Pakistan's Energy Security Via Shale Gas Revolution

US natural gas prices have fallen below $2 per million BTU (approx 1000 cubic feet), about one-sixth of the price Pakistan has agreed to pay for Iranian gas. With over 50 trillion cubic feet of known shale gas reserves in Sindh alone, Pakistanis can also enjoy the benefits of cheap and abundant source of energy for decades via the shale gas revolution already sweeping America.



Increased production of gas from shale rock in the US has created a huge new supply, pushing down gas prices from $13/BTU (million British thermal units) four years ago to just $2/BTU today, even as the price of oil has more than doubled. By contrast, the Iran pipeline gas formula links the gas price to oil prices. It means that Pakistan will have to pay $12.30/BTU at oil price of $100/barrel, and a whopping $20/BTU for gas if oil returns to its 2008 peak of $150/barrel.

To encourage investment in developing domestic shale gas, Pakistan has approved a new exploration policy with improved incentives as compared with its 2009 policy, a petroleum ministry official said recently. Pakistan Petroleum is now inviting fresh bids to auction licenses to explore and develop several blocks in Dera Ismail Khan (KPK), Badin (Sind), Naushero Firoz (Sind) and Jungshahi (Sind), according to Oil Voice.



In addition to the fact that the Iran gas is extremely expensive, the entire Iran-Pakistan gas pipeline project raises other serious issues as well.

Iran-Pakistan Pipeline Issues:

1. Chinese investors and contractors have pulled out of the project for fear of being hit by US sanctions on their banks and other companies.

2. Russia's Gazrom is reportedly interested but only if it gets the deal at whatever price it decides to charge without any competitive bidding.

3. Pakistani companies and financial institutions are also under threat of US sanctions if they participate in the project.

4. If the pipeline does eventually get built, it will still be several years before gas starts to flow to Pakistan.

5. If Iran is still under US sanctions when the Iranian gas imports finally begin, Pakistan will have difficulty paying for the gas using international banking system. Iran has already been suspended by SWIFT, the Society for Worldwide Interbank Financial Telecommunication, which is the main mechanism used for international bank transactions.

6. The largest chunk of Pakistan's trade deficit is accounted for by energy imports. Iranian gas bill will only worsen this deficit, contributing to yet another balance of payments crisis sending Pakistan back to IMF.



Advantages of Domestic Shale Gas Development:

1. Cheap domestic gas can start flowing from Pakistani shale in a couple of years if Pakistan can make a deal with US (and American pioneers of shale gas like George Mitchel's Devon Energy) to invest and execute on an accelerated schedule in exchange for dropping Iran pipeline.

2. Pakistan will dramatically reduce its dependence on foreign sources and save a lot of foreign exchange spent on hydrocarbon imports.

3. Gas burns a lot cleaner than coal which is also a option given vast amounts of it in Thar desert. World Bank and other International financial institutions are more amenable to financing shale gas development than coal.

4. Abundant and cheap domestic gas supplies can help reduce electricity load-shedding which is caused mainly by under-utilization of installed generating capacity for lack of affordable fuel.

Shale gas revolution began a few years ago when an American named George P. Mitchell defied the skeptics and fought his opponents to extract natural gas from shale rock. The method he and his team used to release the trapped gas, called fracking, has paid off dramatically. In 2000, shale gas represented just 1 percent of American natural gas supplies. Today, it is over 30 percent and rising.



Among the potential downsides of shale gas development is the possibility of groundwater contamination reported in some places in the United States. Such risks can be minimized by following accepted practices to protect the aquifers which are found at levels well above the deep shale rock fractured for extracting natural gas.

Cheap and abundant energy is a pre-requisite for rapid economic growth in any country. Pakistan is no exception. The sooner Pakistanis recognize and resolve this crisis, the better it will be for the south Asian nation.

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Pak Consumer Boom Fuels Underground Economy

Car sales increased 14 percent in February from a year earlier. Cement sales are rising with growing housing demand for increasing population. Lucky Cement, Pakistan’s biggest publicly traded construction materials company, is expected to post record earnings this year. Rising farm prices of bumper crops are pumping hundreds of billions of rupees each year into Pakistan's rural economy.

Contrary to government statistics of a stagnant economy, packed shopping malls and waiting lines at restaurants tell a different story-- the story of growing discretionary incomes of Pakistani consumers today.



So where is the disconnect between these two opposite views of Pakistan's economy? Naween Mangi of Businessweek answers it in her piece "The Secret Strength of Pakistan's Economy". She attributes it to the fast growing informal sector of the nation's economy that evades government's radar, illustrating it with the story of a tire repair shop owner Muhammad Nasir. Nasir steals water and electricity from utility companies, receives cash from his customers in return for his services and issues no receipts, pays cash for his cable TV connection, and pays off corrupt police and utility officials and local politicians instead of paying utility bills and taxes.

