Friday, September 10, 2010

Can Global Pakistanis Invest $10 Billion in Post-Floods Reconstruction?

Members of Pakistani diaspora must remember their compatriots in distress as we celebrate Eid today.

While there have been high-profile recent efforts by overseas Pakistanis to raise millions of dollars to fund rescue and relief efforts after the recent devastating floods, it is now time to begin to shift focus on to the much longer term and significantly more expensive reconstruction phase that will requires billions, not millions, of dollars.

World Bank economist Sanket Mohapatra has said in a recent post that remittances by overseas Pakistanis have played a significant role in Pakistan's economic improvement. Not only have such remittances contributed to significant poverty reduction in Pakistan "by an impressive 17.3 percentage points between 2001 and 2008 (from 34.5 percent in 2001-02 to 17.2 percent in 2007-08)", but "continued strong growth in worker’s remittances in the past few years has also contributed to improvements in the external current account balance” and “have facilitated improvement in the country’s external position”, according to a World Bank report released on July 30, 2010.

World Bank's Mohaptra adds that "there is now a risk that devastating floods that have hit Pakistan, killing more than 1,200 people and leaving 2 million people homeless, could reverse some of the gains in poverty achieved in the last few years, which were already believed to have been weakened in the wake of the recent financial crisis and rise in food prices. During past natural disasters, migrants have sent additional remittances to help their families and friends in need – for example, during the Pakistan earthquake in 2005, in Philippines after typhoons Ondoy and Pepeng in 2009, after an earthquake in Haiti in early 2010, and in other countries in Asia, Africa and Latin America. It is likely that the Pakistani diaspora will send additional financial resources to help their family, friends and even larger communities. These person-to-person transfers could complement official aid efforts".

The cost and the task of post-flood reconstruction may appear to be monumental, but I feel confident that global Pakistani community is equal to it. Already, non-resident Pakistanis have been sending home nearly ten billion US dollars a year in remittances to their home country. And their invested assets are estimated to be in hundreds of billions of US dollars in different parts of the world. I believe Pakistani diaspora can double their remittances in the next twelve months, thereby boosting Pakistan's overall economy by a $10 billion stimulus for reconstruction.

If a significant part of this additional $10 billion in remittances goes into special, professionally managed, investment funds specifically for post-floods reconstruction and rehabilitation, it will be an even greater boost to Pakistan's overall economy. To put it in perspective, the $10 billion in a year would be 5 times the annual foreign aid, and twice the peak FDI Pakistan received in 2007, the last year of healthy economic growth in 2007-2008.

Here's a video clip of Pakistan's billionaire real estate developer Malik Riaz Husain pledging $2 billion of his own wealth to help the flood victims rebuild:



Related Links:

Haq's Musings

Pakistani-Americans Extend Help to Flood Victims

World Bank Report on Pakistan released on July 30, 2010

Pakistan's Economic Performance 2008-2010

Aid, Trade, Investments and Remittances in Pakistan

World Bank Blog on Impact of Remittances in Pakistan

51 comments:

floydian said...

Remittances have shown an increasing trend which is encouraging. Lets just hope that they increase further and aid the flood relief and rehabilitation process. Excellent post.

i said...

"In fact, the analysis of the poverty impact of recent economic shocks suggests that the recent
gains in poverty reduction may have been partly reversed in the wake of recent economic crises.

Food and fuel prices rose by 23.7 and 18.4 percent, respectively, between 2007/08 and 2008/09, resulting in a 21 percent reduction in purchasing power. The 2007/08 household survey results indeed suggest that poverty started rising towards the end of that fiscal year. Many middle class households have slipped into poverty due to reduction in purchasing power. However, the impact of the recent economic
downturn on poverty will only be known when the next household survey has been conducted and results analyzed." World Bank Report 07/2010.
Riaz, this taken directly from your postings and it is interesting to note this report was taken before the floods. Secondly, your report on middle class reflects data from 2004-5. Dramatic negative changes have taken place; therefore your comparisons (again with India) may not hold water today.

Riaz Haq said...

i: "Riaz, this taken directly from your postings and it is interesting to note this report was taken before the floods. Secondly, your report on middle class reflects data from 2004-5. Dramatic negative changes have taken place; therefore your comparisons (again with India) may not hold water today."

Since you quoted m on Pakistan poverty estimates, let me share with updated Indian poverty figures, as reported by Reuters:

India now has 100 million more people living below the poverty line than in 2004, according to official estimates released on Sunday.

The poverty rate has risen to 37.2 percent of the population from 27.5 percent in 2004, a change that will require the Congress-ruled government to spend more money on the poor.

The new estimate comes weeks after Sonia Gandhi, head of the Congress party, asked the government to revise a Food Security Bill to include more women, children and destitutes.

"The Planning Commission has accepted the report on poverty figures," Abhijit Sen, a member of the Planning Commission told Reuters, referring to the new poverty estimate report submitted by a government panel last December.

India now has 410 million people living below the U.N. estimated poverty line of $1.25 a day, 100 million more than was estimated earlier, officials said.

India calculates how much of its population is living below the poverty line by checking whether families can afford one square meal a day that meets minimum nutrition needs.


http://in.reuters.com/article/idINIndia-47791820100418

varun said...

Check this out Mr. Riaz Haq.

http://www.youtube.com/watch?v=W7YRoKvm2dw&feature=related

Anonymous said...

'India now has 100 million more people living below the poverty line than in 2004, according to official estimates released on Sunday.'

That's because the definition of what constitutes poverty changed i.e India raised the bar.So the increase is statistical not due to additional deprivations thrust on the poor.

In Pakistan by contrast the ACTUAL poverty rate has increased (whatever way u measure it).The average PAkistani is poorer now in absolute terms and what money he has buys significantly less than what it did in 2007 thanks to massive double digit inflation.

This is before the floods whose full economic impact in terms of outbreaks of cholera etc,lost industrial production in the textiles,sugar and food processing(Pakistan's principal industries) industry due to massive loss of cotton,sugarcane and food crops crops and increased social instability will only be fully felt by the end of this financial year...

Riaz Haq said...

anon: "That's because the definition of what constitutes poverty changed i.e India raised the bar.So the increase is statistical not due to additional deprivations thrust on the poor."

India raised the bar to what? One square meal a day? That is ridiculous.

anon: "In Pakistan by contrast the ACTUAL poverty rate has increased (whatever way u measure it).The average PAkistani is poorer now in absolute terms and what money he has buys significantly less than what it did in 2007 thanks to massive double digit inflation."

You may be right, but where is the data?

gunam said...

data is the purchase parity of the currency.

1 usd = 44 inr
1 usd = 90 pkr

India is far ahead of pakistan in economic parameters however it has to handle the distribution of wealth in a better manner.

DCruncher4 said...

raising the bar, lowering the bar is all useless. the correct indicator is economy and sales of cars, homes, appliances like AC, Fridge. On all counts India is doing significantly better than Pakistan - which clearly means middle class is far better in
India than in Pakistan.

Anonymous said...

pakistanis or non pakistanis will invest(as opposed to donating for charity) $10billion more in Pakistan ONLY if they see a quality return on their investment.

The country's current situation doesn't warrant much confidence for long term investments like car & capital goods factories and the like.

Yes short term speculative portfolio investments may be significant in certain fast growing sectors like telecom,media etc etc
also investments in real estate may be forthcoming..

