Tuesday, September 29, 2009

Can Democracy Deliver For the People in Pakistan?

In an Op Ed piece published in Pakistani newspaper "the News" recently, Ms. Farahnaz Ispahani, the wife of Pakistani Ambassador in Washington and a close Zardari aide, claims "democracy does deliver". She proudly talks about her government's success in tripling of the US non-military aid to $1.5 billion a year "to the dismay of the government's detractors and contrary to the vilification campaign going on in the country against the elected leadership".

When Ms. Ispahani says that "democracy does deliver", what she really means is that democracy delivers US aid to her government. The underlying assumption appears to be that such aid alone will solve Pakistan's current economic problems. However, she does not mention Pakistan's serious economic decline, mounting job losses and rising poverty since her party took control of the government in 2008, nor does she make any reference to the ominous conditions attached to the US aid bill and the serious concerns by the US about PPP's corrupt leadership siphoning off the funds provided by the Americans. Here is some context to the declaration of victory by Zardari's spokesperson Ispahani in getting US aid:

Pakistan's Recent Economic Performance:

According to Economic Survey 2008-09, presented by Finance Minister Shaukat Tarin, Pakistan's economy grew by a mere 2.0 percent, barely keeping pace with population growth. The growth fell significantly short of the 4.5 percent target for the year, which was already very modest compared with an average of 7% economic growth witnessed from 2001-2008.

The manufacturing sector contracted by 3.3 percent in 2008-09 as compared to expansion of 4.8 percent last year and target of 6.1 percent. Small and medium manufacturing sector maintained its healthy growth of last year at 7.5 percent.

Large-scale manufacturing experienced contraction of 7.7 percent compared with expansion of 4.0 percent in the last year and 5.5 percent target for this year. The massive contraction has been because of severe power outrages, bad governance, security environment and political disruption in 2008-2009. The services sector grew by 3.6 percent, missing the target of 6.1 percent and last year’s actual growth of 6.6 percent.

The growing lines of poor people lining up for free food paid for by philanthropists at some restaurants and charitable institutions offer significant anecdotal evidence of rising poverty from widespread job losses since last year.

US Aid Strings:

The list of conditions attached to the US aid bill, also known as Kery-Lugar bill, affect almost all of the Pakistani stakeholders, including Pakistani military, the intelligence agencies and the people of Pakistan and the government's conduct of relations with Pakistan's neighbors such as India and Afghanistan.

According to the News, the newly approved US aid will be provided in multiple installments and the US Secretary of State will have to issue a certificate on these sensitive subjects before each installment of the US aid is disbursed.

The US Secretary of State, under the direction of the president, will have to certify to the appropriate congressional committees that:

1. Pakistan is continuing to cooperate with the United States in efforts to dismantle supplier networks relating to the acquisition of nuclear weapons-related materials, such as providing relevant information from or direct access to Pakistani nationals associated with such networks;

2. Pakistan during the preceding fiscal year has demonstrated a sustained commitment to and is making significant efforts towards combating terrorist groups, consistent with the purposes of assistance described in section 201, including taking into account the extent to which the Government of Pakistan has made progress on matters such as:

(a) ceasing support, including by any elements within the Pakistan military or its intelligence agency, to extremist and terrorist groups, particularly to any group that has conducted attacks against United States or coalition forces in Afghanistan, or against the territory or people of neighboring countries;

(b) preventing al-Qaeda, the Taliban and associated terrorist groups, such as Lashkar-e-Taiba and Jaish-e-Mohammed, from operating in the territory of Pakistan, including carrying out cross-border attacks into neighboring countries, closing terrorist camps in the FATA, dismantling terrorist bases of operations in other parts of the country, including Quetta and Muridke, and taking action when provided with intelligence about high-level terrorist targets; and

(c) strengthening counter-terrorism and anti-money laundering laws; and

(3) the security forces of Pakistan are not materially and substantially subverting the political or judicial processes of Pakistan.

Renewed Corruption Charges:

It was only in 2007 that President Asif Ali Zardari returned to Pakistan under an amnesty, euphemistically called National Reconciliation Ordinance (NRO), sponsored by the Americans. However, the Americans know that the corruption charges against Zardari were credible and he, along with his late wife, was convicted in at least one case by a Swiss judge. The conviction was under appeal in Switzerland when Pakistan government withdrew all charges pursuant to the NRO signed by then President Musharraf under pressure from the Americans.

Now, the Obama administration officials are debating how much of the assistance should go directly to a government that has been widely accused of corruption, according to a report in the New York Times. The American aid officials believe that they need to assist the Pakistani economy directly in view of the renewed corruption allegations against the government of Mr. Zardari for its handling of the recent power shortages. The nation-wide power outages which have contributed to Pakistan’s first year of negative industrial growth this decade.

There have been widespread complaints in Islamabad, including by Finance Minister Shaukat Tarin, that the government had solutions to improve the power output but was refusing to implement them in order to benefit a handful of power plant operators, such as those supplying rental power at exorbitant rates, while the IPPs are not being paid for supplying power from currently underutilized installed capacity. Requests for information by Transparency International Pakistan regarding rental power contracts have been ignored by the Ministry of Water and Power. There are widespread corruption allegations against Mr. Zardari personally who has influenced the award of the 783 MW rental power contracts to a former governor of Oklahoma and his Pakistani partner.

Here is the full text of the Ispahani's opinion published in the News today:

Much to the dismay of the government's detractors and contrary to the vilification campaign going on in the country against the elected leadership, the US Senate voted on Thursday to triple non-military aid to Pakistan to roughly $1.5 billion per year.

The bill, approved unanimously, had been agreed upon between the Senate and House sponsors of legislation passed separately by each chamber earlier this year. The sponsors are Senators John Kerry and Richard Lugar. The bill has incorporated improvements over the earlier version of the Kerry-Lugar Bill passed by the Senate and the House. The vital aspect of the bill is that its language is far less prescriptive and stringent. Specific references to India as well as A Q Khan have been eliminated while the language related to nuclear proliferation is markedly toned down from "ensure access of US investigators to individual suspected" to receiving cooperation "in efforts such as providing relevant information from or direct access to Pakistani nationals associated with such networks."

On Thursday, for the first time ever, major economic powers agreed to the formation of a multi-donor trust fund (MDTF) to help the country build its tribal areas which have been the worst victim of the fight against the militants.

In an unprecedented show of solidarity President Barack Obama, President Asif Ali Zardari and Prime Minister Gordon Brown co-chaired the meeting of Friends Democratic of Pakistan (FoDP). The participants included a galaxy of world leaders, such as President Sarkozy of France, Prime Minister Berlusconi of Italy, Turkish Prime Minister Erdogan, the prime ministers of Australia and Canada and World Bank president Robert Zoellick. Foreign Minister Shah Mahmood Qureshi termed the summit a "diplomatic success," stating that it represented a vote of confidence in the Pakistani nation.

British Prime Minister Gordon Brown applauded Islamabad's campaign to rid the restive border areas of violent extremism and bring stability to the region. The British leader commended the leadership of President Zardari and the role of the armed forces for launching an effective offensive against the militants.

Earlier, US President Barack Obama reaffirmed his administration's commitment to economic cooperation with Pakistan.

The total amount of the bill passed by US Senate for FY 2009 is $3021.0 million. $1147.5 million would be given under the head of Development and Reconstruction out of which $33.5 million will be given under the head of Child Survival and Health Programme whereas Economic Support Fund would receive $1,114.0 million while $11,02 million will be made available for the country in FY2010 with $27.9 million and $1,074.3 million on Child Survival and Health Programme and Economic Support Fund respectively.

Pakistan will receive a total of $1103.1 million under the head of Security Assistance out of which foreign military financing would be $300.0 million this year whereas $700.0 million have been allocated for Pakistan Counter Insurgency Fund; $13.3 million would be spent on Non-Profit, Antiterrorism, Demining and Related Issues. International Narcotics and Law Enforcement would receive a total of $87.5 million while $2.3 million would be spent under the Head of IMET. It is worth mentioning here that $298.0 million, $22.7 million, $155.2 million and $ 4.0 million respectively would be given to the country under the same head in FY2010.

