Saturday, June 28, 2008

Resurgent Taliban Threaten Kandahar, Peshawar

As the US-led NATO coalition in Afghanistan and the new government in Pakistan find themselves in policy disagreements and total disarray, with Hamid Karzai playing the spoiler, the resurgent Taliban appear to be preparing for the takeover of major cities on both sides of the border: Kandahar in Afghanistan and Peshawar in Pakistan. This is something that would have been considered unthinkable just a few months ago. The concern until recently was focused on the tribal areas of Pakistan. Now the Taliban are asserting themselves in the settled areas, such as Swat and Peshawar, long controlled by the Pakistani government and attempting to enforce their tribal code of morality and cultural norms. The Taliban have clearly taken advantage of the sincere efforts of the new Pakistani government to bring peace in the region. They have used the lack of pressure, and windfall narco-profits from Afghanistan, to regroup and rearm themselves to push their broader agenda of seizing control of Islamabad and Kabul.

Recently, the Taliban have staged daring raids in Kandhahar and briefly taken over parts of the city and freed large numbers of prisoners. On June 16, the Associated Press reported that the Taliban assault on the outskirts of Kandahar is the latest display of prowess by the militants despite a record number of U.S. and NATO troops in the country. The push into the Arghandab district — a lush region filled with grape and pomegranate groves that the Soviet army could never conquer — comes three days after a Taliban attack on Kandahar's prison that freed 400 insurgent fighters. Those fighters, NATO conceded Monday, appear to be massing on the doorstep of the Taliban's former power base. The city of Kandahar lies only 10 miles to the southeast.

In Peshawar, heavily armed bands of Taliban fighters have been intimidating people into observing their strict interpretation of Islamic law. In the last two months, they have suddenly tightened the noose on this city of three million people, one of Pakistan’s biggest, establishing bases in surrounding towns and, in daylight, abducting residents for large ransom. A New York Times report says they have turned up at courthouses in nearby towns, ordering judges to stay away. On Thursday, they stormed a women’s voting station on the city outskirts, and they are now regularly kidnapping people from the city’s bazaars and homes. There is pervasive fear that the city could fall to the Taleban at any moment. The provincial NWFP government in Peshawar, recently elected by a large majority, appears helpless against the Taliban.

The actions of NATO and Pakistani military in response to the Taleban's latest offensive appear to be too little, too late. An effective response to this seriously deteriorating situation requires a joint NATO-Pakistani strategy backed by strong coordinated action to strike a powerful blow against the Taliban on both sides of the border. This powerful action must then be followed by sustained pressure on both sides of the border to prevent Talebanization of the entire region with all its negative consequences for the people in Pakistan and Afghanistan and wider implications for the rest of the world.

Friday, June 27, 2008

Manekshaw: India's War Hero Passes On

Sam Hormusji Framji "Sam Bahadur" Jamshedji Manekshaw MC (April 3, 1914 – June 27, 2008) passed away today in Tamil Nadu, India. He was an Indian Army officer, with his distinct handlebar mustache, and only one of two generals to reach the rank of the Field Marshal in the Indian Army. He was the last of the top commanders involved in Bangladesh war of 1971.

In his long career spanning nearly four decades, Manekshaw rose to be the 8th Chief of Staff of the Indian Army in 1969 and under his command, Indian forces concluded a victorious campaign during the Indo-Pakistani War of 1971.

While Lt. General Jagjit Singh Arora ( Feb 13, 1916-May 3, 2005) was the face of the Indian victory and received highly publicized surrender documents from Lt. General A.K. Niazi(1915 - February 2, 2004) of Pakistan, Manekshaw was the real architect of the historic win over India's arch foe. It represented redemption for Sam Bahadur who also participated in the 1962 campaign against China which saw the Indian military thoroughly defeated and demoralized.

Explaining the defeat, General Niazi, the commander of the vanquished Pakistani military, had always insisted that he had acted according to the orders of the High Command. Following the war, Niazi was made the scapegoat and blamed for much of Pakistan's human rights abuses in Bangladesh (he was personally blamed for smuggling and rape of Bengali civilians in the Hamoodur-Rehman commission report) as well as the military and strategic losses during the war. He was subsequently dishonorably discharged by Pakistan Army. For the rest of his life, Niazi had sought Court-Martial to prove his innocence, but was never charged.

Manekshaw was born in Amritsar, Punjab to Parsi parents who immigrated to the Punjab from the small town of Valsad on the Gujarat coast. After completing his schooling in Amritsar and Sherwood College (Nainital), he joined the first batch of 40 cadets at the Indian Military Academy, Dehradun on 1 October 1932. He graduated from the IMA in December 1934 and was commissioned as a Second Lieutenant in the Indian Army. He held several regimental assignments and was first attached to the Royal Scots and later to the 4/12 Frontier Force Regiment. The fact that Sam Manekshaw was of Parsi descent made him rather unique as a military man in predominantly Hindu India. He represented the secular face of India's democracy, along with Lt. General Arora, his Sikh lieutenant in 1971, and Maj. General Amin Naik, a Muslim, who currently heads the Indian military in Kashmir .

After the Bangladesh war, when Sam Bahadur retired, the Indian government was not particularly generous with him, according to Lt. Gen JFR Jacob who headed the Eastern Command under Maneckshaw during the war. Manekshaw retired on a paltry pension of Rs. 1300 a month with no perks, not even a car. Eventually, the Government gave him a check for Rs. 16 million in lieu of the salary he should have received as Field Marshal but didn’t get over 36 years.

A humble hero, Sam Manekshaw will go down in history as one of the most significant Indians who changed the course of history in South Asia by inflicting a traumatic defeat on Pakistan. The fact that the great military hero then faded away from the public eye to continue to serve quietly in the military and then retire honorably is a testament to India's enduring democracy, where military men are constitutionally and practically subservient to the civilian leadership. In his death, Manekshaw is being honored with a state funeral, an appropriate farewell for the great soldier who served his nation well.

Sources: News Reports

Why are the Food and Fuel Prices Soaring?

As South Asians, Americans and the rest of the world suffer the impact of doubling of the food and fuel prices in about a year, there is a strong desire around the world to understand and address the underlying causes driving this phenomenon. While conspiracy theories abound, the more serious reasons being explored include imbalances between supply and demand and market speculation by large financial players. Meanwhile, the people continue to suffer in countries such as Pakistan and India where the poor spend as much as 66% of their income on food and fuel.

Increasing demand from the fast growing economies of the BRIC countries is usually acknowledged as a factor. Simultaneously, supply jitters have been caused by "peak" oil theories bandied about Saudi Arabia and crop failures in traditional breadbaskets of the world. In addition, the US and Japan have become the largest hoarders of oil. The Strategic US Petroleum Reserve (SPR) is an emergency petroleum store maintained by the United States Department of Energy. The US SPR is the largest emergency supply in the world with the current capacity to hold up to 727 million barrels (115,600,000 m³) of crude oil. The second largest emergency supply of petroleum is Japan's with a 2003 reported capacity of 579 million barrels (92,100,000 m³). The current US inventory is displayed on the SPR's website. As of June 11, 2008, the current inventory was 704.9 million barrels (112,070,000 m³). At current market prices ($138 a barrel) the SPR holds over $38.7 billion in sweet crude and approximately $50.9 billion in sour crude (assuming a $15/barrel discount for sulfur content). The total value of the crude in the SPR is approximately $89.6 billion USD.

However, it appears that the increased demand, greater national hoarding and limited supply do not completely explain such a steep price rise over less than a year.

It seems the line between financial assets such as stocks and bonds, and essential commodities such as food and oil, is rapidly fading with huge institutional investors including pension and hedge funds looking to increase their returns substantially. Some of them may be buying oil, food and other physical commodities as well as futures contracts to hedge against inflation and the falling US dollar.

Recently, George Soros, the legendary investor and speculator, told a US senate committee that speculation, while not the only contributor to the recent runup in crude oil prices, "reinforces the upward pressure on prices." He said speculation is "distinctly harmful" to the economy.

"We're paying, some believe, as high as a 50% premium to the pockets of speculators that are operating in markets that are completely unpoliced," said Michael Greenburger, a University of Maryland professor and former CFTC official. "At least 70% of the US crude oil market is driven by speculators and not people with commercial interests."

"Americans may be surprised to learn that the oil futures markets were substantially deregulated by the CFTC staff decisions that were made behind closed doors," said Sen. Maria Cantwell, D-Wash. "Now this London and Dubai loophole is keeping important U.S. energy trading in the dark and without proper light ... it can give manipulators free rein in energy markets."

Investigating food prices in India, a government appointed commission concluded that futures trading has nothing to do with the increase in the prices of food products such as wheat and rice. That was the unanimous finding of the four-member committee headed by Abhijit Sen asked to look into the connection between the two.

While the futures trading may not have caused the price rises, there is a strong belief that investors are playing their part in the food chain and may contribute to further price volatility.

Soaring agricultural prices, growing demand for biofuels and the growth of the Chinese and Indian economies are leading top global investment banks to buy farmland in a bid to embrace the physical commodities market, according to Reuters.

Investment banks and hedge funds are buying up vast tracts of agricultural land around the world, hoping to ride the so-called "commodities supercycle" that has lifted prices of everyday agricultural commodities such as wheat, rice, soybeans and corn to record highs, says a Reuters report.

One of the Middle East's largest private equity firms has been quietly buying up farmland in Pakistan as part of plans by the United Arab Emirates to increase food security and to control inflation, according to a gulf website Please read prior blog posts on this subject.

