Monday, April 19, 2021

Income Inequality: Elite Capture in Pakistan

A recent United Nations report on inequality reveals that the richest 1% in Pakistan take 9% of the national income.  A quick comparison with other South Asian nations shows that 9% income share for the top 1% in Pakistan is lower than 15.8% in Bangladesh and 21.4% in India. These inequalities result mainly from a phenomenon known as "elite capture" that allows a privileged few to take away a disproportionately large slice of public resources such as public funds and land for their benefit. 

Share of Income of Richest 1% in South Asia


Elite Capture:

Elite capture, a global phenomenon,  is a form of corruption. It describes how public resources are exploited by a few privileged individuals and groups to the detriment of the larger population. 

A recently published report by the United Nations Development Program (UNDP) has found that the elite capture in Pakistan adds up to an estimated $17.4 billion - roughly 6% of the country's economy. 

Pakistan's most privileged groups include the corporate sector, feudal landlords, politicians and the  military. UN Development Program's NHDR for Pakistan, released last week, focused on issues of inequality in the country of 220 million people. 

Ms. Kanni Wignaraja, assistant secretary-general and regional chief of the UNDP, told Aljazeera that Pakistani leaders have taken the findings of the report “right on” and pledged to focus on prescriptive action. “My hope is that there is strong intent to review things like the current tax and subsidy policies, to look at land and capital access", she added. 

Inequality in Pakistan. Source: UNDP

Income Inequality:

The richest 1% of Pakistanis take 9% of the national income, according to the UNDP report titled "The three Ps of inequality: Power, People, and Policy". It was released on April 6, 2021. Comparison of income inequality in South Asia reveals that the richest 1% in Bangladesh and India claim 15.8% and 21.4% of national income respectively.

In addition to income inequality, the UNDP report describes the inequality of opportunity in terms of access to services, work with dignity and accessibility. It is based on exhaustive statistical analysis at national and provincial levels, and includes new inequality indices for child development, youth, labor and gender. Qualitative research, through focus groups with marginalized communities, has also been undertaken, and the NHDR 2020 Inequality Perception Survey conducted. The NHDR 2020 has been guided by a diverse panel of Advisory Council members, including policy makers, development practitioners, academics, and UN representatives.

Savings, Investments and Exports:

It is generally accepted that the rich save a much bigger portion of income than the middle class and the poor. The effect is strongest among those in the top quintile of the lifetime earnings distribution—they have substantially greater wealth relative to their earnings than those in the bottom 80% of the distribution, according to published research. 

Lower inequality in Pakistan is reflected in its abysmal domestic savings and investment rate of around 10% of GDP. It shows in Pakistan's lower economic growth rate compared to Bangladesh and India. The distribution of national income in a country is a key socioeconomic variable with broad economic and societal implications. Income inequality and wealth inequality are related because the flow of income determines savings and investments, which in turn determine GDP growth and accumulation of wealth. An economic model offered by Galor and Zeira finds that the effect of rising inequality on GDP per capita is negative in relatively rich countries but positive in poor countries like Pakistan.

Investment as Percentage of GDP Source: State Bank of Pakistan 


While Pakistan's per capita income more than doubled from $500 to $1,000 in the ten years 2000 to 2010, the growth has slowed to less than 30% from 2010 to 2020. Faster GDP growth in the decade of 2000-2010 was partly the result of significant increase in Pakistan's savings and investment rates. Meanwhile, rising worker remittances from overseas Pakistanis have been boosting Pakistan national savings rate and helping reduce current account deficits. 
 
Savings Rate in Pakistan. Source: Dawn


Pakistan's exports doubled from $10 billion to $20 billion in years 2000-2010. In the last decade 2010-2020, the nation's exports have grown only about 25% to $25 billion. Exports have declined in terms of percentage of the country's GDP from 13% to 10% in the most recent decade. 

Pakistan FDI inflows have significantly lagged behind those of the rest of South Asia.

FDI Inflows in Pakistan. Source: World Bank

Pakistan saw rapid economic growth in the 1960s in spite of low domestic savings rate. This can be explained by foreign development aid of as much as 10% of GDP that Pakistan received in that decade. . 

