Friday, May 30, 2008

"Economic Meltdown" in Pakistan

Modern economies and markets are largely driven by business, investor and consumer confidence. The movers and shakers of business and investment world look to the national political and economic leadership and their pronouncements and actions for cues on what is to come. When they sense a lack of competent leadership, their confidence drops and the markets and the economies come crashing down, as has been observed in Pakistan recently.

In his first comments about Pakistani economy since the formation of PPP-PML(N) coalition government, the PPP co-chairman Asif Ali Zardari told a press conference on May 17 that the economy is headed toward "meltdown". These remarks came immediately after Finance Minister Ishaq Dar had pulled out of the cabinet on the issue of the judges restoration. Yesterday, Nawaz Sharif said that Pakistan’s ruling coalition had agreed to “expel” President Pervez Musharraf from power, further contributing to market unease.

As the PPP and PML leaderships continue their political posturing, the larger story is the massive loss of confidence by business/investment community in Pakistan. It is worrying to see a sudden halt to foreign investments and the flight of capital by Pakistani investors to investments elsewhere in the world.

State Bank has raised interest rates from 10% to 12.5%, the rupee is in free fall, the dollar reserves are disappearing and both S&P and Moody’s have cut Pakistan’s credit ratings.

KSE 100 index lost 2992 pts during May 2008 starting at 15122 & ending at 12130. The index lost 879 pts during the week ended May 30th , 2008, at a nine month low.

Credit-default swaps on Pakistan's government debt increased 10 basis points to 530 in Hong Kong, according to Morgan Stanley's prices. That means it costs $530,000 a year to protect $10 million of Pakistan's debt from default for five years.

As Pakistan's foreign currency reserves dwindle, the ability to borrow additional cash has been impaired by Pakistan's credit rating cut for the first time in nine years by S&P and Moody's Investors Service, which cited "growing economic imbalances and renewed political difficulties."

"The ratings could impact Pakistan's effort to raise debt overseas or sell shares in companies," said Zaheeruddin Khalid, head of research at Al-Meezan Investment Management Ltd. in Karachi, which oversees $270 million in stocks and bonds.

A recent report on Pakistan’s Geo TV said that Pakistani real estate companies have been moving capital out of the country to the tune of at least $15 billion so far to invest in Gulf real estate. Such steep loss of capital will inevitably lead to job losses in Pakistan and contribute to further economic and political instability.

Unfortunately, it takes time and serious effort to create confidence in markets and economy. But it is very quick and easy to destroy such confidence by ill-conceived, impromptu statements. Zardari's comments such as Pakistani economy heading toward a "meltdown" add fuel to the fire and weaken confidence in Pakistan's economy and drive away investors. What Pakistan needs more than anything else is a sense that the leadership understands the issues and working seriously in a focused manner to resolve the economic issues. They need some sense of political stability and predictability.

Labels: , , , ,

Tuesday, May 27, 2008

Spring Wheat Crop Threatened by Disease

A relatively new, aggressive strain of black stem rust, called Ug99 for its 1999 discovery in Uganda, has spread to Kenya, Ethiopia, Yemen and Iran. Most commercial wheat grown world-wide has no resistance to the disease. The threat comes at a time when wheat stockpiles have shrunk because of bad weather and strong demand for wheat-based foods, reports the Wall Street Journal this morning.

Ug99 poses a more serious threat to commercial crops than even the U.S. black-stem-rust epidemic of 1954 that destroyed 40% of the U.S. wheat crop, experts told the Wall Street Journal.

Fears that the disease may have spread to Pakistan haven't been confirmed, experts say, but Pakistan is a concern because of its proximity to India, the world's third-largest wheat producer with over a billion mouths to feed.

The potential for crop loss in Africa, the Middle East and South Asia is higher. Based on wind patterns and the rate of spread, the United Nations Food and Agriculture Organization says countries in the immediate path of Ug99 grow 25% of global production.

While wheat traders are aware of the disease, it hasn't significantly affected wheat-futures prices yet. Friday, the July wheat contract on the Chicago Board of Trade rose 7.5 cents a bushel to $7.5250 ($276 per ton). A metric ton of wheat has 36.744 bushels.

