Pakistan's Year 2019 in Review: Economic and Security Challenges

Pakistan started the year 2019 in the midst of a very serious economic crisis with very high twin deficits and extremely low foreign exchange reserves. While Pakistan's internal security challenges subsided, the external security concerns grew with India's attack on Balakot in 2019. Tough actions by PTI government have started to pay off at the end of year 2019.  Toward the end of the year, Pakistan's twin deficits declined substantially and credit rating agency Moody's upgraded Pakistan's outlook from negative to stable. Mass migration continued both within and outside Pakistan. About 600,000 Pakistanis went to work overseas in 2019. And at least 4 times more Pakistanis moved from rural to urban areas.  Pakistan had high profile visits of the royal families from the UK and the Netherlands as well as the visit of the Sri Lankan cricket team, the first foreign team to play test series in Pakistan in a decade. Conde Nast Travel picked Pakistan as the top tourism destination for 2020. Regional security situation worsened with Indian and Kashmiri Muslims facing the threat of genocide at the hands of newly re-elected Indian government of Hindu fanatic Prime Minister Narendra Modi.

Economic Crisis:

The year 2019 began with Pakistan battling massive twin deficits, deteriorating foreign currency reserves, low exports, diminishing tax revenues, a weak currency, unsustainable external debt payments, and soaring sovereign debt. This crisis has forced the country to seek IMF (International Monetary Fund) bailout, the 13th such request in Pakistan's 72 year history.

Tough actions by PTI government have started to pay off at the end of year 2019.  In October 2019, Pakistan saw a monthly trade surplus of $99 million, its first in decades. Pakistan's exports in November 2019  jumped 9.6% to $2.02 billion while imports dropped 17.53% to $3.815 billion over corresponding month of last year, the Ministry of Commerce data showed.

Pakistan Trade Data 2019

In December 2019, IMF's Pakistan representative Maria Teresa Daban Sanchez said as follows: “Pakistan has put behind its difficult years of security. Now, it is time for the business community and society in general to enjoy this new time and to really unleash the potential of Pakistan.”

Moody's credit rating agency upgraded Pakistan's outlook from negative to stable as the year 2019 came to a close.

Security Challenge:

While newly elected PTI government was still dealing with the economy, the Indian Air Force entered Pakistani airspace and dropped bombs in Balakot on the orders of India's far-right Prime Minister Narendra Modi. The Indian action drew strong Pakistani response with Pakistan Air Force crossing the Line of Control in Kashmir and shooting down two Indian fighter jets.  Pakistan also captured an Indian fighter pilot shot down down in Azad Kashmir. It was Pakistani Prime Minister Imran Khan's deft handling of the regional crisis that prevented further escalation into a full-blown India-Pakistan war that could have gone nuclear. The year 2019 ended with Pakistani economy stabilizing and Indian and Kashmiri Muslims facing the threat of genocide at the hands of newly re-elected Indian government of Hindu fanatic Prime Minister Narendra Modi.

The Indian action drew strong Pakistani response with Pakistan Air Force crossing the Line of Control in Kashmir and shooting down two Indian fighter jets.  Pakistan also captured an Indian fighter pilot shot down down in Azad Kashmir. It was Pakistani Prime Minister Imran Khan's deft handling of the regional crisis that prevented further escalation into a full-blown India-Pakistan war that could have gone nuclear. The year 2019 ended with Pakistani economy stabilizing and Indian and Kashmiri Muslims facing the threat of genocide at the hands of newly re-elected Indian government of Hindu fanatic Prime Minister Narendra Modi.

Source: South Asia Terrorism Portal

Pakistan saw lowest terror related fatalities in a decade with 228 deaths in the first half of 2019. This is a huge improvement from 2009 when Pakistan had nearly 12,000 deaths in terrorism related incidents.

Source: Conde Nast Traveller 

Improved security helped Pakistan earn number one spot among top tourism destinations picked by Conde Nast Travel magazine.  Pakistan hosted Prince William and his wife Kate Middleton as well as Queen Maxima of the Netherlands among other top foreign dignitaries. In December, Pakistan had its first cricket test series at home in a decade with the visit of the Sri Lankan cricket team.

International Relations:

Pakistan's relations with India sank to a new low when Prime Minister Narendra Modi ordered bombing of Balakot in February 2019 and Pakistan responded by crossing the Line of Control and shooting down two Indian fighter jets in Kashmir and capturing an Indian pilot.  It was Pakistani Prime Minister Imran Khan's deft handling of the regional crisis that prevented further escalation into a full-blown India-Pakistan war that could have gone nuclear. The year 2019 ended with Pakistani economy stabilizing and Indian and Kashmiri Muslims facing the threat of genocide at the hands of newly re-elected Indian government of Hindu fanatic Prime Minister Narendra Modi.

Prime Minister Imran Khan's visit to the White House and meeting with President Trump helped warm up ties with the United States. Speaking with the media in a joint press conference with Prime Minister Imran Khan in the Oval Office, President Trump said: "It's my honor to have the very popular and great athlete, the Prime Minister of Pakistan at White House". The President added that Pakistan was helping the US to "extricate" US troops from Afghanistan, through political negotiations.

