Showing posts with label Power Crisis. Show all posts
Showing posts with label Power Crisis. Show all posts

Friday, October 14, 2011

Corruption & Incompetence Hobble Pakistan Power Sector

In spite of the injection of government's subsidies of $7.4 billion since 2008, the power crisis in Pakistan continues to worsen, according to credible reports attributed to Pakistan's Ministry of Finance.

The poster child of the waste, fraud and abuse is the Turkish Karkey rental power ship deal which sinks Rs. 780 million or nearly $9 million per month of public funds for providing very little power because of lack of sufficient fuel supply, according to The News.

There were credible reports in 2009 that the ruling PPP politicians, particularly President Zardari and his inner circle, ignored former Finance Minister Shaukat Tarin's key recommendations to address the acute power shortages in the country. Zardari's insistence on pushing rental power projects, rather than fix the huge circular debt problem in the energy sector first, specially frustrated the nation's former finance chief, and he eventually quit last year.



What is becoming increasingly clear is that the government's corruption and incompetence in the power sector, not just insufficient installed generating capacity blamed on Musharraf, are at the heart of the deteriorating energy situation in Pakistan.

Nine Independent Power Producers (IPPs), with a combined power generation capacity of 1,800MW, have now notified the government and central power purchasing agency (CPPA) that they are invoking sovereign guarantees for the recovery of their dues amounting to Rs. 31 billion.

The much-heralded reforms of the power sector designed to attract more private investment are stalled, and the current financial mess is scaring away potential investors. With circular debt touching Rs. 250 billion, or nearly 40% of the sector's annual revenue as estimated by ADB, new investors are hesitant to risk their capital. As a result, neither the short-term relief from load shedding nor the long term improvements in the energy sector appear to be on the horizon.

In addition to the long delayed structural reforms in the power sector, there is a total lack of will to tackle the widespread problem of power theft and the mounting unpaid electricity bills which account for as much as 40% of the industry revenue. This deprives the crucial sector of the cash it needs to operate as a sustainable and responsive business capable of satisfying its customers' requirements of reliable electricity service. Rather than deal with these underlying issues, the government is choosing to apply the temporary band-aid of uncertain periodic subsidies and repeated rate hikes.

The recent electricity riots and the approaching elections now appear to be having the effect of adding some sense of urgency at the cabinet level to deal with the long festering crisis. The Cabinet Committee on Restructuring (CCoR) on power sector Thursday approved the creation of a holding company to be led by an independent board of directors to finalize the restructuring of four power generation companies (GENCOs).

This holding company will supervise the management of four GENCOs to be managed in the private sector and would try will make sure of fresh investment in such GENCOs to improve power generation from existing 3,500 megawatts (MW) to 4,800 MW in near future to bridge the demand and supply gap, according to a report in Daily Times.

The paper also reported that the PEPCO (Pakistan Electric Power Co) would be dissolved by October 30, 2011 and replaced by CPPA (Central Power Purchasing Agency) with private management would be its successor. A source said that role of the ministries in power sector would be minimized and private sector would have complete administrative and financial authority under the reform process to improve the system.

It's absolutely essential that highly competent and fully empowered leadership be brought in urgently to lead the power industry from the dire straits it's in today. The political leadership in Islamabad must understand the following very clearly: Without first repairing the power sector, there can be no hope of fixing the economy and spur growth before the next elections.

Related Links:

Haq's Musings

Pakistan's Worsening Power Crisis

Circular Debt and Load Shedding

Musharraf's Economic Legacy

Pakistan's Tops Jobs Growth in South Asia

World Bank Report on Jobs in South Asia

Pakistan's Twin Energy Crises

Pakistan's Worsening Electricity Crisis

Pakistan's Struggling Economy

Lahore School of Economics Paper on Circular Debt

Thursday, July 14, 2011

Pakistan Building 1000 MW Wind Farms

Pakistan is prepared to approve a Norwegian company’s plan to build a 150-megawatt wind farm, the first part of a $1 billion plan that could boost by a third the announced capacity for clean-energy power plants, according to Bloomberg News. Joar Viken, the CEO of NBT, a Norwegian company focused on building wind farms in China, Norway and Pakistan, said he plans to tap financing for his project from one of three Chinese turbine makers that his company is talking with about supplying machinery for the facilities in Pakistan.

Wind Farm at Jhimpir, Sindh, Pakistan


Pakistan has about 1000 MW of wind power plants at various stages of planning and construction, and another 498.5 megawatts of wind programs announced, mostly in Jhimpir, Gharo, Keti Bandar and Port Qasim wind corridors along the Arabian Sea coast in Sindh. The output from these plants will provide much-needed additional power for Pakistan, improve the country’s energy security, and lower reliance on natural gas and furnace oil. It is estimated that the Gharo to Keti Bandar corridor alone could produce between 40,000 and 50,000 megawatts of electricity, says Ms. Miriam Katz of Environmental Peace Review who has studied and written about alternative energy potential in South Asia.

Pakistan's First 2.5 MW Nordex Wind Turbine in Sind 

Other major wind energy projects in Pakistan include American AES Corporation's 150 MW farm, Turkey's Zorlu Enerji Electrik Uretim's 56 MW farm, and Pakistan's FFC Energy's 50 MW farm.



Pakistan is fortunate to have something many other countries do not, which are high wind speeds near major population centers, according to data published by Ms. Katz .

Near Islamabad, the wind speed is anywhere from 6.2 to 7.4 meters per second (between 13.8 and 16.5 miles per hour). Near Karachi, the range is between 6.2 and 6.9 (between 13.8 and 15.4 miles per hour).

In Balochistan and Sindh provinces, sufficient wind exists to power every coastal village in the country. There also exists a corridor between Gharo and Keti Bandar that alone could produce between 40,000 and 50,000 megawatts of electricity, says Ms. Katz who has studied and written about alternative energy potential in South Asia. Given this surplus potential, Pakistan has much to offer Asia with regards to wind energy. In recent years, the government has completed several projects to demonstrate that wind energy is viable in the country. In Mirpur Sakro, 85 micro turbines have been installed to power 356 homes. In Kund Malir, 40 turbines have been installed, which power 111 homes. The Alternative Energy Development Board (AEDB) has also acquired 18,000 acres for building wind farms.

In addition to high wind speeds near major centers as well as the Gharo and Keti Bandar corridor, Pakistan is also very fortunate to have many rivers and lakes. Wind turbines that are situated in or near water enjoy an uninterrupted flow of wind, which virtually guarantees that power will be available all the time. Within towns and cities, wind speeds can often change quickly due to the presence of buildings and other structures, which can damage wind turbines. In addition, many people do not wish for turbines to be sited near cities because of noise, though these problems are often exaggerated.

Pakistan has a goal to generate at least 5 percent of its electricity needs from renewable sources by 2030, according to Pakistan Alternative Energy Development Board (AEDB). Last year, 53 percent came from natural gas, 30 percent from oil and the rest from coal, nuclear and hydropower, according to data from BP Plc. The London-based oil company didn’t measure any sources of renewable energy there.



