This week, Microsoft rubber-stamped Windows 8 as good to go for manufacturers. This means PC makers and other partners can grab the operating system code and test it out with their products, which should start arriving Oct. 26. The struggle for the future of computing as we know it has essentially commenced.
Microsoft has essentially opened a window in having media and technology start anew with their new operating system. As they have minted a lot of money through Windows Vista, and through Windows 7, who says that they won't do the same now?
Howevever, what one really needs to see is a resurgence of the Personal Computer industry, to battle smartphones and tablets in the ever-growing information technology market. Windows unsuccesful bid to bring forth a popular Tablet PC for their customers brought an opportunity for Apple to establish its brand through the iPad. Early smartphones in the form of handheld palmtops such as the HP Jornada have given Google an edge in bringing forth Android phones with more advanced operating systems.
So it essentially comes down to this: with Windows 8, we get to find out what the non-Apple computing industry really has left.
Windows needs some resurgence to its already established brand, as the bringer of Personal Computers during in an information technology hike in the 80's, 90's, and 00's. It really needs to get the ball rolling and not leave companies like Dell, Hewlett-Packard, or Acer sitting idly by while others get ahead in the game.
Just about everyone—even Apple fans—should hope that some company gets its act together, takes some risks, and wows the public on the back of Windows 8. It’s the sort of competition the industry needs to be healthy and for innovation to continue at a furious clip.
It has been about a month since the IMF report on Pakistan ‘ingeniously’ highlighted the economy’s fragility. A sense of urgency was incumbent; the PM quickly and quite conveniently replaced the secretaries of finance and FBR. Very few questions were asked; the damage was covered. How and why would the public demand accountability and transparency, or an extenuating correction of seemingly portrayed fudged figures when it has been residing in blissful ignorance with regard to the economy? Or maybe the silence was another extension of the disillusionment with the system. For the purpose of reminiscing, the IMF report in Feb-12 revealed that the (please note: expected) budget deficit communicated by the government for FY12 has been understated by Rs532 billion where in the revenue was overstated by Rs215 billion and expenditures were understated by Rs317 billion. This would imply that the budget deficit for the current fiscal year would arrive at about 6.6 per cent of GDP, instead of the government’s repeated assurances about realising the promised five per cent contingent on promised external inflows which even the sovereign would vouch by…but nevertheless. Given this back drop, the very act of changing secretaries signals that the government is capable of making only cosmetic changes in an effort to please the almighty IMF. The first contention questions why the IMF is so important that the government needs to replace qualified personnel who have served its cause throughout the regime so far. Moreover, current deliberations by the ex-finance minister reveal that domestic debt has exceeded foreign debt, indicative of greater reliance on the domestic financial system instead of lenders abroad. So why is there a need to prove credibility in front of this iffy source of funds? The second contention challenges the autonomy of the ministry of finance as the government’s window into its accounts. If expenditures, especially the larger recurrent ones are being exceeded than the target, is the finance ministry really supposed to suffer blame? There are severe structural deficiencies in the collection and distribution of revenues between the federal and the provincial governments. For instance, the provincial government or the chief minister has the power to undertake expenditures without taking prior approval from the national assembly. This automatically results in a greater than expected deficit in provincial budgets as the latter have limited space to raise revenues, especially, post the 18th amendment which led to the devolution of many subjects that were earlier apart of the federal list. Third, the PM’s alacrity in reading international evaluations of the economy is commendable and therefore must be lauded. Why should he pay heed to weekly caveats published by domestic analysts who have repeatedly tried to inform, challenge or at least warn the government regarding the same macro variables delineated by the IMF? The government is ready to cheer the FBR chairman when he reports higher than target revenue collection, but ever ready to replace the same person when the numbers are challenged by an international body! Why are there no internal checks and balances? And moreover, is the 2-3membered IMF office in Pakistan better equipped to report federal collection of taxes and expenditures? Regardless of whether the answer is in the affirmative, there is only a sense of embarrassment and shame that holds its ground. If the government is ever so concerned about accurate reporting of its accounts and more importantly meeting its target spending, ‘may be’ it needs to address the inefficiencies that exist in its very own government offices. Supposedly, for the provision of government services annually, the government spends about Rs13,000 per capita, leaving out the amount that is assigned for expanding the scope of these services ie the PSDP. And to put an end note: there is little education, very little health and almost no security in the country. The writer is an economic analyst and freelance financial journalist. She can be reached at firstname.lastname@example.org
an economy unable to reach its production possibility frontier will always remain vulnerable to exogenous shocks, as in the case of Pakistan. It would have been a different story if the last two-to-three years had seen some sort of visible improvement in handling deficits and improving growth. If we had produced, exported and grown more, we would have had a more stable support base, restricting damage from external shocks our economic and political managers have no control over. In the present circumstances, among Pakistan’s chief worries is rising energy and input cost, the demand-supply dynamics of which play out on a stage and involve actors far removed from Islamabad’s sphere of influence. With our deficits in uncomfortable zones, additional price pressure due to increasing inflation, predominantly higher energy and input costs, is putting unsustainable pressure on the country’s reserve situation. Therefore, even as relevant quarters and analysts calculate a few month elbow room for reserves, their value diminishes every time international pressures bid up oil. Things looked up in the