Riaz Haq said...

anon: "pakistanis or non pakistanis will invest(as opposed to donating for charity) $10billion more in Pakistan ONLY if they see a quality return on their investment."

I agree, and as recently as the period from 2001-2008 has shown that there are great returns to be made on foreign investments in Pakistan.

Overseas Pakistanis have to overcome the fear mongering of the media and lead the world investors by example to go back into Pakistan.

Riaz Haq said...

gunam: "data is the purchase parity of the currency.

1 usd = 44 inr
1 usd = 90 pkr"

I am afraid you don't know what you are talking about.

PPP has nothing do with official exchange rates which you have exaggerated.

Riaz Haq said...

Amidst serious allegations that powerful feudal politicians ordered flooding of poor village to save their own estates and farms, I don't have much expectations from the current government in Pakistan. But I still have great hopes in the people of Pakistan.

There are several fundamental positive trends in Pakistan that are often overlooked by the daily media grind.

Pakistan is urbanizing faster and has a bigger middle class than its neighbors. ...it's on its way to becoming an urban middle class society in the next decade. Such a society will limit the excesses of the elites, and be more conducive to better governance and accountability in a democracy.

The current crisis offers opportunities to remake Pakistan, and well-to-do-Pakistanis, including overseas Pakistanis, have a special responsibility to invest in Pakistan's reconstruction and refugee resettlement to enable the poor peasants to escape from the clutches of their terrible feudal lords.

DCruncher4 said...

"Pakistan is urbanizing faster and has a bigger middle class than its neighbors. .."

and their purchasing power seems to be far less than their neighbor (no plural), as evident by total lack of economy in recent years.

Anonymous said...

"Pakistan is urbanizing faster and has a bigger middle class than its neighbors. .."

not really,Pakistan is urbanizing a lot slower than India and even Bangladesh since 2007 and the trends don't look very promising.

Besides India is set to grow around 9%+ for this decade while Pakistan will according to the IMF not hit 6% per annum at least till 2015.

It takes an awfully long leap of faith to believe than an economy growing at 9% p.a with an industrial growth rate of 16% p.a last quarter is urbanizing slower than what is essentially a stagnant economy surviving on aid and remittance.

also kindly clarify:

You say on some of your posts that 30mn Pakistanis have an income greater than $10,000.
BUT
30mn X $10,000= $300 billion
The size of Pakistan's economy is significantly less than $200 billion.
So what u are probably stating is PPP 10,000 i.e a nominal income of roughly $3,000 per annum to classify someone as middle class.

Riaz Haq said...

anon: "not really,Pakistan is urbanizing a lot slower than India and even Bangladesh since 2007 and the trends don't look very promising."

According to CIA World Fact Book, Pakistan has urbanized at a rate of 3% a year (2005-2010) vs India's urbanization rate of 2.4% a year in the same period.

And the post-floods reconstruction and rehab is likely to accelerate rural-to-urban migration rate and urbanization in Pakistan.

anon: "So what u are probably stating is PPP 10,000 i.e a nominal income of roughly $3,000 per annum to classify someone as middle class."

Yes, it's the income in PPP dollars that is used to classify poor or middle class in most international reports for all nations, including India and Pakistan.

Riaz Haq said...

DC: "and their purchasing power seems to be far less than their neighbor (no plural), as evident by total lack of economy in recent years."

Not true. Consumption in Pakistan accounts for 75% of its GDP. Private consumption since 2008 has remained strong in Pakistan, even as investment and public spending has dropped as percent of GDP. At least part of this private consumption is driven by increasing remittances from overseas Pakistanis, according to ADB report.

http://www.adb.org/Documents/Books/ADO/2009/update/pak.pdf


As an aside, India has been manipulating its GDP numbers, as reported by SeekingAlpha:

Yesterday, we had written about the controversy over GDP numbers. What has happened since is even more bizarre. Now the government has issue new numbers. All within some 24 hours. The government has revised consumption numbers quite dramatically, claiming the earlier low numbers were simply a result of a calculation error.

The size of revision is dramatic. The consumption side GDP growth estimate is now 10%, compared to 3.7% earlier. Pvt consumption growth is now 3.7% compared to 0.3%, while the government expenditure growth is now 14.2% compared to -0.6% earlier.

Contrary to making us feel better about government data, this makes us feel even more uncomfortable. Yesterday, we had believed the explanation behind the low consumption numbers were systemically less efficient calculation methods. We understand quarterly data on GDP has started coming out only in the last 1-2 years, so we thought, the government still has to get its act right on the number collection mechanism.

So our point was: just ignore these consumption numbers, focus on the supply side numbers, where the data is being collected for several years, so more reliable.


http://seekingalpha.com/article/223561-bizarre-events-with-india-s-gdp-data

Anonymous said...

'Not true. Consumption in Pakistan accounts for 75% of its GDP. Private consumption since 2008 has remained strong in Pakistan, even as investment and public spending has dropped as percent of GDP.'

This according to u is a good thing?
investment/GDP is 35% + in India,It is over 50% in China.But in Pakistan it is around 10% very little of that in long term capital stock.

consumption at 75% of GDP usually means the internal capital of the economy is being eroded i.e people are shutting shop and putting money in liquid assets like gold etc

Riaz Haq said...

anon: "But in Pakistan it is around 10% very little of that in long term capital stock."

Wrong! Pakistan's gdp from investments is still about 17.5%--down from about 20% in 2008. Of course, it would be better if more of its GDP would come from investments and exports.

Unlike the Chinese economy, India's economy is also essentially consumer-driven, with private and public consumption accounting for 75% of Indian GDP.

Anonymous said...

'Unlike the Chinese economy, India's economy is also essentially consumer-driven, with private and public consumption accounting for 75% of Indian GDP.'

I am sorry consumption is around 60% of Indian GDP with investments around 40% and net exports around -5%.

Please refer:
http://blog.investraction.com/2010/06/indian-private-consumption-falling-as.html

but still :

exports(merchendise +services) +remitances+ FII + FDI > imports + outward investments.

i.e the net flow of funds for the economy as a whole remains strongly positive and we also have a $300 billion FX reserve to tide over emergencies this is 1.2 times our total external liabilities effectively making India a net creditor...

Riaz Haq said...

anon: "effectively making India a net creditor..."

Thanks for the data and the link. I stand corrected on consumption to gdp ration for India.

But I don't agree that India is a "net creditor" nation with its large twin deficits of trade and budget. India depends on foreign inflows because if its significant current account deficit.

Anonymous said...

You are most welcome for the data.

However India is a net creditor to the world because by definition foreign exchange reserves are in the form of treasury bills and other liquid debt instruments effectively credit that India extends to the world's central banks.This volume is 20% greater than the absolute value of total liabilities in foreign currencies that the Indian state(Net outstanding dues to World bank,ADB etc) as well as India Inc (Think TATA buying Corus,Tetley etc) have incurred.

Of course a much simpler way would be for India to funnel part of its foreign exchange reserves to India Inc against set export targets (South Korean policy in the 1970s and 80s basically) but the fiercely independent RBI is very very edgy about letting politicians think of India's foreign exchange reserve as a source of funds.I for one can understand the RBI's apprehensions.

Iqbal Singh said...