The country’s electricity shortfall reaches as much as 3,628 megawatts per day, according to demand-supply data available on the ministry of power and water website.

Related Links:

Haq's Musings

Pakistan Launches Wind Farm Projects

Renewable Energy to Solve Pakistan's Electricity Crisis

Electrification Rates By Country

Wind Turbine Manufacturing in Pakistan
Pakistan Pursues Hydroelectric Power Projects

Solar Energy for Sunny Pakistan
Wind Power Tariffs in Pakistan

Pakistan's Twin Energy Shortages

Pakistan Council of Renewable Energy Technology

Renewable Energy for Pakistan

Abundant Cheap Electricity From Pakistani Coal

Pakistan Policy on Renewable Technology

Sugarcane Ethanol Project in Pakistan

Community Based Renewable Energy Project in Pakistan

Tuesday, April 13, 2010

Burn Garbage to Solve Pakistan's Electricity Crisis?

Among other things during a visit to Pakistan last year, the frequent power outages, commonly called "load shedding", and piles of garbage in the streets made a distinct impression on my family and I. Since our return to the United States, I have been wondering if it is possible to solve both problems at once? Clean up the streets by collecting garbage, and burn the collected trash to generate more electricity? It seems that the Danes are doing exactly that, according to a story in today's New York Times.

Denmark's Community Power Plants:

The new plants in Denmark are far cleaner than conventional incinerators. Such new type of plants convert local community trash into heat and electricity. Dozens of filters catch pollutants, from mercury to dioxin, that would have emerged from its smokestack only a decade ago.

As a result of new innovations, Denmark now regards garbage as a clean alternative fuel rather than a smelly, unsightly problem. And the incinerators, known as waste-to-energy plants, are welcomed by many upscale communities of professionals that vie to have them built.

Denmark now has 29 such plants, serving 98 municipalities in a country of over 5 million people, and 10 more are planned or under construction. Across Europe, there are about 400 plants, with Denmark, Germany and the Netherlands leading the pack in expanding them and building new ones, according to the New York Times.

Pakistan's Mountains of Garbage:

With the consumption boom of packaged products in the last few years, it seems that Pakistani cities are inundated with rubbish, and the garbage collection and waste disposal systems are totally inadequate. Here is an excerpt from my post in July 2009 about visit to Karachi:

"We saw lots of heaps of stinking trash in several parts of the city along the roadside on our way. It seemed as though the Karachi garbage collectors were on strike, but my impressions proved to be incorrect, as I was told that this was normal in several parts of Karachi. The government owned and operated garbage collection systems pick up less than 50% of the solid waste generated and the remaining uncollected garbage rots on the streets, posing serious health risks for the growing population. The massive piles of garbage also plug up the already inadequate storm water drains resulting in serious flooding in the monsoon months of July and August every year. None of the major cities in Pakistan have an adequate solid waste management system, though Karachi city government has reportedly contracted with a Chinese firm to establish and operate such a system. The waste collection and management firm, Shanghai Shen Gong Environmental Protection Company Limited, will start its operations of collecting litter from across the city from August 14, 2009 - initially in only six of the eighteen towns of the city of Karachi. And, as expected, this service will not come free, nor should it. Karachi-ites will be required to pay Rs. 100 to 1,000 per month as public utility charges under six categories (according to lot size) on their residential units. Businesses built on 200 sq yards to 10,000 sq yards or more will have to pay Rs. 500 to Rs. 5,000 in garbage collection fees while industrial units covering an area of 1,000 sq yards to 5,000 sq yards and above will be billed Rs. 500 to Rs. 2,000 per month. There have already been howls of protests against these garbage collection fees and it will be interesting to see how effective CDGK (City District Government of Karachi) will be in ensuring payments."

Unfortunately, I am told that things have gotten much worse since last year. The City District Government of Karachi (CDGK) has since been dissolved, and the privatization of garbage collection has not materialized. At the same time, the energy crisis has become significantly more acute, with extended hours of "load shedding" on a daily basis.

Recommendation:

There is no real substitute for dramatic improvements in government's energy policies and governance to solve the acute energy problems Pakistan faces. However, I do think the Danish experience is worth exploring by at least some of the communities in Pakistan. Instead of just complaining about mounting garbage piles, and running noisy and polluting diesel generators to fill the growing power gap, it is time for some of the upscale urban communities to start taking a page from the European experience to kill two birds with one stone. Based on the "clean energy" designation, these projects might even qualify for dollars from carbon credits under Kyoto's Clean Development Mechanism (CDM). Upscale communities such as Defense Housing Societies should seek guidance from their Danish counterparts to establish a few pilot projects to prove the concept in Pakistan.

Similar efforts can be undertaken in the industrial sector as well, with various industrial estates leading the way to solve their power problems. Rachna Industrial Park near Sheikhupura has already launched a 25 MW trash-burning power plant project currently underway.

Here's a video explaining waste to energy processes:



Related Link:

Load Shedding and Circular Debt in Pakistan

President Musharraf Video Defense on Power Crisis

Creative Financing of Pakistan's Energy Projects

Eleven Days in Karachi

Garbage Disposal in South Asia

Europe Finds Clean Energy in Trash

Going Through the CDM Process

Pakistan's Energy Crisis

Renewable Energy for Pakistan

Pakistan Inks Hydroelectric Power Deals

Carbon Offsets Under Fire

The Politics of Climate Change

Cap and Trade and The New Carbon Economy

Electric Power Crisis Worsens in Pakistan

Light a Candle, Don't Curse Darkness

Social Entrepreneurs Target India and Pakistan

Grameen Shakti Solar For Pakistan

Waste-to-Energy Needed in Pakistan

Climate Change Worsens Poverty in India

Carbon Trading: Opportunity For Pakistan

Sunday, February 28, 2010

Pakistan's "Circular Debt" and "Load Shedding"

As Pakistanis discuss major causes and crippling effects of the worst ever power crisis in the nation's history, "load shedding" and "circular debt" are two key phrases that have entered the vocabulary of average people in Pakistan during the last few years.

Load Shedding:

What do these common phrases mean? Let me start with "load shedding" first. Long and daily power outages are called "load shedding". "Load shedding" is supposedly an attempt to share a limited resource equitably among many consumers. In addition to insufficient installed capacity as the culprit, the dramatic increase in "load shedding" in the last two years is commonly also blamed on growing "circular debt" which results in significant under-utilization of power plants already in place. There is credible data to suggest that the deepening electricity crisis since 2008 has more to do with the independent power producers(IPPs) operating at less than 50% of their installed capacity because they can not pay for the fuel they need to produce more. The outgoing finance minister Mr. Shaukat Tarin acknowledged the problem of circular debt, and tried to focus on it. He even threatened to quit last year over the lack of resolution of this problem. However, he was only partially successful in paying down the government debt. He is reportedly taking a parting shot at the problem on his final day in office.