There are also concerns about the lack of rain in Australia impacting the wheat crop this winter. Wheat futures are likely to rise sharply if the forecast rain fails to materialize in Australia’s main eastern growing state of New South Wales, leaving farmers anxiously waiting to plant their next crop. Australia is normally the second-biggest wheat exporter in the world, after the United States.

This latest news adds to the worries about much higher wheat prices driven by potential real shortages exacerbated by speculators in the world futures markets. It would hit poor countries in Africa and South Asia particularly hard with the increased probability of a serious famine.

Labels: , , , , ,

Monday, May 26, 2008

Reflections on Pakistan's Achievements

Guest Post By Tariq A. Al-Maeena

On the day of our departure for Jeddah, with our bags packed and goodbyes dispensed with, our group found itself together at the coffee shop of the hotel. There each one of us talked about whether this trip had changed our opinions of Pakistan and its people.

This is a country of about 160 million people scattered about four provinces and Azad Kashmir. As the world's fifth largest democracy, Pakistan has had its share of questionable leadership, but there is enough evidence that the country's progress had not taken a back seat.

We all agreed that the media had been over blowing Pakistan's lack of safety and security. Never once had we felt threatened for our personal safety during our entire trip, and there were many times when individually we would set off on our own to the busiest sections of the cities we had visited.

Nether were our pre-visit ideas about a dirty and poor country justified, for we saw enough to prove otherwise. The infrastructure wherever we went was either intact or in the process of being upgraded.

We also felt that in the context of their internal politics, news of Pakistan's emerging industries and economies were continuously being relegated to the back pages of the media.

Perhaps it has more to do with Pakistan's preoccupation with conflicts at their northern borders over recent times, but little is written on the fact that with more than 100 universities and 150 research institutes, Pakistan produces 100,000 engineering graduates annually, and another 100,000 technically trained graduates.

More than 50 foreign companies have set up R&D facilities in Pakistan recently. Some of these include multinationals such as GE, DuPont, Bell Labs, IBM and Microsoft. In the business of automobiles, Pakistan manufactures and sells engine components to five of the world's largest manufacturers. Suzuki and Hyundai are recent entrants to the manufacturing buzz in Pakistan setting up full-fledged plants, with Pakistan taking its rank as the ninth largest automobile manufacturer in the world.

Along with heavy industry, Pakistan is also one of the world's largest exporters of textiles and related products. Garment exports alone are expected to fetch in $8 billion by year's end.

In its quest for self-reliance, Pakistan is among seven countries in the world that launch their own satellites. It is also among a few countries that have developed and built their own nuclear power capabilities using their own indigenous technology.

New emerging industries in areas of interest include mecha-tronics, biotechnology, pharmaceuticals and clinical research. And foreign investment has shown a remarkable increase in recent years. Ironically, Gulf countries awash with high returns on the sale of oil have yet to take advantage of an educated labor pool and invest heavily in this growing economy.

And as with the aspirations of the Saudi ambassador in Pakistan, we too wished well for our Pakistani hosts, for they do have a country that should make Pakistanis everywhere proud and more determined to develop their political participation in a positive manner. It is their country, and they should all join hands under the crescent and the star, the symbol of their flag to ensure a secure and stable government, free from personal agendas.

As we settled in our seats for the flight back home, individually we all vowed Insha Allah that we would one day return to Pakistan with our families. We had had but a glimpse into this land of tourism and resilience and all of us wanted more.

Pakistan Revisited — VI: A Time for Reflection
By Tariq A. Al-Maeena,
Saturday 17 May 2008 (11 Jumada al-Ula 1429)

Labels: , , , , ,

Friday, May 23, 2008

Pakistan's Economic Crisis Deepens

The Karachi Stock Exchange's 100 share index lost 615.26 points, 4.5%, to an eight month low of 13,011.74. The KSE index is now down 17% from its peak at the end of April amid growing loss of confidence in the country's leadership.