immediate aftermath of the 18th amendment, which transferred increased power and responsibility to provincial governments. Yet with no proper revenue generation framework, and unable to get help from a largely defunct FBR, they have been unable to make any meaningful contribution so far. On the other hand, the federal machinery has not been able to introduce any form of value addition in the present export basket. This means that almost all traditional means of generating national revenue are compromised. That is why we rely on international trends to facilitate our economic engine. We are always in need of improved remittances to defend deficits. We are always praying for international events that push down the price of oil so our own economic managers can breathe easy. And of course, we are always on the lookout of bailout and donor assistance. Sadly, despite the obvious persistence of such trends, we have not moved in manner that the situation merits. It bears noting that persistent growth problems require solvency in credit markets to stimulate the only indigenous option to revive GDP. When the external situation exerts unbearable pressure, economies look inward, prompting private sector expansion which in turn attracts offshore investment. In this case, banks facilitate private sector investment, in some cases ably guided by the official machinery, in a way that the centre does not interfere in market mechanism, only facilitates it. This is where the Pakistani banking sector needs to step up to the plate. For some years now, a proactive lending regime, one that incorporates targeted needs of the time, has been conspicuous by its absence. Whatever little scope the private sector has had has been compromised by heavy government borrowing. This equation requires urgent balancing. The last couple of years of private sector crowding out have left a vast investment field yet to be exploited. Ironically, the laxity of the past might even turn into an attractive opportunity for the present. If properly handled, private sector investment can create jobs, improve infrastructure, create employment and, most importantly, engineer second round market multiplier, with gains for all. We have now come to the point of no return. Both government and autonomous organs must finalise an action plan that will stimulate employment and growth. That means fine tuning both fiscal and monetary policies. Once the finance ministry initiates immaculately targeted fiscal expansion, and the central bank makes credit available to private investors, we may even see a domino effect strong enough to lure bulky foreign investors. Our problems are not existential, but their handling has made them acute. We have the necessary inputs, its just a little toggling of official policy that is required. The recent stock market optimism is an adequate indicator of productive potential across the economy. All that is needed is effective program management. The writer is Chief Manager SME bank and has been a leading banker in the industry for more than 30 years
Recent events in Europe have been extremely instructive. Greece accounts for a very small proportion of the main European economy. It comprises but a couple of percentage points of continental GDP. Yet its debt debacle has had the entire continent strung in an awkward position for a good two years now. Germany and France, the two biggest EU economies, have thrown in all but the kitchen sink to keep the debt ridden country from defaulting. What is more, the bailout package just agreed has all but turned the bond market on its head. Ironically, the ECB is saved from the painful haircut all other ‘old’ bondholders have been made to take. Why such desperation? Why must Greece be kept from defaulting, which is what ordinarily happens when a country is unable to meet debt obligations? The reasoning is pretty simple. The minute Greece defaults, exits the EU and abandons the single currency, an untold number of big international financial organisations will immediately go belly up, their position compromised by overwhelming exposure to Greece and other, bigger economies, sometimes in much worse position. And when big money collapses, the financial and political elites on both sides of the Atlantic will be ruined, even though Greece will revert to the drachma, devalue considerably and export and grow out of the subsequent depression. While this partially explains the rush to rescue Greece, it does not nearly save the European project. Portugal, Spain, Italy and even France are hemorrhaging, and not very far from needing substantial help in doses, which will inevitably tilt towards the bailout precedent that the Greece example has set. Counting on Germany to keep filling budget deficits of other, less resilient economies would, of course, border on insanity. Interestingly, financial markets initially greeted the deal with optimism. The euro advanced, crude oil rallied and, coupled with signs of growth returning to the American economy, the European package introduced much welcome risk appetite in global currency and commodity markets. However, it was only a matter of quick time before long term concerns returned to pundits. When that happened, the euro collapsed, reintroducing long-term shorts. The message for other economies, especially Asia’s emerging markets, is obvious. In the post recession era, when capital market solvency is in serious question, sovereign debt is a very serious issue. Once capitals start running serious deficits, financial institutions with the slightest exposure are put at serious risk. And when that happens, the life and blood that oils the international globalised market – credit – dries up, compromising whatever efforts are made to return to growth. For an economy like Pakistan the message is even more serious. Unlike regional economies, our state of stagnancy is acute. Growth is nowhere on the horizon, there is still no value addition in exports, and the rupee is in freefall. While February’s impressive stock market performance deserves credit, it does not reflect critical structural deficiencies in the macro economy that cannot be sustained without serious overhaul of policy. Our deficits are in serious red. With substantial components of international aid also petering out, there will be yet more unforeseen upward revision of the current account deficit, while the development budget, year-end revenue and final GDP are all revised downward. We must immediately introduce policies that check unnecessary leakages and stimulate growth. At present, both fiscal and monetary policies are counter productive, while relevant authorities doing little of intrinsic value. The election is near. Learning from examples of countries destroyed by debt will not only heal the state of the economy, but also facilitate the government’s long term survival in Islamabad. The writer is Chief Manager, SME Bank, with more than 30 years’ experience in the banking industry.