Prime Minister Imran Khan's rally drew nearly 30,000 Pakistani-Americans to Capital One Arena on Sunday, July 21, 2019. It was the largest ever public gathering of any diaspora to welcome a foreign visiting leader in the United States until the more recent Howdy Modi rally in Houston that drew nearly 60,000 people. Earlier record of 18,000 was set by Indian Prime Minister Narendra Modi's rally at New York City's Madison Square Garden in 2014.

China, Saudi Arabia and United Arab Emirates maintained close ties with Pakistan and offered valuable assistance to Islamabad to deal with its economic difficulties. United States and the European Union (EU) nations also supported IMF's bailout of Pakistan.

Massive Migration:

Nearly 600,000 Pakistanis went overseas for work in the first 11 months of 2019, according to figures recently released by Pakistan Bureau of Emigration and Overseas Employment. This phenomenon helped contain unemployment in a country where about 2 million young people are entering the job market each year. It has also helped remittances soar nearly 21X to nearly $21 billion since the year 2000.

Emigrants From Pakistan 1990-2019. Source: Pakistan Bureau of Emigration

Pakistan is in the midst massive migration, both internal and external. Over half a million Pakistanis are migrating overseas while about 2 million are migrating internally from rural to urban areas. These trends are transforming the nation. Overseas remittances are soaring. Pakistan is becoming more urban. The country is also seeing growing foreign cultural influences from both the West and the Middle East.

Summary:

Pakistan faced serious economic and security challenges in 2019. While Pakistan's internal security challenges subsided, the external security concerns grew with India's attack on Balakot in 2019. Tough actions by PTI government have started to pay off at the end of year 2019.  Toward the end of the year, Pakistan's twin deficits declined substantially and credit rating agency Moody's upgraded Pakistan's outlook from negative to stable. Mass migration continued both within and outside Pakistan. About 600,000 Pakistanis went to work overseas in 2019. And at least 4 times more Pakistanis moved from rural to urban areas.  Pakistan had high profile visits of the royal families from the UK and the Netherlands as well as the visit of the Sri Lankan cricket team, the first foreign team to play test series in Pakistan in a decade. Conde Nast Travel picked Pakistan as the top tourism destination for 2020. Regional security situation worsened with Indian and Kashmiri Muslims facing the threat of genocide at the hands of newly re-elected Indian government of Hindu fanatic Prime Minister Narendra Modi.

Related Links:

Haq's Musings

South Asia Investor Review

Pakistan's Debt Crisis

India's Attack on Balakot and Pakistan's Response

Internal and External Mass Migration in Pakistan

Retired Justice Katju: Dark Clouds Over India

Pakistan Tourism Boom

Digital BRI: China and Pakistan Building Fiber, 5G Networks

LNG Imports in Pakistan

Growing Water Scarcity in Pakistan

China-Pakistan Economic Corridor

Ownership of Appliances and Vehicles in Pakistan

CPEC Transforming Pakistan

Pakistan's $20 Billion Tourism Industry Boom

Riaz Haq's YouTube Channel

PakAlumni Social Network

Over Half Million Pakistanis Migrating Abroad Each Year

Nearly 600,000 Pakistanis have gone overseas for work in the first 11 months of this year, according to figures recently released by Pakistan Bureau of Emigration and Overseas Employment. This phenomenon has helped reduce unemployment in a country where about 2 million young people are entering the job market each year. It has also helped remittances soar nearly 21X since the year 2000.

Emigrants From Pakistan 1990-2019. Source: Pakistan Bureau of Emigration

Migration Overseas:

Over 11 million Pakistanis have left home for employment in Europe, America, Middle East and elsewhere since 1971, according to Pakistan Bureau of Emigration. The pace has particularly picked up over the last 10 years with over half a million Pakistanis migrating abroad each year.  This phenomenon has helped reduce unemployment in a country where about 2 million young people are entering the job market each year.

Emigrants From Pakistan 1971-2019. Source: Pakistan Bureau of Emigration

More Pakistanis have migrated overseas in the last 9 years (2011-2019) than in previous 30 years (1971-2010).  The average figure has been about 500,000 each year since 2011. The highest was 946,571 in 2015 while the lowest was 382,439 in 2018.  These figures do not include Pakistanis who went abroad for education and never returned.

Source: Bloomberg

Remittance inflows from Pakistani diaspora have jumped 21-fold from about $1 billion in year 2000 to $21 billion in 2018, according to the World Bank. In terms of GDP, these inflows have soared nearly 7X from about 1% in year 2000 to 6.9% of GDP in 2018.

Composition of Pakistan Emigrants. Infographic Courtesy of Gulf News

Myths About Emigration:

A common myth about emigration is that it is driven by poverty. But the fact is that the poorest and least developed people tend to stay put where they are; they do not migrate. It's only people who have a certain level of income and skills who are more likely to migrate to other countries for better opportunities. This fact has been well-established by multiple studies conducted in Africa.