Ultimately, the comparisons that you make between India and Pakistan are futile.
Assuming your premise is true that Pakistan is better than India what good does it bring to the average Pakistani anyway. You haven't been to India and I have not seen Pakistan; therefore, these statistical differences between the countries are miniscule when compared to Japan for example.

However, what matters is the future 10-15 years from now. Globally what matters is how each country is percieved in socio-economic terms. The hard facts are business drives the world (unless you are a 100% communist nation = N. Korea) and that will, hopefully, bring more employment.

Making the conditions better for business that's what the Fed Bank (US) does just like any other responsible central bank in other nations. A more fruitful dialogue should discuss what the future holds. Riaz, in your case that would be Pakistan.
How does the global entrepreuner see Pakistan? What can Pakistan do to create a climate more conducive to business.

Your blog invariably leads to a discussion of India/Pakistan.

Riaz Haq said...

Singh: "You haven't been to India and I have not seen Pakistan; therefore, these statistical differences between the countries are miniscule when compared to Japan for example."

I have visited both India and Pakistan on multiple occasions, and seen the situation on the ground first hand. I have visited cities ad villages in both nations.

DCruncher4 said...

http://www.2point6billion.com/news/2010/09/16/china-and-india-top-forbes-asias-2010-fab-50-list-7147.html

Zen, Munich, Germany said...

@Datacruncher
"raising the bar, lowering the bar is all useless. the correct indicator is economy and sales of cars, homes, appliances like AC, Fridge. On all counts India is doing significantly better than Pakistan - which clearly means middle class is far better in
India than in Pakistan."

Are we comparing two poor third world countries or Germany and France?
If India and Pak. were middle class countries, it would have made sense to look into discretionary spending. But when more than a third goes to bed empty stomach, how can you take car sales as a reliable indicator of the well being of the people?

It is just another economic indicator and do not reflect the well being of people.

DCruncher4 said...

@Zen,

I was talking about the state of middle class in India and Pak. Somehow Riaz deludes that Pakistan has better middle class than India, which is not corroborated by economic stats.

Riaz Haq said...

DC: "Somehow Riaz deludes that Pakistan has better middle class than India, which is not corroborated by economic stats."

Do you think car sales in India signify middle class consumption, a middle class defined as making $2 a day?

I'm afraid you're wrong.

What you need to look at it overall consumption as percent of GDP...which, at 80%, is much higher in Pakistan than India's 60%. See my latest post on this subject.

aamsvad said...

Indo-Pak debate:-Two third class students who have failed in all subjects for over 6 terms.But that does not at all defer them form childishly comparing who got a "Bigger Zero's" on their Exam paper or who was marked a "sterner red ink wrong answer".
It would be best to compare them selves with those who have consistently passed the exams, if not the class topper!

aamsvad said...

Riaz , India has handed over 20 million cash grants to Pakistan.As you love trumpeting India's poverty around, this gesture is more than laudable. India is with u in time of need.Disasters should be above politics.But sadly Pak-Govt ,under Army pressure did exactly that.Grants would have been far more if not for...you know what happened.
so on a lighter note there is 20 mil of your 10 billion.

Riaz Haq said...

Foreign investment in Pakistan declined 34% in 2 months, says a report in Daily Times:

KARACHI: Net foreign investment in the country fell 34.1 percent to $267 million in the first two months of the fiscal year 2010-11 (FY11) as compared with $405.4 million in the same period last year, the State Bank of Pakistan said on Friday. Out of the total foreign investment, foreign direct investment (FDI) fell 50.2 percent in July and August to $171.4 million from $344.5 million in the same period last year, the central bank said. A worsening security situation, with a Taliban insurgency in the country’s northwest, coupled with chronic power shortages has put off investors, analysts say. There was a net inflow of $95.6 million in the first two months of the FY11, as compared with a net inflow of $60.9 million in the same period last year. On monthly basis, FDI to the country witnessed a decline of 31 percent in the month of August 2010 to stand at $69.5 million as compared to $101.9 million in the previous month. According to the latest data, the foreign private investment recorded a decline of 18.49 percent as it dropped by $26.6 million to stand at $117.2 million as compared to $143.8 million last month. However, portfolio investment reached $47.7 million in the second month of the current fiscal year as compared to $41.8 million in the first month, showing an increase of 14.11 percent. An International Monetary Fund (IMF) emergency loan package agreed in November 2008 helped Pakistan avert a balance of payments crisis and shore up reserves. It received the fifth tranche of $1.13 billion of the IMF loan of $11 billion in May and Pakistan and IMF authorities are going to meet in November to discuss the release of the sixth tranche. The IMF on Wednesday approved as expected $451 million in emergency funding for Pakistan to help the country rebuild from devastating floods. This was separate from the $11 billion IMF program

DCruncher4 said...

"What you need to look at it overall consumption as percent of GDP...which, at 80%, is much higher in Pakistan than India's 60%. See my latest post on this subject."

80% by itself means nothing unless we have a breakdown of what type of consumption. A poor man may spend 70% of his earnings on food, than a rich man who say about 10%. But who will conclude that the poor man is eating more and better food than rich.

By all indicators middle class in India have more disposable income for discretionary spending. This is indicated by growing revenue of pvt airlines in India and revenue from upper class segment of Indian railways. Pakistan is shutting down trains due to lack of demand and lack of money for infrastructure.

Riaz Haq said...

DC: "By all indicators middle class in India have more disposable income for discretionary spending. This is indicated by growing revenue of pvt airlines in India and revenue from upper class segment of Indian railways."

I don't think you understand what middle class means in India and Pakistan. It means people making $2 a day most of whom can not afford any of the things you are talking about.

DCruncher4 said...

"I don't think you understand what middle class means in India and Pakistan. It means people making $2 a day most of whom can not afford any of the things you are talking about."

Why are you side stepping the issue? Why is India showing higher consumption of cars, electronics items or other discretionary spending (notice how international retails are opening in India and not pak). In Pakistan they are not declining in growth.

In your obsession about India you are forgetting that unlike India, Pak was better off 20 yrs ago and is now seemingly in a irreversible decline, coinciding with growing islamization of society.

Riaz Haq said...

DC: "Why are you side stepping the issue? Why is India showing higher consumption of cars, electronics items or other discretionary spending (notice how international retails are opening in India and not pak). In Pakistan they are not declining in growth."

I am not sidestepping the issue, I am trying to educate you on the concept of middle class consumption by asking you a simple question:

Can someone living on about $2 a day afford the things you cite as examples of middle class consumption? Can they even buy the gasoline for the cars you seem to think they are buying?

Here are the figures from ABD report on middle class:

India's middle class (defined as $2 a day or more) is 25% of the population, and 80% of this middle class sits just at or slightly above $2 day income level.

Pakistan's middle class (defined as $2 a day or more) is 40% of the population, and 80% of this middle class is at or slightly above $2 a day income level.

Here are the details of income levels in India, Pakistan and China as reported by ADB:

Daily Income..$2-$4...$4-$10..$10-$20 Over $20

India...20.45%...4.15%..0.45%...0.10%

Pakistan..32.94%...6.56%...0.62%..0.15%

China...33.97%...25.17%..3.54%..0.68%

Riaz Haq said...

European textile firms are protesting EU trade concession for Pakistani textile imports to help Pakistan after the massive floods. Here's a Wall Street Journal story on it:

European Union trade concessions for flood-ravaged Pakistan have triggered a backlash among European manufacturers, led by an EU textile sector already imperiled by Chinese imports.