Foreign Aid to Pakistan as Percent of GDP Source: World Bank

Summary:

The richest 1% of Pakistanis take away 9% of the national income. Inequality in Pakistan has many dimensions beyond income. The rich enjoy greater access to education, healthcare, financial services, employment and business opportunities. Corporations, feudal landowners, politicians and the military are the most privileged groups with the best opportunities to own businesses, financial assets, farmland and real estate. They capture an estimated $17.4 billion - roughly 6% of the country's economy. Ms. Kanni Wignaraja, assistant secretary-general and regional chief of the UNDP, told Aljazeera that Pakistani leaders have taken the findings of the report “right on” and pledged to focus on prescriptive action. “My hope is that there is strong intent to review things like the current tax and subsidy policies, to look at land and capital access", she added. The policymakers in Pakistan should consider the negative economic implications of any such moves, particularly on savings and investments in the country.  




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Wednesday, April 14, 2021

2010-2020: Pakistan's Lost Decade

Until 2010, Bangladesh was a laggard in South Asia region. Its per capita income was about half of Pakistan's. Now Bangladesh has surpassed Pakistan as the Pakistani economy has suffered significant slow-down from the previous decade. In fact, the Pakistan economy grew at the slowest rate in South Asia as reflected in per capita incomes. However, the income inequality in Pakistan continues to be the lowest in South Asia. 

Per Capita Income Growth in Pakistan Lags in South Asia. Source: World Bank

Lower income inequality in Pakistan is reflected in its abysmal domestic savings and investment rate of around 10% of GDP. It shows in Pakistan's lower economic growth rate compared to Bangladesh and India. The distribution of national income in a country is a key socioeconomic variable with broad economic and societal implications. Income inequality and wealth inequality are related because the flow of income determines savings and investments, which in turn determine GDP growth and accumulation of wealth. An economic model offered by Galor and Zeira predicts that the effect of rising inequality on GDP per capita is negative in relatively rich countries but positive in poor countries like Pakistan.

Source: The Economist


Investment as Percentage of GDP Source: State Bank of Pakistan 

US Aid to Pakistan 2001-2020


While Pakistan's per capita income more than doubled from $500 to $1,000 in the ten years 2000 to 2010, the growth has slowed to less than 30% from 2010 to 2020. Faster GDP growth in the decade of 2000-2010 was partly the result of significant increase in Pakistan's savings and investment rates.  Meanwhile, rising worker remittances from overseas Pakistanis have been boosting Pakistan national savings rate and helping reduce current account deficits. 

Savings Rate in Pakistan. Source: Dawn

Pakistan also saw rapid economic growth in the 1960s in spite of low domestic savings rate. This can be explained by foreign development aid of as much as 10% of GDP that Pakistan received in that decade.


Foreign Aid to Pakistan as Percent of GDP Source: World Bank


Pakistan's exports doubled from $10 billion to $20 billion in years 2000-2010. In the last decade 2010-2020, the nation's exports have grown only about 25% to $25 billion. Exports have declined in terms of percentage of the country's GDP from 13% to 10% in the most recent decade. . 

Pakistan Exports Since Year 2000. Source: World Bank


Return on money invested in Pakistani stock market has also been cut in half in 2010-2020 when compared with the return in 2000-2010.  Shares of companies making up the Karachi Stock Exchange 100 index have returned 8% in US$ terms in 2010-2020, less than half of the 20% during 2000-2010 period. KSE100 still managed to achieve 14% return over the 20-year period from 2001 to 2021, among the highest in the world. 


Stock Market Returns. Source: Tundra 


Foreign direct investment (FDI) in Pakistan ramped up in 2000-2010, reaching the peak of $5.6 billion (3.67% of GDP) in 2007. FDI inflow has since suffered a steep decline.

Foreign Direct Investment in Pakistan. Source: World Bank

Pakistan FDI inflows have significantly lagged behind those of the rest of South Asia.

FDI Inflows in Pakistan. Source: World Bank

Pakistan's manufacturing output tripled from $7 billion in 2000 to $21 billion in 2010. Then it rose just 60% to $34 billion in 2019. The nation's industrial output declined as percentage of GDP from 14% to 12% in the last decade, according to the data from UNIDO, the United Nations Industrial Development Organization. 

Pakistan's Manufacturing Output Trend Since 2000. Source: World Bank


Pakistan's literacy rate has been flat at about 59% in the last decade (2010-2019) after substantial rise from 45% to 55% in the decade of 2000-2010. 


Pakistan Literacy Rate. Source: World Bank

The net primary enrollment rate in Pakistan jumped from 55% in 2000 to 65% in 2010. The progress on this metric slowed as it increased just two percentage points to 67% in 2019. 


Net Primary Enrollment Rate in Pakistan. Source: World Bank


Pakistan has seen a major decline in the rate of human development growth in the country over the last decade. Pakistan saw HDI (Human Development Index) average annual growth of 1.4% in 2000-2009 and 0.80% in 2010-2019, according to Human Development Indices and Indicators 2018 Statistical Update.  The fastest growth in Pakistan human development was seen in 2000-2010, a decade dominated by President Musharraf's rule, according to the latest Human Development Report 2018.