Here's an excerpt from Mangi's Businessweek story:

"The rhythms of life in the underground economy remain largely undisturbed. After work, Nasir and his friends sometimes hire a rickshaw to head to the beach or to a religious festival. The driver, part of the flourishing local transport business, doesn’t turn on the meter because he doesn’t have one. On his way home, Nasir stops to buy cooking oil, wheat flour, and sugar at a small grocery store that isn’t officially there. Out of about 1 million shops, up to 400,000 are grocery stores, and most of them are not registered and don’t pay taxes, according to Rafiq Jadoon, president of the City Alliance of Markets Association. In the evening, Nasir unwinds in front of the television. He watches an Indian movie transmitted by a local cable operator to whom he pays a monthly fee—in cash."

The estimates of the size of Pakistan's underground economy vary from 30% to 50% of the official GDP of just over Rs. 18 trillion (US$200 billion). Businessweek's Mangi claims that the government is losing as much as Rs. 800 billion (US$9 billion) in taxes from the informal sector...nearly enough to wipe out Pakistan's current fiscal deficit.

In my view, there are two major problems that arise from the underground economy described by Mangi. First, the massive tax evasion fosters Pakistan's dependence on foreign aid which comes with strings attached and infringes of national sovereignty. Second, the widespread theft of electricity is largely responsible for the huge circular debt and the ongoing power shortages that affect all aspects of life and scare away investors. The sooner the government and the people realize the severe downsides of the underground economy, the better it will be for Pakistan.

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US Can Help Pakistan Develop Shale Gas

Pakistan has over 50 trillion cubic feet of shale gas reserves, according to the US Energy Information Administration (EIA) estimates. It's enough to energize Pakistani homes, businesses, power plants, CNG vehicles, fertilizer plants and factories for 25 years at a rate of 2 trillion cubic feet of consumption per year at half the currently agreed price of imported gas from Iran, an agreement the US strongly opposes. It will also save Pakistanis hundreds of billions of dollars in foreign exchange.

The relevant question here is whether America is willing to offer through its oil and gas companies the necessary investment and the advanced technology to quickly and profitably develop shale gas fields in Pakistan in exchange for abandoning the Iran-Pakistan gas pipeline?



Shale gas revolution began a few years ago when an American named George P. Mitchell defied the skeptics and fought his opponents to extract natural gas from shale rock. The method he and his team used to release the trapped gas, called fracking, has paid off dramatically. In 2000, shale gas represented just 1 percent of American natural gas supplies. Today, it is over 30 percent and rising.



Up until 2009, the US was the largest importer of Qatari LNG. However, the discovery of development of shale gas has caused a glut in the US. The Qatari LNG imports are no longer needed and the gas prices have plummeted in the United States. Qatari oil minister was quoted by Bloomberg as saying that 60 percent of Qatari LNG exports “moved to the east” in 2009.



Increased production of gas from shale in the US has created a huge new supply, pushing down gas prices from $13/BTU (million British thermal units) four years ago to just $2/BTU today, even as the price of oil has more than doubled. By contrast, the Iran pipeline gas formula links the gas price to oil prices. It means that Pakistan will have to pay $12.30/BTU at oil price of $100/barrel, and a whopping $20/BTU for gas if oil returns to its 2008 peak of $150/barrel.

To encourage investment in developing domestic shale gas, Pakistan has approved a new exploration policy with improved incentives as compared with its 2009 policy, a petroleum ministry official said recently. Pakistan Petroleum is now inviting fresh bids to auction licenses to explore and develop several blocks in Dera Ismail Khan (KPK), Badin (Sind), Naushero Firoz (Sind) and Jungshahi (Sind), according to Oil Voice.



Under the new policy, exploration companies will be offered 40-50% higher prices for the extracted gas compared with the $4.26/Btu price announced in Exploration and Production Policy 2009. Companies which succeed in recovering gas from tight fields within two years will get 50% hike over the 2009 price and if it takes more time they will get only a 40% hike on the 2009 price. As an added incentive, the leases for the fields will now be for 40 years instead of 30 in the 2009 policy, the official said.

Even with the higher prices for the tight gas offered to the exploration companies, it is estimated that Pakistan will have to pay a maximum of $6.50/Btu for the gas compared with $12.30/Btu for gas imports, according to a report by Platts.