Oh, what a beautiful morning! I turn onto the main road only to stare at the enormously gigantic billboards and flex banners featuring pretty girls from Bollywood. In the Pakistani context, it would not be presumptuous to state that celebrity endorsements by Bollywood actresses can and in fact, have successfully managed to aggrandise the brands involved. Passing by the roads of Lahore these days, I am forced to contemplate and have second thoughts about my location status. Whether I am really in Lahore or not: that is the question. It appears as if I am watching a Bollywood movie or taking a walk through the streets of Delhi, where every other pole is lined up with a banner of a visibly beautiful Indian actress wearing a - not so visibly in focus, lawn print (I still am in serious doubts whether the celebrity is endorsing the product or the product is endorsing the celebrity). Pakistan, just like India, is one country which has always idolised stars of the celluloid world. Therefore, it makes tremendous sense for a brand in Pakistan to procure a celebrity for its endorsement. But despite the obvious economic advantage of using relatively unknown celebrities or Lollywood actresses for that matter, as endorsers of the advertising campaigns; the choice of Bollywood actresses to fulfill that role has become common practice for lawn brands competing in the lawn-race. The objective for a celebrity endorsement of this sort is clearly to garner faster brand recognition in an attempt to win the customer preference and sell the product. And Bollywood actresses have no doubt helped the lawn brands to stand out from the surrounding clutter of ever-increasing lawn brands, improving their communicative ability and brand recall. Just like I remember that Firdous became the pioneer and talk of the town by endorsing ‘Kareena Kapoor’ for their lawn prints; I can also recall my male friends’ enthusiasm on waking up one fine day to see their epitome of Bollywood beauty endorsing a product of their least concern. I am not sure about the target audience of these lawn prints, but the males did and still continue to get a good eye candy of these celebrities coming straight from the neighbouring country. On the flip side, recently there has been a massive uproar among the leading industrialists, including people from the textile industry, regarding the Most Favoured Nation (MFN) status to India, trade liberalisation and phasing out of the negative trade list with India in order to secure the domestic industry. Seems like cognitive dissonance is playing its cards quite perfectly because there is a strong lack of agreement between the beliefs held by the group and their actions. The irony of the situation is that even when the textile industry is taking a heavy toll on the situation, it is choosing the favoured nation for endorsing and selling the textile products. Marketers claim that advertising simply mirrors the attitudes and values of the surrounding culture. Hence, you only make a celebrity endorse your product because you ‘believe’ that the ‘particular’ celebrity is the most favoured and popular among the target audience of your product. Therefore, the reality of the situation is that the industry somewhere in the corner of its mind also upholds this belief and regards the nation to be favourable while on the other hand opposes the decision of the government. Also, remember that ‘people make a nation’. I am certainly not favouring any side and neither giving my stance on the MFN status to India, however, the point that I am trying to make here is that if we are using our favoured nation’s people to sell our products then we should accept the recognition of their granted status as well. Let’s just open our eyes and step out of our shells of double-standards to embrace this reality, which is otherwise dirt-under-the-carpet. The writer is Sub-Editor, Profit. She can be reached at email@example.com
The economy continues to tread the path of uncertainty and doom. The rupee refuses to budge from Rs90/USD, the investment climate staggers, and inflation somehow seems a non-representative variable. Amidst these unsettling issues, what if the system were revamped? What if the inelasticity of the burden of oil imports was to be challenged? And what if the plight of those consumers who purchased cars in the fruitful yesteryears but face shortages and helplessness at CNG stations was taken into account? Not all can afford tanks full of petrol any more, and there should be no shame in admitting this fallout. Putting into perspective, the foreign exchange spent on petroleum imports each year, the first half of FY12 registered a 35 per cent increase in the oil bill, while comprising a 35 per cent of the total imports. If this trend continues in the later half of the current fiscal year, the total oil import bill can be expected to arrive at $17 billion versus $12 billion in FY11. Studies show that about 49 per cent of oil is used for transportation purposes, which implies that $8 billion will be spent on mere commuting in urban areas where only one third of the total population resides. In the last six months Arab crude prices (specific to Pakistan) have risen from $108/bbl to $124/bbl, registering an increase of 15 per cent. Given that oil embargo on Iran is not far to follow, immediate measures need to be taken for resources to be not be subservient to variations in international prices. Given this background, a recent announcement from the Lahore Transport Corporation, to import 350-500 buses by April, makes one heave a thankful sigh of relief for the presence of some visionaries in the government. Moreover, the construction of Bus Rapid Transit System to serve about 150,000 passengers daily on Ferozepur Road, also deserves considerable applaud. If one were to design a plan for medium term, the biggest hurdle that the government is bound to face involves a huge paradigm shift for the urban elite. The message would be simple; every member of the household does not need to own a car or travel by a private vehicle to reach their destination be it a workplace, a social event, or simply menial grocery shopping. The ‘west’ that we all aspire to god-willing immigrate to, has well developed public transportation systems which require at times hours of travelling for citizens to commute. Why can’t we provide security and confidence to women, children and people at large from ourselves first, before demanding these essentials from the state? The parallel measures that provincial governments need to undertake involve giving a boost to competition in the provision for transportation services. This would ensure a greater emphasis on quality, prices and the development of an overall culture for using these services in addition to ancillary employment generation. Moreover, to disincentivise use of personal vehicles, commercial parking zones can be developed which charge heavy tolls for people who chose to bring out their cars. The benefits of this approach are many and easy to appreciate. Greater revenue, less traffic congestion, pollution, driving stress should hopefully be adrenaline boosters for many. The onus of these suggestions falls on both policy makers and consumers alike. If traffic regulations were imposed, the informal market and the mafia where rates are decided for driving/ routing the semblance of public transportation that we currently have, would suffer great dents. As a final measure, I propose recall of all driving licenses, and retaking of tests to ensure greater security and less stress on roads. The time to rethink is now! The writer is an economic analyst and freelance financial journalist. She can be reached at firstname.lastname@example.org
