Riaz Haq writes this data-driven blog to provide information, express his opinions and make comments on many topics. Subjects include personal activities, education, South Asia, South Asian community, regional and international affairs and US politics to financial markets. For investors interested in South Asia, Riaz has another blog called South Asia Investor at http://www.southasiainvestor.com and a YouTube video channel https://www.youtube.com/channel/UCkrIDyFbC9N9evXYb9cA_gQ
CS analyst Farhan Rizvi says in his report that "higher PSDP (Public Sector Development Program) spending has led to a resurgence in domestic cement demand in FY12 (+8%) and with increased PSDP allocation for FY13 (+19%) and General Elections due in Feb-Mar 2013, domestic demand is likely to remain robust over the next six-nine months".
Nagan Chowrangi Interchange in Karachi
Ongoing public sector projects include new large and small dams, irrigation canals, power plants, highways, flyovers, airports, seaports, etc. Most of these were already in the pipeline when the PPP government assumed control in 2008. Recent pre-election increases in PSDP funding allowed work to resume on these projects in 2011-12.
In addition to public sector infrastructure projects, there is a lot of privately funded real estate development activity visible in all major cities of the country. Big real estate developers like Bahria Town and Habib Construction are developing both commercial and housing projects in Islamabad, Karachi and Lahore. Other cities like Faisalabad, Hyderabad, Larkana, Multan, Mirpur, Peshawar and Quetta are also seeing new housing communities, golf courses, hotels, office complexes, restaurants, shopping malls, etc.
Artist's Rendering of Sheraton Islamabad Golf City Resort
CS analyst Farhan Rizvi has initiated coverage with "an OVERWEIGHT stance, as we believe compelling valuations, improving domestic demand outlook, better pricing power and easing cost pressures make the sector an attractive investment proposition. Despite better growth prospects (3-year CAGR of 17% over FY12-15E) and improving margins, the sector trades at an attractive FY13E EV/EBITDA of 3.8x, 49% discount to the historical average multiple of 7.4x. Moreover, FY13E EV/tonne of US$74 is approximately 29% discount to historical average EV/tonne of US$104 and 50% discount to the region".
Another CS analyst Farrukh Khan, based in Credit Suisse’ Asia Pacific
headquarters in Singapore,says in his research report that “liquidity in 2012 has been concentrated in stocks offering positive
earnings surprises (e.g., United Bank, Lucky Cement, DG Khan Cement and
Bank Alfalah), enabling them to be strong outperformers. With further improvements in
liquidity, we expect a broad-based price discovery to take hold in
attractively valued oil and fertilizer stocks as well.”
A string of strong earnings announcements by Karachi Stock Exchange
listed companies and the Central Bank's 1.5% rate cut have already helped the KSE-100 index gain 32% in US dollar terms year to date.
"We will rid the country of corruption within the first 90 days in office...I condemned the attack on Malala within 48 hours and was the first to visit her in the hospital...Taliban have killed hundreds of ANP workers...If I condemn the Taliban, they'll kill my workers too." PTI Chief Imran Khan in San Jose, CA. Oct 28, 2012
There were many contradictions in PTI chief Imran Khan's San Jose speech that attracted about 500 Pakistani-Americans. The attendees were quite enthusiastic in their welcome of the national cricket hero who has turned to politics with a strong anti-corruption platform. Imran was accompanied by PTI leader Fauzia Kasuri and sufi rock singer- songwriter Salman Ahmad of Junoon fame.
When Imran Khan arrived, the fundraiser-dinner quickly turned into an urban middle class rally reminiscent of the PTI events in major Pakistani cities like Lahore and Karachi. The banquet hall at Dolce Hayes Mansion came alive with slogans of "Pakistan Zindanad" and "Imran Khan Zindabad" following Pakistan's national anthem played by Salman Ahmad.
The well-attended Silicon Valley event was a confirmation of the fact that PTI is essentially an urban middle class phenomenon drawing support from people who are looking for new leadership to rid the country of corruption and misrule by Pakistan People's Party and Pakistan Muslim League (Nawaz), the two major political parties which have dominated Pakistani politics since 1980s.