US investment bank Morgan Stanley has bought several thousand hectares of land in Ukraine, Europe's grain basin. Reuters says Morgan Stanley declined to comment, but industry executives say many other big banks are looking at land.

A recent NY Times report raises concerns about the commodity speculators jumping into the fray. By owning land and other parts of the agricultural business, the investors, including sovereign funds, are freed from rules aimed at curbing the number of speculative bets that they and other financial investors can make in commodity markets. “I just wonder if they need some sheep’s clothing to put on,” said Jeffrey Hainline, president of Advance Trading, a 28-year-old commodity brokerage firm and consulting service in Bloomington, Illinois in the United States.

If the governments do decide that the futures trading is driving significant price increases rather the fundamental supply-demand equation, then the possible fixes include a range of options. The regulators can just ban futures trading outright (as they have in India) in one or more commodities or, at a minimum, significantly increase margin requirements (from 5-10% to 50%)for futures contracts to dampen speculation. The latter option is better because it does preserve the ability of genuine producers and consumers to hedge against future price volatility. Given the potential for artificially high food and fuel prices causing major disruptions in the global economy, it would be wise for major governments to act now, rather than wait for conclusive evidence.

On the oil speculation front, the US Congress appears ready to act to restrict oil futures trading, under mounting pressure from the airline industry, American consumer groups, the International Monetary Fund and Billionaire investor George Soros. A similar effort will probably be needed to curb food price increases based on speculation.

Here's a video clip of world leaders, including Shaukat Aziz, at the World Economic Forum in Kuala Lumpur talking about Global Food and Energy Crises:

Wednesday, June 25, 2008

Karachi Stocks in Engineered Rally

Pakistan's KSE-100 index has gained more than a thousand points in two days bringing it back above 12000 points but still well below the 15739.25 reached on April 21. The latest rally was triggered by several joint measures by the Securities and Exchange Commission of Pakistan and the Karachi Stock Exchange. The measures included a 1-month ban on short selling, a special 30 billion rupee ($446 million) fund set up to stabilize volatility, and revision of the short circuits to 10% on the upside and 1% on the downside.

The new measures could reduce the downside while "creating incentives for the KSE-100 to increase," said Khalid Iqbal Siddiqui, head of research at Invest & Finance Securities, speaking to the Wall Street Journal.

Some 78 companies of the 650 listed on the KSE gained close to the new limit of 10% on Tuesday. Among those that jumped 10% were Oil & Gas Development, National Bank of Pakistan and Lucky Cement.

While there is short-term euphoria in response to the SECP and KSE actions, there is concern that fundamental issues of political stability and confidence in economic growth will likely assert themselves, bringing this rally to an end.

The recent market drop has come as the political situation has become uncertain since February elections. A fractious coalition led by the PPP is in power, and many observers say the country is adrift.

Foreign Visitors to Pakistan Pleasantly Surprised

As Pakistan increasingly finds itself the object of the world media attention, its coverage is frequently based on widespread negative perceptions by the correspondents who parachute in to cover specific events there for brief periods of time. Often, there is little or no context to the "breaking news" of the hour and little understanding of the country, its history and its people. The reporters often go there to find and confirm what they already believe rather than to uncover and learn the big picture of what is really happening there. Their cameras often focus only on a tiny slice of Pakistan that suits the report they want to file. For example, pictures of bearded men carrying weapons or chanting anti-West slogans or women in burkas demanding Shariah laws are often used to symbolize Pakistan. Pakistan does have its share of protesters and extremists, but it has a lot more than that, as some visitors discover. Here are a few such visitors and their impressions that I have found recently:

Islamabad: Well Organized, Welcoming:

"Islamabad is surely the most well-organized,picturesque and endearing city in all of South Asia. Few Indians would, however, know this, or, if they did, would admit it. After all, the Indian media never highlights anything positive about Pakistan, because for it only 'bad' news about the country appears to be considered 'newsworthy'. That realization hit me as a rude shock the moment I stepped out of the plane and entered Islamabad's plush International Airport, easily far more efficient, modern and better maintained than any of its counterparts in India. And right through my week-long stay in the city, I could not help comparing Islamabad favorably with every other South Asian city that I have visited. That week in Islamabad consisted essentially of a long string of pleasant surprises, for I had expected Islamabad to be everything that the Indian media so uncharitably and erroneously depicts Pakistan as. The immigration counter was staffed by a smart young woman, whose endearing cheerfulness was a refreshing contrast to the grave, somber and unwelcoming looks that one is generally met with at immigration counters across the world that make visitors to a new country feel instantly unwelcome."

Yoginder Sikand
10 June, 2008

Resurgent, Prosperous Middle Class:

"On the ground, of course, the reality is different and first-time visitors to Pakistan are almost always surprised by the country's visible prosperity. There is far less poverty on show in Pakistan than in India, fewer beggars, and much less desperation. In many ways the infrastructure of Pakistan is much more advanced: there are better roads and airports, and more reliable electricity. Middle-class Pakistani houses are often bigger and better appointed than their equivalents in India.
Moreover, the Pakistani economy is undergoing a construction and consumer boom similar to India's, with growth rates of 7%, and what is currently the fastest-rising stock market in Asia. You can see the effects everywhere: in new shopping centers and restaurant complexes, in the hoardings for the latest laptops and iPods, in the cranes and building sites, in the endless stores selling mobile phones: in 2003 the country had fewer than three million cellphone users; today there are almost 50 million."

William Dalrymple
14 August, 2007
The Guardian

Absurd Notions About Pakistan:

"Suicide bombs, battles in tribal areas, and states of emergency tend to put off casual tourists. But the impression such events convey can often be misleading and unrepresentative of a country as a whole. A few days ago I was sitting in a cafe sipping best Italian espresso and reading a news magazine. The front page was full of furious faces and clenched fists under the headline, The Most Dangerous Nation in the World isn't Iraq, it's Pakistan. The cafe was in a smart bookshop in Pakistan's capital, Islamabad. I sighed and turned to the article inside.
It was a revealing analysis of some penetration of a few places in Pakistan by the Taleban and al-Qaeda. I pondered the magnifying-glass effect of dramatic news coverage. The suicide bomb attack on Benazir Bhutto's homecoming parade in Karachi in October, which killed an estimated 140 people, and the assault on a Taleban pocket in the Swat valley, a tourist destination, took place while I was in Pakistan.
But neither event had a noticeable effect on the general sense of security and stability where I was in Islamabad or on the road. The notion that Pakistan is more dangerous than Iraq is absurd."

Bill Sykes
BBC News
12 November, 2007

Pakistan as Attractive Investment Opportunity:

"A little more than six years ago, immediately after the Sept. 11 attacks on U.S. cities, few sane investment advisers would have recommended Pakistani stocks.
They should have. Their clients could have made a fortune.
Since 2001, the nuclear-armed South Asian country, blamed for spawning generations of Islamic militants and threatening global security, has been making millionaires like newly minted coins.
As Western governments have fretted about Pakistan's nuclear weapons falling into the hands of militants, the Karachi Stock Exchange's main share index has risen more than 10-fold."

Mark Bendeich
Jan 10, 2008

Pakistanis Should be Proud:

"Perhaps it has more to do with Pakistan's preoccupation with conflicts at their northern borders over recent times, but little is written on the fact that with more than 100 universities and 150 research institutes, Pakistan produces 100,000 engineering graduates annually, and another 100,000 technically trained graduates. More than 50 foreign companies have set up R&D facilities in Pakistan recently. Some of these include multinationals such as GE, DuPont, Bell Labs, IBM and Microsoft. In the business of automobiles, Pakistan manufactures and sells engine components to five of the world's largest manufacturers. Suzuki and Hyundai are recent entrants to the manufacturing buzz in Pakistan setting up full-fledged plants, with Pakistan taking its rank as the ninth largest automobile manufacturer in the world.

New emerging industries in areas of interest include mecha-tronics, biotechnology, pharmaceuticals and clinical research. And foreign investment has shown a remarkable increase in recent years. Ironically, Gulf countries awash with high returns on the sale of oil have yet to take advantage of an educated labor pool and invest heavily in this growing economy."

Pakistan Revisited — VI: A Time for Reflection
By Tariq A. Al-Maeena,
Saturday 17 May 2008 (11 Jumada al-Ula 1429)

These eyewitness accounts of Pakistan by serious individuals are a reminder of the fact that fly-by-night journalism and sensational media reports are not reliable sources of information to guide policy on relations with Pakistan, investment decisions in Pakistan, the ongoing war on terror, and Pakistan's role in it. Let's hope that the international policy makers consider sources beyond the traditional commercial media when making important strategic decisions on crucial issues.

Here's a video titled "I Am Pakistan":

Related Links:

Escape From India

Reflections on India

Monday, June 23, 2008

Health Risks Rise with Bunge in Pakistan

Bunge, the third biggest US agribusiness company after Archer-Daniel-Midland and Cargill, is buying Chicago-based Corn Products International Inc. for $4.2 billion in stock to add corn-based sweeteners as demand increases for soft drinks and processed foods in China, India and Pakistan, according to US media reports. This acquisition enlarges Bunge's international footprint in emerging economies to drive its growth.

