Thursday, January 31, 2008

Emaar Boss Bullish on Pakistan

Talking with CNBC today, Mohamed Ali Alabbar, Chairman of Dubai-based Emaar Properties, said he believes Pakistan represents a great investment opportunity for his company as it goes global. In fact, he repeated it twice to convince Erin Burnett, the CNBC anchor, who appeared surprised. He further said Emaar sold a major project yesterday within hours of launch in Pakistan.

A massive real estate project valued at $43b by Emaar is underway in Pakistan to develop two island resorts near Karachi. This is Emaar's single largest project and supersedes the $26.7 billion King Abdullah Economic City project in Saudi Arabia announced in 2006. This project will include office buildings, hotels, apartments, shopping malls, restaurants, golf courses, and beaches. The two islands will be self-contained cities spread over 30,000 acres of land.

Emaar has already energized the Pakistani economy with development projects worth $2.4 billion. Emaar has unveiled its first master planned community in the country — Canyon Views in Islamabad. The company has also announced the highlands project in Islamabad and Crescent Bay in Karachi. It has also signed a memorandum of understanding (MoU) with Port Qasim Authority for a mixed-use land development comprising residential, retail, commercial and hospitality components.

Another Dubai-based company, Abraaj Capital, has acquired land in Karachi's financial district to build Karachi Financial Towers (twin-towers) to cater to the booming banking sector in Pakistan.

Apart from creating new job opportunities for Pakistanis, these projects will support ancillary industries and strengthen foreign investment inflow into the country.

Arif Masud Naqvi Vice-Chairman of Dubai based Abraaj Capital said that Pakistan is a country of enormous business potential, and investors are comfortable and see opportunity rather than risk.

ASEAN Architect Suharto Passes On

Last Sunday was a sad and a historic day in Southeast Asia as General Suharto, a key architect of ASEAN, left this world at age 86. It seemed like any other day in Indonesia and the world. There was a state funeral but few world leaders mourned his passing. However, the General's close friends and co-architects of ASEAN, Singapore's Lee Kwan Yu and Malaysia's Mahathir Muhammad, reportedly made a visit to his deathbed and wept.

"Lee, 84, and Mahathir, 82, paid what they knew would be their final respects to a former comrade-in-power, in a moment pregnant with symbolism as the curtain was drawing on a key regional actor. The death of Suharto, the most senior of the three ASEAN octogenarians, marks the beginning of the end of a defining generation of regional leaders", said Yang Razali Kassi of Pacific CSIS.

General Suharto leaves a mixed legacy for Indonesia and the entire region. He ruled with a firm hand over a diverse and sprawling country. Many will remember him for the rapid progress made by Indonesia and the ASEAN region that transformed both from agrarian and natural resource based economies to modern industrial economies. Others will recall the deaths of millions of Indonesians in the Communist purge, the human rights abuses in Indonesia and the horrors in East Timor and Aceh that took place on his watch.

Lee Kwan Yu and Mahathir Muhammad, the other two important architects of ASEAN, share many things in common with General Suharto. It was, therefore, quite natural for them to weep at the General's deathbed and think about their own legacies.

The questions that will continue to be asked are: Could the ASEAN economic transformation have been achieved without such leaders? Are other leaders elsewhere in the world inspired or horrified by such legacies? Would countries such as Pakistan be transformed economically in the same way? Are there better days ahead for them?

Here's a video clip on Suharto Legacy:

Wednesday, January 30, 2008

Internet Outage Affects India, Pakistan, Middle East

Internet services have been disrupted in parts of the Middle East after damage to an undersea cable in the Mediterranean. There was disruption to 70% of the nationwide network in Egypt, a government official told Reuters. There was also disruption in the United Arab Emirates (UAE), Kuwait and Saudi Arabia, reported the Associated Press. India also suffered up to 60% disruption, a national industry body told Reuters news agency.

Blogger Masud Reza from Pakistan is reporting that Pakistan is also affected by this outage. Mesud said as follows in his post:
"At approx. 11:30am today, the SMW4 Segment 4 Sumbarine Cable went down due to a fiber cut between Marseille and Palermo due to which the Internet connectivity in Pakistan is severely affected.
At this moment, TWA1 customers are suffering the most. PTCL has switched it's Internet traffic from SMW4 to SMW3.
Let's hope that this fault is repaired soon since degraded Internet service cripples internet for business.
Update: A ship has left Italy for repairing the fault. However, timelines indicated by SMW4 are anywhere from twelve to fourteen days!!"

This latest disruption reminds me of June 2005 outage of ALL Internet access in Pakistan due to damage to the lone undersea fiber optic cable in the Arabian Sea connecting Pakistan with the rest of the world. This cable is owned by a 92-nation international consortium and operated by SingTel, the Singapore telecommunications company. There were satellite link but these links have very limited bandwidth. Even though the number of Internet users in Pakistan is relatively small at about 15-20 million, the impact on business was disproportionate. Traders on KSE reported as much as 80% drop in trading volume from this outage. All call center activities and other BPO vendors were severely affected.

In February 2006, there was another brief disruption when Pakistan’s first undersea fiber optic cable, SMW3, was damaged causing interruption in the country’s Internet and voice traffic. However, there was no breakdown in any part of the country, as the recently-commissioned submarine cable, SMW4, was fully operational. Since then, yet another submarine cable TWA1 has also been added. While the two additional cables have made Pakistan less vulnerable, the growing use and bandwidth requirements in Pakistan will continue to strain these cables, unless additional capacity is added on a regular basis.

Tuesday, January 29, 2008

Merchant of Death Eyes Pakistan Market

Philip Morris International, the international unit of the US tobacco giant Philip Morris often described as a merchant of death, is building a new massive cigarette plant in Pakistan.
Philip Morris is expected to spin off PMI as an independent company to be unconstrained by the U.S. tobacco regulations and out of reach of American litigators. Importantly, its practices would no longer be limited by American public opinion, paving the way for trying out new products.

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.

The World Health Organization's Framework Convention on Tobacco Control, an international public-health treaty, has 152 participating countries, including China, Brazil and Pakistan. While it has led to greater regulation in many of the world's markets, countries such as Indonesia and Russia haven't signed on. It should be noted that Pakistan was derisively named as "The Winner of Marlboro Man of The Year Award" by anti-tobacco activists for stalling these negotiations but ultimately signed the treaty.

In addition to targeting Pakistan, India, Brazil and Russia, one of PMI's immediate goals is to harness the huge potential of China's smoking population, as well as some of that country's own brands, reports the Wall Street Journal.

After negotiating for three years, PMI is expected this year to begin marketing three Chinese brands. The smokes -- selected from hundreds of varieties produced by state-run China National Tobacco Corp. -- will be sold in Central Europe, Eastern Europe and Latin America, according to PMI.

The launch is planned for sometime in the next six months. It is part of a December 2005 deal in which Philip Morris agreed to market Chinese brands internationally in exchange for the right to produce its own Marlboro brand at state-owned factories. At the moment, Philip Morris is limited to importing its cigarettes for sale in China and is restricted by stringent quotas.

While Philip Morris investments in Pakistan, Brazil, Russia, India and China are expected to bring in much-needed capital and create thousands of new jobs, the proven health risks posed by smoking will also cause widespread disease and death in future years. This does not appear to be a good bargain for these emerging economies with young populations.

Pakistan's Political Class And The War of the Elite

Ayesha Siddiqa, the well known author of "Military, Inc." has written a very insightful piece for BBCUrdu.com, arguing that Pakistan is ruled by a small elite that disregards the wishes and the best interests of its average people. I absolutely agree with Ayesha Siddiqa, that Pakistan has been and still is ruled by a small elite consisting of feudal lords, military officers, industrialists, and bureaucrats (and, I add, some nefarious clerics colluding with them).