Here's an except of African Development Bank report on migration:

"Results show that despite increase in the absolute number of migrants, Africa, particularly SubSaharan Africa has one of the lowest rate of emigration in the world .... Poorer countries generally have lower rate of emigration ......Bad socio-economic conditions generally seem to lead to higher rate of emigration by highly skilled individuals. Generally, migration is driven by motives to improve livelihoods with notable evidence on changes in labor market status. Often, self-employed or unemployed émigré ended up in wage employment. The paper outlines policy issues emerging from the migration trend in Africa."

Migration vs Human Development Source: Hein de Haas

Data shows that increased human and economic development is initially associated with increasing emigration. Any form of development in the poorest countries of the world is therefore likely to lead to accelerating emigration. Such findings contradict conventional thinking and force us to radically change our views on migration. Such rethinking can be achieved by learning to see migration as an intrinsic part of broader development processes rather than as a problem to be solved, or the temporary response to development “disequilibria”, according to The Conversation, a US publication.

Migration to Non-English Speaking OECD Nations:

Migration data for 2016 released by Organization for Economic Cooperation and Development, the club of rich industrialized nations of Europe, North America and East Asia, shows that a growing number of Pakistanis are migrating to its non-English Speaking member countries. Traditionally, most Pakistanis migrating to rich industrialized nations have preferred to go to English-Speaking nations. The biggest factor driving such migrations appears to be the growing labor shortages caused by aging populations and declining birth rates in OECD member nations.

Among the biggest non-English Speaking OECD destinations in 2016 for Pakistani migrants are Italy (14,735)  , Germany (12,215), Spain (6,461), South Korea (2,724), Japan (1,486), France (1,350) and Sweden (1.211). 

Pakistani Migration to Non-English Speaking OECD Nations in 2016. Source: OECD

Among English Speaking OECD nations, the top destination for Pakistani migrants continues to be the United States (19,313) followed by Canada (11,335), United Kingdom (11,000) and Australia (6,958). 

Young Population Decline in Major Labor Exporting Countries. Source: Nikkei

Internal Migration:

Internal migration in Pakistan far exceeds external migration. Estimates from the 2014-2015 Labor Force Survey (LFS) indicate that the internal migrant population is roughly four times larger than the emigrant population. This means that some 13% of the Pakistani population is an internal migrant, according to Pakistan Migration Snapshot published in August, 2019.

Like most developing nations, the internal migration in Pakistan is linked to the differences in level of development between urban and rural regions with people moving for better employment and to overcome poverty. Pakistan has also experienced many natural hazards, which have caused numerous waves of internal displacement and internal migration (Sadia et al., 2017; Cibea et al, 2013).

Summary:

Pakistan is in the midst massive migration, both internal and external. Over half a million Pakistanis are migrating overseas while about 2 million are migrating internally from rural to urban areas. These trends are transforming the nation. Overseas remittances are soaring. Pakistan is becoming more urban. The country is also seeing growing foreign cultural influences from both the West and the Middle East.

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Pakistan Remittance Soar 21X

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Is Pakistan Ready For Clean Energy Revolution?

Rising worries about climate change have recently made me join the Clean Energy Revolution by installing rooftop solar and leasing an electric car. What is the Clean Energy Revolution? It is the growing use of solar panels, battery storage and electric vehicles to reduce carbon emissions. Is Pakistan ready to join the Clean Energy Revolution?

Tesla Surpasses China's BYD in EV Sales. Courtesy Electrek

Tesla Electric Cars:

Silicon Valley is at the forefront of this clean energy revolution led by Tesla. Tesla is more than an electric car company; the company also supplies solar panels and batteries. Other automakers are also taking their cues from Tesla.  China's BYD Auto has only recently been surpassed by Tesla in production volumes. Auto giants General Motors and BMW are both building electric cars and planning to build "gigafactories" like Tesla's to manufacture battery packs for vehicles and homes. Pakistan is building up renewable power generation capacity. The country has also recently announced its National Electric Vehicle Policy that offers incentives to transition to clean energy.

Bloomberg estimates that Batteries and electric transmission account for about 40% of passenger cars’ costs. European demand is met by mainly Japanese and South Korean battery makers like Panasonic, LG Chem Ltd. and Samsung SDI Co. In the U.S., Tesla has built its own battery cells at its Gigafactory to manage costs and satisfy demand for the cars it produces. Chinese demand for battery packs is met by BYD.

Battery Backed Renewable Energy Costs:

High-capacity battery pack costs have dropped nearly 40% since 2015, according to Wood Mackenzie data as reported by Wall Street Journal. The prices of lithium and vanadium—two of several key raw materials that are used in such batteries—also have declined over the past year or so.

Battery storage costs have fallen nearly 90% in the past decade, according to NextEra Energy.  Cost reductions are expected to continue to only $8 to $14 per MW-hour by 2020, or about a penny per kW-hour. For perspective, the average kW-hour of electricity costs about 13 cents for retail users.