It is a matter of concern for any country which gets reduced to a dumping ground for used materials and discarded articles. Pakistan, being a very relevant example, where the mounting ratio of importing, used or recycled plastic items, has become a constant threat to the health of the citizens. At present, there are hundreds of importers and buyers in Pakistan who are trading different used plastic items and materials. Definitely these types of used items are economically cheap and very cost effective, especially for the average buyer in the Pakistani market. But, the overall hazards resulting due to the unrestrained and uncontrolled usages of these used plastic items outweigh the so-called benefits and advantages. Sipping water from a used pet bottle would not be an ideal option for any health-conscious individual living in any part of the world, but there are a number of traders in Pakistan rejoicing the economic benefits offered by the treasured rubbish, that is discarded by the more developed countries of the world. Starting from CPU casings to monitors, from CDs and DVDs to keyboards, dustbins, milk jugs, lawn chairs, other furniture, etc; imported plastic waste in Pakistan is being used to manufacture products that are commonly used on a daily basis, including soft drink and shampoo bottles, buckets, credit cards, disposable latex gloves and syringes, shoe soles, trash bags, etc. Heavier consumption of imported plastic waste into making of everyday products can result in various medical and environmental concerns because this plastic waste is toxic in nature, and hazardous to human health in many ways. For example, products made from coloured plastics entail higher amounts of pigments composed of highly-toxic heavy metals like lead, cobalt, chromium, cadmium, selenium, and copper. Regular use of used plastic bottles may even cause cancer as used plastic bottles harbor various kinds of bacteria. A majority of used plastics being imported to Pakistan contain polycarbonate plastics, which are harmful and dangerous. Bisphenol-A (BPA), a widely-used chemical in baby bottles and hard-plastic drinking bottles, has reported to be one of the major causes of birth defects and infertility in later stages, along with diabetes and cardiovascular diseases as well. Used plastics which are further utilised in our local industries in the manufacturing of various medical devices and accessories are equally harmful and dangerous. Commonly known as vinyl, PVC plastic is used in many medical devices, examples including IV bags, disposable gloves, curtains and flooring, etc, and results in a large number of health risks and environmental concerns. In Pakistan, there are more than 800 manufacturing units that buy used syringes and discarded plastic bags for a measly price of Rs20 per kilogram, and after reprocessing, these factories sell it to the other local distributors and suppliers for up to Rs120 per kilogram. There are more than 400 plastic recycling and crushing units working in Karachi alone. These factories usually import all kinds of discarded plastics from UAE, which are then crushed and transformed into granules, and washed with many different toxic chemicals. These granules are sold at very cheap rates in the local wholesale markets. A large number of small factories, mostly operational in slum areas, purchase these plastic materials to manufacture a range of plastic products. Most of the used plastics being imported to Pakistan are collected from the dumpsites, and chemicals from these plastics cause soil and water pollution, destroying crops and the natural habitats of fish and other marine life. Furthermore, used plastic items being sold in Pakistan are made with unknown composition of polymer and additives which results in unexpected chemical degradation. Most of the plastic waste is being imported into Pakistan from UAE, US, Canada, Germany, Japan, China and other developed countries, plastic waste coming from UAE is 400 times cheaper since western countries dump their all plastic waste and rubbish in UAE, from where it makes its way to Pakistan. While international standards of waste management underscore the three R's — reduce, reuse and recycle, Pakistanis tend to follow their own philosophy revolving around the three R’s which are rupees, revenues, and returns. Concerned health and environment departments should take notice of such import of used plastics into the country, and this should be brought to an immediate halt due to the harmful effects to the health of the consumers and the environment. Uncontrolled import of used plastics into this country also affects the local plastic manufacturers who are producing various plastic-based products and devices according to international safety standards and are abiding by globally-certified manufacturing laws and regulations. The writer is Texas A&M University graduate who is currently employed with Telenor in the Products - Commercial Division. He can be reached at email@example.com
Unfortunately, we all have to stumble upon those fiddly little moments when we have to take life defining decisions. Some of us prefer to take the backseat and let others take those decisions for us, hence, conjuring up a scapegoat for the inevitable failure in judgment – while others choose to keep the decision-making powers within their own hands. Either way, there is no doubt that one such earth-shattering decision is that of earmarking one’s spouse; a choice that undoubtedly has lifelong ramifications. Nuptial historians classify marriages into two primary categories; love marriages and arranged marriages. However, there is a painful sub-category of the latter, in which one is pressurised into walking down the aisle with the trophy wife – one that the family has chosen – in lieu of one’s longtime sweetheart. Pakistan is at the crossroads of taking a plunge into one such heartbreak scenario, as our uncle is twisting our arm and forcing us into opting out of a decision that we have long set our heart upon. In this little world of energy crisis driven metaphorical matrimonies, the uncle in question is of course our dear Uncle Sam, with the Iran-Pakistan pipeline playing the high school sweetheart to TAPI’s trophy wife. And with the energy shortage in our neck of the woods well documented – six billion cubic feet natural gas requirement being met with merely 4.1 bcf per day, and gas shortfall of one billion units per day – it would be an understatement to suggest that Pakistan is in desperate need of gas pipeline wedlock. The IP love affair began in May 2009, with the project expected to bring in around 750 million cubic feet of gas to Pakistan and providing around 5,000 megawatts power generation capacity. Considering their label of being wobbly and indecisive, our government’s uncharacteristically firm stance on the IP pipeline divulges an unprecedented level of passionate affection. Couple this with the global antagonism over all things Iranian, and the devotion becomes all the more momentous. All the same, if there is a ‘Romeo and Juliet’ tale in the global geo-political scene, the Iran-Pakistan pipeline story is that. With Uncle Sam being our godfather, and the final authority on most family matters, the Washington-Tehran-Islamabad triangle is reminiscent of Shakespearean tragedies; with unfulfilled