Tuesday, January 30, 2018

Pakistan's Debt Crisis: Fact or Fiction?

Pakistan is taking on significant amounts of domestic and foreign debt to finance its budget deficits and to support major energy and infrastructure development projects as part of China-Pakistan Economic Corridor (CPEC).  Over one-third of this public debt is external debt denominated in US dollars, Euros and other hard currencies. At the same time, Pakistan's exports have declined over the last several years and the country's current account deficits have grown.

Critics Warnings: 

Critics believe that Pakistan is facing a severe debt crisis. They fear that it could get caught in a big debt trap laid by foreign governments. They warn that Pakistan will go broke. It will be unable to repay these mounting debts. Are they right? To answer this question, Dr. Ishrat Husain, a former central banker and governor of the State Bank of Pakistan, has analyzed Pakistan's debt as of June 30, 2017. Here are some of his key findings:
Pakistan Public Debt-to-GDP Trend. Source: Dr. Ishrat Husain
Total Public and Private Debt:

Pakistan’s total debt and liabilities (TDL) consist of public debt and private debt. Total stock of outstanding debt and liabilities on June 30, 2017 stood at 79% of gross domestic product (GDP). Of this, Gross Public Debt accounted for 85% of the total outstanding or 67.2% of GDP. The remaining 15% is the private debt mostly to borrowers outside the country, for which the government has no fiscal obligation, but the SBP has to provide foreign exchange to service this debt. Within the gross public debt, the government’s share was predominant – almost 92% while the balance was owed by the public enterprises but guaranteed by the government. Borrowing from IMF is also included in gross public debt, although it is a liability of the SBP.

As of June, 2017, Pakistan's total public debt-to-gdp ratio is 67.2%, up from 59% in 2008 and 64% in 2013, according to an analysis by Dr. Ishrat Husain, former governor of the State Bank of Pakistan.  The external debt-to-gdp ratio is 20.7%, down from 28.8% in 2008 and 21.3% in 2013.  Pakistan's external debt to foreign exchange earnings ratio has shot up to 161.9% from 123.9% in 2008 and 121.3% in 2013.
Total Debt Service as Percentage of GDP. Source: Dr. Ishrat Husain

Debt to GDP Ratio:

Public External Debt is lower in 2017 i.e. 20.7% of GDP while it was 27.1% in 2008 and 21.4% in 2013. About 93 pct of the public external debt falls under the category of Medium and Long term while 7% under the short term. Therefore the risk appetite for further short term borrowing to tide over payment difficulties cannot be ruled out as the short term public external debt to SBP reserves ratio is 5.5%. Concessional loans still form more than half of the outstanding stock and commercial loans account for only 1.6 percent of the total.

Debt Service Share of Government Revenue. Source: Dr. Ishrat Husain
Debt Servicing as Percent of GDP:

Pakistan's current debt servicing requires 5.9% of GDP. It is down from 6% in 2008 and 6.9% in 2013.  These percentages are by no means alarming. However, the external debt service component to be repaid in US dollars is of concern because of declining foreign currency earnings.

External Debt Repayment: 

A major setback has been caused by stagnation in foreign exchange earnings due to a $ 4 billion drop in export receipts since 2013 .This has raised the EDL (external debt and liabilities) to FEE (foreign exchange earnings) ratio from 121 to 162 in 2017 . There has been some growth in exports in last few months but the pace is unspectacular to make a dent. The other element which is picking up is Foreign Direct Investment but that also won’t be able to lower this ratio significantly. On the fiscal side, almost 24% of government revenues were pre-empted by payments of interest and foreign loan repayments . The average interest rate is down to 6.3 percent with domestic debt being relatively expensive at 8.2 percent.
External Debt as Percentage of Foreign Exchange Earnings. Source: Dr. Ishrat Husain

Summary:

As of June, 2017, Pakistan's total debt-to-gdp ratio is 67.2%, up from 59% in 2008 and 64% in 2013, according to an analysis by Dr. Ishrat Husain, former governor of the State Bank of Pakistan.  The external debt-to-gdp ratio is 20.7%, down from 28.8% in 2008 and 21.3% in 2013. Pakistan's current debt servicing requires 5.9% of GDP. It is down from 6% in 2008 and 6.9% in 2013.  These percentages are by no means alarming. However, the external debt service component to be repaid in US dollars is of concern because of declining foreign currency earnings.  Pakistan's external debt to foreign exchange earnings ratio has shot up to 161.9% from 123.9% in 2008 and 121.3% in 2013. Of these, the critics are absolutely right about the last one---the ratio of external debt to foreign exchange earnings. Pakistan has to heed their warnings and urgently address its declining exports and rising current account deficits to avoid the potential external debt trap.

Related Links:

Haq's Musings

Pakistan is the 3rd Fastest Growing Trillion Dollar Economy

CPEC Financing: Is China Ripping Off Pakistan?

Information Tech Jobs Moving From India to Pakistan

Pakistan is 5th Largest Motorcycle Market

"Failed State" Pakistan Saw 22% Growth in Per Capita Income in Last 5 Years

CPEC Transforming Pakistan

Pakistan's $20 Billion Tourism Industry Boom

Home Appliance Ownership in Pakistani Households

Riaz Haq's YouTube Channel

PakAlumni Social Network

Sunday, January 28, 2018

Padmaavat Reinforces Negative Stereotypes of Muslim Rule in India

Famed Bollywood producer Sajay Leela Bhansali's Padmaavat is a fictionalized portrayal of a Rajput queen Padmavati, played by Deepika Pudokone, whose earliest mention is found in a 16th century epic poem by a Muslim poet Malik Muhammad Jayasi. With the movie Padmaavat's (Padmavati's) musical score and the song and dance sequences and the opulence and the splendor of the costumes, the jewelry and the sets, it's safe to say that the fans of Bhansali's earlier Bollywood blockbusters like Bajirao Mastani and Devdas will not be disappointed. It looks particularly spectacular when watched in 3D-IMAX version-- something my wife and I experienced in a local Silicon Valley multiplex.