NextEra Energy forecasts that post-2023, wind plus energy storage costs will be $20 to $30 per MW-hour, and solar plus energy storage will be $30 to $40 per MW-hour. Natural gas is expected to match the solar-plus-storage costs.

Pakistan Electric Vehicle Policy:

Pakistan has a low level of motorization with just 9% of the households owning a car. Nearly half of all households own a motorcycle. Motorization rates in the country have tripled over the last decade and a half, resulting in nearly 40% of all emissions coming from vehicles. Concerns about climate change and environmental pollution have forced the government to to take a number of actions ranging from adoption of Euro6 emission standards for new vehicles with internal combustion engines (ICE) since 2015 and announcement of a national electric vehicle (EV) policy this year.

Private vehicle ownership in Pakistan has risen sharply over the last 4 years. More than 9% of households now own cars, up from 6% in 2015. Motorcycle ownership has jumped from 41% of households in 2015 to 53% now, according to data released by Federal Bureau of Statistics (FBS) recently. There are 32.2 million households in Pakistan, according to 2017 Census.

Vehicle Ownership in Pakistan. Source: PBS

Pakistan's National EV Policy is a forward looking step needed to deal with climate concerns from growing transport sector emissions with rapidly rising vehicle ownership. It offers tax incentives for buyers and sellers. It also focuses on development of nationwide charging infrastructure to ease adoption of electric vehicles.

Low Carbon Energy Growth:

In recent years,  Pakistan government has introduced a number of supportive policies, including feed-in tariffs and a net metering program to incentivize renewables. These have been fairly successful, and renewables capacity in the country surged substantially over 2018 when 1245 MW was added, of which 826MW was contributed by the solar sector, according to Fitch Solutions.

Non-Hydro Renewables in Pakistan. Source: Fitch Solutions

Pakistan’s Alternative Energy Development Board (AEDB) recently signed deals for projects that will see the country expand its wind power capacity by 560 MW.  Fitch Solutions forecasts Pakistan's solar capacity to grow by an annual average of 9.4% between 2019-2028, taking total capacity over 3.8GW by the end of our forecast period.

Sindh government has recently signed a deal for 400MW solar park at Manjhand, 20MW rooftop solar systems on public sector buildings in Karachi and Hyderabad, and 200,000 solar home systems for remote areas in 10 districts of the province. The project is estimated to cost USD105million, with the World Bank funding USD100 million.

The biggest and most important source of low-carbon energy in Pakistan is its hydroelectric power plants. Pakistan ranked third in the world by adding nearly 2,500 MW of hydropower in 2018, according to Hydropower Status Report 2019.  China added the most capacity with the installation of 8,540 megawatts, followed by Brazil (3,866 MW), Pakistan (2,487 MW), Turkey (1,085 MW), Angola (668 MW), Tajikistan (605 MW), Ecuador (556 MW), India (535 MW), Norway (419 MW) and Canada (401 MW).

New Installed Hydroelectric Power Capacity in 2018. Source: Hydroworld.com

Hydropower now makes up about 28% of the total installed capacity of 33,836 MW as of February, 2019.   WAPDA reports contributing 25.63 billion units of hydroelectricity to the national grid during the year, “despite the fact that water flows in 2018 remained historically low.” This contribution “greatly helped the country in meeting electricity needs and lowering the electricity tariff for the consumers.”

Electricity vs Fossil Fuel Demand Forecast. Source: Economist

Chinese BYD in Pakistan:

Multiple media reports suggest that China's BYD is about to enter Pakistan market following the announcement of Pakistan National EV Policy.   These reports indicate that Toyota, one of the largest automakers in Pakistan, has signed a deal with BYD to manufacture electric vehicles.

Other reports indicate that Pakistan's Rahmat Group is in talks with BYD to set up an electric vehicle plant at Nooriabad in Sindh province.

Minister for Science and Technology Fawad Chaudhry has claimed that in three years Pakistan will become the first country to manufacture electric buses, which will be driven by an electric motor and obtains energy from on-board batteries.

Summary: 

It appears that Pakistan is starting to get serious about joining the Clean Energy Revolution to deal with rising climate change concerns. The country has set targets for renewable energy growth and announced National Electric Vehicle Policy.  In recent years, Pakistan government has introduced a number of supportive policies, including feed-in tariffs and a net metering program to incentivize renewables. These have been fairly successful, and renewables capacity in the country surged substantially over 2018 when 1245 MW was added, of which 826MW was contributed by the solar sector, according to Fitch Solutions.  High-capacity battery pack costs have dropped nearly 40% since 2015, according to Wood Mackenzie data as reported by Wall Street Journal.  Cost reductions are expected to continue to only $8 to $14 per MW-hour by 2020, or about a penny per kW-hour. While production and use of renewable energy are growing, the electric vehicles in Pakistan have yet to find traction. Hopefully, the National EV policy will encourage production and adoption of electric vehicles in the country.