Corn Products is the fourth-largest maker of high-fructose corn syrup in the U.S. and will give Bunge new customers in Pakistan, South Korea and Thailand, Credit Suisse analyst Robert Moskow said in a note on this deal. Corn sweeteners are used in soft drinks and processed foods instead of traditional cane or beet sugar because of their lower cost and higher concentration. A single 12-ounce can of soda has as much as 13 teaspoons of sugar in the form of high fructose corn syrup, according to San Francisco Chronicle. China, India and Pakistan have all seen double digit annual growth in consumption of soft drinks and processed foods for several years. Last year, the PepsiCo growth in US and Europe was less than 3% but PepsiCo International sales were up 22%, an impressive increase fueled by double-digit growth in China, Russia, Pakistan and the Middle East.

According to the Wall Street Journal, corn and soybeans are the two biggest crops grown in North America and the two companies already are selling ingredients to many of the same players in the food and brewing industries. For Bunge, the combination will give it a bigger presence in several developing countries where a growing middle class is demanding more Western-style foods. Corn Products has extensive corn milling operations throughout South America. The company also operates in Mexico, Pakistan, South Korea and Thailand, among other places.

Corn Products was established in 1906 through a combination of U.S. corn-refining companies. The company processes corn in South America and has operations in Asia and Africa. In April, the company said first-quarter profit advanced 29 percent to $64.3 million, according to Bloomberg.

Processed foods and soft drink companies are often blamed in the United States for dramatic increases in obesity and diabetes, particularly among children. Some even accuse them of being merchants of death, not unlike the big tobacco companies. Many health experts argue that the issue is bigger than more calories. The theory goes like this: The body processes the fructose in high fructose corn syrup differently than it does old-fashioned cane or beet sugar, which in turn alters the way metabolic-regulating hormones function. It also forces the liver to kick more fat out into the bloodstream leading to heart disease.

While the presence and growth of Bunge, Pepsi and other food giants are likely to create more jobs in emerging economies such as India and Pakistan, the price for this opportunity is likely to be the danger of greater health problems associated with fats and corn sweeteners in processed foods and soft drinks.

Similar or even greater health threats are coming from the major expansion of tobacco giant Philip Morris in emerging economies. As the smoking rates in developed countries have slowly declined, they have risen dramatically in some developing counties, where PMI is a major player. These include Pakistan (up 42% since 2001), Ukraine (up 36%) and Argentina (up 18%), according to the Wall Street Journal. Philip Morris is currently building a major new plant in Pakistan.

Globalization offers many benefits, including access to good jobs and better living conditions in the emerging economies. However, globalization also brings with it all the ills that have been witnessed in the West, including environmental deterioration and life-style diseases such as diabetes, heart-disease, various forms of cancer etc. The challenge for Pakistan, and other countries like it, is to learn from the mistakes of the West. Instead of just repeating such mistakes, Pakistan, India and China must find ways to extract the benefits while minimizing the cost of modernization.

Sunday, June 22, 2008

Zardari, the Nelson Mandela of Pakistan?

"Time will prove he is the Nelson Mandela of Pakistan". This statement was attributed to late Benazir Bhutto by a former senator and Bhutto family friend Dr. Abdullah Riar, as reported in the New York Times, and the "he" here refers to Asif Ali Zardari.

The only thing that allows for any comparison of Zardari with Mandela is their time in jail and their link to the word "Reconciliation". That's where the comparison begins and ends. When Mandela used the word "Reconciliation" he combined it with "Truth" as in "Truth and Reconciliation Commission". "Reconciliation" for Mandela did not mean freedom from prosecution for any personal corruption or misconduct. He was never under any suspicion. It meant a chance for all South Africans for being truthful and acknowledging their crimes and misdeeds as part of the national healing process to ensure a healthy future for the nation.

What Pakistan needs more than anything else is a national healing process. But healing can not even begin without acknowledgment of misdeeds and true contrition by all. Once there is a sincere acknowledgment by all the actors (Musharraf, Sharif, Zardari, the military, the judiciary etc) on public stage carried live by the media, then the process of repentance and forgiveness can move forward. We need a high-powered "Pakistan Truth and Reconciliation Commission" comprising of people beyond reproach, people like Bishop Desmond Tutu of South Africa. I am sure we can find a few people who fit this description in a nation of 160 million people.

As part of this process, Pervez Musharraf must respond to the charges of undermining Pakistan's constitution and the laws, human rights abuses, and acting arbitrarily against people who opposed him.

Nawaz Sharif must address the allegations of his contempt for the judiciary when he was in office, and the charges that he amassed wealth and left the country bankrupt in 1999. He must address specific allegations of where, how he got the money to pay off the $450m loan as ordered by a British court in 1998, in connection with Hudaibia Paper Mills Ltd.

Asif Ali Zardari needs to honestly deal with allegations of corruption and abuse of power rather than rely on Musharraf's NRO. If he is innocent, he should seek to clear his name. If he is guilty, he should acknowledge his guilt and seek forgiveness of the people as part of the process.

Other politicians, party leaders, military officers, judges and bureaucrats should follow Musharraf, Sharif and Zardari and admit to any wrongdoing on their part, clear the air and ask for forgiveness to start with a clean slate.

The examples set by major leaders will inspire others in and out of government to start believing in personal responsibility and accountability for their actions.

The continuing blame game in Pakistan means every one wants others to be held accountable without acknowledging their own misdeeds. No one wants to look at himself or herself honestly in the mirror. Corruption and power abuse allegations are used as a means to achieve and maintain political power. There is a great deal of hypocrisy in how Pakistani politicians, military, judiciary and bureaucracy go about dealing with the concept of accountability so essential for a functioning democracy. This must change for the sake of the future of Pakistan.

I am not naive, but I am hopeful that this will eventually happen. Asif Zardari has shown lately that he is quite capable of working across party lines with his friends and foes alike. He has set aside his urge for personal revenge against those who persecuted him in the 1990s. Maybe, just maybe, Asif Zardari would want to prove his late wife's appraisal of him was accurate by using his influence as the PPP leader and follow Mandela's example and begin the healing process in Pakistan. I just hope that it happens before it's too late.

Saturday, June 21, 2008

India's Bid to Extend its Cultural Dominance

What is the secret of world domination by the English-speaking nations like the United States and Great Britain over the last two or three centuries? Is it their leading role during the industrial revolution? Is it their embrace of democracy and capitalism? Is it their wealth? or military power? or technology? It is probably all of the above. But, more than anything else, it seems that this phenomenon is rooted in the cultural domination of the world by the English-speaking nations. Taking a leaf from this playbook, the Indians are aiming at similar cultural domination of the world through media and entertainment. The size of India's domestic market, its new found wealth and the current wave of globalization sweeping the world clearly favor India in its quest.

Anil Ambani, the Indian billionaire, is putting up between $500 million and $600 million to back famous Hollywood director Steven Spielberg and his team at DreamWorks as they leave Viacom Inc.'s Paramount Pictures later this year, according to the Wall Street Journal.

While Anil Ambani, married to a former Bollywood actress Tina Munim, has clearly shown great interest in the Indian film world for a while, his global ambition to build a major international media and entertainment empire is just beginning to emerge.

Ambani's company, Reliance Big Entertainment, said last month that it would finance movies by production houses connected to George Clooney, Jim Carrey, Tom Hanks, Brad Pitt and others. It also said it plans to spend more than $1 billion in the next 18 months to expand its entertainment empire. Reliance is not the only Indian company pursuing deals in Hollywood. Similar deals are being made by UTV Motion Pictures, which co-financed current U.S. box-office hit "The Happening" directed by Oscar-winning Indian-American Manoj Night Shyamalan. And a similar joint effort is underway between Disney and Yash Raj Films in producing an animated film "Roadside Romeo" for the Indian audience. Disney is also an investor in UTV.

The history of outside investors, including foreign companies, trying to profit from Hollywood is long, with few notable successes. The 1980s saw a flood of Japanese investors, followed in the 1990s by Germans. The Indians, however, are different. Bollywood film revenues totaled $2.5 billion last year, less than one-tenth the total made by Hollywood films, according to PricewaterhouseCoopers. But film revenue in India has been growing at about 17% a year for the past three years, while growth in the U.S. has been less than 3%. Emerging markets in general have outpaced the U.S. and most other developed markets: Annual movie revenues have climbed more than 6% in the Asia-Pacific region and Latin America in the same period, according to the Wall Street Journal.

Besides the Hollywood deals, Ambani is launching 20 TV channels and owns FM stations in India. Anil Ambani's plans appear to be highly ambitious and may partly be driven by the sibling rivalry between Anil and Mukesh. Currently, Mukesh is ranked a notch higher on the Forbes billionaires list.

The opportunities for growth in Bollywood are attracting successful, Silicon Valley based Indian-American entrepreneurs such as Raj Singh and Kanwal Rekhi to invest in Indian movies with broad, international appeal.

Beyond the big Indian investors, other Indian cultural organizations such as the Indian Council of Cultural Relations (ICCR) has established 20 cultural centers (and two sub-centers) worldwide. Of these, Southeast Asia has only two centers (Jakarta and Kuala Lumpur) and one sub-centre (Bali), according to India Post.

According to a recent piece written by Pranav Kumar of Jawahar Lal University, the Indian Council of Cultural Relations (ICCR), founded by Maulana Abul Kalam Azad, has established 20 cultural centers (and two sub-centers) worldwide. Of these, Southeast Asia has only two centers (Jakarta and Kuala Lumpur) and one sub-centre (Bali).

These centers organize performances of dance, drama, and music, essay competitions, lectures, photo exhibitions, and so on. They also conduct classes for yoga, Indian music and Hindi language. However, with the increasing importance of Southeast Asia in India's foreign policy, there are plans to open more centers in the region. Educational assistance forms another important element in India's cultural diplomacy, offering Southeast Asians opportunities to visit India, acquire education and learn about Indian culture.