The tensions show how the economic downturn is increasing anxieties over trade to the point where even targeted humanitarian efforts to lower tariff barriers are called into question.

The European Commission, the EU's executive, Wednesday approved tariff waivers on 75 categories of imports from Pakistan for up to three years. The gesture followed an order by EU leaders eager to show they're helping some 10 million Pakistanis left without shelter after violent flooding this summer.

Pakistan isn't a big exporter to the EU, shipping only $4.2 billion worth of goods to the bloc last year. It ranked a distant 46th among EU trading partners, between the United Arab Emirates and Serbia.

However, more than 75% of those exports are textiles, clothing, leather or related products, and those goods will make up a majority of the roughly $140 million in total extra trade the EU says the deal will generate from eliminating the EU tariffs.

That's a problem for European textile manufacturers, mostly located in Europe's southern rim, from Portugal to Italy to Romania. Thousands of small shops and their workers have been getting crushed ever since China joined the World Trade Organization in 2001, partially opening up European textile markets. Some of these European economies are suffering slow growth because of the euro zone's debt problems.

Riaz Haq said...

Here are some excerpts from Bloomberg-Businessweek on Pakistani companies prospects after floods:

Toyota Motor Corp. and Unilever affiliates in Pakistan said the worst floods in the nation’s history may sap growth and force production cuts as consumers struggle to cope with the destruction of crops and houses.

“The economy is fragile,” Parvez Ghias, chief executive officer of Toyota-backed Indus Motor Co., Pakistan’s largest automaker by market value, said by phone yesterday from Karachi. “The prices of food and essentials have gone up significantly.”

“The overall impact of the floods is going to be very serious for the economy,” said Nasim Beg, who helps manage $200 million at Karachi-based Arif Habib Investments Ltd. “In the long term, something like cement might look alright, but in the immediate term, I think everything will be under stress.”

“The damage is going to be significant,” said Muhammad Adil Ghani, plant operations head at Lahore-based Nishat Mills. “We have to reevaluate the forecast for the coming year.”

One of the group’s power plants, in Punjab province, northern Pakistan, was closed for at least five days because of floods, he said. The company’s four textile factories around Karachi, Faisalabad and Lahore haven’t been directly affected.

Nationwide car sales may fall as much as 25 percent this quarter because of the floods, said Indus Motor’s Ghias. The automaker, 38 percent owned by Toyota and an affiliate, may cut output in October because of the expected slowdown, he said. The company has enough orders to maintain its 200 cars-a-day production rate until then, he said.

Pakistan’s major cities and industrial areas, such as Karachi and Faisalabad, have escaped the flooding, which has limited damage at factories and may also curb the impact on earnings. Unilever’s local unit gets about 8 percent of revenue from the worst affected areas, CEO Malik said.

“So far there hasn’t been a major impact on sales,” he said. A reduction in costs may offset any decline in revenue, safeguarding profit, he said.

Mark Mobius, who oversees about $34 billion in developing- nation assets as executive chairman of Templeton Asset Management Ltd.’s emerging markets group, is also buying Pakistani shares in anticipation of a rebound from the floods. Local stocks’ valuations are “very, very attractive,” he said earlier this week.

Unilever Pakistan has maintained production through steps including re-routing shipments of goods, Malik said. Nestle Pakistan Ltd., a unit of the world’s biggest food company, has continued operations at its factories, which are concentrated in Sheikhupura, Kabirwala and Islamabad.

The full impact of the disaster on foodmakers will become clearer over the next week or so as they work through inventories of goods such as fruit pulp, used to make juices, said Syed Fakhar Ahmed, a spokesman for Nestle Pakistan.

Engro Foods’ milk tankers have been unable to reach areas of Sindh and Punjab provinces because of the floods, CEO Rehman said. Retail milk prices may eventually rise by as much as 4 rupees (5 cents) a liter, he said. In the short term, the effect on food prices has been mitigated by Ramadan, a month of fasting for Muslims that began on Aug. 11, he said.

“After the people return and transportation resumes, the supply chain will recover but not completely,” Rehman said.

The country will need to import 1 million head of livestock within five months to replenish stocks, according to the nation’s Meat Merchants Welfare Association. Livestock accounted for 11 percent of gross domestic product in the year ended June 30, according to the government’s economic survey.

“Agriculture is a very significant part of the economy,” Indus Motors’ Ghias said. “If we’re going to see negative growth there, other sectors will be impacted.”

Riaz Haq said...

About 60% of India's workforce is engaged in agriculture, contributing about 16% of GDP, according to published data. Textile manufacturing claims the second largest employment and comprises 26% of manufacturing output. It accounts for a fifth of India’s exports, and employs almost 10 percent of India’s workforce, or some 35 million people, and has the potential to add another 12 million new jobs --dwarfing the 1-2 million jobs created by the much-heralded IT and BPO sector, according to a World Bank report. Even the most optimistic estimates by NASSCOM put the total direct and indirect employment in IT and ITES sectors at 10 million jobs.

Agriculture in Pakistan accounts for 19.4% of GDP and 42% of labor force, followed by services providing 53.4% of GDP and 38% employment, with the remainder 27.2% of GDP and 20% workers in manufacturing sector. Over half of Pakistan's manufacturing jobs are in the textile sector, making it the second biggest employer after agriculture.

Here is a quick comparison of different sectors of the economy in India and Pakistan in terms of employment and GDP contribution:

Country....Agri(emp/GDP)..Textiles..Other Mfg..Service(incl IT)

India........60%/16% ...........10%/4%.....7%/25%...........23%/55%

Pakistan......42%/20%...........12%/8%......8%/18%...........38%/54%

Riaz Haq said...

Here are some excerpts from BBC.com's Soutik Biswas's blog about Azim Premji's $2 billion donation for rural education and development in his native India:

Mr Premji remains an exception in the world of Indian business. India has some 60 billionaires. The wealth of its top 10 billionaires equals 12% of its GDP, compared to just 1% in China, 5% in Brazil and 9% in Russia. The combined net worth of India's 100 wealthiest people is about a quarter of its GDP. But the philanthropic record of India's rich is spotty.

A few like the Tatas - who built and run the city of Jamshedpur and have a decent record in what is called corporate social responsibility - appear to have been more generous than the others. In recent years, India's billionaires have given away money to their alma mater, mostly foreign universities. A mobile phone giant has set up a foundation for underprivileged children; a tyre company has invested in containing HIV/Aids. The chairman of a leading software company has said he would set aside 10% of his wealth for philanthropy. A tea company has adopted several hundred villages. But one suspects that it all does not add up to much, considering the enormous concentration of wealth in the hands of India's rich and the power they wield.

Are Indians then too greedy to be philanthropic? Americans, for example, are known to be generous, giving away some $300bn - or 2% of the nation's GDP - to charity. There are no figures available for India - a much poorer country - but I am sure they will not be anywhere close.

I don't think some people are hardwired for altruism and others aren't - an act of charity is often spurred by an incentive of publicity and media coverage. Readers always responded handsomely whenever a magazine I used to work with launched a donation drive following a devastating flood or an earthquake. "You give not only because you want to help but because it makes you look good, or feel good, or perhaps feel less bad," write economist Steven Levitt and journalist Stephen Dubner in SuperFreakonomics. So, traditionally, India's businessmen have felt that they have contributed enough to society by giving away a lot of money towards building of temples.