The latest drop in the KSE-100 was triggered by the country's central bank's decision to raise interest rates to 12.5% from 10% to slow the inflation rate. However, the key issue for business and investment community in the last few months has been growing anxiety over the lack of economic and political leadership. Finance Minister Ishaq Dar's ill-advised and ill-timed statements talking down the economy have also contributed to the loss of confidence in the Pakistani markets. The result has been the flight of capital from Pakistan. Instead of continuing to invest in Pakistan, the capital is now flowing away to the Gulf and invested in real estate by Pakistanis.

A recent report on Pakistan’s Geo TV said that Pakistani real estate companies have been moving capital out of the country to the tune of at least $15 billion so far to invest in Gulf real estate. Such steep loss of capital will inevitably lead to job losses in Pakistan and contribute to further economic and political instability.

As Pakistan's foreign currency reserves dwindle, the ability to borrow additional cash has been impaired by Pakistan's credit rating cut for the first time in nine years by Moody's Investors Service, which cited "growing economic imbalances and renewed political difficulties."

According to Bloomberg, the South Asian nation's foreign-currency sovereign rating was lowered to B2 from B1, one level below Turkmenistan and Jamaica. The ranking on locally-issued debt was also reduced to B2, Moody's said in an e-mailed statement today. This followed the May 15 announcement by Standard and Poor which also cut Pakistan's sovereign debt rating.

"Macroeconomic management and policy formulation remain significantly constrained" given the rivalry between the two main coalition partners -- the Pakistan Peoples' Party (PPP) and the Pakistan Muslim League-Nawaz (PML-N), said Standard & Poor's credit analyst Agost Benard.

"The ratings could impact Pakistan's effort to raise debt overseas or sell shares in companies," said Zaheeruddin Khalid, head of research at Al-Meezan Investment Management Ltd. in Karachi, which oversees $270 million in stocks and bonds.

Credit-default swaps on Pakistan's government debt increased 10 basis points to 530 in Hong Kong, according to Morgan Stanley's prices. That means it costs $530,000 a year to protect $10 million of Pakistan's debt from default for five years.

As the average Pakistanis' suffering deepens with the growing lack of "roti, bijli and paani" (food, electricity and water), the elitist media and the self-proclaimed "civil society" led by the lawyers and the Nawaz league appear to be completely disconnected from the ground realities. They continue to harp on restoring deposed judges and are bent on exacting revenge from Musharraf, regardless of the disastrous consequences of their actions on common people's livelihood.

This coalition, while well-intentioned, now appears to have been a serious negative distraction for Mr. Zardari and the PPP government. It is time for Mr. Zardari and Prime Minister Gillani to acknowledge this reality and get on with focusing on the real priorities of the people to address their basic economic issues of survival.

Labels: , , ,

Sunday, May 18, 2008

TiEcon and HDF Bring South Asian Leaders to Silicon Valley

South Asians in Silicon Valley had a big weekend with both TiE(The Indus Entrepreneur)and HDF(Human Development Foundation)holding their annual events. These events brought out the powerful, rich and famous with origins in the sub-continent including former Pakistani Prime Minister Shaukat Aziz, Lord Nazir Ahmad and celebrity politician Tariq Aziz. While Mr. Shaukat Aziz was the keynote speaker on Thursday evening at the TIE Global charter member reception, the Human Development Foundation annual fundraiser was addressed by Lord Nazir Ahmad and Tariq Aziz, among others.

TiEcon 2008

Mr. Shaukat Aziz was warmly received by the The Indus Entrepreneur charter members as he spoke about the opportunities for American and South Asian entrepreneurs and investors in both India and Pakistan. "They can help lower the temperature and build trust, which is needed to resolve disputes," he said of TiE effect on the political animosity between India and Pakistan.

Beyond the TiE Global charter member event on Thursday night,the TiEcon 2008 conference continued through Friday and Saturday. There were some 4,000 attendees at the Santa Clara Convention Center, packing keynotes and parallel panel discussions on topics such as the Internet economy, green technologies, life sciences, what's hot - and not - in mobile phones to next-generation enterprise software programming.