There are several important schemes, under which India provides scholarships for Southeast Asian students to study in India. Under the General Cultural Scholarship Scheme (GCSS) of the (ICCR), 55 scholarships are provided to Southeast Asian countries (Brunei-1, Thailand-10, Malaysia-1, Philippines-1, Vietnam-6, Combodia-2, Indonesia-20, Laos-4 and Myanmar-10). Thirty scholarships are provided to BIMSTEC countries. Myanmar and Thailand from Southeast Asia come under the BIMSTEC umbrella. The Indian Council of Cultural Relations (ICCR) has established 20 cultural centers (and two sub-centers) worldwide. Of these, Southeast Asia has only two centers (Jakarta and Kuala Lumpur) and one sub-center (Bali).

These centers organize performances of dance, drama, and music, essay competitions, lectures, photo exhibitions, and so on. They also conduct classes for yoga, Indian music and Hindi language. However, with the increasing importance of Southeast Asia in India's foreign policy, there is an immediate need to open more centers in the region. Educational assistance forms another important element in India's cultural diplomacy, offering Southeast Asians opportunities to visit India, acquire education and learn about Indian culture.

There are several important schemes, under which India provides scholarships for Southeast Asian students to study in India. Under the General Cultural Scholarship Scheme (GCSS) of the (ICCR), 55 scholarships are provided to Southeast Asian countries (Brunei-1, Thailand-10, Malaysia-1, Philippines-1, Vietnam-6, Combodia-2, Indonesia-20, Laos-4 and Myanmar-10). Thirty scholarships are provided to BIMSTEC countries. Myanmar and Thailand from Southeast Asia come under the BIMSTEC umbrella. These centers organize performances of dance, drama, and music, essay competitions, lectures, photo exhibitions, and so on. They also conduct classes for yoga, Indian music and Hindi language. However, with the increasing importance of Southeast Asia in India's foreign policy, there is an immediate need to open more centers in the region. Educational assistance forms another important element in India's cultural diplomacy, offering Southeast Asians opportunities to visit India, acquire education and learn about Indian culture.

There are several important schemes, under which India provides scholarships for Southeast Asian students to study in India. Under the General Cultural Scholarship Scheme (GCSS) of the (ICCR), 55 scholarships are provided to Southeast Asian countries (Brunei-1, Thailand-10, Malaysia-1, Philippines-1, Vietnam-6, Combodia-2, Indonesia-20, Laos-4 and Myanmar-10). Thirty scholarships are provided to BIMSTEC countries. Myanmar and Thailand from Southeast Asia come under the BIMSTEC umbrella.

In Silicon Valley, there is a very active Indian Cultural Center that promotes Indian culture by organizing events and offering classes. Several wealthy Indians have established Indian Studies departments at major universities in the United States to project a positive image of India.

Indians have achieved the kind of domination of their region that could not be achieved by the force of arms. Rather than its huge military and its nuclear arsenal, India's soft power based in Bollywood has been its weapon of choice. Almost every child, every newspaper and every TV channel in Pakistan follows the day to day activities of Bollywood stars like Amitab Bachan and Aishwariya Rai. Having established its cultural dominance over its neighbors including Pakistan, India is now setting its sights on Hollywood and US media to become a major media and entertainment powerhouse extending its influence and spreading its culture well beyond South Asia. The Indians are coming! Rupert Murdoch, Sumner Redstone and Walt Disney and Sony bosses had better watch out!

Thursday, June 19, 2008

The Nightmare Scenario for Pakistan

As the seventh anniversary of the 911 attacks approaches and the Americans prepare to vote in November, a major terrorist attack from Pakistan's tribal areas on the US soil is the nightmare scenario that may unfold in 2008. Such an attack would immediately trigger massive bombing and invasion of Pakistan by the US and NATO, with or without the approval of Pakistani authorities. It could also result in the removal of the democratically elected government and installation of a new military regime in Pakistan. Not only would this scenario set Pakistan as well as South and Central Asian regions back by decades, it would unleash terrible consequences for Pakistani diaspora around the world. In addition to unparalleled death and destruction, such a scenario could turn Pakistan into a failed state with widespread unrest, homelessness, poverty, hunger and disease. With the potential take-over of Pakistan's nuclear arsenal by the US, it would render Pakistan unable to deter its neighbors from adventures into Pakistan. Within the United States, it would mean the election of John McCain as the new president continuing the current policies of George W. Bush.

This nightmare scenario is not far-fetched. It is almost certainly on the minds of US military planners planning contingencies. At the Senate Armed Services Committee hearings recently, General David H. Petraeus, the newly-nominated head of the US Central Command, answered in the affirmative to a question by Sen Jack Reed if he agreed with the intelligence community and Joint Chiefs Chairman Admiral Mike Mullen's assessment that the next terrorist attack on the United States would most likely come from the Pakistan-Afghanistan border area. The US intelligence Community, the Chairman of the Joint Chiefs and future CENTCOM commander all agree that Pakistan poses the greatest danger as the potential source of a major terrorist attack on the US.

There is a rising chorus of international criticism of Pakistan as the newly elected government in Islamabad attempts to change its policy on dealing with the terrorist threat along Pakistan-Afghan border. It seems that the Pakistani military is showing signs of weariness in its fight against the Taleban who have local roots in the tribal belt on both sides of the highly porous Durand line. The NWFP provincial government and Islamabad are eager to try negotiating peace with the militants to improve security within Pakistan. However, the US, NATO, and Afghan governments are concerned with rise in attacks on their forces from the militants who are alleged to be operating from Pakistani side of the border. With the rising death toll on the Afghan side, there are warnings coming from US General Dan McNeill and President Hamid Karzai to Pakistan to stop the cross-border attacks.

As the Pakistani leadership currently focuses on restoration of judges, peace deals with the Taleban in tribal areas, and calls for UN inquiry into Bhutto assassination, this rising chorus of criticism has the potential to blind-side the newly elected government with sudden escalation along the border with Afghanistan. It is time for the new Pakistani leaders to start to pay attention to Pakistan's vital relations with the West and prevent any precipitous action by US and NATO along the Pak-Afghan border. Pakistan must persuade and involve US in any peace deals with the Taleban to avoid creating suspicions. The Taleban must be told not to provide sanctuaries to foreign terrorists and extremists and to stop cross-border attacks as a condition for any peace deals. Pakistan and US must focus on isolating and marginalizing the extreme elements within the Taleban and offer incentives to those who agree to cooperate in ending the hostilities threatening the entire region.

On the US side, there is some hope that a precipitous and a major and purely military action along the western border can be avoided. The new CENTCOM commander General Petraeus believes in the use of diplomacy along with the military force. “In most of the issues we'll address, a purely military approach is unlikely to succeed,” he noted, “and our strategy must recognize that.”

General Petraeus said he’d seek to deal with the underlying causes of challenges in the region. Thoughtful joint planning and coordination with the US and NATO as well as internal strategizing by Pakistan's diplomatic and security analysts can help Pakistan avoid the nightmare scenario to assure Pakistan's democracy and economic progress. It is important that Pakistan's leaders recognize the far-reaching significance of their actions regarding the war on terror and feel the urgency and full weight of responsibility while making political and security decisions.

Monday, June 16, 2008

Silicon Valley Summit of Pakistani Entrepreneurs

On June 14, the SAP campus in Palo Alto was the venue for OPEN Forum 2008, probably the world's largest gathering of Pakistani entrepreneurs outside of Pakistan with over 500 attendees. Organization of Pakistani Entrepreneurs (OPEN) describes itself as "a voluntary, not-for profit organization dedicated to the promotion of entrepreneurship and leadership in the Pakistani-American business community". Only a stone-throw away from Sandhill Road, the home of the big Silicon Valley venture capitalists, and located next to the legendary Xerox PARC, OPEN Forum this year naturally brought together a large number of VCs, high-tech executives, technologists, political leaders, diplomats, recruiters and the media.

The conference was opened by Dilawar Syed, the current president of OPEN, who welcomed the attendees and explained what OPEN Silicon Valley is about.

It was immediately followed by Adam Lashinsky of Fortune Magazine in conversation with Mike Moritz, Manging Director of Sequoia Capital, who came in via live satellite link from his hotel room in Beijing, China. It was 2AM Beijing time and Moritz confessed he was dressed only from the waist up.

Mike Moritz, a prominent partner at Sequoia Capital,made a keynote speech at OPEN Forum 2008. Mike Moritz discussed Sequoia's investment strategy and key areas such as information technology, clean technology, energy being targeted by the biggest VC partnership known for its successful investments in Yahoo, Google, PayPal, Apple Computer, Cisco, and YouTube. In terms of its international investments, Moritz said the Sequoia started investing in Israel, India and China when the founders of their portfolio companies opened R&D facilities there. Although Sequoia is currently not looking to go into another geography, it may consider other geographies such as Pakistan if their portfolio companies chose to open offices there. It should be noted that Sequoia has invested in several Silicon Valley startups with Pakistani-American founders. The chances of that happening are fairly low unless the Pakistani expatriates in the valley make a case for it.

In one of several panel discussions that followed Moritz at OPEN Forum 2008, Faraz Hoodbhoy, the CEO of PixSense, argued that Pakistani expatriates in Silicon Valley are the harshest critics of Pakistan. They are not immediately likely to ask US VCs to invest in Pakistan. PixSense currently has a big presence in Pakistan and prides itself in what Pakistani engineers have done for it to make it successful at a very low budget., the only Pakistani company to get US VC funding from Draper Fisher Jurvetson and ePlanet Ventures, accomplished it because its founders are from Silicon Valley who set up a development center in Pakistan. Please read this post for more on venture investments in Pakistan.