Many believe that India's rich are not generous enough and flaunt their wealth vulgarly in a country where the majority are poor. One reason could be that most Indian businesses are run by families and have mercantile origins. Prime Minister Manmohan Singh once appealed to businessmen to share their profits with the common man, maximise profits "within levels of decency" and refrain from ostentatious display of wealth because such "vulgarity insults the poor". Gurcharan Das, a writer and management guru who has worked with some of India's top companies, believes that Indian capitalism has begun to flower in the past few decades and wealth is "now being created" in plenty. He believes that the rich will begin to contribute to social causes in a big way soon, and Mr Premji's $2bn charity for education sets an "important" precedent. Time will tell whether Mr Das is being too optimistic.

Anonymous said...

"What is the track record of Pak Muslim tycoons in charity?"

Riaz Haq said...

Anon: "What is the track record of Pak Muslim tycoons in charity?"

Recently, a Pakistani billionaire real estate developer Malik Riaz Husain committed to spending 75% of his wealth on helping the flood victims.

And Pakistanis gave Rs. 140 billion to charity in 2009, according to Pakistan's center for philanthropy in Islamabad.

Rs. 140 billion is about US $1.7 billion...nearly 1% of Pakistan's GDP for philanthropy. Obviously, this money is spent in Pak rupees, not US dollars. Examples include Edhi's ambulance service...the largest non-profit ambulance service in the world.

$1.7 billion is about half of the US philanthropy of 2% of GDP, which is not bad given that there are no tax or other incentives for philanthropy in Pakistan

Zakat and Charity are key pillars of faith in Islam to ensure that the poorest and weakest members of society are well looked after.

One of the key reasons why there is less hunger and poverty in Pakistan than in India is the generosity of Pakistani philanthropists

In India, too, the biggest philanthropist is a Muslim, Azim Premji, who recently announced
a $2 billion donation for rural education and development in his native India. Other, richer Hindu and Parsee billionaires, have done nothing like this so far.

The rich in Pakistan cheat on their taxes, but not on zakat (poor due) and sadaqa (charity).

Riaz Haq said...

Here's an excerpt from a piece by Lawrence MacDonald of Center for Global Development on flood recovery in Pakistan:

..Molly (Kinder) adds that aid money could make a real difference in how well and how quickly Pakistan is able to recover from the floods. As Molly, Nancy (Birdsall) and Wren have written, redirecting unspent aid money towards flood reconstruction could bolster Pakistan’s economy at a critical moment and lay the foundation for poverty-reducing growth when and if the necessary domestic policy reforms are enacted. We discuss ways to make that aid transparent and to ensure that it isn’t diverted for other purposes.

As Molly and I spoke, top officials from the Pakistani government were in in town for the third set of so-called Strategic Dialogue meetings with their American counterparts. We at the Center got just a taste of those meetings when we hosted Pakistani Finance Minister Abdul Hafeez Shaikh for a private breakfast with members of Washington’s Pakistan policy community and U.S. government representatives. Shaikh’s talk and his savvy about both economic policies and politics impressed all those who attended, but Molly warns that while Pakistan has a full team of skilled economists in the top ranks of government, knowing what needs to be done and managing to overcome the substantial obstacles to reform are two separate issues. Molly adds: the finance minister “rightly identified the challenge, which is how can you create the political momentum within Pakistan to enable these very difficult reforms to happen?”

Riaz Haq said...

Here are a couple of reports on flood recovery in Pakistan:

World Food Program Report: "Six months after Pakistan was hit by devastating monsoon flooding, the recovery is at different stages in different parts of the country. In the north and central Pakistan, most families have been able to return to their homes, rebuild their houses, plant crops and take back their former lives.

But in a few areas of the southern province of Sindh, many communities are still surrounded by floodwaters. Thousands of families in Balochistan, in the southwest, are also unable to return to their homes. Between the two provinces, some 600,000 flood victims are still living in temporary camps and for these people recovery seems some way off."


BBC Report: " A village in Pakistan devastated by flooding has been renamed Midlands after a West Midlands charity raised money to help rebuild it.

Walsall-based Midland International Aid Trust raised £113,000 to help the 20 million people thought to be affected by the monsoon floods last year.

The village of Lal Pir, now named Midlands, had been cut off by water.

Mohammed Aslam MBE, the trust's founder, has been visiting the country to oversee how the aid is spent.

Mr Aslam, 71, originally from Kashmir, said he wanted to make sure every penny of aid went to the people living in the region.

He said in August he could only reach Lal Pir by boat.

Now all 36 homes which were destroyed have been rebuilt, at a cost of £2,000 each, after the charity provided the villagers with materials and tools.

The floods struck the north of the country in August. At least 1,500 died in the deluge."

Riaz Haq said...

A quick comparison of the figures from Pakistan Center for Philanthropy and Bain and Co confirms the fact that the rich in India are only half as philanthropic as their Pakistani counterparts.

Here's an excerpt from a report by Arpan Seth of Bain:

In 2006, India’s giving totaled close to $5 billion. That would translate into $7.5 billion in 2009 based on gross domestic product (GDP) figures if the rate of giving remained steady. According to Bain analysis, philanthropic donations
would amount to 0.6 percent of India’s GDP. In Brazil, the rate of giving is 0.3 percent and in China, just one-tenth of 1 percent, so we are faring well when
compared with other emerging nations. But this is cold comfort given the enormous needs of the poor and disadvantaged in India."

The fact is that the lack of philanthropy by the rich in India is common knowledge, and it has come under criticism in the media recently.

Here's an excerpt from a recent news story in London's Daily Telegraph:

"Azim Premji, the founder of Wipro, a software and call centre to cooking oil empire, is India's second wealthiest man, and one of the world's richest 50 tycoons with a personal fortune of $18 billion.

The donation means he will succeed the Microsoft founder Bill Gates, who has given $1.6 billion to charitable projects in India, as the country's largest individual donor.

The announcement of his gift came amid criticism that too few of India's growing number of millionaires and global billionaires take philanthropy seriously or give enough of their wealth to charitable causes.

The Prince of Wales sought to bridge the gap in charitable giving on the Indian subcontinent when he hosted a dinner for some of the regions wealthiest businessmen and sought to persuade them to set an example by giving to well-run charities. He invited Ratan Tata, owner of Jaguar Land Rover, steel baron Lakshmi Mittal, property magnate K.P Singh and Mukesh Ambani, the world's richest Indian, to launch the British Asian Trust to encourage Asian billionaires to give more. "

Riaz Haq said...

Here's an interesting CGAP report on the use of technology to aid Pakistan's flood victims in 2010:

CGAP’s partner in Pakistan, Tameer Microfinance Bank, and their parent company, Telenor Pakistan, have made it possible for people in Pakistan who may not have internet access to make donations to relief organizations using their EasyPaisa mobile banking platform and have removed the usual transfer fees. EasyPaisa account holders can make donations direct from their mobile wallets and anyone can walk into one of 6,000 agents to contribute to the work of organizations including the Pakistan Red Crescent Society and SOS Children’s villages. They are also in discussion with a number of NGOs about using EasyPaisa to help them to distribute payments to people who have lost their homes or their livelihoods and Telenor themselves have pledged over Rs 213 million (USD 2.5 million) to flood relief efforts.