Released amidst death threats by right wing Hindu groups,  one would have expected that the movie in some way challenges the revisionist history being promoted by the ruling BJP's ideologues.

Surprisingly, the movie Padmaavat  reinforces the current Hindutva narrative about the Muslim rulers of India. It portrays Muslim ruler Alauddin Khilji of the Delhi Sulatanate, played by Ranveer Singh, as a violent and lustful man lacking any scruples, fitting in with the current wave of Islamophobia in India. On the other hand, his Hindu Rajput counterpart Maharawal Ratan Singh, played by Shahid Kapoor, is shown as an honorable and principled person.

The story appears to glorify the act of mass suicide by Rajput Hindu women by self-immolation in the name of honor....an idea that the Karni Sena opposing it picked up by threatening mass self-immolation by 1700 women in protest if the film is released. It begs the question: Why should only women commit this mass suicide in protest? Why not the men of the Karni Sena?

Meanwhile, it remains a mystery as to how a fictional Hindu queen first mentioned in a poem by a 16th century Muslim poet has become the symbol of honor for Rajputs in the 21st century.  For this, one must understand the larger underlying trend in Indian polity today with the rise of Hindutva under right-wing Hindu Prime Minister Narendra Modi's leadership.

American historian Audrey Truschke, in her recently published book "Aurangzeb: The Life and Legacy of India's Most Controversial King", attributes today's Hindutva revisionist history to the colonial-era British historians. She says they deliberately distorted the history of Indian Muslim rule to vilify Muslim rulers as part of the British policy to divide and conquer India. These misrepresentations of Muslim rule made during the British Raj appear to have been accepted as fact not just by Islamophobic Hindu Nationalists but also by at least some of the secular Hindus in India and Muslim intellectuals in present day Pakistan, says the author.  Aurangzeb was neither a saint nor a villain; he was a man of his time who should be judged by the norms of his times and compared with his contemporaries, the author adds.

Alauddin Khilji, portrayed in Padmaavat as a villain, was in fact neither an angel nor a devil; he was a man of his time who should be judged by the norms of his times and compared with his contemporaries.  Colonial-era British historians deliberately distorted the history of Indian Muslim rule to vilify Muslim rulers as part of their policy to divide and conquer India, according to American history professor Audrey Truschke. Professor Truschke has systematically dismantled all the myths about India's Muslim rulers as hateful and bigoted tyrants who engaged in rape and pillage of Hindus and carried out widespread destruction of Hindu temples across India. Hindu Nationalists led by Indian Prime Minister Narendra Modi are using false history to justify their hatred and violence against Indian Muslims today.

Related Links:

Haq's Musings

Hindu Nationalists Admire Nazis

Lynchistan: India is the Lynching Capital of the World

Hindu Supremacist Yogi Adiyanath's Rise in UP

Hinduization of India

Globalization of Hindu Nationalism

Hindutva Distortion of Indian History Textbooks

2017: The Year Islamophobia Went Mainstream

Thursday, January 25, 2018

Electric Power Rates in India and Pakistan

Pakistan National Electric Power Regulatory Authority (NEPRA) has cut electricity price by 2.99 rupees (2.7 U.S. cents) per unit under the fuel adjustment for the month of December, 2017, according to news reports. This reduction brings the price per kilowatt-hour to Rs. 5.11 (4.60 US cents), down from Rs. 8.10 (7.30 US cents).

Power Rate in Pakistan:

Reduction brings the price per kilowatt-hour to Rs. 5.11 (4.60 US cents), down from Rs. 8.10 (7.30 US cents). The CPPA (Central Power Purchasing Authority) said total energy was generated at the cost of Rs. 25.24 billion, or Rs. 3.52/unit for the month of November, 2017.

The reduction in the actual generation cost is mainly because of a decline in fuel prices, zero use of high-speed diesel in the power plants and higher contribution from the cheapest source – hydropower. The furnace oil (Rs. 9.03 per unit) has been replaced by domestic natural gas at Rs. 4.49 per unit and liquified natural gas (LNG) at Rs. 6.33 per unit.
 
This decision will not affect K-Electric consumers which is privately owned and generates its own power for residents of Karachi. K-Electric currently charges significantly higher rates of Rs. 12.77 per unit (11.50 US cents per unit).

Comparison With India:

Across the border in India, the nation's Central Electricity Regulatory Commission (CERC) has set the national average power purchase cost (APPC) at INR 3.48 (5.43 cents), barring a few states for open access. The APPC will apply during the financial year (FY) 2017-18 and until further orders for deviation settlement with respect to open access, according to Indian media reports.

The latest round of power rate cuts in Pakistan has brought the average electricity unit price (4.60 US cents) lower than that in neighboring India (5.43 US cents).

Future Power Rates: 

The average cost per unit of power produced by new power plants being built in Pakistan as part of CPEC will likely be higher. It's mainly due to higher depreciation cost of new plant and equipment and higher guaranteed return on equity (ROE) of 17% for Chinese IPPs (Independent Power Producers). The 17% return on equity in Pakistan is higher than 4% to 15% ROE for power companies in India.

The average return on equity for almost 8,000 large US firms is 14.49%. The power utility companies – with an average of 10.13% – are on the lower end of the spectrum because they are viewed as less risky investments.

In the United States, the rate of return varies significantly from state to state, as each state regulator has exclusive authority to regulate utility operations as they choose.