Key Players:

The key players in this "circular debt" trap are the federal and provincial governments as the biggest deadbeats, the power distributors like KESC, the power producers like Pepco and Hubco, and the fuel suppliers like government-owned Pakistan State Oil (PSO) and partially state-owned Pak-Arab Refinery Ltd (PARCO). This debt circle begins with the government as the biggest debtor and ends with a government-owned entity as the biggest creditor. So the obvious question is: If the government is both the biggest debtor and the biggest creditor, then why is it that the government leaders can not solve the problem? Is it the lack of will? or the lack of competence? Is there a personal profit motive of the top leader of the ruling PPP, who is allegedly pushing rental power plants (RPPs) contracts ahead of the speedy resolution of circular debt? Is it a combination of corruption and incompetence? The answer to these questions depends on who you ask.

Circular Debt:

While you ponder possible answers to the question of resolving circular debt, let me share with you an interesting story posted by Naresh Goyal that explains circular debt and how it can be resolved:

It is raining, and the little town looks totally deserted. It is tough times, everybody is in debt, and everybody lives on credit.

Suddenly, a rich tourist comes to town... He enters the only hotel, lays a 100 Euro note on the reception counter, and goes to inspect the rooms upstairs in order to choose one.

The hotel proprietor takes the 100 Euro note and runs to pay his debt to the butcher. The butcher takes the 100 Euro note, and runs to pay his debt to the pig grower.

The pig grower takes the 100 Euro note, and runs to pay his debt to the supplier of his feed and fuel...

The supplier of feed and fuel takes the 100 Euro note and runs to pay his debt to the town's prostitute that in these hard times, gave her "services" on credit.

The hooker runs to the hotel, and pays off her debt with the 100 Euro note to the hotel proprietor to pay for the rooms that she rented when she brought her clients there.

The hotel proprietor then lays the 100 Euro note back on the counter so that the rich tourist will not suspect anything.

At that moment, the tourist comes down after inspecting the rooms, and takes his 100 Euro note, after saying that he did not like any of the rooms, and leaves town.

No one earned anything. However, the whole town is now without debt, and looks to the future with a lot of optimism.....


Summary:

Clearly, the circular debt problem has assumed alarming proportions, threatening Pakistan's future. The IMF and the US officials in their recent meetings with Pakistan government have described the circular debt as a significant threat to the country’s economy.

After signing hundreds of millions of dollars worth of rental power plant (RPPs) projects in the face of harsh criticism, the government is finally starting to deal with rising circular debt to address power shortages. Outgoing finance minister Saukat Tarin recently told the News that “in real terms the circular debt has swelled to Rs108 billion which mainly includes non-payment of Rs42 billion by KESC, Rs21 billion by the government of Sindh and Rs15-16 billion from commercial consumers to the Pakistan Electric Power Company (Pepco)".Just prior to leaving office, Tarin has decided to raise Rs. 25 billion as a small step toward settling a debt estimated at hundreds of billions of rupees.

Unless Pakistani government deals with the economics of power generation by boldly tackling the issue of growing circular debt quickly, it will be almost impossible to get the IPPs to fully utilize existing installed capacity, much less attract new investments in the power sector.

Here is a recent video clip of former President Muharraf talking about the power crisis in Pakistan:



Related Links:

Tarin's Parting Shot at Circular Debt Problem

Circular Debt: Finance 3.0

Shaukat Tarin Resigns

US Fears Aid Will Feed Graft in Pakistan

Pakistan Swallows IMF's Bitter Medicine

Shaukat Aziz's Economic Legacy

Pakistan's Energy Crisis

Karachi Tops Mumbai in Stock Performance

Pakistan's Electricity Crisis

Pepco Increases Load Shedding By 5 Hours

Sunday, August 2, 2009

Eleven Days in Karachi, Pakistan



Arrival in Karachi

My family and I arrived at Karachi's Jinnah International Airport on Tuesday in mid-July, 2009, after a short flight from Dubai in the afternoon. Our arrival was an hour later than scheduled. The disembarkation from the plane was fairly quick but the process of immigration and baggage claim was very slow, in clear contrast to our experience in Dubai. Even though it took more than a half hour to go through the immigration line where the passport numbers were being manually written down instead of being scanned, when we got to the baggage claim we had to wait another half hour to get our baggage. But we did go through the Customs green channel quickly without being stopped, and emerged to be greeted by a warm welcome by our family members in Pakistan.

As they did in Dubai, my daughters again found familiar symbols of American business presence as they saw a McDonald's restaurant right across from the exit at Karachi airport. We were driven to a suite at a private club where we stayed for the next eleven days. Because of my nephew's planned wedding two days after our arrival, I expected my sister's house to be quite full of people, and I chose to stay at the club rather than a hotel because of the relative security it offered from potential terror threats. In addition to a better security and lower daily rate than hotels, the club also offered more space and facilities, including room service, a gym, a jogging track, open lawns and assurance of uninterrupted supply of water and electricity that have become luxury for Karachi residents.


Karachi Weather and Traffic

Though it was a hot, humid and hazy summer day and the traffic was undisciplined, the drive from the airport was still fast and smooth, with all of the new infrastructure development consisting of many recently-built flyovers, underpasses, on-ramps and of-ramps to take us to the club in Defense Housing Authority (DHA) in Karachi.

After checking in at the club, we left for my sister's home which was a quick and short drive, in spite of the fact that a section of the road was torn up for repairs that delayed us slightly. As we sat down for lunch with my sister and her family, the power went out, but a small UPS unit kept some of the fans and lights still functioning. We enjoyed traditional Pakistani dishes of kofta, kebab and biryani, which were followed by delicious Pakistani mangoes in season in July. After lunch, one of my nephews bought a Warid SIM for my cell phone which was loaded with Rs. 500 worth of minutes ( at less than Rs. 3 per minutes) and it activated immediately upon installation. He also set up a Wi-Fi connection for us to start using our iPhones' email and browser functions and our notebook computers. On the way back to the club, we stopped at Makro, a Dutch-German warehouse-style supermarket like Costco, and picked up milk, tea bags, Splenda, orange juice, yogurt, croissants and Nestle water bottles to consume during our stay. Though the brand names were different, the shopping experience was similar to our grocery shopping trips in California. After returning to the club, we went to bed early to freshen up for the following full day of activities before my nephew's wedding day.