UBL Bank has won a contract from the Government of Pakistan to make electronic payments of Rs 100,000 (USD 1,170) each to 2 million households – the vast majority of whom will never have set foot in a bank. UBL plan to use their Omni Branchless Banking platform to deliver payments to recipients via Visa debit cards. They will open accounts and distribute cards so that recipients can spend their money at stores or withdraw their cash at ATMs or agents that have been specially set up to deal with the post-flood situation. In post-disaster situations, being able to access cash becomes a life or death issue and from the provider perspective it’s also a major challenge. UBL has 1,800 agents at present and they plan to set up 3,000-4,000 more over the next 3-4 months to cope with the increased demand, according to Abrar Mir, Executive Vice-President of Branchless Banking, who hopes that the people that they reach will continue to use their accounts long after the floods have subsided.

Other organizations are using mobile phones in innovative ways that are not related to branchless banking. Ushahidi, an open source project that allows users to crowdsource crisis information via mobile, have set up pakreport.org a mapping service that allows anyone in the country to text information about the flood. Information is collated and made available to the emergency services and disaster response organizations and NGOs via a web-based interface.

The presence of two branchless banking services in Pakistan (EasyPaisa and UBL Omni) may play an important part in the response to the flood in Pakistan. In Haiti, where no branchless banking solutions exist, the Bill & Melinda Gates Foundation and USAID set up a prize for the first organization to launch a branchless banking solution earlier this year that could be used to make payments to those affected by the earthquake. Although there are some encouraging signs, the prize has yet to be claimed. The response in Pakistan has been much faster due to the presence of existing systems.

Disasters are a fact of life in many countries, and disproportionately affect the poor. Branchless banking will never be able to prevent disasters, but it has the potential to dramatically improve the way in which we can respond to them.

Riaz Haq said...

Pakistan govt has distributed Rs 28.6 billion among flood victims, according to Daily Times:

ISLAMABAD: Government of Pakistan has distributed Rs 28.6 billion among 1.483 million flood-affected families through NADRA’s Watan Card — each card has Rs 20000 cash assistance.

Deputy Chairman NADRA, Tariq Malik stated this while briefing the UN delegation headed by Margareta Wahlstrom, Special representative of the Secretary General for Disaster Risk Reduction who visited NADRA Headquarters today for briefing on Flood Relief System.

Tariq Malik while elaborating the overall progress said that in Punjab, 608,824 flood-hit families received Rs 11.96 billion while in Sindh 558,997 families received Rs 10.11 billion. In Baluchistan

Rs 1.85 billion have been distributed among 102,945 families and Rs 3.8 billion were disbursed among 199,414 families in the province of Khyber Pakhtunkhwa. He said in AJK and Gilgit Baltistan

Rs 188,450,000 distributed among 10,173 families and Rs 61,626,000 given to 3,263 families respectively.

He said the selection of beneficiaries is one of the most contentious aspects of any post disaster cash transfer programs in various countries. “NADRA walked extra miles as our aim was to protect the most vulnerable among the flood victims like women household, widows, special persons and minorities,” he told.

He told 120,081 Watan Cards were given to the households headed by women folks in the remotest areas of Pakistan — and 11,746 Watan Cards were given to minorities notified by the provinces.

Emphasising on Grievances Redressal System, Tariq Malik explained that 3.2 million people visited Watan Card centers, 335,044 complaints were received and NADRA has verified that 167,063 were eligible of Watan Cards of which around 155,000 have been given Watan Cards.

Fifty percent (50%) of the complaints were not genuine as these included people who already had received Watan Cards or their family member had received Watan Card. “We are not closing complaints redressal system, and would like to entertain all complaints on case to case basis,” he added.

He urged the media, international donor agencies and NGOs to focus on facts and real data, not on anecdotes or stereotypes or politically motivated press reports aiming generalisation based on isolated incidents.

Neva Khan, Country Director Oxfam, Madhavi Malagoda ARIYABANDU, Regional Programme Officer, UN International Strategy for Disaster Reduction were among the members of delegation.

Riaz Haq said...

Here's a piece on "strategic philanthropy" in Pakistan as presented at Asian Philanthropy Conference:

Zubair Bhatti’s conference paper for the APPC Hanoi Conference shows many optimistic signs for the future of strategic philanthropy in Pakistan. Of the estimated six million Pakistanis living outside Pakistan, around 3.9 million sent home a total of US$5.5 billion from 2006 to 2007—through formal banking channels. The Ministry of Labor and Overseas Pakistanis even placed the estimated remittances at some US$8 billion—contributed by around 7 million persons “of Pakistani origin.”

And this isn’t even the good news yet. Even more positive is the observation that these remittances, and the philanthropic purposes for which they are sometimes allocated, are beginning to be “aimed at long-term social change,” showing the relative maturity of overseas Pakistanis when it comes to strategic giving. According to Bhatti: “Strategic giving is not a new phenomenon in Pakistan. Among the Muslims of the subcontinent, a proud tradition of philanthropy as an instrument of social change has long co-existed with the dominant impulse of helping the poor.” At present, more signs are pointing towards the giving public’s preference for institutional, if not strategic, methods and channels for giving. These include the following:

• The rising number of NGOs, as well as the increasing visibility of their work and their fund-raising activities;
• The proliferation of major advertisements on billboards, newspapers, and TV screens showing charitable organisations and their campaigns;
• The increasing willingness of donors to allocate their donations, including Zakat, to organisations “rather than to the poor in the family or immediate locality according to the traditional interpretation of Zakat;”
• The growing interest in corporate social responsibility among wealthy businessmen;
• American Pakistanis’ utilisation of personal foundations and funding organisations in allocating and disbursing large sums of money toward charitable causes; and
• The large percentage of funds being raised by local Pakistani NGOs from the diaspora community.

Bhatti cites several “drivers of change” in this shift toward a more strategic philanthropic perspective in Pakistan. First is the observation that overseas Pakistanis “are more educated, more aware, more affluent... than Pakistanis back home... [They] have seen the role of strategic philanthropy in [more advanced] societies.”

Next is the aging population of first-generation Pakistani emigrants and their propensity to be involved in charitable activities given their affluence, their prominence, and the amount of free time they have on their hands. Related to this is the rise in status of medical professionals who left Pakistan in the 1970s to study in medical colleges, and who now find themselves in a position “where they can use their financial resources and contacts to mobilize funds for their alma mater and other related social causes.”

As the population of Pakistani professionals in other countries matures and reaches out, so does the maturity and reach of its professional associations. Bhatti shares that, in the United States, the Association of Physicians of Pakistani Descent in North America (APNAA)—a 10,000-strong organisation—supports strategic philanthropy through health and education initiatives in rural areas. Also in the Unites States, “the growing size of remittances... represents greater opportunities for organized fund-raising.”

Riaz Haq said...

Here's Maplecroft risk warning for investing in India, according to Times of India:

LONDON: The United Kingdom-based Global Risks Atlas 2011 on Friday described India as the 16th riskiest country to invest in for the security hazards it poses and rather embarrassingly clubs it with Niger, Bangladesh and Mali. The Atlas is published by Maplecroft, a consultancy founded by Alyson Warhurst, chair of strategy and international development at Warwick Business School.