Pakistan Human Development Index Growth Rate. Source: Human Development Report 2020


Bangladesh surpassing Pakistan in socioeconomic indicators has brought into sharp focus the contrast between Pakistan's decades of 2000-2010 and 2010-2020.What changed? The biggest change is Bangladeshi leader Shaikh Hasina's decision to stifle the unruly Opposition and the media to bring political and economic stability to the South Asian nation of 160 million people. It has eliminated a constant sense of crisis and assured investors and businesses of continuity of government policies. With development taking precedence over democracy, Shaikh Hasina followed the example of Asian Tigers  by focusing on export-led economic growth of her country. She incentivized the export-oriented garment industry and invested in human development. Bangladesh now outperforms India and Pakistan in a whole range of socioeconomic indicators: exports, economic growth, infant mortality rate, primary school enrollment, fertility rate and life expectancy.       

South Asian Countries' Export Growth. Source: Wall Street Journal

Bangladesh's garment exports have helped its economy outshine India's and Pakistan's in the last decade. Impressed by Bangladesh's progress, the United Nations’ Committee for Development Policy has recommended that the country be upgraded from least developed category that it has held the last 50 years. 

The next challenge for Bangladesh is to move toward higher-value add manufacturing and exports, as Vietnam has done. Its export industry is still overwhelmingly focused on garment manufacturing. The country’s economic complexity, ranked by Harvard University’s Growth Lab, is 108 out of the 133 countries measured. That is actually lower than it was in 1995, according to the Wall Street Journal. 

Pakistan Growth By Decades. Source: National Trade and Transport Facility


Vietnam ruled by autocrats is rapidly becoming an Asian Tiger. With rising manufacturing costs in China and the US-China trade war,  many major manufacturers are relocating to other countries in Asia. This situation has helped Vietnam emerge as a hub of foreign direct investment (FDI). FDI flow into the country has averaged more than 6% of GDP, the highest of any emerging economy. The country’s recent economic data shows a rise of 18% in exports, with a 26% jump in computers/components exports and a 63% jump in machinery/accessories exports.  These figures have earned Vietnam the moniker of the newest "Asian Tiger".

Musharraf Years & History of Pakistan's GDP Growth Rates. Source: PBS 


It was in 2007 that Pakistan caught the "democracy" fever led by the lawless lawyers of Lahore. This led to the return of corrupt dynastic rule of Asif Zardari and then Nawaz Sharif. The year 2007 also marked the beginning of yet another lost decade that saw Pakistan's per capita gdp's continuing lag behind South Asia region and other emerging economies. 


Pakistan was the original "Asian Tiger" back in the 1960s when  other developing Asian economies sought to emulate its development model. It became an export powerhouse in the 1960s when the country's manufactured exports exceeded those of Thailand, Malaysia and Indonesia combined.  The creation of major industrial estates in Karachi under President Ayub Khan's industrial policy incentivized industrial production and exports of value added manufactured products such as textiles. Now the country's industrial output lags its neighbors'. 

History of Pakistan's Manufactured Exports


With Chinese looking to relocate some of their industrial production to low-cost countries, Pakistan has a golden opportunity to grow its industrial output and exports again. Here's Karen Chen explaining why:

“Vietnam is too crowded already and moved into automobiles and electronics. There is no space for investment in Vietnam. Myanmar doesn’t have infrastructure. India is terrible. In Bangladesh you don’t have right conditions for setting up fabric units. So Pakistan is the ideal location for such garment manufacturing because of abundance of cheaper labour. The investment and tax policies for SEZs and new projects are also good. We’ve confidence to be at here.”

Seizing the opportunity to attract export-oriented investors will help Pakistan become the next Asian Asian Tiger economy. It will help the country avoid recurring balance-of-payments crises that have forced the nation to seek IMF bailouts with all their tough conditions. Focusing on "Plug and Play" Special Economic Zones (SEZs) is going to be essential to achieve this objective.

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Sunday, April 11, 2021

Cultural Psychologist Michele Gelfand on American and Pakistani Stereotypes

Americans see Pakistanis as "aggressive and violent" while Pakistanis say Americans are "loose, immoral and arrogant", according to research study findings of American cultural psychologist Michele Gelfand. She told an interviewer that the American media portrayed Pakistanis as "big bad wolf".  Gelfand is a distinguished professor at the University of Maryland. She studies why different cultures accept different levels of rule-making. 

