Friday, August 29, 2008

Desperate Times, Desperate Measures for Pakistani Investors

Fearing a complete meltdown of stock prices at Karachi Stock Exchange, Pakistan's Securities and Exchange Commission imposed a floor of 9144 for the market's benchmark KSE-100 index. The index closed at 9144 level on Wednesday, Aug 27, the day the KSE and SEC announced their decision to not allow the KSE-100 to trade below this arbitrary level. This extraordinary action, the first of its kind since the exchange opened its doors in 1948, came after investors pushed down the index to its lowest level in more than two years.

Karachi stock exchange saw very thin trading on Friday and the KSE-100 index finally closed at 9,208.26 points, with a meager gain of 4.48 points. The KSE-30 index increased by 15.87 to close at 10,198.05 level.

The KSE-100 has lost 34.6% of its value this year, as investor confidence has been been hurt by political uncertainty and a long list of economic troubles, including skyrocketing inflation, disappearing foreign exchange reserves, declining rupee and a soaring deficit. Putting it in perspective, India's Sensex is down 48%, Shanghai has lost 44 percent, Russia is down 25 percent, and Brazil, 36 percent.

"One thing that is badly missing in Pakistan is investor confidence," said analysts at JS Global in a research report on Thursday. "The global financial crunch, rising commodity prices and [the] local political situation has affected the macroeconomic picture," they said. "And that is reflected in the stock, money and currency markets." Pakistan's currency, the rupee, has fallen about 16% in the last four months.

Prior market stabilization measures introduced by Karachi Stock Exchange in June included tighter circuit breakers on the downside and a complete ban on short selling. However, when these measures were reversed in July, the market continued its downward slide because the fundamentals further deteriorated.

The latest media reports indicate that the Pakistani stock-market regulator will review the freeze imposed on the market within the next 12 days. It is almost certain the market will continue to slide as soon as the freeze is lifted, unless political stability and economic fundamentals show any signs of clear improvement.

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Thursday, August 28, 2008

Harry Potter Versus Hari Puttar

"We have recently commenced proceedings against parties involved in the production and distribution of a movie entitled Hari Puttar," Warner Bros spokeswoman Deborah Lincoln told The Hollywood Reporter.

"Warner Bros values and protects intellectual property rights.

"However, it is our policy not to discuss publicly the details of any ongoing litigation."

Hari Puttar, made by Mirchi Movies of India, tells the story of a 10-year-old Indian boy, named Hari, who moves to England with his parents and becomes embroiled in a battle over a secret microchip. The boy, left home alone, fights off burglars when his parents go away on vacation - a plot more reminiscent of the popular film Home Alone, starring Macaulay Culkin.

In response to the Warner Bros. lawsuit, Munish Purii, chief executive officer of Mumbai-based producer Mirchi Movies, said, "There is absolutely nothing to link Hari Puttar with Harry Potter." Hari is a common name in India and puttar is Punabji for son, he said.

What is all the fuss about Hari Puttar? Hari Puttar may or may not be a copy of Harry Potter. However, Bollywood movie makers do routinely lift story lines, complete scenes, word-for-word dialog and music tunes from popular Hollywood hits. On occasion, they even copy titles or pick similar titles. Recent examples of Bollywood plagiarism include "God Tussi Great Ho", a copy of "Bruce Almighty", and "Partner" which is a copy of "Hitch".

The fuss is about the threat to Harry Potter, a global brand that is estimated to be worth multiple billions of dollars. Harry Potter has made J.K. Rowling one of most famous authors and put her on the Forbes list of the richest people in the world. It is one of most successful franchises in the history of publishing, entertainment, manufacturing and retail. At least a dozen companies list Harry Potter as a factor that has either boosted or slowed their sales over the years. Time Warner is the biggest beneficiary. Others include Scholastic, Amazon, Barnes and Noble, Borders, Mattel, Electronic Arts, etc.

Bollywood seems to have been emboldened by getting away with plagiarism for a long time. But, as the Indian movie industry matures and competes for richer markets, it is bound to be challenged for some of its illegal practices which threaten the profits of others. Bollywood will now have to tread more carefully and be forced to create movies and entertainment with original ideas and distinct story lines, songs and music.