Garbage, Garbage Everywhere

On Wednesday morning we ate breakfast in our room. Then we ordered a Metro cab to take us to my sister's home, had lunch at my wife's sister's home and then on to the cemetery in North Nazimabad. We saw lots of heaps of stinking trash in several parts of the city along the roadside on our way. It seemed as though the Karachi garbage collectors were on strike, but my impressions proved to be incorrect, as I was told that this was normal in several parts of Karachi. The government owned and operated garbage collection systems pick up less than 50% of the solid waste generated and the remaining uncollected garbage rots on the streets, posing serious health risks for the growing population. The massive piles of garbage also plug up the already inadequate storm water drains resulting in serious flooding in the monsoon months of July and August every year. None of the major cities in Pakistan have an adequate solid waste management system, though Karachi city government has reportedly contracted with a Chinese firm to establish and operate such a system. The waste collection and management firm, Shanghai Shen Gong Environmental Protection Company Limited, will start its operations of collecting litter from across the city from August 14, 2009 - initially in only six of the eighteen towns of the city of Karachi. And, as expected, this service will not come free, nor should it. Karachi-ites will be required to pay Rs. 100 to 1,000 per month as public utility charges under six categories (according to lot size) on their residential units. Businesses built on 200 sq yards to 10,000 sq yards or more will have to pay Rs. 500 to Rs. 5,000 in garbage collection fees while industrial units covering an area of 1,000 sq yards to 5,000 sq yards and above will be billed Rs. 500 to Rs. 2,000 per month. There have already been howls of protests against these garbage collection fees and it will be interesting to see how effective CDGK (City District Government of Karachi) will be in ensuring payments.

Cemetery Visit

Upon reaching the cemetery, my wife managed to find her parents' final resting place, but I was not so fortunate to find and pay my respect at my father's grave. I was told by my brother-in-law who accompanied us that the cemetery keepers have no qualms about reselling used burial plots to build fresh graves on top of existing ones when they realize no one has visited for a while. But I did find some consolation in praying for my father's soul and the souls of others at the cemetery.

Nephew's Wedding

Thursday was my nephew's wedding day and we were warned that weddings in Karachi are very late night affairs that last into the wee hours of the next morning. So we decided to sleep in late in the morning on Thursday, but unfortunately one of my daughters started complaining of an upset stomach in the middle of the night. The next morning I called one of my friends to help me find medications for her. I was pleasantly surprised to find that almost everything I was looking for was available at a nearby store, ranging from Imodium to Pedialyte and Gatorade.

In the evening, we gathered at my sister's house to form a wedding procession. One of my nephews took the groom's car to be adorned by a florist but, as he was returning from the florist's, he was robbed at gun point and relieved of his wallet, cash, driver's license, credit cards and mobile phone. He seemed still quite shaken up as the wedding party (barat) left at 11:00 PM for the wedding hall in Gulshan-e-Iqbal, where the bride's family had made arrangements for the nikah. When we arrived at our destination, everyone was there but the kazi who was supposed to solemnize the marriage. Apparently, he had car trouble along the way and had to make alternative arrangements. He showed up about a half hour late, but then promptly completed the religious ceremony and the dinner was served. It was a good occasion for me to see a lot of my relatives and friends who I hadn't met in years. Since my daughter was still not well, we decided to leave about 1:30 AM, well before the rukhsati.

Breakfast with Friends

Three of my friends, SM, FN and TS showed up Friday morning for breakfast with me at the club dining hall. All three are fellow NEDians who I met after at least eight years. SM is a member of the club and made arrangements for my stay there. He is in the carpet business which is currently very slow because of the ongoing economic crisis hurting consumer confidence in Pakistan. FN, who joined us is doing brisk business by selling UPS units and diesel/gas generators because of the erratic and unpredictable power situation in Pakistan. I suggested to him to consider adding solar panel units backed up with battery storage to his list of offerings to try and promote cleaner energy. He seemed a little skeptical because of the current higher costs of solar solutions per watt compared to the UPS devices and gas-burning generators. The third friend, TS, is in management consulting business and is the current president of the local chapter of the IEEE. We reminisced about the old times, talked politics and current affairs and had the traditional omelet-paratha breakfast with Pakistani chai.

Twelve Hour Power Outages

There is continuing and growing gap between the nation's power supply and demand. An aspect of the increasing power outages from just a few hours in 2007 to over twelve hours a day now is the fact that most power producers are operating 30-40% below capacity, generating only 12000 MW when the installed capacity is about 20,000 MW. Companies like PEPCO, WAPDA and KESC owe billions of rupees in unpaid bills to the various power producers who are not buying enough fuel to operate on full capacity. Part of the problem is the widespread power theft accounting for as much as 30-40% of the total power produced. Even the government departments and government ministers and officials are guilty of not paying their bills while demanding the continuation of power flow.



Lunch with Activist Friend

We were invited to lunch with a friend RD and his wife VD at Barbecue Tonight restaurant in Clifton on Friday. The couple picked us up at the club and took us to the restaurant by the sea where we had a very good lunch of Pakistani grilled meats and curries of various flavors.

The former head of an NGO called Shehri, RD is a well-known Karachi engineering consultant and a prominent civic activist, who has often been a thorn in the side of the local developers and their friends in big places. Since he is not Muslim, he was particularly targeted with a fatwa against him by the unscrupulous mullahs in developers' pockets. He remained under police protection for a while until the fatwa against him was lifted. But he continues to be undaunted in his pursuit of a better Karachi for its citizens. His current campaign is aimed at significant modifications in the $43 billion Bundal and Buddo islands projects awarded to Emaar, a Dubai developer, in 2006. A bridge will be constructed at a cost of $50 million to link Karachi Defense Housing Society (DHA) Phase-8 with the two Islands. The islands are situated about a mile off the coast of Karachi. A major portion of one of the two islands has submerged beneath the sea and the Emaar Group will reclaim this land. According to the initial plan, about 15,000 houses are to be constructed and sold to the public. The construction on the islands has started in December, 2008, but the reports indicate a slowing of the planned effort due to the current economic slowdown in Emaar's Dubai home base and the weak real estate market in Karachi.

The Dreaded Monsoon

We woke up to heavy monsoon rains on Saturday morning, the day my sister and her husband had planned valima reception for their son. The rain did stop mid-day and we were able to go out and visit with my sister, but the situation got worse in the evening and the reception had to be abandoned. The temperature dropped several degrees and a pleasant breeze was in evidence, but the city streets were flooded and many drivers stranded, there was a massive and prolonged power outage hitting more than 90% of the city, and life essentially came to a standstill. The streets around our club were also flooded, but the water was quickly pumped out by large pumps by the next morning. Almost the entire city lost power. Even our club had trouble because an underground cable connecting with the emergency diesel generator was flooded. It took a few hours for the club to restore emergency power to our suite. There were reports of dozens of casualties from drownings to electrocutions to building collapses in different parts of the city. The problems were compounded by the loss of power at the city's main pumping station at Dhabeji that cut off water to the entire city for more than 24 hours. An estimated 700 million gallons of water could not be pumped over a period of about 40 hours. There were riots in the streets on Sunday as angry residents spilled out on to the streets and violent protests stopped traffic in many parts of the city.

Media Revolution

Since I was stuck in my club suite for many hours, I sat in front of the TV and flipped through the channels. It seemed that there are multiple, competing channels catering to almost every niche, whim and taste---from news, sports, comedy and talk shows to channels dedicated to cooking, fashion, fitness, music, business, religion, local languages and cultures etc. There has been a big media revolution during the Musharraf era that I hadn't seen before. It seems that this media revolution has had a profound influence on how many young people talk, dress and behave, emulating the outspoken media personalities, actors, preachers, singers, sportsmen, celebrities and fashion models. In addition to a smorgasbord of TV channels born out of a surge in advertising spending, there are many newspapers and tabloids, and serious and glossy magazines, and many FM radio stations providing local news, sports, weather and traffic.

