meat consumption in rich countries like Australia and the United States.

A study published in Proceedings of the National Academy of Sciences and Nature magazine reports that Pakistanis are among the most carnivorous people in the world.  After studying the eating habits of 176 countries, the authors found that average human being is at 2.21 trophic level. It put Pakistanis at 2.4, the same trophic level as Europeans and Americans. China and India are at 2.1 and 2.2 respectively.

Chicken Vs Daal:

IN 2016, Pakistan's then finance minister Ishaq Dar suggested to his countrymen to eat chicken instead of daal (pulses or legumes). To some, the minister sounded like Queen Marie-Antoinette (wife of France's King Louis XVI) who reportedly said to hungry rioters during the French Revolution:  “Qu'ils mangent de la brioche”—“Let them eat cake”?

It was indeed true that some varieties of daal were priced higher than chicken. For example, maash was selling at Rs. 260 per kilo, higher than chicken meat at Rs. 200 per kilo. But other daals such as mung, masur and chana were cheaper than chicken.

The reason for higher daal prices and relatively lower chicken prices can be found in the fact that Pakistan's livestock industry, particularly poultry farming, has seen significant growth that the nation's pulse crop harvests have not.

Summary:

Per capita daal consumption is falling while meat and milk consumption is rising in Pakistan with rising household incomes. According to the Household Integrated Surveys of Pakistan, the average monthly household income in the country jumped from Rs. 30,999 in 2013-14 to Rs. 35,662 in 2015-16.  Pulse consumption has sharply declined to about 7 kg/person from about 15 Kg/person in 2000, according to data released by Food and Agriculture Organization and reported in Pakistani media. Meat has replaced it as the main source of protein with per capita meat consumption rising from 11.7 kg in 2000 to 32 kg in 2016. It is projected to rise to 47 kg by 2020, according to a paper published in the Korean Journal of Food Science of Animal Resources.

Tuesday, April 17, 2018

Washington-Based Baloch Activist "Let Down" by "India's RAW"

Ahmar Mustikhan, a pro-insurgency Baloch activist based in Washington D.C., has released a video recorded in Urdu in which he has lambasted Indian intelligence agency RAW for letting him down.  Mustikhan has been part of Indian sponsored media campaign to attack Pakistan in the United States. He has collaborated with Tarek Fatah known for his advocacy for Baloch insurgency in Pakistan. He has been in the news for heckling visiting Pakistani leaders during presentations at think tanks in the US capital.

Baloch Activist Ahmar Mustikhan With Tarek Fatah
Mustikhan says he "was promised huge help by those who were interested in the heckling of Nawaz Sharif. None of those promises were ever fulfilled. There was this gentleman in the Indian embassy who left (for India) in January and never fulfilled his promise. There were other things that happened too," according to Pakistani media reports.

"RAW's system is so corrupt that its high officials keep 40 percent of what's earmarked. India should have been engaged in public diplomacy and helping those who are involved in raising the profile of Balochistan issue but while China is trying to build, India is choosing to bomb. India is going in the opposite direction—it should have helped the people who are involved in diplomatic effort," he said.

The RAW man he named in his video is Nagesh Bhushan. He says Bhushan worked at the Indian spy agency's Balochistan Desk.  Another Indian journalist Aveek Sen has described Bhushan as "media fixer" in a 2016 tweet in response to pro-independence Baloch activist Shah Nawaz Bugti. Sen's tweet said "hello, Mr. Nagesh Bhushan. Introducing the media fixer to the world".

Here's Mustikhan's video:

https://youtu.be/XOEaea4u8_4





The current Baloch Nationalist revolt in Pakistan started in 2003, the same year that Indian intelligence agency RAW recruited Kulbhushan Jadhav and gave him a new identity as Hussein Mubarak Patel, according to Indian media reports. This was three years before the killing of Baloch leader Akbar Bugti on August 26, 2006. Jadhav was sent to Chabahar in Iran to orchestrate insurgent attacks next door in Balochistan.

Kulbhushan Jadhav was arrested in Balochistan in 2016. He has confessed to orchestrating insurgent attacks on targets in Balochistan that resulted in deaths, injuries and destruction of property.

India's former RAW officers, including one ex chief, have blamed Indian spy Kulbhushan Jadhav, arrested by Pakistan in 2016, for getting caught in Pakistan as a "result of unprofessionalism", according to a report in India's "The Quint" owned and operated by a joint venture of Bloomberg News and Quintillion Media. The report that appeared briefly on The Quint website has since been removed, apparently under pressure from the Indian government.

It is believed to be the strongest and longest of the insurgencies seen in Pakistani Balochistan which has had earlier bouts of it in 1948, 1958-59, 1962-63 and 1973-77.

Friday, April 13, 2018

How Industrialized West Enables Corruption in Developing World

Some have called London the "Money Laundering Capital of the World" where corrupt leaders from developing nations use looted wealth from their people to buy expensive real estate and other assets. Private individuals and businesses from poor nations also park money in the west and other off-shore tax havens to hide their incomes and assets from the tax authorities in their countries of residence.

The multi-trillion dollar massive net outflow of money from the poor to the rich countries has been documented by the US-based Global Financial Integrity (GFI). This flow of capital has been described as "aid in reverse". It has made big headlines in Pakistan and elsewhere since the release of the Panama Papers and the Paradise Leaks which revealed true owners of offshore assets held by anonymous shell companies. Bloomberg has reported that Pakistanis alone own as much as $150 billion worth of undeclared assets offshore.

Politicians Dominate Off-shore Company Owners in Panama Leaks
Aid in Reverse:

In 2012, the latest year for which data is available, developing countries received $1.3 trillion, including all aid, investments, worker remittances, and other income from abroad. In that same year some $3.3 trillion flowed out of them. In other words, developing countries sent $2 trillion more to the rest of the world than they received, according to the data compiled by the US-based Global Financial Integrity (GFI) and the Centre for Applied Research at the Norwegian School of Economics and reported by the UK's Guardian newspaper.