In Advance Energy Economy (AEE) Power Portal database, which tracks ROE for over 100 investor-owned utilities across the country, the highest allowed ROE belongs to Alabama Power Co., at 13.75% and the lowest to United Illuminating Co. (CT) at 9.15%.

Within the US states, Alabama being seen as relatively less safe for investment, offers 13.75% return. So why is it such a surprise to see Pakistani regulator offer Chinese investors a higher rate of return of 17%?

Summary:

The current per unit average cost of electricity to consumers in Pakistan is 4.60 US cents while the average in India is 5.43 US cents. Per unit cost of electricity in Pakistan is likely to be  bit higher with new capacity being built as part of China Pakistan Economic Corridor due to higher guaranteed rates of return offered to attract Chinese investors.  However, plentiful supply of electricity from CPEC power projects will significantly boost economic growth and create millions of new jobs.

Related Links:

Haq's Musings

CPEC Financing: Is Pakistan Being Ripped Off?

Will Pakistan Benefit From Historic Low LNG Prices? 

Pakistan Among Fastest LNG Markets in the World

Campaign of Fear, Uncertainty and Doubt About CPEC

CPEC Will Create Over 2 Million New Jobs

CPEC is Transforming Least Developed Parts of Pakistan

Pakistan Rising or Falling? Perception vs Reality

Riaz Haq's YouTube Channel

PakAlumni Social Network

Wednesday, January 24, 2018

Madrasa Teacher Inspired Pakistani-American to Transform Medical Education Online

Inspired by a madrasa teacher in Islamabad, Pakistani-American Dr. Husain Sattar is revolutionizing medical education in a similar way that Salman Khan of Khan Academy has transformed K-12 education. Dr. Sattar has written a widely used medical textbook titled "Fundamentals of Pathology" along with a series of videos called Pathoma available online.

Professor Husain Sattar M.D.
University of Chicago Professor:

Currently an Associate Professor at  the University of Chicago Pritzker School of Medicine, Dr. Sattar credits his innovation to his madrasa teacher who had the "ability to take vast amounts of information and summarize it in the most eloquent, simple, principle-based method", according to a piece written by Nancy Averett and published on the University of Chicago website.

Madrasa Education:

Born in Chicago in 1972, Dr. Husain Sattar, MD, took a leave of absence after first year of medical school in the United States to study Arabic and Islamic spirituality in Islamabad, Pakistan.  It was in a spartan setting with a classroom that had clay walls that would heat up to 120 degrees in summer. In winter, the unheated classrooms were freezing — Islamabad sits at the foothills of the Himalayas — where Sattar sat on the floor with the other students shivering and dreaming of summer.

At the Islamabad madrasa, Averett writes that there was a "Pakistani teacher who made an impression on Sattar — one that planted the seed for Sattar’s wildly successful textbook and video series on pathology known as Pathoma".

 “This teacher always came to class without notes,” Sattar told Averett, recalling the instructor with the gray beard who smiled often and dressed in the traditional Pakistani garb of loose pants (shalwar) and tunic-like shirt (kameez). “He would say, ‘If I can’t tell you about it from the top of my head, then I shouldn’t be telling you about it at all.’” The man lectured passionately, as if there were 3,000 people in the room instead of eight, but what the young American medical student found most impressive was his skill distilling colossal amounts of material. “He had this ability to take vast amounts of information and summarize it in the most eloquent, simple, principle-based method,” Sattar said.

Pathoma:

Dr. Husain Sattar has written a widely used medical textbook titled "Fundamentals of Pathology" along with a series of videos called Pathoma available online.

Thousands of medical students who use Pathoma talk about the clarity with which Dr. Sattar explains difficult concepts. “He has a remarkable gift for clarity,” Averett quotes Palmer Greene, a third-year student at the University of Chicago Pritzker School of Medicine, as saying. “He can take the pathophysiology of any organ system and present the information in a way that makes the entire mechanism click in your head.” Lucy Rubin, a fourth-year at Tufts University School of Medicine, has similar praise: “He has this amazing way of explaining concepts,” she said. “He simplifies things to the most basic elements.”

Summary:

Inspired by a madrasa teacher in Islamabad, Pakistani-American Dr. Husain Sattar is revolutionizing medical education in a similar way that Salman Khan of Khan Academy has transformed K-12 education. Dr. Sattar has written a widely used medical textbook titled "Fundamentals of Pathology" along with a series of videos called Pathoma available online. One good teacher in a spartan Islamabad seminary inspired a young Pakistani-American, Husain Sattar, to study medicine and create learning material that has revolutionized medical education for many generations of healers to serve humanity better.

Acknowledgement: I thank my Pakistani-American friend Rizwan Kadir, a University of Chicago alumnus, for bringing Dr. Sattar's work to my attention.

Related Links:

Haq's Musings

Khan Academy

Obama Honors Pakistani-American Doctor With Top Award

Pakistan is the 3rd Largest Source of Foreign Doctors in America

Hindus and Muslims Well Educated in America But Least Educated Worldwide

Pakistanis Make Up Silicon Valley's Largest Foreign Born Muslims Group

2017: The Year Islamophobia Went Mainstream

Pakistani-American Shahid Khan is the Richest South Asian in America

Tuesday, January 23, 2018

Modi's Hypocrisy on Full Display at Davos 2018

Indian Prime Minister Narendra Modi spoke today at the World Economic Forum in Davos, Switzerland in support of globalization and talked of his commitment to diversity in his country.



Modi's Rhetoric:

Prime Minister Modi warned that "forces of protectionism are raising their heads" against international trade and commerce. "Bilateral and multilateral trade negotiations have come to a kind of standstill," he said.