Pakistan will receive a total of $255.4 million under the head of humanitarian grant; further details are that Migration and Refugee Assistance will be given $69.6 million while Food for Progress will get $31.0 million, PL480 $36.3 million and International Disaster Assistance will be given $118.0 million in the FY 2009. Migration and Refugee Assistance will receive $20.0 million while no money has been reserved for Food for Progress, PL and International Disaster Assistance in the FY 2010. Total State Department operations will entail $2,506.0 million in this financial year whereas it would be $1602.0 million in the next financial year.

The Department of Defence will receive a total of $515.6 million in which Counter- Narcotics will receive an amount of $63.3 million this year and $38.4 million in the next financial year while $25.0 million have been reserved for FATA Authority this year. Ensuring that the present government does not face any obstacle in its democratic dispensation a condition in the bill requires that the security forces of Pakistan do not subvert judicial processes. The aim of the legislation is to promote stability in the country.

It is worth mentioning that the bill underlines the importance of supporting Pakistan's national security needs to fight the ongoing counterinsurgency and improve its border security and control. However, it does not specify any amount or percentage. This provides the administration maximum flexibility and none of the conditions can set in motion automatic sanctions.

Previously, Pakistan was governed by a dictator and that regime weakened all our important institutions like the judiciary and the parliament. Even the media was brutalised and attacked when the crunch came. Today all our institutions are working for the betterment of the people. The judiciary and the parliament are respected by the executive. The media is free to examine and comment on the working of the government. Internationally, Pakistan stands in the strongest diplomatic position in its sixty two year history. Our leaders now stand shoulder to shoulder with the leaders of other democracies. And perhaps the most important message that President Zardari sends to our nation and to the world is that democracy does indeed deliver.


Even if the current Pakistani government does succeed in effectively responding to the concerns of the foreign aid donors regarding transparency in the use of funds and Pakistan's sincerity in fighting terrorism, it is extremely important to recognize that there can be no real economic progress, measurable poverty reduction and visible human development that translate into winning the hearts and minds of the people, unless there are good policies and competent governance in the country.

Related Links:

Good Governance Reform Agenda in Pakistan

Asian Development Bank Partnership with Pakistan
Pakistan Economic Survey 2008-2009

Pakistan Economic Slump Hurts Workers

Musharraf's Economic Legacy

Zardari Corruption Probe in Switzerland

US Fears Pakistan Aid Bill Will Feed Graft

USAID, Democracy and Governance in Pakistan

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Thursday, September 24, 2009

Optimisim For South Asian Slums

There is a growing wave of urbanization in the developing world as the cities are drawing people away from subsistence farming to jobs in the industrial and service sectors. This rapid migration of people from rural to urban areas is causing massive increases in urban populations, creating more and larger urban slums, increasing the potential for environmental deterioration, and bringing tremendous pressures on city services already strained beyond limits. Take sanitation, for example, and it is no surprise that three major South Asian cities, Dhaka, Mumbai and New Delhi, show up on Mercer's list of the world's dirtiest cities.
United Nations Habitat estimates that roughly 1 billion people -- or 33 percent of the world's urban population lives in slums. By 2030, according to the UN's human settlement program, that number is likely to double.

The slum dwellers struggle to survive with little clean water and sometimes no electricity around metropolises like Rio de Janeiro, Brazil; Mumbai, India; Lima, Peru; and Istanbul, Turkey. Their shantytowns are usually vast in expanse and dense in population. In Kibera, a slum near Nairobi, Kenya, for example, more than a million people live in an area about the size of New York's Central Park.

When visitors see a squatter city in India or Pakistan or Bangladesh, they observe overwhelming desperation: rickety shelters, little kids working or begging, absence of sanitation, filthy water and air. However, there are many benefits of rural to urban migration for migrants' lives, including reduction in abject poverty, empowerment of women, increased access to healthcare and education and other services. Historically, cities have been driving forces in economic and social development. As centers of industry and commerce, cities have long been centers of wealth and power. They also account for a disproportionate share of national income. The World Bank estimates that in the developing world, as much as 80 percent of future economic growth will occur in towns and cities. Nor are the benefits of urbanization solely economic. Urbanization is associated with higher incomes, improved health, higher literacy, and improved quality of life. Other benefits of urban life are less tangible but no less real: access to information, diversity, creativity, and innovation.

In a recent interview published by Wired Magazine, Stewart Brand, "the pioneering environmentalist, technology thinker", and founder of the Whole Earth Catalog focuses on the positive aspects of urban slums. Brand also makes a counterintuitive case that the booming slums and squatter cities in and around Mumbai, Nairobi, and Rio de Janeiro are net positives for poor people and the environment. Wired asked him to elaborate.

Wired: What makes squatter cities so important?

Stewart Brand: That's where vast numbers of humans—slum dwellers—are doing urban stuff in new and amazing ways. And hell's bells, there are a billion of them! People are trying desperately to get out of poverty, so there's a lot of creativity; they collaborate in ways that we've completely forgotten how to do in regular cities. And there's a transition: People come in from the countryside, enter the rickshaw economy, and work for almost nothing. But after a while, they move uptown, into the formal economy. The United Nations did extensive field research and flipped from seeing squatter cities as the world's great problem to realizing these slums are actually the world's great solution to poverty.

Wired: Why are they good for the environment?

Brand: Cities draw people away from subsistence farming, which is ecologically devastating, and they defuse the population bomb. In the villages, women spend their time doing agricultural stuff, for no pay, or having lots and lots of kids. When women move to town, it's better to have fewer kids, bear down, and get them some education, some economic opportunity. Women become important, powerful creatures in the slums. They're often the ones running the community-based organizations, and they're considered the most reliable recipients of microfinance loans.

Wired: How can governments help nurture these positives?

Brand: The suffering is great, and crime is rampant. We made the mistake of romanticizing villages, and we don't need to make that mistake again. But the main thing is not to bulldoze the slums. Treat the people as pioneers. Get them some grid electricity, water, sanitation, crime prevention. All that makes a huge difference.

The effect of urbanization in defusing the "population bomb" mentioned by Stewart Brand does make sense in Pakistan's context. With increasing urbanization, Pakistan's population growth rate has declined from 2.17% in 2000 to 1.9% in 2008. Based on PAI Research Commentary by Karen Hardee and Elizabeth Leahy, the total fertility rate (TFR) in Pakistan is still the highest in South Asia at 4.1 children per woman. Women in urban areas have an average of 3.3 children compared to their rural counterparts, who have an average of 4.5 children. The overall fertility rate has been cut in half from about 8 children per woman in 1960s to about 4 this decade, according to a study published in 2009.

In a recent interview with Wall Street Journal, Pakistan's former finance minister Salman Shah explained that "Pakistan has to be part of globalization or you end up with Talibanization". "Until we put these young people into industrialization and services, and off-farm work, they will drift into this negative extremism; there is nothing worse than not having a job," Shah elaborated. But increasing urbanization in South Asia represents both a challenge and an opportunity for India, Pakistan and Bangladesh. It is a challenge because it imposes a rapidly growing burden on the already overcrowded megacities such as Mumbai, Delhi, Dhaka and Karachi. Such a massive challenge will require a tremendous focus on providing housing, transportation, schooling, healthcare, water, power, sanitation and other services at an accelerated pace. But if this challenge can be successfully met, there will be an opportunity to develop the human potential of the rural poor and employ them more productively in the growing industrial and services sectors in the cities. In the case of Pakistan, if the level of robust economic growth, human development and increased urbanization can be sustained to significantly enlarge the South Asian nation's middle class, then there can be hope for genuine and durable democracy to thrive.

