Showing posts with label infrastructure. Show all posts
Showing posts with label infrastructure. Show all posts

Wednesday, January 15, 2025

Pakistan to License Multiple LEO Satellite Internet Service Providers

The Pakistan government is preparing to license three low-earth-orbit (LEO) satellite operators for space communication services in the country, according to media reports. The companies whose applications are pending include London-based OneWeb, China's Shanghai Spacecom and US headquartered Starlink.  They operate tens of thousands of small mass-produced satellites in low orbits that communicate with designated (mobile and stationary) ground stations.  Each LEO satellite circles the earth in 128 minutes or less. The critical importance of the services they offer has recently become apparent in the Ukraine War being waged in Europe and the ongoing disaster response in the areas devastated by the California wildfires. Such services are essential for any area, remote or otherwise, where the land-based infrastructure either does not exist or it has been destroyed by war or natural disasters.

Representation of low, medium and geosynchronous orbits. Source: MIT


Pakistan has established a regulatory framework consisting of two bodies: the Pakistan Space Activities Regulatory Board (PSARB) and the Pakistan Telecommunications Authority (PTA). Each space telecom operator must first get a no-objection certificate (NOC) from the PSARB and then a license from the PTA to operate in Pakistan. The government has reiterated its commitment to fostering digital inclusion through the PSARB, which was established to regulate satellite-based services. Industry experts emphasize that accelerating the approval process is essential for leveraging LEO technologies to boost the country’s digital transformation, according to The News

The LEO satellite industry has become highly competitive, with several companies competing for market share. Some of the key players in the industry include SpaceX, OneWeb, Amazon and Shanghai Spacecom, all of which are working to develop and launch their constellations of LEO satellites for various applications such as broadband, internet, remote sensing, and satellite communication, according to the Washington-based Bipartisan Policy Center

Initial prices announced by Starlink for Pakistan range from the lowest Rs. 2,000 per month for 2 MPS to Rs. 8,700 per month for 10 MBPS. OneWeb is partnering with VEON to offer Internet access packages but no pricing has yet been announced. Shanghai Spacecom has registered in Pakistan but no pricing is available so far. Hopefully, the competition among the three players will benefit consumers in terms of lower pricing and higher bandwidth availability. It will also reduce the digital divide in the country. 

Saturday, March 11, 2023

Guess Why Pakistani Analyst Uzair Younus is Making Headlines in India!

Pakistani analyst Uzair Younus has recorded personal impressions of his recent India visit on his YouTube channel, as well as in an interview on another YouTube channel called "Pakistan Experience".  Indian media have gleefully jumped on it with headlines like "Visiting India Was Like Stepping Into The Future" and a "Pakistani analyst" talking of India's "communal harmony". It has helped Younus' channel draw its highest ever views, and inundated it with Indian trolls' comments praising Hindu Nationalist Prime Minister Narendra Modi and denouncing Pakistan.  This is yet another confirmation of what former US President Barack Obama wrote in his book "A Promised Land": “Expressing hostility toward Pakistan was still the quickest route to national unity (in India)”. 

Indians See Uzair Younus Endorsing Indian PM Modi's Policies


Digital Payments: 

Younus' "stepping into the future" comment refers primarily to the ubiquity of QR codes for retail digital payments that he observed in India. He said the currency in circulation accounts for 13% (actual: 13.7%) of India's GDP, versus 20% of GDP (actual: 18%) in Pakistan. He also saw the GST (Goods and Services Tax) numbers displayed at all retailers, and the GST taxes being paid everywhere. 

Pakistan's RAAST P2P System Taking Off. Source: State Bank of Pakistan


There's no question that India has made significant strides in digitizing payments in recent years. However, it should be noted here that Pakistan, too, is making progress in digital payments. Raast, Pakistan's P2P payments equivalent of India's UPI, has crossed Rs. one trillion mark in payments in 11 months, according to the State Bank of Pakistan.  Pakistan is also among the world's top 10 smartphone markets. 

Pakistan Among World's Top 10 Smartphone Markets. Source: NewZoo


Infrastructure: 

Younus also praised India's growing infrastructure and compared it with Pakistan's, claiming that the Pakistani infrastructure is better but it only serves the rich. He cited the example of driving time to Islamabad International Airport (serving 5 million population in the metro area) in Pakistan being much shorter than the driving time to Delhi Airport (serving 33 million+ population in the metro area) in India, claiming that it is because only the rich use the Islamabad Airport. This makes me wonder if the 5 million passengers who traveled in and out of Islamabad last year are all rich? 

