Sunday, February 27, 2011

Will Economic Fallout of Middle East Turmoil Impact India and Pakistan?

Much is being written about the potential for the spread of political upheaval that started in Tunisia and recently led to the end of the 30 years rule of the Egyptian dictator Hosni Mubarak. Most of the commentary and punditry has so far been focused on potential political instability forced by possibly massive street protests.

Political fall-out from the events in Tunisia and Egypt has already engulfed the Middle Eastern nations of Bahrain, Libya and Yemen. However, little attention has so far been paid to the more immediate impact of spreading trouble in the oil-rich Middle East on developing nations in South Asia and elsewhere.

Crude oil prices have been rising for some time but the fears of the spread of the political unrest have accelerated the rate of increase. The price of crude has already crossed the crucial $100 a barrel mark with the Libyan crisis in full bloom. South Asian economies are keeping a close eye on the situation in Africa and Middle East but still remain unaffected in receiving their oil supplies through this region. Any further spread of the unrest into GCC countries, particularly Saudi Arabia, could have a huge impact on the health of South Asian economies.

According to the World Bank's Immigration and Remittances Factbook 2011, the top remittance sending countries in 2009 were the United States, Saudi Arabia, Switzerland, Russia and Germany. Worldwide, the top recipient countries in 2010 were India, China, Mexico, Philippines and France, according to Dawn News. In South Asia, the top five remittance receiving nations in 2010 were: India ($55.0 billion), Bangladesh ($11.1 billion), Pakistan ($9.4 billion), Sri Lanka ($3.6 billion), and Nepal ($3.5 billion).

Pakistan's exports to the Middle East add up to several billion dollars a year. The United Arab Emirates alone imported $1.7 billion worth of Pakistani products last year, according to Arabian Business.

Relatively stable energy prices and rising exports and surging remittances have helped South Asian nations in 2009-2010. But this could all unravel with rising oil import bill combined with the fall of inflows from worker remittances and decline in exports to the Middle East region. India and Pakistan are already running significant current account deficits, and experiencing high rates of inflation exacerbated by rising food and energy prices since late 2010. The economic hardship, particularly high food prices and unemployment, could become a catalyst for serious political turmoil in South Asia in 2011 and beyond.

Related Links:

Haq's Musings

Pakistan's Economy 2008-2010

Pakistan's Rising Exports and Remittances

Indian Economy: Hard or Soft Landing in 2011?

China's Trade and Investment in South Asia

India's Twin Deficits

Inflation Hits India

Goldman Sachs India Warning on Twin Deficits

India's Nov 2010 Imports, Exports

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Wednesday, February 23, 2011

Pakistan Leads South Asia in Charitable Giving

Indian billionaire Azim Premji and Pakistani billionaire Malik Riaz Husain have recently made news by their generous pledges to help their disadvantaged fellow South Asians.

While Premji, the third richest among India's 50-odd billionaires, has announced $2 billion donation to improve public education, billionaire Malik Riaz has pledged 75% of his wealth to help Pakistan's flood victims rebuild.

Prior to Premji's $2 billion pledge, the biggest philanthropist in India was Bill Gates, an American, whose foundation is contributing $1.6 billion to help India's poor.



Beyond these high-profile pledges, the state of philanthropy in South Asia, especially in India, is not particularly healthy. Charity contributions in India make up only 0.6% of GDP, significantly lagging behind 2.2% in the United States, 1.3% in the UK, 1.2% in Canada, and 1% of GDP in Pakistan, according to data reported by Bain & Company, and Pakistan Center for Philanthropy.



Pakistanis contributed Rs.140 billion (US$1.7 billion), nearly 1% of the nation's gross domestic product of $170 billion in 2009, according to PCP. Their donations help organizations like Khana Ghar that feeds the hungry, Edhi Foundation which operates non-profit ambulance service and Human Development Foundation which builds and operates schools and clinics for the poor.



Indians gave $7.5 billion to charities, about 0.6% of India's GDP. The donations supported Indian organization like Akshaya Patra which feeds the hungry, and Premji's Foundation that is helping improve primary education to shift away from rote learning to creative thinking.

One of the measures of the goodness of a nation, particularly its middle class, is its level of civic engagement.

By this measure, advanced western nations lead the pack with the United States in #1 position, followed by Ireland, Australia, New Zealand, Britain, Holland, Canada, and lo and behold! Sri Lanka.

In South Asia, Pakistan is a distant second to Sri Lanka's 51% participation rate. Pakistan's participation rate of 42% ranks it at 27, the same as Israel.