Laws in America and Europe allow the creation of anonymous shell companies. An anonymous shell company is a corporate entity that has disguised its ownership in order to operate without scrutiny from law enforcement or the public. These “phantom firms” can open bank accounts and wire money like any other company, making them a favorite tool for money launderers to hide their business and assets from authorities, according to the US-based Global Financial Integrity (GFI).

GFI estimates that developing countries have lost as much as $13.4 trillion through unrecorded capital flight since 1980. Bloomberg reports that Pakistanis own $150 billion worth of undeclared offshore assets, attributing this estimate to Syed Muhammad Shabbar Zaidi, a partner at Karachi-based A.F. Ferguson and Co. -- an affiliate of PricewaterhouseCoopers LLP.

Impact on Economic Growth:

There's a direct relationship between investment and GDP. Flight of capital reduces domestic investment and depresses economic growth in poor countries. Lower tax revenues also impact spending on education, health care and infrastructure, resulting in poor socioeconomic indicators.

In Pakistan, for example, it takes investment of about 4% of GDP to grow the economy by 1%. Lower levels of investments in the country has kept its GDP growth below par relative to the rest of South Asia.  Any reduction in the outflow of capital to offshore tax havens will help boost economic growth in Pakistan to close the gap with its neighbors, particularly Bangladesh and India whose economies are both growing 1-2% faster than Pakistan's.

Panama Papers Leak:

There is an entire industry made up of lawyers and accountants that offers its services to help hide illicit wealth. Mossack Fonseca, the law firm that made headlines with "Panama Leaks", is just one example of companies in this industry.

Mossack Fonseca's 11.5 million leaked internal files contained information on more than 214,000 offshore entities tied to 12 current or former heads of state, 140 politicians, including Pakistan's now ex Prime Minister Nawaz Sharif's family.  Icelandic Prime Minister resigned voluntarily and Pakistani Prime Minister was forced out by the country's Supreme Court.

The Panama list included showbiz and sports celebrities, lawyers, entrepreneurs,  businessmen, journalists and other occupations but it was heavily dominated by politicians.

War on Tax Evasion and Money Laundering: 

Organization of Economic Cooperation and Development (OECD), the club of world's rich industrialized nations, and some of its member states appear to be taking some steps to stem the global rising tide of tax evasion and money laundering.

OECD is promoting  enhanced co-operation between tax authorities through AEOI (Automatic Exchange Of Information) to bring national tax administrations in participating countries in line with the globalized economy.

Several countries, including the United Kingdom, are working on legislation forcing the disclosure of the ultimate beneficial owners of the properties held by anonymous shell companies. The new laws will establish publicly accessible registry of beneficial owners of real estate.

Tax Amnesty Schemes:

Developing countries are offering tax amnesty schemes to bring back the off-shore wealth to help their economies. Argentina and Indonesia did this recently.  Indonesia's tax amnesty in 2017 saw $330 billion worth of assets declared.   Pakistan is in trying to the do the same to help build its dollar reserves and expand its tax base.

Under Pakistan's announced tax amnesty, Pakistani citizens can declare previously undeclared foreign assets and still keep them abroad by paying 5% penalty for liquid assets and 3% penalty for real estate. Alternatively, they can declare and repatriate liquid assets to Pakistan by paying just 2% penalty.

The assets covered by the amnesty include "real estate, mortgaged assets, stock and shares, bank accounts, bullion, cash, jewels, paintings, accounts and loan receivables, beneficial ownership or beneficial interests or contribution in offshore entities and trusts."

Summary:

Laws and practices in the West and other offshore tax havens encourage corruption in developing nations that results in net outflow of trillions from poor countries to the rich industrialized world, according to the US-based Global Financial Integrity (GFI). There are some efforts underway to stem this outflow. Pakistanis hold as much as $150 billion in undeclared assets overseas. The latest tax amnesty in Pakistan is an attempt to bring some of it back to the country, or at least collect 3-5% of it in the form of penalties.

Related Links:

Haq's Musings

South Asia Investor Review

Did Musharraf Steal Pakistani People's Money?

Pakistan Economy Hobbled By Underinvestment

Raymond Baker on Corruption in Pakistan

Nawaz Sharif Disqualified

Culture of Corruption in Pakistan

US Investigating Microsoft Bribery in Pakistan

Zardari's Corruption Probe in Switzerland

Politics of Patronage in Pakistan

Why is PIA Losing Money Amid Pakistan Aviation Boom?

Wednesday, April 11, 2018

India Top Recipient of Global Private Charity; Pakistan Ranks 12th

India tops the list of charity recipients from private foundations while Pakistan is ranked as the 12th largest recipient of philanthropic giving in the world, according to a report released by OECD (Organization for Economic Co-operation and Development).

Private Foundation Philanthropy in Asia. Source: OECD 


Global Philanthropic Foundations:

Philanthropic contributions of major international private foundations in Pakistan totaled  $267 million out of the $42 billion global contribution in  2013-2015.  This compares with $1.6 billion in top-ranked India and $498 billion in second-ranked China.  US-based Bill and Melinda Gates Foundation (BMGF) contributed nearly half of the $42 billion in global charity by private foundations.

Private foundations are filling the huge gaps in public funding of health and education sectors in developing nations. . They contributed  $11 billion for the health sector alone in the three year period, ranking third behind the United States and a global fund for fighting disease.

Massive Western Aid to India:

In addition to being the biggest recipient of private foreign charity,  India has been the number one recipient of official US aid since 1947, according to the US government data.   The country India's first Prime Minister turned to for help during the 1962 China-India war was also the United States.