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Wednesday, August 27, 2008

Dawn of Mobile Internet Revolution

Mobile application developers and high-bandwidth wireless data network operators are being dramatically boosted by latest innovations, growing popularity and rising demand of smartphones such as iPhone, Blackberry, Palm Treo and other mobile platforms. Some 10 percent of phones shipped worldwide — and some 19 percent of phones sold at retail in the United States — are smart-phones. Taiwanese smartphone maker High Tech Computer Corp. (HTC) expects its sales in India to double in 2008, from 100,000 in 2007 to 200,000 in 2008. Although reliable figures are not available, Blackberry is finding traction in Pakistan and HTC is promoting its low-cost smartphones. Overall, there is room for substantial growth. In terms of wireless voice and data, markets with large populations and relatively low penetration rates, such as India, China, Philippines, Pakistan, Vietnam and Indonesia, will continue to grow at a rapid rate, according to an Aug 2008 report by Paul Budde Communication Pty Ltd.

Each platform provider is vying for greater developer mindshare and faster wireless networks to add value to its device and gain market share to become the standard in mobile computing and communication. These developments are pulling together all of the necessary ingredients for explosive growth of mobile internet business in the coming decades. Though it's early, this ongoing mobile platform revolution could easily eclipse the PC and Internet revolutions of the 1980s and 1990s. The reason is simple: The cost and convenience of mobile devices makes them much more affordable and useful to a much larger population of the world today.

In an earlier post titled Mobile Internet for Pakistan, I wrote as follows: With the personal computers and the Internet penetration in Pakistan in single digit percentages and the mobile phone penetration approaching 50%, should Pakistanis still aspire primarily for the Western style PC/Internet access model? The answer to this question is clearly a resounding NO. Here is an opportunity for a strategic leapfrog to ubiquitous Internet connectivity via the most prevalent device owned by the largest number of people--the mobile phone. It makes sense from many perspectives: Device cost, connectivity options, electricity availability, usefulness for the vast majority of people, etc.

So what would the mobile internet do for people? Many consumers already use programs that come with their phones to send text messages, browse the web or take and email pictures. In addition to standard widgets like time, temperature, stock prices, and maps, Apple is offering an iTunes like online store called AppsStore that lets users download and install applications. iPhone owners can install programs that let them tune into Internet radio stations or get directions to the nearest gas station.

In future, phones will be able to do a lot more. San Jose Mercury quotes analysts as saying:

1. By simply using your phone's camera to take a picture of a bar code, you will find out instantly whether the store across the street or one online is selling a coffee maker at a lower price than the store you are at.

2. Whenever your bank account dips below a certain balance, your phone will notify you — and allow you with one click to instantly move more money into the account.

3. If you have a medical device implant, you will be able to use your phone to instantly and automatically alert your doctor to any troubling conditions.

4. Your phone will be able to tell you when you need to leave your house or office to make an appointment on time, given existing traffic conditions along your route.

As PC-like standards emerge in the mobile space and all-you-can-eat data services become inexpensive , the natural progression toward cloning and commoditization will happen, thereby making highly useful and multi-functional mobile platforms more affordable and ubiquitous in emerging markets such as India and Pakistan.

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Scrabulous Removal Angers Indian Brothers

Jayant and Rajat Agarwalla, the Calcutta-based developers of the Facebook application Scrabulous, have lashed out at Facebook for worldwide removal of their popular creation. With over half a million users, Scrabulous is likely the most popular online version of Scrabble (Hasbro's own Facebook version of Scrabble, which was released in July, has a little over 9,000 users). The Agarwalla brothers have a point: Why did Facebook yield to bullying by Mattel in the absence of a court order?

The Indian brothers are not alone in their criticism. Prof. Peter Fader, co-director of the Wharton Interactive Media Initiative, told the Knowledge@Wharton online business journal that Hasbro’s move was an “incredibly bad business decision.” Scrabulous “has been such a fabulously good thing for the Scrabble franchise [that] Hasbro should have been celebrating. ” The Wharton online article notes that Scrabulous in 2007 had about 1.3 million monthly users and had 600,000 players each day.Not only is Hasbro making a big PR blunder by alienating and angering Scrabulous’s fans, but it’s also missing a great opportunity to harness the online game’s popularity, Prof. Fader added.