Communal Harmony: 

Uzair cited the example of a Muslim peer's shrine in Rajkot being looked after by Hindus which the Indian media interpreted as "communal harmony" in its reporting. The fact is that India is ranked as the world's worst in terms of religious hostilities, particularly against Muslims, according to a Pew Survey.  Scoring a high 9.5 on a scale of 10, India’s score is found to be worse than all the South Asian countries, including Pakistan, which scores 7.7, followed by Bangladesh 7.2, Afghanistan 6.5, Burma (Myanmar). 5.9, Sri Lanka 5.6, Nepal 2.6, China 1.3 and Bhutan 0.4.


India Tops Social Hostilities. Source: Telegraph India

National Debt and Deficits: 

Uzair Younus argues that the Indian infrastructure is not built with loans while Pakistan takes on debt to build its infrastructure. It seems that the esteemed Pakistani analyst is unaware of the fact that India is the world's biggest borrower of infrastructure loans from various international financial institutions such as the World Bank, the Asian Development and the Asian Infrastructure Investment Bank. 

India's external debt to GDP ratio is about 20% while Pakistan's is 34%.  In addition, both India and Pakistan also run twin deficits: budget deficit and current account deficit (CAD). India's fiscal deficit is about 6.4% and its CAD is 3.3% of GDP. Corresponding figures for Pakistan are 7.9% and 4.6%. 

India has perennially run huge trade and budget deficits. But substantial western capital inflows since the end of the Cold War have helped India avoid a balance of payments crisis. So, India's economic success is in part due to the change in global geopolitics in this century. In short, the West, led by the United States, is boosting India to counter China. 

India is now emerging as the biggest beneficiary of the Ukraine War and the US efforts to check China's rise. Indian businesses are busting US sanctions to take advantage of the vacuum left in Russia by the exit of western businesses since the start of the Ukraine War.  At the same time, the US is rewarding India by promoting it as an alternative to China in the global supply chain.  Meanwhile, Beijing is warning New Delhi that India "will be the biggest victim" of America's "proxy war" against China. 

Women at Work:

Younus saw many women at work in Indian cities, some engaged in constructions, other riding scooters to work. He compares it to what he perceives as absence of women in the workplace in Pakistan. What he misses is the fact that the female labor participation rate in India is, in fact, lower than in Pakistan, according to the International Labor Organization data.  

Female labor force participation rate in India has recently fallen to just 19%, the second lowest after Afghanistan's 15% in the South Asia region. By contrast, Pakistan's women's labor force participation rate is 21%, Sri Lanka's 31% and Bangladesh's 35%. Prime Minister Narendra Modi's mishandling of the COVID19 pandemic has hit Indian women particularly hard, with 90% of those who lost their jobs now shut out of the workforce. 

Female Labor Force Participation Rate in South Asia. Source: World Bank


The precipitous loss of women workers is disastrous news for India's economy, which had started slowing before the COVID19 pandemic, according to a Bloomberg report. Rosa Abraham, an economics professor at Azim Premji University in Bengaluru, tracked more than 20,000 people as they navigated the labor market during the pandemic.. She found that after the first lockdown, women were several times more likely to lose their jobs than men and far less likely to recover work after restrictions were lifted. "When men are faced with this kind of a huge economic shock, then they have a fallback option," Abraham told Bloomberg. "They can navigate to different kinds of work. But for women, there is no such fallback option. They can't negotiate the labor market as effectively as men do." 

Optimism: 

Based on the small sample of people he met in India and Pakistan, Uzair concludes that people in India are very optimistic while those in Pakistan are despondent. Results of a recent Gallup International Poll of 64 nations differ from his conclusion. 

Doing Better Than Parents. Source: Gallup International

Pakistan is in the middle of multiple serious crises. But the vast majority of Pakistanis feel that they have better lives than their parents did, and they think their children will have even better lives than theirs, according to a Gallup International Poll of 64 countries conducted from August to October last year. The poll asked two questions: 1) Do you feel your life is better, worse or roughly similar to that  of your parents? and 2) Do you think your children will have a better, worse or roughly the same life as you? The answers to these questions reveal that Pakistanis are among the top 5 most positive nations among 64 countries polled by Gallup International. Anecdotal evidence in terms of packed shopping malls and restaurants in Pakistan's major cities confirms it. Such positivity augurs well for Pakistan's prospects of successfully dealing with the current crises. It will drive the nation's recovery. 