The evaluation is structured on seven key global risks including macroeconomic risk and threats around security, governance, resource security, climate change, social resilience and illicit economies.

Maplecroft assessed India faces simultaneous threats of terrorist attacks from Islamists and Maoists. It also points at India's lack of social resilience despite a robust economic growth and cites its poor human rights record. It says large sections of the population lack access to basic services such as education, healthcare and sanitation, and highlights its less productive workforce, greater susceptibility to pandemics and susceptible to social unrest.


A press release by Maplecroft lumps Pakistan with Russia on investment risk:

Dynamic political risks constitute immediate threats to business and Maplecroft rates 11 countries as ‘extreme risk.’ Most significantly, the emerging economy of Russia has moved up five places from 15th to enter the top ten for the first time, whilst Pakistan has also moved two places up the ranking to 9th.

The ‘extreme risk’ countries now include: Somalia (1), DR Congo (2), Sudan (3), Myanmar (4), Afghanistan (5), Iraq (6), Zimbabwe (7), North Korea (8), Pakistan (9), Russia (10) and Central African Republic (11).

Russia’s increased risk profile reflects both the heightened activity of militant Islamist separatists in the Northern Caucasus and their ambition to strike targets elsewhere in the country. Russia has suffered a number of devastating terrorist attacks during 2010, including the March 2010 Moscow Metro bombing, which killed 40 people. Such attacks have raised Russia’s risk profile in the Terrorism Risk Index and Conflict and Political Violence Index. The country’s poor performance is compounded by its ‘extreme risk’ ratings for its business environment, corporate governance and the endemic nature of corruption, which is prevalent throughout all tiers of government.
-----
Jim O’Neil, Chairman of Goldman Sachs Asset Management, states: "Growth is happening where political risk is most challenging. So, meticulous monitoring and mitigation now will enable business to flourish and benefit from the opportunities presented by the future growth economies of the BRICs and Next 11".

Looking to the longer term, the BRICs countries are witnessing increasingly worse structural political risk trends for 2011. China (25), India (32) and Russia (51), rated ‘high risk’ and Brazil (97) medium risk, have all seen risks increase compared to scores from last year’s Atlas.

Riaz Haq said...

British Prime Minister David Cameron, now on a visit to Pakistan, has offered about $1 billion in aid for education, according to Financial Times:

Please respect FT.com's ts&cs and copyright policy which allow you to: share links; copy content for personal use; & redistribute limited extracts. Email ftsales.support@ft.com to buy additional rights or use this link to reference the article - http://www.ft.com/cms/s/0/cc68ce4c-5f91-11e0-bd1b-00144feab49a.html#ixzz1IfKt9DJ6

David Cameron offered Pakistan’s leaders up to £650m ($1,055m) of aid for schools and heaped praise on their “huge fight” against terrorism in a diplomatic gamble to end years of mutual mistrust with a gesture of goodwill.

During a confidence-building visit to Islamabad with an entourage of his most senior security advisers, Mr Cameron jettisoned the usual list of UK demands and instead gave Pakistan the benefit of the doubt over Afghanistan and its support for militant groups.

Please respect FT.com's ts&cs and copyright policy which allow you to: share links; copy content for personal use; & redistribute limited extracts. Email ftsales.support@ft.com to buy additional rights or use this link to reference the article - http://www.ft.com/cms/s/0/cc68ce4c-5f91-11e0-bd1b-00144feab49a.html#ixzz1IfLC3dkM

Such optimism over Islamabad’s intentions marks a big break in British diplomacy, making a stark contrast with Mr Cameron’s description of Pakistan “looking both ways” on terrorism, a remark that triggered a serious diplomatic incident last year.

Rather than regarding Pakistan as a country that “can do more”, particularly on curbing Taliban activities, the British assumption is now that Islamabad’s security agencies have limited control over militant groups they once helped to create.

The big test for Mr Cameron is whether his expression of trust can generate better results than the more transactional approach adopted in the past. British officials say they are already seeing tangible improvements in intelligence co-operation and a greater willingness to discuss a political peace deal in Afghanistan.

Mr Cameron sought to demonstrate the breadth of the new partnership by offering funds for up to 4m school places by 2015. “I struggle to find a country that’s more in our interest to progress and succeed than Pakistan,” Mr Cameron said after a meeting with Yusuf Raza Gilani, Pakistan’s prime minister.

“If Pakistan succeeds then we will have a good story ... if it fails we will have all the problems of migration and extremism, all the problems.”

The package of up to £650m, which more than doubles previous education funding, forms part of an aid programme that is set to become Britain’s biggest.
----------
The centrepiece of Mr Cameron’s visit was a security round-table with Pakistan’s civilian leadership and General Ashfaq Kayani, its military chief. Sir John Sawers, head of the Secret Intelligence Service, MI6, and General Sir David Richards, chief of the defence staff, also attended, in their second visit to Islamabad in less than a month.

Mr Gilani later brushed aside questions over Pakistan’s willingness to combat terrorism. “We’ve the ability and we have the resolve and we are fighting and we’ve paid a very heavy price for that,” he said, citing the 30,000 casualties in Pakistan’s effort to quell an internal insurgency.

One senior Pakistani government official speaking after Mr Cameron’s meetings said closer security ties would take some more time to develop. “Clearly, the UK wants Pakistan to extend help to combat militant plots on British soil,” he said. “But the UK will also need to be much more forthcoming on helping Pakistan to go after members of its own militant groups from places like Baluchistan who have taken refuge in Britain.”

Riaz Haq said...

Pakistan Attractive as Growth Outweighs Violence, Atlas tells Bloomberg:

---“I really don’t spend any time worrying about law and order,” said Muhammad Abdul Samad, 40, who oversees $77 million in Pakistani stocks and bonds as chief investment officer at Atlas Asset in Karachi. “If you want to make returns, you have to look at the positives: we have a huge market of 180 million people and the economy is still growing.”

Gains in National Refinery Ltd. (NRL), the second-biggest oil processor, and Attock Petroleum Ltd. (APL), a fuel retailer, boosted Atlas’s top fund in the year ended June, Samad said. For the fiscal year starting July, it’s seeking investments in banks, oil and gas, and fertilizer industries, he said.

Pakistan’s benchmark stock index, which trades at 6.4 times estimated earnings, the lowest in Asia, has fallen 9 percent since the end of June as escalating violence hurt business confidence. Prime Minister Yousuf Raza Gilani’s government aims to boost economic growth to 4.2 percent in the year to June 30, 2012, from 2.4 percent in the previous 12 months.
--------
“Selling from foreign portfolio investors is affecting the local market,” Samad said.

Last year, global funds bought $344 million worth of Pakistani stocks compared with net sales of $65 million, according to central bank data. More than 35,000 Pakistanis have been killed in terrorist attacks since 2006 as Taliban militants retaliate against military offensives in the northwest, according to the government.

Samad’s 650 million rupee ($7.5 million) Atlas Stock Market Fund outperformed all Pakistan’s 30 equity funds, according to Invest Capital Markets Ltd. The fund returned 40 percent in the 12 months ended June 30 and beat the 29 percent return of the benchmark Karachi Stock Exchange 100 Index.

His top five holdings as of June 30 were Nishat Mills Ltd., MCB Bank Ltd., Pakistan Oilfields Ltd., United Bank Ltd. and Allied Bank Ltd.