While this piece does a great job of painting a fairly accurate picture of the situation in Pakistan, it stops short of telling you how to change it and empower
the ordinary people of Pakistan. In my humble view, the way to change is to let the middle class continue to grow in size and strength, as it has in the last 8 years.

According to Teresita Schaffer, a Pakistan expert at the Center for Strategic and International Studies in Washington. “The emerging urban middle class is very important to Pakistan’s future, but by themselves, they are not numerous enough to swing elections or spearhead a major social movement.”

The size of Pakistan’s expanded middle class is in fact debated. Tara Vishwanath, the World Bank’s lead economist for South Asia, said 5 percent of Pakistan’s 160 million people — or roughly 8 million Pakistanis — appear to have moved from living in poverty to being part of the lower middle class between 2001 and 2004. She said data being collected this year was needed to confirm whether the increase was permanent.

While there are no precise figures, Pakistani political scientists estimate the upper and middle classes may now include 10 to 20 percent of the population.
I believe that, with a stronger and larger middle class, the elite will be forced to concede power, as has happened in many societies that have transitioned from feudal to industrial societies in the last 100-200 years.

India is, perhaps, the only exception to this rule. The reasons cited for this exception are many. But the two that come to mind immediately are:
1) India's Prime Minister Nehru ordered and implemented real and extensive land reform that limited land ownership to no more than a dozen or two acres per family in India. This action emasculated the feudal class and freed the rural people to choose their leaders without fear of persecution. In sharp contrast to this, the feudal families in Pakistan own tens to hundreds of thousands of acres.
2) India is so vast and diverse that it is extremely difficult for any military to rule it for any period of time.
So the Indians have chosen to support democratic institutions, in spite of the fact that Indian democracy has not served the vast majority of its people well. They have understood that the alternatives are far worse.

So, as a general rule, transition to industrialization being an essential component for democracy, the industrialists are a necessary evil to free societies from the clutches of the feudal system and let the average people become educated enough to think and act in their own best interest.

Monday, January 28, 2008

Pakistan's Energy Crisis

Pakistan’s economy has recently been growing at 7-8% per year, doubling its GDP over the last 7 years. The industrial growth rate has been closer to 12.5% per year during this period, contributing 38% of the total economic output of Pakistan. Per capita energy consumption of the country is estimated at 14 million Btu, which is about the same as India's but only a fraction of other industrializing economies in the region such as Thailand and Malaysia, according to the US Dept of Energy 2006 report. To put it in perspective, the world average per capita energy use is about 65 million BTUs and the average American consumes 352 million BTUs. With 40% of the Pakistani households that have yet to receive electricity, and only 18% of the households that have access to pipeline gas, the energy sector is expected to play a critical role in economic and social development. With this growth comes higher energy consumption and stronger pressures on the country’s energy resources. At present, natural gas and oil supply the bulk (80 percent) of Pakistan’s energy needs. However, the consumption of those energy sources vastly exceeds the supply. For instance, Pakistan currently produces only 18.3 percent of the oil it consumes, fostering a dependency on imports that places considerable strain on the country’s financial position. On the other hand, hydro and coal are perhaps underutilized today, as Pakistan has ample potential supplies of both.

Pakistan’s rising energy demand, according to the U.S. Department of State’s Paul Simons, creates opportunities for regional cooperation. To this end, the U.S. Trade and Development Agency convened a meeting a couple of years ago in Istanbul that produced an agreement on examining options for exporting Central Asian electricity to Pakistan. It should be noted here that US does not favorably look upon any Iran-Pakistan cooperation in the energy sector. At an Asia Program event organized by Wilson Center in 2006, Vladislav Vucetic of the World Bank provided a troubling assessment of the state of Pakistan’s electricity sector—demand is approaching maximum production capacity, while institutional capacity for policy development and implementation remains low. Worse, failing to resolve these problems may cause investment delays and hamper Pakistan’s economic growth. Sanjeev Minocha of the IFC, a major source of private sector financing, noted the paucity of domestic private sector initiatives in Pakistan. The IFC has sought to raise investor confidence through its funding of private Pakistani energy companies, including the new firm Dewan Petroleum. Ultimately, stated Minocha, it is crucial that investment projects take into account the interests of local communities.

In early 2008, Pakistan's industrial consumers are facing an electric power deficit of up to 3,600 megawatts (MW)due to low water levels at hydroelectric dams and damage to two main power lines attacked during the three days of violence following Bhutto's assassination. More than anything, this represents the failure of long term energy planning to go with the economic growth forecasts.

Among the temporary issues exacerbating the larger power crisis, the two main power transmission lines were blown up in January 2008 in Sind, creating a shortfall of 1,000 MW. The business community complain that lopsided and unplanned shutdowns have resulted in closures in almost all industries. Subsequent production losses will be reflected in further pressure on exports and lead to increased imports.

Water levels have fallen by 32% compared with last year, according to the Pakistan Electric Power Company (PEPCO). Pakistan's current installed capacity is around 19,845 MW, of which around 20% is hydroelectric. Much of the rest is thermal, fueled primarily by gas and oil. PEPCO also blames independent power producers (IPPs) for the electricity crisis, as they have been able to give PEPCO only 3,800 MW on average out of 5,800 MW of confirmed capacity. Most of the IPPs are running fuel stocks below the required minimum of 21 days.

While there are many economic successes of the Musharraf-Aziz administration in terms of reviving the Pakistani economy and putting it on a growth path again, the energy sector represents its biggest failure. This failure has the potential to threaten Pakistan's economic future, unless immediate steps are taken to bring this crisis under control over the next few years.

Sunday, January 27, 2008

What's Next After "Da Vinci Code"?

It usually takes just one new really big seller to ignite book sales and revive the publishing industry fortunes. There has been the "Harry Potter" phenomenon and the "Da Vinci Code" that kept the industry humming over the last few years and brought lots of people to bookstores around the world. Lately, however, the book sales have slowed down. "Harry Potter" has retired and Dan Brown, the author of "Da Vinci Code" has been taking his time to complete the much-anticipated novel about Freemasonry movement and the involvement of the US founding fathers in this movement. Meanwhile, the nation's biggest retailers can barely restrain themselves. "We're constantly asking," Bob Wietrak, vice president of merchandising at Barnes & Noble Inc. told the Wall Street Journal.
So what is its status? It's a mystery as deep as the secrets of the Knights Templar.
"When a major author doesn't deliver, you get down on your knees and pray," says Laurence Kirshbaum, a book agent who heads up LJK Literary Management in New York. "You can't threaten, you can't cajole, you wait."
Back in November 2004, a spokeswoman for Doubleday said the target publishing date for Mr. Brown's next book was 2005, although she noted that "there are no guarantees."
Now, the publisher is hinting that a manuscript is close. "Dan Brown has a very specific release date for the publication of his new book, and when the book is published, his readers will see why," says Stephen Rubin, president of Bertelsmann's Doubleday Broadway Publishing Group, whose Doubleday imprint publishes Mr. Brown. Mr. Rubin declined further comment.
Given that the book is likely to deal with the US founding fathers in Freemasons, there is a lot of speculation about the release date. Is it going to be July 4? or Sept 18 when George Washinton led the Masonic parade on Pennsylvania Ave? Or Oct 13 when the White House Foundation was laid?

Saturday, January 26, 2008

Pakistan: A Magnet For Foreign Investors?