Pakistan should ask the Obama administration to help fund and develop shale gas in exchange for abandoning the Iran-Pakistan gas pipeline. It will be a historic win-win for both nations, as historic as the US aid to Pakistan for Green Revolution in 1960s. Pakistanis will get relief from the severe energy crisis which affects almost everyone in the country. The US energy companies will create thousands of American jobs and make a huge profit in the process with the potential bonus of largely neutralizing the strong anti-American sentiments in the country.

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Pakistan on Goldman's BRIC+ N11 Growth Map

In his recently published book "The Growth Map", Goldman Sachs' Jim O'Neill of BRIC fame has reiterated Pakistan's long term growth prospects as part of the Next 11 (N-11) group of nations which includes Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, Turkey, South Korea, and Vietnam.



Goldman Sachs has recently launched an N-11 equity fund (GSYAX) to enable investors to take advantage of growth in the Next-11 group of nations.

Answering a reporter's question about the growth prospects of GCC (oil-rich nations of Gulf Cooperation Council) at a recent investment conference in Dubai, he said: "Some GCC countries are well placed to be hubs for the BRIC and N-11-influenced world. I often think of Dubai as a kind of N-11 center, even the capital of the N-11 world, given its business adjacency to Egypt, Pakistan, Iran, Turkey, and, of course, India and Russia."

While the primary criterion used by Goldman Sachs for membership of a developing nation in BRIC and N-11 is the size of its population, the firm also considers what it calls Growth Environment Score (GES) of each nation. The 13 variables which make up growth environment score are inflation, fiscal deficit, external debt, investment rate, openness of the economy, penetration of phones, penetration of personal computers, penetration of internet, average years of secondary education, life expectancy, political stability, rule of law and corruption.

Goldman Sachs has given Pakistan a low GES score which puts the country among the bottom third of Next-11 nations. However, this score is rising, and Goldman forecasts that Pakistan will be among the top 20 world economies by 2025.



It seems to me that Goldman Sachs' assessment of Pakistan's growth prospects are too heavily influenced by the current crises the country faces. It is too conservative and does not fully reflect its future potential based on the nation's economic history over the last 64 years. For example, Goldman assumes a future growth rate that is less than the average of over 5% a year which Pakistan has seen over the last 64 years.



My view is that Goldman Sachs' forecast should fully reflect the fact that Pakistan's per capita GDP increased by 60% to $3,000 in the last decade. Even if it is assumed that there is no demographic dividend and the country's gdp growth rate will not accelerate, its per-capita income should still rise to nearly $20,000 by 2050, well above the Goldman Sachs' forecast of $15,066.00.

It is unrealistic to assume that Pakistan's economy will not benefit from its very young population. With half of its population below 20 years and 60 per cent below 30 years, Pakistan is well-positioned to reap huge demographic dividend, with its workforce growing at a faster rate than total population. This trend is estimated to accelerate over several decades. The average Pakistanis are now taking education more seriously than ever. Youth literacy is about 70% and growing, and young people are spending more time in schools and colleges to graduate at higher rates than their Indian counterparts in 15+ age group, according to a report on educational achievement by Harvard University researchers Robert Barro and Jong-Wha Lee. Vocational training is also getting increased focus since 2006 under National Vocational Training Commission (NAVTEC) with help from Germany, Japan, South Korea and the Netherlands.

The fact is that equity markets in Pakistan have already produced much higher returns than BRICs' markets have over the last decade.

Pakistan's main stock market ended 2010 with a 28 percent annual gain, driven by foreign buying mainly in the energy sector, despite concerns about the country's macroeconomic indicators after summer floods, according to Reuters. Although it was less than half of the 63% gain recorded in 2009, it is still an impressive rise in KSE-100 index when compared with the performance of Mumbai(+17%) and Shanghai(-14.3%) key indexes. Among other BRICs, Brazil is up just 1% for the year, and the dollar-traded Russian RTS index rose 22% in the year, reaching a 16-month closing high of 1,769.57 on Tuesday, while the ruble-based MICEX is also up 22%.

Pakistan's key share index KSE-100 dropped about 5% in 2011, significantly less than most the emerging markets around the world. Mumbai's Sensex, by contrast, lost about 25% of its value, putting it among the worst performing markets in the world.

Given the historical economic data I have shared in this post, I remain optimistic that Pakistan can and will easily beat Jim O'Neill's current forecast in the coming decades.

Related Links:

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Branchless Mobile Banking Takes Off in Pakistan

Spurred by a favorable regulatory and technology environment, Pakistan is witnessing dramatic growth in branchless banking, according to a March 14, 2012 report by the State Bank of Pakistan.