promises of teenage lovers mortifying under worldly animosity. Washington’s wide array of sanctions on Iran, owing ostensibly to its civil nuclear programme, has ensured that Islamabad is under escalating pressure to abandon the pipeline project, even though the repercussions for Pakistan are as conspicuous as an African elephant slipping over a banana skin. And with every potential bride shunned by those at the helm of the family, there is an alternate better half that has been identified to distract the Romeo away from his Juliet. Cue TAPI pipeline. TAPI is your typical ‘other woman’ from epic love stories; good looking, strong family background, alluring for one and all barring the protagonist of the tale. However, a closer look suggests that all is not quite as well. With TAPI, it’s the ‘A’ that stands out as the biggest thorn; and any project that traverses the precarious land of Afghanistan falls short of the realm of safety by a good few light years. Also, with the eventual price tag of TAPI gas towering way above that of IP, our uncle’s choice has proved to be more high-maintenance than earlier perceived to be. Nevertheless, it is easy to discern the reasons behind Uncle Sam and his chums’ desire of uniting Islamabad and TAPI, with western multinational companies’ hegemony over Dauletabad gas reserves. It’s the lust for monopoly over oil and gas; a skewed nuclear proliferation policy; an embarrassing war on terror; and the new great game all thrown into the Middle Eastern/Central Asian cauldron as Washington plans on stamping Islamabad’s marital future. Considering all the aforementioned twists in this dramatic tale, do we actually take the IP project as our lawfully approved gas pipeline for better for worse, for richer for poorer and in sickness and in health, to love and to cherish till death do us part? It seems as if we do. The writer is Sub-Editor, Pakistan Today. He can be reached at firstname.lastname@example.org
Only a strong domestic industrial and agriculture base can ensure a strong economy of Pakistan, presently, at a critical stage in the wake of rising twin deficits — fiscal deficit and current account deficit. The planning commission has estimated that the total investment of about $4 billion per annum is required to meet the country’s energy needs which are projected to grow at a pace of 2.0 GW per year in the next five years. According to an updated version of Pakistan Integrated Energy Model Policy Analysis Report, almost 12 GW of new capacity will be added to the system by 2015, of which over 8.0 GW is in the planning stage. The report represents a least cost development path for the Pakistan energy sector that supports the government’s projections for GDP growth. However, the projections depend on many factors, such as the demand projections, prices assumed for fuel, cost and performance of future technology options, future characteristics of the existing and committed power plants, and demand sector end use technology choices. Growth of Pakistan economy has become a tricky business. No foreign investment can be chipped in without a reliable and affordable supply of energy. Furthermore, as the past several years of load-shedding have demonstrated; not just the economy, but the quality of life of the people of Pakistan will also at stake if the country is not able to identify a reliable roadmap for its energy future. The options are many, and major decisions need to be made by policy makers. The energy requirements would become double than present and it would cross the figures of 120 MTOE (million tonnnes of oil equivalent) in 2015, if the government plans to achieve the growth target. It may be mentioned here that Pakistan meets 80 per cent of its energy requirement through import. On the other hand, international prices of oil have not only broken the past records, but touching new heights which are directly or indirectly affecting the black gold industry badly. Moreover, the speculators estimate that the oil prices would reach to $100 per barrel, very soon. WAPDA, for producing electricity, purchases oil at a high price and shifts the financial burden on the consumers. High electricity tariff has already imbalanced the entire economy. There is a general impression among the concerned circles that the basic reason of energy crisis is the irrational, short-term and wrong policies of the government. The government should focus to develop and promote other resources of energy like atomic energy, search, and use of natural gas, import of natural gas, solar energy, coal and wind energy, apart from oil. Energy crisis has declined the industrial production by 50 per cent due to which the rate of unemployment has increased. Pakistan economy is under strong pressure of energy crisis. Agriculture sector has also taken the hit, impacting the farming capacity due to short supply of energy. Meanwhile, high inflationary pressure, likely to stay at 12 per cent during current year, has shed economic growth further due to limited availability of credit to the private sector. Textile industry is expressing its inability to export inflation. A dismal industrial growth has resulted in massive unemployment. The textile industry is pursuing the government for sustained gas supply to the Captive Power Plants. The government is unable to do so because of high demand from domestic consumers on SNGPL network. Closing down of gas-dependent mills is leaving labourers out of job on a large scale. As a result, the street crime is on the rise. Many industrialists are receiving threats of kidnap for ransom. One way of tackling the ongoing energy crisis is permanent closure of gas-dependent Captive Power Plants (CPPs), particularly in textile industry, relatively a cheap fuel against furnace oil to generate electricity. There is a tariff difference of about Rs3 per unit between the mills with gas-dependent CPPs and the PEPCO-fed units. CPPs consume 600MMCFD gas with low efficiency, which means more wastage of precious fuel in generation of electricity. All these CPPs should be handed over to PEPCO for power generation. It should be mandatory for Pepco to ensure 24/7 smooth supply of electricity to the industry. PEPCO can also introduce special tariff for industry, a bit higher than what costs these mills on CPPs. The industry circles have only one apprehension on this arrangement that the government would not be able to ensure priority of electricity supply to industry. They are of the view that they would not only be deprived of their present share in gas, but also electricity supply. The government should act fast and legislate on this point for prudent use of gas as a fuel to produce cheap electricity and keep the industry wheel running. The writer is President American Business Forum, Chairman and CEO NetSol Technologies, Honorary Consul of Australia for the province of Punjab, Pakistan