Extreme Investing or Safe Haven?
Some call it "Extreme Investing". Call it by any name, but international investors have discovered Pakistan as an attractive destination.
Referring to the recent upsurge in violence, Bank Muscat CEO Ali Issa said, "We are not worried about our investment in Pakistan, we think it's just a passing phase."
Chief Strategist for Merrill Lynch Mark Matthews is the most bullish about Pakistan, calling it a “safe haven” for investors. Matthews believes Benazir Bhutto's death is "on the whole, largely irrelevant to the economy, which like other places, is what really moves the stock market." He says Pakistan represents the “biggest information arbitrage,” which in its crudest terms, means that body bags are good for stock pickers. He reckons that the slew of bad news from Pakistan is diverting people’s attention from the fact that the Pakistan economy is humming along nicely, with growth forecast to reach 7% this year, a repeat of 2007, and stocks yielding an average of 6% dividend yield. Karachi was up an impressive 40% last year, and would have closed even higher had it not been for the tragic assassination of former Prime Minister Benazir Bhutto in December which trashed the market.
Pakistan’s Telecom Sector
Telecom sector is attracting the largest share of foreign direct investment in Pakistan. Foreign investors pumped in $364m into it during July-Sept 2007 quarter, according to the latest figures released by Pakistan Telecommunications Authority. The total FDI in Pakistan for this 3-month period was $962.5m.
The number of cellular subscribers in Pakistan has crossed 76m in Dec, 2007, from 500,000 in 2004. According to Business Recorder, Pakistan's financial daily, most forecasters believe that the upward trend will continue in the next 5 years because of the huge market potential, particularly in the rural areas where the build-out has yet to happen. Operators such as Wateen (with Motorola) are planning a large Wimax roll-out to improve voice and high bandwidth data access across the country. The biggest mobile operators in Pakistan include Mobilink with 30m subscribers, Ufone with 16m, Telenor with 14m, Warid with 13m and Paktel with 1m. It is estimated that the telecom sector has added at least 300,000 jobs in the last few years.
Financial Services & Infrastructure
While Telecom has been the hottest sector, here are some of the recent deals making the news:
1. Nomura announced it would team up with an Omani bank to buy Saudi Pak Bank for US$200m.
2. Barclay’s Bank received a banking license in Pakistan and will open up 10 branches with US$100m.
3. International Petroleum Investment, a UAE company, announced it would build a US$5b refinery.
4. Hutchison Port Holdings announced it will build a US$1b deep water container port.
5. Singapore’s Temasek, through NIB Bank, is buying PICIC.
6. Philip Morris is building a new plant, and China Mobile is hiring thousands of people, as it doubles its base stations in the country.
Private Equity Funds
Recent launch of a private equity fund focused on Pakistan is another indication of continuing investor interest in Pakistan economy as a magnet for investors. This fund, solely dedicated to investing in Pakistan was closed December 2007, capping a year in which the country was one of the hottest emerging markets despite its political turmoil. This is the fourth or fifth major private equity fund focusing on Pakistan. JS Group, a Pakistani financial services group, is the sponsor and a large investor in this new JS Private Equity Fund, which was closed on Dec. 31 at $158 million.
The Future
While many Pakistanis seem to have a developed a sense of pessimism, even a hint of cynicism, the international investors are telling us that that there’s a bright future ahead for Pakistan. All we have to do is believe in it and not be swayed by all the bad news that media like to play up. A hopeful nation can do wonders, if the hope is backed up by sincere actions to realize that hope. The current continuing growth in the size and strength of the middle class in Pakistan, if continued for another decade, can do wonders in empowering the people and taking the power away from the small elite that has ruled Pakistan since its inception. Let’s be patient. Let’s not ever give up hope.

Friday, January 25, 2008

New Private Equity Fund Targets Pakistan

A private-equity fund solely dedicated to investing in Pakistan was closed December,2007, capping a year in which the country was one of the hottest emerging markets despite its political turmoil.
JS Group, a Pakistani financial services group, is the sponsor and a large investor in the new JS Private Equity Fund, which was closed on Dec. 31 at $158 million.
The fund, launched in 2006, is likely the third or fourth private-equity fund to invest solely in Pakistan. There are also several regional funds with a mandate to invest in Pakistan. Compared with neighboring India, however, Pakistan has a virtually virgin private-equity market.
In Karachi, the benchmark KSE-100 stock index rallied 47% in 2007 through Dec. 27, making it one of the best-performing emerging markets and nearly matching the gains of India's Sensex index. In comparison, Indonesian shares gained 52% and Brazil 40% in 2007.
"I could understand why a lot of foreign investors are a little spooked by what is happening in Pakistan," said Stephen Smith, partner at JS Private Equity. "Those less experienced in emerging markets will become very nervous."
After Bhutto's killing, the stock exchange was closed for several days and when it reopened on Dec. 31, the market tumbled 4.5%. Subsequently, however, the market has slowly pared its losses. The KSE-100 index is virtually unchanged on the year as of late Thursday.
Smith, however, believes that the political premium is likely overstated and that Pakistan's economic growth and unpenetrated private-equity market offer big opportunities for investors willing to take the risk.
Pakistan has a population of $160 million and its GDP growth has averaged 7% over the past five years. According to a recent United Nations report, Pakistan's GDP is expected to grow 6.2% or more in 2008.
Pakistan is one of the so-called "Next 11" countries singled out by Goldman Sachs as having the potential to offer tremendous investment opportunities, akin to those of leading emerging markets.
"The real thrust of the fund is to provide expansion capital to businesses that are domestic-demand driven," Smith said. "Things have really changed in Pakistan over the last five years. You have the emergence of a fledgling middle class."
The fund sees opportunities in both export-related industries, such as textiles, leather and medical supplies, as well as domestic-demand related industries, such as consumer goods, media and advertising. Smith also sees opportunities in inefficiencies in infrastructure, transportation and logistics, as well as agriculture and horticulture.
"[About] 25% of its economy is agricultural and horticultural and yet the amount of wastage of those products is extraordinarily high, because the infrastructure points are not very efficient," Smith said.
The JS Private Equity Fund has already made two investments. The first is a control investment in Optimus, the Hertz franchise in Pakistan, which specializes in long-term vehicle contract-leasing to businesses. The second is a minority investment in Engro Asahi Polymer & Chemicals, the only Pakistani producer of PVC resin.
Focus on institutional investors
JS Group has been doing private-equity style deals in Pakistan for a long time, but it was only in 2006 that it decided to create a formal fund, targeting professional institutional investors.
With a $40-million investment, CDC Group, a British government-owned fund of funds that invests in emerging markets, is the largest investor in the JS fund. Other investors include the International Finance Corporation; Samba, one of Saudi Arabia's leading financial groups; the Asian Development Bank; the Swiss Investment Fund for Emerging Markets; and PROPARCO, a subsidiary of the French Development Agency dedicated to financing the private sector.
"We're essentially betting on the long term, putting aside short-term volatility. Long-term the economy will win," said Brian Lim, portfolio director at CDC Group.
"We're essentially betting on the long term, putting aside short-term volatility. Long-term the economy will win."
— Brian Lim, CDC Group
"What we did look at was the history of the economy over successive generations of rulers," Lim said. "There did seem to be an economic will for liberalization, for FDI [foreign direct investment]. The one certainty is the economy has worked very well over the recent past. We're hopeful that things will resolve themselves on the political front."
Another reason to enter the Pakistani market is that there is very little competition among private-equity players, Lim said.
"In many sectors there were companies that could grow even faster, but the capital wasn't there," he said.
While neighboring India is experiencing a private-equity boom, Pakistan remains largely overlooked by the industry. There are only a handful of other private-equity funds solely dedicated to Pakistan. Among them are the $100-million TMT-SEAF Pakistan Growth Fund and the $300-million Abraaj BMA Pakistan Buyout Fund L.P. Several regional funds also have a mandate to invest in Pakistan.
In comparison, there are approximately 110 to 120 funds focused primarily on India, according to estimates from the Emerging Markets Private Equity Association.
That estimate looks conservative compared with that of Evalueserve, a global research and analytics firm, which estimates that approximately 200 funds are actively investing or fundraising in India.
"It's a very, very different market from India and China," Smith said. "We like to think we're helping to develop the market. We're a long away from what I'd call a competitive market for private equity. It means that we have to do a lot of patient education."