Cultural Psychologist Michele Gelfand, Author of Rule Makers, Rule Breakers


In an interview with Kara Swisher of Recode, Gelfand said Americans and Pakistanis usually "meet in the media". In other words, their perceptions of each other are based on media stereotyping of the two nations. "Pakistanis think Americans are half naked all the time. They don’t just think we’re loose, they think we’re exceedingly loose", she said.  Gelfand found that Americans "don’t think about Pakistanis as playing sports or reading poetry. They think about them as excessively tight". Here's an excerpt of Gelfand's book titled "Rule Makers, Rule Breakers": 

"My research similarly shows that creating spaces for empathy can prove invaluable for combating intergroup hostility. In 2015, my research assistants and I interviewed Americans and Pakistanis on their views of each other’s culture. We found that both groups held highly negative beliefs and stereotypes about the other. Pakistanis didn’t just see Americans as loose, but as immoral and arrogant. Americans saw Pakistanis as overly constrained, but also aggressive and violent. As impressions are often formed through the media, which thrives on caricature, such extreme stereotyping is perhaps not surprising. What’s more, we tend to live in our own echo chambers. Even on Twitter and Facebook, we communicate with those we know and those who share our views, rather than engaging with people from other cultures. In our study, we wondered if we could lessen intergroup intergroup hostility by giving each group a more realistic window into each other’s lives. We didn’t have the budget to fly Pakistanis to the United States or vice versa. But what if Americans were able to read the actual daily diaries of Pakistanis, and Pakistanis were able to read the diaries of Americans, over the course of a week? Would this exposure to one another’s day-to-day lives change their attitudes? To find out, my collaborator Joshua Jackson and I had American and Pakistani students write about their everyday experiences for one week. We then gave a new group of participants, including a hundred American and a hundred Pakistani students, a set of these diary entries to read over the course of a week. The results of this low-cost intervention were striking: As compared with participants who read diary entries from members of their own culture, participants who read diary entries written by members of the other culture viewed the two cultures as being much more similar. What’s more, Pakistani participants who read Americans’ diaries viewed Americans as more moral and as having less of a sense of superiority over other cultures. And, by the end of this intervention, our American participants who read diaries written by Pakistanis viewed Pakistanis as less violent and more fun-loving. “I don’t know many Pakistanis personally, but the diary entries helped me learn about the everyday life of someone in Pakistan,” one American participant wrote at the study’s end. “I think that they tend to be a bit more religious than the people in America, but have similar life patterns and personalities to us.” Likewise, a Pakistani participant remarked, “Americans may be different than us in moral, ethical, or religious values, but the lives of students in America are very similar to the life of a student here . . . They are law-abiding citizens, which is one of the reasons the system in America is working smoothly.” As these quotes show, interventions that improve our understanding of people from other cultures hold tremendous promise for defusing stereotypes, heading off conflict, and resolving intercultural disputes. Every day, citizens are finding meaningful ways to interact with people far outside their own social circles. In 2017, the Washington Post reported that, in a Dairy Queen in Dallas, Texas, two American-born men decided to have a sit-down over burgers and fries to untangle their mutual suspicion. On one end, there was David Wright, a white man who had founded a militia called the Bureau of American Islamic Relations (BAIR) with the mission of rooting out Islamic terrorists in Texas. At the other end was Ali Ghouri, a member of a local mosque where Wright and his coalition had protested twice with weapons and signs reading “Stop the Islamization of America.” Against the advice of other members of his mosque, Ghouri confronted the protesters, saying, “I have a weapon. You have a weapon. I’m not scared of you.” Five months later, Wright and Ghouri met at the Dairy Queen. Each man brought a friend—and a gun". 

The study by Michele Gelfand and Joshua Conrad Jackson, a PhD students at the University of North Carolina, started with 10 Americans and 10 Pakistanis — who were about 24 years old on average — submitting diaries over a one-week period. Gelfand and Jackson then recruited 100 Pakistanis and 100 Americans — who were about 21 years old on average — to read a Pakistani or American diary every day for one week, telling the participants the diaries were for a social memory study. Before and after reading the diaries, the participants rated how much they believe a particular stereotype about the opposite culture. If a participant read a diary from their own culture, they rarely changed their attitudes about the other culture. But when participants read diaries from the opposite culture, researchers found they felt less prejudice toward it — results Gelfand called “amazing.” “They tended to see each other as more human, as more similar,” Gelfand said. “They still saw each other as different, but they really, really changed the way that they viewed each other.” 