India lags far behind with the participation rate of only 28% ranking it at 48 among 130 nations, according to a recent Gallup poll on civic engagement that included 130 nations.

While 53% of Sri Lankans gave money to charity and 53% volunteered time, 51% of Pakistanis contributed money and 27% volunteered time. In India, 28% donated money and 18% volunteered time. Comparable figures for the top-ranking United States are 65% and 43%.

Although South Asians are more generous than the Brazilians (0.3% of GDP) and the Chinese (0.1% of GDP), charity continues to lag in South Asia (Pakistan 1%, India 0.6%) in spite of the rising number of high net worth individuals and families. Bain research shows that nearly 40 percent of India's wealth is controlled by the top 5 percent of India's households. And the top 1% of Indians control about 16% of India's wealth.

The growing disparities created by the heavily skewed benefits of economic growth accruing to a few creates the potential for serious social unrest, unless the newly rich begin to share their wealth to address the widespread hunger, poverty and deprivation in South Asia. I think it is time for the rich in India and Pakistan to begin to emulate the fine example of generosity being set by Premji and Malik Riaz.

Here's a video clip of Malik Riaz's interview with CNN:



Related Links:

Haq's Musings

How Can Overseas Pakistanis Help Flood Victims?

Light a Candle, Don't Curse Darkness

Pakistan Center for Philanthropy

An Overview of Indian Philanthropy

Aaker Patel on Philathropy

Orangi Pilot Project

Three Cups of Tea

Volunteerism in America

Dr. Akhtar Hamid Khan's Vision

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Friday, February 18, 2011

Pakistan Pursues Wind Power Generation

As part of its effort to tap renewable energy sources to solve its painful black-outs and brown-outs, Pakistan has recently launched several wind-farm projects expected to produce over 250 MW of power within the next two years.

The Asian Development Bank has agreed to a loan to help fund the first privately owned and financed wind farm in Pakistan. The output from the plant will provide much-needed additional power for Pakistan, improve the country’s energy security, and lower reliance on fossil fuels. Zorlu Enerji Electrik Uretim, will use the $36.8 million loan to install wind turbines to increase the output of its wind farm – located in the southern Sindh province, 100 kilometers northeast of Pakistan’s commercial hub of Karachi – from the current 6 megawatts to a total of 56.4 megawatts. The existing 6 megawatt wind farm project is currently selling power to the Hyderabad Electric Supply Company. Once the second construction phase is complete – expected in 2012 – the 56.4 megawatt wind farm will supply power to the national grid through a 20-year take-or-pay power purchase agreement with the National Transmission and Dispatch Company. The approved tariff will ensure that the electricity is priced competitively, with the rate dropping over time as project debt is paid down.

Pakistan has entered into another agreement to build a $375 million wind farm to produce 150 megawatts of electricity near Karachi, its largest industrial city, according to a report in the Express Tribune. It is scheduled to be completed in two years by AES Corporation, a US company, with assistance from US Agency for International Development. The project would be set up at three sites in the Gharo Corridor in Thatta district of Sindh.

FFC Energy, a subsidiary of Pakistan's Fauji Fertilizer Company, is also building a 50 MW wind farm in Jhimpir near Karachi, at a cost of $130 million, according to Reuters. Nordex AG announced that it has signed a contract with FFC Energy Limited, Rawalpindi, for the delivery of a 50 megawatts (MW) wind farm. Known as Jhimpir, the wind farm is to be built in the province of Sindh, where Pakistan is planning to establish new capacity of around 4,600 megawatts. The average wind speed at the site of the planned project is 7.8 meters per second. FFC has therefore opted for the Nordex S77/1500 series, which is specially designed for medium-strong wind conditions. Nordex AG will be supplying hot climate versions of the turbines, which are to be produced at its facilities in China. The 33 turbines are to be delivered soon after tariff approval from NEPRA (National Electric Power Regulatory Authority) and signing of the energy purchase agreement. Nordex has obtained a Letter of Intent for another 100 MW of wind farms from the government.



Pakistan is fortunate to have something many other countries do not, which are high wind speeds near major population centers, according to data published by Miriam Katz of Environmental Peace Review.

Near Islamabad, the wind speed is anywhere from 6.2 to 7.4 meters per second (between 13.8 and 16.5 miles per hour). Near Karachi, the range is between 6.2 and 6.9 (between 13.8 and 15.4 miles per hour).