Source: MarketWatch, January, 2008

Atiq Raza Pays $3m Fine, Settles Insider Trading Charges

Saiyed Atiq Raza, prominent Silicon Valley Pakistani-American and venture investor, agreed to pay $3m in fine to settle SEC charges of insider trading, according to the US Securities and Exchange Commission.
The charges against Saiyed Atiq Raza, 58 years old, a former president and chief operating officer of chip maker Advanced Micro Devices Inc., stemmed from trades he made in 2006 while serving as a director of San Francisco orthodontic device maker OrthoClear Holdings Inc. Under the terms of the agreement, Mr. Raza was also barred from serving as an officer or director of a public company for five years, and he was permanently enjoined from future violations of the federal securities laws.
The SEC alleged that Mr. Raza in September 2006 was informed by OrthoClear's chief executive Zia Chishti that the company had agreed to cease competing with rival Align Technology Inc., of Santa Clara, Calif. The agreement, which effectively put OrthoClear out of business, followed a long-running intellectual-property rights dispute between the transparent teeth-aligner market competitors.
According to the SEC, Mr. Raza within two days of learning about the settlement began making large purchases of Align call options -- which would increase in value if the company's share price rose -- before the litigation settlement agreement became public. When the OrthoClear settlement was publicly announced several days later, the price of Align stock shot up 48% and Mr. Raza netted a profit of $1,450,900, the SEC said.
Zia Chishti is a Pakistani-American founder of both Align and OrthoClear. Zia is also the founder of The Resource Group, a company with call centers in Pakistan serving clients in the United States.

Thursday, January 24, 2008

Musharraf Promotes Pakistani Economy at Davos, Switzerland

"Judge economic performance, the welfare of people and political stability," President Musharraf told business and political leaders at the World Economic Forum in Switzerland.
"Please don't judge (us) on maybe unrealistic Western perceptions of democracy and human rights." According to Reuters, he went on say, "The elections must be free, fair and transparent. And I've added another word -- peaceful, we will make sure that they are peaceful."
President Musharraf, Bangladeshi Prime Minister Fakhruddin Ahmed, Iraq's Deputy Prime Minister Barham Salih and Afghanistan's President Hamid Karzai together appeared at a panel discussion in Davos Thursday to discuss 'The Quest for Peace and Stability.'
Earlier, Mr. Musharraf met with US Secretary of State Condoleeza Rice on the sidelines at Davos. After this meeting, Rice praised him as a steadfast ally in the war on terror whose country would continue to receive substantial U.S. support. But she stressed that he must uphold his stated commitment to democracy. Musharraf's meeting with Rice was part of a European tour aimed at reassuring Western leaders about his ability to restore democracy and prevail in the escalating combat between government troops and Taliban rebels along Pakistan's mountainous border with Afghanistan.

Wednesday, January 23, 2008

Musharraf Woos European Investors

The European Union is Pakistan's largest trading partner, with annual trade worth $9bn. With this backdrop, it makes sense for President Musharraf to visit Europe on what is described by some as a "charm offensive".
In spite of all the turmoil and recent bad news, Pakistani economy continues to be the bright spot often ignored by the media. This European visit is intended to get attention to Pakistan's economic performance and to attract European investment to help keep the economy on track for continued growth of 7-8% per year. In addition to meeting the political leadership in Europe, Mr. Musharraf has talked with the media and the business and investor community to reassure of them of progress on various fronts, including the restoration of democracy, the war on terror, and economic growth.
On the political front, he reassured them the elections would be held on the scheduled date and would usher political stability in the country. He further said that nobody would be allowed to create chaos and agitation in the country before or after the polls, reports APP, a Pakistani news agency.
Mr. Musharraf highlighted the economic achievements of the country during the past seven years and said Pakistan succeeded in sustaining economic growth of up to 7 percent and further improving the economic indicators like increasing the per capita income, foreign reserves and stock exchange index position. He said there has been an industrial boom in Pakistan in recent years, which was also a factor behind shortage of energy.
Replying to a question, the President allayed concerns and mis-perceptions among business executives about the law and order and political situation in Pakistan. He assured them that they will find best possible opportunities and a win-win situation in the country to make economic gains.
Mr Musharraf is expected to meet Nicolas Sarkozy, France’s president, and Gordon Brown, the UK prime minister, as well as to attend the World Economic Forum in Davos.

Who Is In Charge: Mehsud or Mullah Omar?

Americans have now been saying for several months that the Taleban and Al-Qaeda have shifted their focus of attacks from Afghanistan to destabilize Pakistan. "Al-Qaeda right now seems to have turned its face toward Pakistan and attacks on the Pakistani government and Pakistan people," US Defense Secretary Robert Gates told the Washington Post on Dec 21, 2007. Most of the recent activities including a big surge in suicide bombings in Pakistan seem to confirm this belief. It appears that Baitullah Mehsud has been the main commander leading the charge against Pakistani military and political leadership, while Mullah Omar has not been heard from. This is likely to change, if today's report in Asia Times On Line turns out to be accurate. ATOL is reporting that Mullah Omar has fired Baitullah Mehsud and decided to turn his attention for a major spring offensive against the US/NATO forces in Afghanistan. Mehsud was expected to provide valuable support to the Taliban in Afghanistan, but instead he directed all his fighters against Pakistani security forces. This has apparently angered Mullah Omar who may personally take charge of the Taleban in Pakistan, in addition to his leadership of the Taleban in Afghanistan. This may also be an indication of split between Al-Qaeda and the Taleban in Pakistan. As recently as Sept, 2007, Usama bin Laden called for a rebellion in Pakistan. The storming of the Red Mosque in Islamabad in July "demonstrated Musharraf's insistence on continuing his loyalty, submissiveness and aid to America against the Muslims ... and makes armed rebellion against him and removing him obligatory," bin Laden said in an audio tape.
While this change of targets from Pakistan to Afghanistan would help relieve pressure in Pakistan in the near future, the Americans and NATO are likely to continue to press President Musharraf to not let up on the Taleban forces to minimize the impact of their planned offensive in Afghanistan.

Tuesday, January 22, 2008

Karachi Stocks Hold Up Well As World Markets Plunge

As the world stock markets plunged dramatically on fears of US recession dragging down the world economy, the stock prices in Karachi did well on Tue, the 22nd of January, 2008. While shares on Mumbai, Shanghai, Tokyo and other world stock markets lost 5% or more of their value, the KSE-100 lost only 24 points to close at 13,850 points and KSE-30 gained 18 points closing at 16,505. This remarkable resilience at KSE is a testament to the investor confidence that Pakistani economy has great potential offering very good companies at significant discount to valuations of similar companies elsewhere. Various analysts estimate that, in spite of 40 percent increase in 2007, Pakistani shares still sell for about half the P/E ratios of shares in India and China.