It was heartening to see that three of the five participants in the entrepreneurs panel on "Secrets of Success" were fellow NEDians, alumni of Karachi's NED University now settled in Silicon Valley. Naveed Sherwani is the founder and CEO of OpenSilicon funded by Sequoia Capital, Raghib Husain is the founder and CTO of Cavium, a VC funded company with over $1 billion valuation, that had a successful IPO on NASDAQ last year and Safwan Shah, the CEO of Infonox, which he bootstrapped into a successful, private held business. While the secrets each shared varied, the common themes were risk-taking, burning desire, serendipity, perseverance and good preparation to seize the opportunities.

The conference was an all day affair capped by an evening keynote by Howard Dean, the Chairman of the National Democratic Party. Howard Dean was clearly upbeat about the Democrats' prospects in November elections and talked about the recent successes in congressional elections where Republicans have been defeated in traditionally Republicans district. He highlighted a 50-state strategy to make gains for Democrats in all parts of the country from coast to coast.

Dilawar Syed and his team deserve a lot of credit for pulling off a very successful OPEN Forum 2008, an event that will bring positive focus on the Pakistani expatriate community in the United States and present a side of Pakistan that is too often ignored by the US and Pakistani media. If OPEN Silicon Valley continues to showcase Pakistani expats in the same way as TIE presents Indians, it is quite possible, even probable that, in the foreseeable future, we can develop Pakistan as a great brand name destination that attracts business and investment to Pakistan and helps its people become part of the modern, successful and globalized world at par with India and China and other emerging economies of the world.

Sunday, June 15, 2008

Venture Investing in Pakistan

As the US venture capital investment activity in India and China races ahead, the VC investments in Pakistan are just beginning to show signs of life with two young Pakistani companies receiving funding in late 2006 and middle of 2007.

Venture capital investment in China was up to $719m across 39 deals during the first quarter of 2008 from $492m in the first quarter of 2007, with media and advertising companies accounting for the bulk of deal activity and investment, according to the China Quarterly Venture Capital Report released by Dow Jones VentureSource. China has seen some very high-profile IPOs and exits recently that have firmly established China's value to the US VCs as a desirable destination.

IT and IT enabled services sectors have emerged on top for VC investments in India in the first three months in 2008, attracting over two-third of the total deals worth 144 million dollar. Venture capitalists invested $928 million in 80 India-based companies last year, a significant 166% jump compared to 2006, according to Down Jones. The Dow Jones report found nearly 48% of all venture financing deals in India were for Information Technology (IT) companies, as 38 rounds were completed, accounting for $384 million, more than India’s entire 2006 venture investment total. The most popular recipients of venture capital in the IT industry were companies in the Web-heavy “information services” sector, which accounted for 22 deals and nearly $141 million in investment. Among the deals in this area was the $10 million second round for Bangalore-based Four Interactive, an online provider of local information on food, events, lifestyle, shopping and more.

Overall, from 2006 to 2007, the number of VC and private equity deals in India increased from 299 to 387. The value of the deals increased from $7.5b to over $14b year-over-year, according to IVCA, the Indian Venture Capital and Private Equity Association (IVCA) which has all the big-name Silicon Valley VCs represented in India. Only a quarter of the funds accounted for VC deals. In terms of exits, there were 65 M&As and 16 IPOs in 2007.

While China is flying about 5-10 years ahead of India which is gaining altitude in terms of venture capital investing with high-profile exits, Pakistan is just trying to get off the ground in this space.

Naseeb Networks, a Pakistani online recruitment, social networking, and classifieds company, has received an undisclosed amount of venture investment from two Silicon Valley VC firms, ePlanet Ventures and Draper Fisher Jurvetson. Earlier in December, 2006, PixSense received $5.4 million in equity funding, led by ATA Ventures and Innovacom.

While there is a history of US VC investments in Silicon Valley technology companies founded by Pakistani founders, none of these VCs have previously funded companies such as Naseeb and PixSense which have significant R&D centers and operations in Pakistan.

At the OPEN Forum 2008 in Silicon Valley, Mike Moritz, Senior Partner at Sequoia Capital, said that Sequoia is currently not looking to go into another geography but it may consider other geographies such as Pakistan if their portfolio companies chose to open offices there. What took Sequoia to China, India and Israel were the founders of Silicon Valley companies who made a decision to locate R&D facilities in these geographies.

Speaking in a panel discussion at OPEN Forum 2008 recently organized by the Organization of Pakistani Entrepreneurs in Silicon Valley, Faraz Hoodbhoy, the CTO of PixSense, argued that Pakistani expatriates in Silicon Valley are the harshest critics of Pakistan. They are not immediately likely to ask US VCs to invest in Pakistan. However, Hoodbhoy's company PixSense has taken this path. PixSense currently has a sizable presence in Pakistan and prides itself in what Pakistani engineers have done for it to make it successful on very low budget., the only other Pakistani company to get US VC funding from Draper Fisher Jurvetson and ePlanet Ventures, accomplished it because its founders are from Silicon Valley who set up a development center in Pakistan that has produced great results.

Faruq Ahmad, a Pakistani-American VC in Silicon Valley, wrote recently: "In my field of expertise, venture capital, Pakistan's success is particularly hard to predict. My investment experience includes India and China, and I saw how long it took these countries to get to critical mass as attractive investment destinations for US institutional investors. Pakistan is assembling a $50 million fund to help kick-start venture capital support for local companies. How the government structures and selects managers for this fund will determine whether future funds attract institutional investors and sponsorship support from top Silicon Valley firms, assuming attractive deal flow."

A public-private partnership is working with US experts to develop venture capital and private equity sectors in Pakistan. Venture capital is being promoted by the Competitiveness Support Fund (CSF), a joint initiative of the United States Agency for International Development (USAID) and Ministry of Finance, Government of Pakistan which is working closely with the Pakistan Business Council (PBC). To support the innovation economy and spur entrepreneurial economic growth in Pakistan; CSF has a special window on business incubator/ venture capital for which CSF will be working closely with relevant stakeholders in the public and private sector along with the academia and the media. This facility will lead to the creation of business incubators and provide funding for them. Support for CSF is part of the US$ 1.5 billion in aid that the US Government is providing to Pakistan over five years to improve economic growth, education, health and governance.

While the efforts of the Pakistani government and CSF are laudable, the real impetus will come from the successful outcome of VC investments in companies such as PixSense and Naseeb. The other factor that will influence US VCs to do deals in Pakistan is the willingness of Pakistani-American entrepreneurs in the US to set up presence in Pakistan and demonstrate the value of Pakistani talent to the Americans and the rest of the world. Events such as OPEN Forum 2008 will also help bring Pakistan as a VC destination into the consciousness of the US VCs. And, of course, a measure of political stability and security will make a big difference to Pakistan's perception as investment-friendly.

Related Link:

Start-ups Drive a Boom in Pakistan

Wednesday, June 11, 2008

Ahmad Rashid in Silicon Valley

Future of Democracy in South Asia:

The Indian Community Center in Milpitas, CA was the venue on June 11, 2008 for a panel discussion organized by Asia Society with well-known Pakistani author Ahmad Rashid, Stanford University Prof. Larry Diamond, UC Berkeley Prof. Pradeep Chibber, and Muhammad Humayon Qayoumi, President of California State University at Hayword. The discussion centered on "The Future of Democracy in South Asia" and it was moderated by Prof. Diamond. The event drew capacity crowd of over 100 attendees of many different ethnicities and origins in the US including Caucasian Americans as well as South Asians, East Asians and Central Asians.

Ahmad Rashid's presence was made possible by his ongoing book tour that brought him to Silicon Valley, California to promote his latest work "Descent into Chaos: The US and the Failure of Nation Building in Pakistan, Afghanistan, and Central Asia". Professor Diamond gave Rashid's book a big plug and stood in line with others to buy and get the book autographed by the author after the panel discussion concluded.


Larry Diamond moderated the panel. He is a senior fellow at the Hoover Institution, Stanford University, and is the author or editor of more than twenty books, including Squandered Victory: The American Occupation and the Bungled Effort to Bring Democracy to Iraq, and the newly released The Spirit of Democracy: The Struggle to Build Free Societies Throughout the World.

As part of the introductions, Prof. Diamond mentioned Freedom House findings that about 2 billion people, almost a third of humanity, now live under some form of democracy. Half of this population lives in India, the world's largest democracy. He praised the work of the ICC in nurturing good relations between India as the world's largest democracy and the United States as the world's most powerful democracy. The panelists were introduced as follows:

Ahmed Rashid is a Pakistani journalist and best-selling author who has covered Pakistan, Afghanistan, and Central Asia for 25 years. He writes for The Washington Post, The International Herald Tribune, The New York Review of Books, BBC Online, and The Nation and appears regularly on NPR, CNN, and the BBC World Service. His newest book is Descent into Chaos: The U.S. and the Failure of Nation Building in Pakistan, Afghanistan, and Central Asia. Previous books include Jihad, Taliban (which has sold over 1.5 million copies), and The Resurgence of Central Asia.