Gelfand and Jackson's diary reading intervention helped both Pakistanis and Americans have a better understanding of each other. Here's how she describes it in her book "Rules Makers, Rules Breakers": "Pakistani participants who read Americans’ diaries viewed Americans as more moral and as having less of a sense of superiority over other cultures. And, by the end of this intervention, our American participants who read diaries written by Pakistanis viewed Pakistanis as less violent and more fun-loving". 

Here's a video clip of CNN analyst Van Jones talking about Pakistani-Americans:

https://www.youtube.com/watch?v=gr5cLv8Dj2I





Related Links:

Haq's Musings

South Asia Investor Review

Hindus and Muslim Well-educated in America But Least Educated Worldwide

What's Driving Islamophobia in America?

Pakistani-Americans Largest Foreign-Born Muslim Group in Silicon Valley

The Trump Phenomenon

Islamophobia in America

Silicon Valley Pakistani-Americans

Pakistani-American Leads Silicon Valley's Top Incubator

Silicon Valley Pakistanis Enabling 2nd Machine Revolution

Karachi-born Triple Oscar Winning Graphics Artist

Pakistani-American Ashar Aziz's Fire-eye Goes Public

Two Pakistani-American Silicon Valley Techs Among Top 5 VC Deals

Pakistani-American's Game-Changing Vision 

Minorities Are Majority in Silicon Valley 


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Friday, April 9, 2021

Pakistani Academics Win Google Research Award For AI Paper on Machine Perception

Dr. Mohsen Ali and Dr. Izza Aftab have won Google Research Scholar Award 2021, according to an announcement on Google AI Blog. Dr. Ali is an assistant professor of computer science at the Information Technology University (ITU) in Lahore, Pakistan while Dr. Aftab is an assistant professor of economics at the same university. 

Google Research Award Recipients Professors Izza Aftab & Mohsen Ali. Source: Izza Aftab


The Google Award is for a joint paper authored by the two Pakistani professors. It is entitled "Is Economics From Afar Domain Generalizable?". This research deals with the challenges of assessing economic indicators through machine learning. The paper shows how such indicators for a region can be developed from satellite imagery and geo-spatial datasets as an alternative to the on-site collection of administrative data that is done annually or biennially. This data helps design policy interventions, and paints a geo-spatial picture of economic well-being in developing countries like Pakistan. The findings from this project can aid governments and businesses.        

"Economics From Afar". Source: Dr. Mohsen Ali

Dr. Izza Aftab's interests include theory and modeling of firm level innovation in developing countries, the Economics of climate change, and role of Big Data in informing Public Policy. Dr. Mohsen Ali's research interests include solving theoretical and practical problems entailing Computer Vision, Artificial Intelligence (AI) and Machine Learning, specifically on the problems related to image co-segmentation, remote sensing, medical imaging and affective computing, according to ITU website.

 Google introduced the Research Scholar Program in March 2020. It is "an effort focused on developing collaborations with new professors and encouraging the formation of long-term relationships with the academic community", according to Google AI Blog. In response to a call to compete for the research award, Google received research papers from faculty who are working on cutting edge research across many research areas in computer science, including machine learning, human-computer interaction, health research, systems and more. Participants represented 50 universities in 15 countries, mainly in America and Europe but a few from Asia as well.   

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Thursday, April 8, 2021

Pakistan State Bank Governor on Fintech, Digital Currency and Stripe

State Bank of Pakistan is studying the issuance of central bank digital currency (CBDC), according to the country's central bank chief Dr. Reza Baqir. Recognizing Pakistan's growth potential, the San Francisco-based Stripe, valued at $95 billion, has recently invested in Safepay, a fintech startup in Karachi, Pakistan. Dr. Baqir spoke of both of these developments in an interview with CNN's Julia Chatterly. 

Central Bank Digital Currency (CBDC):

China's central bank is testing its digital currency in several major Chinese cities. The chairman of the US Federal Reserve has recently confirmed that the US Central Bank is working on digital dollar. The State Bank of Pakistan announced in 2019 that it was developing a digital currency. It seems that the popularity of Bitcoin has triggered serious worries of loss of control of the official financial systems among the central bankers around the world. China's substantial lead in digital currency could put it far ahead of the US in the future of global payments and financial settlement. It could eventually displace the US dollar and provide China with the immense global financial power that the US currently enjoys. 