Related Links:

Light a Candle, Do Not Curse Darkness

Urbanization in Pakistan Highest in South Asia

Orangi Pilot Project

Orangi Beats Dharavi

Can Slumdog's Success Improve Lives of Poor Children?

Dr. Akhtar Hameed Khan

UN Population Fund Report 2007

Urbanization Levels of Countries of the World

Eleven Days in Karachi

Karachi: The Urban Frontier

Slums Offer Hope

Urbanization Challenges in Pakistan

World's Dirtiest Cities

Karachi Fourth Cheapest for Expats

Cities and Environment

Pakistan's Choice: Talibanization or Globalization

Patterns of Urbanization in Pakistan

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Sunday, September 20, 2009

Is India Condemning its Children to Brain Damage?

While researching the causes of the sugar crisis in Pakistan earlier this month, I found that, on a per capita basis, Pakistanis consume significantly more of almost everything they eat than their neighbors, including wheat, dairy, meat, poultry and sugar. The only comparable category between Indians and Pakistanis are fruits and vegetables, of which both use less than 100 grams a day.

This was before the shameful deaths of several destitute Karachi women scrambling to grab free wheat bags stole the headlines.

In spite of the fact that there is about 22% malnutrition in Pakistan and the child malnutrition being much higher at 40% (versus India's 46%), the average per capita calorie intake of about 2500 calories is within normal range. But the nutritional balance necessary for good health appears to be lacking in Pakistanis' dietary habits. One way to alleviate the sugar crisis in Pakistan is to reduce sugar consumption and substitute it with greater intake of fruits and vegetables. There is an urgent need for better health and nutritional education through strong public-private partnership to promote healthier eating in Pakistan.

Among other basic food commodities, per million population wheat consumption in Pakistan is 115,000 metric tons versus 63,000 metric tons in India, according to published data.

Pakistanis consume over 25 Kg of sugar per person versus India's 20Kg.

According to the FAO, the average dairy consumption of the developing countries is still very low (45 kg of all dairy products in liquid milk equivalent), compared with the average of 220 kg in the industrial countries. Few developing countries have per capita consumption exceeding 150 kg (Argentina, Uruguay and some pastoral countries in the Sudano-Sahelian zone of Africa). Among the most populous countries, only Pakistan, at 153 kg per capita, has such a level. In South Asia, where milk and dairy products are preferred foods, India has only 64 kg and Bangladesh 14 kg. East Asia has only 10 kg.

While it remains very low by world standards, meat and poultry consumption has also increased significantly in Pakistan over the last decade. Per capita availability of eggs went from 23 in 1991 to 43 in 2005, according to research by N. Daghir. Per capita meat consumption in Pakistan now stands at 12.4 Kg versus India's 4.6 Kg.

In addition to relatively large per capita wheat and sugar consumption, Pakistanis also consume significantly higher amounts of meat, poultry and milk products than other South Asian nations, getting more protein and almost half their daily, per capita calorie intake from non-food-grain sources.

About two weeks after the widely reported wheat deaths in Karachi, there is a new damning British report about the serious malnutrition affecting Indian children.

The new British government report on child hunger and malnutrition in India says the nation is an "economic powerhouse" but a "nutritional weakling". Here is an excerpt from Times online story:

India is condemning another generation to brain damage, poor education and early death by failing to meet its targets for tackling the malnutrition that affects almost half of its children, a study backed by the British Government concluded yesterday.

The country is an “economic powerhouse but a nutritional weakling”, said the report by the British-based Institute of Development Studies (IDS), which incorporated papers by more than 20 India analysts. It said that despite India’s recent economic boom, at least 46 per cent of children up to the age of 3 still suffer from malnutrition, making the country home to a third of the world’s malnourished children. The UN defines malnutrition as a state in which an individual can no longer maintain natural bodily capacities such as growth, pregnancy, lactation, learning abilities, physical work and resisting and recovering from disease.

In 2001, India committed to the UN Millennium Development Goal of halving its number of hungry by 2015. China has already met its target. India, though, will not meet its goal until 2043, based on its current rate of progress, the IDS report concluded.

“It’s the contrast between India’s fantastic economic growth and its persistent malnutrition which is so shocking,” Lawrence Haddad, director of the IDS, told The Times. He said that an average of 6,000 children died every day in India; 2,000-3,000 of them from malnutrition.

Related Links:

FAO Statistics

Grinding Poverty in Resurgent India

Pakistan's Sugar Crisis

Agricultural Diversification in South Asia

Nutrition in Pakistan

FAO Report on Food Consumption Patterns

Wheat Consumption in India and Pakistan

World of Sugar

Pakistan's Livestock Farming

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Saturday, September 19, 2009

More on Quality of Higher Education in South Asia

A recent Chowk.com article titled "Indian Technical Recession", written by an IIT Alumnus Mr. Sharad Chandra, asks the following basic question about the quality of engineering education in India:

"So why Indian engineering education system is not capable of producing quality engineers for the country?"

Then the author goes on to answer his own question as follows:

"One of the primary answers lies in the fact that Indian education is totally focused on academic excellence. A student is never asked to analyze, understand, and deliver an engineering project. Very often faculty also has no engineering experience. Professors may have an excellent academic background going themselves through graduation, post graduation and PhD but with a minimal exposure to industrial applications. In short, they prepare their students also for an excellent academic career expecting him to learn hard core engineering on the job but very often producing bankers.

In all there is about 3 months spent in training during graduation. It is taken more as a break from courses as no industry will give any serious project for such a short period. Student spends his time as an observer rather than as a responsible engineer. There is nothing like putting a trainer on a real job under the supervision of an experienced engineer. By the time, he has finished 6months to a year working on a real project, as any European student does, he will have something to his credit to show to a future employer."

A few top-tier Indian schools, such as the elite Indian Institutes of Technology (IITs), are often compared with world-class schools, but the American investors and businesses have finally learned the hard way that there is huge gap between the few tier one schools and the large number of tier two and three schools in India, and the quality of education most Indians receive at tier 2 and 3 schools is far below the norm considered acceptable in America and the developed world.

In 2005, the McKinsey Global Institute conducted a study of the emerging global labor market and concluded that a sample of twenty-eight low wage nations, including China, India and Pakistan, had about 33 million young professional in engineering, finance and accounting at their disposal, compared with only 15 million in a sample of eight higher wage nations including the US, UK, Germany, Japan, Australia, Canada, Ireland and South Korea. But "only a fraction of potential job candidates could successfully work at a foreign company," the study found, pointing to many explanations, but mainly poor quality of education.

Some India watchers such as Fareed Zakaria, an Indian-American who often acts as a cheerleader for India in the US, have expressed doubts about the quality of education at the Indian Institutes of Technology. In his book "The Post-American World", Zakaria argues that "many of the IITs are decidedly second-rate, with mediocre equipment, indifferent teachers, and unimaginative classwork." Zakaria says the key strength of the IIT graduates is the fact that they must pass "one of the world's most ruthlessly competitive entrance exams. Three hundred thousand people take it, five thousand are admitted--an acceptance rate of 1.7% (compared with 9 to 10 percent for Harvard, Yale, and Princeton)."

As a student of Karachi's NED University of Engineering and Technology in 1970s, I had similar assessment of my alma mater (and other UETs) in Pakistan as Zakaria's characterization of the IITs in India. NED Engineering College in 1970s was "decidedly second-rate, with mediocre equipment, indifferent teachers, and unimaginative classwork". However, given the fairly strict merit-based admission process, I found myself mostly surrounded by some of the best, most competitive students who had graduated with flying colors from Karachi's intermediate colleges and ranked very high on the Board of Education examination to make it into NED College. It was indeed the creme de la creme of Karachi's youth who have later proved themselves by many accomplishment s in various industries, including some of the leading-edge high-tech companies in America. Even in the 1970s, there were a small number of students admitted on non-merit-based special quotas. NED University today, however, appears to have significantly expanded such special, non-merit-based, quotas for entrance into the institution, an action that has probably affected its elite status, its rankings and the perceived quality of its graduates, while other, newer institutions of higher learning have surpassed it. Some of the special categories now include sons and daughters of employees, children of faculty and professional engineers and architects, special nominees from various ministries and an expanded quota for candidates from rural areas and the military.

