No takers for Pakistan

By Amir Zia
Money Matters
The News
November 14, 2011

Pakistan’s reputation as the hub of global extremism and terrorism, its inconsistent economic policies, poor governance and rampant corruption – all have contributed to keeping foreign investment away from the country

Some of the once most lawless, poor and backward African countries have emerged as new zones of economic development and growth. Countries including Rwanda, Mozambique, and Nigeria are now among the sought after destinations for global investment and joint ventures. In South Asia, India is seen as an “economic power house” of the 21st Century. Indians now appear more interested in seeking joint ventures and investment opportunities abroad rather than trying to attract foreign money into their country. Many Indian business tycoons appear on a buying spree of world famous brands and companies. They are making their mark in the world and Indian economic success and growth is equated with China which is all set to overtake the United States as the world’s biggest importer.
Talk about the much smaller economies of South Asia, including Sri Lanka and Bangladesh. They too are witnessing an upward swing. These countries are pushing their exports and attracting foreign investment. The economies of Southeast Asia, including Malaysia, Vietnam and Indonesia, also have an economic success story to tell.
The other emerging economies – from the Middle East to Latin America – are all focusing on reaping the benefit of globalisation, economic integration, inter-dependence and regional trade. Where does Pakistan – the world’s lone Muslim nuclear power with a might army – stands in this economic race? Does our country – with a vast market of around 180 million people -- emerge on the radar of foreign investors? And most importantly, is our ruling elite serious in transforming Pakistan into an economic and trade hub? Lip service and wish-lists apart, are there any serious moves to push the country back into a high-growth trajectory?
The recent Commonwealth Business Forum (CBF), held in Perth, not just underlined Pakistan’s irrelevance when it comes to big business and money, but also exposed the ineptness and lack of will of our government and its institutions in pushing the country’s economic agenda.
The CBF provided Pakistan a rare opportunity to showcase itself as a trade and investment destination on such a big platform where more than 1,400 business and government leaders from 54 countries, including 16 heads of governments, participated over the three days – October 25-27.
The CBF’s country-session on Pakistan, held on October 27, proved an eye-opener as there was a clear lack of interest in the economic and investment opportunities which the country wants to offer. The session was attended by less than 50 people – almost half of them Pakistanis. Only a handful of foreign delegates, some of them from neighbouring India and a few others from Africa, attended the session. The Indians were there apparently more as a goodwill gesture or out of curiosity, while African delegates attended the session on the last minute urgings of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) President Senator Haji Ghulam Ali, who was upset at the low turnout and empty seats of the huge hall.
Minutes before the start of the Pakistan session, dozens and dozens of delegates had come out of the same hall after attending a similar session on Mozambique. Other country-specific sessions, including those of India, Malaysia and Namibia, attracted much bigger crowds.
This signifies the lack of interest among foreign investors and businesspeople in Pakistan which is now seen as a forgotten story, though the country was among the best performing economies of Asia till 2007.
Pakistan’s reputation as the hub of global extremism and terrorism, its inconsistent economic policies, poor governance and rampant corruption – all have contributed to keep foreign investment away from the country.
The numbers are telling. From the highs of 8.42-billion-dollar net foreign investment in financial year 2007, it slumped to a meagre1.91 billion dollars in FY 2011.
The problem is compounded by the fact that there appears no drive and no vision among the economic managers to change the perception about Pakistan for the better. The CBF proved one of this missed opportunities in which the government officials, including those affiliated with Pakistan’s embassy in Australia and those who frequently take joy-rides on the national exchequer, hardly made any effort to push and market this session about their country. All was left up to the CBF organisers, who could provide the platform and announce the event, but expecting them to lure participants to the hall was perhaps too much to ask for.
Indeed, Pakistani speakers comprising Abdul Razak Dawood and Mian Mohammad Mansha, two of Pakistan’s leading business minds, along with Tariq Puri of the Trade Development Authority of Pakistan, pleaded Pakistan’s case well, but their show was in front of mostly empty chairs.
The participation of businesspeople from Pakistan also remained slim – just half-a-dozen. This was an event where, according to the organisers, around 10 billion dollars worth of business and investment deals were signed. Countries much smaller than Pakistan – both in terms of population and size of the economy – had much bigger and more aggressive participation at the CBF, which is one of the top three international forums of the world.
In most formal and informal interactions at the CBF, investors and officials from other countries were more interested in discussing al Qaeda, the Taliban, security issues and the crime rate in Pakistan. Is Pakistan drifting toward anarchy? Are the extremists in a position to take over the country or parts of it? Is the army sponsoring the Taliban? Do you really believe that no one in your military establishment knew about Osama bin Laden? Tell us about your president…? While some of these questions appear bizarre given they are about a country which has suffered the most due to terrorism, yet they showed how the world sees Pakistan. Such questions also underscore our inability and failure in changing the perception and our reality for the better.
In today’s world in which the buzzwords remain investment, trade and economic growth, Pakistan is hardly mentioned on international forums or if mentioned, it is for all the wrong reasons.
How can Pakistan and its economy be brought on the front-burner globally? For this, our ruling elite must bring the economy to the forefront on the domestic front. This is one of the biggest challenges the country faces today, but no one seems ready to throw down the gauntlet.

Destined to fail

By Amir Zia
Weekly Money Matters
The News
October 24, 2011

There is a need to build a political consensus among all the major stakeholders, especially the political parties, on the vital issue of energy conservation.