India has received $65.1 billion in US aid since its independence, making it the top recipient of American economic assistance. Pakistan, with its $44.4 billion, is at number 5 on the list.  US data also shows that Pakistan is not among top 10 for military or total economic and military aid.

Local Charity in Pakistan:

Pakistanis donate generously to local charities in the country in the form of religiously mandated donations such as "zakat, sadaqa and fitrana".  One of the key measures of empathy is generosity to others, the kind of generosity demonstrated in Pakistan by the likes of  late Abul Sattar Edhi. The Edhi Foundation set up by the great man is funded mainly by small donations from ordinary people in Pakistan.

 Anatol Lieven, author of "Pakistan: A Hard Country" wrote the following tribute to the Mr. Edhi:

"There is no sight in Pakistan more moving than to visit some dusty, impoverished small town in an arid wasteland, apparently abandoned by God and all sensible men and certainly abandoned by the Pakistani state and its elected representatives - and to see the flag of Edhi Foundation flying over a concrete shack with a telephone, and the only ambulance in town standing in front. Here, if anywhere in Pakistan, lies the truth of human religion and human morality."  

What Professor Anatol Lieven describes as "human religion and human morality" is the very essence of the Huqooq-ul-Ibad (Human Rights) in Islam. Abdus Sattar Edhi understood it well when he said, "there's no religion higher than humanity".

Edhi understood the meaning of what the Quran, the Muslim holy book, says in chapter 2 verse 177:

"Righteousness is not that ye turn your faces towards the east or the west, but righteous is, one who believes in God, and the last day, and the angels, and the Book, and the prophets, and who gives wealth for His love to kindred, and orphans, and the poor, and the son of the road, beggars, and those in captivity; and who is steadfast in prayers, and gives alms."

A recent article written by Shazia M. Amjad and Muhammad Ali and published in Stanford Social Innovation Review said that "Pakistan is a generous country. It contributes more than one percent of its GDP to charity, which pushes it into the ranks of far wealthier countries like the United Kingdom (1.3 percent GDP to charity) and Canada (1.2 percent of GDP), and around twice what India gives relative to GDP."

OECD says corporate donations in Pakistan have increased from  $4.5 million to $56.4 million over the last 15 years. Corporate donations are dwarfed by individual donations made as zakat, sadaqa and fitrana as commanded by the Quran.

In addition to zakat, sadaqa and fitrana, Pakistanis spent about $3.5 billion on Eid ul Azha in 2017, according to analysts. This included sacrifice of $2.8 billion worth of livestock and another $700 million on clothes,  shoes, jewelry and various services. This amount represent a huge transfer of wealth from urban to rural population, including many rural poor, in the country. It also brings philanthropic donations of Rs. 2.5 billion to Rs. 3 billion ($25-30 million) worth of animal hides which are sold to the nation's leather industry.

Empathy Study:

A Michigan State University (MSU) study of 63 countries finds that Pakistanis have higher empathy for others than people in their neighboring countries. It also finds that the United States is among the most empathetic nations in the world.





The MSU researchers, led by William J. Chopik,  analyzed the data from an online survey on empathy completed by more than 104,000 people from around the world.

The survey measured people’s compassion for others and their tendency to imagine others’ point of view. Countries with small sample sizes were excluded (including most nations in Africa). All told, 63 countries were ranked in the study, according to MSUToday, a publication of Michigan State University.

Summary:

Pakistanis are among the most generous people in the world.   They contributes more than one percent of the nation's GDP to charity, which pushes Pakistan into the ranks of far wealthier countries like the United Kingdom (1.3 percent GDP to charity) and Canada (1.2 percent of GDP), and around twice what India gives relative to GDP, according to Stanford Social Innovation Review.  Average Pakistanis continue to be empathetic and generous in spite of the violence and the terror they have endured for over a decade. It can only be attributed to the strength of their faith and their adherence to what Prof. Lieven describes as "the truth of human religion and human morality".

Related Links:

Haq's Musings

Study Says Pakistanis Have Higher Empathy Than Neighbors

Comparing Median Wealth and Income in India and Pakistan

Eid ul Azha Economy

Foreign Aid Pouring in India

Huqooq-ul-Ibad in Islam

Philanthropy in Pakistan

Panama Leaks Scandal

Misaq-e-Madina Guided Quaid-e-Azam's Vision of Pakistan

Interfaith Relations in Islam

Tuesday, April 10, 2018

Alibaba and Amazon Entry to Accelerate E-Commerce in Pakistan?

Media reports suggest global e-commerce behemoth Amazon.com could purchase substantial stake in Pakistan's e-commerce site  Clicky.pk.  This comes on the heels of a Bloomberg story that quoted anonymous sources indicating Chinese e-commerce giant Alibaba is in serious negotiations to acquire Daraz.pk.  Online sales in Pakistan's $152 billion retail market are doubling every year,  according to Adam Dawood of Yayvo online portal. He expects them to pass $1 billion in the current fiscal year (2017-18), two years earlier than the previous forecast.

Amazon's Presence in Pakistan:

Amazon already owns about 33% stake in Clicky.pk through its acquisition in 2017 of Dubai-based online retailer Souq.  Souq acquired this stake in the Pakistani company in late 2016.

In March this year, Bloomberg cited sources saying that Alibaba and Daraz.pk are negotiating a a price for the acquisition. It said that the "deliberations are an early state and no decisions have been made".

E-Commerce Market Growth: 

Online sales in Pakistan's $152 billion retail market are growing much faster than the brick-and-mortar retail sales. Adam Dawood of Yayvo online portal estimates that e-tail sales are doubling every year. He expects them to pass $1 billion in the current fiscal year (2017-18), two years earlier than the previous forecast.