Following the decision by the US Federal Reserve to cut interest rate by an unexpected 0.75%, it is likely that the world markets will stabilize shortly. However, the Asian markets have become extremely expensive with Pakistan's KSE being one of the few exceptions. This is likely to spur greater international investment in Karachi. The one wild card that remains is the Pakistani elections in February and what happens in its aftermath. If Musharraf handles it well, both the KSE and the Pakistani economy will be the beneficiaries. Beyond that, if some semblance of stability continues, it would only be an additional bonus driving up the economy and the stock prices higher, bringing new jobs, expanding the size of the middle class with its spending power, and improving the living standards for all Pakistanis.

Monday, January 21, 2008

The Story of Oil, Greed, Religion, and Blood

The story of oil, greed, religion, and blood is as old as the discovery of oil. This story is brought to life in the recent Hollywood movie "There Will Be Blood", starring Daniel Day Lewis as the greedy oilman drilling for oil in California over 100 years ago. Loosely based on Upton Sinclair's novel "Oil", the movie shows oil discovery in San Fernando Valley in Southern California in early 1900s. I must say the performance by Lewis is masterful. The story establishes the link between greed and blood, exploitation and religion, and just base human instincts and its horrible consequences for the people. While the players have changed more recently, this story of oil has continued to play itself out in various ways in the international arena. As the economic dependence of the industrialized world on oil has grown, so have the power and the profits of the oil industry. And the industry has used its power and profits to influence government policies around the world, particularly in the United States. Whether it is the installation of the Shah of Iran, the two recent wars in the Persian Gulf, the US presence in Saudi Arabia or Iraq, or the US Mid-east policy, you can see access to oil as the underlying reason. The manifestations of the resulting conflicts are many. Sometimes it appears as Israel versus Arab conflict, or as Islam versus the West, or Democracies versus Dictatorships, the civilized world versus the terrorists, there is no denying that the fundamental issue has to do with oil in each case. The US anti-war protesters have it right when they say: "Hell No, We won't go, We won't fight for Texaco."
As the world searches for alternative sources of energy, this story may eventually end. However, humans being humans, we are probably going to find another reason to fight. It could be water, or some other essential commodity in great demand and limited supply. Let's just hope the consequences of these new fights are not as deadly as we have seen.

Here's a video clip from this movie:

Pakistan's Telecom Boom Continues

Telecom sector is attracting the largest share of foreign direct investment in Pakistan. Foreign investors pumped in $364m into it during July-Sept 2007 quarter, according to the latest figures released by Pakistan Telecommunications Authority. The total FDI in Pakistan for this 3-month period was $962.5m.
The number of cellular subscribers in Pakistan has crossed 76m in Dec, 2007, from 500,000 in 2004. According to Business Recorder, Pakistan's financial daily, most forecasters believe that the upward trend will continue in the next 5 years because of the huge market potential, particularly in the rural areas where the build-out has yet to happen. Operators such as Wateen (with Motorola) are planning a large Wimax roll-out to improve voice and high bandwidth data access across the country. The biggest mobile operators in Pakistan include Mobilink with 30m subscribers, Ufone with 16m, Telenor with 14m, Warid with 13m and Paktel with 1m.
It must be noted that FDI is different from stock market investments. FDI money goes to build factories, infrastructure and facilities rather than the purchase of financial assets such as stocks and bonds by mutual funds.
According to Pakistan's Daily Times, Pakistan’ telecom boom has created more than 300,000 jobs in the telecom sector. This has resulted in huge demand for professional and capable telecom workforce that can expertly meet the new age requirements of these positions. Creative public private partnerships are being established to meet this demand.



Thanks to Pakistanis' rising incomes, which have more than doubled to over US$900 per year in the last seven years, and increased competition, the teledensity rate is expected to go over 50 percent in the next couple of years, according to officials and analysts. Opportunities such as these are fueling the continuing growth in the middle class which further enhances the ongoing consumer boom. By various estimates, the Pakistani middle class has now grown to over 30m people, about 20% of the total population. The size of this middle class makes Pakistan an attractive opportunity for investors, in spite of the continuing political uncertainty with the approaching elections in February, 2008. Analysts such as Merrill Lynch's Chief Market strategist Mark Matthews are very bullish on Pakistan. Matthews has called Pakistan a "safe haven" for investors as recently as Jan 6, 2008 in an interview with CNBC.

Related Link:

State of Telecom Industry in Pakistan

Online Political Activism in Pakistan

Sunday, January 20, 2008

Unreasonable Men: Martin Luther King to Barack Husain Obama

"A reasonable man adapts himself to his environment. An unreasonable man persists in attempting to adapt his environment to suit himself. Therefore, all progress depends on the unreasonable man." So said the famous British playwright George Bernard Shaw a century ago. The "unreasonable Man" label applied well to the famous civil rights leader Rev Martin Luther King in the 1960s and applies well today to US presidential candidate Senator Barack Husain Obama. As the Americans celebrate Martin Luther King's birthday today, we are reminded of the struggle he led in 1960s to make it possible for Obama to make history by recently winning the first of the presidential primaries in Iowa, a predominantly white state with very few Blacks or other minorities. When MLK started his non-violet civil disobedience movement (emulating Mahatma Gandhi), few thought he would succeed. But his sincere methods, powerful oratory and great persistence convinced a large number of Blacks and Whites to join in and eventually made it possible for civil rights legislation to pass. MLK did not live to see the day as he was assassinated in 1968. About 39 years later, as Barak Husain Obama spoke after the history-making Iowa win, he said, "They said this day would never come. Our time for change has come."
Here's a video of Obama's victory widely-acclaimed speech in Iowa:



Barack Hussain Obama's historic win in Iowa caucuses clearly signals that desire for change in America is strong and all-encompassing. The scope of this change includes a new willingness to accept a black man as commander-in-chief, a break from the Bush policies such as the choice of military force over soft power and diplomacy in international affairs, and increasing concern to provide ordinary citizens with broader access to healthcare and education. The people of Iowa strongly endorsed Obama's message of change and rejected Hilary's message of experience as continuation of the business-as-usual rather than a strength. Obama's victory speech carried live on national TV was widely well received. Some even compared it with the memorable speeches of FDR and MLK. The Obama candidacy has energized a lot of people, including a large number young men and women, and brought them into the electoral process. Just look at how large a presence Obama supporters have on Facebook and college campuses.
It seems that this nation appears ready to judge a person by the content of his(her) character rather than the color of the skin, as dreamed by Rev Martin Luther King in the 1960s.
From his message of change, it is clear that Obama wants to tap the clamoring for change in America by all, including Republicans. He wants to be a unifier to lead this effort for positive change in America.
Regardless of the ultimate outcome of this race, Obama has already made history by winning in Iowa as the first black presidential candidate. The fact that it happened in Iowa, the first state to vote in primaries and the state with more than 90% whites, is particularly encouraging for those of us looking for big changes in the US.
Comparing the hard-fought primaries for the political parties here in the US with the political parties in Pakistan, the less said the better. In Pakistan, Hilary Clinton would have already been crowned the leader of her party for life. It would be quick and efficient and still be considered entirely "democratic".
I have received a number of questions from my Pakistani friends on Obama's views from Pakistani perspective. Here is how I explain what Obama's win is likely to mean for Pakistan:

The US presidential elections are won mainly on domestic issues except the last election in the aftermath of 911 where security issues figured prominently and George W. Bush won.
Obama made statements about unilaterally sending US troops into Pak
that were widely ridiculed in the US. He has since backtracked on
those statements. US presidential candidates (with a few exceptions)
are not very knowledgeable about the world and rely mainly on experts
when the time comes to make policy. Obama will do the same, if he gets any further from the first two or three primaries. Democrats in general tend to favor democracy and human rights (since the Carter administration) rather than dictators often favored by Republicans. Democrats also tend to be more pro-India and pro-Israel
but usually are not pro-war. They are likely to emphasize soft power and diplomacy if they win the White House. A Democrat in the White House is not going to be good for President Musharraf,unless Musharraf really changes his ways.
The Democrats will probably reach out more to the civil society and political parties in Pakistan. The bottom line will still be to support secular forces and weaken the religious elements. Maulana Fazlur Rahman may be an exception to this. He is seen as someone who can help neutralize the anti-US elements in NWFP and Baluchistan.