The federal cabinet’s October 12 energy conservation plan has been off to a rocky start. Shopkeepers are angry and threatening protests and shutter downs if forced to close shops early. They want to keep to business as usual, which for many of them means starting the day late at around 11 a.m. or 12 noon and keeping shutters open till past midnight -- even in times of an acute electricity shortage. In big urban centres, including Karachi and Lahore, late night shopping remains a trend for the past many decades now.
The small and big chambers of businesspeople and industrialists -- from Karachi to Peshawar -- are also unanimously opposing the two weekly days off. They say it hurts productivity, hits exports and general business activities at a time when the overall economy remains sluggish and sentiments negative. They want low power tariffs and an uninterrupted supply, which appear fair demands on paper, but unfortunately beyond the powers of this government to fulfil. The magic wand quick-fix solutions are only the stuff fit for fairy tales and not of the troubled world we live in.
The major opposition parties and provincial governments say that the centre announced the controversial plan without consultation or taking them into confidence. They appear in no mood to cooperate.
Yes, the overwhelming response to the cabinet’s decision of reintroducing two weekly days off, closure of shops at sunset and staggering holidays in the industrial sector to reduce power consumption during peak hours, remains of disapproval and defiance.
The only section of the population that appears contented and happy with the plan are the government and private-sector employees, including those of banks, who now get an extra day off on Saturday. They can sleep longer, relax a bit more and have time with their families or in front of the television -- depending on the bent of mind. But the harsh fact remains that the satisfaction of these fortunate few is not going to end the energy woes of Pakistan.
All the bickering, the divide and discord over the federal cabinet’s energy management programme indicates that like the past, it is destined to fail again. The coming winters are likely to be tougher for most Pakistanis as massive energy shortages, including that of natural gas and of hydro-power, will hit every section of society.
The struggling government and its institutions lack the capacity and ability to address the complex challenges of the energy sector in the short- to mid-term even if from today every decision and step they take remains 100 percent professionally sound and honest.
There are no quick fixes to the complex problem of massive circular debt which hovers at around 300 billion rupees. This has been the most significant factor behind the current electricity woes in the country which has sapped the liquidity of major companies operating in the energy sector -- from upstream to the downstream institutions. No wonder that despite having a generation capacity, the output of power plants remains low as one institution fails to clear the dues of the other.
The non-payment of dues, massive electricity theft and land and line losses aggravate this problem.
The government does not have the kind of political will which can take decisive steps against the parasitical vested interests nor does it have the resources needed to revamp the rickety old distribution network of the power companies.
The high and volatile international oil prices also remain beyond the government’s control, while the plans to import natural gas from the Central Asian countries and Iran still remain a pipe-dream.
What could be the possible options in this scenario?
Of course, the government has to plan for the long-term, which means at least giving the authorities 5 to 10 years to complete the high investment projects if they start work on them from today. This includes giving a fresh impetus to the exploration of new hydrocarbon reserves and exploiting the available ones including Thar coal, which remains easier said than done given the high risk of investment and the current security environment in the country. But still this is one avenue which offers hope over the next 5 to 10 years.
Construction of new mega dams is not just a high investment game but a political hornet's nest and a big environmental issue. A dam can take years and years to materialise even if hypothetically, political parties build a consensus on this tricky issue.
Import of multi-billion dollar natural gas through pipelines from Iran or Central Asia is tied to bigger regional and geo-political developments. It also remains a prospect for some distant future.
To ease the energy problems in the near term, the government has to start with restructuring of the power sector, fighting the menace of the deep-rooted corruption, electricity theft and controlling the distribution losses as well as to take measures to conserve energy.
The federal cabinet’s October 12 announcement may be a good plan on paper for energy conservation, but it remains poorly executed. However, this does not mean that the idea should be abandoned.
The energy poverty of Pakistan can be addressed to an extent in the near-term by educating people about the need to make the best use of sunlight and an intelligent and prudent use of natural gas and electricity.
There is a need to build a political consensus among all the major stakeholders, especially the political parties, on the vital issue of energy conservation. Once there is a consensus, the authorities need to implement the plan in all fairness and without any wheeling and dealings with interest groups.
Pakistani state institutions have a poor record of giving concessions to pressure groups. The more vocal or violent the group is, the bigger concession it can extract from the state. This needs to be changed and the state must establish the rule of law. In the case of the energy conservation drive, it simply means applying already framed laws which require shops to shut businesses at sunset and start their day early. This is practiced all over the civilized world. Why can’t it happen in Pakistan? Why we are not ready to give up our bad habits of starting the day late?
The shutter power managed to doom such energy conservation drives in the past as well. Will they be allowed to succeed again?
The major political parties, some of whom enjoy a firm vote bank among shopkeepers and traders, need to rise above their petty politics and self interest and help the government implement this plan. The opposition Pakistan Muslim League Nawaz and the two government allies – the Muttahida Qaumi Movement and the Awami National Party -- can play a crucial role in implementing this plan.
The government also needs to convince the media and other leaders of public opinion about the merits of energy conservation. But before it does so, it needs to take symbolic steps of conserving energy itself. This may include switching off air-conditioners at the Parliament House where even during the hot summers of Islamabad, lawmakers appear in imported suits and jackets. Why can’t these public representatives dress up in line with the Pakistani climate rather than donning clothes which suit cooler European climates more?
When the people see the ruling elite pitching their share in energy conservation -- no matter how symbolic -- they will also not hesitate in doing what is required of them.
The recent bouts of violence in several cities of Punjab and the past energy riots in Karachi show that the energy crisis has all the potential to transform into an explosive political issue that can further shake this already polarised and divided state. The energy issue is also directly linked to the economy. The wheels of production must not stop. That needs to be given top priority. Until the country seeks long-term solutions to bridge the energy deficit, energy conservation is the only way through which we can mitigate the intensity of this crisis. We must not hesitate in making the right choice -- no matter what the cost.