Here are some of the key indicators contained in the State Bank report:

1. Number of branchless banking accounts jumped 40 percent to 929,184 in October-December 2011 (Second quarter of FY2011-12) from the preceding three month period.

2. Total amount of branchless banking deposits surged 169 percent to Rs 503 million in Oct-Dec 2011 from July-September 2011.

3. Number of branchless banking transactions during the second quarter rose 30 percent to 20.6 million while the value of transactions showed a growth of 35 percent to reach Rs. 79,410 million.

4. Branchless banking agents network in Pakistan grew by 16 percent in the second quarter (October- December 2011) of current fiscal year 2011-12 to reach 22,512 agents covering the entire length and breadth of the country.

5. The average size of branchless banking transaction was Rs 3,855 while the average number of daily transactions was 228,855.

6. Bills payment and mobile phone SIM card top-ups remained the dominating activity in the quarter under review with 53 percent share in total number of transactions, followed by fund transfers and deposits with share of 39 percent and 8 percent respectively.

7. While P2P payments remained the most popular mechanism with 74pc share in the total funds transfer, mobile branchless banking is penetrating all areas of payments such as utility bills, Government-to-Person (G2P) and Person-to-Person (P2P) payments while scaling up other services relating to deposits and loans.

A 2011 report by World Bank's Consultative Group to Assist the Poor (CGAP) describes Pakistan's mobile banking as "a unique laboratory for innovation". Here's an excerpt from it:

"Branchless banking regulation was first introduced in Pakistan in April 2008. From the beginning, the State Bank of Pakistan (SBP) has taken a constructive regulatory approach by providing clear guidance and being willing to listen to businesses and adjust regulation where necessary. A variety of business models is emerging that involves a wide range of players, including mobile network operators (MNOs), technology companies, and even a courier business. (Notably, a bank remains ultimately liable to SBP in all the models.) The government is further encouraging innovation by piloting the use of branchless banking to distribute government payments. Taken together, these factors make Pakistan a unique laboratory for innovation."



In a country where only 22% of the population owns bank accounts and more than 62% owns mobile phones, mobile banking is proving to be the fastest way to promote financial inclusion considered by experts to be essential to lift people out of poverty. Benefits include easy access for rural customers to banking services through agents in villages without bank branches, better documentation of the economy, enlarging of the tax-base and efficiency of economic transactions.

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Khan Academy Draws Pakistani Visitors

The revolutionary Khan Academy is a brainchild of Bangladeshi-American Salman Khan. It is growing in popularity among Pakistanis wishing to take advantage of "Free World Class Education" offered online via short 10-15 minute videos. The subjects range from math, physics, chemistry and biology to astronomy, history, economics, finance, engineering and medicine. Khan counts Microsoft founder Bill Gates among his fans and students. Gates has described Sal Khan as his favorite teacher, and Gates Foundation has provided funding to enable Khan Academy to grow.



Former hedge fund analyst known as Sal Khan in Silicon Valley, the Academy founder has an MBA from Harvard Business School and three Bachelors degrees in Math, Electrical Engineering, and Computer Science from MIT. Here's how Khan explains on his website why he decided to become a teacher to the world: “A lot of my own educational experience was spent frustrated with how information was conveyed in textbooks and lectures. I felt like fascinating and intuitive concepts were almost intentionally being butchered into pages and pages of sleep-inducing text and monotonic, scripted lectures.”

The number of unique visitors to Khan Academy has grown fourfold from about a million a month in 2010 to 4 million in December, 2011. Bulk of the hits to the educational website still come from the United States, but the latest Alexa traffic data shows that Pakistan is among a handful of countries (shown in green on the map) which are bringing a growing number of learners to it.





Khan's ties to Pakistan go beyond Pakistani visitors to his online academy; his wife is from Karachi, and the man in charge of translating Khan's videos to Urdu and other foreign languages is former Pakistani president's son Bilal Musharraf who lives in Silicon Valley.

Pakistan is ranked fourth in the world for expansion in broadband Internet access which is fueling growth in traffic to video sites like Khan Academy. Planned Urdu translations of video tutorials will only add to the already increasing traffic.

Bilal Musharraf told Pakistan's Dawn newspaper that the goal is to have 1000 videos ready in 10 different languages in a year or two. And the project is mostly volunteer-driven. Khan academy offers best practices of “how-to-dub or re-do Sal’s existing videos, and volunteers take it from there. At present, someone in Japan is working on an Indonesian playlist and engineering students in Saudi Arabia are working on an Arabic playlist. In a matter of months, hundreds of videos have already been translated. You can now learn the Khan way in Spanish, Portuguese, Russian, Arabic, Bengali, Cantonese, French, German, Hindi, Indonesian, Japanese, Korean, Mandarin, Polish, Sinhalese, Tamil, Thai and Urdu.