Looking at the top 500 universities in the world, one can see a few universities from China, Japan, Singapore and India and a few more from Muslim nations such as Malaysia, Indonesia, Turkey, Iran and Pakistan. The notable institutions from South Asia include several campuses of the Indian Institutes of Technology and Pakistan's National University of Science and Technology (NUST), University of Lahore, Karachi University and Lahore's University of Engineering and Technology. The top Pakistani school on this list is National University of Science and Technology (NUST) at #376, followed by University of Lahore, University of Karachi, and UET Lahore. Many new universities are now being built in several Muslim nations in Asia and the Middle East, and they are attracting top talent from around the world. For example, King Abdullah University of Science and Technology (KAUST), scheduled to open on Sept. 23, is the country's attempt to create a world-class research university from scratch. It's hiring top scholars from all over the world. "Our goal is to kick-start an innovation-based economy," says Ahmad O. Al-Khowaiter, the university's vice-president for economic development. "We need a couple of success stories, and we think this will lead to one (collaboration with IBM Research)."

According to Businessweek, KAUST agreed to buy an IBM supercomputer, which is an essential tool in the research projects that IBM and the Saudis are targeting for their first collaboration. Among other things, the two teams will collaborate on a study of the nearby Red Sea, which they believe will help improve oil and mineral exploration. "[The supercomputer] is a magnet for smart people, and it makes it possible for us to solve big problems," says Majid F. Al-Ghaslan, KAUST's interim chief information officer.

An MIT survey of human resource professionals at multinational corporations in India revealed that only one quarter of engineering graduates with a suitable degree could be employed irrespective of demand (Farrell et al., 2005). Another survey of employers shows that only a handful of the 1400 engineering schools in India are recognized as providing world-class education with graduates worthy of consideration for employment (Globalization of Engineering Services, 2006). These results suggest that engineering degrees from most Indian colleges do not provide signaling value in the engineering labor market. Hence, low quality (in the labor market sense) engineering schooling has come to predominate in the education market. The current situation, with an abundance of low quality engineering schooling, is considered problematic by many in the Indian polity and it could stifle growth of the Indian economy (Globalization of Engineering Services, 2006).

For the first time in the nation's history, President Musharraf's education adviser Dr. Ata ur Rahman succeeded in getting tremendous focus and major funding increases for higher education in Pakistan. According to Sciencewatch, which tracks trends and performance in basic research, citations of Pakistani publications are rising sharply in multiple fields, including computer science, engineering, mathematics, material science and plant and animal sciences. Over two dozen Pakistani scientists are actively working on the Large Hadron Collider; the grandest experiment in the history of Physics. Pakistan now ranks among the top outsourcing destinations, based on its growing talent pool of college graduates. As evident from the overall results, there has been a significant increase in the numbers of universities and highly-educated faculty and university graduates in Pakistan. There have also been some instances of abuse of incentives, opportunities and resources provided to the academics in good faith. The quality of some of the institutions of higher learning can also be enhanced significantly, with some revisions in the incentive systems.

Admission meritocracy, faculty competence and inspirational leadership in education are important, but there is no real substitute for higher spending on higher education to achieve better results. In fact, it should be seen as an investment in the future of the people rather than just another expense.

Of the top ten universities in the world published by Times of London, six are in the United States. The US continues to lead the world in scientific and technological research and development. Looking at the industries of the future such as nanotechnology, biotechnology, green technologies, the US continues to enjoy a huge lead over Europe and Asia. The reason for US supremacy in higher education is partly explained by how much it spends on it. A 2006 report from the London-based Center for European Reform, "The Future of European Universities" points out that the United States invests 2.6 percent of its GDP in higher education, compared with 1.2 percent in Europe and 1.1 percent in Japan.

Post Script: More than 160,000 Indian students are currently studying in schools in the U.S., Australia, Britain and other industrialized nations. Writing for the Time Magazine, Nandini Laxman claims that over 100,000 pack up and head to study abroad every year, spending $7 billion on tuition and housing. Most of them never return, taking both their tuition money and their talent overseas. In a recent development, India's new Minister for Human Resource Development, Kapil Sibal, has talked about opening up the Indian higher education market to foreign universities to set up campuses in India. If done properly, this new government initiative could provide a big boost to quality of higher education in India.

Pakistan also represents a sizable market for higher education consisting of students interested in studying at foreign universities, but it would be difficult to attract foreign universities to Pakistan because of the current security situation. Every year 10,000 foreign student visas are granted in Pakistan, including many for British universities, according to a report in Spiked. But up to 20 times as many applicants are rejected, mainly because of exaggerated concerns about security. Between 2004 and 2008, about 42,000 Pakistani students were admitted to the UK.

Related Links:

Haq's Musings


NEDUET Admissions Prospectus 2009-10

Global Shortage of Quality Labor

Nature Magazine Editorial on Pakistan's Higher Education Reform

India Invites Foreign Colleges to Set Up Indian Campuses

McKinsey Global Institute Report

Pakistan Ranks Among Top Outsourcing Destinations

Pakistan Software Houses Association

World's Top Universities Rankings

Improving Higher Education in Pakistan

Globalization of Engineering Services 2006

Center for European Reform

Reforming Higher Education in Pakistan

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Thursday, September 17, 2009

Foreign Investors Eye Pakistan's Agricultural Land

Pakistan is seriously pushing ahead with a plan to sell or lease over 700,000 acres of agricultural land to foreign investors in the face of growing opposition at home. A Saudi delegation is due in the country this month for further talks on a plan to lease an area of land more than twice the size of Hong Kong, a Pakistani official told Reuters this month. Similar reports have surfaced earlier, indicating UAE investors have been quietly buying Pakistani farm land.

In June, news agency Reuters reported that the government of Pakistan had offered 404,700 hectares (ha) of farmland for sale or lease to foreign investors. It is the usual suspects of the Gulf states and South Korea who are the likely targets of the government's drive for investment. Oil rich, food poor states from the Middle East and food deficit prone South Korea have been spurred by the high food prices of 2007 and 2008 to increase their food security by investing in agricultural land abroad.

Also in June 2009, Swedish multi-national food company Tetra Pak announced the signing of an memorandum of understanding with local company Engro Foods to create a dairy hub in the Sahiwal district of the Punjab. The hub will serve 15 villages in the district and aims to promote more efficient production and bring smallholders into the formal dairy market chain.

In July, the Pakistani minister for investment said that the country would be happy to provide land for Korean companies to build food and dairy processing facilities, according to Pakistan Agribusiness Report. Also in July, the chief minister of the Punjab said that there was a large amount of interest in investing in the province's agriculture from Qatar.

It is not just Arab states that are buying up farm land in other nations. China secured the right to grow palm oil for biofuel on 2.8m hectares of Congo, which would be the world’s largest palm-oil plantation. It is negotiating to grow biofuels on 2m hectares in Zambia, a country where Chinese farms are said to produce a quarter of the eggs sold in the capital, Lusaka. According to one estimate, 1m Chinese farm workers will be working in Africa this year, reports the Economist.

In order to assess the situation and develop serious policy recommendations, it is important to have a basic understanding of how Pakistan's agriculture sector operates. Here are some of the important facts about it:

1. Feudal Land Ownership and Farm Productivity: The size of Pakistan's total arable land is about 22 million hectares (1 hectare=2.47 acres), the 15th largest in the world. Most of the best farm land is held by feudal landowners who use poor sharecroppers or illiterate tenant farmers to cultivate their land. As a result of the nation's landowning system, not only are the landholdings in Pakistan much larger than almost all of Pakistan's neighbors (average farm is Pakistan is about 10 acres vs only 4.5 acres in India), but the productivity and crop yields have been neglected by the absentee landlords. In spite of the massive public investments in building the irrigation and support infrastructure for Pakistan's farm sector and expensive incentives such as no taxation of farm income, Pakistan's farm productivity has been lagging, turning Pakistan from a food-surplus nation to a food-deficit nation in the last sixty years.