HDF Silicon Valley Fundraiser 2008

The fundraiser was attended by over 500 Silicon Valley Pakistani-Americans and others at the Wyndham Hotel in San Jose, CA. It featured Lord Nazir Ahmed as the keynote speaker as well other speakers including Ethan Casey, author of a travelogue "Alive and Well in Pakistan" and Prof John Mock, a professor of Hindi and Urdu at University of California Santa Cruz. The event raised over $140,000 for building schools for the poor children in Pakistan. As usual, Mr. Javed Khan, Mr. Shahid Khan and Mr. Ather Siddiqui were at the forefront of this effort.

Lord Nazir, in his keynote, talked about the continuing difficulties faced by Pakistanis. He said that Pakistanis have lowered their expectations from "roti, kapra and makaan" to "roti, bijli and paani" and were still struggling for the lowered expectations. He was critical of Musharraf. Ethan Casey, however, said he has been going to Pakistan for over twelve years and he found all successive governments from Bhutto to Sharif to Musharraf all deeply flawed. Casey felt that Pakistanis are quite used to dealing with continuing crises and they will rise to the occasion and address their problems without relying on the governments. He particularly thought that the Pakistan expatriate community can help.

Though Lord Nazir Ahmed was a keynote speaker, he almost stole the show from comedian Azhar Usman with his jokes. For example, he said his mother does not understand what a British lord is. She thinks he has become a Tehsildar, a notch above the Numberdar, the highest government official in the village where he was born near Mirpur. What he said sounded a lot funnier in Punjabi. Then he had a sirdarji joke about a sikh who told him he was "Lord Ranjit Singh". When Lord Nazir expressed surprise about not having seen him in the British House of Lords, Ranjit Singh explained, "I was a landlord in Punjab. I left the land back home. So, in the UK, I am just a lord, not a landlord."

The speeches and fudraising were followed by stand-up comedy performances by Samson Koletkar (who claims to be "the world's only Indian Jewish comedian") and Azhar Usman (Allah Made Me Funny) who looks like Osama Bin Laden and jokes about it.

Samson is young and emerging desi star comedian who warmed up the audience before the better known Azhar Usman took the stage. Samson has pretty good material but his delivery was a bit lacking in its effect. He had a couple of very good jokes about his Jewish-Indian parents.

For example: "Most comedians say their dad is so cheap that.... When I hear that I say to them "You talk about cheap. My dad is an Indian Jew. Now beat that!"

Another one: " My Jewish mother in India wanted me to marry " a nice Jewish girl", a Jewish mother in New York wants her son to marry " a Jewish girl". But a Jewish mother in San Francisco just wants her son to marry "a girl".

Azhar's famous intro line that gets the audience laughing is " Hello, I am not Osama Bin Laden. I am his cousin Osama Bin Laughin". He had a lot good material about desi and Muslim humor in the US. For example: "You often hear Muslim men described as terrorists and Muslim women as oppressed. Have these people actually been inside a Muslim household to observe it? If they really do, they'll find the reverse to be true. Muslim men oppressed and terrorized by their women."

Another example: " Desis are the biggest bootleggers. They buy one copy of my CD and copy it for a hundred people and sell it. Once I asked my dad to buy me a Nike
pair of shoes costing a hundred dollars in Chicago. My dad's response: "Pagal ho kiya? Soo dollar ka joota pehno gai?" Then my dad took me on a trip to Patna market in Bihar where he found me a Nike pair that looks exactly like the one I saw in Chicago. But when you look closely at the logo, it says "Nice".

As the population of South Asians of various ethnicities, religions and opinions grows from tens of thousands to hundreds of thousands in this high-tech hub, it seems that Silicon Valley is becoming a center of South Asian culture and business in the West. This region can serve as the bridge between this great nation and the emerging economic and political powers in South Asia.