Sal Khan's efforts are reinventing education and making quality teaching accessible to global population of students everywhere, including developing nations like Pakistan. One example of innovation inspired by Khan can be seen at Los Altos schools in Silicon Valley, CA, as shown by a recent CBS 60 Minutes segment.

"There are no textbooks and no teacher lecturing at the blackboard. Instead, students watch Khan videos at home the night before to learn a concept, then they come to class the next day and do problem sets called "modules," to make sure they understand. If they get stuck they can get one-on-one help from the teacher. Less lecturing, more interaction. What you think of as homework you do at school, and school work you do at home. It's called "flipping the classroom"..."

While anyone can benefit by watching Khan Academy video tutorials online any time and anywhere, it's also important to integrate Khan's video lessons as part of the classrooms learning in a way that is currently being piloted by Los Altos schools.

Here's a video clip from Khan Academy in Urdu:



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Pakistani Entrepreneurs Thrive Against All Odds

Growing at more than 55% a year and collectively employing 41,000, the winners of Pakistan Fast Growth 100 contest were announced by Harvard-based Allworld Network last week. Of these 100 entrepreneurial companies, 70 also qualified for the Arabia500, putting Pakistan in second position after Turkey with 117 winners.



AllWorld was co-founded by Harvard Business School Professor Michael E. Porter, Deirdre M. Coyle, Jr., and Anne S. Habiby with the aim to bring visibility to growing companies in emerging markets to increase their odds of success. Any private, non-listed, company with rapid sales growth and an ability to demonstrate results with audited financial statements was invited to compete for a spot on the inaugural Arabia500 which includes Pakistan and Turkey in addition to the emerging economies of the Middle East and North Africa.

Each Pakistan entrepreneur ranked in the top 100 has grown an average of 40 percent annually between 2008 and 2010, created an average of 200 jobs per company, and is succeeding in industries from web technology to transportation, food to textiles, and construction to consulting, according to an AllWorld press release. With an average age of 42, nearly all of them plan to establish another entrepreneurial venture within the next two years.

Dr Abdul Hafeez Shaikh, Pakistan’s Minister for Finance, is quoted as saying that “the strong performance of Pakistani companies in Arabia500 illustrates that in spite of the challenges there continues to be strong business and investment opportunity in Pakistan. Pakistani companies in Arabia500 are surfacing new horizons for growth and quickening the pace of economic development and regional integration.”

The fastest growing company from Pakistan, E2E Supply Chain Management, grew at nearly 2000 percent between 2008 and 2010, with 2010 revenues above $50 million and 297 employees. Of the Arabia500 winners from 15 countries, E2E was the third fastest growing. Taking the second spot for Pakistan was Exceed Private Limited with a growth rate of 1,320 percent and 90 employees, and in sixth position overall on the Arabia500.

Pakistan also had the highest number of women entrepreneurs on the Arabia500, and Luscious Cosmetics of Pakistan topped the list of the fastest growing Arabia500 women entrepreneurs with growth of 392 percent and 82 employees.

Complimenting the Pakistan100 winners at the Awards Ceremony held in Lahore, AllWorld co-founders Deirdre Coyle and Anne Habiby urged the Pakistan100 to go further “When no one expected much, the Pakistan100 broke records for growth, transparency and competitiveness. They are the personification of what every country dreams of having. Now raise the bar higher and build Pakistan as a leading entrepreneurial nation.”



A recent World Bank report titled "More and Better Jobs in South Asia" said that 63% of Pakistan's workforce is self-employed, including 13% high-end self-employed. Salaried and daily wage earners make up only 37% of the workforce.

Even if one chooses to consider just the 13% who are high-end self-employed as entrepreneurs by choice, it puts Pakistanis among the most entrepreneurial people in the world.

The winners of Pakistan100 entrepreneurs are truly inspirational. They epitomize the Pakistani nation's extraordinary resilience and reaffirm that Pakistan's best days are ahead.


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Pakistan in Supercomputing Top 200

NUST's new 132 Teraflop supercomputer has catapulted the Pakistani university's supercomputing center to the elite Top 200 list of supercomputing sites in the world, a list dominated by a handful of industrialized nations. National University of Science & Technology's supercomputer is named ScREC after its supercomputing research and education center. The cluster consists of 66 nodes equipped with a total of 30,992 cores. The NUST site breaks down the components as follows: 32 dual-socket quad-core nodes, 32 NVIDIA GPUs, a QDR InfiniBand interconnect, and 26.1 TB of storage.