2. Water Scarcity: With only about 1000 cubic meters per person per year water resources, Pakistan is a water-scarce country. Out of the 169,384 billion cubic meters of water withdrawn since 2000, 96% were has been for agricultural purposes, leaving 2% for domestic and another 2% for industrial use. By far the most water is used for irrigated agriculture. With the world's largest contiguous irrigation system, Pakistan has harnessed the Indus River to transform 35.7 million acres for cultivation in otherwise arid conditions. Yet,the sector contributes less than 20% of the Pakistan's GDP and Pakistan remains a food-deficit nation. Rather than flood irrigation used in Pakistani agriculture, there is a need to explore the use of drip or spray irrigation to make better use of nation's scarce water resources before it is too late. As a first step toward improving efficiency, Pakistan government has launched a 1.3 billion U.S. dollar drip irrigation program that could help reduce water waste over the next five years. Early results are encouraging. "We installed a model drip irrigation system here that was used to irrigate cotton and the experiment was highly successful. The cotton yield with drip irrigation ranged 1,520 kg to 1,680 kg per acre compared to 960 kg from the traditional flood irrigation method," according to Wajid Ishaq, a junior scientist at the Nuclear Institute for Agriculture and Biology (NIAB).

3. Growing Urbanization Trend: Pakistan is already the most urbanized nation in South Asia where the farm sector contributes about 20% of the GDP, less than the 27% contribution by the industrial sector and the rest by service sector. And as the urbanization process accelerates, the farming techniques, emphasis on water-saving irrigation methods and productivity need to increase significantly to feed the growing population with fewer farmers.

If the foreign investors bring modernization to Pakistani farms, then the interest by foreign investors is worth considering. But the leases must be written up to ensure significant investment in the land and water management techniques, as well as much higher farm productivity benchmarks with the first right of refusal to the harvest given to Pakistanis.

A carefully crafted lease arrangement with foreign investors can accomplish the following:

1. Industrialization: Transform Pakistan from the traditional feudal society to an industrial society with modern agribusiness capable of not only feeding its growing population, but exporting surplus to add to the much-needed foreign exchange stream of earnings.

2.Productivity Enhancement: Increase productivity and improve Pakistan’s food security. There is significant room for increasing farm productivity in Pakistan. For example, Ahmed, Chaudhry and Iqbal of Pakistan Institute of Development Economics argue that per hectare wheat yield in Pakistan can be raised from about 2000-2500 kg to about 3500 kg with improved farming inputs and techniques. Since Mexico and Pakistan are located in analogous ecological zones, the introduction of Mexican varieties of high-yielding wheat by American agronomist Norman Borlaug in the country in sixties ushered an era of green revolution. But unfortunately the pace of development has not been maintained and Pakistan now lags significantly behind the Mexican yields, who are producing 3900 kg of wheat grain per hectare as compared to 2491 kg for Pakistan in the year 1999, the best season in recent memory. According to FAO data reported by Pakissan.com, among spring wheat growing countries Egypt has the highest yield, producing 5422 kg of grain per hectare and Indian Punjab produces 4090 kg versus 2500 kg per hectare in Pakistan.

3. Public Revenue Enhancement: Grow Pakistan’s tax base from the annual leases and the farm income tax received from foreign investors. This additional revenue can help boost spending on the critical education and health care programs to develop Pakistan's lagging human resources.

The terms for any land lease agreements must protect the best interest of all Pakistani stakeholder, including the farm workers, farmers, the domestic consumers, local communities, and ensure improved food security for Pakistanis and the protection of the land, water resources and the environment, while helping the foreign investors meet their basic objectives of food security in their nations.

In my view, it is not a good idea to summarily dismiss foreign investor interest in leasing farm land and investing in Pakistan's agriculture sector. What is important is to carefully assess the opportunity and come up with the best possible terms for such an arrangement to be mutually beneficial to both parties. Joachim von Braun, the head of IFPRI, argues that the best way to resolve the conflicts and create “a win-win” is for foreign investors to sign a code of conduct to improve the terms of the deals for locals. Various international bodies have been working on their versions of such a code, including the African Union, which is due to ratify one at a summit this year.

While I do think some skepticism is justified here, doing nothing is not an option. Pakistan faces potentially severe food and water shortages in satisfying the needs of its growing population. Significant investments are urgently required to avert potential famines and droughts. The best course of action now is to try and pressurize Pakistan's leadership and negotiating team to proceed cautiously and craft the best possible terms for a few pilot deals they can to ensure Pakistanis' food security and looking after Pakistan's best long term interests, while offering reasonably attractive returns to investors.

Related Links:

Foreign Investors Buying Pakistani Farm Land

Is Leasing Agricultural Land to Foreigners a Good Idea?

Pakistan's Sugar Crisis and Dietary Habits

Wheat Research and Development in Pakistan

Pakistan's Water Crisis

Wheat Productivity, Efficiency and Sustainability

Agrarian Reform in Pakistan

Urbanization in Pakistan

Pakistan Agribusiness Report 2009

Pakistan to Lease 700,000 Acres to Arab States

Pakistan's Total Arable Land

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Tuesday, September 15, 2009

Pakistan's Debt Rating Raised

International credit rating agencies Moody's and Standard and Poor have both raised Pakistan's credit rating and outlook, according to Bloomberg News.

Moody’s rates Pakistan’s foreign debt at B3, six levels below investment grade and the same ranking as Argentina and Bolivia. The country’s local-currency bonds are rated by Moody’s at the same level. India's credit ratings (BBB-/Negative/A-3) are higher than Pakistan's but the ratings may be lowered because of concerns about its rising fiscal deficit of 6.8% of GDP announced in the 2009-10 Budget.

“The upgrade reflects Pakistan’s improved external liquidity position, coupled with its successes in implementing corrective policy measures to rectify an unsustainable fiscal trajectory,” S&P said in a statement. “A narrowing current account deficit, helped by buoyant remittance inflows, and successive disbursals of the IMF and other multilateral loans have reduced the risk of near-term external payment difficulties for Pakistan,” S&P added.

Moody’s rates Pakistan’s foreign debt at B3, six levels below investment grade and the same ranking as Argentina and Bolivia. The country’s local-currency bonds are rated by Moody’s at the same level.

After losing 41% of its value in fiscal 2008-09, the KSE-100 has begun to rebound. The investors returning to the Karachi stocks have pushed the KSE-100 up 43% so far this calender year, up from 6295 points at the end of 2008 to 9030 level yesterday. While it pales in comparison with Mumbai's stock gains of 63%, the KSE's 43% gain is close to the MSCI emerging market index performance of 48% for 2009 so far.

During 2008, Pakistan's foreign currency reserves rapidly declined, economic growth stalled, and the ability to borrow additional cash was impaired when the nation's credit rating was cut by the rating agencies. S&P cut Pakistan's sovereign debt rating from B+, four notches below investment grade, as did Moody's from B1 with a negative outlook, for the first time in nine years, citing "growing economic imbalances and renewed political difficulties."

The signs of an economic rebound in Pakistan are visible today, bringing new investors and businesses to Pakistan. A lot now depends on whether the PPP government lets Mr. Shaukat Tareen, the current finance minister and former Prime Minister Shaukat Aziz's protege, guide the economy forward without undue political interference potentially detrimental to the recovery effort.

Related Links:

Pakistani Economy Poised For Rebound

International Investment Outlook For Pakistan

Signs of Economic Rebound in Pakistan

Shaukat Aziz's Economic Legacy

S&P Cuts Pakistan's Rating

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India's VNL Wins Wireless Innovation Award

VNL's solar-powered base station for cellphone networks was judged as leading the wireless category of the Wall Street Journal Technology Innovation Awards 2009.