Self-proclaimed economists many a times lead one to experience a fatal cringing and a heightened need to claw. The latest argument encountered by the writer on what policy makers should and shouldn’t do proposed closing down the economy! The dissenting would agree that no matter how rhetorical, ‘blanket’ and ‘unheard of’ this argument seems, it is still intriguing. With chants of more and freer trade coming from all corners of the globe, the prospect of gliding back and finding sustainable alternatives sounds alien. Introspection would object otherwise. The theoretical backing for trade and comparative advantage is consumer centered. If more and cheaper can be imported from abroad, one should put domestic resources to other productive ventures. Applying this to the Pakistani or the emerging market scenario; without significant investments being made in technology or simply put ‘catching up’, the very theory of comparative advantage has led the economy to greater dependence on foreign inflows and agriculture for survival. Mixed with the country’s state directed corruption, very little remains in terms of tangible hope to allay apprehensions of implosion. Why then should the country trade, if no good is to come out of it? In the last five years (since FY05), the cumulative outflows on the balance of payments front have amounted to $1.2 billion (Rs107 billion). Specific to trade, the cumulative current account deficit has amounted to $42 billion (Rs3.7 trillion). Identifying commodity classifications in the export/import list, textiles and oil emerge as the most prominent products. In the last three years, the former has comprised 51-2 per cent of the total export receipts while oil amounted to 32-4 per cent of the import bill. In simple magnitude terms, the economy has coincidentally imported/exported oil/textiles worth $11 billion on average in the last three years. However, upon close inspection of the import commodity bill (and much to the dismay of the messiah), one finds that most goods (besides oil) have an inelastic demand, and so circularly, to sustain the foreign reserve outflow, the export side is pressed to buttress. Thus for reasons beyond neocolonialism, the economy cannot be closed down! Nevertheless, given that the economy has been able to sustain net foreign currency outflow or deficit in the last five years and since independence, it clearly does not lack the ability to garner some millions of dollars to invest back home. If power and energy (and the oil bill) is what drags the economy down, then maybe ministers and other important whatstheirnames should really stop making shiny comments about 175 billion tonnes of coal reserves and actively direct whatever resources the economy has, to utilise this resource and save or redirect the $11 billion being spent on oil instead of plugging in just Rs900 million or $1 billion for extraction of gas. If this vast resource is put to use, about 2000-2500 (conservative estimate) years can be spent without wondering which direction Arab crude prices will take. And for once, inflation might as well take a step down! In all, Pakistan has sort of missed the bandwagon in terms of identifying its major sources of income. With India on the software, hardware and industrial front, China another league and even Bangladesh banking heavily on the ready made garments segment and with a steady growth rate higher than Pakistan’s, the time to identify and prosper on behalf of a niche has probably departed. And thus, to save whatever is left and running, inputs have to be restored. Once again, if the country is flushed with abundance, the rulers might as well stop themselves or be stopped from creating delays and inefficiencies. One remembers Marx’s definition of capital as what regenerates itself. Surely sitting on liquidity and investing in land will not create more of either of the two. The writer is an economic analyst and freelance financial journalist. She can be reached at email@example.com
In late October, I started noticing a tug-of-war going on in the stock market. It shows up on the charts by forming a symmetrical triangle turned sideways on the chart. Triangles typically have five major pushes to each side of the triangle before breaking out. Some time ago, it was nearing the completion of the fifth pass, so I told my valued clients that a stock market breakout was likely coming within the coming week or two maximum. Well, sure enough just a few short days later, the stock market broke out of the triangle pattern on the daily chart of the S&P 500 and started heading south. This was a huge tip for currency traders. You see, when stock market breakouts happen like that, it illustrates currency traders which currencies will likely benefit and which ones will likely suffer from the breakout. In the industry, we call it the “risk on” or “risk off” trade. When stocks breakout southward the risk-off trade is in play and when stocks breakout northward on the chart, the risk-on trade is in play. Now as investors, you just need to know who’s in the risk-on and risk-off camps. The risk-on currencies are the ones that tend to track stocks and commodities closely and often carry higher interest rates. So some of the risk-on currencies are the Australian dollar, New Zealand dollar, Canadian dollar and even sometimes the euro and the pound. Emerging market currencies like the Mexican peso, South African rand, etc. are also risk-on currencies since they are influenced by commodities and have higher interest rates. The risk-off currencies are the defensive currencies like the U.S. dollar, Swiss franc and yen. The dollar is really taking the lead right now as the “defensive currency of choice” because the central banks of Switzerland and Japan have made the other ones essentially bad defensive choices because of these central banks intervening in their currencies to weaken them. So if you have an opinion on where stocks are heading, whether up or down…then you also have an opinion of whether the risk-on trade will be in play or if the risk-off trade will be in play. And knowing that, you’ll be able to know which currencies have an edge and which ones don’t. Then you can play them against each other. For instance, if the risk-off trade favors the dollar and hurts the Aussie dollar and New Zealand dollars then you can sell-short AUD/USD or NZD/USD and benefit from both dynamics going on there. So keep an eye on what stocks [and even commodities] are doing and you’ll have a great take on what is going on in the currency market even though you may not have as much experience in the currency market. This is a great way to take your stock market experience and translate it into what that means in the currency market. As investors , you will find that transacting your trades in the currency market (rather than the stock market) can carry some distinct advantages such as: no commissions, just the spread to pay…less slippage, quicker fills on your orders, 24-hour a day trading, etc. Happy investing in the currency market Disclaimer: This is just a research piece and not an investment advice. All financial transactions carry a RISK. The writer is a financial market economist and commodity expert with 12 years of financial market experience. He graduated from University of Chicago, Booth School of Business, USA & IBA Karachi. He can be reached at. Blogs at www.economistshan.blogspot.com