The Wharton article goes on to note that many companies are too quick to pursue infringers – especially in today’s Web 2.0 world where viral expansion can greatly help, not hurt, a brand. Hasbro clearly didn’t like another outfit capitalizing on the household name it spent years building. But nowadays having such enormous popularity associated with your brand – even if it’s not technically authorized — might not be such a bad thing after all.

Facebook decision to take down Scrabulous does have consequences for its own future. If Mark Zuckerburg does not learn to fight off challenges like the Hasbro/Mattel challenge, Facebook will have to pay a price in terms of stunted growth of what Forbes describes as the Facebook economy.

The Scrabulous fight is just another manifestation of the traditional media and entertainment companies' inability to understand and exploit the new opportunities presented by rapidly growing online consumers of content including music, videos, games, etc. In this particular instance, for example, Hasbro instead could have formed a partnership with the Agarwalla brothers or bought the game from them.

As the battle of Scarbulous rages on, the India-based brothers are not standing still. They have developed another online spelling game that’s gaining traction.

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Tuesday, August 26, 2008

Quality Problems Plague Indian Wind Turbines

India's Suzlon Energy (SUZL: BSE), with 8% market share of wind turbines in the US, is beset by quality issues at home and abroad, according the Wall Street Journal.

Suzlon Energy, with market cap of INR 270B, is a wind power company in India. In terms of market share, the company is the largest wind turbine manufacturer in Asia and the fifth largest worldwide. With headquarters in Pune it has several manufacturing sites in India including Pondicherry, Daman, Bhuj and Gandhidham as well as in mainland China, Germany and Belgium. The company is listed on the National Stock Exchange of India and on the Bombay Stock Exchange.

The window of opportunity for Suzlon opened up with growing demand for green energy amid global-warming fears and the soaring cost of oil, coupled with shortages of turbines from more established players. The company's less-expensive turbines raised hopes for a reduction in the cost of wind power, which currently is subsidized in many countries, including the U.S.

Suzlon's problems in India come as the company also is stumbling in the U.S. Blades on turbines sold to U.S. customers Deere & Co. and Edison International's Edison Mission Energy began splitting last year, leading to a blade recall for strengthening. Indian customers say the turbines have technical problems that make them vibrate excessively when operating at high wind speeds. Some turbines have run out of control in strong gusts, leading to generator blowouts and blades splitting.

The Wall Street Journal reports that Madras Cement has bought 36 units of Suzlon's 1.25 megawatt turbines since 2003. A.V. Dharmakrishnan, executive director of finance for the Chennai-based company, says excessive vibrations at high wind speeds, forcing turbines to run below capacity, are costing the company about $4 million in lost power this year. "The turbines are not capable of producing [electricity] even when the wind is there," he says.

Speaking to Wall Street Journal, Suzlon spokesman Vivek Kher denied the company's turbines have experienced technical problems in its home market. Any drop in performance, he said, is because of falling wind speeds in India in the past couple of years and regular problems connecting to India's shaky electricity grid, which frequently causes turbines to shut down. "There are many companies who are extremely happy with their investment in Suzlon wind turbines," Mr. Kher said.

These latest reports are clearly a blow to a rising Indian company at the forefront of the green energy revolution. How it addresses these issues will clearly determine its future.

The Suzlon shares closed at INR 207.45, down 1.55 from the opening bid of INR 209.00 in latest trading. However, Suzlon is down more than 50% from its 52 week high of INR 460 hit on Jan 9 of this year.

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Saturday, August 23, 2008

Sri Lanka's Economic Troubles

It may not be any consolation to an average Pakistani but Pakistani economy is not alone in returning to the bad old days. Sri Lanka is keeping pace with Pakistan.
While Sri Lanka's long running civil war has largely been limited to the north and east, leaving the populous, well-off west largely unscathed, its stresses are beginning to show in the island nation's economy.

The Economist reports that Sri Lanka's annual inflation is close to 30%, the highest in South Asia. The rupee has appreciated against the dollar, further hurting exporters. By one estimate, economic growth—which was 7.6% in 2006—will be 4.3% this year. As elsewhere, inflation is being driven by high food and energy prices. But in Sri Lanka, 25-year average annual inflation is 12%. Monetary policy has been too loose, in part to finance the war. Including the cost of resettling refugees, the war eats up around 30% of the government’s budget.