He also praised his country's commitment to democracy and diversity. "For a society with diverse religions, cultures, languages, attires and cuisines, democracy is not just a political system but a way of living," he said, adding that inclusion is the "main principle" of his government.

Is Modi living up to the ideals of globalization and diversity that he spoke of in his Davos speech? Let's compare these words to his government's actions.

Globalization:

In December 2017, Modi's government imposed stiff tariffs on imports of cellphones, video cameras and televisions, according to a report in New York Times.

The Indian government is also seriously considering a recommendation by Indian Directorate General of Safeguards, Customs and Central Excise that the country impose 70 percent tariffs on imported solar panels.

Diversity:

Mr. Modi has pursued Hindutva politics and policies in spite of warnings by leading economists, including Ragu Rajan, Arun Shourie and analysts at Moody's. These have created a lot of fear among religious minorities and Dalits.

But Mr. Modi has built his entire political career on the intense hatred of  Muslims. US President Donald Trump built his successful presidential campaign on Islamophobia and xenophobia. That's what the two men have in common.

 India's largest state of Uttar Pradesh elected rabidly anti-Muslim chief minister Yogi Adiyanath who was hand-picked by Muslim-hating Prime Minister Narendra Modi in 2017.

Just as white racists form the core of Trump's support base in America, the Modi phenomenon in India has been fueled by Hindu Nationalists whose leaders have praised Adolph Hitler for his hatred of Jews.

M.S. Golwalkar, a Hindu Nationalist who Mr. Modi has described as "worthy of worship" wrote the following about Muslims in his book "We":

 "Ever since that evil day, when Moslems first landed in Hindustan, right up to the present moment, the Hindu Nation has been gallantly fighting on to take on these despoilers. The Race Spirit has been awakening.”

"To keep up the purity of the Race and its culture, Germany shocked the world by her purging the country of the Semitic races -- the Jews. Race pride at its highest has been manifested here. Germany has also shown how well-nigh impossible it is for races and cultures, having differences going to the root, to be assimilated into one united whole, a good lesson for us in Hindusthan to learn and profit by."

Summary:

Indian Prime Minister Narendra Modi's actions do not match his rhetoric on globalization and commitment to diversity.  His government's protectionist trade policies and treatment of minorities speak far louder than his words at the World Economic Forum  Davos, Switzerland.

  Related Links:

Haq's Musings

Hindu Nationalists Love Nazis

A Conversation With White Nationalist Jared Taylor on Race in America

Lynchistan: India is the Lynching Capital of the World

Modi and Trump

Anders Breivik: Islamophobia in Europe and India

Hindu Nationalism Goes Global

Hindutva: The Legacy of the British Raj


Monday, January 22, 2018

WEF Reports More Pakistanis Sharing Fruits of Economic Growth

More and more Pakistanis are sharing in their nation's development, according to World Economic Forum (WEF). Pakistan ranks 47 among 74 emerging economies ranked for inclusive development by WEF released recently at Davos, Switzerland. Inclusive development in the South Asian country has increased 7.56% over the last 5 years. World Economic Forum assesses inclusive development  based on "living standards, environmental sustainability and protection of future generations from further indebtedness."

WEF Inclusive Development Report 2018:

The WEF inclusive development index ranks Pakistan at 47, below Bangladesh at 34 but above India at 62. The 7.56% rate of increase in inclusive development in Pakistan is higher than 4.55% in Bangladesh and 2.29% in India. China ranks 26 and its inclusion is rising at a rate 2.94%.

WEF IDI Rankings. Source: WEF

Pakistan has improved its ranking from 52 last year to 47 this year, while India's rank worsened to 62 this year from 60 last year.  China's ranking also worsened from 15 last year to 26 this year.

Another WEF report compiled by Oxfam said the richest 1% of Indians took 73% of the wealth generated last year.

Income Share Change in Asia's Poorest Quintile: 

The share of national income of Pakistan's poorest 20% of households has increased from 8.1% to 9.6% since 1990 , according to the United Nations Economic and Social Commission for Asia and Pacific (NESCAP) Statistical Yearbook for 2015.  It's the highest share of income for the bottom income quintile in the region.

The countries where people in the poorest income quintile have increased their share of total income include Kyrgyzstan (from 2.5 per cent to 7.7), the Russian Federation (4.4 per cent to 6.5), Kazakhstan (7.5 per cent to 9.5) and Pakistan (8.1 per cent to 9.6).  India's bottom income quintile has seen its share of income drop from 9% to 7.8%.

Bottom Quintile Income Share Change. Source: UNESCAP Statistical Yearbook

Although more people in China have lifted themselves out of poverty than any other country in the world, the poorest quintile in that country now accounts for a lower percentage of total income (4.7 per cent) than in the early 1990s (8.0 per cent). The same unfortunate trend is observed for a number of other countries, including in Indonesia (from 9.4 per cent to 7.6) and in the Lao People’s Democratic Republic (from 9.3 per cent to 7.6).

CPEC Transforming Least Developed Regions:

Development of China Pakistan Economic Corridor (CPEC) is transforming Pakistan.  Among the parts of the contry being transformed the most by CPEC are some of the least developed regions in Balochistan and Sindh, specifically Gwadar and Thar Desert. Here is more on these regions:

Gwadar Port City:

Gwadar is booming. It's being called the next Shenzhen by some and the next Hong Kong by others as an emerging new port city in the region to rival Dubai. Land prices in Gwadar are skyrocketing, according to media reports. Gwadar Airport air traffic growth of 73% was the fastest of all airports in Pakistan where overall air traffic grew by 23% last year, according to Anna Aero publication.  A new international airport is now being built in Gwadar to handle soaring passenger and cargo traffic.