Nearly two-thirds (65%) of Pakistanis said they live better than their parents did. And 69% of Pakistani parents think their children will have better lives than they do. In neighboring India, 54% of respondents feel their lives are better than their parents' while only 43% say their children will have better lives than theirs'.  The global average for the former is 51% and it is 44% for the latter. The poll results put Pakistanis among the world's five most hopeful nations

Uzair Younus' Background:

Uzair talks about his family's humble beginnings in a small Gujarati village near Rajkot which he visited during his India tour. His grandparents fled to Pakistan in search of better lives. He grew up in Clifton, an upscale neighborhood of Karachi. 

In his effusive praise of the neighboring country that has twice elected Modi, Uzair completely missed the fact that Narendra Modi, now India's prime minister, is widely believed to be the perpetrator of a anti-Muslim pogrom in 2002 when he was the chief minister of Gujarat. The Muslim survivors of the 2002 massacre are still languishing near a mountain of trash on the outskirts of Ahmedabad, battling poverty and disease. Uzair Younus should have paid a visit to show solidarity with them. 

Related Links:


Thursday, December 22, 2022

Rural Pakistan: New Infrastructure Driving Socioeconomic Revolution in Tharparkar

In a 2018 New York Times Op Ed titled "How Not to Engage With Pakistan",  ex US Ambassador to Pakistan Richard G. Olson wrote: "Its (CPEC's) magnitude and its transformation of parts of Pakistan dwarf anything the United States has ever undertaken". Among the parts of Pakistan being transformed by China Pakistan Economic Corridor (CPEC) are some of the least developed regions in Balochistan and Sindh, specifically Gwadar and Thar Desert. Over 70% of Thar desert's population is Hindu. 

Tharparkar: Road Built Under CPEC. Source: Emmanuel Guddu

More recently, Pakistani architect and social activist Arif Hasan has detailed the socioeconomic impact of new infrastructure in Tharparkar district, further reinforcing what Ambassador Olson wrote about how CPEC is transforming Pakistan's least developed areas. In his book titled "Tharparkar: Drought, Development, and Social Change", author Arif Hasan has highlighted the following (excerpted from Arif Hasan's recent piece published in Dawn):

1. New roads, airports, solar panels, cell towers and mobile phones are opening up opportunities for employment, entrepreneurship, education and healthcare for the Thari population. 

2. New infrastructure is empowering Thari women to challenge the long established patriarchy in Tharparkar. A major change has occurred in gender relations — males are less restrictive; there is an increase in education and hygiene; women now move around without male escorts. Women are giving up old traditional clothes for more fashionable dresses. 

3. Road construction in Thar that started in the Musharraf era (2000-2008)  has made transportation cheaper and easier. Before these new roads, the old six-wheeler kekra (WW II era American Army truck) was the only mode of vehicular transportation in the desert.  It was slow and expensive. It has now been replaced by normal Bedford trucks which are cheaper to run.   

4.  Bank loans to buy taxis are now available. Number of taxis operating in Thar has increased from 150 to over 400, while the qingqis in Mithi have increased from over 150 to over 300 since 2013. 

5. The old kekras (old American Army 6-wheelers) have been converted into water tankers; people can now actually order one by phone, to pick up potable water from Mithi and deliver it to villages. 

6. The new roads have helped substantially increase trade and commerce.  Thar’s agricultural produce now reaches distant markets — six to seven trucks per day carry onions from Nagarparkar to Lahore, and vegetables and fruit from other parts of Sindh and Punjab are now easily available in Thar.  

7. Roads have helped in the increase of salt and china clay mining. These have created more jobs, especially for those villages that are next to the mines. The lives of the families who have benefitted from this growth in the job market have changed and the first investments they make is in the building of pakka houses, with steel channel and brick-tiled roofs. Another important investment is in motorbikes, which makes flexible and faster mobility possible. People have sold their camels and donkeys to buy motorbikes.

8. Thari men now work in the garment industry in Karachi, where they save and send home Rs 10-12,000 a month.

9. Tourist traffic has grown in Thar with tens of thousands of people visiting the area every year after the rains and for the many religious festivals that the desert celebrates. Women producing traditional handicrafts are able to sell their wares to the tourists.  This creates economic opportunities for the local population. 

10. Dozens of carpentry workshops are now operating in Mithi. The carpenters have moved in from the rural areas of Thar, where they worked for the rural population, who paid them in grain. 

11. Number of retail stores has also increased — in Mithi there were 20 to 25 grocery stores in 2015, as opposed to seven or eight 10 years earlier. Earlier, the store owners used to travel to Hyderabad to buy goods but, today, because of the road and mobile phone, they just order the items from Karachi and the transporter delivers them. The clients at the stores are both rural and urban.

12. Access to healthcare units in district capital Mithi is a lot easier and faster, and has been of special importance in maternity-related cases.