Sri Lanka's exports and economy have been propped up by special EU preferences for Sri Lankan textiles. Under a concession known as “GSP Plus”, awarded in 2005 to help Sri Lanka rebuild after the 2004 tsunami, Sri Lankan exporters enjoy preferential tariff treatment from the EU. As a result, the EU is Sri Lanka ’s biggest export market, accounting for annual sales of around $1 billion; about half are covered by GSP Plus. But there is a problem with the rules of GSP Plus. Beneficiaries must comply with 27 international conventions, on environmental, labour and human rights standards. And on the last of these, Sri Lanka is struggling. The agreement expires at the end of 2008. The Economist believes that it will not be renewed.

What has upset the EU are various reports indicating government complicity in the abduction or murder of hundreds of Tamil and Muslim men. It is at war with human-rights groups. It has refused to let the UN High Commissioner for Human Rights set up an office in Sri Lanka. The EU cancellation of Sri Lankan preferences would mean 4% cut in Sri Lanka’s garment exports. Overall, it would cost 2% of GDP. If the EU renewed the agreement without progress on human rights, it might be challenged at the World Trade Organization—as happened to an EU trade sop to Pakistan in 2004.

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Tuesday, August 19, 2008

Musharraf's Economic Legacy

Regardless of the criticism of President Musharraf's politics or personality, there is general agreement among independent economists that, through his structural reforms and economic management, President Musharraf left Pakistan's economy in much better shape than he found it when he seized power in 1999.

Here are some of the key highlights of the results of Musharraf era economy:

1. Pakistan's tax base and government revenue collection more than doubled from about Rs. 500b to over Rs. 1 trillion.

2. Pakistan's GDP more than doubled to $144b since 1999.

3. Most recent figures in 2007 indicate that Pakistan's total debt stands at 56% of GDP, significantly lower than the 99% of GDP in 1999.

4. Pakistan attracted over $5 billion in foreign direct investment in the 2006-07 fiscal year, ten times the figure of 2000-01. Contrary to accusations by Musharraf's detractors that it was an artificial consumer-led growth, it was really an investment-led boom that Pakistan experienced in Musharraf years.

5. In spite of the election-related political turmoil, Pakistan’s economy maintained its momentum in 2007, growing by 7%, slightly more than the 6.6% for 2006. Agricultural sector growth recovered sharply, from 1.6% in 2006 to 5% in 2007, while the manufacturing sector growth continued at 8.4% in 2007, slightly more moderate than the 10% for 2006. Services grew at 8% in 2007, down from 9.6% in 2006.

6. The strong consumer demand in Pakistan drove large investments in real estate, construction, communications, automobile manufacturing, banking and various consumer goods. Millions of new jobs were created. By all accounts, the ranks of the middle class swelled in Pakistan during Shaukat Aziz's term in office. According to Tara Vishwanath, the World Bank's lead economist for South Asia, about 5% of Pakistanis moved from the poor to the middle class in three years from 2001-2004, the most recent figures available. In 2007, analysts at Standard Chartered bank estimated that Pakistan has a middle class of 30 million which earns an average of about $10,000 per year. And adjusted for purchasing power parity (PPP), Pakistan's per capita GDP is approaching $3,000 per head.

7. The Karachi stock market surged ten fold from 2001 to 2007.

8. Pakistan positioned itself as one of the four fastest growing economies in the Asian region during 2000-07 with its growth averaging 7.0 per cent per year for most of this period. As a result of strong economic growth, Pakistan succeeded in reducing poverty by one-half, creating almost 13 million jobs, halving the country's debt burden, raising foreign exchange reserves to a comfortable position and propping the country's exchange rate, restoring investors' confidence and most importantly, taking Pakistan out of the IMF Program.

The Wall Street Journal did a story in September 2007 on Pakistan's start-up boom that said, "Scores of new businesses once unseen in Pakistan, from fitness studios to chic coffee shops to hair-transplant centers, are springing up in the wake of a dramatic economic expansion. As a result, new wealth and unprecedented consumer choice have become part of Pakistan's volatile social mix."

The one sore spot that sticks out in President Musharraf's and Shaukat Aziz's record is their lack of attention to the rising energy needs of the country. Appropriate planning should have comprehended new power plants to support growth forecasts. There were other mistakes as well, such as the decision to export wheat in 2007 that created shortages and price hikes that helped bring down the PML (Q) government and ultimately led to President Musharraf's departure.