Visit to a Friend's House

We were invited to lunch at SQ's house in Defense on Sunday. SQ is the friend who let us use his apartment and driver in Dubai. This close friend of ours also has a special connection with us because he was my classmate at NED Engineering College and his sister and his wife were my wife's classmates at Dow Medical College in Karachi. He had invited several classmates from our common alma mater of NED Engineering College in Karachi. Several of them could not attend because of the widespread flooding and power outages, but seven or eight still showed up. The street in front of SQ's house was flooded and we had to tiptoe around the big water puddle to step into his nice house in an upscale neighborhood. The grid power was out when we entered and only a few lights and fans were running off of the UPS. The gas-fired generator could not be started because it would significantly reduce the gas pressure and shut down the cooking range in the kitchen. The choice was between cooking and air conditioning. Finally, when the signal came from the kitchen that the cooking was done, the generator and the air conditioning were turned on for the comfort of the hosts and the guests. The discomfort from the lack of air conditioning during cooking was more than amply compensated by the delicious food we ate for lunch at SQ's house.

Private Power and Co-generation

As the conversation turned to power problems and every one jumped in to express their anger and frustration, I asked them if they can do something about it rather than complain? My friend RD, the civic activist, joined in and got the rest of the group to acknowledge that they are indeed among the top 1% of Pakistan's elite in terms of their education, income and social status. That begged the question as to why they can not do something about a problem that affects their daily lives so profoundly? Since they all live in the same upscale neighborhood in Defense, is it possible for them to try and set up a private power plant which can fill their needs and still make surplus power available to the grid? RD mentioned that he was working with a client who has just 10MW extra power to connect the plant to the grid and sell the power to KESC, the local power utility. If there were a hundred private plants like it, each with ten surplus megawatts, it could easily add up to a thousand megawatts extra power for Karachi, closing the demand-supply gap significantly.

Meeting with Karachi's Elite

On Monday, my NGO friend RD and his wife invited me to lunch at the Sindh Club with Mr. Ardeshir Cowasjee, a popular Karachi columnist and commentator whose writings I have admired. Mr. Cowasjee has been a strong supporter of many of my friend's civic activities and written about the issues faced by Karachi-ites as their city is going through significant new development. After spending a few minutes with him, it became obvious that Mr. Cowasjee is far more articulate and effective as a writer than he is in a face-to-face one-on-one conversation. The most memorable part of the conversation was Mr. Cowasjee's mention of another Sindh club member who had complained against him for calling him a Charya. Following lunch, I was introduced to a number of people who are considered as the city elite in Karachi. Some of them were journalists and talk-show hosts on Cable TV, others were business executives, senior bureaucrats, artists and architects. I did not find my conversation with them particularly enlightening, stimulating or inspirational.

Beach Day

Tuesday was beach day when we headed out to Hawke's Bay in Karachi. One of my nephews, who works for British Petroleum, reserved a BP hut for the family to enjoy the hot summer day on the beach. When we left, my sister's home was without electricity or water, just as most of the other homes in the city. But the BP hut had the luxury of power and water. The access roads to the beach were very crowded after the pavements were badly damaged by the monsoon rains. The construction crews were out there repairing the edge of some sections of the road that had collapsed and the traffic in both directions was sharing only one side of the divided road. I saw more trucks, beautifully painted and adorned, than I have ever seen in my life, parked on both sides of the road. At the beach, the water was comfortably warm and nice and a pleasant breeze was blowing from the Arabian sea as we slowly stepped into the water, fearing the presence of jellyfish in July's warm waters. While the children enjoyed camel rides and frolicking on the sandy beach, I decided to take a walk along the beach. Later, we enjoyed a picnic style lunch and returned to the club by late afternoon using a different, less crowded route that our driver learned from other drivers.

Tuesday evening, my friend MK invited me and a number of other friends to dinner at the Club I was staying at. Several friends showed up and we had a good time talking politics, among other things. Passions ran high briefly as the topic of Musharraf's possible trial and the campaign against the Taliban came up. One of the friends showed strong emotional support for holding Musharraf to account for Lal Masjid which has become a rallying cry for many supporters of the right-wing religious parties in Pakistan. The polarization was quite obvious on the question of the performance of the current leadership in comparison with Musharraf, though almost all expressed reservations about the current leadership and the direction of the country.

The Upscale Crowd

My family and I spent most of Wednesday with FN and his family, starting with lunch at the Gymkhana Club. Karachi Gymkhana Club is one of the oldest private clubs in Karachi that was founded by the British colonial rulers and remained exclusive for them for a while. It was not until the early 1950s that a Pakistani became the president of the club. It's an old colonial style building on a large piece of prime real estate in the most expensive part of Karachi, located close to two five-star hotels and the American consulate. After a sumptuous lunch, my wife headed out for shopping with my friend's wife and their son showed me and my daughters around town, mostly the upscale area near the water front. We passed by the Creek Club, stopped at the Defense Golf Club and Resort, the Clifton beach and later stopped at the Emaar Crescent project to tour their tastefully decorated model units on display.
This part of town could be easily mistaken for resort communities in California or Florida. The first release of the Emaar Crescent project offered one, two and three bedroom world-class, beach-front luxury apartments ranging in price from $300,000 to $500,000 sold out quickly last year. The Crescent community will be a self-contained community with its own gyms, tracks, water, power, schools, parks, libraries and shopping etc. A lot of the speculators probably bought these units in the expectation of rising real estate prices to make a quick profit. But the real estate bubble burst in Karachi as it did elsewhere. The second release is now underway but the prices have not gone up as some expected, nor has this release been sold out like the last one.

Hospital Emergency Room Visit

As we prepared to attend the wedding of my cousin's daughter on Wednesday evening, my younger daughter complained of fever and stiff neck that sent alarm bells ringing in my physician wife's head. She suspected the worst, forcing us to make an emergency room visit around 10PM. The Agha Khan University Hospital emergency room is where our driver took us. FN volunteered to join us there to help us guide through the process. Fortunately for us, the hospital procedures and staff were quite comparable to what we have seen in California. Without filling out any paperwork, the triage nurse and doctor examined my daughter and quickly concluded that it is not the horrible ailment that my wife feared. But they still went ahead and ordered blood tests to confirm their conclusion. The whole thing cost under Rs. 2000, a far cry from emergency room bills in the US. The prescription drugs were even cheaper, just under Rs. 150 for a full course of antibiotics. It turned out to be a relatively quick and painless process because of the procedures, the equipment and the skilled and friendly staff at the emergency room. On our way back from the emergency room at 1AM, I stopped at a McDonald's restaurant to pick up a couple of big macs and I was astonished to see customers waiting in lines at such late hour. It seemed to me that most Karachi-ites never sleep or sleep very little.