13. With the construction of new roads, the villagers are now more willing to send their children to school, including girls, because schools are easier to access. 

Back in 2018, I wrote a post titled "CPEC is Transforming Least Developed Parts of Pakistan". Below is an except that talks about Thar development: 

Thar Desert:

Thar, one of the least developed regions of Pakistan, is seeing unprecedented development activity in energy and infrastructure projects.  New roads, airports and buildings are being built along with coal mines and power plants as part of China-Pakistan Economic Corridor (CPEC). There are construction workers and machinery visible everywhere in the desert. Among the key beneficiaries of this boom are Thari Hindu women who are being employed by Sindh Engro Coal Mining Company (SECMC) as part of the plan to employ locals. Highlighted in recent news reports are two Hindu women in particular: Kiran Sadhwani, an engineer and Gulaban, a truck driver.

Kiran Sadhwani, a Thari Hindu Woman Engineer. Source: Express Tribune


Thar Population:

The region has a population of 1.6 million. Most of the residents are cattle herders. Majority of them are Hindus.  The area is home to 7 million cows, goats, sheep and camels. It provides more than half of the milk, meat and leather requirement of the province. Many residents live in poverty. They are vulnerable to recurring droughts.  About a quarter of them live where the coal mines are being developed, according to a report in The Wire.


Hindu Woman Truck Driver in Thar, Pakistan. Source: Reuters


Some of them are now being employed in development projects.  A recent report talked of an underground coal gasification pilot project near the town of Islamkot where "workers sourced from local communities rested their heads after long-hour shifts".

Hindu Woman Truck Driver in Thar, Pakistan. Source: Reuters 


In the first phase, Sindh Engro Coal Mining Company (SECMC) is relocating 5 villages that are located in block II.  SECMC is paying villagers for their homes and agricultural land.

SECMC’s chief executive officer, Shamsuddin Ahmed Shaikh, says his company "will construct model towns with all basic facilities including schools, healthcare, drinking water and filter plants and also allocate land for livestock grazing,” according to thethirdpole.net He says that the company is paying villagers above market prices for their land – Rs. 185,000 ($ 1,900) per acre.

Thursday, September 22, 2022

Angelina Jolie Using Her Star Power to Help Pakistan Flood Victims

Beautiful Hollywood star Angelina Jolie is known for her international humanitarian work as the United Nations Goodwill Ambassador. A winner of multiple awards including one Oscar and three Golden Globes, she is among the highest paid actors in the world. Jolie is currently visiting Pakistan to bring global attention to the immense suffering caused by devastating floods in the country, particularly in its southern Sindh province.  

Angelina Jolie

Pakistan is dealing with the aftermath of the worst floods in the country's history. Over 1500 Pakistanis are dead. About 33 million people in two southern provinces are homeless. Sindh is inundated with 784% of normal rainfall so far this year. Balochistan has seen 522% of average rainfall. Both provinces suffered their worst ever heatwave prior to this unprecedented deluge. Nearly a million livestock have been lost, over two million acres of farmland is underwater and 90% of the crops in Sindh and Balochistan have been damaged. 

UN Sec Gen Antonio Guterres

The United Nations Secretary General Antonio Guterres has described the unprecedented flooding in Pakistan as “a monsoon on steroids" that has created a massive humanitarian crisis. The country can not deal with it alone. He said Pakistan "is drowning not only in floodwater, but in debt.” Mr. Guterres has called for debt relief for developing nations such as Pakistan. “The Debt Service Suspen­sion Initiative should be ex­tended – and enhanced. We also need an effective mechanism of debt relief for developing coun­tries – including middle income countries – in debt distress. Creditors should consider debt reduction mechanisms such as debt-climate adaptation swaps.

It will take hundreds of millions of dollars to provide immediate relief to 33 million people, followed by tens of billions of dollars in assistance to rebuild the lives and livelihoods and the infrastructure destroyed by this catastrophe. Pakistan's gross capital formation is only 15% of its GDP. Among the world’s top 20 economies by population, only Egypt has a lower rate of gross capital formation than Pakistan, according to Bloomberg. It is time for the rich industrialized world to help developing nations such as Pakistan to deal with the massive impact of climate change. 

Low Gross Capital Formation in Pakistan. Source: Bloomberg 

Pakistan's population is about 2.6% of the world population. The nation has contributed just 0.28% of the cumulative global carbon emissions since 1750. It lacks the resources needed to deal with the consequences of this man-made disaster. The Industrial Revolution in Europe and the United States was fueled mainly by fossil fuels such as coal and oil believed to be responsible for climate change. 