Since the takeover by the PPP-PML(N) coalition, there has been a sharp decline in Pakistan's economy. Summing up the current economic situation,the Economist magazine in its June 12 issue says as follows:" (The current) macroeconomic disarray will be familiar to the coalition government led by the Pakistan People's Party of Asif Zardari, and to Nawaz Sharif, whose party provides it “outside support”. Before Mr Sharif was ousted in 1999, the two parties had presided over a decade of corruption and mismanagement. But since then, as the IMF remarked in a report in January, there has been a transformation. Pakistan attracted over $5 billion in foreign direct investment in the 2006-07 fiscal year, ten times the figure of 2000-01. The government's debt fell from 68% of GDP in 2003-04 to less than 55% in 2006-07, and its foreign-exchange reserves reached $16.4 billion as recently as in October." Please read "Pakistani Economy Returning to the Bad Old Days".

The current government hailed the performance of Pakistan's economy under President Musharraf's watch as follows: "Pakistan's economy witnessed a major economic transformation in the last decade. The country's real GDP increased from $60 billion to $170 billion, with per capita income rising from under $500 to over $1000 during 2000-07". It further acknowledged that "the volume of international trade increased from $20 billion to nearly $60 billion. The improved macroeconomic performance enabled Pakistan to re-enter the international capital markets in the mid-2000s. Large capital inflows financed the current account deficit and contributed to an increase in gross official reserves to $14.3 billion at end-June 2007. Buoyant output growth, low inflation, and the government's social policies contributed to a reduction in poverty and improvement in many social indicators". (see MEFP, November 20, 2008, Para 1)

In addition to the improved economy, President Musharraf's policies enabled halving of poverty from 34% in 2000 to 17% in 2008, proliferation of independent radio and television stations, and an expanded middle class, which ultimately led to his downfall.

It was on "dictator" Musharraf's watch that Pakistan saw unprecedented deregulation of the mass media, prolific growth, and vibrant debate that had never occurred before him. None of the "democrats" or "dictators" who ruled before him gave such a gift to the people of Pakistan.

It is this media freedom that I think is Musharraf's best legacy that can not be easily denied or reversed. It'll serve Pakistan well by shining light on the misdeeds of Pakistan's leaders now, and in the future.

Related Links:

Haq's Musings

FDI in Pakistan

Video: Who Says Pakistan Is a Failed State?

Structural Reforms in Pakistan's Economy

President Musharraf Video Defense on Power Crisis

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Tuesday, August 12, 2008

Declining Food and Fuel Prices to Help South Asians

Wheat is down from a record high of $900 per ton earlier this year to $300 per ton today. For December 2007 delivery, Pakistan paid an estimated import price of $380-400 per ton, exclusive of transportation. Earlier in April-May 2007, Pakistan had exported wheat at the then-prevailing $225 per ton.

The rising oil import bill has been the biggest budget buster for Pakistan and other developing nation which must import oil. Pakistan's dollar reserves have dramatically dropped from $15.5b to $10.5b this year. The fact that oil is down from the peak of $145 a barrel to $114 a barrel is good news for Pakistanis and South Asians. Since June 30, oil on the New York Mercantile Exchange has fallen 18%, and natural gas has sunk 37%, to $8.349 a million British thermal units.

The pullback has spread to other commodities as well. Since the end of June quarter, gold is down more than 11%, and several industrial metals also have tanked. Agriculture has pulled way back, with a 31% drop for corn, a 24% drop for soybeans and a 5.9% drop for wheat.

While the demand has eased off slightly due to recent record prices, the biggest impact on commodities has been due to the threat of U.S. Congressional action, the credit crunch and bearish sentiments in noncommercial speculation by the likes of hedge funds. So-called noncommercial oil traders, which include players such as hedge funds, have been reversing once-bullish bets. Wall Street Journal says that independent energy-market analyst Stephen Schork pointed out Monday that as of Aug. 5, according to regulatory data, noncommercial traders moved to their largest bearish view in oil futures since February 2007.

The credit crunch has made it harder for such traders to carry bullish commodity futures bets as the market has turned, because of the collateral, or margin, traders must post to stay in the game. What's more, many are bailing out of positions as the U.S. Congress debates a legislative overhaul of commodity markets that could reduce the size of bets speculators can make, according to Wall Street Journal.