In addition to building a major seaport that will eventually handle 300-400 million tons of cargo in a year, China has built a school, sent doctors and pledged about $500 million in grants for an airport, hospital, college and badly-needed water supply infrastructure for Gwadar, according to Reuters.

The Chinese grants include $230 million for a new international airport in Gwadar, one of the largest such disbursements China has made abroad, according to researchers and Pakistani officials.

New development work in Gwadar is expected to create as many as 20,000 jobs for the local population.

Thar Desert:

Thar, one of the least developed regions of Pakistan, is seeing unprecedented development activity in energy and infrastructure projects.  New roads, airports and buildings are being built along with coal mines and power plants as part of China-Pakistan Economic Corridor (CPEC). There are construction workers and machinery visible everywhere in the desert. Among the key beneficiaries of this boom are Thari Hindu women who are being employed by Sindh Engro Coal Mining Company (SECMC) as part of the plan to employ locals. Highlighted in recent news reports are two Hindu women in particular: Kiran Sadhwani, an engineer and Gulaban, a truck driver.

Kiran Sadhwani, a Thari Hindu Woman Engineer. Source: Express Tribune

Thar Population:

The region has a population of 1.6 million. Most of the residents are cattle herders. Majority of them are Hindus.  The area is home to 7 million cows, goats, sheep and camel. It provides more than half of the milk, meat and leather requirement of the province. Many residents live in poverty. They are vulnerable to recurring droughts.  About a quarter of them live where the coal mines are being developed, according to a report in The Wire.

Hindu Woman Truck Driver in Thar, Pakistan. Source: Reuters

Some of them are now being employed in development projects.  A recent report talked of an underground coal gasification pilot project near the town of Islamkot where "workers sourced from local communities rested their heads after long-hour shifts".

Summary:

More and more Pakistanis are sharing the fruits of development in Pakistan as shown by the World Economic Forum report on inclusive growth. WEF ranks Pakistan at 47, below Bangladesh at 34 but above India at 62. The 7.56% rate of increase in inclusive development in Pakistan is higher than 4.55% in Bangladesh and 2.29% in India.   The share of national income of Pakistan's poorest 20% of households has increased from 8.1% to 9.6% since 1990 , according to the United Nations Economic and Social Commission for Asia and Pacific (NESCAP) Statistical Yearbook for 2015.  It's the highest share of income for the bottom income quintile in the region.  Development of China Pakistan Economic Corridor (CPEC) is transforming Pakistan.  Among the parts of the country being transformed the most by CPEC are some of the least developed regions in Balochistan and Sindh, specifically Gwadar and Thar Desert. 


Saturday, January 20, 2018

Pakistan Rising or Failing? Reality vs Perception

Pakistan has a population of over 200 million people and a booming trillion dollar economy ranked among the top 25 largest economies of the world.
Courtesy:  Ashraf Hameedi, Highforest Capital

Pakistan's 135 million millennials have made it the world's fastest growing retail market. There is surging demand for fast moving consumer goods (FMCG) and durables like smartphones, computers, cars, motorcycles and home appliances.

Courtesy: Nikkei Asian Review

Major energy and infrastructure projects, part of China-Pakistan Economic Corridor (CPEC), are transforming the country and creating millions of new jobs.

Incidents of terrorism and terror related deaths are in sharp decline since the country's military started nation-wide anti-terror operations in 2013.

Its $20 billion tourism industry is seeing rapid growth.

And yet, many continue to call Pakistan a "failed state". Why is it? Why is perception lagging reality?

Viewpoint From Overseas host Faraz Darvesh discusses these questions with Monis Rehman, Pakistani entrepreneur and CEO of Rozee.pk, and regular panelist Riaz Haq (www.riazhaq.com)

https://youtu.be/XDima7JSxKs





Related Links:

Haq's Musings

Pakistan is the 3rd Fastest Growing Trillion Dollar Economy

Pakistan Education Budget Surpasses Defense Spending

Information Tech Jobs Moving From India to Pakistan

Pakistan is 5th Largest Motorcycle Market

"Failed State" Pakistan Saw 22% Growth in Per Capita Income in Last 5 Years

CPEC Transforming Pakistan

Pakistan's $20 Billion Tourism Industry Boom

Home Appliance Ownership in Pakistani Households

Riaz Haq's YouTube Channel

PakAlumni Social Network

Thursday, January 18, 2018

Pakistan's $20 Billion Tourism Industry is Booming

Pakistan's tourism industry, currently estimated at $20 billion (6.9% of GDP in 2016), is booming, according to data available from multiple reliable sources. World Travel and Tourism Council (WTTC) forecasts it to grow to over $36 billion within a decade.

Economic Impact of Tourism:

Pakistan tourism industry generates $20 billion in revenue and supports 3.6 million jobs directly and indirectly, according to the World Travel and Tourism Council. Foreign visitors generate nearly a billion US$ in exports.

Economic Contribution of Pakistan Tourism. Source: WTTC

Tourism Growth: 

Significantly improved security situation has helped boost annual tourist arrivals in Pakistan by 300% since 2013 to 1.75 million in 2016, while domestic travelers increased 30% to 38.3 million, according to the state-owned Pakistan Tourism Development Corp.  Hotel bookings increased 80 percent in 2016, according to Jovago, Pakistan’s biggest hotel booking website.

Courtesy: Nikkei Asian Review

By contrast, foreign tourist arrivals in the country’s larger neighbor, India, jumped from 6.97 million in 2013 to 8.8 million in 2016, according to Indian government figures. 88% of India's and 92% of Pakistan's tourism revenue is domestic. India's tourism industry is worth $209 billion (9.6% of of GDP in 2016), according to WTTC.