Cumulative CO2 Emissions Since 1750. Source: Our World in Data

Below is a map from Professor Jason Hickel showing that the countries in the global north are the biggest polluters while those in the global south are the most vulnerable to the effects of climate change.  

Climate Injustice: Low Emitters Global South vs Big Polluters in Industrial North. Source: Prof J. Hickel

After viewing the flood disaster in Pakistan Jolie said: "I have never seen anything like this. I have been to Pakistan many times. I came because of the generosity that Pakistani people have shown to the people of Afghanistan. Oftentimes those who have less give more than so many other countries. The climate change is not only real but it's here.  This is a wakeup call to the world about where we are. The countries that have not done as much damage to climate are the ones that are bearing the brunt. The needs in Pakistan are now so great. I appeal to the world to help. Many of the victims here will not make it without a lot of help."

Here are some more excerpts from her press conference in Pakistan: 

"I feel overwhelmed but I feel it is not fair to say that since I am not living this." 

"I've never seen anything like this and I have been to Pakistan many times"

"I came  because of  the generosity that Pakistani people have shown to the people of Afghanistan over the years...My heart is very very much with people at this time.”

"It is often seen that the countries that don't have as much give more than so many other countries"

"I am absolutely with you in pushing the international community to do more. I feel that we say that often... we speak of aid appeals, relief and support but this is something very, very different"

"Climate change is not only real and it is not only coming, it is here,"

"I've seen the lives that were saved but I've also seen... I've been speaking to people and thinking that if enough aid doesn't come they won't be here in next few weeks... they won't make it"

"Even if they make it next few months with the winter coming and the destruction of the crops and the hard reality ... I am overwhelmed but I feel it is not fair to say that because I am not living this so I simply try to speak out for help. I can't even imagine what it feels like to be there"

"I will return and continue to return and my heart is very, very much with the people at this time"

https://youtu.be/tsHpbzF_Olg



Saturday, September 3, 2022

Climate Change: Pakistan Requires Massive Assistance to Recover From Catastrophic Floods

Pakistan is dealing with the aftermath of the worst floods in the country's history.  Over a thousand Pakistanis are dead. About 33 million people in two southern provinces are homeless. Sindh is inundated with 784% of normal rainfall so far this year. Balochistan has seen 522% of average rainfall. Both provinces suffered their worst ever heatwave prior to this unprecedented deluge. Nearly a million livestock have been lost, over two million acres of farmland is underwater and 90% of the crops in Sindh and Balochistan have been damaged. This is a massive humanitarian crisis. Pakistan can not deal with it alone.

Pakistan Flood 2022 Map. Source: DW

Satellite Image of Qambar, Sindh Before/After Floods 2022. Source: NASA

Satellite Image of Shikarpur, Sindh Before/After Floods 2022. Source: NASA




Balochistan and Sindh Worst Affected by Monsoon22. Source: The Economist

Pakistan's population is about 2.6% of the world population. The nation contributes less than 1% of the global carbon emissions. It lacks the resources needed to deal with the consequences of this man-made disaster. The Industrial Revolution in Europe and the United States was fueled mainly by fossil fuels such as coal and oil believed to be responsible for climate change.  The following map from Professor Jason Hickel shows that the countries in the global north are the biggest polluters while those in the global south are the most vulnerable to the effects of climate change. 

Climate Injustice: Low Emitters Global South vs Big Polluters in Industrial North. Source: Prof J. Hickel
Average Annual Cost of Floods in Vulnerable Countries. Source: Bloomberg


Comparison of 2022 and 2010 Floods in Pakistan. Source: WWF

It will take hundreds of millions of dollars to provide immediate relief to 33 million people, followed by tens of billions of dollars in assistance to rebuild the lives and livelihoods and the infrastructure destroyed by this catastrophe. Pakistan's gross capital formation is only 15% of its GDP. Among the world’s top 20 economies by population, only Egypt has a lower rate of gross capital formation than Pakistan, according to Bloomberg. It is time for the rich industrialized world to help developing nations such as Pakistan to deal with the massive impact of climate change. 

Low Gross Capital Formation in Pakistan. Source: Bloomberg 


All Pakistanis and non-Pakistanis need to pitch in with donations to help finance immediate disaster relief activities. Beyond that, Pakistan will have to be helped by international experts to build disaster preparedness capacity. The new housing and infrastructure will have to be funded and built to ensure its resilience in future climate disasters which are likely to occur more often with greater intensity. There is an urgent  need to prepare western and multilateral financial institutions to deal with such climate catastrophes in developing nations. Mechanisms also need to be put in place to provide and manage funding of these projects in a transparent manner. 