The recent strength of the US dollar has contributed in bringing down food and fuel prices as well. The US dollar has risen to a 24-week high against the euro and and stayed near a seven-month high against the yen.

These recent declines of world food and fuel prices should help ease retail inflation in Pakistan which has surged by 24.33 percent over the same period last year. The food prices have risen by 33.81 percent, significantly eroding the purchasing power of the people, according to Federal Bureau of Statistics. Wholesale prices in India have also grown by 11.89% in the year to the end of June, the fastest rate since the measure began in 1995.

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Monday, August 11, 2008

India, Pakistan and Johnson-Ali Olympics Success Model

“Why are the top 10 medaling nations top 10?” Professor Daniel Johnson asks. “It’s not that athletic prowess is completely independent from wealth and population. These nations have more resources at their disposal.” Daniel Johnson, a college professor and an economist in Denver, Colorado has developed a mathematical model for predicting each nation's Olympics success.

Professor Johnson's model weighs factors such as wealth and population rather than rely on the detailed knowledge of individual athletes' abilities. The model, which was concocted by Johnson and former student assistant Ayfer Ali in 1999 at Harvard, also considers a country’s climate and the advantages of hosting.

Though the professor predicts the US will still lead the overall medals table with 103 medals this year, China will be aided by a booming economy, its host advantage and polluted air to take home the most gold medals—44 to be exact. Based on recent Olympics history, the professor has had a pretty good success rate at about 95%. Here's the link to Johnson and Ali's Beijing 2008 Olympics medals forecast. The duo predict Pakistan will win 12 medals, including three golds, at Beijing, just above Israel with 10 medals, including 9 golds.

He said the U.S. would win 103 medals, 35 of them gold at Athens in 2004. Real numbers: 103 and 37. But when it came to forecasting China's output in Greece, the economic indicators were way off. Johnson and Ali said China would win 39 overall and 15 gold. They took 63 and 32, respectively.

The Johnson-Ali model has not done well for nations other than the top 10. For example, Pakistan, which Johnson suggested would win seven medals, including three golds, won no medals at all at Athens. In fact, Pakistan has won three golds,three silvers and four bronze medals, a total of 10 medals in the entire history of its participation in Olympics since 1948. The last Olympic medal Pakistan won was a bronze in 1992. India has won eight golds,four silvers and five bronze medals, a total of 17 medals in its entire Olympics history which began in 1927 while Sri Lanka has won two medals in its history at the Olympics, one silver and one bronze. The rest of the South Asian nations have never won any medals at the Olympics.

Since the 1984 Olympics in Los Angeles, there has been a steady increase in the number of countries that have won at least one medal. The number grew from 47 nations in 1984 to 52 in 1988, 64 in 1992, 79 in 1996 and 80 in 2000. For the first time in two decades, however, the number failed to rise in the Athens Games of 2004. Only 74 countries claimed at least one medal in those Olympics. Majority of the nations of the world, including Afghanistan, Bangladesh, Myanmar (Burma) and Nepal in South Asia, have never won any medals in the history of the Olympics. Many countries lack the quality athletes who can qualify to participate in the Olympics. For example, no Bangladeshi athlete has ever qualified for the Olympics. In order to broaden the participation in the Games, the International Olympic Committee (IOC) provides some wild cards to those countries whose athletes have failed to get any qualification. Afghan Nisar Bahawe is already a proven world class black belt and he has qualified for Beijing on his own merit rather than through a wild-card system to participate in Tae Kwon Do competition. Bangladesh applied for 6 wild cards for the Beijing Olympics. The IOC only gave the country five, while inviting one female shooter, Sharmin, to watch the Games as a spectator. Here is the link to an interactive map by New York Times showing Olympics medal winnings by countries.

Johnson's formula has come under criticism for several reasons. The critics ask why Cuba and Ukraine aren't included in his predictions, or why India, with factors similar to China's, isn't high in the medal projections. Johnson's response: Cuba's economic reports are too sketchy to trust, Ukraine's political history is too thin and India is too democratic, Johnson says. Critics also say Johnson should consider the culture of a nation, which would explain how a small country such as Australia blows away India.