Labels: , , , , , , ,

Tuesday, May 13, 2008

Entrepreneurs See Opportunity in Food Crisis

Richard Spinks, a 41-year-old British entrepreneur, is going door-to-door, leasing small plots of land from hundreds of thousands of poor farmers in western Ukraine. His company, Landkom International PLC, has planted wheat, barley and rapeseed (aka Canola) on a combined 25,000 acres. Landkom expects to reap its first big harvest this fall, according to the Wall Street Journal.

The Wall Street Journal believes that with the world food crisis becoming acute, entrepreneurs see opportunities to tackle it and make big money. Such efforts could give a much-needed boost to feed the growing population of the world. For years, big agribusiness companies have used new seed and fertilizer varieties to push yields higher. But as technology gains have slowed, the search for additional arable land has intensified. That's created an opening for entrepreneurs with visions of re-collectivizing the land in former communist countries and boosting production.

The total combined arable land in Russia, Ukraine and Kazakhstan that fed the former Soviet Union adds up to about 437m acres, almost the same as the total arable land in the United States. Among other nations with large arable acreage, India has 400m acres, China has about 350m acres and Brazil 146m acres. Of these countries, only China and Brazil have increased total arable land by about 10% over the last decade while others have shrunk. Compared to these nations, Pakistan has about 50m acres of arable land. And, given appropriate investments, Pakistan can increase its arable land by 10-20% over the next decade.

The current food crisis presents an opportunity for entrepreneurs and investors to invest in Pakistan's farm sector and reap big benefits. The new government in Pakistan should seize this opportunity by formulating a new policy of investment in the agriculture sector to bring prosperity to rural areas in Pakistan and help feed the nation and the world.

Labels: , , , , , ,

Friday, May 9, 2008

Farms Beckon Investors to South Asia

While the term "energy security" has been in vogue for many years, the term "food security" seems to be competing with it for an equal or higher ranking on the world agenda. Food Security is particularly high on the list for countries such as China with the world's largest population to feed and the Middle East nations such as Saudi Arabia and Libya who depend on imported food.

So what are these countries doing? They are acquiring farmland in the nations considered world's breadbaskets. Countries in Africa, Latin America, and Eastern Europe who have plenty of farmland but not a lot of money. While these efforts will help increase food production, a downside of an aggressive policy for more farmland is that it will accelerate deforestation and hurt the environment.

The Chinese agriculture ministry has drafted a proposal to support the acquisition of farmland, especially in Africa and South America, to help guarantee China's food security, the Financial Times reports. Beijing already promotes aggressive foreign acquisition by Chinese oil, banking and manufacturing firms -- to mixed receptions abroad at a time of heightened suspicion surrounding sovereign-wealth investments. A Chinese official tells the FT that there shouldn't be any problem getting the policy approved, but that Beijing worries that foreign governments may be "unwilling to give up large areas of land."

And at a time of relative food shortages and soaring prices for cereals and other nutritive commodities, China will already have some competition, says the Wall Street Journal. In the Middle East, the region most dependent on imported food, Saudi Arabia has said it plans to invest in farm and livestock projects overseas to get a handle on its commodity prices and ensure supply, while Libya has been talking to Ukraine about the possibility of growing its own wheat there. Any shift of economic power from the Middle East to the likes of poorer Ukraine, one of the world's biggest wheat producers, could revive the Heartland Theory of 19th-century and 20th-century geographer Sir Halford John Mackinder, who argued control of the natural resources of the East European breadbasket region was key to controlling the "World Island" of Europe and Asia, and thus the world.

This developing new dynamic creates an opportunity for Pakistan to form partnerships with the Chinese and the Saudis aimed at dramatic improvement in the productivity of its farmland in Sind and Punjab without actually selling the land to foreigners. Farm modernization to realize the full potential of its farmland is a goal Pakistan must set for itself for this decade. If pursued with a clear plan and strategy, Pakistan can not only feed its own population well but it could also become the breadbasket for the world and improve the living standards of Pakistan's rural population.

Prior efforts beginning in 2000 toward corporate farming have met significant opposition. For example, an official of Pakistan's Ministry of Food and Agriculture said in July 2000, "We are working to finalize a policy for introducing corporate agriculture in the country where large farm holdings will be allowed to companies which would seek listing in the stock exchange," said an official of the Ministry of Food and Agriculture.