Sunday, September 24, 2017

Pakistani-American to Fellow Overseas Pakistanis: Go Back and Visit

Guest Post by Rashid Ahmad

You should go back and visit. You would be surprised!

Pakistan in your mind may be frozen in time, but real Pakistan has moved on. Everything has changed.

Pakistani Capital Islamabad

You will find both familiarity and alienness there. It would appear to you like a dream. Or perhaps like being on Star Trek Holodeck, where things are familiar but there are new actors on the deck, and you are bit of a stranger.

First thing that would hit you would be the increase in population. Too many people every where, compared to the time you left Pakistan. Some areas that were farms and free spaces when you were there would now be occupied by new housing developments.

The physical appearances would have changed. There would not be any complete transformation to prosperity, but new buildings replacing the old ones, and new motorways, would change the physical reality.

You would find distances have shrunk. The places that seemed far away because you walked to them or went on bicycle, would appear to be so near because now you would travel by car.

Something would sting your heart a bit. Your home where you grew up, would now belong to someone else. When you were growing there, everybody knew it as your father's home, your home, but now if you were to ask directions to your home in your own Mohalla, they will refer to it as some strange family's home! It is your home only in your childhood memories.

You would meet someone, with white beard, bald head, missing teeth, and perhaps walking with a cane, who be introduced to you as your classmate. You would be blown away by the ravages of time, and be grateful for your own health.

A middle aged woman with young children would come to visit you. And she will turn out to be the daughter of a cousin or a friend, who was just an infant at the time you left Pakistan.

Almost anybody you meet would be younger than you!

And finally, as you relive the memories of your childhood, you may find a reason to visit again and again.

Author Rashid Ahmad is a Pakistani-American civil engineer with a Master's degree from UC Davis. Ahmad came to the United States in 1970 and has since been living in Sacramento-Davis area in California. 

Related Links:

Haq's Musings

Pakistani Diaspora in America

Pakistan's Modern Infrastructure

Rising College Enrollment Rate in Pakistan

Pakistan Population Bomb

Upwardly Mobile Pakistan

The Rise of Gated Communities in Pakistan

Rising Standards of Living in Pakistan

Wednesday, July 19, 2017

CPEC Financing: Is Pakistan Being Ripped Off By China?

Is China ripping off its all-weather friend Pakistan by charging high interest rates on loans and exorbitant guaranteed returns on investments in China Pakistan Economic Corridor (CPEC) projects?  That's a question that is being asked on a frequent basis by Pakistan's friends and foes alike. While friends of China-Pakistan ties are concerned about an undue burden on Pakistanis, the foes see CPEC as an opportunity to create a lot of fear, uncertainty and doubt about it and its benefits for Pakistan's economy and society. Who's right? Who's wrong? Why? Let's dive into it.

CPEC Projects in Pakistan

Claims by CPEC Detractors:

Many Western and Indian opponents claim that the cost of CPEC financing will be so high that Pakistan will not be able to bear it. They assert that China is attempting to catch Pakistan in a debt trap from which the country will not be able to escape, eventually turning it into a Chinese colony. The financing costs for Chinese loans and investments they claim are in high teens.

Misguided Pakistani Analysts' View:

Many well-meaning Pakistanis, including serious economists, seem to echo detractors' claims without any serious examination or comparison with prevailing bench-marks. They do not mention how similar projects in other parts of the world are financed and what sort of interest rates and return-on-equity are guaranteed.

CPEC Finance Rates vs Benchmarks:

About two-thirds of Chinese CPEC funding is for power projects while one-third is for infrastructure projects like roads, rail lines and ports.

The Chinese soft loans for CPEC infrastructure projects carry an interest rate of just 1.6%, far lower than similar loans offered by the World Bank at rates of 3.8% or higher.

Chinese companies investing in Pakistan power sector are getting loans from Chinese banks at commercial interest rates. These loans will be repaid by the Chinese companies from their income from these investments, not by Pakistani taxpayers.

The rate of return guaranteed by Pakistan power regulators to the Chinese power companies is about 17%. Is it too high, as some claim? Let's compare it to the US market considered among the safest investments in the world.

Rate of Return in United States: 

The average return on equity for almost 8,000 US firms is 14.49%. The power utility companies – with an average of 10.13% – are on the lower end of the spectrum because they are viewed as less risky investments.

In the United States, rate of return varies significantly from state to state, as each state regulator has exclusive authority to regulate utility operations as they choose.

In Advance Energy Economy (AEE) Power Portal database, which tracks ROE for over 100 investor-owned utilities across the country, the highest allowed ROE belongs to Alabama Power Co., at 13.75% while the lowest belongs to United Illuminating Co. (CT) at 9.15%.