Dr. Reza Baqir has recently confirmed to CNN what a top official of the State Bank of Pakistan, the nation's central bank, announced in April 2019: the institution aims to issue a digital currency (Central Bank Digital Currency or CBDC) by 2025.  Speaking at the launch of regulations of Electronic Money Institutions (EMIs), central bank officials said in 2019 that EMIs will be non-bank entities to be licensed by the central bank to issue e-money for the purpose of digital payments. Pakistan's finance minister Asad Umar and the central bankers said they are targeting Pakistan's economy to go fully digital by 2030. Here's what Governor Reza Baqir told CNN's Julia Chatterly:

“The benefit for us is twofold: Not only does [potential CBDC issuance] give another boost to our efforts for financial inclusion but, second, if the central bank issues a digital currency, it allows us to make further progress in our fight towards Anti-Money Laundering, towards countering terrorism financing. So, we are at a stage where we are studying it. We hope to be able to make an announcement on that in the coming months.” 

More recently, the State Bank of Pakistan launched Raast, a digital payment system.  It is essentially a pipe that is intended to connect government and financial institutions with consumers and merchants with each other to process payments instantly at very low cost. Raast will be boosted by Pakistan government's decision to use it to pay salaries, pensions and pay welfare recipients under Benazir Income Support and Ehsaas Emergency Cash programs. 

Stripe's Entry in Pakistan:

Stripe, a San Francisco fintech firm valued $95 billion, announced last month that it is entering the Pakistan market with an investment in Karachi-based Pakistani startup Safepay. Founders Ziyad Parekh and Raza Naqvi told Rest of World that they were taken aback by the interest from fellow Y Combinator alumni Stripe. “We were not expecting it and were really intrigued, as they have been a huge inspiration for us,” said Naqvi.“They (Stripe’s founders) understand that partnering up with people who are ambitious and want to tackle a problem is a much better way to enter a market than kind of going in there without any context,” he added. “At a founder-to-founder level, we spoke, and they understood what our vision was.”  

The State Bank of Pakistan recently launched Raast, a digital payment infrastructure that represents a great leap forward for the use of financial technology (FinTech) and financial inclusion in the  country.  It will also promote e-commerce in Pakistan. Undocumented economy poses a serious threat to the country because it creates opportunities for criminal activities and tax evasion.  Raast is part of the government's effort to modernize payment systems and document the nation's cash-based informal economy. 

Pakistan's Potential:

Pakistan is the world's 5th largest population with young demographics offering tremendous growth opportunity. Broadband subscriptions in the country have soared from 2 million in 2012 to 100 million now, according to the nation's telecommunications regulator. Ookla, recognized globally for its broadband speed testing, reports that Pakistan's average broadband download speed is 11.35 Mbps, while its upload speed stands at 10.7 Mbps. Thousands of kilometers of new fiber optic cable is being installed and mobile data usage in Pakistan has recently surged to 8,000 petabytes. Smartphone sales are also swelling. All signs are pointing to Digital Pakistan becoming reality in the near future. 

Pakistan's economy is overwhelmingly cash-based. More than half the population is unbanked. It offers a great untapped market for financial technology firms. Pakistan is also promoting digital payments to enhance financial inclusion and document the economy. Eliminating  interbank digital transaction fees during the covid pandemic has resulted in 100%-200% jump in such transactions.  

Summary:

Speaking with CNN"s Julia Chatterly, the State Bank of Pakistan Governor Reza Baqar said the Pakistani government is currently studying the idea of issuing central bank digital currency (CBDC). China is showing Pakistan the way with its CBDC. There will be an announcement on the country's CBDC in the next several months. Because CBDC is issued by the central bank, it can help the country fight crime and corruption. Pakistan is also promoting digital payments to enhance financial inclusion and document the economy. Eliminating digital payment fees during the covid pandemic has resulted in 100%-200% jump in such transactions. He said fintech companies and digital payment processors like Stripe are welcome to operate in Pakistan. It has the world's 5th largest population with young demographics offering tremendous growth opportunity.


Here's a brief video of Dr. Reza Baqir's CNN interview with Julia Chatterly:

https://youtu.be/BZ8MAi-_Qb4
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Tuesday, April 6, 2021

Digital Pakistan: Broadband Subscriptions Soar to 100 Million

Broadband subscriptions in Pakistan have soared from 2 million in 2012 to 100 million now, according to the country's telecommunications regulator. Ookla, recognized globally for its broadband speed testing, reports that Pakistan's average broadband download speed is 11.35 Mbps, while its upload speed stands at 10.7 Mbps. Thousands of kilometers of new fiber optic cable is being installed and mobile data usage in Pakistan has recently surged to 8,000 petabytes. Smartphone sales are also swelling. All signs are pointing to Digital Pakistan becoming reality in the near future. 