While Indians were disappointed by the failure of their hockey team to even qualify for Beijing Olympics, India's first-ever individual gold won by Abhinav Bindra in 10m air rifle shooting, has come as welcome news for the people of India. Meanwhile, Pakistani hockey team has made a disappointing start by losing its first match to the lowly British field hockey squad. The epicenter of field hockey seems to have moved from the South Asian sub-continent.

Overall, the two major South Asian nations remain very low in the field of health, fitness, athletics and competitive sports. The only way to fix this situation is to apply greater national focus starting with school children.

As the most gracious hosts, the Chinese put on the best ever show with the opening ceremony of Beijing Olympics 2008. The largest ever gathering of the world's heads of state and the world's best performers and athletes made it a grand party. It was a joy to watch. Eat you heart out, Steven Spielberg. No one missed you at the big Beijing party. Here's a video clip:

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Thursday, August 7, 2008

Is It Time to Invest in South Asia Again?

With political instability, rising inflation and economic slowdown, many investors are fleeing South Asian markets. India's Sensex is down 48% and Pakistan's KSE-100 is down 34.6% this year. Most of the rest of the world's emerging markets dropped, too— Shanghai lost 44 percent, Russia, down 25 percent, and Brazil, 36 percent. They're fighting inflation and their slingshot growth has eased. To investors, it looks like a no-go zone.

As far as Pakistan is concerned, a little less than seven years ago, immediately after the Sept. 11 attacks on U.S. cities, few sane investment advisers would have recommended Pakistani stocks. In hindsight, they should have. As Western governments have fretted about the resurgent Taliban or Pakistan's nuclear weapons falling into the hands of militants, the Karachi Stock Exchange's main share index has risen more than 8-fold, in spite of the recent troubles and major decline of KSE-100 this year.

Is it time again for a counterintuitive idea? Put money gradually into emerging market mutual funds over the next six to 12 months, says analyst Peter Perkins of BCA Research in Montreal, according to Newsweek. These stocks aren't optional anymore. Anyone who sees the future has to own them.

As Jane Bryant Quinn, a popular personal finance adviser, puts it in Newsweek: Put aside the idea that developing countries live on the fruits of cheap labor and raw materials. On the contrary, they're home to world-class corporations with innovative management, superior technology and global reach. To mention just three: Embraer, the top small-jet manufacturer (Brazil); Samsung Electronics, a worldwide brand (South Korea), and Infosys Technology, for IT services (India). "The countries in the former Third World will become the dominant economies of tomorrow," says Antoine van Agtmael, president of Emerging Market Management and author of "The Emerging Markets Century."

Jane Bryant Quinn concludes her recent Newsweek column with the following advice: If emerging markets are good for geezers, where have the crazies gone? To funds invested in "frontier markets": Nigeria, Kazakhstan, Pakistan, Croatia and the Arab Gulf states. Today, these stocks ride the political winds. In the future, they'll be in our children's IRAs.

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Tuesday, August 5, 2008

Cost, Challenge of Climbing K2 and Mount Everest

Not only is it dangerous, climbing Mount Everest is not cheap, either in terms of lives or dollars. And yet, hundreds are drawn each year to climb it. Commercial expeditions can cost climbers $60,000 to $75,00 each. Nepalese government charges fees ranging from $25000 for one member expedition to $70,000 for seven members. The total cost for climbing is steep, according to CNN. An expedition to the world's second highest peak, K2 in Pakistan, runs around $50,000 per climber. A trip to Everest has the steepest price at $65,000. Individual climbers can easily spend $5,000 on equipment. The total Mt. Everest annual revenue runs into tens of millions of dollars and provides employment to several thousand people. 3,681 people have made the summit so far, but thousands more have tried. About 170 climbers have died in their attempts to reach the summit.

While Mount Everest is considered the tallest peak at 8,848 meters (29,029 feet), it is K2, believed to be the second tallest at 8,611 meters (28,251 ft), that is documented as the most dangerous. In fact, there have been rumors circulating in the mountaineering world that new measurements show that K2 is actually taller than Everest. Rumors that it might actually be much, much higher - 12 feet taller than Everest - began in 1987 after a British expedition measured K2 and found it to be 29,041 feet. If confirmed, this new measurement, along with the greater challenge of K2, could hurt significant tourist revenue stream of Nepal and bring it to Pakistan.