E-commerce in Pakistan is being enabled by increasing broadband penetration and new online payment options. Ant Financial, an Alibaba subsidiary, has just announced the purchase of 45% stake in Pakistan-based Telenor Microfinance Bank.

Payment Options: 

Mobile wallets, also called m-wallets, are smartphone applications linked to bank accounts that allow users to make payments for transactions such as retail purchases. According to recent State Bank statistics on branchless banking (BB) sector, mobile wallets reached a high of 33 million as of September 2017, up 21% over the prior quarter. About 22 percent of these accounts – 7.4 million – are owned by women, up 29% seen in Jul-Sep 2017 over previous quarter. Share of active m-wallets has also seen significant growth from a low of 35% in June 2015 to 45% in September 2017.

Summary: 

Online sales in Pakistan's $152 billion retail market are doubling every year,  according to Adam Dawood of Yayvo online portal.  The country's retail market is the fastest growing in the world, according to Euromonitor.  Expanding middle class, particularly millennials with rising disposable incomes, is demanding branded and packaged consumer goods ranging from personal and baby care items to food and beverage products. Strong demand for fast moving consumer goods is drawing large new investments of hundreds of millions of dollars.  Rapid growth in sales of consumer products and services is driving other sectors, including retail, e-commerce, paper and packaging, advertising, media, sports and entertainment. Potential downsides of soaring consumption include increased amount of  solid waste and decline in domestic savings and investment rates.

Related Links:

Haq's Musings

Pakistan Retail Sales Growth

Advertising Revenue in Pakistan

Pakistan FMCG Market

The Other 99% of Pakistan Story

PSL Cricket League Revenue

E-Commerce in Pakistan

Fintech Revolution in Pakistan

Mobile Broadband Speed in Pakistan

Sunday, April 8, 2018

The Story of Pakistan's M8 Motorway Construction Amid Baloch Insurgency

Construction on the recently completed 893 kilometer long Gwadar-Ratodero motorway, also known as M8, was started by a Chinese contractor back in early 2004 on former President Pervez Musharraf's watch. The work was soon abandoned when three Chinese engineers were killed by a car bomb during the first week of May, 2004.  In 2003, a year before this incident, Indian intelligence agency RAW had recruited Kulbhushan Jadhav as an undercover agent. He was issued a passport under an assumed name of Hussein Mubarak Patel and sent to Chabahar in Iran to orchestrate insurgent attacks next door in Balochistan.

After the Chinese left the project, another contractor who was awarded the project could not continue M8 construction. Eventually, Pakistan Army's Frontier Works Organization (FWO) completed the project 13 years later in 2017. This success has come at great cost in terms of time, money and human lives. FWO has lost dozens of military and civilian employees and many more have been injured in insurgent attacks. Meanwhile, a combination of military and intelligence operations by Pakistan Army and serious infighting among militants have significantly weakened the Baloch insurgency.

Pakistan Motorways. Source: Pakistaniat.com

M8 Motorway:


The M8 motorway connects Ratodero in Sindh to Gwadar in Balochistan. It is 893 long and runs through Baloch cities of Khuzdar, Awaran, Hoshab and Turbat along its east-west route.  Its recently completed first phase has two lanes and an additional two lanes are planned to handle future traffic growth. The motorway passes over Dasht River and also provides access to Mirani Dam completed in 2006. It is the world's largest dam in terms of floodstock capacity of 588,690 cubic hectometer

Local Baloch residents now use M8 motorway on a daily basis. They say it has significantly reduced the time needed to travel from Gwadar to Turbat, and indeed, reduced the time for produce and supplies to be transported between cities, according a report in local Pakistani media.

Detailed M8 Map. Source: Scroll.in

Indian Support of Baloch Insurgency:


The current Baloch Nationalist revolt in Pakistan started in 2003, the same year that Indian intelligence agency RAW recruited Kulbhushan Jadhav and gave him a new identity as Hussein Mubarak Patel, according to Indian media reports. This was three years before the killing of Baloch leader Akbar Bugti on August 26, 2006. Jadhav was sent to Chabahar in Iran to orchestrate insurgent attacks next door in Balochistan.

Kulbhushan Jadhav was arrested in Balochistan in 2016. He has confessed to orchestrating insurgent attacks on targets in Balochistan that resulted in deaths, injuries and destruction of property.

India's former RAW officers, including one ex chief, have blamed Indian spy Kulbhushan Jadhav, arrested by Pakistan in 2016, for getting caught in Pakistan as a "result of unprofessionalism", according to a report in India's "The Quint" owned and operated by a joint venture of Bloomberg News and Quintillion Media. The report that appeared briefly on The Quint website has since been removed, apparently under pressure from the Indian government.

It is believed to be the strongest and longest of the insurgencies seen in Pakistani Balochistan which has had earlier bouts of it in 1948, 1958-59, 1962-63 and 1973-77.

State of Baloch Insurgency:

Baloch insurgency has been significantly weakened recently by the continuing military and intelligence operations of the Pakistan Army.  The other probably more significant reason for it is serious infighting among insurgent groups from various tribes,  according to pro-insurgent US-based Baloch analyst Malik Siraj Akbar and a former US military intelligence officer retired US Lt. Col. Ralph Peters who supports Baloch insurgency.

In a US Congressional hearing on Balochistan, Peters said the most serious issues with the Baloch independence movement is “deeply troubling” infighting, according to a report in HuffPost. He condemned such bickering; going so far as to assert: “they are quickly becoming their own worst enemies.”

Peters has also pointed out gross human rights violations committed by Baloch insurgents against civilians. He said, “I am very concerned with Baloch extremists. Killing teachers and doctors is just dumb. It might feel good as revenge but it is not going to win you friends in Washington. Assassinating these folks is just hurting their movement.”