Friday, January 18, 2008

CIA Believes Mehsud Network Killed Benazir Bhutto

CIA Director Michael Hayden told the Washington Post that the former Pakistani prime minister was killed by fighters allied to Baitullah Mehsud. Mr Hayden did not reveal the sources for his claim. Apparently, CIA has come out with this conclusion based on their own independent intelligence sources and due diligence. With this CIA claim, there is now agreement between the Pakistani intelligence and the US intelligence on the identity of the people behind Benzair's assassination.
In fact, the CIA chief Hayden, goes further and believes it is part of a larger plan by combined Taleban-Al-Qaida forces to target Pakistani political leadership to destabilize Pakistan and take advantage of the ensuing chaos.
While there will continue to be alternative theories and claims of motives and conspiracies implicating Musharraf and PML(Q), there are reasons to believe that Taleban-Al-Qaida axis would want to eliminate Benazir from the scene. When Benazir returned to Pakistan earlier, it was widely believed that her return was sponsored by the United States. Her statements later confirmed that she would fully cooperate with the US in all matters including "war on terror", access to A.Q. Khan, allowing US troops to enter the Pakistani territory to fight the Taleban and Al-Qaida etc. These promises of collaboration with US went far beyond anything Musharraf was willing to do for the US. It was a no-brainer for Mehsud and his allies to see Benazir as a threat.

Thursday, January 17, 2008

Pakistan Conducting Research in Antarctica

Pakistan's National Institute of Oceanography, based in Karachi, is operating a summer-only Jinnah Arctic Station in Antarctica first established in 1991 when Pakistan Navy hoisted the Pakistani flag there. The Jinnah Station was formally commissioned on Friday the 25th January, 1991 and the scientific observations commenced. According to Waponline, the Jinnah Station consists of three laboratories in pre-fabricated huts, three pre-fabricated Igloos manufactured in Pakistan for accommodation of 9 persons and four tents for miscellaneous needs. It also includes a sophisticated unmanned weather station from which weather data is now being received in Pakistan via satellite .This makes Pakistan the first among the Muslim nations and the second nation in South Asia (after India) to be poised for full membership of the Antarctic Treaty System. Establishing research presence in Antarctica is seen as important by nations of the world because of its value in understanding global climate change and its potential for tremendous resources including oil and other mineral deposits. It is also important for Pakistan because India is alleged to have trained its soldiers there for occupation of Siachen in Kashmir. This allegation, if true, would be a violation of the treaty prohibiting military use of the continent. The Antarctic Treaty of 1959 sets aside the entire continent for peaceful scientific use only.
Here's the mission statement of NIO Pakistan:
The National Institute of Oceanography is located in Karachi. It was established in 1981 by the Ministry of Science and Technology, Government of Pakistan. The main area of research of the Institute is the north Arabian Sea and beyond. The oceanic and atmospheric processes of the north Arabian Sea modify our climate, offer numerous living and non-living resources, Oceanographic research brings together all the scientific disciplines needed to study the ocean.“
To learn more about various Antarctic stations set up by different nations of the world, please visit here.
Click here to see the world map highlighting nations with bases in Antarctica.

Acknowledgment: The inspiration for this post came from a post on Moin Ansari's blog.

Foreign Remittances by Pakistanis Rising

Overseas Pakistanis sent home over $3B during July-December 2007 period. This is up 19.4% over the same period last year, according to a report in Business Recorder, Pakistan's financial daily newspaper. The biggest inflows came from the US with $874m followed by Saudi Arabia with $563m, UAE with $500m, GCC countries with $457m, UK with $227m and EU with $89m. The remittances to Pakistan are rising at twice the overall rate of remittances from developed to developing countries.
These remittances also compare favorably with the foreign direct investment of $1.87B in Pakistan in the first half of 2007 which increased by 67% over the same period in 2006.
In addition to these inflows, Pakistan earns about $18B a year through exports and receives another $750m annually in US aid.
While good economic policies by Pakistani government have inspired confidence among investors and the business community, these additional inflows have clearly helped in achieving about 7% annual growth with rising incomes and the growing middle class clout in Pakistan.
Let's hope that this economic growth continues in spite the current political turmoil to give people hope in the long term for better lives under a true, non-feudal and enlightened democracy.

Wednesday, January 16, 2008

Merrill Chief Strategist Says Pakistan A Safe Haven For Investors

"Pakistan is a safe haven for investors", says Mark Matthews, chief Asia strategist at Merrill Lynch, speaking to CNBC's Arnold Gay in January, 2008. This is in sharp contrast to some of the rating agencies like S&P and Moody's hinting at possible downgrade of Pakistan as an investment opportunity. Matthews argues that Pakistan is one of the best information arbitrage markets in the world.
While the bombings, shootings and the body bags make good headlines for the news media, Matthews says it is incorrect to say that Pakistan is being radicalized. There is always a radical fringe in Pakistan like many other countries. Matthews is "very bullish on Pakistan". He points out that Karachi Stock Exchange KSE-100 index rose 45% and Pakistan's GDP grew by 7% in 2007 in spite of continuing political instability and a continuous stream of news of violence and mayhem on the streets. Pakistan has some of the best companies in the world with stock valuation about a half of similar companies in India.
Here's a link to the CNBC video of Matthews' interview.

Tuesday, January 15, 2008

Wheat Flour Shortage in Pakistan

Rising Atta Prices
The rising prices and acute shortages of atta (wheat flour), a staple in Pakistan, are clearly distressing to the people. However, putting it in perspective, this wheat crisis is not isolated to Pakistan. There are widespread fears of food shortages and lack of affordability in
many countries around the world.

According to a recent report in Wall Street Journal, the prices of Illinois corn and soybeans rose 40% and 75%, respectively, from a year ago. Kansas wheat is up 70% or more. And a growing number of economists and agribusiness executives think the run-ups could last as long as a decade, raising the cost of all kinds of food.

World Wheat Stock At 26-Year Low
Global Demand is leaving end-of-year grain inventories at levels that are less than 20% of the total amount used each year; a graph of stocks as a percentage of use is as follows:



Source: US Dept of Agriculture

No More Cheap Grain
"The days of cheap grain are gone," says Dan Basse, president of AgResource Co., a Chicago commodity forecasting concern.

Rising prices and surging demand for the crops that supply half of the world's calories are producing the biggest changes in global food markets in 30 years, altering the economic landscape for everyone from consumers and farmers to corporate giants and the world's poor. The biggest increases in demand are the result of rising incomes in the developing nations where a large number of people have moved up into the middle class. Meanwhile production has failed to keep up with the rising demand. In Canada, for example, Statistics Canada trimmed its spring wheat production estimate to 509.8 million bushels, down from its October forecast of 526 million. In 2006, Canada produced 684 million bushels of spring wheat. Canada produced less
spring wheat this year than in 2006 due to reduced plantings and unfavorably hot conditions during the growing season.