Related Links:

Haq's Musings

South Asia Investor Review

Pakistan Electric Vehicle Policy

Nuclear Power in Pakistan

Recurring Cycles of Drought and Floods in Pakistan

Pakistan's Response to Climate Change

Massive Oil and Gas Discovery in Pakistan: Hype vs Reality

Renewable Energy for Pakistan

Digital BRI: China and Pakistan Building Fiber, 5G Networks

LNG Imports in Pakistan

Growing Water Scarcity in Pakistan

China-Pakistan Economic Corridor

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India's Retired Justice Katju at Interfaith Event in Silicon Valley

Justice Markandey Katju, retired judge of Supreme Court of India, talked of "dark clouds over India" in a speech to about 200 people of all faiths at an interfaith event in Silicon Valley.  He said "Muslims making up only 15% of the population are on the receiving end" but the rest of India is also paying the price. India's economy is in serious trouble. There is rampant poverty and high rates of malnutrition in the country. There are heavy job losses across the entire labor market.  The event was organized by Ibadatkhana Foundation led by Tasawar Jalali. Other organizers included Javed Ellahie, Naren Singh, Santosh Addagulla and Prabakar Karuppiah .

"Indian Supreme Court has surrendered, Indian media have surrendered" to the "dark forces" of Modi's "Hindutva", he said. He said "there was no communalism in India before 1857", the year Delhi fell to the British colonizers. The colonial rulers from Britain then proceeded to "divide and conquer India" by using what Justice Katju described as "history in the service of colonialism", an apparent reference to Professor B.N. Pande's 1977 speech to Rajya Sabha, the upper house of India's  parliament.

Ibadatkhana:

Justice Katju described "Ibadat Khana" as part of a brief history lesson on Mughal Rule in India.  Ibadat Khana was built by Emperor Akbar in Fatehpur Sikri in 1575 as a place where scholars of various faiths could discuss theology. The establishment of this center of learning was motivated by the emperor's desire for "Sulh-e-Kul, meaning "universal peace" among various faiths.

This was about the same period as St. Bartholomew Massacre in Europe. Catholic mobs attacked and killed tens of thousands of Protestants in France. These religious wars raged in Europe for centuries. In fact, Ireland witnessed sectarian massacres as recently as the 1990s.

India's Diversity:

Justice Katju said India is a very diverse land of immigrants. He said 92% of the population descended from ancestors who arrived from other lands to settle in India. The original inhabitants of India make up about 8% of the population.

He said people migrate from harsh to more comfortable places. India with its rivers and valleys offered rich fertile soil for agriculture that dominated the world economy for thousands of years before the Industrial Revolution. There have been only two periods when people left India in large numbers to go elsewhere: Indentured service after the end of slavery in 1800s and more recently the migration of better educated Indian to America and Europe.

Modi's India:

Mr. Katju said "dark clouds" are gathering over India with courts and media surrendering to Modi's despotic rule. He said "Muslims making up only 15% of the population are on the receiving end" but the rest of India is also paying the price. India's economy is in serious trouble. There is rampant poverty and high rates of malnutrition in the country. There are heavy job losses across the entire labor market.

A diverse country like India can not afford Hindutva. This is a time to bring back Emperor "Sulh-e-Kul" to save India.

Panel Discussion:

There was a panel discussion with Justice Katju, Dr. Jasbir Kang, Mr. Javed Ellahie and Prof. Randolph Langenbach. The panel was moderated by Ritu Jha and Mariam Turab. During the panel discussion, Justice Katju brought up the idea of reunification of India and Pakistan. He argued "if East and West Germany can reunify, so can India and Pakistan". The idea was contested by Mr. Javed Ellahi and Dr. Jasbir Kang who talked about the idea of pushing for more trade and people-to-people exchanges which could eventually lead to replication of European Union in South Asia. But Hindutva stands in the way of peace in South Asia.

Summary:

In a speech to about 200 people of various faiths in Silicon Valley, Justice Markandey Katju, India's retired Supreme Court judge, talked about "dark clouds over India". The event was organized as an interfaith event by Ibadatkhana Foundation. A diverse country like India can not afford Hindutva. This is a time to bring back Emperor Akbar's "Sulh-e-Kul" to save India, he said.

Related Links:

Haq's Musings

South Asia Investor Review

Hindutva: Legacy of British Raj

Balakot and Kashmir: Fact Checkers Debunk Indian Claims

South Asian Contrasts: Kartarpur and Ayodhya

Hindu Nationalists Admire Nazis

Lynchistan: India is the Lynching Capital of the World

Hindu Supremacist Yogi Adiyanath's Rise in UP

Hinduization of India

Globalization of Hindu Nationalism

Hindutva Distortion of Indian History Textbooks

AdAsia 2019: Asia's Biggest Advertising Industry Conference in Lahore, Pakistan

On December 2, 3, 4 and 5, 2019,  Pakistan played host to AdAsia 2019 after a gap of 30 years. It is the largest and most prestigious advertising industry conference in Asia – organized bi-annually by the Asian Federation of Advertising Associations (AFAA). It drew attendees from all over the world to Lahore, Pakistan.  This conference has taken place at a time when Pakistan's 88 billion rupee media industry is in the midst of a major shakeout after a long period of rapid double-digit growth since the turn of the century. The only advertising segment still hot and growing at double digit rates is digital.