Under the proposal, foreign companies were to be granted a 30-year lease on government-owned land that could be extended for another 20 years. However, food rights campaigners expressed the fear that profit-driven agribusiness transnational companies (TNCs) would use Pakistan as a base for exporting cash crops which would replace staple cereals on the country's farms.

Since the failure of the effort in 2000,Pakistan has again already initiated efforts in 2007 to build serious agribusiness using modern techniques as part of a mega project sponsored by the Ministry of Food, Agriculture and Livestock, with the technical and financial assistance of Asian Development Bank. The executing agencies include Ministry of Food, Agriculture and Livestock (MINFAL), Department of Agricultural & Livestock Products Marketing & Grading, State Bank of Pakistan, Provincial Agriculture, Livestock and marketing Departments, and the Agriculture and Livestock Departments of FATA, FANA and AJK. The Project has its headquarters in Islamabad and implementation offices in Punjab, Sindh, NWFP, Balochistan, Federally Administered Tribal & Northern Areas and Azad Jammu and Kashmir.

To the dismay of biodiversity advocates and environmentalists, Brazil has become a dramatic success in food production by making use of the Cerrado (literally meaning Closed), a region of grassland near the equator that was considered not cultivable. The large scale American agribusiness investments have transformed the region into a major producer of soybean and made Brazil a food exporter rivaling the United States. Soybean is a major source of protein for livestock. Livestock farming is in big demand as the world consumes more meat and dairy products. Brazil is also the largest producer and consumer of biofuels and self-sufficient in energy.

The world food and energy crises clearly present opportunities for investors to invest in countries with plenty of fertile farmland but low farm productivity. By bringing the farm expertise and enhancing crop yields, agribusiness companies such as Archer-Daniel, Cargill, Bunge, Dow and Monsanto and their international competitors have tremendous opportunities in South Asia. So do companies like Caterpillar, John Deere, Kubota, Hyundai, Mahindra and others in the farm machinery and construction business. While many South Asians may be concerned about the negative impact of big agribusiness on the society and the environment, the over-riding need for efficiency to feed the growing population and international export opportunities will likely trump these concerns.

Labels: , , , ,

Thursday, May 8, 2008

The Asian Power Triad: China, India and Japan

Bill Emmott, a former editor of The Economist and a longtime Asia-watcher, says in his recently published book "Rivals" that China will continue its remarkable rise for years to come. But he thinks that a modernizing India and a resurgent Japan could end up jostling for supremacy in Asia, pitting "Asians against Asians." A balance-of-power politics could evolve resembling Europe's in the 19th century.

Talking about the Bush administration's growing ties with India, Emmott says the US recognize the fact that while Al-Qaeda and its cohorts pose the biggest short-term and perhaps medium-term challenge to America, in the long term it is the expected shift in the world’s economic and political balance towards Asia that promises to have the greatest significance.

Economists at Goldman Sachs estimate that if China continues with pro-growth policies and manages its economy reasonably well, it could overtake the United States as the world’s biggest economy by 2020. By 2050 India might also have overtaken the United States if it pursues vigorous economic reforms in this decade and beyond. India, at present the world’s 11th-largest economy, has long been thought of as a laggard compared with China: good at information technology and outsourcing but incapable of the sort of manufacturing that has powered China’s economic emergence.

Even if the dates and figures in forecasts such as Goldman’s are wrong, Asia is going to get richer and stronger, probably for a long time to come. The reason why Tibet and Tata come into the picture is that the rise of Asia is not just going to pit Asia against the West. It is going to pit Asians against Asians. This is the first time in history when there have been three powerful countries in Asia at the same time: China, India and Japan. That might not matter if they liked each other or were somehow naturally compatible. But they do not and are not. Far from it, in fact.

An array of disputes, historical bitternesses and regional flashpoints weigh down on all three countries. Conflict is not inevitable but nor is it inconceivable. If it were to occur – over Taiwan, say, or the Korean peninsula or Tibet or Pakistan – it would not simply be an intra-Asian affair. The outside world would be drawn in.