Frontier Works Organization (FWO):

The Frontier Works Organization (FWO) is a branch of the Pakistan Army that employs both active duty military officers and civilians. It was commissioned in 1966 and its first major project was the construction of the Karkoram Highway, the world's highest road that connects Pakistan with China.  Since then, the FWO has  built motorways, bridges, roads, tunnels, airfields and dams in Pakistan.

FWO has successfully completed several large construction projects in some of the most hostile conditions ranging from rough hilly terrains to insurgency-hit parts in Balochistan and federally administered tribal areas (FATA).  This success has come at great cost in terms of human lives. Dozens of FWO's military and civilian employees have lost their lives and many more have been injured in insurgent attacks.

China Pakistan Economic Corridor:

Currently, FWO is engaged in several large infrastructure projects related to China-Pakistan Economic Corridor. In addition to major road construction, FWO is building housing, water projects, power plants and oil refineries in different parts of the country.

Various militant groups, including Indian government proxies, are engaged in sabotaging CPEC. While some attacks have been successful, it is believed that the Pakistani military has been able to prevent many more. Thousands of soldiers and hundreds of intelligence officers are believed to be working to manage the security situation all along the western route and in Gwadar.

Summary:

The construction of the recently completed 893 kilometer long Gwadar-Ratodero motorway, also known as M8, was started by a Chinese contractor back in early 2004 on former President Pervez Musharraf's watch. The work was soon abandoned when three Chinese engineers were killed by a car bomb during the first week of May, 2004.  In 2003, a year before this incident, Indian intelligence agency RAW had recruited Kulbhushan Jadhav as an undercover agent. He was issued a passport under an assumed name of Hussein Mubarak Patel and sent to Chabahar in Iran to orchestrate insurgent attacks next door in Balochistan.

After the Chinese left the project, another contractor who was awarded the project could not continue M8 construction. Eventually, Pakistan Army's Frontier Works Organization (FWO) completed the project 13 years later in 2017. This success has come at great cost in terms of time, money and human lives. FWO has lost dozens of military and civilian employees and many more have been injured in insurgent attacks. Meanwhile, a combination of military and intelligence operations by Pakistan Army and serious infighting among militants have significantly weakened the Baloch insurgency.

Related Links:








Saturday, April 7, 2018

Why is PIA Losing Money Amid Air Travel Boom in Pakistan?

What is behind the domestic and international aviation boom in India and Pakistan? Why is Pakistan doing better than India in terms of international passenger growth while badly lagging in domestic air travel?

Passenger Aircraft at Karachi International Airport
What has happened to the global airline industry since the passage of the US Deregulation Act of 1978? Why did many big airlines of yesteryears die in spite of huge growth of air travel? How did so many upstart low-cost carriers succeed while state-owned airlines failed?

Why are the domestic air fares in Pakistan three times higher than those in India for similar distances? Why does state-owned PIA control two-thirds of Pakistan's domestic market? Why isn't there more competition on domestic routes in Pakistan?

Why are state-owned airlines, including PIA and Air India, losing a lot of money, requiring massive taxpayer subsidies and still performing poorly? Why aren't these airlines run more efficiently? Are PIA jobs used for political patronage? Why does PIA fly so many empty seats rather than cut fares to expand market?

Viewpoint From Overseas host Faraz Darvesh discusses these questions with Misbah Azam and Riaz Haq (www.riazhaq.com)

https://youtu.be/hh99nMnueBA




Related Links:

Haq's Musings

South Asia Investor Review

Pakistan Air Travel Market

Pakistan $20 Billion Tourism Industry Booming

Saving PIA, Railways and Education in Pakistan

Pakistan: Political Patronage Trumps Public Policy

Riaz Haq's Youtube Channel

Friday, April 6, 2018

Aviation Boom in India and Pakistan

Aviation market in South Asia is among the fastest growing in the world. It is soaring in terms of both domestic and international travel. Last year, the Indian commercial aviation market grew to 176 million passengers and Pakistan's reached 22 million. A total of 22 million passengers (7.2 million domestic, 14.6 million international) flew commercial airlines in Pakistan in 2016-17, up 5.11% from 20.7 million (6.95 million domestic, 13.76 million international) in 2015-16, according to Civil Aviation Authority (CAA). While Pakistan's international aviation market as a percentage of its population is bigger than India's, the Indian domestic market is far outpacing Pakistan's mainly due to greater competition and significantly lower airfares.

Pakistan International Aviation Market in 2016-17. Data Source: CAAP
International Travel:  

Nearly 15 million international passengers flew in and out of Pakistan in fiscal year 2016-17. This number is about a quarter of the 59 million international passengers who flew to and from India in roughly the same period, according to data available from the aviation authorities of the two South Asian countries. India's population is about six and a half times larger than Pakistan's.

Pakistan's state-owned PIA carries 3.2 million international passengers giving it only 22% market in the country's international aviation market. Other major international carriers flying in and out of Pakistan are Emirates (2.2 million),  Shaheen (1.57 million), Air Blue (1.4 million), Saudi Arabian and Qatar (1.1 million each).

Domestic Aviation:

The difference in domestic air traffic between the two countries is far bigger compared to the ratio for international traffic. India has seen its domestic air travel market soar to 117 million passengers versus Pakistan's 7.2 million in 2017.  India's combined aviation market for both domestic and international travel is 176 million versus Pakistan's 22 million passengers. 
Pakistan Domestic Aviation Market in 2016-17. Data Source: CAAP

The other difference in terms of domestic markets of the two nations is that the state-owned Pakistan International Airlines (PIA) enjoys massive 67.2% market share while the state-owned Air India has only 14.2% India's domestic market share and the rest of the market is divided among IndiGo (38.2%), Jet Airways(15.4%), Spice Jet(13.8%) and other smaller domestic airlines.