Within the US states, Alabama being seen as relatively less safe for investment, offers 13.75% return. So why is it such a surprise to see Pakistani regulator offer Chinese investors a higher rate of return of 17%?

Growing Infrastructure Gap:

Development of physical infrastructure, including electricity and gas infrastructure, is essential for economic and social development of a country such as Pakistan. China-Pakistan Economic Corridor financing needs to be seen in the context of the large and growing infrastructure gap in Asia that threatens social and economic progress.

 Rich countries generally raise funds for infrastructure projects by selling bonds while most developing countries rely on loans from international financial institutions such as the World Bank and the Asian Development Bank to finance infrastructure projects.

The infrastructure financing needs of the developing countries far exceed the capacity of the World Bank and the regional development banks such as ADB to fund such projects. A recent report by the Asian Development Bank warned that there is currently $1.7 trillion infrastructure gap that threatens growth in Asia. The 45 countries surveyed in the ADB report, which covers 2016-2030, are forecast to need investment of $26 trillion over 15 years to maintain growth, cut poverty and deal with climate change.

Pakistan Country Report in Shanghai Business Review Feb/March 2016


Summary:

China is financing CPEC projects at rates that are comparable to similar projects elsewhere. Chinese loans for infrastructure projects such as rails, roads and ports are at rates (2% or less) below those (3.8%) offered by the Asian Development Bank and the the World Bank. The rate of return on power project investments under CPEC is 17%, somewhat higher than the 13.75 offered by much safer US state of Alabama.

Development of physical infrastructure, including electricity and gas infrastructure, is essential for economic and social development of a country such as Pakistan. China-Pakistan Economic Corridor financing needs to be seen in the context of the large and growing infrastructure gap in Asia that threatens social and economic progress.

An unrelenting campaign of fear, uncertainty and doubt (FUD) about China-Pakistan Economic Corridor (CPEC) has been unleashed in the media in recent weeks. This strategy harkens back to the aggressive marketing techniques used by the American computer giant IBM in the 1970s to fight competition. Part of the motivation of those engaged in FUD against CPEC appears to be to check China's rise and Pakistan's rise with its friend and neighbor to the north. As in IBM's case, the greatest fear of the perpetrators of FUD is that CPEC will succeed and lift Pakistan up along with rising China.  Their aim is to preserve and protect the current world order created by the Western Powers led by the United States at the end of the second world war.   Pakistani government should respond to the FUD campaign against CPEC by countering it with facts and data and increasing transparency in how CPEC projects are being financed, contracted and managed. 

Related Links:







Monday, February 6, 2017

Pakistan's Focus on Infrastructure (Hardware) at the Expense of Human Development (Software)

American theologian and author James Freeman Clarke (1810-1888) is reported to have explained the distinction between a politician and a statesman as follows: "A politician thinks of the next election. A statesman, of the next generation."

How does this apply to the current crop of Pakistani leaders in charge of running the country? Are they statesmen or mere politicians?

I think the answer to this question can be found in how they invest available national resources, particularly their longer term investments in education, training, nutrition and health care sectors which do not show results as quickly as building roads, metro bus, metro trains, ports and other physical infrastructure.

China Pakistan Economic Corridor:

Pakistani politicians, particularly PMLN and Nawaz Sharif, love to highlight China-Pakistan Economic Corridor  (CPEC) projects and their accomplishments in terms of motorways, metro bus, metro trains, ring roads and airports rather than education and health care. And the reason they do it is because such projects can be completed before the next elections while the returns on investments in education and health take much longer to become visible.

Pakistan's M2 Motorway

In a recent piece titled "Pakistan's misguided obsession with infrastructure", The Economist magazine  said Chinese diplomat assigned to work with Pakistan on China-Pakistan Economic Corridor acknowledged this problem. Here's an excerpt from The Economist:

"Lijian Zhao, a Chinese diplomat, says China is all too aware that Pakistan needs more than just big-ticket infrastructure if it is to flourish. Disarmingly, he praises the efforts of Britain and other countries to improve Pakistan’s “software”, such as education and the rule of law. “But China’s expertise is hardware,” says Mr Zhao."

Education and Literacy Rates:

Pakistan's net primary enrollment rose from 42% in 2001-2002 to 57% in 2008-9 during Musharraf years. It has been essentially flat at 57% since 2009 under PPP and PML(N) governments.

Source: Economic Survey of Pakistan 2015-16

Similarly, the literacy rate for Pakistan 10 years or older rose from 45% in 2001-2002 to 56% in 2007-2008 during Musharraf years. It has increased just 4% to 60% since 2009-2010 under PPP and PML(N) governments.