Such a conflict could break out suddenly. Last month’s unrest in Tibet has shown just how volatile China can be – and how easily one of those flashpoints could cause international tension.

If the Asians can manage their relations peacefully, it will not only help China make a successful transition to the world's great superpower, but a strong Indian performance might succeed in lifting people out of poverty throughout the whole subcontinent, including Pakistan and Bangladesh. The self-confidence that such an outcome would foster would make it easier for the three main powers to work together and, with the rest of Asia, to create a true single economy along the lines of the European Union.

What cannot be in dispute is that the outcome matters enormously. The catastrophic decisions that European nations made a century ago are still within our folk memory. The world still lives with the consequences of the First World War. We have to hope that Asia, now in some ways at a similar stage of development, manages to cope with its tensions better than Europe did.

Times Online
Wall Street Journal
The Independent

Labels: , , , , ,

Google and Intel Boost Mobile Internet

When Intel puts its weight behind an initiative, it automatically gets a boost. But when Google and Intel together join forces, no one in their right mind can bet against such a combined force. Mobile Internet with broadband access has achieved that inevitability with Google backing a Wimax joint venture between wireless veteran Craig McCaw's Clearwire and Sprint-Nextel. In addition to Intel and Google, this venture is also supported by Comcast and Time-Warner.

As the world goes mobile, Intel's objective is to extend its leadership position in platforms used to access the Internet. Google is aiming at capturing the huge market for mobile advertising that is likely to grab a increasingly larger share of online advertising revenue.

The wireless carriers such as Verizon and AT&T have long been busy building walled gardens and controlling the distribution and content of mobile platforms. On the other hand, Intel and Google have long been arguing for an open model similar to the Internet access by PCs where the consumer is in charge. Such a model would obviously benefit both Intel and Google to extend their current dominance in the desktop/laptop user market into the mobile Internet space. Now the two giants appear to be succeeding with the roll-out of the Wimax network and Sprint-Nextel's willingness to work with them to beat Verizon and ATT Wireless as the incumbent carriers.

According to Wall Street Journal, the WiMax venture will create a network that potentially covers 120 million to 140 million people in the U.S. by 2010, the companies said. The venture, valued at more than $12 billion, will have a two-year head-start on rivals Verizon Wireless and AT&T Inc., which are just beginning to sketch out plans for their next-generation wireless networks.

While the potential for Wimax in the US market looks very good, I believe the really big opportunity is in the emerging markets, such as India and Pakistan, where the mobile phone has achieved greater than 50% penetration and the PC/Internet penetration remains in single digits. South Asia is witnessing some of biggest deployments of Wimax with a lot of consumer interest in both fixed and mobile broadband.

According to Juniper Research, South Asia will be the driving force behind the growth of Mobile WiMax, or the 802.16e standard. The Asia and Australia regions are expected to account for more than 50% of the total WiMax deployments by 2013.

Pakistan, being among the first countries in the world to roll-out a functional WiMax service, is experiencing tremendous growth in demand after Wateen Telecom’s launch of its WiMax service and roll-out plans announced by Mobilink.

India's state-owned Bharat Sanchar Nigam Limited is rolling out a Wimax network for broadband access in response to government requirement that 20 million broadband lines be in service by 2010.

Given the pent-up demand for the Internet access and the ubiquity of mobile phones, Wimax roll-out will likely spur the largest adoption of mobile Internet in South Asia first.

Labels: , , , , , ,

Tuesday, May 6, 2008

Pakistan Rupee Hits New Lows

Pakistani Rupee has hit a new low at Rs. 66.00 for a US dollar. The rupee decline seems to have accelerated recently against a weak US currency amid reports of rising imports, stagnant exports and falling foreign exchange reserves held by the State Bank of Pakistan.

“The fast erosion in the central bank reserves is creating pressures on the rupee,” the treasury dealer Rehanuddin at Invest Cap told the Gulf Times.