The government has made a comeback for all those who were wondering what banks’ next avenue of choice would be. With a complete and partially rejected auction up its sleeve, the financial system’s investment portfolio seemed a little threatened at first sight, if one did not take into account the entirety of about Rs690bln that has been borrowed from scheduled banks in the half year ending December. However, it seems like the finance ministry modus operandi regarding resources that it needed to garner during the last month was a little out of order. Or maybe, December has not turned out to be a month of pride in terms of tax collection and the officials to sit back and snore. In any case, the recent T-bill action has brought fresh gossip to be consumed by all. Lo and behold after months of struggling participation in 3m-bills, (less that Rs20bln on average since August-11), the recent auction has brought out an interest of no less than Rs52bln with government accepting around Rs21.4bln. What is most interesting is that the government has been able to chastise the financial system by making it offer more and that too at a much lower price; the latest cut-off for 3m-T-bills is 11.78 per cent versus the previous 11.82 per cent at which the government picked up a measly Rs200mln in the previous auction. Moreover, the participation is concentrated in 6m bills, Rs97bln of which Rs70bln was accepted. The government and the private sector have given each other tacit assurances through this bill, by pricing it higher at 11.83 per cent versus 11.67 per cent in the previous auction. The story goes that a confused financial system once sought a signal as to whether there could be a discount rate increase ahead. They placed their bets on maintain (participation in 6m) while enquiring about a rate hike possibility by engaging the yearlong ignored 3m T-Bill. To which, the government removed the need for anticipation by aligning its acceptance with a maintain vote for the policy announcement in January. The 12m T-Bill although sidelined for the moment, holds immense importance as far as the future of bank participation has to be determined. In the first half of the current fiscal year, banks have generously poured in about Rs920bln in the respective bond that is going to mature in the first half of FY13. This can be expected to strain liquidity in the banking system and level of participation in the upcoming months. A possible solution could be OMO- injections by the SBP that may pose problems for the latter in terms of necessitating greater printing of money to finance its deficit. During the previous bout of discount rate reductions, the SBP was often attacked for giving in to the political whims unnecessarily. Many predicted that the discount rate was being aimed to be as low as 9-10 per cent as the government wished to lower its servicing costs. However, in the current scenario, with currency depreciation, and imminent IMF payment, the SBP will face the challenge of keeping itself and the currency afloat while also steering liquidity in the financial system. Thus, the private sector might as well sigh and think of out of the box solutions to rejuvenate its growth. With the liquidity short and NPLs standing at 16.7 per cent, highest in the last one year, very little can be done to persuade banks to lend more to increase investment. Alas, another SBA or a more intense war on terror can be the economy’s next saviour, if at all. The writer is an economic analyst and freelance financial journalist. She can be contacted at firstname.lastname@example.org
Currency war, capital controls, regional trade and protectionist policies would be the hot topics in the years to come. Countries are worried about their exports, employment, productivity and GDP growth. Not a single country is willing to let her currency appreciate that would hurt exports. Countries like Brazil, Thailand, South Korea, Saudi Arabia, Singapore, and Switzerland have recently imposed capital controls in one form or the other. In my humble opinion, capital controls are not effective in curbing currency appreciation. Currency appreciation can be controlled through strategic implementation of monetary and fiscal policies. However, many countries have failed to comprehend the tools of macro-economics that can be very useful in getting down to the crux of the issue. Currency appreciation is normally seen as hurting exports, decreasing productivity, increasing unemployment and creating lower than expected GDP growth rate. Thus nations are worried not to let their income levels down i.e. GDP growth. Once currency starts to appreciate, it makes exports expensive, imports cheaper and sends policy makers wondering as to how to control rising currency. Singapore government has recently taken measures of capital controls, 10 per cent tax on property papers bought by foreigners. Brazil have imposed tax on bond purchased by foreigners, Thailand and South Korea have done the same. Saudi Arabia imposed capital controls on foreign remittances. Foreigners working in Saudi Arabia can only send 10 per cent of the total deposit amount in their bank accounts as remittance back home. Switzerland intervened in the currency market and pegged its rate against USD. Investors, high net-worth clients, speculators and people who are looking for wealth protection have taken position in various currencies including Brazilian Real, South Korea Won, Swiss Franc to name a few. So the question arises, are capital controls effective in controlling rising currency? According to IMF and World Bank research reports, capital controls are short term solutions but not a long term one. Hence, capital controls are not effective in taming rising currency. These two policies are the real key in controlling rising currency or taming strong currency. Having studied with a Nobel Laureate at University of Chicago, Prof Gary Becker and respected Prof John Huizinga at Chicago School, I strongly feel that monetary policy and fiscal policy are the real solution to currency appreciation containment. How does it work in the real world? Monetary Magic - Central bank can start printing money or using quantitative easing method or expand balance sheets in order to bring down the value of the currency. In this way, monetary inflation will rise and the currency appreciation impact will die down soon as more supply of the local currency comes in the financial market. Fiscal Magic - Government can undertake huge projects with strong return-value focus in order to create employment and buttress economic activity. Once the government starts these projects like infra-structure development, up-gradation of hospital services, restoration of historical sites, building of new departments at universities, updating military hardware or investment on bureaucratic knowledge base or capacity enhancement activities; it would let the economic ball rolling. These investments would require local currency utilisation and keep the currency from rising fast. These ventures would send a signal to the investors globally who might be interested in taking position in currencies viewed as strong to consider macro-audit of their asset allocation or investment portfolio for the long run before making investment in the strong currency. Governments can adopt any one of the two approaches mentioned in order to meet the challenge of rising currency. Chile is often quoted as the best example to take control of the rising currency in 1998. However, some people mention about Malaysia’s capital controls to be effective as well. Again, I would say it depends on the individual country and her regions location. In the coming years, I would say that currency manipulation or undervalued currency or currency dumping might become a bone of contention among many countries as they compete quite fiercely in the global trade market to win market share going forward. Are you ready for protectionist policy or capital controls phenomenon? The business magazine/financial newspapers would run many articles on capital controls as we move forward for the next 3-years. The writer is a financial market economist with 12 years of solid global experience based in Asia Pacific. He has graduated from Uni of Chicago, Booth School of Business, USA and IBA Karachi. He can be reached at email@example.com. Blogs at www.economistshan.blogspot.com