A story in the Financial Times, a British newspaper, quotes British tour operator Jonny Bealby as saying,   “While I am sure this will raise some eyebrows, we are starting to see a marked increase in tourism to Pakistan".  Bealby's company arranged 55% more clients to Pakistan in 2017 compared with 2016, and advance bookings are more than 100 per cent up on this point 12 months ago, according to the Financial Times.

Top Adventure Tourism Destination: 

British Backpackers Society has recently ranked Pakistan as its top destination for adventure tourism.  The Society describes Pakistan “one of the friendliest countries on earth, with mountain scenery that is beyond anyone’s wildest imagination”.

Pakistan Tourism Promotion in Jakarata, Indonesia
Pakistan's northern areas are a top destination for adventure-seekers interested in mountain climbing, white water rafting,  extreme kayaking and helicopter skiing.

Pakistan Brand Promotion on London Buses

Pakistan Tourism Promotion: 

Pakistan government's tourism campaign — including covering buses in several major world cities with beautiful pictures of Pakistan's tourist attraction — have helped raise the country’s profile. Increased investments in roads, airports and other infrastructure have helped ease travel.



Pakistan government has announced its decision to provide 30 day tourist visa on arrival for visitors from 24 countries on three continents.

Summary:

Tourism industry in Pakistan is booming with 300% increase in foreign tourist arrivals since 2013. It contributed $20 billion (6.9% of GDP in 2016) and supported 3.6 million jobs in 2016. World Travel and Tourism Council (WTTC) forecasts it to grow to over $36 billion within a decade.

Here's a video about Pakistan narrated by an American Journalist Cynthia Ritchie:

https://youtu.be/G8bzv3G9vjY




Related Links:

Haq's Musings

Pakistan Travel and Tourism Boom

Extreme Kayak Adventures in Pakistan

Helicopter Skiing in Karakorams

Climbing K2: The Ultimate Challenge

Indian Visitors Share "Eye-Opening" Stories of Pakistan

American Tourist Picks Pakistan Among Top 10 Best Countries to Visit

Pakistani American to Pakistani Diaspora: Go Back and Visit Pakistan

Riaz Haq's YouTube Channel

PakAlumni Social Network

Tuesday, January 16, 2018

Pakistan is the World's 5th Largest Motorcycles Market

Pakistan is the 5th largest motorcycle market in the world after China, India, Indonesia and Vietnam. With 7,500 new motorcycles being sold everyday, Pakistan is also the among the world's fastest growing two-wheeler markets. Passenger car and motorcycle sales in Pakistan are both soaring at rates of over 20% a year.



Auto Demand Soaring:

Nearly 2.3 million motorcycles have rolled off the factories in Pakistan in the last 10 months. The production of motorcycles jumped 22.34 percent in the first four months of fiscal year 2017-18 (FY18), over the corresponding period of in FY17, according to the latest data from Pakistan Bureau of Statistics (PBS) as reported by the media.

Pakistan automobile market is also expanding along with the motorcycle market. Sales of passenger cars soared 20.4% to 103,432 units in the first half of the current fiscal year of 2017/18, recently released official data shows. Car sales were 85,901 in the same period of last fiscal year, according to Pakistan Automotive Manufacturers Association (PAMA).

Durable Goods Ownership:

Ownership of consumer durables like computers, home appliances and vehicles is often seen as an important indicator of the size and health of the middle classes in emerging economies. Examples of periodic household surveys used by researchers to measure such data include NSS (National Sampling Survey) in India and PSLM (Pakistan Social and Living Standards Measurement) in Pakistan.

Durables Ownership in India and Pakistan. Source: KSBL
Pakistan's Trillion Dollar Economy:

Pakistan is now the world's third fastest growing economy among the world's top 25 economies with PPP GDP of over one trillion US dollars, according to  the International Monetary Fund (IMF). IMF has recently raised the country's 2018 growth forecast to 5.6%.
Courtesy:  Ashraf Hameedi, Highforest Capital
Pakistan 3rd Fastest Among Top 25: 

Spectator Index has ranked India first with 7.3% growth, followed by China (6.5%), Pakistan (5.6%), Indonesia (5.3%) and Turkey (3.7%) among the world's 25 largest economies in terms of PPP GDP.

Earlier in October 2017, the International Monetary Fund (IMF) forecast Pakistan's economy to grow at 6.3% CAGR over 2017-2022.

India-Pakistan Comparison:

Dr. Jawaid Abdul Ghani, a professor at Karachi School of Business Leadership, has recently analyzed household surveys in India and Pakistan to discover the following:

1.  As of 2015, car ownership in both India and Pakistan is about the same at 6% of households owning a car. However, 41% of Pakistani household own motorcycles, several points higher than India's 32%.

2. 12% of Pakistani households own a computer, slightly higher than 11% in India.

3. Higher percentage of Pakistani households own appliances such as refrigerators (Pakistan 47%, India 33%), washing machines (Pakistan 48%, India 15%) and fans (Pakistan 91%, India 83%).

4. 71% of Indian households own televisions versus 62% in Pakistan.

Durables Ownership Growth in Pakistan. Source: KSBL
Growth over Time:

Dr. Abdul Ghani has also analyzed household data to show that the percentage of Pakistani households owning washing machines has doubled while car and refrigerator ownership has tripled and motorcycle ownership jumped 6-fold from 2001 to 2014.

Income/Consumption Growth in Pakistan. Source: KSBL

Rapid Income Growth:

Rising ownership of durables in Pakistan has been driven by significant reduction in poverty and growth of household incomes, according to Dr. Abdul Ghani's research. Percentage of households with per capita income of under $2 per day per person has plummeted from 57% in 2001 to 7% in 2014. At the same time, the percentage of households earning $2 to $10 per day per person has soared from 42% of households in 2001 to 87% of households in 2014.  The percentage of those earning over $10 per day per person has jumped 7-fold from 1% of households in 2001 to 7% of households in 2014.