The central bank has so far lost around $4bn in the last five months to $12.65bn this week over $16.48bn on October 31. Analysts say the reserves will dwindle to $10bn by the end of the fiscal year on June 30. “Political uncertainty, lack of foreign investment and import pressures have badly hit reserves,” Aqeel Ahmed, senior analyst at First Cap Securities, said.

"The import pressure is rising rapidly on high oil prices, our exports are not increasing due to food shortage while foreign investment is also slow and all these factors are contributing to the weaknesses of the rupee," said Syed Nabeel Iqbal, the chief of trading and research at Karachi-based Khanani & Kalia, one of the largest foreign exchange firms in the country.

According to market sources, three major Pakistani companies - Lucky Cement, the National Bank of Pakistan and Habib Bank - are planning to float Global Depository Receipts (GDRs) amounting to close around 1 billion dollars.

State-owned Oil and Gas Development Company Ltd is planning to float its bonds to be exchangeable with its lucrative stocks. It is hoped that the major privatization will help boost Pakistan's dwindling foreign currency reserves.

China announced in April it will provide Pakistan with 500 million dollars in balance-of-payment support.

'All this is positive news which may help the rupee in maintaining stability in its declining path, but when all these positive factors will figure in is a big question,' said said Khurram Shahzad, senior analyst at Invest Cap Securities.

Failure by Pakistan to arrest any further significant decline in rupee will accelerate inflation and add to the misery of the people already suffering high prices for basic commodities.

The bottom line, however, will be the competence of the new economic team in charge of Pakistan's finance and treasury in dealing with the challenges and taking advantage of the opportunities. Given the terrible track record of the current Finance Minister Mr. Ishaq Dar in the Sharif government of the late 1990s, it is hard to be sanguine about the prospects of Pakistan's economy.

Any hope of recovery will depend on how soon the Pakistani ruling politicians can rise above the nepotist politics and choose competent technocrats to navigate the Pakistani economy through troubled waters.

Sources: Gulf Times
Business News

Labels: , , ,

Sunday, May 4, 2008

Could Pakistan Become Cash Magnet Again?

Until mid-2007, foreign investment in Pakistan rose steadily. For the fiscal year that ended in June 2007, the country received $5.2 billion in foreign direct investment and $1.8 billion in portfolio investment. The investors have turned lukewarm since the second half of last year. In the eight months that ended in February, foreign investment was just two-thirds what it was in the same period one year earlier.

At the Karachi stock market, the numbers continue to look good. Even with the turmoil of 2007's last months, the KSE 100 index was still up 40% for the year. And its performance so far in 2008 compares very well not just with Western markets, but with the Bombay Stock Exchange's Sensex index, which has suffered double digit drop.

While the new government of Prime Minister Gillani faces many economic challenges including food and energy crises, the expectation of relative stability is likely to spur foreign investors to start pumping money back into the Pakistani economy.

One of the triggers investors are expecting is the resumption of privatization, particularly of the banking and the energy sectors. According to the Wall Street Journal, the new government's first test is coming up in the banking sector. Last year, Pakistan announced plans to sell stakes in the National Bank of Pakistan and Habib Bank through global depositary receipts, or GDRs, on the London Stock Exchange. As political storm clouds gathered, the sales -- expected to be for a 23% stake in NBP and a 7.5% stake in Habib Bank -- didn't materialize.

The Journal says that investors are asking if the new government, formed by parties that have promoted populist policies, can take the measures needed to avert an economic crisis. "Let's not skirt around the issue that these guys have been in power in the past and they've had a pretty bad track record in governance and also dealing with foreign investors," says Sakib Sherani, an economist with ABN Amro Bank in Pakistan.

In spite of the economic woes, some observers expect the Karachi market to gain 20% to 25% in 2008, in line with growth in corporate earnings. The expectations are based on the idea that some sectors of the economy, such as real estate, are undervalued, and on the continuing attractive valuation of Pakistani stocks. By some estimates, stocks in Pakistan have a historic average price-earnings ratio of 11. The prospects for outsize returns in Pakistan relative to the rest of the world are likely to revive Pakistan as a cash magnet in 2008.

Labels: , , ,