Our Alma Maters

On Thursday, my activist friend RD's wife gave us a tour of both NED Engineering University's old campus in the city which now houses the Department of Architecture headed by Professor Noman Ahmed, and Dow Medical College now known as Dow University of Health Sciences. The visits brought back many fond memories for both of us as we walked on the hallowed grounds of our alma maters and took many pictures. Our daughters were particularly interested in seeing their parents colleges and thoroughly enjoyed the opportunity. Professor Noman Ahmed explained to us the work he is doing in restoring the old colonial NED building to preserve its grand, historical edifice, complete with its tall stone masonry chimney that has symbolized NED for generations. Their passion and commitment came through loud and clear as he and one of his female lieutenants talked about their efforts. Later in the day, I went to visit the NED University's new campus near Karachi University, about 20 miles from the downtown campus. There I had lunch with Professor MN of Electrical Engineering department. MN and I both graduated from NED in 1974 and he chose to serve his alma mater, after attending graduate school at Duke, while I decided to stay and work in the United States. MN gave me a tour of the campus and I met several students who recognized me because of PakAlumni social network which has hundreds of NEDians as members. MN talked about his successes and frustrations in his teaching career in particular, and the politics in general. MN has the distinction of being well remembered and highly regarded by many of his past students who have now become quite successful in Silicon Valley and elsewhere. By all accounts, he is indeed a very dedicated teacher and mentor of many successful NEDians. In many ways, MN shares the idealism of my other activist friend RD in Karachi, and he is an activist in his own right and fights for the causes he believes in.

We spent most of the day Friday saying goodbyes, packing up and getting ready for our departure to Beijing on Friday night.

I Am Optimistic

Overall, we had a good time in Pakistan. It offered me and my wife a great opportunity to renew contacts with many good friends and close relatives, and for my daughters to get a closer look at their parent's culture and country of origin. We immensely enjoyed the extraordinary hospitality extended to us by all of our family and friends. In spite of all their current difficulties and multiple crises they are facing, I have faith in Pakistanis' abilities to deal with their problems. I felt their pain, but I remain optimistic about Pakistan's future.

Related Links:

Karachi, Pakistan

Power Shortages in Pakistan

America's Best Run Cities

Karachi: The Urban Frontier

Garbage Collection in Karachi

Pakistan's Electricity Crisis

Emaar Bullish on Pakistan

Karachi Dreams Big

Cost of Power Outages in India

Monday, May 11, 2009

Shakti Solar Model For Pakistan

Reliable 24X7 availability of electricity is taken for granted in most of the developed world. Whenever consumers plug their favorite gadgets into the wall socket, it is assumed that the power will be there. Everyone has access to it. Electrical power outages are extremely rare.

Electricity empowers consumers by enhancing their lives through better learning and entertainment, higher productivity and income, greater comfort, increased safety, superior health, and improved economy. People in the developed world live with the benefits of electricity everyday. While most people give little thought to where electricity comes from, there are many different ways to generate electricity - including coal, oil, gas, hydroelectric, nuclear, wind and solar. It is delivered to individual homes by extensive national grid systems.

In most of the developing nations, however, the availability of electricity to majority of the population is either unreliable or non-existent. The lack of such an essential energy source results in low levels of human development, low productivity and widespread poverty in the developing world, as evident from the chart above. The governments of most developing nations, particularly in South Asia, have miserably failed in providing such a basic necessity as electricity to their people. About 40% of the people in both India and Pakistan have no access to electricity, The percentage lacking access in Bangladesh is even higher. Socially-oriented enterprises such as Grameen Shakti and D.light are offering poor communities an affordable alternative to kerosene, which is ubiquitous but hazardous. The quality of the kerosene lamp light isn't good, it emits pollutants, and it's just plain dangerous. "You travel around these villages, and everyone has a story of a child being burned or a house destroyed by fire," says Nedjip Tozun of D.light, speaking to Fortune by phone from his office in Shenzhen, China. "And yet in some places we found that people were spending 15% to 20% of their income on light." The world's poor spend about $38 billion a year on kerosene for lighting, according to the International Finance Corp.

Pakistan's current installed capacity is around 19,845 MW, of which around 20% is hydroelectric. Much of the rest is thermal, fueled primarily by gas and oil. Per capita energy consumption of the country is estimated at 14 million Btu, which is about the same as India's but only a fraction of other industrializing economies in the region such as Thailand and Malaysia, according to the US Dept of Energy 2006 report. To put it in perspective, the world average per capita energy use is about 65 million BTUs and the average American consumes 352 million BTUs.

Extended electricity load shedding in Karachi's five major industrial estates is causing losses in billions of rupees as the production activity has fallen by about 50 per cent. KESC, Karachi's power supply utility, is dealing with with a shortfall of around 700MW against a total demand of 2200MW. Almost all forms of power generation from fossil fuel-fired thermal to hydroelectric to nuclear are down from a year ago. As a result of the daily rolling blackouts, the economy, major exports and overall employment are also down and the daily wage earners are suffering. The KESC and PEPCO owe more than Rs. 10b to the independent power producers (IPPs) and paying them will help bring them into full operation and ease the crisis at least partially.

The electric power situation in India is not much better. The country is suffering its worst electricity crisis. Maharashtra, Uttar Pradesh, West Bengal and Haryana are the worst hit by the ongoing crisis and they are facing power gaps of about 5,000MW, 1,000MW, 2000MW, 1,500MW respectively. Some major cities in India are facing alarming situations; continuous load shedding in Bangalore has led to diesel shortage as people are using diesel generators to deal with the crisis. Times of India has reported student protests against power cuts affecting their studies. Textile and jute mills in West Bengal have been badly hit by unscheduled power cuts. In Tamil Nadu, severe power shortage has hit industrial production, according to MSN India. Companies said production could be down as much as 30 per cent. Sectors like textile, leather and salt appear to be among the worst hit. Industry associations put the loss in production at around Rs 4,000 crore. In Maharashtra, state officials are asking industrial consumers to lower their demand by 10% or be ready to face forced load shedding (rolling blackouts). Last year, IBN reported that New Delhi, the capital, faced 30 percent shortage in power. Maharashtra on an average had 8 to 10 hours of load shedding every day. Madhya Pradesh had 26 percent power deficit. In Gujarat, while the requirement is 5,500 Mega Units, availability is 4,780 Mega Units. Andhra Pradesh, Karnataka and Tamil Nadu are facing 2000 Mega Units of energy deficit and Bihar and Jammu and Kashmir have 1,500 and 1000 Mega Units of power shortages respectively. Cities and towns are facing 7 to 13 hours blackouts.

To empower people and communities in some of the developing nations, social entrepreneurs are stepping in to fill the large gap between supply and demand for electricity. In Bangladesh, for example, Grameen Shakti is a social enterprise selling home solar electricity systems to families that do not have access to electricity otherwise, which includes more than 70% of the country’s population. It is an enterprise that demonstrates the success of a densely networked approach involving mutually reinforcing investments in human, social, ecological and financial capital by a number of organizations.