Pradeep Chhibber is Professor and Chair of the Political Science Department at U.C. Berkeley. He is the author of The Formation of National Party Systems, Democracy without Associations: Transformation of Party Systems and Social Cleavages in India, and many articles. He holds an M.A. and an M.Phil. from the University of Delhi and a Ph.D. from UCLA.

Mohammad Humayon Qayoumi is president of California State University, East Bay. The author of eight books and over 85 articles, he was the senior advisor to the minister of finance of Afghanistan from 2002 to 2005 and sits on several boards of directors, including that of the Central Bank of Afghanistan. Dr. Qayoumi has a B.S. degree in electrical engineering from American University of Beirut and an M.B.A. in finance and a Ph.D. in electrical engineering from the University of Cincinnati.

The Panel Discussion:

After the customary introductions, Prof. Diamond invited each of three panelists to speak on the topic for 10-15 minutes each. Mr. Qayoumi was the first speaker. He said democracy does not begin and end with free and fair elections. It must be anchored in rule of law and transparency of actions and budget/spending process to stop corruption. In most the nations considered free by Freedom House, there is no transparency in budgets and spending. He then proceeded to complain about the lack of US financial support to develop Afghanistan and described Pakistan as the "biggest exporter of terrorism". He questioned Pakistan's raison d'etre as a nation and dismissed it as just four ethnic groups with little in common except a passport and quarreling with each other and Afghanistan as just a buffer state. He blamed Pakistan for most of the problems in Afghanistan and drew applause from a section of the audience.

Mr. Qayoumi was followed by Ahmad Rashid. Mr. Rashid pointed out the two biggest early mistakes by the US in Afghanistan after 911. The first mistake was to tell Pakistan to go after Al-Qaeda exclusively and leave the Taleban alone, which allowed the Taleban to gather and regroup in Pakistan's tribal belt along the Afghan border. The second mistake was to farm out security to the Afghan warlords rather than strengthen the central government in Afghanistan.

Rashid said the resurgent Taleban have now become a major threat to both Pakistan and Afghanistan. He criticized the US policy of continuing to support President Musharraf after the crushing defeat of his loyalists and the Islamists in the recent elections. He said the Pakistani military still dominates Pakistan's foreign policy and it is also continuing to support Mr. Musharraf who is a threat to Pakistan's fragile democracy led by a secular party. He blamed the powerful military for undermining democracy in Pakistan during its 60 years of existence. He even brought up the possibility of another martial law in the near future with deteriorating political situation and the latest border incident between NATO and Pakistan that killed 11 Pakistani soldiers.

Prof. Pradeep Chhibber praised India's democracy and mentioned all the surveys and opinion polls in India that reinforce broad public support for current democracy. However, the Indian democracy does face two key challenges. The first challenge is the complete absence of the government or state in large swaths of India. The second challenge is that the government often acts in inconsistent and arbitrary ways where it does exist. He went on to say that, in some parts of Chhattisgarh, the government relies on private militias to act on its behalf. He also acknowledged the existence of corruption and criminal elements among the politicians in India. He said about a third of Indian legislators have criminal records. Democracy is a process that must be allowed to continue in spite its messiness for it to eventually bear fruit.

Questions and Answers:

There was strong participation by the audience in the Q&A session that followed the speakers. This scribe addressed the following question to Ahmad Rashid, "Unlike Al-Qaeda, the Taleban do have roots among the people on both sides of the Afghan-Pakistan border. Do you think the US and Pakistan should negotiate with some elements within the Taleban for peace, rather than rely solely on military means to defeat them?" Rashid said there should be negotiations, but only after "the Taleban sanctuaries end in Pakistan." Prof. Diamond did a follow-up by asking Rashid as to how can the sanctuaries be ended? Alas, Rashid had no answer to this question either during the Q&A or later at the book-signing in the lobby.

A couple of questioners asked whether Al-Qaeda was real and one even attempted to make fun of the Taleban as "75-year old students" of the madrassahs in Pakistan. These questions seemed to be tongue-in-cheek but those asking appeared to be quite serious.

There was a question as to why democracy has taken hold in India but not in Pakistan. Rashid suggested it was because of Pakistan's powerful military and its political and economic ambitions. Others thought it had to do with religion. The scribe offered that it may have something to do with the emasculation of the feudal lords in India through extensive land reform that never happened in Pakistan. One participant, a former president of TIE, proposed that Pakistan had to have strong military, disproportionate to its size, because of continuing hostilities with the much bigger neighbor India. The powerful military, needed for strong defense, has now become a liability in its quest for democracy. There was general agreement that democracy is a process that must be allowed to continue un-interrupted to work out its bugs and improve over time to serve the people.

South Asians in Silicon Valley:

The strong South Asian presence in Silicon Valley is helping bring focus to issues related to India, Pakistan, Afghanistan and the entire South and Central Asian region with the participation of US opinion makers such as Stanford Prof. Larry Diamond who is also a fellow at the Hoover Institution. The ICC is clearly playing a major role and showing a path to PACC, its Pakistani counterpart in the valley.

Is Pakistani Economy Adrift?

Pakistani economy adrift with nobody in full charge: Burki

* Economist says policy makers have no serious priorities, common man sees no sign of relief
* Says period of high growth in Pakistan is over
* Says government should not be held responsible for current wheat shortage Warns government against subsidizing energy

WASHINGTON: No one is in full charge of Pakistan’s economy, while the political elite is preoccupied with the judges’ issue and power-sharing arrangements, according to Pakistani economist and financial planner Shahid Javed Burki. Burki, a former World Bank vice president and finance minister in the Moeen Qureshi caretaker government, told a meeting at the Woodrow Wilson Centre, at which he is a senior scholar, that there is a “disconnect” between the poor, whose prime concern is their next meal, and the elite. The establishment and the citizen are not on the same page, which is making the common man increasingly angry as he sees no sign of any serious attention being paid to his precarious situation. Burki said if the present situation continues, there would be social and political turmoil. He said he found during several months of stay in Pakistan that the policymakers have no serious priorities. Burki said looking back over the last 60 years, Pakistan has not done badly economy-wise, having maintained an annual growth average of 4 percent. The country’s economy has grown 18 times since independence. There has also been a significant decline in poverty, which was 65 percent in 1947 but which has fallen to 33 percent today. Only 20 percent of Pakistan’s income is derived from agriculture, while 53 percent comes from the service sector.

Period of high growth is over:

The worrying aspect of Pakistan’s economy is that it is dependent on external capital, not domestic resources. Neither has Pakistan invested in the development of its vast human resources. Investing in education should be the top priority from now on, Burki stressed. He also warned that the period of high growth for Pakistan is over. Poverty is going to increase and income disparities are set to worsen. Pakistan is also burdened with a huge fiscal deficit, which stands at 7.5 percent to 9 percent of GDP, with trade and balance of payments representing a good part of it. Pakistan, he explained, can only tolerate a deficit of 4.5 percent to 5 percent. He advised the government to cut down public spending but without slowing growth. He pointed out that the Musharraf government had failed to enhance even by one kilowatt Pakistan’s power-generating capacity, which was why the country had been hit today by such severe shortages. He said the rich are protected against power shortages as they have their own generators but the vast majority is in dire straits and it is angry and restless.

Wheat shortage:

Burki said that the government should not be held responsible for the current wheat shortage. He pointed out that the terms of trade worldwide are in favour of agriculture and Pakistan’s policymakers must take advantage of that because Pakistan has a lot of potential, given the right set of public policies. He regretted that Pakistani policymakers know very little about the global economy and as a result, the country is not well integrated into the global economic system. Burki said it is absolutely necessary to have a high rate of savings and investment, while the market should be allowed to determine the allocation of resources, but the private sector should not be “hand-held”, as in the past.

Energy subsidies:

He also warned against providing energy subsidies, nor should the government become the employer of last resort. There should be no open-ended protection to the textile industry and no price controls to cut inflation. Public servants must not be underpaid. Punjab, he predicted, could become the “engine of growth” for the rest of the country, but it must reduce the burden it places on the federal government.

Shaukat Aziz:

He described former prime minister Shaukat Aziz’s economic policies as “misguided” and a result of his failure to understand the strategy of economic planning. He said what Aziz had given Pakistan what could only be described as “casino economics”.

Source: Daily Times

Tuesday, June 10, 2008

Long March or Big Farce?

As the "Long March" by the Pakistani lawyers gets headlines in Pakistan and around the world, it is natural to ask what is all the fuss about? Ostensibly, it is to restore Pakistani judiciary as an independent and powerful institution and strengthen democracy. But is this a realistic expectation that an independent, powerful judiciary supported by lawyers and the media in Pakistan would be good for democracy and the rights of the average citizen? Let's look at the following facts to answer this question:

1. In most international opinion surveys on professional ethics, lawyers consistently rank near the bottom. They are slightly below the journalists and above the politicians and used car salesmen in how they are perceived by the general public worldwide. If the recent success of the movie "Michael Clayton" is any indication, the public perception of lawyers breaks down into four archetypes, each represented by a character in the movie: brutal (Sydney Pollack), disappointed (George Clooney), psychotic (Tom Wilkinson) and criminal (Tilda Swinton). It’s probably no coincidence that Clayton’s only Oscar went to Swinton.

2. In most of the rest of the world, the judges are generally perceived as honest. But not in Pakistan. According to Transparency International surveys, the Pakistani judiciary is considered the third most corrupt institution after police and power departments. Even the taxation and customs people are regarded as more honest than the judges. Among the four provincial governments, the Transparency survey ranks Punjab (the hub of the lawyers movement) as the most corrupt and NWFP the least corrupt.