The speed and depth of the mobile phone penetration in the developing countries, such as India, Bangladesh and Pakistan, has been the subject of a lot of discussion in business and marketing circles. The fact that the poor people in these developing nations are willing to spend several months' wages to purchase mobile phones has established that the poor do represent a significant market opportunity to sell products that offer value to them. Though most major multi-nationals have not caught on yet, mobile service carriers like Telenor and Digicel are already laughing all the way to the bank. Telenor was drawn to Bangladesh and Pakistan, and Digicel to Haiti, by low-wage workforces and the potential for creating local consumer markets, despite poverty. Both companies refused to accept the low-purchasing-power status quo and have been systematically building up local consumer markets. They are now boosting economic growth by creating jobs, rising tax revenue, and growing investment, according to a study published in Harvard Business Review.

The HBR study says that both "Norway-based Telenor and Jamaica-based Digicel have fared well: Telenor’s Grameenphone joint venture, which has been doing business in Bangladesh since 1997, became profitable in 2000 and is now the country’s largest telecom firm. Telenor Pakistan, a more recent initiative, increased its revenues 265% in 2007 and saw a nearly 200% jump in its customer base, to 15 million. Digicel doesn’t break down its profits by country, but Haiti represents the company’s largest market, and the corporation’s profits doubled to roughly $450 million for the year ending March 2008. The phenomenal growth in all three markets suggests significant improvements in local purchasing power. In Bangladesh, another indicator of increased purchasing power is a recent decline in the profits of the 280,000 “phone ladies,” who offer access to Telenor’s services, as more and more people in remote villages can now afford their own phones".

It is now clear that mobile-phone service can deliver huge benefits to the poor consumers in developing nations. But getting cellphone coverage to remote, rural parts of India and other developing nations is hindered by high installation and operating costs, as well as the specialized knowledge needed to set up and run a cellular station. As a result, few operators have taken advantage of these communities. The award winning solution from Vihaan Networks Limited is an attempt to enable wider rural coverage in India and other developing nations.

Here is a description of the innovation in the Wall Street Journal:

VNL is looking to overcome this obstacle with a low-power cellular base station that requires little capital expense and has almost no operating costs. The base stations can be powered by a small solar panel in daylight; batteries provide backup power for up to 72 hours.

Another challenge was making the device so simple that it can be installed at low cost by villagers.

The solution was inspired by the Scandinavian retailer Ikea: The entire base station comes delivered in six boxes, small enough to all fit in an ox cart. Simple illustrated instructions show how to put the pieces together using color-coded cables.

Even turning the station to the right microwave signal is easy—it emits a continuous beeping sound when the signal is strongest.

The technology may not be much of a technical breakthrough, but "it's worthy because of what it might bring to developing countries," says William Webb, head of research and development at Ofcom, the U.K. communications regulator, and one of the Innovation Awards judges.

Related Link:

Rural India's Mobile Phone Growth

Pakistan's Telecom Boom

Pakistan Tops Text Messaging Growth

Even the Poorest Can Be a Thriving Market

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Sunday, September 13, 2009

Growing Urbanization in South Asia

Urbanization is not just a side effect of economic growth; it is an integral part of the process, according to the World Bank. With the robust economic growth averaging 7 percent and availability of millions of new jobs created between 2000 and 2008, there has been increased rural to urban migration in Pakistan to fill the jobs in growing manufacturing and service sectors. The level of urbanization in Pakistan is now the highest in South Asia, and its urban population is likely to equal its rural population by 2030, according to a report titled ‘Life in the City: Pakistan in Focus’, released by the United Nations Population Fund. Pakistan ranks 163 and India at 174 on a list of over 200 countries compiled by Nationmaster.

Pakistan has and continues to urbanize at a faster pace than India. From 1975-1995, Pakistan grew 10% from 25% to 35% urbanized, while India grew 6% from 20% to 26%. From 1995-2025, the UN forecast says Pakistan urbanizing from 35% to 60%, while India's forecast is 26% to 45%. For this year, a little over 40% of Pakistan's population lives in the cities.

The urban population now contributes about three quarters of Pakistan's gross domestic product and almost all of the government revenue. The industrial sector contributes over 27% of the GDP, higher than the 19% contributed by agriculture, with services accounting for the rest of the GDP.

A 2008 report by UN Population Fund says the share of the urban population in Pakistan almost doubled from 17.4 percent in 1951 to 32.5 percent in 1998. The estimated data for 2005 shows the level of urbanization as 35 per cent, and CIA Factbook puts it at 36% in 2008, and it is increasing with 3% of the nation's population migrating to cities every year. With over 5 million rural migrants each year, the population of Pakistani cities in exploding, and Karachi has now becoming the world's largest city, according to Citymayors.com.

India's urban residents in 2008 residents accounts for 29% of its population, and the CIA Fact Book estimates it growing at 2.4% of the total population every year.

An expected positive consequence of the increasing urbanization of society in Pakistan will be the creation of over 100 million strong middle class by 2030. This large urban population will not only create a domestic market for goods and services, but it can create a skilled work force that can be the engine of economic growth and source of innovation.

According to the 1998 census, Sindh is the most urbanized province with 49 percent percent of the population living in urban centers. NWFP is the least urbanized province with only 17 percent of its population living in urban areas.

The shares of urban population in Punjab and Balochistan in 1998 were 31 and 23 percent respectively. There has been a visible narrowing down of the growth rate differentials among provinces, although the urban population in Balochistan and Islamabad has been increasing at higher rates of 5.1 and 5.8 percent respectively.

More than 60 percent of the population of urban Sindh lives in Karachi and this concentration has increased over time. Approximately three-quarters of the total urban population of Sindh are concentrated in just three urban centers: Karachi, Hyderabad and Sukkur. Karachi is growing so fast that estimates of its population range from 12 million to 18 million. The country's financial capital is also a city where about half the population lives in sub-standard housing.

National Public Radio(NPR), an American radio network, did a series recently on a massive wave of urbanization sweeping the world's emerging economies such as Brazil, China, India and Pakistan. It chose to start with Karachi, which it described as Pakistan's "economic lifeline" and financial and industrial "powerhouse" that produces 25% of Pakistan's GDP, and called it "one of the largest and most crowded cities of the world".

In Punjab, 22 percent of the urban population lives in Lahore, and half of the total provincial urban population lives in five large cities.

Peshawar has a population of approximately one million without counting the Afghan refugees, which is 33 percent of the urban provincial population. The share of Quetta in the total urban Balochistan population was 37 percent.

More than half of the total urban population of Pakistan lived in 2005 in eight urban areas: Karachi, Lahore, Faisalabad, Rawalpindi, Multan, Hyderabad, Gujranwala and Peshawar. Between 2000 and 2005, these cities grew at the rate of around 3 percent per year, and it’s projected that this growth rate will continue for the next decade.

Along with increasing internal rural to urban migration, there has also been a wave overseas migration from urban areas in Pakistan to urban centers overseas, especially the Middle East. The Middle East, with its vast oil wealth, has provided many opportunities for overseas workers to work and earn a living building and maintaining infrastructure in various Arab states, especially in the Persian Gulf. In recent years, overseas Pakistanis have been contributing to Pakistan's economy with remittances exceeding $7 billion a year.

There are many benefits of rural to urban migration for migrants' lives, including reduction in abject poverty, empowerment of women, increased access to healthcare and education and other services. Historically, cities have been driving forces in economic and social development. As centers of industry and commerce, cities have long been centers of wealth and power. They also account for a disproportionate share of national income. The World Bank estimates that in the developing world, as much as 80 percent of future economic growth will occur in towns and cities. Nor are the benefits of urbanization solely economic. Urbanization is associated with higher incomes, improved health, higher literacy, and improved quality of life. Other benefits of urban life are less tangible but no less real: access to information, diversity, creativity, and innovation.