Broadband Subscriptions Growth in Pakistan. Source: PTA


Pakistan Telecommunications Authority (PTA),  the nation's regulator, said in a statement that 87% of the population has access to the internet at the lowest rates. PTA claims the average download speed is 17.7 Mbps, and the upload speed is 11.3 Mbps, higher than the speeds measured by Ookla recently. Ookla found that mobile download speed in Pakistan is 40% faster than in India. It reported that download speed in Pakistan has grown 24% over last year, while the speed in India grew 12% in the same period. 

Broadband Subscriptions Growth in Pakistan. Source: PTA Via Monis Rahman


Rising broadband subscriptions have triggered a significant increase in Internet data, particularly with the spike in Internet traffic caused by the COVID19 pandemic related lockdowns. Mobile data usage in Pakistan has recently soared to 8,000 petabytes. 

Mobile Data Consumption in Pakistan. Source: Rogue Economist


Both the private sector and the government are laying thousands of kilometers of new fiber optic cable to deal with growing mobile broadband subscriptions and expanding coverage. In addition, the growth in international data traffic is being met with new high-speed undersea cables. 

Pakistan and East Africa Connecting Europe (PEACE) is  96 Tbps (terabits per second), 15,000 km long, privately owned submarine cable that will originate in Karachi, Pakistan and run underwater all the way to Marseilles, France via multiple points in the continent of Africa.  It is being built as part of Digital Silk Road sponsored by China. Cybernet and Jazz are the local landing and global connectivity partners of PEACE Cable System in Pakistan. It will enable high-speed access to a variety of content, cloud computing, gaming and video streaming platforms.  


PEACE Undersea Cable Route. Source: Submarine Cable Networks



The laying of PEACE undersea cable in Pakistan's territorial waters will begin in March, following government approval this month for Cybernet, a local internet service provider, to construct an Arabian Sea landing station in Karachi, according to Nikkei Asia. The Mediterranean section of the cable is already being laid, and runs from Egypt to France. The 15,000 kilometer-long cable is expected to go into service later this year.   

A 820-kilometer long China-Pakistan fiber optic cable has already been laid between the city of Rawalpindi, Pakistan in the south and the Khunjerab Pass, China in the north  and operational since July, 2018. It is currently being extended to Karachi for connection to PEACE cable. 

When completed, PEACE cable will be Pakistan's 7th highest bandwidth, lowest latency undersea connection to the global Internet system. Currently, there are 6 international submarine cable systems connecting Pakistan, including SMW3, SMW4, SMW5, IMEWE, AAE-1 and TW1. PTCL is the landing party in Pakistan for SMW3, SMW4, AAE-1 and IMEWE cable systems, operates cable landing stations in Karachi. SMW3, SMW4 and IMEWE land at Hawksbay, while AAE-1 lands at Clifton. Transworld Associates Private Limited (Transworld, or TWA) privately owns the TW1 cable system and is a member of the SMW5 consortium. Both TW1 and SMW5 land at Hawksbay and terminate at Transworld's cable landing station in Karachi.  

Rapid growth in subscriptions has led to a huge increase in imports of smartphones in the country. The nation’s mobile phone imports have swelled by 51.5% to $1.3 billion in July 2020- February 2021, from $865m in the same period last year. Pakistan has begun local assembly of low-cost smartphones to meet soaring demand.  Since the introduction of the mobile phone manufacturing policy in March 2020, several smartphone assembly plants have been set up to produce 18 million units annually. 

Soaring broadband subscription, swelling data usage and huge surge in smartphone sales are all pointing to Digital Pakistan becoming a reality in the near future. 

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Saturday, April 3, 2021

Muslim Politician Holds Key to Netanyahu Retaining Top Office in Israel

Mansour Abbas, 46-year-old Palestinian leader of an Islamic party, has emerged as the man who can make or break Israeli Prime Minister Benjamin Netanyahu's ambition of retaining the top elected office in his country. On Thursday, Abbas quoted from the Holy Quran in a primetime speech on Israeli National Television and said he was "a proud Arab and Muslim". 

Mansour Abbas, Israeli Knesset Member


The recent March 23 vote in Israel was the 4th in 2 years. With no single party or group of allied parties winning a clear majority, this election has also proved inconclusive like the last three. Abbas heads the Raam party that won just four seats in the latest elections for 120-seat Knesset, the Israeli parliament. Netanyahu's Likud party won 30 seats, making it the biggest party -- but a majority of 61 is required to form a government. Netanyahu has urged his former right-wing allies Naftali Bennett and Gideon Saar to "come back home" after the two ran their own lists in the last election. Saar has ruled out joining a Netanyahu government, while Bennett has not yet declared his loyalty, according to an AFP report.