USDA Report on Pakistan Wheat Crisis
According to a US Dept of Agriculture Report in December 2007, Prime Minister Shaukat Aziz announced in Sept, 2007 that the GOP would import one million tons of wheat, stating that this action was necessary to “maintain a reasonable buffer stock for the future.” The export price for Pakistani wheat during the April-May export window was approximately $225-232 per ton. For December 2007 delivery, Pakistan is now
looking at an estimated import price of $380-400 per ton, exclusive of transportation. The timing couldn’t be worse. World wheat stocks are at a 26-year low, mainly due to severe weather conditions in the major production areas of Canada, Australia, the EU and Ukraine. Consequently, wheat prices have hit all-time record highs.
The Government of Pakistan subsequently decided to make smaller wheat purchases, rather than a single 1 million ton purchase. Pakistani officials cited overbooking at the Port of Karachi and the problems berthing larger vessels as well as the need for a monthly review of the wheat situation as reasons for moving away from a single tender. They have also hinted that they may lift the ban on private imports. The Government of Pakistan could provide a subsidy for the imported wheat to cover the differential between the government issue price and the import price.
Clearly, Pakistan witnessed a perfect storm scenario on wheat in 2007 with an overly optimistic wheat crop estimate, a well-intentioned decision to lift the four-year wheat export ban to raise farm prices, severe weather conditions in the major world wheat production areas, and increased demand during Ramadan. In hindsight, lowering the official crop estimate should have had the same effect on farm prices as exports, while keeping more wheat within Pakistan. This report clearly spells out some of the mis-steps by Pakistani Government leading up to the current crisis.

Food Subsidies
Many developing nations, such as Pakistan, control and subsidize food prices by procuring the harvest from farmers at a fixed price and by providing subsidies to keep the retail prices low. The world market price for raw wheat comes to about Pak Rs. 24 per kilo in large quantity purchases excluding the cost of transportation, milling and bagging. Pakistan Government has set the retail price of atta(wheat flour) at Rs.16 per kilo. Large differentials in prices and availability across national borders encourage smuggling for profiteering. Add to this the endemic corruption in many developing nations, and you have all the ingredients for a serious food shortage. Measures such as the use of the military to guard grain storage and milling and distribution centers can help temporarily. But these are just band-aids.

The Future
There is no obvious long term solution, other than systematically increasing production, building state wheat reserves (instead of wheat exports), and by providing special assistance to the low-income people. I hope I am wrong but there is clearly a possibility of atta riots in Pakistan to add to the already precarious security situation. The politicians opposed to Musharraf would be all too happy to take advantage of this situation, as the media play up the shortages to stoke widespread public anger.

Thursday, January 10, 2008

Social Networking in Pakistan is Lagging

As the membership of social networks and the users of social media applications such as Facebook, MySpace, and Orkut grow dramatically to hundreds of millions in the US, Europe, Asia and Latin America, it seems that this phenomenon is still in very early infancy in Pakistan. As of now, there are about 117,000 Pakistanis on Facebook, about 100,000 on Orkut, and a few thousand on MySpace. There are smaller social networks such as Naseeb.com that have a few thousand Pakistani members as well. While Naseeb.com bills itself as a Muslim social network, it seems primarily focused on match-making. Pakistan's middle class is estimated to be about 25m people, larger than the population of several European countries and Australia. With such a large middle class population, only a small fraction is participating in the social networking phenomenon. The reasons cited for this minuscule participation include the lack of access to the PC and the Internet, lack of familiarity, and shyness standing in the way of appropriate public self-expression. While I acknowledge that these might be contributing factors, I believe the main factor is the lack of a socially and culturally appropriate content and welcoming environment that suits the Pakistani sensibility and taste. It is something hard to describe but it is something you know when you see it. A new social network called PakAlumni Worldwide has recently been launched to serve this exact need and to encourage Pakistanis to participate in larger numbers. It is still in its early days with about 700 members but growing rapidly. The membership includes a large number of Pakistanis living in the United States, Europe, the Middle East and various parts of Asia. The social connections made via PakAlumni can easily turn into business connections and bring the Pakistani diaspora together to grow closer and more prosperous and help Pakistan achieve greatness in the process while improving its civil society and image.

Bilawal Bhutto's Extra-curricular Activities at Oxford

In his high-profile role as the Chairman of one of Pakistan's largest political parties, there are enormous security threats for Bilawal Bhutto Zardari. In the words of John Giduck, a US security consultant, "The threat level is going to be inordinately high - you are dealing with a young man with an enormous target painted on him. It would take dozens of people and hard assets to keep this man safe". In addition to this security threat, Bilawal is dealing with the loss of his privacy with the British tabloids such as The Sun and The Daily Mail pursuing and finding more and more pictures of him with various male and female friends at various parties in Oxford. Bilawal is reportedly very popular on the Oxford campus and participates in many extra-curricular activities. The Daily Mail has discovered a number of Facebook comments including references to being hungover, his friendship with "Boozie Suzie" and the joys of free alcohol. This new found fascination of the British tabloids is likely to continue in spite of Bilawal's pleas for privacy.

For more on this, please take a look at PakAlumni website.

Wednesday, January 9, 2008

Is Demand in South Asia Driving Up Gold Prices?

Human civilization's fascination with gold goes as far back as the Sumerians of Mesopotamia (Modern day Iran and Iraq) where gold was first discovered in the third millennium B.C. While the reasons for accumulating gold have been changing over time, the fascination continues unabated. The gold price is surging again. This week it set a new record of about $890 per troy ounce, well ahead of the previous all-time record of $850 an ounce set in 1980. A troy ounce is about 31.1 grams and a tola is 11.7 grams. Some analysts argue that, even at the nominal price of $890 an ounce today, it remains far below the inflation-adjusted high of about $2200 an ounce, based on the current equivalent of the 1980 dollars.



There are many factors driving the price of gold in recent times. Among others, the slowing sale of gold reserves by the European central banks and the declining production and falling dollar have been the most cited reasons. However, the one factor that I believe is the most significant is the newfound wealth and the surge in gold demand in South Asia, the Middle East and China. According to the World Gold Council figures, the annual demand in India alone is about 800 tonnes, almost all of it for jewelry. The Indians are estimated to own about 40,000 tonnes of gold, about a third of the world's total. Exact figures for Pakistan are hard to find but demand in Pakistan is estimated at 150-160 tonnes per year. The Chinese are using 220 tonnes a year. A tonne is 32,150 ounces. Most forecasts indicate continuing growth in gold demand as Asian growth continues for the foreseeable future.

In addition to the growth in traditional jewelry demand in South Asia and the Middle East, the US dollar erosion and the inflation and recession fears are fueling investor interest in gold and new ways of investing in gold are thriving. Two ETFs called streetTRACKs Gold Trust (NYSE: GLD) and Metal Gold ETF (LON: PHAU) have been very popular vehicles for retail investors. An ETF is an Exchange Traded Fund. It is similar to a Mutual Fund except that it can be traded like regular shares at any time when the markets are open.
GLD currently holds 628 tonnes of gold, just behind Japan central bank.

Many analysts are quite bullish about continuing surge in gold prices. If, however, Central Banks decide to start selling significant amounts of gold again, gold price could drop. US Federal Reserve alone holds about 8,500 tonnes of gold followed by Germany with 3,400 tonnes. The last crash of the gold price in 1990s was caused by large gold sales by the Bank of England and other European central banks.