Pakistani Middle Class:

Only 5% of Pakistanis in $2-$4 per day per person income group have college degrees. But 20% of those in $4-$10 have college degrees, according to the survey results.

Pakistan Middle Class Profile. Source: KSBL

Credit Suisse Income and Wealth Data:

Average Pakistani adult is 20% richer than an average Indian adult and the median wealth of a Pakistani adult is 120% higher than that of his or her Indian counterpart, according to Credit Suisse Wealth Report 2016. Average household wealth in Pakistan has grown 2.1% while it has declined 0.8% in India since the end of last year.

Median wealth data indicates that 50% of Pakistanis own more than $1,180 per adult which is 120% more than the $608 per adult owned by 50% of Indians.

GDP Estimates Using Household Survey Data:

Pakistan's GDP calculated from consumption data in PSLM is significantly higher than the government estimates based on production data. The reverse is true of Indian GDP.

M. Ali Kemal and Ahmed Waqar Qasim, economists at Pakistan Institute of Development Economics (PIDE),  explored several published different approaches for sizing Pakistan's underground economy and settled on a combination of  PSLM (Pakistan Social and Living Standards Measurement) consumption data  and mis-invoicing of exports and imports to conclude that the country's "informal economy was 91% of the formal economy in 2007-08". 

Prominent Indian economists Abhijit V Banerjee, Pranab Bardhan, Rohini Somanathan and TN Srinivasan teaching at MIT, UC Berkeley, Yale University and Delhi School of Economics believe that India's GDP estimate based on household survey (National Sampling Service or NSS) data is about half of what the Indian government officially reports as India's GDP. 

Here's a quote from French economist Thomas Piketty's book "Capital in the Twenty-First Century" explaining his skepticism of production-based official GDP figures of India and China:

"Note, too, that the very high official growth figures for developing countries (especially India and China) over the past few decades are based almost exclusively on production statistics. If one tries to measure income growth by using household survey data, it is often quite difficult to identify the reported rates of macroeconomic growth: Indian and Chinese incomes are certainly increasing rapidly, but not as rapidly as one would infer from official growth statistics. This paradox-sometimes referred to as the "black hole" of growth-is obviously problematic. It may be due to the overestimation of the growth of output (there are many bureaucratic incentives for doing so), or perhaps the underestimation of income growth (household have their own flaws)), or most likely both. In particular, the missing income may be explained by the possibility that a disproportionate share of the growth in output has gone to the most highly remunerated individuals, whose incomes are not always captured in the tax data." 

Who is Dr. Jawaid Abdul Ghani?

The PSLM household data cited in this blog post is taken from a recent presentation made by Dr. Jawaid Abdul Ghani at the Karachi School of Business and Leadership (KSBL) where he teaches. KSBL has been established in collaboration with  Cambridge University's Judge Business School. Prior to his current faculty position, Dr. Abdul Ghani taught at MIT's Sloane School of Management and Lahore University of Management Sciences (LUMS). He has a computer science degree from MIT and an MBA from Wharton Business School.

Summary:

Pakistan is the 5th largest motorcycle market in the world after China, India, Indonesia and Vietnam. With 7,500 new motorcycles being sold everyday, Pakistan is also the among the world's fastest growing two-wheeler markets.  Passenger car and motorcycles sales in Pakistan are both soaring at rates of over 20% a year.  Pakistan has managed to significantly reduce poverty and rapidly grow its middle class since 2001. The country now boasts the world's third fastest growing economy among the world's top 25 economies with PPP GDP of over one trillion US dollars, according to the International Monetary Fund (IMF). IMF has recently raised the country's 2018 growth forecast to 5.6%. spite of major political, security and economic challenges. The foundation for the rise of the middle class was laid on President Musharraf's watch by his government's decisions to invest in education and infrastructure projects that led to the expansion of both human and financial capital. My hope is that the continued improvement in security situation and implementation of China-Pakistan Economic Corridor (CPEC) related projects will bring in higher long-term investments and accelerate Pakistan's progress toward prosperity for all of its citizens.

Related Links:

Haq's Musings

Credit Suisse Wealth Report 2016

Pakistan's Trillion Dollar Economy Among World's Fastest Growing

Pakistan: A Majority Middle Class Country

Karachi School of Business and Leadership

State Bank: Pakistan's Actual GDP Higher Than Officially Reported

College Enrollment in Pakistan

Musharraf Accelerated Development of Pakistan's Human and Financial Capital

China-Pakistan Economic Corridor

Sunday, January 14, 2018

Pakistan Economy is the World's Third Fastest Growing Among Top 25 Economies

Pakistan is now the world's third fastest growing economy among the world's top 25 economies with PPP GDP of over one trillion US dollars, according to  the International Monetary Fund (IMF). IMF has recently raised the country's 2018 growth forecast to 5.6%.
Courtesy:  Ashraf Hameedi, Highforest Capital

Pakistan 3rd Fastest Among Top 25: 


Spectator Index has ranked India first with 7.3% growth, followed by China (6.5%), Pakistan (5.6%), Indonesia (5.3%) and Turkey (3.7%) among the world's 25 largest economies in terms of PPP GDP.

Earlier in October 2017, the International Monetary Fund (IMF) forecast Pakistan's economy to grow at 6.3% CAGR over 2017-2022.

World Bank: 

The World Bank sees Pakistan's GDP to grow 5.5% in current fiscal year 2017-18 ending in June 2018, a full percentage point faster than the 4.5% average GDP growth for Emerging and Developing Economies (EMDEs) that include Argentina, Brazil, China, India, Nigeria and Russia among others. However, Pakistan economic growth continues to lag growth forecast for regional economies of India and Bangladesh. The report also highlights the issue to growing trade deficit and current account gap that could lead to yet another balance of payments crisis for Pakistan requiring another IMF bailout.