ScREC will be be deployed for research in the areas of computational biology, fluid dynamics, image processing, cryptography, medical imaging, geosciences, finance, and climate modeling. Specifically, RCMS is currently developing a direct simulation Monte Carlo (DSMC) method for subsonic nanoscale gas flows. Other projects include external flow analysis of heavy vehicles to reduce fuel consumption, and numerical investigation on performance and stability of axial compressors used in aircraft engines and gas turbines.

In his recent book Turing's Cathedral, computer historian George Dyson explores how the digital universe has exploded in the aftermath of World War II. The proliferation of both codes and machines has paralleled two historic developments: the decoding of self-replicating sequences in biology and the development of the hydrogen bomb, with the most destructive and the most constructive of human endeavors occurring at the same time.

In the decades after World War II, computers have become an absolutely essential tool for research in a variety of fields ranging from weapons to weather and life sciences.

In particular, the distinction between computing and biology has begun to blur in a way that will have enormous benefits for human health, productivity and longevity. Pakistan is among a handful of nations where there is significant research underway in genomics and biotechnology which requires substantial computing power.

Researchers at the Panjwani Center for Molecular Medicine and Drug Research (PCMD) in Karachi collaborated with Beijing Genomics Institute (BGI) to complete gene mapping of Dr. Ata-ur-Rahman, according to SciDev. Dr. Rehman, President of Pakistan Academy of Sciences, volunteered himself for the project.

Pakistan has significant research efforts in seed and livestock development at various agriculture universities, institutes and departments. Pakistani researchers and scientists are currently collaborating in life sciences with their counterparts in the US and China. A number of crops like cotton, rice, wheat, corn, potato, ground nut are being developed locally or with the collaboration of Chinese and US seed companies.

Currently, there are over two hundred life sciences departments which are engaged in genomics and biotechnology research at various Pakistani universities, and they all can benefit from access to modern high-speed supercomputing.

Pakistan has been a Science Watch rising star for several years for research papers in multiple fields, particularly in biological sciences. Publications by Pakistani research teams have increased four-folds in the last decade, and the majority of publications from major universities are in life sciences.

Let's hope that there will be many more high-speed supercomputing sites established at various universities and research institutes to meet the growing demand for computing power by Pakistani researchers.

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Should Pakistan Ignore "Washington Consensus" on Free Trade?

East Asian experience has some important lessons for Pakistan as the country embraces the western prescriptions of democracy and free trade. It's particularly important to recall these lessons now in view Pakistan's decision to open unrestricted trade with India whose major industrialists like Tata and Birla have greatly benefited from protectionist policies to scale up and gain experience.

The East Asian nation of South Korea has become a great model of economic success for the developing world. Back in 1960s, its annual per capita income was around $80, less than half of Ghana's at the time. Today, it stands at $30,000, comparable to that of some wealthy European nations. For most of this period, the people of South Korea have ignored the Washington consensus, the western prescription on economy and politics, to achieve this miraculous progress.



In 1960s and 1970s, Korea was led by military ruler General Park Chung-Hee who put in place the policies which helped Koreans realize their great potential. President Park made huge investment in infrastructure, health and education. In addition, South Korean analyst Ha-Joon Chang says that the Korean government "practiced many policies that are now supposed to be bad for economic development: extensive use of selective industrial policy, combining protectionism with export subsidies; tough regulations on foreign direct investment; active, if not particularly extensive, use of state-owned enterprises; lax protection of patents and other intellectual property rights; heavy regulation of both domestic and international finance."

Pakistan, too, was ruled by a military dictator General Ayub Khan in a period labeled by Pakistani economist Dr. Ishrat Husain as "the Golden Sixties". General Ayub Khan pushed central planning with a state-driven national industrial policy. In fact, South Korea sought to emulate Pakistan's development strategy and copied Pakistan's second "Five-Year Plan".



Here's how Dr. Husain recalls Pakistan of 1960s:

"The manufacturing sector expanded by 9 percent annually and various new industries were set up. Agriculture grew at a respectable rate of 4 percent with the introduction of Green Revolution technology. Governance improved with a major expansion in the government’s capacity for policy analysis, design and implementation, as well as the far-reaching process of institution building. The Pakistani polity evolved from what political scientists called a “soft state” to a “developmental” one that had acquired the semblance of political legitimacy. By 1969, Pakistan’s manufactured exports were higher than the exports of Thailand, Malaysia and Indonesia combined. Though speculative, it is possible that, had the economic policies and programs of the Ayub regime continued over the next two decades, Pakistan would have emerged as another miracle economy."