Anti-Corruption, being the key theme of Imran's speeches, elicited a number of questions from the audience. One questioner suggested that "99% of the people are involved in some form of corruption" and asked how would Imran Khan end it? Imran responded by citing low government salaries as the main cause. He said bureaucrats like his father were not corrupt because their monthly salary was large enough to buy a car back in 1950s. He did not elaborate as to how he would raise government employee salaries to such lofty levels in Pakistan as part of his plan to end corruption in 90 days, nor did he elaborate on the role of the elite colonial-era civil service to control the population rather than serve the people.
Continuing on the theme of low salaries, Imran Khan mentioned that one of his brilliant classmates at Aitcheson College became a top scientist but had such "low income that he could not afford to send his children to Aitcheson College". After hearing this answer, the first thought that ran through my mind was to compare Imran Khan with the Republican presidential nominee Mitt Romney who is being portrayed as "out of touch" and "disconnected" from the ordinary folks.
A woman questioner asked him how he would "end corruption in 90 days when it takes 9 months to make a baby?" In response, Imran said "I am not talking about making babies". Then he proceeded to cite an example of an "honest police superintendent" in some small town near Dera Ismail Khan who ended all crime within 90 days. He also saw the chief minister of the Indian state of Bihar as an inspiration for ending corruption and achieving double-digit economic growth.
Addressing a question about how he intends to deal with the Taliban, Imran blamed it on the US presence in the region and the use of drones. He said dialog is the way to end it. He also said that the number of "irreconcilable" Taliban militants was very small and could be defeated by a "small military military operation" by Pakistan Army after the US exit from the region.
Responding to a question about PTI's election strategy, Imran Khan said he did not believe in "constituency politics" and would not give his party tickets based on the notions of electability. Instead, he is counting on a PTI landslide victory similar to the 1970 elections in which Zulfikar Ali Bhutto's PPP won big in West Pakistan.
After Imran's speech, I was asked by some PTI-USA officers about what I thought of it. I told them that I felt Imran was confused when he said he condemned the Taliban after the Malala shooting but then proceeded to ask "who will protect my workers if I condemn the Taliban". Three of the PTI officers, including Dr. Nasrullah Khan, rose to defend their leader's remarks on the Taliban by asking me "who do you think attacked Malala?" When I said the TTP has claimed responsibility for it, they claimed it was "someone other than the Taliban". As the discussion continued, Dr. Nasrullah Khan pulled up a picture of injured Malala on his iPhone and said "I am a cardiologist and I have seen gun-shot victims" and the nature of Malala's head injury shows the "attack was staged".
My assessment of Imran Khan after yesterday's event is that he has very enthusiastic support among young urban middle class Pakistanis who are probably participating in the political process for the first time in Pakistan's history. This augurs well for the country in the long run. However, PTI's chances of emerging with a majority of seats in Pakistani parliament in 2013 elections appear remote.
I also believe that Imran Khan is well-meaning but he appears to be naive, even disconnected from the reality, when it comes to Pakistan's current electoral politics which is based on a system of patronage. He is also significantly underestimating the serious national threat posed by the Taliban and other militant groups and the widespread culture of corruption in the country.
Media coverage of Pakistan's brisk Eid-ul-Azha livestock sales are a reminder that the nation is among the world's top ten consumers of goat meat and beef based on USDA data.
Pakistan's goat meat consumption of 779,000 tons in 2011-12 ranks it among the top 3 in the world. 1.7 million tons of beef consumption in Pakistan is ranked 9th among beef consuming nations. In addition, 834,000 tons of poultry meat consumption puts it among world's top 20.
Although meat consumption in Pakistan is rising, it still remains very low by world standards. At just 18 Kg per person, it's less than half of the world average of 42 Kg per capita meat consumption reported by the FAO.
Being mostly vegetarian, neighboring Indians consume only 3.2 Kg of meat per capita, less than one-fifth of Pakistan's 18 Kg. Daal (legumes or pulses) are popular in South Asia as a protein source. Indians consume 11.68 Kg of daal per capita, about twice as much as Pakistan's 6.57 Kg.