Source: Economic Survey of Pakistan 2015-16

Pakistan's Human Development: 

Human development index reports on Pakistan released by UNDP confirm the ESP 2015 human development trends.Pakistan’s HDI value for 2013 is 0.537— which is in the low human development category—positioning the country at 146 out of 187 countries and territories. Between 1980 and 2013, Pakistan’s HDI value increased from 0.356 to 0.537, an increase of 50.7 percent or an average annual increase of about 1.25.

Pakistan HDI Components Trend 1980-2013 Source: Human Development Report 2014


Overall, Pakistan's human development score rose by 18.9% during Musharraf years and increased just 3.4% under elected leadership since 2008. The news on the human development front got even worse in the last three years, with HDI growth slowing down as low as 0.59% — a paltry average annual increase of under 0.20 per cent.

Going further back to the  decade of 1990s when the civilian leadership of the country alternated between PML (N) and PPP,  the increase in Pakistan's HDI was 9.3% from 1990 to 2000, less than half of the HDI gain of 18.9% on Musharraf's watch from 2000 to 2007.



Summary:

The history of the industrialized world tells us that democracy, peace and prosperity can not be sustained in the long run without a solid foundation of a healthy and well-educated society. Pakistani leaders must learn from history and pay more attention to accelerate human development along with building the necessary infrastructure such CPEC projects. They must allocate greater resources and maintain sharp focus to improve education and health of the people of Pakistan.

Related Links:

Haq's Musings

Pakistani Democracy's Disappointing Record on Human Development

China-Pakistan Economic Corridor

Pakistan's Infrastructure and M2 Motorway

Pakistan's Lost Decades

Saving Pakistan's Education, Airline and Railway

Asian Tigers Brought Prosperity; Democracy Followed

Pakistan Democracy: Neither Democracy Nor Development

Challenges of Indian Democracy

Pakistan's Economic History

Comparing Bangladesh with Pakistan

Economic and Human Development in Musharraf Years

India's Share of World;s Poor Up from 22% to 33%

Why is Democracy Failing in Pakistan?

Musharraf Era Higher Education Reforms in Pakistan

Comparing 30-Year Dictatorships in Indonesia and Pakistan

Democracy vs. Dictatorship in Pakistan

Sunday, February 15, 2015

Record Cement Sales Raise Hopes of Pakistan Economic Recovery

Domestic cement sales are up 9% year-over-year for the first 7 months of Pakistan's Fiscal 2014-15, according to media reports.  Overall, cement industry reports cement shipment of over 20 million tons in 7 months, a 6% annual increase with rising domestic demand offsetting falling exports due to weakness abroad.

Market capitalization of  Pakistani cement companies has jumped 70% last year, about 3 times more than the KSE-100 market index which rose 27% in 2014. This is the third consecutive year that cement companies have outperformed the broader market. Investors in Pakistan's cement sector have seen 600% rise in the last three years.

It appears that construction  sector is getting a boost from falling inflation and declining interest rates with a big drop in world oil prices. Domestic sales of 2.5 million tons a month translate to about 160 Kg per capita consumption of cement, the highest level in Pakistan's history.


















Pakistan saw its domestic cement consumption double from about 11 million tons in 2003 to 22 million tons in 2008 on President Musharraf's watch. It remained essentially flat from 2009 through 2011 before rising to a new high of 24 million tons in 2012. With expected GDP annual growth to average 4.5-5.5 per cent over the next 3 years, local cement sales could rise by 9 per cent on average annually to reach 34 million tons per year by 2017 and exports to 8 million tons per year.

Cement sales and building activity indicators are an important sign of the strength or weakness of the broader economy, due to construction's important role in the economic sector. If individuals and businesses are willing to invest in new construction, it is a sign that the economy is doing well or poised to recover. If they aren't, the economy may be weak or headed for trouble. Construction is a very labor-intensive activity which creates many new jobs. Higher employment drives consumer spending which further stimulates the national economy.

In addition to rising demand for housing and new commercial real-estate, major infrastructure and energy projects related to the China-Pakistan Industrial Corridor are expected to significantly boost domestic cement consumption and create millions of new jobs over the next several years.

Related Links:

Haq's Musings

State Bank: Pakistan's Actual GDP Higher Than Official Figures

Investors Bullish on Pakistan Cement Sector

Pakistan Ranks in the Middle For Infrastructure and Logistics

China-Pakistan Industrial Corridor

India Fudging GDP to Claim Faster Growth Than China?

India-Pakistan Economic Comparison 2014