3. The Pakistani judiciary (including Justice Iftikhar Chaudhry with PCO-I) has a long and inglorious history of undermining the laws and the constitution of Pakistan. This scribe has had personal experience with the individual judges of the highest courts showing little respect for the rule of law and engaging in corrupt practices and nepotism in their own personal lives for petty gains.

So why are the judges and the lawyers being elevated to such high stature by the "civil society" (read: foreign-funded NGOs*) and their media and politician cheerleaders? The answer probably lies in their obsessive need for vengeance against Musharraf by the PML(N), the lawyers and the journalists.

It probably goes beyond that. The real agenda appears to be to frustrate the newly elected PPP government and make it impossible for it to deliver on the PPP promises to the people in terms of their basic needs of roti, bijli and paani. Such a failure would likely result in the ouster of the PPP, early elections and the "restoration" of the pre-1999 situation with PML(N) government led by Nawaz Sharif.
This agenda can be accomplished with or without the restoration of judges. If the activist judges such as Iftikhar Chaudhry are restored, they can get rid of Musharraf by declaring his election invalid and rule against his NRO to put Zardari behind bars. Even if the judges are not restored, the continuing turmoil will still serve Nawaz Sharif's purpose of forcing early elections and ensuring his victory by pointing to lack of performance by Zardari.

The risk is that all the scheming by Nawaz Sharif and his supporters may actually give civilian led democracy a bad name and damage its prospects in Pakistan.

*Note on "civil society" NGOs: A recent Asian Development Bank report on Pakistani NGOs says as follows: "Much of the alarm of the Government about NGOs is recent and direct result of activities of the new breed of NGOs that appear less interested in delivering services or implementing development projects than in lobbying and advocacy. Many of these NGOs have sprung up overnight, and many appear to have huge funds and international support at their command, even though they lack any track record. They are often perceived as agents of outsiders with agendas that may be detrimental to Pakistan."

Monday, June 9, 2008

Pakistan Signs Hydropower Deal

MWH, a global provider of environmental engineering, strategic consulting and construction services, today announced that it was selected by the Pakistan Water and Power Development Authority (WAPDA) to provide engineering and construction management services for the Neelum-Jhelum Hydroelectric Project. The project is expected to add 963MW power generating capacity at a cost US $2.2 billion, according to Business Wire. MWH is a US firm based in Broomfield, Colorado.

Hydroelectric Power Potential in South Asia Source: Economist Magazine

This hydroelectric project, first formally announced by former Minister Omar Ayub on June 10, 2007, is finally starting in earnest under the PPP government of Prime Minister Yousaf Raza Gilani. Prior to this project, the new Pakistani Prime Minister signed a deal with a Chinese company, Dong Fong, for setting up 525 MW thermal power plant with an investment of $450 million at Chichoki Mallian (Sheikhupura). Both of these projects are expected help partially close the 3000 MW gap that exists today between supply and demand in Pakistan.

The Joint Venture, Neelum-Jhelum Consultants, lead by MWH and consisting of MWH, Pakistani firms NESPAK, ACE and NDC, and Norwegian firm NORPLAN, will provide design, construction drawing preparation and construction management services for the next eight years.

Located in the Muzaffarabad District in the state of Azad Jammu Kashmir, approximately 85 miles (138 kilometers) from Islamabad, Pakistan, the Neelum-Jhelum project is one of several major projects planned to increase Pakistan's hydroelectric generation capabilities to meet the growing energy needs of the country. The project is part of the Pakistani government's "Vision 2025 Program," envisaged to improve energy development in the country. In addition, Neelum-Jhelum is a priority project in Pakistan's Indus Basic Water Treaty with India. This project has been in the works for eight years but delayed due to various problems including the land acquisition costs in Azad Kashmir. Any further delays would jeopardize Pakistan's right to the water from Neelum river (Called Ganga in India) under the Treaty with India.

In the late 1960s, MWH helped to develop and implement Pakistan's Indus Basin Project. It was the result of a treaty between Pakistan and India, which ended a long and bitter dispute between the two countries over the use of water from the Indus River and its five tributaries. The first large dam built as part of the Indus Basin Project was the Mangla Dam, completed in 1968. An essential part of the project is the MWH -- designed spillway for a 1.1 million cubic feet per second discharge. The company provides water, wastewater, energy, natural resource, program management, consulting and construction services to industrial, municipal and government clients in the Americas, Europe, Middle East, India, Asia and the Pacific Rim.

Both power and water projects are crucial for Pakistan's economy in the intermediate and long term. The challenge for the Pakistani government is to make up for the neglect of several years in the power and water sector. It means that the government must ensure that the water and power projects get started and stay on schedule to begin to address the growing shortage of water and electricity in Pakistan.

Karachi Bearish as Asian Stocks Tumble

The bears reigned supreme as Karachi Stock Exchange (KSE)100-Index plunged by 226.33 points to close at 12,908.23, a loss of 1.75% on Monday. Other Asian countries also saw their stocks slump, India's Sensex lost 3.3%, Japan's main Nikkei 225 index slid 2.1% and Taiwan's Taiex shed 1.8%.

While the Asian and international stocks have been in decline since the beginning of the year, the latest round of losses was triggered by an $11 a barrel spike in oil prices with renewed inflation fears. On Monday, oil prices slid slightly, though this did little to ease concerns in Asia. The US markets, however, have opened higher on Monday morning.

Central banks across the globe have warned that interest rates may have to rise as they look to keep inflation under control, despite the fact that economic growth is slowing in key areas such as the US and EU.

Pakistan's State Bank has recently raised interest rates from 10% to 12.5% and cut 2007-8 growth from 7.2% to 5.8%. This forecast comes on the heels of dire talk of economic "meltdown" by the new leadership that is facing serious political instability amid growing differences in the PPP-PML(N) coalition government. The ongoing unease with new leadership is continuing to accelerate loss of confidence in Pakistan's economy by businesses, investors and consumers.

With the dramatic rise in international commodity prices, the food and fuel subsidies have contributed to Pakistan's rising budget deficit, which the central bank said would reach 6.5 percent to 7 percent. The deficit was just 4.3 percent in fiscal 2007. With imports rising faster than exports, the central bank said Pakistan's current account deficit will rise between 7.3 percent and 7.8 percent - a record high.

While it is true that at least part of the inflation in Pakistan is imported from global markets, it is important for the Pakistani leadership not to use it as an excuse for inaction on the economic front. Faced with international turmoil, it becomes even more important to assert leadership in economic matters to keep the national economy afloat and able to recover quickly in the future.

Friday, June 6, 2008

Foreign Investors Buying Pakistani Farmland

One of the Middle East's largest private equity firms has been quietly buying up farmland in Pakistan as part of plans by the United Arab Emirates to increase food security and to control inflation, according to a gulf website Please read prior blog posts on this subject.

Dubai-based Abraaj Capital says it is working with the UAE government on the strategic agribusiness investments in Pakistan. The government in Abu Dhabi has been holding talks with Islamabad about a framework for investment in its agricultural sector as it seeks to secure cheaper long-term supplies of staples such as wheat and rice.

The UAE investments appear to be part of a pattern of international investments in agriculture. Record prices of wheat and various grains have been attracting hundreds of billions of dollars from hedge funds and other speculators to the commodity futures markets (particularly wheat and rice futures) in recent months. A NY Times report now says that the investors are starting to make longer term commitments in food and agriculture sector including farmland, fertilizer, grain elevators and shipping equipment.

"Our aim is not to do away with precious farmland but in fact to raise the productivity of our farms and turn barren land in to fertile farmland," said a senior Pakistani official familiar with negotiations between Pakistan and UAE, according to a report in Financial Times.

Abraaj Capital, with $5bn of assets spread across the Middle East, North Africa and the South Asia, has been buying farmland in Pakistan during the past year, a company official said. UAE state and private entities planning to build agribusinesses in Pakistan have acquired as much as 800,000 acres of land, he said. Other companies participating in farming investments in Pakistan include Emirates Investment Group and the Abu Dhabi Group.

Similar farmland purchase or lease deals are being reported in Brazil, Canada, the United States, and the former Soviet Republics. Farmland prices have spiked up as a result of new money and growing interest in farmland.

At a recent Middle East-Pakistan Agriculture and Dairy Investment Forum in Dubai, Huma Fakhar, an adviser to the Government of Bahrain on Bahrain-US free trade agreement, said Arab nations are suffering from declining farm exports and rapid growth in population, leading to an increase in their imports of food products. Regarding investment commitments from the GCC investors in Pakistan's agriculture, livestock and dairy sectors, she termed the forum a success. "Major groups from GCC in general and the UAE in particular are willing to avail the opportunity and commit significant investment in Pakistan’s agriculture sector for the first time" she said.

Belal Pasha, Commercial Attache at Pakistan Embassy in the UAE, said five to 10 major UAE groups will explore Pakistan’s agriculture sector by making significant investment in corporate farming, livestock and dairy sectors. However, he didn’t name any group. In reply to a question, he said Pakistan could get significant share of GCC farm imports worth $200 billion if sizable investment is made in its agriculture sector.

The NY Times report raises concerns about the commodity speculators jumping into the fray. By owning land and other parts of the agricultural business, the investors, including sovereign funds, are freed from rules aimed at curbing the number of speculative bets that they and other financial investors can make in commodity markets. “I just wonder if they need some sheep’s clothing to put on,” said Jeffrey Hainline, president of Advance Trading, a 28-year-old commodity brokerage firm and consulting service in Bloomington, Illinois in the United States.