Solar energy makes much sense for Pakistan for several reasons: firstly, majority of the population lives in 50,000 villages that are far away from the creaking old national grid, according to a report by the Solar Energy Research Center (SERC). Connecting these villages to the national grid would be very costly, thus giving each house a solar panel would be cost efficient and would empower people both economically and socially.

To draw inspiration for empowering Pakistani villagers with solar energy, Pakistanis don't have to look far. In Bangladesh, Grameen Shakti (GS) is demonstrating that it can be done. GS was founded by Bangladeshi Nobel Laureate Mohammad Yunus in 1996 as part of the Grameen Bank’s family of enterprises. Shakti is attempting to rescue the rural people from energy poverty which hampers their social and economic development. Shakti's unique program has taken the first step to break the social and economical divide between those who have energy and those who do not.

The Grameen Bank, based in Dhaka, Bangladesh, was started in 1976 and officially founded in 1983; it operates on a model of providing small loans without collateral to the rural poor in Bangladesh. Grameen Shakti is one of more than two dozen organizations within the Grameen family of enterprises that is dedicated to improving the quality of rural life in Bangladesh. Although registered as a not-for-profit organization, Grameen Shakti is run like a business. In the face of persistent market challenges, the organization achieved profitability in 2000, after only four years of operation. Grameen Shakti has installed more than 40,000 individual solar energy systems that have provided more than 100,000 lower-income individuals with access to reliable electricity.

GS’s solar program mainly targets those areas, which have no access to conventional electricity and little chance of getting connected to the grid within 5 to 10 years. It is one of its most successful programs. Currently, GS is one of the largest and fastest growing rural based renewable energy companies in the world. GS is also promoting Small Solar Home System to reach low income rural households.

Solar Home Systems(SHSs) can be used to light up homes, shops, fishing boats etc. It can also be used to charge cellular phones, run televisions, radios and cassette players. SHSs have become increasingly popular among users because they present an attractive alternative to conventional electricity such as no monthly bills, no fuel cost, very little repair, maintenance costs, easy to install any where etc.

Grameen Shakti has a micro-utility model for some very poor rural consumers who cannot afford a complete solar home system. Under this model, one entrepreneur installs the system at his own premise and share the load with some of his neighbors. Owner of the system is responsible for making installment payments to GS, more than 50% of which is covered by the rents he collects from the users of his system. Micro-utility model has become very popular in the rural market places and has helped to increase business turnover by extending business hours. More than 1000 micro-utility systems are operating in the rural market places.

GS installed SHSs have made a positive impact on the rural people. GS has introduced micro-utility model in order to reach the poorer people who cannot afford a SHS individually. Another successful GS venture is Polli Phone which allows people is off grid areas the facilities of telecommunication through SHS powered mobile phones.

Pakistani blog Pakistaniat has reported practical examples of the use of solar energy as seen in some villages of Pakistan where each house has been provided with a solar panel that’s sufficient to run an electric fan and two energy saving bulbs. Prior to this arrangement, the whole village used to go dark at night. In Narian Khorian, a village about 50 kilometers from Islamabad, 100 solar panels have been installed by a local firm, free of cost, to promote the use of solar energy. With these panels, the residents of 100 households are enjoying light and fan facilities. This would not have happened for decades as the supply of electricity from the national grid would be difficult and costly due to the mountainous terrain.

Dawn newspaper recently reported that the Alternative Energy Development Board is planning electrification of 6968 remote villages through solar photovoltaic (PV) systems in the next 20 years. All the renewable energy projects, being undertaken by AEDB in the country, are financed by federal government through public sector development program (PSDP) allocation and funding from international multi-lateral institutions.

Among private non-government initiatives, a number of community-based micro hydro projects are being executed with the help of the Agha Khan Foundation in Pakistan's Northern Areas and NWFP. Within this region, out of a total of 137 micro-hydro plants, the AKRSP has established 28 micro-hydros with an installed capacity of 619kW. Initially, in 1986, these plants started as research and demonstration units. These projects were extended to Village Organizations (VOs) and became participatory projects. A Village Organization (VO) is a body of villagers who have organized themselves around a common interest.

Shakti Solar offers a very good model for organizing and funding a larger, nation-wide effort to empower Pakistanis with electrical energy to improve their lives.

Last February, I wrote an article "Solar Energy For Sunny Pakistan" suggesting that Pakistanis should seriously pursue the solar energy option. Many of the comments on the post were quite skeptical, some even cynical. But one particular response elated me. It was posted by someone with initials SK, who wrote as follows: "I am a consultant for the World Bank and I work on energy and infrastructure development issues. I am in the process of leaving and starting a non-profit organization to replicate the Grameen Shakti solar pv model in Pakistan because it is the only project I ever reviewed that seemed to make a bit of difference in actually alleviating poverty".

I do hope SK is out there now trying to light up a few homes in Pakistan to empower people. I wish SK, and others like him, great success as social entrepreneurs in Pakistan. It is indeed better to light candles than to curse darkness.

Here is a video on Grameen Shakti Solar:




Related Links:

Energy Shortage

Electric Power Crisis Worsens in Pakistan

Light a Candle, Don't Curse Darkness

Social Entrepreneurs Target India and Pakistan

Solar Energy For Sunny Pakistan

UN Millennium Goals in Pakistani Village

Tuesday, March 24, 2009

China Signs Power Plant Deals With Pakistan


China has agreed to build several power plants in Pakistan to help the South Asian nation deal with its worsening electricity crisis. When completed over the next several years, these plants, including Nandipur (425 MW, Thermal), Guddu(800 MW, Thermal) and Neelam-Jhelum(1000 MW, Hydro), Chashma (1200 MW, Nuclear) will add more than 3000 MW of power generating capacity for the energy-hungry country. Pakistan is currently facing a deficit of 4,000 to 5,000 megawatts, resulting in extensive load-shedding (rolling blackouts) of several hours a day.

China has already installed a 325-megawatt nuclear power plant (C1) at Chashma and is currently working on another (C2) of the same capacity that is expected to be online by 2010. The agreements for C3 and C4 have also been signed. The United States has objected to China supplying C3 and C4 on the grounds that any Pak-China nuclear cooperation would require consensus approval by the NSG, of which China is now a member, for any exception to the guidelines. The US is applying double standards since it supported and got approval for such an exception from NSG for its own nuclear deal with India.

Under another agreement, China has agreed to invest about $600 million for setting up an integrated coal mining-cum-power project in Sindh. The project will produce 180 million tons of coal per year, which is sufficient to fuel the proposed 405 MW power plant. Pakistan is currently world's seventh largest coal-producing country, with coal reserves of more than 185 billion tons (second in the world after U.S.A.'s 247 billion tons). Almost all (99 percent) of Pakistan's coal reserves are found in the province of Sindh. Pakistan's largest coal field is Thar coal field which is spread over an area of 9100 square kilometers, and contains 175 billion tons of coal. So far this coal field has not been developed but efforts are underway.