In Pakistan,  Shaheen (1.17 million), Air Blue (797,628) and Serene (386,970) have the remainder of the domestic market.

Fares and Competition:

As to the reason for India's domestic market being 16 times larger than Pakistan's, let me quote the UK's Financial Times as an explanation:  "A highly competitive domestic aviation market (in India) means that a passenger looking to fly from Delhi to Mumbai on July 1 this year, for example, can pay as little as $35. In Pakistan, someone wanting to do the roughly equivalent trip from Islamabad to Karachi will probably have to fly with the government-controlled Pakistan International Airlines and pay at least $100 to do so".

 Given the basic price-demand elasticity, it makes sense that Pakistan's domestic airfares being three times higher than India's reduce air travel demand to a mere 3.5% of Pakistan's population versus India's 8% of its population.

Level of Service:

Higher airfares in Pakistan do get you better service, according to Kiran Stacey of Financial Times. Here's how he sees it:

"Flying in Pakistan is unlike anywhere else I have been — and the polar opposite to flying in India, where I live. Departing from any of the three major Pakistani cities is the closest a modern traveller is likely to get to experiencing what flying was like in the 1950s. Checking in is effortless and there are no queues at security. At Islamabad airport, you do not even have to go to your gate: you can sit in the cafĂ© until your flight is called and then leave via a downstairs door that takes you straight on to the tarmac and a waiting minibus. Just hours earlier, I had suffered the regular indignity of catching a flight from Delhi airport. It took 20 minutes of disorganised queueing to check in, and another 30 to get through security. Getting on the aeroplane, as usual, reminded me of warfare at the Sino-Indian border, where troops are unarmed and so fight by jostling each other using only their torsos".

Highly Competitive Business:

Commercial aviation business has become much more cut-throat in recent years. It all began to fundamentally change with the passage of the 1978 US Airline Deregulation Act that made it easier for low-cost airlines to enter the market.  Regulations mandating minimum fares no long applied.

Since then, many other countries, including emerging economies, have adopted legislation similar to the US airline law.  Some of the big name airlines of yesteryears like Pan Am, TWA and Eastern Airlines have died. Number of airline passengers across the world has increased dramatically as air fares have plummeted.

State-Owned Airlines: 

Deregulation has forced state-owned airlines around the world  to either shut down or seek big government subsidies to stay in business. Running a successful airline business now requires different management skill sets and efficiencies in the current deregulated and highly competitive environment.

Part of it is technology driven transformation that enables minimizing staff and aircraft time on the ground, higher fuel efficiency and dynamic pricing based on demand. Unfortunately, state-owned airlines are finding it extremely difficult to operate in this environment.  Most of them, including PIA and Air India, incur huge losses year after year and require substantial tax-payer subsidies.

Empty Seats Flying on Karachi-Lahore PIA Flight. Credit: Monis Rahman 
I saw an example of poor management of Pakistan International Airline (PIA) a few days ago when a friend posted a picture of nearly empty cabin on a PIA flight from Karachi to Lahore. There were rows and rows of empty seats which is a rare occurrence in the airline business these days. Efficient airlines use yield management software to cut fares dynamically until their flights reach capacity.  Flying even one empty seat is seen as a problem by professional airline managers.

The other serious issue facing PIA and many other state-owned airlines is that their staffs are not recruited based on merit. It is reported that even the senior managers lacks professional experience of running a commercial airline. Instead, the PIA jobs are doled out as part of the political patronage system that gives favors to the supporters of the ruling politicians.

Summary:

Aviation markets in South Asia are growing rapidly in terms of both domestic and international travel. Last year, Indian air travel market grew to 176 million passengers while Pakistan's reached 22 million. While Pakistan's international aviation market as a percentage of its population is bigger than India's, the Indian domestic market is far outpacing Pakistan's mainly due to greater competition and significantly lower airfares.

Pakistan needs to take a page from the Indian playbook to increase competition and lower prices in the aviation market. This will expand the market, create jobs and make air travel more affordable in the country.


Here's Viewpoint From Overseas host Faraz Darvesh discussing the subject with Misbah Azam and Riaz Haq (www.riazhaq.com)

https://youtu.be/hh99nMnueBA




Tuesday, April 3, 2018

Young Shooting Victims: Malala, Parkland and Sandy Hook

What common experience have Malala Yousufzai and some of the young shooting victims of Parkland and Sandy Hook schools shared? After being at the receiving end of life-threatening shootings, they became targets of the slings and arrows of conspiracy theorists alleging the attacks were staged. Malala acknowledged this fact in her video message to American student marchers recently.

Malala Yousufzai:

Malala Yousufzai was shot in the head by Pakistani Taliban in Swat Valley in 2012. She luckily survived after being airlifted to a hospital in Pakistan where the doctors operated on her to save her life. Later, she went through additional surgery and rehab in England where she is now a student at Oxford University. 

As if her physical ordeal was not enough, some anti-West right-wing conspiracy theorists attacked her for being a willing participant in a "staged" shooting to defame Pakistan. The fact that Malala was given multiple awards, including the Nobel Peace Prize, only added to the anger of such groups. 

Parkland School Shooting Survivors:  

The students at Marjory Stoneman Douglas High School in Parkland, Florida, saw a mass shooting in February, 2018. Seventeen people were killed and seventeen more were wounded, making it one of the world's deadliest school massacres.

Michael Kugelman, an American analyst at Woodrow Wilson Center, sees some parallels between Malala and Parkland school shooting survivors.  Here's what he wrote in a op ed for Pakistan's Dawn newspaper about those attacking Parkland shooting survivors:

" A similar story is playing out now in the United States......These haters say the grieving victims (of Parkland mass shooting) attract attention they don’t deserve, come off as sanctimonious and self-righteous, are frauds, and are “being funded” and “given scripts.” The gun massacre survivors are branded as Nazis, targeted in doctored photo campaigns, and even mocked for college rejection letters..."