Tuesday, January 8, 2008

Bilawal's Appeal for Personal Privacy

After being named Chairman of Pakistan Peoples Party to succeed his high-profile mother Benazir Bhutto, Bilawal's life has suddenly gone from very private to very public. As expected, the tenacious Papparazi and the ruthless tabloid press have found a new subject to pursue relentlessly. Examples of this coverage include the stories in the British tabloids The Sun and The Daily Mail. While clearly distressing for the teenager just starting college, this attention is not unexpected. What is most unfortunate is the fact that poor Bilawal probably did not choose to be in this situation. More than the circumstances, I believe it is Mr. Asif Zardari, the widower of late Benazir Bhutto, who has brought it upon his 19-year old son. As the father of a daughter of the same age as Bilawal, I truly sympathize with his need and appeal for personal privacy that he has made in his news conference in London today. At the same press conference, he has echoed a number of allegations and made demands that have been made by other PPP leaders. Taking very public positions on such issues while at the same time appealing for personal privacy seem incongruent. More than anything else in the world, what this young man needs is advice and support and sincere guidance from his family to survive this difficult period right after the tragic loss of his mother. Such advice and guidance should include a wise counsel to lay low and stop making any public statements to the media. I wish this young man the very best in this difficult time.

Saturday, January 5, 2008

CSI: Pakistan ?

Watching the news, the pictures, the videos, and the abundance of speculation and conspiracy theories, it makes me wonder whether all of this controversy could have been avoided had there been a thorough and professional investigation undertaken after Benazir Bhutto's tragic assassination? Then I realize it is too much to ask of the people involved. Here are some of my reasons why:

1. There is a total lack of professionalism in the way the law-enforcement agencies in Pakistan go about their business. Even a cursory review by a lay person who has watched CSI:Miami or other US police shows on TV can see that no established crime scene procedures are understood or followed in Pakistan. The police do not immediately seal off the crime scenes. The police do not take time to carefully collect and preserve crime scene evidence such as detailed pictures, sketches, weapons, bullet fragments, explosives residues, blood swatches, fibers, vehicles etc. The police do not immediately contact the people present in the vicinity, interrogate them professionally and record their statements. They do not order an immediate autopsy in murder cases. They let the media and even ordinary folks just walk into the crime scene, disturb it and take pictures etc. They order that the crime scene be hosed down as quickly as possible even before it is scrutinized adequately for clues.
2. Even if all of the appropriate and internationally acceptable procedures were followed, there is a widespread fascination among the people and the media for all kinds of conspiracy theories on all matters, big and small. The politicians, in particular, immediately start accusing their opponents to gain political advantage. With total disregard for search of the truth, such an environment is clearly not conducive to any serious investigations of political or any other crimes in Pakistan.

Looking at the history of political assassinations in Pakistan, there are three assassinations that stand out: Liaquat Ali Khan's assassination in 1951, Murtaza Bhutto's assassination in 1996, and Benazir Bhutto's assassination in 2007. What is common in these assassinations is that in each case there were conspiracy allegations and Scotland Yard was brought in. In the first two cases, Scotland Yard could not help for various reasons including the fact that the crime scene evidence in each case was bungled by the Pakistani police. My fear is that the latest effort by Scotland Yard to investigate Benazir Bhutto's murder will meet the same fate.

If Pakistanis really want to learn anything from this history, they must resolve to fix the law-enforcement training and procedures to start to do the basic things right. Otherwise, they will be doomed to repeat the same mistakes again and again. Given the formidable challenge of the various domestic and international terror groups, Pakistan would become a soft target for their violence against perceived pro-West people and politicians and suffer widespread death and destruction. If Pakistanis do fix these procedures, I think they have a chance of dealing with political, terrorist, and criminal violence more effectively and lessen its impact on society at large. In my view, this suggestion is applicable in Pakistan regardless of the form of government Pakistan has: civilian, military, democratic, autocratic etc. Of course, democracy is preferable to enlist the support of the people to address the underlying causes of violence.

Obama's History-Making Win and Implications for Pakistan

Barack Hussain Obama's historic win in Iowa caucuses clearly signals that desire for change in America is strong and all-encompassing. The scope of this change includes a new willingness to accept a black man as commander-in-chief, a break from the Bush policies such as the choice of military force over soft power and diplomacy in international affairs, and increasing concern to provide ordinary citizens with broader access to healthcare and education. The people of Iowa strongly endorsed Obama's message of change and rejected Hilary's message of experience as continuation of the business-as-usual rather than a strength. After the win, Obama said to a wildly cheering supporters, "They said this day would never come. They said our sights were set too high. Our time for change has come." Obama's victory speech carried live on national TV was widely well received. Some even compared it with the memorable speeches of FDR and MLK. The Obama candidacy has energized a lot of people, including a large number young men and women, and brought them into the electoral process. Just look at how large a presence Obama supporters have on Facebook and college campuses.

Here's what Obama wrote on his Facebook page right after his election win: "We just won Iowa, and I'm about to head down to talk to everyone.
Democrats turned out in record numbers tonight, and independents and even some Republicans joined our party to stand together for change.
Thank you for everything you've done to make this possible."

From this message, it is clear that Obama wants to tap the clamoring for change in America by all, including Republicans. He wants to be a unifier to lead this effort for positive change in America.

Regardless of the ultimate outcome of this race, Obama has already made history by winning in Iowa as the first black presidential candidate. The fact that it happened in Iowa, the first state to vote in primaries and the state with more than 90% whites, is particularly encouraging for those of us looking for big changes in the US.

Comparing the hard-fought primaries for the political parties here in the US with the political parties in Pakistan, the less said the better. In Pakistan, Hilary Clinton would have already been crowned the leader of her party for life. It would be quick and efficient and still be considered entirely "democratic".

Here's a video of Obama's widely-acclaimed speech after the Iowa win:



I have received a number of questions from my Pakistani friends on Obama's views from Pakistani perspective. Here is how I explain what Obama's win is likely to mean for Pakistan:

The US presidential elections are won mainly on domestic issues except
the last election in the aftermath of 911 where security issues figured
prominently and George W. Bush won.
Obama made statements about unilaterally sending US troops into Pak
that were widely ridiculed in the US. He has since backtracked on
those statements. US presidential candidates (with a few exceptions)
are not very knowledgeable about the world and rely mainly on experts
when the time comes to make policy. Obama will do the same, if he gets
any further from the first two or three primaries.
Democrats in general tend to favor democracy and human rights (since
the Carter administration) rather than dictators often favored by
Republicans. Democrats also tend to be more pro-India and pro-Israel
but usually are not pro-war. They are likely to emphasize
soft power and diplomacy if they win the White House.
A Democrat in the White House is not going to be good for President Musharraf,
unless Musharraf really changes his ways.
The Democrats will probably reach out more to the civil society and
political parties in Pakistan. The bottom line will still be to support secular
forces and weaken the religious elements. Maulana Fazlur Rahman may be
an exception to this. He is seen as someone who can help neutralize
the anti-US elements in NWFP and Baluchistan.

Thursday, January 3, 2008

Bilawal Bhutto Zardari in Devil Costume at a Halloween Party in Oxford

“We’re ready to bring hell on earth. . . waaahahahahahah.”

Here is a picture of Bilawal Bhutto Zardari (Facebook alias: Bilawal Lawalib) posing with a friend published by the UK tabloid The Sun. The Sun obtained it from Facebook. This picture reinforces the fact that Bilwawl is just a kid, enjoying life as college kids do in the West. Poor Bilawal. He's been pushed into this limelight by his father at such a young age. I just hope it does not invite the attention of the unsavory elements in society.