“Banks are going to post attractive earnings because if interest rates come down, they will lend more to the private sector and if they don’t, they will invest in high-yielding government securities,” said Samad, adding that the three banks are among his top picks this fiscal year. “Banks are in a comfortable position either way.”

Pakistan’s central bank unexpectedly cut the benchmark interest rate to 13.5 percent on July 30, after holding it at 14 percent, one of the world’s highest, for four straight reviews.

In the oil and gas sector, Samad likes Pakistan Oilfields, Pakistan Petroleum Ltd., and Attock Petroleum. Pakistan, which imports 80 percent of its fuel needs, is increasing production to reduce reliance on shipments from overseas. He also favors Fauji Fertilizer Ltd., the biggest urea maker, and Fauji Fertilizer Bin Qasim Ltd. (FFBL), a fertilizer producer.
-------
“Active fund management, timely investment and divestment, as well as the performance of some stocks like Attock Petroleum were main reasons for Atlas’s outperformance,” said Mazhar Sabir, an analyst at Invest Capital Markets in Karachi.

Samad said Atlas may introduce a government bond fund this year targeting investments of three to five years and is considering a dividend-yield equity fund and a sector-specific stock fund next year.

“In the short run, law and order problems definitely hurt investors,” Samad said. “But in the long run, there’s no impact. And we’re here for the long run.”

Riaz Haq said...

Here's an ET report on record high remittances from Pakistani diaspora:

With an impressive 17.7% annual growth, remittances sent home by overseas Pakistanis surged to a record high and crossed the psychological mark of $13 billion in the previous fiscal year 2011-12, the State Bank of Pakistan (SBP) announced on Tuesday.

Continuous growth in remittances is being billed as a lifeline for Pakistan’s economy, especially when energy shortages and high inflation have hurt gross domestic product (GDP) growth.

“Remittances have been playing a key role in the country’s economic performance,” said Muzammil Aslam, Managing Director of Emerging Economics Consultancy.

“One can safely say that the continuous rise in remittances in the last few years has saved Pakistan from serious economic problems including default on debt repayments.”

Aslam suggested that the government can further increase the flow of remittances if it reduces the difference between interbank and open market exchange rates for the US dollar from the present one rupee to 10 to 15 paisa. “This will encourage overseas workers to send more and more dollars through banking channels instead of illegal means.”

Invest Capital Markets analyst Khurram Schehzad commented that the continuous rise in remittances is significantly positive for the country as the money supported the economy in different forms. Overseas Pakistani workers remitted a record amount of $13.186 billion in the last fiscal year ended June 30, 2012, compared with $11.201 billion received a year earlier, the SBP said.

Except for September ($890.42 million) and November ($924.92 million), Pakistanis remitted more than $1 billion in each of the remaining 10 months.

Monthly average of remittances rose 17.73% to $1.099 billion compared with $933.41 million a year earlier.

In June overseas Pakistanis sent home $1.117 billion compared to $1.104 billion received in the same month of 2010-11.

In the same month, remittances from Saudi Arabia, UAE, USA, UK, GCC countries and EU countries amounted to $333.68 million, $219.14 million, $206.60 million, $128.12 million, $126.72 million and $29.24 million respectively. In comparison, remittances from these countries were $291.55 million, $270.04 million, $204.64 million, $121.35 million, $106.20 million and $33.83 million respectively in June 2011.

Analysts believe that the SBP’s initiative for facilitation of remittances, called the Pakistan Remittance Initiative (PRI), has significantly contributed to the growth of remittances.

Since its inception in April 2009, PRI has taken a number of steps to enhance the flow of remittances through legal channels. These include preparation of strategies on remittances, taking all necessary steps to implement the overall strategy, playing an advisory role for the financial sector in terms of preparing a business case, relationship building with overseas correspondents, creating separate and efficient remittance payment highways and becoming a national focal point for overseas Pakistanis through a round-the-clock call centre.


http://tribune.com.pk/story/406343/remittances-surge-to-record-high/

Riaz Haq said...

Here's a Bloomberg report on remittances helping the poor and keeping Pak economy afloat:

Living in poverty in a mud shack in Pakistan, Mazhar Ali dropped out of school, sold the family’s two buffalo and bought a visa to work in Dubai. The money he sends home is paying for a new house.

“We’re going to build three rooms with bricks and cement, plus a courtyard and a washroom,” said his younger brother Azhar in Larkana, home town of the ruling People’s Party about 300 kilometers north of Karachi. “We will then start marrying one by one, starting with Mazhar sometime this year.”

The family’s change in fortunes reflects a rising trend of rich nations with aging workers tapping poorer ones for labor -- total remittances to developing economies will rise 7.9 percent this year, and reach $534 billion by 2015, the World Bank says. For Pakistan, the income offers a source of stability, with the country poised for its first civilian handover of government in May even amid power shortages, bombings and a Taliban insurgency.

“This is our savior for keeping Pakistan out of the oxygen tent,” Farooq Sattar, former Minister for Overseas Pakistanis said in an interview in Karachi last month before his party quit the government alliance. “It has kept us from a complete economic collapse.”

Almost 10 million Pakistanis work overseas and the sum they’ve sent home has doubled in the four years through June, to a record $13 billion.

The rising tide of funds from overseas contrasts with a struggle by President Asif Ali Zardari’s administration to raise enough revenue to fund programs that would boost domestic growth. Pakistan owes the IMF $7.5 billion by 2015 and is evaluating a possible further loan from the fund as a buffer against shocks, Saleem H. Mandviwalla said in December as Finance Minister.
Falling Rupee

The local currency has fallen on concern loan repayments will erode foreign-exchange reserves, which fell to $7.5 billion in January from $11.8 billion a year earlier, according to the central bank. The rupee traded yesterday at 98.35 per dollar, near a record low, according to data compiled by Bloomberg.

Pakistan was among the 15 lowest revenue-gathering nations in the world as a percentage of GDP, according to the U.S. Central Intelligence Agency’s World Fact Book 2012. The South Asian nation recorded the highest budget deficit in two decades in the fiscal year through June as it missed its tax target.

The nation’s fiscal deficit may be 7.5 percent of gross domestic product this year, wider than the government’s target of 4.7 percent, the IMF said in January.

Among the biggest challenges for the government is the need to add almost 4,000 megawatts of power generation to end a shortage that’s causing blackouts for as long as 18 hours a day, idling factories and swelling unemployment. The government said energy shortages cut economic growth last year by as much as 4 percentage points.

Keeping Afloat

“Extreme poverty has not risen as much as it would have without remittances,” Rashid Amjad, a professor at the Lahore School of Economics said in an e-mail. “Most of the remittances are flowing into consumption, real estate, housing and the stock market, and have played a critical role in keeping Pakistan’s economy afloat.”

Pakistan will hold parliamentary elections on May 11, after the outgoing government, led by Zardari’s Pakistan Peoples Party, became the first democratically elected administration in 65 years of independence to complete its term.
--------
Remittances that fuel a thriving underground economy may rise further in the next few years as more Pakistanis seek employment overseas, said G.M. Arif, an economist at the Pakistan Institute of Development Economics in Islamabad.

---

Some Pakistanis also use the system to avoid paying tax..
...


http://www.bloomberg.com/news/2013-03-25/pakistan-s-army-of-overseas-workers-keeps-economy-from-collapse.html