Pakistan President Arif Alavi delivered the closing keynote address. Other speakers included Sir Martin Sorrell, Founder, WPP; Philip Thomas, CEO, Cannes Lions; Randi Zuckerberg, CEO, Zuckerberg Media and former Director Market Development, Facebook; Kaveri Khullar, Marketing Director, Mastercard Southeast Asia; Fernando Machado, Global CMO, Burger King; Asad J. Malik, an artist specializing in augmented reality; Piyush Pandey, CCO Worldwide and Executive Chairman India, Ogilvy; Marcus Peffers, Global CEO, M and C Saatchi World Services; Stefan Sagmeister, Co-Founder Sagmeister and Walsh; Richard Quest of CNN Business;  and Yasuharu Sasaki, ECD, the Dentsu Network.


Digital Advertising: 

Sessions on digital advertising were packed at the conference. This segment of advertising is growing rapidly amidst declining total ad spend in Pakistan.

Randi Zuckerberg, former executive at Facebook and sister of Mark Zuckerberg, was a featured speaker to talk about digital marketing. She shared her experience of how digital media became a powerful force for marketers. “15 years ago, my marketing budget for a whole year was one box of t-shirts,” she told the audience as she talked about her years at Facebook. “It’s really amazing to see how far the world can come in time,” she added.

Zuckerberg praised Pakistan as a country that honors women. “Pakistan has given us women such as Malala Yousafzai and Benazir Bhutto,” she said. “This shows that Pakistan is a country that really honors its women.”

Zuckerberg was followed by Tom Goodwin, head of innovation at Zenith Media.  He focused on how our lives have been transformed by ongoing Digital Revolution.  “Smartphones have become like fireplaces to people. People gather around their devices and their connection to the world becomes what gives them warmth,” Goodwin said.

Growth of broadband access in Pakistan is changing the country's media landscape. Digital advertising revenue is forecast to grow by 32% in 2019 to Rs. 10.8 billion ($103 million), 12% of total national advertising revenue (NAR), according to Magna Advertising. Digital marketing expert Lars Anthonisen believes Pakistan is quickly becoming a "digital first country". Anthonisen sees "new opportunities for brands to reach and engage with consumers who may have previously been overlooked". Overall ad spend in Pakistan is expected to rise by 15% in 2019 to Rs. 88.3 billion ($840 million) following a steep decline (-11%) in 2018, according to a Branding in Asia report. Growing availability of smartphones, tablets and mobile broadband is extending the reach of advertisers to digital media where it is possible to precisely target prospective customers.

Pakistan Media Industry: 

Pakistan's 88 billion rupee media industry is in the midst of a major shakeout after a long period of rapid double-digit growth since the turn of the century. Hundreds of journalists and other staff have lost their jobs. At least one TV channel, Waqt News, has closed while several others are downsizing. While such consolidation was long overdue after nearly two-decade long period of explosive growth, the PTI government's decision to reduce advertising budget, which constitutes nearly a quarter of all ad spending in the country, appears to be the main trigger. Those affected by consolidation are accusing the government of exercising press censorship by cutting its ad spending.

Rapid Media Growth:

Rising buying power of rapidly expanding middle class in Pakistan drove the nation's media advertising revenue up 14% to a record Rs. 76.2 billion 2016 and another 12% to Rs. 88 billion in 2017, making the country's media market among the world's fastest growing media markets.

Industry Shakeout:

Massive commercial media growth in Pakistan has been most apparent in terms of private TV channels growing from just one in Year 2000 to over 100 today after President Musharraf's deregulation of electronic and other media.

Explosive growth with many new entrants is the fundamental business reason for the recent wave of consolidation and shakeout. Shakeout is a business term used to describe the consolidation of an industry or sector after it has experienced a period of rapid growth in demand followed by oversupply.

At least one TV channel, Waqt News owned by Nawai-Waqt Media Group, has closed while several others are downsizing.  “We are trying to compile exact figures of the affected media persons. So far, we can say that around 1,000-1,500 workers have lost their jobs or faced cuts in salaries in the past few weeks,” Muhammad Afzal Butt, president of one the main factions of Pakistan Federal Union of Journalists (PFUJ) told  The News Sunday (TNS) this week.

Government Spending:

About a quarter of Rs. 80 billion ad revenue comes from federal and provincial government ads in the media. Some of the TV channels receive as much as 50% of their revenue from the government.

"The government has cut its media spend by more than 70% and companies by almost 50%", according to a leading advertising agency owner who spoke to Dawn.

"The (federal) government used to spend some Rs. 10 billion on advertisements annually, which was increased up to Rs35 billion in the last years of the (Nawaz Sharif's PMLN) government," Fawad Chaudhry,  federal minister of information,  told The News Sunday (TNS).  This tax-payers’ money, says the minister, was used by the previous government to bribe the media for favorable coverage.