South Korea's Chang has exposed the hypocrisy of the West by explaining that the "G7 was always remarkably reluctant to recommend these (South Korea's) "heterodox" policies and insisted that the "Washington consensus" package of opening up, deregulation and privatization was the right recipe for everyone. When confronted with the Korean case, Washington consensus supporters tried to brush it off as an exception. However, the history of take-offs in most of the G7 countries – especially Britain, the US, Germany, France and Japan – is far closer to the Korean model than is commonly thought. The "unorthodox" policies used by Korea and almost all of today's rich countries need to be seriously considered in any discussion on development options."

Since the great success achieved by South Korea and other Asian Tigers in the latter part of the 20th century, China has become the latest example to have followed the East Asian development model with great results for what is now being dubbed the Asian century. Each of these nations has done it by ignoring the Washington Consensus about democracy, free markets and free trade.

As Pakistan embarks on a new course in trade, it's important for its leadership to recognize the wide gap between the theory and practice of the "Washington Consensus" to effectively safeguard its economy, domestic industries and jobs for Pakistanis to develop and prosper in the 21st century.

Related Links:

Haq's Musings

Ishrat Husain: Structural Reforms in Pakistan's Economy

Pakistan's Bilateral Trade Agreements

Role of Politics in Pakistan Economy

History of Pakistan Economy 1947-2010

Pakistan's Economic Performance 2008-2010

Incompetence Worse Than Corruption in Pakistan

Pakistan's Circular Debt and Load Shedding

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

India Pakistan Contrasted 2010

Pakistan's Foreign Visitors Pleasantly Surprised

After Partition: India, Pakistan and Bangladesh

The "Poor" Neighbor by William Dalrymple

Pakistan's Modern Infrastructure

Video: Who Says Pakistan Is a Failed State?

India Worse Than Pakistan, Bangladesh on Nutrition

UNDP Reports Pakistan Poverty Declined to 17 Percent

Pakistan's Choice: Talibanization or Globalization

Pakistan's Financial Services Sector

Pakistan's Decade 1999-2009

South Asia Slipping in Human Development

Asia Gains in Top Asian Universities

BSE-Key Statistics

Pakistan's Multi-Billion Dollar IT Industry

India-Pakistan Military Comparison

Food, Clothing and Shelter in India and Pakistan

Pakistan Energy Crisis

IMF-Pakistan Memorandum of Economic and Financial Policies

Genomics & Biotech Advances in Pakistan

Complete gene mapping of a Pakistani citizen by Human Genome Project in Karachi has put the country on a very short list of nations which have accomplished this scientific feat. To assess the state of genomics and biotechnology in Pakistan, let's take a look at what is happening in the country in this field:

1. Researchers at the Panjwani Center for Molecular Medicine and Drug Research (PCMD) in Karachi collaborated with Beijing Genomics Institute (BGI) to complete gene mapping of Dr. Ata-ur-Rahman, according to SciDev. Dr. Rehman, President of Pakistan Academy of Sciences, volunteered himself for the project.

2. More than two hundred life sciences departments are engaged in genomics and biotechnology research at various Pakistani universities, according to a report in The News.

3. Pakistan has been a Science Watch rising star for several years for research papers in multiple fields, particularly in biological sciences. Publications by Pakistani research teams have increased four-folds in the last decade, and the majority of publications from major universities are in life sciences.

4. Pakistan began producing biotechnology based pharmaceuticals in 2009. The first of these plants was set up by Ferozesons in Lahore to produce interferon for treatment of hepatitis, according to Nature magazine.

5. Pakistan has significant research efforts in seed and livestock development at various agriculture universities, institutes and departments. Pakistani researchers and scientists are currently collaborating in life sciences with their counterparts in the US and China. A number of crops like cotton, rice, wheat, corn, potato, ground nut are being developed locally or with the collaboration of Chinese and US seed companies.

6. Post-doctoral research on biotechnology and related agricultural issues is being funded under a Young Scientists Program, as part of the USDA-funded sustainable endowment to support the Agricultural Linkages Program at the Pakistan Agricultural Research Council (PARC). An MOU for $7.5 million has been signed under the Pakistan-U.S. Science and Technology Program between Pakistan’s Higher Education Commission (HEC) and the Ministry of Science and Technology and the U.S Agricultural Research Service (ARS) for scientific collaboration and capacity building of scientists.

7. National Biosafety Committee has allowed stacked gene (Cry 1A and Cry 2Ab) in cotton developed by Center of Excellence in Molecular Biology (CEMB), Lahore. Several other stacked gene products are in the pipe line and will be put for approval soon.