At the same time, there are many issues caused by the current wave of urbanization, including the fact that massive increases in urban population create more and larger urban slums, increase the potential for environmental deterioration, and bring tremendous pressures on city services already strained beyond limits. Take sanitation, for example, and it is no surprise that three major South Asian cities, Dhaka, Mumbai and New Delhi, show up on the Mercer's list of world's 25 dirtiest cities. Some non-government organizations, such as the Orangi Pilot Project (OPP) in Karachi, are stepping in to fill the huge gaps left by the municipal authorities. Under OPP guidance, between 1981 and 1993 Orangi residents installed sewers serving 72,070 of 94,122 houses. To achieve this, community members spent more than US$2 million of their own money, and OPP invested about US$150,000 in research and extension of new technologies.

Like any growing megacity in the developing world, Karachi has its share of problems. Pollution, crime, corruption and political volatility are just some of the issues confronting the 12 million to 18 million "Karachiites" who call this overcrowded city home. Karachi is 60 times larger than it was when Pakistan was created in 1947. And with the population growing at an annual rate of 6 percent, one of the biggest challenges for city officials is managing the tensions and violence that often flare along ethnic and religious lines.

In a recent interview with Wall Street Journal, Pakistan's former finance minister Salman Shah explained that "Pakistan has to be part of globalization or you end up with Talibanization". "Until we put these young people into industrialization and services, and off-farm work, they will drift into this negative extremism; there is nothing worse than not having a job," Shah elaborated. But increasing urbanization in South Asia represents both a challenge and an opportunity for India, Pakistan and Bangladesh. It is a challenge because it imposes a rapidly growing burden on the already overcrowded megacities such as Mumbai, Delhi, Dhaka and Karachi. Such a massive challenge will require a tremendous focus on providing housing, transportation, schooling, healthcare, water, power, sanitation and other services at an accelerated pace. But if this challenge can be successfully met, there will be an opportunity to develop the human potential of the rural poor and employ them more productively in the growing industrial and services sectors in the cities. In the case of Pakistan, if the level of robust economic growth, human development and increased urbanization can be sustained to significantly enlarge the South Asian nation's middle class, then there can be hope for genuine and durable democracy to thrive.

Related Links:

UN Population Fund Report 2007

Urbanization Levels of Countries of the World

Eleven Days in Karachi

Karachi: The Urban Frontier

America's Best Run Cities

Urbanization Challenges in Pakistan

World's Dirtiest Cities

Karachi Fourth Cheapest for Expats

UN Population Growth Data

Cities and Environment

Pakistan's Choice: Talibanization or Globalization

Patterns of Urbanization in Pakistan

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Wednesday, September 9, 2009

China's Unfair Advantage in Hybrid Car Batteries

With China poised to surpass the United States as the world's largest automobile market this year, the Chinese government has announced plans to help the nation leapfrog Japan to become the largest producer of all-electric and hybrid vehicles in the world. By committing to electric vehicle production, China is also attempting to reduce urban air pollution, carbon emissions and growing dependence on imported oil.

A current production Toyota Prius nickel metal hydride battery pack uses 30 kilograms of nickel, 2 kilograms of cobalt and 12 kilograms of lanthanum because the active hydrogen storage alloy in the battery is either LaNi4.5Co0.5 or (Ce, La, Nd, Pr)Ni5. The Prius assembly plant in Japan has so far used one and 1.5 million rechargeable nickel metal hydride battery packs and achieved with them some of the lowest numbers of service issues ever seen in the OEM automotive industry. In fact most of the original Prius rechargeable nickel metal hydride battery packs have exceeded their 8-year 100,000 mile warranty and are still functioning, according to Resource Investor website.

China controls 95% of the world’s supply of rare earth elements, a class of ores used not just in Prius batteries but in a wide range of high-technology applications, from sonar systems to wind turbines, mobile phones and fluorescent lights.

All this gives China an extraordinary - some might say unfair - advantage to lead the race to dominate the manufacture of cutting-edge technology, according to the Wall Street Journal. Even before any major technology partnership announcements, there are reports that the legendary US investor Warren Buffet is investing in BYD, an obscure Chinese battery, mobile phone, and electric car company.

Toyota and Honda, the two currently leading makers of hybrid vehicles, do not think the Li-on technology is ready for prime time yet. They reportedly are going with an upgraded NiMH battery, using the rare earth elements found in China. Carlos Ghosn, on the other hand, is taking Nissan directly into what he thinks will be the ultimate answer, a Li-on powered electric car with a short stop in hybrid-land, but still powered with Li-on.

Last year, Honda announced that it would produce only hybrid motor vehicles by 2018, and others are likely to follow in its footsteps. As the demand for nickel hydride car batteries grows, those depending on such ores may be forced in the near term to invest in rare earth development in Inner Mongolia, Jiangxi and some other southern provinces to secure supply. In fact, some companies already have done just that. Right now, it’s stuff like X-ray screen makers, phosphor-panel and lamp manufacturers and other electronics firms that have set up joint ventures in China.

What China is waiting for is for the really high-end technology with mass market leverage like hybrid car batteries to beat a path to its door, says the Wall Street Journal. Beijing will have a window to get to a position of advantage with high-end manufacturers as it holds most of the cards for now.

Meanwhile,the new auto-industry plan, published on the main Web site of China's central government, says China aims to build capacity to manufacture 500,000 "new energy" vehicles, such as all-electric battery cars and plug-in electric hybrid vehicles. The plan aims to increase sales of such new-energy cars to account for about 5% of China's passenger vehicle sales.

Related Links:

China's Electric Ambitions

Buffet Investing in Chinese Battery Maker

Car Battery Battle Between Li-on and Nickel Metal Hydride

Auto Industry Prospects in India, Pakistan and China

Pakistan Automobiles Report 2009

Auto Pakistan Expo 2009

Pakistan Automotive Report

China Surpasses US in Auto Sales

Auto Industry in India

India's Global Shopping Spree

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Tuesday, September 8, 2009

India's Space Program Suffers Setback

By Ameer Alam
The Indian Space and Research Organization (ISRO) terminated the Chandrayaan-1 mission 18 hours after losing contact with the spacecraft on Aug 29, 09. The spacecraft completed less than half (10 months) of its two year mission life.

The initial inkling of something amiss came of May 19, 09 when the satellite was suddenly raised from a lunar orbit of 100 km to 200 km orbit. ISRO did not disclose the nature of the problems at that time, instead it claimed that "the higher altitude would enable further studies on gravity anomalies and imaging a wider swath of lunar surface". Later it was revealed that both the primary and secondary star trackers (sensor units), had failed on orbit. Star tracker is a part of the spacecraft attitude control system, which accurately orients the spacecraft and helps keep the cameras and other instruments properly aimed at the lunar surface. The ISRO controllers then switched to a less accurate option of a combination of gyroscopes, antenna-pointing data and lunar landmarks to determine spacecraft orientation.

To make matters worse the Chandrayaan-1 had earlier lost power supply to the satellite primary bus management unit due to overheating. The bus management unit is an on-board computer that performs real-time data, navigation and control processing for the satellite. After the secondary unit lost power the ground controllers stopped receiving telemetry data, radio contact was lost and the mission was abandoned.

Earlier on Aug 20, NASA and ISRO performed joint observations with their lunar orbiters to determine evidence of water/ice at the moon’s North Pole Erlanger Crater, using the US built Mini-SAR/Mini-RF devices. The hope was that bistatic imaging data will reveal whether the radars were actually seeing ice or just surface material with same characteristics. Later on Sep 3, 09 it was announced that the experiment failed because of the pointing problems (gyro drift of 0.8 deg/hr) with Indian spacecraft. Ground controllers managed to get data back from both spacecraft, but it turned out to be unusable. Further experiments were cancelled due to the loss of Indian spacecraft.