In contrast to Mt. Everest summit's total of 3,681 successful climbs, only 280 climbers have reached the K2 summit. "It's enormous, very high, incredibly steep and much further north than Everest which means it attracts notoriously bad weather," says Britain's most celebrated mountaineer Sir Chris Bonnington, who lost his colleague Nick Escourt in an avalanche on K2's western side during an expedition in 1978. In 1986 13 climbers were killed in a week when a vicious storm stranded numerous expeditions. It is often said that if you were to summit K2 with a climbing partner, it is best to say your goodbyes well ahead the descent, because the statistics claim that one of the two will not come back alive. 46% of the attempts end in death, most during descent, according to a K2 climbers website. The fatality rate for those who reach the summit at 27% is about three times higher than that for Mount Everest, according to BBC.

The latest news of more fatalities seems to confirm K2's status as the most challenging, if not the tallest. At least eleven climbers including three South Koreans, two Nepalis, two Pakistanis, and French, Serbian, Norwegian and Irish climbers had died on the mountain, according to Pakistani authorities. The climbers include Koreans, Pakistanis, Nepalis, a Dutchman and an Italian, reports say, but exact details remain unclear. As about 25 climbers descended from the peak of K2 in the darkness on Friday, an avalanche swept some climbers away and left others stranded. An Italian member of the group has been reached by Pakistani rescuers and taken to an advance base camp on the mountain. The latest reports indicate Pakistani military helicopters have rescued two Dutch climbers stranded on K2. The survivors are being treated for frostbite at Pakistani military hospitals, according to media reports.

While there have been many inspiring stories of success and survival of climbers after storms and avalanches on K2, the story of Greg Mortenson stands out. In 1993, Mortenson, an American from the state of Montana, went to climb K2 in northern Pakistan. After more than 70 days on the mountain, Mortenson and three other climbers completed a life-saving rescue of a fifth climber that took more than 75 hours. After the rescue, he began his descent of the mountain and became weak and exhausted. Two local Balti porters took Mortenson to the nearest city, but he took a wrong turn along the way and ended up in Korphe, a small village, where he recovered.

To pay the remote community back for their compassion, Mortenson said he would build a school for the village. After a frustrating time trying to raise money, Mortenson convinced Jean Hoerni, a Silicon Valley pioneer, to found the Central Asia Institute. A non-profit organization, CAI's mission is to promote education and literacy, especially for girls, in remote mountain regions of Pakistan and Afghanistan. Hoerni named Mortenson as CAI's first Executive Director. Reviewing Greg Mortenson's book "Three Cups of Tea: One Man's Mission to Promote Peace . . . One School at a Time", New York Times columnist Nicholas Kristoff argues "a lone Montanan (Mortenson) staying at the cheapest guest houses has done more to advance U.S. interests in the region than the entire military and foreign policy apparatus of the Bush administration". Kristoff quotes Greg Mortenson, an Army veteran, as saying “Schools are a much more effective bang for the buck than missiles or chasing some Taliban around the country".

While some international and Pakistani climbers and tourists may be dissuaded by the extreme dangers of K2 climbing (or rather descending) or the fear of the Taliban, many more would be drawn to it for the very same reason. As the stories of the challenging mountain reach the worldwide audience, I expect much larger numbers to flock to it for the risks and thrills it offers. With relatively modest investments for average tourists and serious climbers facilities such as access roads, hotels, restaurants, guided tours, a climbing history museum, a climbing skills school, mountaineering equipment and clothing stores, Pakistan can develop a strong revenue stream to create jobs, build schools and promote opportunities for the friendly natives in its picturesque northern areas.

Here's an excerpt from a recent Time Magazine article on Pakistan's tourism potential:

The truth is Pakistan could be — should be — an incredible tourist destination. It offers wonderful Mughal ruins, evocative British colonial architecture, world-class hiking and climbing in the Karakoram Mountains, gorgeous rolling green meadows, captivating culture, great food (especially the fruits and kebabs), and some of the best carpet shops in South Asia. Unfortunately, it is also regularly described as the world's most dangerous country — which, while more intriguing than slogans like "Malaysia, Truly Asia" or "I Feel Slovenia," is not exactly an inducement for people to visit.

Here's a video clip of a K2 Canadian Expedition in 2006:

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