Concerns such as Mr. Hainline's make it necessary for countries such as Pakistan to be deliberative in crafting land sales/lease agreements. Any lease or sales of farmland must be carefully regulated to ensure that the country's food security is not jeopardized by the investors interest in making the biggest possible returns on their investments. The interests of the consumers and the investors must be carefully balanced.

The new agriculture investments and modernization of farming in Pakistan can potentially raise farm productivity and help stabilize prices to adequately feed the growing population as well as increase agricultural exports to earn foreign exchange.
At the same time, Pakistan can follow the Brazilian model of growing and using sugarcane for producing ethanol to reduce its dependence on imported oil. However, this must be done with a sound plan to ensure Pakistan's food security and sovereignty remain intact.

Sources: NY Times
Arab Build
Financial Times
Fresh Plaza

Higher Profits Repatriated from Pakistan

Repatriation of profits and dividends from Pakistan rose by 12.2 percent during the first ten months of the current fiscal year. Foreign direct investors sent $735m abroad from July 2007 to April 2008, up from $654.9 million repatriated in the corresponding period last year, according to the figures released by the State Bank of Pakistan.

It is this policy of the Musharraf-Aziz era permitting repatriation of 100% of the profits that spurred a significant increase in foreign direct investment over the last several years. The investments in power, communication, oil and gas have led the pack in profits repatriated recently.

Thermal power generation companies sent $151.27 million, the most by any sector of economy. This represents 27.9 percent increase over $118.32 million sent last year.

It was followed by the telecommunications sector, which sent $92.06 million during July-April period. It is a drop of 14.3 percent from $107.42 million remitted last year.

The oil and gas exploration companies transfered $64.56 million, up by 83.9 percent from $35.1 million last year.

Petroleum refining sector repatriated $51.7 million compared to $48.69 million sent abroad last year.

Repatriation of profits by companies making pharmaceuticals & OTC products declined from $48.22 million to $26.31 million. Tobacco and cigarettes sector sent abroad $27.28 million as compared to $17.6 million last year.

Chemical manufacturing companies' profit repatriation declined from $42.74 million to $39.4 million. The repatriation of profit by financial sector fell from $92.12 million to $90.64 million.

Many sectors showed a significant decline in profits repatriation. The SBP statistics show no profits repatriated from paper & pulp, mining & quarrying and construction so far this fiscal year. Repatriation by foreign investors registered an increase of 59 percent to 804.2 million dollars during FY07 as compared to 504 million dollars sent abroad during FY06.

Foreign direct investments and the ability to repatriate profits have been the key to the phenomenal economic growth and dramatic poverty reduction in China. What has differentiated China's success from India's has been China's ability to attract vast amounts of FDI. Pakistan must follow the Chinese example to achieve similar results.While it may create major disparities between the rich and the poor in the short term, it is the only to ensure continuing poverty reduction and makes all boats rise with massive job creation. Please see earlier blog post on this subject.

There are some Pakistani economists who are advocating limiting profits repatriation by foreign investors. It may help reduce the loss of foreign exchange reserves temporarily. However, such a move will deter further FDI investments and hurt Pakistan's economic development, job growth and poverty reduction over the long run.

Thursday, June 5, 2008

Pakistan Suspends Tribal Peace Talks

Pakistan's Prime Minister Yousaf Raza Gilani has decided to suspend peace talks with tribes in north and south Waziristan. The apparent sticking point is the insistence by Pakistan, at the behest of the United States, that the tribal leaders agree to stop attacks on both sides of the Pakistan-Afghan border.

According to a report in the Wall Street Journal today, this move by Pakistan's new government could bolster ties between Islamabad and Washington as the Pentagon voices increasing concern that the Taliban and other al Qaeda-linked militant groups have used the peace talks, and accompanying cease-fire agreements, to intensify their military strikes inside Afghanistan.

Pakistan, consequently, will maintain its military presence in South Waziristan and continue to conduct offensive operations against militants throughout the tribal belt, unless they agree to the new terms set down by Mr. Gilani's government, according to officials familiar with the talks. This decision is likely to mean an end to the current ceasefire being observed by the militants and the military on the Pakistani side of the border. It raises the specter of the return of the suicide bombers to the streets of Pakistani cities.

The Bush administration and Mr. Gilani's government have intensified discussions over counterterrorism strategy in recent weeks. U.S. Joint Chiefs of Staff Admiral Mike Mullen is in Islamabad for two days of talks with senior Pakistani military officers, including the army's chief of staff, Gen. Ashfaq Kiyani. Islamabad's new ambassador to Washington, Husain Haqqani, has also met with senior Pentagon and State Department officials in recent days, including Secretary of State Condoleezza Rice and Gen. David Petraeus.

"These negotiations should remove a major impediment in U.S.-Pakistan relations," a senior Pakistani official reportedly told the Wall Street Journal.

The White House's National Security Council spokesman Gordon Johndroe said Wednesday he couldn't comment on any continuing discussions between the U.S. and Pakistan on counterterrorism operations.

Karachi: The Urban Frontier

National Public Radio(NPR), an American radio network, is doing a series on a massive wave of urbanization sweeping the world's emerging economies such as Brazil, China, India and Pakistan. It has chosen to start with Karachi, which it describes as Pakistan's "economic lifeline" and financial and industrial "powerhouse" that produces 25% of Pakistan's GDP, and calls it "one of the largest and most crowded cities of the world". It has a segment on Shehri, the activist group fighting big-money developers.

It highlights several other facts about Karachi such as:

1. Karachi is built along a natural harbor facing the Arabian Sea, and this central location between the Middle East and India has made Karachi an important trading port for hundreds of years.

2. Karachi encompasses both its old seafront district and a sprawling web of commercial and residential development that covers almost 1,400 square miles. Its contemporary landscape spans skyscrapers, posh golf resorts, congested roadways and sprawling squatter colonies.

3. The Port of Karachi handles 60 percent of Pakistan's cargo, and the Karachi Stock Exchange is one of Asia's most active trading markets. The city's main industries include shipping, trade, finance, banking, information technology, manufacturing, real estate, media and education.

4. Like any big city, it has its share of problems. Pollution, crime, corruption and political volatility are just some of the issues confronting the 12 million to 18 million "Karachiites" who call this overcrowded city home. Karachi is 60 times larger than it was when Pakistan was created in 1947. And with the population growing at an annual rate of 6 percent, one of the biggest challenges for city officials is managing the tensions and violence that often flare along ethnic and religious lines.

5. Karachi is growing so fast that estimates of its population range from 12 million to 18 million. The country's financial capital is also a city where about half the population lives in illegal houses.

To learn more about this NPR series, please visit NPR Morning Edition.

Tuesday, June 3, 2008

India is the World's Murder Capital

While India leads the world in total number of murders, South Africa is number one by per capita murder rate. The top five countries by total number of homicides are India, Russia, Colombia, South Africa and United States, according to

Based on murders per 1000 people, India ranks at 26 along with Yemen while Saudi Arabia and Qatar have the lowest murder rates ranking them at 61 and 62 respectively on a list of 62 countries. Though Pakistan is not included in this list, its per capita rate of 0.0602 per 1000 would put it at number 20 along with Poland and just slightly above the US which is at number 24. Pakistan's murder rate is also well below the weighted average of 0.1 per 1000 reported for the world by

There were 32,719 incidents (Nationmaster puts it at 37,170) of murder recorded in India, whereas there were 28,904 in Russia, 26,539 in Colombia, 21,995 in South Africa, 16,692 in the US, 13,829 in Mexico and 9,631 in Pakistan, the report compiled by National Crime Records Bureau and released by the India's Union Home Ministry, said.

Experts believe the actual crime rate in India (and probably Pakistan) is even higher with many cases going unreported.

Overall, five million cases of crime, including murder, rape and drug offenses, were reported in India in 2007-08, the report compiled by the National Crime Records Bureau (NCRB) and released by the Indian home ministry says.

It is interesting to note that Pakistan does not really live up (or down, depending on your perspective) to its undeserved reputation as an "unsafe country" when compared on the basis of real data and crime statistics. On the contrary, it appears to be about as safe as the United States or neighboring India. It is a few, high-profile Al-Qaeda and Taleban terrorist leaders, and the acts of violence they inspire, that contribute to Pakistan's image as an unsafe place. The Western and Pakistani media's pre-occupation with wall-to-wall reporting of such violence enhances the stature of the terrorists and serves their purposes by attracting misguided young men to their destructive cause.

The Pakistan travel advisories by the US, UK and other governments advising their citizens not to travel to Pakistan dramatize the concerns about the security situation there. Refusal by sports teams such as the Australian cricket team to play in Pakistan also wrongly reinforce security concerns.

Among the BRIC countries(Brazil, Russia, India and China), Brazil had some 55,000 homicides in 2005 -- a few thousand more civilians than in three years of war in Iraq, according to leading estimates as reported by Reuters news agency. In 2005, 31,000 murders were reported in China, down 3,000 from the year before, according to He Ting, director in the ministry's criminal investigation bureau, as reported in Shanghai Daily. Neither Brazil nor China are included the report ranking 62 nations.

For the average tourist or businessman or investor, Pakistan is as safe or safer than the BRIC countries attracting a lot of attention as today's most important emerging economies. It is important for Pakistani government, media and the people to accurately inform the world about the real crime data and violence statistics and put them in perspective through a media campaign. If, instead of staying away from Pakistan, every one joins Pakistanis to defy the terrorists and the warmongers, the world will be safer for all of us.