Another ingredient popular in South Asian cuisine is vegetable oil. It's an important source of fat and protein for a nutritious and tasty diet. Edible oil consumption soars during the holidays as hundreds of millions of people eat sweets and fried foods during the September-December festive season. Pakistanis use about 20 Kg of oil, the per capita amount recommended by the World Health Organization, while Indians consume about 13 Kg per capita.
Although still below average relative to the world, per capita consumption of meat, milk and edible oil is rising with rising incomes and standards of living in both India and Pakistan. As the dietary habits change, it'll be important for policy makers and health and fitness professionals to watch the changes and help educate the people about healthy eating.
Here's a video of MeatOne, a meat packer in Karachi:
Ordinary Pakistanis have responded to the barbaric attack on courageous 14-year-old Swat schoolgirl Malala Yousufzai and her classmates by expressing outrage and demanding action against the perpetrators. They have poured out into the streets for prayers for Malala's speedy recovery.
The cowardly attack on a teenage schoolgirl is shocking. But it should not be surprising. The Taliban have a long track record in both Afghanistan and Pakistan of attacking anyone, regardless of age and gender, who disagrees with their goals or tactics. They have a record of using extreme violence to silence those who dare to criticize them. The Taliban have repeatedly said that do not believe in constitutional democracy, political processes and elections.
With the exception of some ANP, MQM and PPP leaders, the rest of the political leadership in Pakistan has failed to rise to the occasion. Here are some recent cowardly statements on the subject of Taliban militancy by PTI and PML(N) leaders:
“Who will save my party workers if I sit here and give big statements against the Taliban.” PTI Chief Imran Khan
"I will support military operation (against the Taliban) if you can guarantee peace after it." PTI Chief Imran Khan
“Gen. Musharraf planned a bloodbath of innocent Muslims at the behest of
others only to prolong his rule, but we in the PML-N opposed his
policies and rejected dictation from abroad. If the Taliban are also fighting for the same cause then they should not carry out acts of terror in Punjab.” PML (N) Leader Shahbaz Sharif
Pakistan's coward politicians need to draw some inspiration from brave little Malala Yousufzai. The nation desperately needs courageous leaders at this moment in history. Pakistan's leaders, particularly those in the Opposition, are failing the basic test of leadership. They are paralyzed by the fear of the militants. They are begging the Taliban to spare them. They are unwilling to take any risks and demanding impossible guarantees of peace that no one can provide. This is a recipe for inaction in the face of the Taliban onslaught on innocent civilians.
Some, especially those in the politico-religious leadership, are promoting confusion to distract the people from the real threat Pakistan faces today. Samia Qazi, the daughter of Jamate-Islami leader Qazi Husain
Ahmed, is orchestrating a social media and email campaign against
14-year-old Malala Yousufzai to tarnish her image by attacking the
victim to deflect attention from the TTP's crimes. Qazi and her supporters are being deliberately disingenuous by claiming sympathy for
Malala while at the same time they engage in a smear campaign against her
to paint her as an American agent.
In a picture first tweeted by
Samia Qazi and posted on social media sites, she claims that Malala is meeting American generals. In fact, there is no American general in it. It is actually a still
frame from a documentary made by the New York Times, which specifies
the footage is from a simple meeting with late Richard Holbrook, US diplomatic representative to the region in
2009, during which Malala asked the US for help in girls’ education in
Pakistan. Samia Qazi should remember that, by her logic, her brother, Asif Luqman Qazi, can also be found guilty by association because he must have met many Americans while attending Boston University in the United States.
Those who refuse to speak out against the Taliban out of fear or sympathy must remember this: If the Taliban succeed in acquiring power in Pakistan, they will not spare them because none of them will measure up to Taliban's expectations of a "good" Muslim.
Samia Qazi will be targeted by the Taliban because they will find her too well-educated and too outspoken for a woman. Asif Qazi will be considered by them as guilty of associating with Americans while in Boston. Imran Khan will face the Taliban's wrath for his past transgressions of engaging in alleged pre-marital sex and for marrying a Jewish woman. The Sharif brothers will be unacceptable to them because they have no beards. Those in the media will be targeted for exercising their right to criticize them.