Summary:

Pakistan has recently hosted AdAsia after a gap of 30 years. It is the largest and most prestigious advertising industry conference in Asia – organized bi-annually by the Asian Federation of Advertising Associations (AFAA). It drew attendees from all over the world to Lahore, Pakistan.  This conference has taken place at a time when Pakistan's 88 billion rupee media industry is in the midst of a major shakeout after a long period of rapid double-digit growth since the turn of the century.  One bright spot is digital advertising which is growing rapidly amidst the declining total ad spend in Pakistan.  Significant reduction in government spending on advertising has triggered a long-overdue shakeout after almost two decades of rapid media growth in Pakistan. About a quarter of Rs. 80 billion ad revenue comes from federal and provincial government ads in the media. Some of the TV channels receive as much as 50% of their revenue from the government.  Hundreds of journalists and other staff have lost their jobs. At least one TV channel, Waqt, has closed while several others are downsizing. Those affected by consolidation are accusing the government of exercising press censorship by cutting its ad spending.


Here's a video discussion on Pakistani media business with Misbah Azam, Sabahat Ashraf and Riaz Haq.


https://youtu.be/Nz1axuB5j-Q





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Mobile Broadband Speed in Pakistan

Pakistan to Become World's 6th Largest Cement Producer By 2030

Pakistan's rank as world's leading cement producer will rise from 16th in 2018 to 6th by 2030. It will replace Japan among the world's top 10 cement producing nations in 2030, according to World Cement Association forecast. Cement consumption is an important indicator of development activity and economic growth. Pakistan's domestic cement sales are continuing to grow, up 9.2% in October, 2019 from the same month last year. Total sales (local and export) in 4-month period between July and October 2019 stood at 16.117 million tons, 4.5 per cent higher than 15.419 million tons during the same period last year.

Source: World Cement Association

Last year, Pakistan produced 41.14 million tons of cement, according to International Cement Review. The country's cement industry has already built capacity to produce 59.5 million tons in anticipation of future demand for housing and infrastructure.  World Cement Association expects Pakistan to produce 85 million tons, 2% of the world's cement production in 2030.

Cement Sales in Pakistan. Source: Bloomberg

Currently, China produces more than half of all the cement used in the world. India produces 8% and  and European Union 3%. The three will continue to be at the top in 2030. However, China's share will drop to 35% while India's share will double to 16%.

Top Cement Producing Countries in 2019

Pakistan's domestic cement sales grew 9.2% in October, 2019 from the same month last year. Total sales (local and export) in 4 months period between July and October 2019 stood at 16.117 million tons, 4.5 per cent higher than 15.419 million tons during the same period last year.  Cement consumption is an important indicator of the state of economy. It is the most important construction material. It drives construction industry that is among the biggest employers in the world. Cement is used to build homes, factories, schools, hospitals, roads, bridges, ports and all kinds of other infrastructure.

Recent Spike in Public Sector Development Spending (PSDP)

Development of infrastructure under China Pakistan Economic Corridor projects is continuing to drive cement demand in the country. In addition, construction of major new housing communities is underway. One example of such a community is Karachi's Bahria Town. It is being built on the outskirts of Pakistan's financial capital is among the world's largest privately developed and managed cities.  It is spread over an area of a little over 70 square miles, larger than the 49 square miles area of San Francisco. When completed, Bahria Town will house over a million people, more than the entire population of San Francisco.

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Pakistani F1 Student Enrollment in US Rising at Slowest Rate in 5 Years

Enrollment of Pakistani students on US F1 visa rose just 5.6% to 7,957 in 2018/19, the slowest rate in 5 years. It's in sharp contrast to 27% jump in Pakistani student enrollment to 28,000 in China this year.

Pakistani F1 Students in US. Source: IIE 

Rate of increase in Pakistani students on F-1 visas declined to 5.6%, down from 8.5% in 2014/15 and 14.7% in 2015/16. However, the total number of Pakistani students on F1 visa in the United States has climbed from 5,354 to 7,957. Enrollment of international students from Pakistan on F1 visa declined from a peak of nearly 9,000 in 2001/02 to a low of 4,600 in 2011/12.

US Non-Immigrant Visa Rejection Rates. Source US State Dept via Quartz India 

Total number of foreign students studying in the United States is nearly 1.1 million, the largest in the world. China hosts nearly 492,000 foreign students. New international student enrollment is declining in the US while it is rapidly climbing in China.

Pakistan (7,957) now ranks 22nd among nations sending students to study in the United States.  China (369,548), India (202,014), South Korea (52.250), Saudi Arabia (37,080) and Canada (26,122) occupy the top 5 positions in terms of the number of international students in the United States.

Number of foreign students in the United States from various countries of origin is heavily skewed by visa refusal rates. 48% of applications from Pakistan for non-immigrant travel visa to the United States, including F-1 student visa, are rejected, a much higher rate than 27% refusals in India. Highest refusal rates are for applicants from Somalia (90.2%) and Iran (87.7%). The lowest are in Argentina (1.7%) and Liechtenstein ( 0%).