The Export-Import Bank of China will lead the multi-national bank financing and China Export and Credit Insurance Corporation (Sinosure) will provide political risk and credit default insurance for the first 425 MW project at Nanipur, Gujranwala estimated to cost $329m, according to Associated Press of Pakistan. Other participating banks include BNP-Paribas, HSBC Bank plc, and CIC France. The lead contractor is China's Dongfang Electric Corporation Limited, with G.E. France as a sub-contractor.



Political risk has been rising in many developing nations, including the South Asian nations of Bangladesh, India, Pakistan and Sri Lanka (see 2008 political risk map). The cost of insurance against political and economic risk has also been going up, as the global economic crisis unfolds. Hong Kong-based Political & Economic Risk Consultancy Ltd. has recently rated India as the riskiest of 14 Asian countries, not including Pakistan and Afghanistan, it analyzed for 2009.

With their national coffers bulging and their exports driven economy slowing, the Chinese see opportunity in the developing world where others see political and economic risks. It is an opportunity for China to assure the continuing availability of raw materials and oil for its growing industries and to diversify its export markets. In addition to helping bail out the ailing US economy, China is using some of its vast cash reserves of $2 trillion to offer supplier financing as well as insurance for the non-Chinese partners to cover political and credit risk in the emerging markets. With bilateral trade volume of about $7 billion, Pakistan is only one example of Chinese interest. Others include politically-risky Afghanistan, and many nations of Sub-Saharan Africa where the Chinese are financing and building major infrastructure projects. In Afghanistan, China has committed nearly $2.9 billion to develop the Aynak copper field, including the infrastructure that must be built with it such as a power station to run the operation and a railroad to haul the tons of copper it hopes to extract. The Aynak project is the biggest foreign investment in Afghanistan to date, according to Reuters. The trade between Africa and China has grown an average of 30% in the past decade, topping $106 billion last year.

Looking at how the Chinese are working with many developing nations in Asia and Africa, it appears to be an unwritten Chinese policy to offer trade and investment in projects rather than direct cash aid. Given the rampant government corruption in many developing nations, including Pakistan, the Chinese policy is a sound one. It attempts to benefit the people and the nation more than the corrupt politicians and government officials who they must deal with.

In terms of Chinese dominance in power infrastructure development, one only needs to look at the heavy Chinese presence in the Indian power sector development. According to the Wall Street Journal, Chinese companies are now supplying equipment for about 25% of the new power capacity India is adding to its grid, up from almost nothing a few years ago. They have sent thousands of skilled workers to Indian plant sites, some of which boast Chinese chefs, Chinese television and ping pong.

Clearly, the Chinese objectives are not entirely altruistic. Their strategy is driven by enlightened self-interest in the developing world, which they see as source of commodities that their industries need as well as growing export market for their products and services. But the Chinese want to do good and do well at the same time by helping to lift people out of poverty in the developing world. By doing so, they want to be seen as friends and partners by the people in Asia, Africa and Latin America. The strategy enhances China's status as the new superpower that takes its global leadership role seriously.

Related Links:

Chinese Do Good and Do well in Developing World

World's Largest Solar Deals

Pakistan Inks Neelum-Jhelum Deal

Political Risk Insurance

Political and Economic Risk Consultancy

Pakistan's Electricity Crisis

Forget Chinindia! It's Chimerica to the Rescue!

Sunday, February 15, 2009

Pakistan's Textile Industry Woes


Pakistan has a diverse economy that includes textiles, chemicals, leather products, food processing, financial services, telecommunications, retail, automobile manufacturing, light and heavy armaments, agriculture and other industries. It is the 45th largest economy in the world in terms of official exchange rates ($144b) and 25th largest based on purchasing power parity ($410b PPP). Its service sector accounts for more than half of its GDP.

Pakistan’s textile industry is a major contributor to the national economy in terms of exports and employment. Pakistan holds the distinction of being the world’s 4th largest producer of cotton as well as being the 3rd largest consumer of the same. In the period July 2007 - June 2008, textile exports were US$ 10.62 Billion and accounted for 55% of the total exports.

As the economies in the US and Europe slow down, Pakistan's key exports of textiles and leather products are experiencing a slowdown in growth as well. According to APTMA, textile exports have declined by about 20 percent in 2008. The industry is bracing for more trouble ahead with continuing crises of electricity and gas, international market access, global economic slow-down,and adverse travel advisories.

According to Pakistan textile industry association, 90 percent of Pakistan's textile industry is losing money losses and facing closure. More than two months of production has been lost due to power cuts and gas shortages.

APTMA, Pakistan's textile industry Association established for the promotion and protection of the textile industry, says that the high cost of finance because of the nation's tight monetary policy has added to their continuing woes.

In order to pave the way for the IMF bailout, Pakistan's central bank raised its bank lending rate in early November by 2 percentage points to 15 percent. Since 2004 interest rates have risen dramatically. Kibor (Karachi Inter-Bank Offered Rate) has surged 261 percent. Likewise, the bank spread, on a weighted average basis, rose from 2 percent to an excessive 7.75 percent. This size of bank spread is among the highest in the world. These high rates were allowed as a policy to restrict money supply to satisfy the IMF conditions.

Federal Textile Adviser Dr Mirza Ikhtiar Baig told the News that Pakistan has a very low share of the international textile market. China tops the US market with a share of 36 per cent followed by Bangladesh 21 per cent, India 18 per cent, Morocco 19 per cent and Pakistan 13 per cent. South Korea has lost 20 per cent of the US market.

In the European market, China tops again with a share of 29 per cent, Vietnam 28 per cent, India 19 per cent and Pakistan only 1.5 per cent while the Philippines had lost 11 per cent of the market.

European buyers have told Baig that Pakistani garment manufacturers could cut their cost up to 45 per cent in sewing by improving efficiency.

“Labor productivity is very low,” said Baig. “Our regional competitors take 75 minutes to complete and produce one piece of cloth whereas we take 133 minutes for the same work. We also waste 30 per cent in finishing and 12 per cent in washing.”

According to a study of Pakistani textile and apparel sector conducted by Werner International, management consultants to the world textile, apparel & fashion industry, some of the garment units were over-staffed by 57 per cent. That was an internal negative factor whereas external factors included no duty-free market access to the EU and negative image and perception of Pakistan abroad.

Baig has asked Werner to submit a proposal for presenting a better image of the textile industry to global brands for achieving collaboration with them. In response, Werner is working on a three-year plan to help Pakistan garment manufacturers.

While Pakistan clearly needs to diversify and increase higher-value-added exports such as sophisticated machinery and high technology products and services, it is essential for it to maintain and enhance the current export levels of textiles, leather and other products for which there is an established export market. The export-oriented industries should get preferential treatment in getting access to necessary inputs of raw materials, financing and energy by government policies. Energy and communications infrastructure, in particular, need much greater focus to enable Pakistani exporters to continue to earn the much-needed hard currency.

Related Links:

Haq's Musings

Pakistan Textile Industry Report