The Taliban will implement draconian laws in the guise of their extreme version of Sharia and enforce such laws with brutal religious police. They will force all men to grow long beards and force burqa on all women. They will ban women's education and shut girls' schools. They will ban television as they did in Afghanistan when they ruled it. In short, the Taliban will find reasons to persecute all non-Taliban just as they did in Afghanistan in 1990s before the post-911 US invasion of Afghanistan.
Let there be no mistake: The phenomenon of Taliban is a Fitna not unlike the 11th century Isma'ili shia Hashasheen (Assassins) whom Marco Polo depicted as trained killers responsible for the systematic elimination of fellow Muslims, mostly Sunnis, who disagreed with them.
Na haq kai liye uththe to shamshir bhi fitna hai
Shamsheer hi kiya nara-e-takbeer bhi fitna hai
To prevent the Taliban from achieving their goals of dominance in Pakistan, the country needs a comprehensive strategy with both political and military components. Such a strategy must be regional to deal with the possibility of the Taliban crossing the Durand line for safe havens as part of their defense. It must begin with building broad popular support, if not consensus, to defeat the Taliban. It must include an effective education campaign led by the politicians and civil society as well as the mass media to end all confusion about the serious threat posed in Pakistan by all factions of the Taliban who all share similar goals of taking control of the country to impose their dark vision in the name of Islam. It must also include a decisive force component to militarily defeat the hard core leadership of the Taliban.
Mass media revolution and rising consumption in Pakistan have spawned an impressive fashion scene in the last decade. It has given birth to a young and thriving fashion industry and created unprecedented opportunities for beautiful young professional models who show off a range of fashion apparel, cosmetics, jewelry and accessories as well as other consumer products and services to a rapidly growing brand-conscious middle class.It has also opened up export opportunities for brand-name textile and leather products and cosmetics and jewelry from Pakistan.
Here are some of the popular models often seen on TV and in print ads and on runways at frequent fashion shows in Pakistan and overseas:
Pakistan ranks 16th among 151 countries of the world on the Happy Planet Index (HPI) 2012, slightly behind Bangladesh in 11th place but well ahead of India in 32nd spot.
Earlier, Gallup 2012 Wellbeing survey reported that 20% of Pakistanis say they are "thriving", down from 32% last year. However, the report
also showed that more of them are still better off than their neighbors in
Bangladesh (16% thriving) and India (11% thriving). The number of those
"thriving" increased in Bangladesh by 3% and declined in India by 6%.
2. Rising consumption of durables
(cars, motorcycles, tractors, Appliances) and non-durables (FMCGs or
fast-moving consumer goods) as well as increasing cement sales are
indicative of the underlying strength of the economy.
3. Pakistan's undocumented economy is continuing to thrive as seen in packed shopping malls and restaurants.
4. There are double digit increases in cash remittances flowing in to
Pakistan from the world's seventh largest diaspora, rising 21.45 percent
to $9.73 billion in the first nine months of the 2011/12 fiscal year.
7. Preliminary estimates are showing that poverty rate in Pakistan has declined from 17.2 per cent in 2008 to slightly over 12 per cent in 2011.
The Gallup survey confirms that only 28% of Pakistanis have confidence
in their national government. In my view, it stems from the obvious
failure of the state in delivering basic services such as rule-of-law,
security and electricity to the people . The best way to improve the
wellbeing of the people is to improve governance, reduce corruption and
persuade people to pay taxes to give the state more resources.
Coming back to HPI 2012, the Happy Planet Index website
says that "the new HPI results show the extent to which 151 countries
across the globe produce long, happy and sustainable lives for the
people that live in them." "The overall index scores rank countries
based on their efficiency, how many long and happy lives each produces
per unit of environmental output", it adds.
There are
three components of HPI – life expectancy, experienced well-being and
Ecological Footprint - that each country is measured on. The scores for
each component are color-coded green (good), yellow (middling) and red
(poor). An additional color-code deep red is used for countries with
poor score in one of the three components of overall HPI score.