In China, South Korea is the leading sender with 50,600 students enrolled in 2018, followed by Thailand (28,600 students), and, in a virtual tie for second place, Pakistan and its 28,000 students in Chinese institutions and schools last year. Rounding out the top five source countries are India (23,200 students in 2018) and the US (21,000 students).

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Brief Overview of Pakistan's Electric Vehicle Policy

Pakistan has a low level of motorization with just 9% of the households owning a car. Nearly half of all households own a motorcycle. Motorization rates in the country have tripled over the last decade and a half, resulting in nearly 40% of all emissions coming from vehicles. Concerns about climate change and environmental pollution have forced the government to to take a number of actions ranging from adoption of Euro6 emission standards for new vehicles with internal combustion engines (ICE) since 2015 and announcement of a national electric vehicle (EV) policy this year.

Vehicle Ownership in Pakistan. Source: PBS

EV Policy:

Pakistan electric vehicle policy 2019 sets EV adoption targets and includes incentives for buyers and manufacturers. It also focuses on development of nationwide charging infrastructure to ease adoption of electric vehicles. Here are some of the salient points of the policy:

 Policy Targets: 

1. Goal for cars: 30% of new sales by 2030 and 90% of new sales by 2040

2. Goal for 2 and 3 wheelers: 50% of new sales by 2030 and 90% of new sales by 2040

3. Goal for buses: 50% of new sales by 2030 and 90% of new sales by 2040

4. Goal for trucks: 30% of new sales by 2030 and 90% of new sales by 2040

Buyer Incentives: 

1. 1% GST for EVs vs 17% for regular vehicles

2. Lower electricity tariffs for EVs

Charging Infrastructure: 

1. Only 1% import duty on charging equipment.

2. Lower power tariffs for charging stations.

3. One fast DC charging station per 3km by 3km area in all major cities

4. DC fast chargers on all motorways every 15-30 km.

5. Ensure uninterrupted power on feeders for charging stations.

Manufacturer Incentives: 

1. All greenfield investments apply to EV manufacturers and those converting their existing facilities to manufacture EVs.

2. State Bank to offer lower rate financing for EV manufacturing.

Summary:

Announcement of National Electric Vehicle (EV) Policy 2019 by Pakistan government is a step in the right direction. It is a forward looking step needed to deal with climate concerns from growing transport sector emissions with rapidly rising vehicle ownership. It also focuses on development of nationwide charging infrastructure to ease adoption of electric vehicles.  Meanwhile it's crucial that Euro6 emission standards be seriously enforced with proper inspections to limit emissions from internal combustion engine (ICE) vehicles being sold now.

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Pakistan's Longest Motorway M5 to Boost Road Transport Sector

Recent opening of M5, Pakistan's longest access-controlled motorway, is a boost for the nation's fast-growing road transport sector. The 6-lane 392 kilometers long M5 motorway is longer than than the 375 kilometers long 6-lane M2 motorway. After M5 opening, the only missing section in planned 1,694 kilometer long 6-lane Peshawar-Karachi motorway is 296-kilometer Sukkur-Hyderabad M6 motorway. Growing network of high-speed motorways is opening up less developed parts of the country for investment, business and tourism. It is aiding agriculture, trade and commerce by moving freight and people faster. Transport sector is part of the service sector which constitutes 54% of the national economy. Service sector includes education, health, financial services, legal services, communication services, hotels, restaurants, recreation, entertainment, retail and wholesale, personal services, etc. It is growing faster than industry (26%) and agriculture (20%) sectors.

Here's a brief overview of Pakistan's road transport sector as summarized by Karandaz research:

1. The Transport, Logistics and Communications (TLC) sector is estimated to have contributed 13.3% of GDP in 2016-17. Of this, more than 62% was contributed by the road transport sector. In 2014-15 the sector employed 3.1 million people.

2. Most traffic intensive routes are a) Karachi to Peshawar via Hyderabad-Multan-Faisalabad-Rawalpindi; b) Sukkur to Quetta; c) Karachi to Quetta via the RCD Highway; and d) N-5 National Highway segment of Multan-Lahore-Gujranwala-Rawalpindi.

3. Passengers and freight are the primary segments of road transport sector. The fastest growing freight segment is the delivery vans at 7.5% annually, while for the passenger segment it is motor cabs and taxis at 5.9% annually.

4. Road transport grew at an average rate of 6.2% annually between 1991 and 2016, faster than the average GDP growth rate 4.4% during this period. China-Pakistan Economic Corridor (CPEC) is expected to accelerate transport sect or growth with construction of roads and other transport infrastructure.

5. Freight transport sector is highly lucrative with profit margins ranging from 21% for large trucks to 43% for rickshaws. Passenger transport sector is even more lucrative with 30% profit margin for wagons to 50% for luxury buses.

Here's a video of Uch Sharif service area on M5 Sukkur-Multan Motorway:

https://youtu.be/NC6J8YRAJS4

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