Sandy Hook Mass Shooting:

Adam Lanza shot and killed 20 children of ages 6-7 years and six adult staff at Sandy Hook Elementary School on December 14, 2012, in Newtown, Connecticut, United States.

As the parents grieved for their lost babies, they were subjected to conspiracy theories branding their tragedy an elaborate hoax. They were accused of being hired actors in a performance staged to bring down the National Rifle Association to kill the Second Amendment.

March For Our Lives:

Students across the United States organized a protest they called March for our lives to demand gun control laws.  At the marches, Malala Yousufzai spoke live via video link  to acknowledge similarities between her shooting and the Parkland shooting. Malala explained what she and the Parkland survivors share in common: They experienced violence and injustice, and they decided to speak out.

School Mass Shootings: 

The mass shooting at Marjory Stoneman Douglas High School in Florida has brought back the horrible memory of the tragic mass shooting at Army Public School in Peshawar, Pakistan on December 16, 2014.  The Peshawar school mass shooting claimed 149 lives, making it the world's second deadliest mass shooting at Beslan school in Russia where 334 people were killed.

Source: bkayy

The Parkland, Florida school shooting was the world's 10th worst with 17 dead. Five of the world's 10 worst mass shootings have occurred in the United States. The rest of them were one each in Russia, Pakistan, Kenya, Israel and the United Kingdom.

Peshawar School Shooting:

On the morning of December 16, 2014, six gunmen affiliated with the Tehrik-i-Taliban (TTP) entered the Army Public School in the northwestern Pakistani city of Peshawar and started shooting. All  six were foreign nationals, included one Chechen, three Arabs and two Afghans.

By the time the Pakistani Army commandos arrived and killed the attackers, 149 people including 132 students, ranging in age between eight and eighteen years, lay dead.

The Peshawar attack galvanized the Pakistani people to take on the Tehrik-e-Taliban Pakistan (TTP) and other terrorist groups. The Pakistani military launched a nation-wide operation Zarb e Azb to bring about a dramatic reduction in terrorist violence in the country.

Parkland School Shooting:

On the afternoon of February 14, 2018, a lone gunman entered and started shooting at Marjory Stoneman Douglas High School in Parkland, Florida.  Seventeen people were killed and fourteen more were taken to hospitals, making it the world's 10th deadliest school massacre. The suspected,  19-year-old Nikolas Jacob Cruz, was arrested shortly afterward and confessed, according to the Broward County Sheriff's Office.

The suspect was a student at Marjory Stoneman Douglas High School. He had been expelled and was angry. He used an AR-15 assault rifle to quickly kill over a dozen of his fellow students.

AR-15 is easily available in the United States, It has become a weapon of choice for mass shootings in America. 2017 Las Vegas mass shooter who killed 58 people also used a modified AR-15 rifle.

Summary:

Conspiracy theorists' attacks on survivors of Parkland school shootings in US state of Florida are no different than similar attacks on Malala Yousufzai in Swat Valley, Pakistan. They have all been accused of being part of staged attacks for political purposes.

While school shootings have occurred in many countries around the world, no other country has seen as many and as frequently as those in the United States. New York Times analysis of the Gun Violence Archive found that there have been 239 school shootings since 2014, including those on college campuses, resulting in 138 deaths. The biggest reason accounting for it is the ease of access to the deadliest of assault weapons in America. Will the US Congress act this time in defiance of the gun lobby? Given the track record of US legislators after worse massacres than Parkland, I wouldn't hold my breath. However, the response of the students has been much stronger and more sustained than in the past. I hope that they succeed where others have failed.

Related Links:

Haq's Musings

Yet Another Award for Malala

Gun Violence, Islamophobia and Terrorism

Gun Violence in America

Peshawar School Attack

Is US Gun Lobby Empowering Terrorists? 

Riaz Haq's Youtube Channel

Sunday, April 1, 2018

Fintech to Promote Financial Inclusion in Pakistan

About 100 million Pakistani adults lacked access to formal and regulated financial services as of 2016, according to a World Bank report on financial inclusion.  Only 2.9% of adults in Pakistan had a debit card, and only 1% of adults used them to make payments. Just 1.4% of adults used an account to receive wages and 1.8% of adults used it to receive government transfers in 2014. Since then, Pakistan has been leading the way in South Asia in digital finance and branchless banking.

According to the latest State Bank statistics on branchless banking (BB) sector, mobile wallets reached a high of 33 million as of September 2017, up 21% over the prior quarter. About 22 percent of these accounts – 7.4 million – are owned by women, up 29% in July-September 2017 over previous quarter. A McKinsey and Co analysis shows that adoption of financial technology (fintech) can help dramatically increase financial inclusion in Pakistan.

Karandaaz Pakistan , a non-profit organization, set up jointly by UK’s Department for International Development and Bill and Melinda Gates Foundation, is promoting financial technology in the country. Finja and Inov8 are among the better known fintech startups in the country. Chinese e-commerce giant Alibaba's Ant Financial's recent entry in Pakistan is creating a lot of excitement in Pakistan's fintech community.

Financial and Digital Inclusion in Pakistan. Source: Brookings Institution

Importance of Financial Inclusion:

Access to regulated financial services for all is essential in today's economy. It allows people and businesses to come out of the shadows and  fully participate in the formal economy by saving, borrowing and investing.

Those who lack access to regulated banking services are often forced to resort to work with unscrupulous lenders who trap them in debt at unaffordable rates. Such loans in extreme cases lead to debt bondage in developing countries.