Among
South Asian nations, India, Pakistan and Bangladesh are rated as
"middling", while Sri Lanka, Nepal and Myamar are rated poor.
The
top-ranked countries are mainly from Latin America with Costa Rica
occupying the top spot. The bottom of the list includes sub-Sharan
African nations with Botswana at the bottom.
US is providing $80 million to create multiple VC and PE funds in Pakistan. These funds will be run by professional fund managers who will be required to manage and raise additional money from other sources to start multiple funds. US Embassy in Islamabad told Express Tribune that they expect that "there will be substantial interest from local, regional and international investors”.
Polish Model:
The initiative is based on the Polish American Enterprise Fund model which was started with $140 million from US government and has now grown to several billion dollars of investable funds, according to Express Tribune.
US AID's Theodore Heisler said that co-investment was essential in bringing the size of each fund to a level where it can cover operating expenses.
The funds will focus on investing in small and medium entrepreneurial companies which, the US Silicon Valley experience has demonstrated, are major drivers of innovation, economic growth and job creation.
History of VC and PE Funds:
In 2010, the Overseas Private Investment Corporation (OPIC) provided JSPE Private Equity Fund II $50 million with a target capitalization of $150 million.
Venture capital investing is not entirely new in Pakistan, according to Venture Beat. Silicon Valley insiders like Reid Hoffman, Mark Pincus and Joe Kraus, along with Draper Fisher Jurvetson (DFJ) and EPlanet Ventures have already started. In 2003, Hoffman, Pincus and Kraus invested in Monis Rahman, a Pakistani-American who left Intel for entrepreneurship. Rahman had successfully launched and sold a start-up in the Bay Area, eDaycare.com.
There are several investment firms in Pakistan, such as BMA Capital, Indus Basin Holdings and JS Private Equity, that offer examples of professionally managed funds. In addition, there are Social Entrepreneurial Funds like Acumen Fund, Dawood Foundation and Kashf Foundation which are very active in the SME sector in Pakistan.
Opportunity in Pakistan:
Pakistan has the world’s sixth largest population, seventh largest diaspora
and the ninth largest labor force. With rapidly declining fertility and
aging populations in the industrialized world, Pakistan's growing
talent pool is likely to play a much bigger role to satisfy global
demand for workers in the 21st century and contribute to the well-being
of Pakistan as well as other parts of the world.
With half the population below 20 years and 60 per cent below 30 years,
Pakistan is well-positioned to reap what is often described as
"demographic dividend", with its workforce growing at a faster rate than
total population. This trend is estimated to accelerate over several
decades. Contrary to the oft-repeated talk of doom and gloom, average
Pakistanis are now taking education more seriously than ever. Youth
literacy is about 70% and growing, and young people are spending more
time in schools and colleges to graduate at higher rates than their
Indian counterparts in 15+ age group, according to a report on
educational achievement by Harvard University researchers Robert Barro and Jong-Wha Lee. Vocational training is also getting increased focus since 2006 under National Vocational Training Commission (NAVTEC) with help from Germany, Japan, South Korea and the Netherlands.
A 2012 World Bank report titled "More and Better Jobs in South Asia"
shows that 63% of Pakistan's workforce is self-employed,
including 13% high-end self-employed. Salaried and daily wage earners
make up only 37% of the workforce. Even if one chooses to consider just the 13% who are high-end self-employed as entrepreneurs, it's still a significant population willing to take risks who can do better with greater availability of venture and private equity money.
A recent Pew Survey of 21 countries
reported that 81% of Pakistanis believe in hard work to achieve
material success. Americans are the second most optimistic with 77%
sharing this belief followed by Tunisians (73%), Brazilians (69%),
Indians (67%) and Mexicans (65%).
Conclusion:
Promoting venture capital and private equity investments in Pakistan is a welcome initiative. It has the potential to unleash funding of new profitable ideas in small and medium size entrepreneurial businesses for significant returns to investors while also helping Pakistan achieve much needed economic stimulus with new jobs to lift more people out of poverty.