8. Pakistan is building the capacity of its young scientists in the legislative, regulatory, and policy areas related to agricultural biotechnology, biosafety and nanotechnology. A small project has been funded in Agricultural Nanobiotechnology related to the use of nanoparticles for plant genetic engineering utilizing a Bio-Rad biolistic gene gun at National Institute for Biotechnology and Genetic Engineering (NIBGE), Faisalabad.



While the universities have stepped up their research programs in life sciences as a result of the higher education reforms undertaken in the last decade, it's still a major challenge to translate the academic work into tangible benefits in terms of improved human health and higher crop and livestock yields in the country.

Part of the challenge stems from the need for regulatory framework for introducing biotech products and technology for humans, plants and animals. To make progress on this front, Pakistan has ratified the Cartagena Protocol of Biosafety (CPB) with a framework for handling GMO’s. The proposed regulatory guidelines are built upon on a three-tier system composed of the National Biosafety Committee (NBC); a Technical Advisory Committee (TAC); and Institutional Biosafety Committees (IBC), according to USADA GAIN report on Pakistan.

In the regulatory framework, the Secretary of the Ministry of Environment heads the NBC, and is responsible for oversight of all laboratory work and field trials, as well as authorizing the commercial release of GM products. The three monitoring and implementing bodies administer enforcement of the National Biosafety Guidelines. The IBC may make recommendations to the NBC regarding the awarding of exemptions for laboratory and fieldwork related to products of bioengineering. These recommendations may be accepted, and formal approval granted, if sufficient information and grounds exist to consider the risk as being minimal or non-existent. After permission for deregulation is granted by the NBC, approval can still be withdrawn provided sufficient technical data and other evidence later becomes available that warrants a review. The other important ministry dealing with production and release of GM crop is Ministry of Food and Agriculture (MINFA). The ministry developed several Standard Operating Procedures (SOP’s) for handling of cases of import/approval/release of GM crops; however, all these have yet to be promulgated.

Genomics and biotechnology have great potential to fight diseases and help improve human lives and increase productivity. So far, the benefits of these advances have accrued mostly to the rich countries because they are driven by market incentives. The time has now come for Pakistan to take advantage of such technological advances. Take crop yields as an example. Wheat is the staple of Pakistan and planted on the largest acreage. It contributes about three percent to the GDP. The national average yield is about 2.7 tons per hectare, far below the average in European countries such as France, Germany and the United Kingdom where they are above seven tons per hectare, according to recent Op Ed by Dr. Ata-ur-Rehman.

There is significant opposition to the use of GM seeds in South Asia today. In his book The Rational Optimist, author Matt Ridley recalls that there was similar resistance in 1960s to Nobel Laureate Norman Borlaug's Mexican dwarf wheat. Ridley writes about how Borlaug's efforts helped spark the Green Revolution in India and Pakistan. Ridley argues that it was Borlaug's work with his new seeds and chemical fertilizer that disproved Paul Ehrlich's claim in his book The Population Bomb that India would never feed itself.

Pakistani farmers have already begun planting biotech cotton since 2011. With 2.6 million hectares of Bt cotton planted in 2011, Pakistan ranks 8th in terms of the area for biotech crops in the world, according to International Service for the Acquisition of Agri-Biotech Applications (ISAAA) report. US ranks number 1, Brazil 2, Argentina 3, India 4, Canada 5, China 6, Paraguay 7 and Pakistan 8. South Africa 9 and Uruguay 10 round out the top 10. Pakistan has had a bumper crop of cotton in 2011-2012 mainly because of the planting of Bt seeds.



While extra caution is absolutely warranted before introducing genetically modified organisms in the environment, an irrational fear of the unknown would be unacceptable in a country like Pakistan with its dwindling water resources and a growing young population that needs to be fed, clothed, educated and nurtured. Clearly, the technology can help cure diseases and lead to development of new drought-resistant seed varieties producing high crop yields.

Related Links:

Haq's Musings

Pakistani Students Studying Abroad

Pakistan Manufacturing Tablet PCs

Military's Role in Pakistan's Industrialization

Pakistan's Demographic Dividend

Pakistan's Defense Industry Goes High-Tech

Pakistan Launches UAV Production Line at Kamra

Pakistan Going Mainstream in IT Products

Pakistan Launches 100 Mbps FTTH Access

Pakistan's $2.8 Billion IT Industry

Pakistan's Software Prodigy

Developing Pakistan's Intellectual Capital

Pakistan Graduation Rates Higher Than India's

Pakistan Conducting Research in Antarctica

Pakistani Scientists at CERN

Higher Education Reforms in Pakistan