Financial inclusion is good for individuals and small and medium size businesses as well as the national economy. It spurs economic growth and helps document more of the economy to increase transparency.

Status of Financial Inclusion in Pakistan:

About 100 million Pakistani adults lacked access to formal and regulated financial services as of 2016, according to a World Bank report on financial inclusion.  Only 2.9% of adults in Pakistan had a debit card, and only 1% of adults used them to make payments. Just 1.4% of adults used an account to receive wages and 1.8% of adults used it to receive government transfers in 2014. Since then, Pakistan has been leading the way in South Asia in digital finance and branchless banking.

M-wallets Growth in Pakistan in millions. Source: Business Recorder

Mobile wallets, also called m-wallets, are smartphone applications linked to bank accounts that allow users to make payments for transactions such as retail purchases. According to recent State Bank statistics on branchless banking (BB) sector, mobile wallets reached a high of 33 million as of September 2017, up 21% over the prior quarter. About 22 percent of these accounts – 7.4 million – are owned by women, up 29% seen in Jul-Sep 2017 over previous quarter. Share of active m-wallets has also seen significant growth from a low of 35% in June 2015 to 45% in September 2017.

“The benefits of digital payments go well beyond the convenience many people in developed economies associate with the technology,” says Dr. Leora Klapper, Lead Economist at the World Bank Development Research Group. “Digital financial services lower the cost and increase the security of sending, paying and receiving money. The resulting increase in financial inclusion is also vital to women’s empowerment.”

A McKinsey and Co analysis shows that adoption of financial technology (fintech) can help dramatically increase financial inclusion in Pakistan. Pakistan is ranked 16th among 26 nations ranked by Brookings Institution with an overall score of 69% in "The State of Financial and Digital Inclusion Project Report" for 2017. The Internet revolution is enabling rapid growth of financial technology (fintech) for increasing financial inclusion in Pakistan.

A McKinsey Global Institute report titled "Digital Finance For All: Powering Inclusive Growth In Emerging Economies" projects that adoption of financial technology (fintech) in Pakistan will add  93 million bank accounts and $36 billion a year to the country's GDP by 2025.   It will also create 4 million new jobs and add $7 billion to the government coffers in this period.

McKinsey report says that "Pakistan has solid digital infrastructure and financial regulation in place and has even had some success in digital domestic-remittance payments".

Fintech Players in Pakistan:

There are a number of companies, including some startups, offering fintech applications for smartphones that are linked to bank accounts. EasyPaisa operated by Telenor Microfinance is already well established. Among some of the better known startups working to disrupt the financial services sector in Pakistan are Finja and Inov8.

China's e-commerce giant Alibaba runs a major global e-payments platform Alipay. It also owns Ant Financial which has recently announced the purchase of 45% stake in Pakistan-based Telenor Microfinance Bank.

Telenor Pakistan runs its own e-payments platform EasyPay which will likely link up with Alipay global payments platform after the close of the Ant Financial deal.   Bloomberg is also reporting that Alibaba is in serious talks to buy Daraz.pk, an online retailer in Pakistan. These developments are creating a lot of excitement in Pakistan's fintech and e-commerce communities.

Alibaba and Alipay and other similar platforms are expected to stimulate both domestic and international trade by empowering small and medium size Pakistani entrepreneurial businesses and large established enterprises.

Karandaaz Fintech Promotion:

A key player promoting financial inclusion is Karandaaz Pakistan , a non-profit organization, set up jointly by UK’s Department for International Development and Bill and Melinda Gates Foundation.  It is providing grants for a number of local initiatives to develop and promote financial technology solutions in Pakistan.

Karandaaz Pakistan is promoting Fintech startups in  5 areas of focus:

1) Access to Financial services

Credit Scoring Models, Formalize savings through need based products, Digital lending services, and Insurance

2) Payments

Retail payments solutions through QR code,  Supply / Value Chain Digitization,  Ideas around digitization of online payments and merchant payments

3) E-Commerce

Smoothening of on-boarding process, Enabling Escrow Accounts for a retail merchant, Alternate payment modes other than COD

4) Interoperability

Innovative ideas to address the lack of interoperability among m-wallets

5) Early stage ideas related to:

 M-Wallet Use cases, Education of Financial Services through technology, Customer Engagement / Experience, Micro Credit, Digital Savings

Summary:

About 100 million Pakistani adults lacked access to formal and regulated financial services as of 2016, according to a World Bank report on financial inclusion.  Only 2.9% of adults in Pakistan have a debit card, and only 1% of adults use them to make payments. Just 1.4% of adults use an account to receive wages and 1.8% of adults use it to receive government transfers in 2014. At the same time, Pakistan is leading the way in South Asia in digital finance and branchless banking.

According to the latest State Bank statistics on branchless banking (BB) sector, m-wallets reached a high of 33 million as of September 2017, up 21% over the prior quarter. About 22 percent of these accounts – 7.4 million – are owned by women, up 29% seen in Jul-Sep 2017 over previous quarter. A McKinsey and Co analysis shows that adoption of financial technology (fintech) can help dramatically increase financial inclusion in Pakistan.

Karandaaz Pakistan , a non-profit organization, set up by UK’s Department for International Development and Bill and Melinda Gates Foundation, is promoting financial technology in the country.  Chinese e-commerce giant Alibaba's Ant Financial's recent entry in Pakistan is creating a lot of excitement in the country's fintech community.

Related Links:

Haq's Musings

South Asia Investor Review

Fintech Revolution in Pakistan

E-Commerce in Pakistan

The Other 99% of the Pakistan Story

FMCG Boom in Pakistan

Pakistan's Financial Services Sector

Bank Deposits Growth in Pakistan

Riaz Haq's Youtube Channel

Viewpoint From Overseas Channel