Predicting the economic ramifications in the current year, and the rationale behind the forecast The economic outlook for the world is pretty clear for 2012. It’s definitely clear; even if it isn’t quite so pretty. As I look deep into my crystal ball, vying to prognosticate the year, that is already well and truly on its way; there are quite a few aspects under the forecast gun that are going to be inevitable, some are debatable and others are mere hunches on my part. All the same, only time will tell about the authenticity of this little spherical crystal ball – metaphorical yes, but it encompasses more than its fair share of realism. The pictures on the surface simply read; European recession, insipid growth in the United States of America, and a precipitous slowdown in China and a multitude of emerging market economies. I can also see Asian economies being exposed to China – no big surprises there –, Latin America being exposed to lower commodity prices and Central and indeed Eastern Europe being exposed to the monster we call the eurozone. The volatility of the ever volatile Middle East is resulting in gargantuan economic ramifications – all over the globe – and escalating oil prices are becoming a menace for all the stakeholders as well, thanks to our dear friend Iran. While the exact measurements might not be quite palpable in the crystal ball, there is not even the slightest of question marks over the inevitable eurozone recession. US’s pedestrian growth might be further halted in the months to come; owing mostly to the fiscal drag, deleveraging in various sectors and political gridlocks. UK is double dipping; again with the same problem of insufficient growth. Japan is dealing with a change at the helm of government and in dire need of structural reforms. At the same time, the major chinks in the armour of Chinese economy are becoming all the more conspicuous. Its growth model is not quite the real deal that it was touted as in the past, falling property prices have a menace of their own and the construction boom looks like being decisively stalled. There is no doubt that the Chinese leaders have their work cut out. And they’re definitely not alone; with the US, Europe and Japan as well finding themselves in a similar fix. Current-account imbalances between the US and China – among other emerging economies – and also within the eurozone jurisdiction, continue to remain large. To restore order, lower domestic demand in over-spreading countries with large deficits and lower trade surpluses and real currency appreciation is the need of the hour. To restore growth, nominal and authentic depreciation is needed to ameliorate trade balances among over-spending countries and surplus countries need to bolster the domestic demand. It goes without saying that the policy makers are short of new ideas – at least short of the ones that would border on being effective. Experts say that currency devaluation is a zero-sum game, and also that most of the countries don’t have the magical wand that would allow them to depreciate and improve exports at the same time. Fiscal policy is also restrained and in the political realm the G-20 has paved for the possibility of an ironical – yet actual – G-0. The restoration of growth is no mean task; and while with every difficult task comes the possibility for the leaders to make their mark, it would take a collective effort from the Who’s Who of global politics to ensure that things improve in 2012 – at least that’s what the crystal ball tells me. The writer is a freelance contributor and is currently working for Philip Morris, Pakistan
Recent growth in China has relied mostly on the surging real estate prices The global economic recession as many are aware of, was brought about by two factors. Firstly, there was an unrealistic boom in real estate and secondly, there was rapid growth in credit creation, debt that was created without the means to back it. Once the bubble burst, and a vacuum was created, that is where traditional economics failed to rescue the affectees from the rubble. There have been austerity measures, and other similar initiatives, that were high on rhetoric but low in effectiveness, and ultimately what we had was one very foul smelling broth. In the aftermath of the global economic meltdown, all eyes have been on China to be the dark horse, the vigilante that rescues the world from its problems, but China has been rather unwilling to don the superhero costume, to step in to the shoes of a saviour that everyone wants it to be. And there are reasons why China has hesitated to do so. Let us try to understand the following narrative. Recent growth in China has relied mostly on the surging real estate prices and coupled with growth has been a rapid rise in credit, with the bulk of the steroids being pumped through ‘shadow banking’ devoid of government guarantees or supervision. However, slowly, like all bubbles this one too is bursting, and there are some strong reasons to smell economic pressures on the Chinese economy. What compels me to resort to this line of thinking is simple, while the Chinese economy was growing household consumptions have somewhat lagged behind the overall growth in the economy. When looked at, consumer spending is roughly 35 per cent of the total GDP. One could begin to explain this phenomenon by stating that 1/3rd of the worlds savings originate from Asia, but despite that, this figure is quite low. Secondly, the bulk of Chinese goods are bought by the minions across the world. While the consumer spending of China declined, the country has largely relied on expanding exports to keep the manufacturing growth steady. The million dollar question however is that Chinese investment has soared to nearly half of the GDP. It’s a paradox to say the least, which then forces one to ask the obvious question. Despite consumer demand being relatively weak what fueled all the steroid injections in the Chinese economy. And the answer might just lie in the real estate bubble we talked about, earlier. The figures validate the narrative we are trying to establish here, since 2000, the real estate investment in China has doubled as a percentage of GDP that accounts for nearly half of the overall rise in investment. The rest was fueled by those corporations that were facilitating the growth of the real estate bubble. Skeptics would ask, how we could be so sure that it is indeed a real estate ‘bubble’. One can never say for sure, however in the last few years or so we have seen one too many a bubbles to not be able to distinguish one from the symptoms that it demonstrates. All the signs seem familiar, from the bubbles witnessed by economies across the world. And there are parallels to be drawn from the example of the US as well. After all the real estate and household bubble that gave rise to credit creation came from a shadow banking system in America. While hard data is never too revealing and thus even in America it was rather hard to predict the coming of the apocalypse, but the symptoms are there and one can hope that like many commentators say, the Chinese leadership is smart and strong enough to cope with the storm in the making. If the balloon bursts, the repercussions would be debilitating for the global economy particularly in the wake of the European debt crisis. The writer is a professional banker and financial commentator. He can bereached at firstname.lastname@example.org