Source: World Bank Group
Pakistan GDP Growth: 

Here's an excerpt of the January 2018 World Bank report titled "Global Economic Prospects" as it relates to Pakistan:

"In Pakistan, growth continued to accelerate in FY2016/17 (July-June) to 5.3 percent, somewhat below the government’s target of 5.7 percent as industrial sector growth was slower than expected. Activity was strong in construction and services, and there was a recovery in agricultural production with a return of normal monsoon rains. In the first half of FY2017/18, activity has continued to expand, driven by robust domestic demand supported by strong credit growth and investment projects related to the China-Pakistan Economic Corridor. Meanwhile, the current account deficit widened to 4.1 percent of GDP compared to 1.7 percent last year, amid weak exports and buoyant imports."

Growing External Account Imbalance: 

The report correctly points out the problem of growing current account deficit that could turn into a balance of payments crisis unless the trade deficits are brought under control. Recent trends in the last three months do offer some hope with December 2017 exports up 15% while imports increased 10%. Exports in November increased 12.3%.

Along with double digit increase in exports in the last two months, Pakistan received remittances amounting to $1.724 billion in December 2017, 8.72% higher compared with $1.585 billion the country received in the same month of the previous year, according to data released by the State Bank of Pakistan (SBP), as reported by Express Tribune.

Summary:

Pakistan is the third fastest growing economy among the top 25 economies in terms of purchasing power parity.  Pakistan's economic growth is continuing to accelerate amid rising rising investments led by China-Pakistan Economic Corridor related infrastructure and energy related projects.  The IMF sees Pakistan economy growing at 5.6% while the World Bank forecasts it to grow by 5.5% in current fiscal year 2017-18 ending in June 2018, a full percentage point faster than the 4.5% average GDP growth for Emerging and Developing Economies (EMDEs) that include Argentina, Brazil, China, India, Nigeria and Russia among others. However, Pakistan economic growth continues to lag growth forecast for regional economies of India and Bangladesh. The report also calls attention to the expanding current account gap as a matter of concern that must be taken seriously by the government to avoid yet another return to the International Monetary Fund (IMF).

Related Links:

Haq's Musings

CPEC is Transforming Least Developed Parts of Pakistan

Per Capita Income in "Failed State" of  Pakistan Rose 22% in 5 Years

Credit Suisse Wealth Report 2017

Pakistan Translates GDP Growth to Citizens' Well-being

Rising Motorcycle Sales in Pakistan

Depth of Deprivation in India

Chicken vs Daal in Pakistan

China Pakistan Economic Corridor

Thursday, January 11, 2018

World Bank: Pakistan Outperforming Emerging Economies Average

The World Bank sees Pakistan's GDP to grow 5.5% in current fiscal year 2017-18 ending in June 2018, a full percentage point faster than the 4.5% average GDP growth for Emerging and Developing Economies (EMDEs) that include Argentina, Brazil, China, India, Nigeria and Russia among others. However, Pakistan economic growth continues to lag growth forecast for regional economies of India and Bangladesh. The report also highlights the issue to growing trade deficit and current account gap that could lead to yet another balance of payments crisis for Pakistan requiring another IMF bailout.

Source: World Bank Group
Pakistan GDP Growth: 

Here's an excerpt of the January 2018 World Bank report titled "Global Economic Prospects" as it relates to Pakistan:

"In Pakistan, growth continued to accelerate in FY2016/17 (July-June) to 5.3 percent, somewhat below the government’s target of 5.7 percent as industrial sector growth was slower than expected. Activity was strong in construction and services, and there was a recovery in agricultural production with a return of normal monsoon rains. In the first half of FY2017/18, activity has continued to expand, driven by robust domestic demand supported by strong credit growth and investment projects related to the China-Pakistan Economic Corridor. Meanwhile, the current account deficit widened to 4.1 percent of GDP compared to 1.7 percent last year, amid weak exports and buoyant imports."

Growing External Account Imbalance: 

The report correctly points out the problem of growing current account deficit that could turn into a balance of payments crisis unless the trade deficits are brought under control. Recent trends in the last three months do offer some hope with December 2017 exports up 15% while imports increased 10%. Exports in November increased 12.3%.

Along with double digit increase in exports in the last two months, Pakistan received remittances amounting to $1.724 billion in December 2017, 8.72% higher compared with $1.585 billion the country received in the same month of the previous year, according to data released by the State Bank of Pakistan (SBP), as reported by Express Tribune.

Summary:

Pakistan's economic growth is continuing to accelerate amid rising rising investments led by China-Pakistan Economic Corridor related infrastructure and energy related projects.  The World Bank sees Pakistan's GDP to grow 5.5% in current fiscal year 2017-18 ending in June 2018, a full percentage point faster than the 4.5% average GDP growth for Emerging and Developing Economies (EMDEs) that include Argentina, Brazil, China, India, Nigeria and Russia among others. However, Pakistan economic growth continues to lag growth forecast for regional economies of India and Bangladesh. The report also calls attention to the expanding current account gap as a matter of concern that must be taken seriously by the government to avoid yet another return to the International Monetary Fund (IMF).

Related Links:

Haq's Musings

CPEC is Transforming Least Developed Parts of Pakistan

Per Capita Income in "Failed State" of  Pakistan Rose 22% in 5 Years

Credit Suisse Wealth Report 2017

Pakistan Translates GDP Growth to Citizens' Well-being

Rising Motorcycle Sales in Pakistan

Depth of Deprivation in India

Chicken vs Daal in Pakistan

China Pakistan Economic Corridor