Abbas spoke of crime, racism and poverty faced by Arab Israelis who make up 20% of the country's population of 9.3 million. He demanded equality and partnership with others in Israel. “Citizens of Israel, I stand in front of you in the atmosphere of the Passover and Easter holidays and on the eve of the month of Ramadan, and carry a prayer of hope, and an uncompromising aspiration for shared life on the basis of mutual respect and true equality", he said. 

The Muslim Israeli leader did not list his demands for the coalition negotiations or any concrete positions – he is open to offers. He may have made the headlines because of his speech on Thursday, but now is when he will face the real test. While the Israeli public views the speech as a message of conciliation, in the Arab community the responses were divided, reported Israeli newspaper Haaretz. 


If Abbas chooses to join a coalition with either the right or left bloc, this will be the first time an Arab party becomes a part of the Israeli government. 

Here's a video on Israeli Apartheid targeting Palestinian citizens of Israel:

https://youtu.be/ZYhsKRngW88


 


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Haq's Musings


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Thursday, April 1, 2021

Groundwater Depletion in Pakistan

Pakistan has about 1.2 million tube wells extracting 50 million acre feet of water every year for farm irrigation. NASA satellite maps show that Pakistan is among the places worst affected by rapid depletion of groundwater. 

Water Stress Satellite Map Source: NASA 

A recent World Bank report titled "Groundwater in Pakistan’s Indus Basin : Present and Future Prospects" lays out the need for better groundwater management in Pakistan. Here are three key highlights of this reports:

1. Improved groundwater management is crucial for a healthy, wealthy, and green Pakistan. Pakistan’s Indus Basin Irrigation System is the largest artificial groundwater recharge system in the world, but the current water management paradigm doesn’t reflect it. 

2. Over-abstraction, waterlogging and contamination threaten the crucial role of groundwater as a life-sustaining resource, which has cascading impacts on drought resilience, public health, and environmental sustainability. 

3. For groundwater to remain a safe and reliable source of drinking water and a lifeline for tail-end farmers, a balance must be achieved between efficiency of the surface water system and sustainability of groundwater resources.

The World Bank report points to the need for better management of groundwater resources. One of the keys to groundwater management is to have an elaborate network of small dams and water reservoirs in strategic locations to recharge underground aquifers. 

In recent years, Pakistan has begun to address its groundwater challenges, starting with the National Water Policy 2018 which identified priorities for groundwater management. 

Pakistan's Common Council of Interests (CCI) with the prime minister and the provincial chief ministers recently adopted a National Water Policy (NWP) in April 2018. It is designed to deal with “the looming shortage of water” which poses “a grave threat to (the country’s) food, energy and water security” and constitutes “an existential threat…”as well as “the commitment and intent” of the federal and provincial governments to make efforts “ to avert the water crisis”.

The NWP supports significant increases in the public sector investment for the water sector by the Federal Government from 3.7% of the development budget in 2017-18 to at least 10% in 2018-19 and 20% by 2030; the establishment of an apex body to approve legislation, policies and strategies for water resource development and management, supported by a multi- sectoral Steering Committee of officials at the working level; and the creation of a Groundwater Authority in Islamabad and provincial water authorities in each of the provinces.

As the NASA satellite map shows, the Punjab is the worst affected province where the groundwater depletion is the highest. Currently, 1.2 million private tube wells are working in the country, out of which 85% are in Punjab, 6.4% are in Sindh, 3.8% are in Khyber-Pakhtunkhwa, and 4.8% are 3 in Baluchistan. 

National Water Policy 2018 was followed by the Punjab Water Policy in 2018 and the Punjab Water Act 2019. The policy emphasizes the need to curb groundwater over-extraction and contamination, and the Act establishes a regime of licenses for abstraction and wastewater disposal, managed by newly created regulatory bodies.

Punjab is also developing a provincial Groundwater Management Plan. In Khyber Pakhtunkhwa province, a similar act was passed in 2020 while in Sindh, a draft Water Policy is underway to provide much needed direction for tackling waterlogging and salinity, and for conjunctive management of surface water and groundwater. The federal government is drafting a five-year National Groundwater Management Plan to provide a framework for coordinating groundwater stakeholders across Pakistan.

It appears that there is now clear recognition of the rapid loss of groundwater and its impact on agriculture irrigation and drinking water availability.  What is needed is serious follow-up and execution to produce results. 

Here's a video discussion on the subject:

https://youtu.be/nrfF3ppBzpo




Related Links:

Haq's Musings



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