These failures are indicative of a lack of understanding of space environment; as a result erroneous thermal profiling caused cascading failures of the spacecraft equipment. Compared to Chandrayaan-1 the Chinese Chang’e-1 and the Japanese Selene lunar missions have performed beyond their expected mission life. The Chinese indigenous space programs continue to thrive despite the technological restrictions imposed by the West.

Nevertheless, Chandrayaan-1 completed 312 days in lunar orbit, circling the moon more than 3,400 times and providing a large volume of data from its suite of sensors which included the Terrain Mapping Camera, Hyper Spectral Imager and Moon Mineralogy Mapper. High-resolution cameras relayed over 70,000 digital images of the lunar surface, providing breathtaking views of mountains and craters, including those in the permanently shadowed area of the moon's polar region. The ISRO Chairman G. Madhavan Nair declared that the mission was a success with 95% of the objectives achieved.

Ameer Alam
The Boeing Co
Space and Network Systems
Huntington Beach CA

Editor's Note: Ameer Alam believes that ISRO is not coming clean with actually what happened to the spacecraft. His view is that it is a great set back to India's space program. Ameer thinks that they are busy analyzing the data and will put out a report in six months (available only to the top govt officials).

Related Links:

India Space Probe Chandrayaan I

India in Moon Race with Big Dogs

China's Chang-e I Ends Lunar Mission with a Bang

Iran Launches Homegrown Satellite

Satellite Capabilities of Emerging Space-Competent Nations

Iran's Space Program

An Indian Analyst's assessment of Pakistan's Space Program

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Saturday, September 5, 2009

Pakistan Poverty Down to 17% in 2007-2008

Center for Poverty Reduction (CPRSPD), backed by the United Nations Development Program(UNDP), has estimated that Pakistan's poverty at national level declined sharply from 22.3 percent in 2005-06 (versus India's poverty rate of 42%) to 17.2 percent in 2007-08. Prior to this report, the 2009 UN Human and Income Poverty Report said the people living under $1.25 a day in India is 41.6 percent, about twice as much as Pakistan's 22.6 percent. The latest poverty estimate of 17.2% has been validated by the World Bank.

It should not be a big surprise, given the close relationship between poverty reduction and robust economic growth that Pakistan saw from 2005-06 to 2007-08. The economic slowdown has only occurred in 2008-09, which appears to have resulted in some visible poverty increase on the ground since the middle of last year. However, there seems to be a deliberate effort being made by some politically motivated Pakistani economists and politicians to delay the release of CPDSPD data and deny what Dr. Ashfaq Khan of NUST calls "the major economic and social achievements of the last one decade" under President Musharraf. Dr. Khan cites the Letter of Intent that the PPP government signed with the IMF which acknowledged that Pakistan's GDP jumped "from $60 billion in 2000-01 to $170 billion in 2007-08 with per capita income rising from under $500 to over $1000". The LOI with IMF also acknowledged that "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 (2008)." Here's an interesting OpEd published in the News by Dr Ashfaque H Khan on how poverty statistics in Pakistan are fair game for the various "experts" with an ax to grind:

The present government is facing real embarrassment on poverty estimates for 2007-08. The Panel of Economists, formed by the government in April 2008 under the leadership of Dr Hafiz Pasha, found that 35-40 percent people of Pakistan were living below the poverty line in 2007-08 – up from 22.3 percent in 2005-06. The political leadership, unaware of the technical details of the estimation techniques, took the estimates of the Panel seriously and everybody, including the ministers, the prime minister and the president started mentioning the numbers within and outside the country. The political leadership had no reason to distrust the professional skills of the Panel of Economists. Their only fault was that they could not realize that some members of the Panel of Economists were positioning themselves to get ministerial jobs and some retired "experts" were trying to secure their jobs in the government. These people could have moved their way to the present regime only if they would paint a bleak picture of the state of the economy, including the substantial rise in poverty. I am positive that this Panel of Economists has had no courage to write similar three paragraphs as documented in the Memorandum of Economic and Financial Policies attached with the Letter of Intent, signed by the Government of Pakistan on Nov 20, 2008 with the IMF. These three paragraphs, written by the present regime, very aptly summarize the major economic and social achievements of the last one decade, including the "reduction in poverty and an improvement in many social indicators." It appears that the Panel of Economists was trying to become more Christian than the Pope and as such came up with poverty estimates based on flawed methodology.

On the other hand, the Centre for Poverty Reduction and Social Policy Development (CPRSPD), using the(Pakistan Social and Living Standards Measurement (PSLM) Survey 2007-08, also estimated poverty for the year 2007-08. They found that poverty at national level declined sharply from 22.3 percent in 2005-06 to 17.2 percent in 2007-08. Poverty, both in rural and urban areas also registered sharp declines. The estimates of the CPRSPD were also validated by the experts from the World Bank. The "experts" from the Planning Commission are of the view that a sharp decline in poverty in 2007-08 does not depict the ground reality. Why should it depict the ground reality? Firstly, the period it covers is from July 2007 to June 2008. Secondly, poverty estimates are not like the growth number, money supply or inflation which change yearly. Poverty number reflects the changes in the lives of the people which are affected by the policies pursued for a fairly long period of time. To be fair to the government, how can they say now that the poverty in Pakistan has declined substantially in 2007-08 as opposed to their earlier stance that it had increased to the range of 35-40 percent? In other words, how can they say that at the time of taking charge of the state of affairs only 17.2 percent people were living below the poverty line and that there are indications that poverty is on the rise once again in Pakistan. This is indeed the real embarrassment for the government caused by the Panel of Economists.

Poverty estimates are highly sensitive to changes in different variables. For example, should we use calorie intake or basic need approach or should we use 2550, 2250 or 2350 calorie to draw the poverty line? Should we use CPI, SPI, WPI or prices derived from the Survey itself to adjust the poverty line or should we use consumption or income? The basket of commodities may differ across researchers and even the cleaning protocol of data may give different poverty estimates. Thus, at any given point in time there can be different poverty estimates with same or different data sets. What is required, therefore, is that we continue to use the same methodology irrespective of its strength and weaknesses, lest we should never be able to know as to what is happening on poverty front.

There are views about the methodology used by the Panel of Economists. One, that in the absence of PSLM Survey data for 2007-08 the Panel simply adjusted the poverty line upward to the extent of cumulative inflation (20 percent) for the period 2006-07 and 2007-08. On the other hand, they used household consumption expenditure for the year 2005-06, which was not adjusted upward to match the poverty line. In other words, apple was compared with orange. Naturally, such a flawed methodology was bound to produce erroneous results. Second, that the Panel used an equation to forecast poverty. This equation has many exogenous variables, such as food inflation, remittances, openness of trade, development expenditure as percentage of GDP, etc. Giving the value of each variable for 2007-08 and using the estimated parameters it predicted poverty for 2007-08. Forecasting is a complex exercise and requires transparency in the use of data. The Panel did not release those numbers which went into the model. Thirdly, they used the preliminary version of the model whose parameters changed substantially in subsequent revisions. The Panel never bothered to contact the author of the model. Had they contacted him, he could have saved the Panel from such disgrace.

At the end, let me once again appeal to the Planning Commission to release the poverty numbers for 2007-08. Not releasing the number is not a good idea. The number is already out. Don't embarrass the government any more. Forget the Panel's report and trust your own young economists at the CPRSPD.

The author is dean and professor at NUST Business School, Islamabad. Email: ahkhan@nims.edu.pk

Related Links:

The News OpEd on Poverty in Pakistan

Musharraf's Economic Legacy

Aid, Trade, Investments and Remittances in Pakistan

Pakistanis' Dietary Habits

Pakistan's LOI with IMF 2008

How Poor are We?

Overview of Pakistan's Economy 2008-9

Truth on Poverty Data

Statistical Yearbook for Asia and the Pacific 2008

Poverty in Pakistan

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