In Balochistan and Sindh provinces, sufficient wind exists to power every coastal village in the country. There also exists a corridor between Gharo and Keti Bandar that alone could produce between 40,000 and 50,000 megawatts of electricity, says Ms. Katz who has studied and written about alternative energy potential in South Asia. Given this surplus potential, Pakistan has much to offer Asia with regards to wind energy. In recent years, the government has completed several projects to demonstrate that wind energy is viable in the country. In Mirpur Sakro, 85 micro turbines have been installed to power 356 homes. In Kund Malir, 40 turbines have been installed, which power 111 homes. The Alternative Energy Development Board (AEDB) has also acquired 18,000 acres for building wind farms.

In addition to high wind speeds near major centers as well as the Gharo and Keti Bandar corridor, Pakistan is also very fortunate to have many rivers and lakes. Wind turbines that are situated in or near water enjoy an uninterrupted flow of wind, which virtually guarantees that power will be available all the time. Within towns and cities, wind speeds can often change quickly due to the presence of buildings and other structures, which can damage wind turbines. In addition, many people do not wish for turbines to be sited near cities because of noise, though these problems are often exaggerated.

Pakistan's Alternative Energy Development Board (AEDB) is trying to boost local private investment in alternative energy by offering incentives and access to wind turbine makers and operators such as Siemens, Nordex SE, Coolwind, SWEG and General Electric, according to Reuters.

Nordex in March agreed to supply Fauji Fertilizer Company (FFC) with turbines for a 50 MW farm in the southern Sindh province.

To attract private investors, AEDB's Arif Alauddin said the government is guaranteeing an annual rate of return of up to 18 percent and will pay power producers if the wind blows below an annual average of 7.3 meters per second.

AEDB has already allocated land for 18 independent power producers for wind power projects of 50 MW each. The U.S. Agency for International Development has plans to help Pakistan develop wind farms to generate 300 MW by the end of 2014.

"You cannot expect changes overnight. It'll take time. But we believe some 10,000 MW would be coming through wind in the next five to 10 years," Alauddin told Reuters.

AEDB is carrying out national wind mapping for possible farms in other locations such as southwestern Baluchistan and northwestern Khyber-Pakhtunkhwa.

While 250 MW of windpower is very modest to fill the current supply-demand power gap of thousands of megawatts, it does represent a good start toward serious use of renewables to generate electricity in Pakistan. Given the uncertainty about cost, availability and environmental impact of hydrocarbons, it is important for Pakistan to rapidly diversify into renewables such as water, wind and sun.

Here's a video of Late Ambassador Holbrooke signing a wind-farm funding agreement with Pakistan in November, 2010:



Here's a video report on Pakistan's first windfarm near Karachi:



Here's a CNBC Pakistan video on KESC's power projects:




Related Links:

Haq's Musings

Renewable Energy to Solve Pakistan's Electricity Crisis

Wind Turbine Manufacturing in Pakistan

Pakistan Pursues Hydroelectric Power Projects

Solar Energy for Sunny Pakistan

Wind Power Tariffs in Pakistan

Pakistan's Twin Energy Shortages

Pakistan Council of Renewable Energy Technology

Renewable Energy for Pakistan

Abundant Cheap Electricity From Pakistani Coal

Pakistan Policy on Renewable Technology

Sugarcane Ethanol Project in Pakistan

Community Based Renewable Energy Project in Pakistan

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Tuesday, February 1, 2011

Brand India Loses Luster at World Economic Forum

Brand India has lost its luster at Davos in 2011!

Poor governance and corruption are endemic in India, and have been the talk of the town at Davos this year, tarnishing the meticulously crafted image of "Shining India" at the World Economic Forum since 2006. The immediate effect is that that India's foreign direct investment (FDI) is already down by a whopping 36% in 2010 from 2009, and there is no recovery in sight yet. Meanwhile India's current account deficit is exploding, accounting for about 3.5% of GDP.



In 2006, the "India Everywhere" campaign orchestrated by Indian planning commission officials and the Confederation of Indian Industry (CII) dominated the ambiance of the World Economic Forum at Davos, Switzerland. They spent two years and more than $4 million and put together an elaborate marketing and PR campaign to ensure that the "India story" got prominent play and did not get drowned in the noise at Davos. The success of the initiative was apparent by the dramatic increase in FDI inflow to India which doubled from less than 1% of GDP to nearly 2% of the expanded GDP in 2008.

Here is how Times of India reported the scene from Switzerland in 2006:

For once, India is really everywhere at Davos. With the 35th World Economic Forum (WEF) opening at the Swiss mountain resort, one cannot help but notice India Everywhere.

Right from the moment you step off the aircraft at Zurich airport, big hoardings proclaiming India greet you. Upon reaching Davos, located about 150 km from Zurich, the Indian colours are just about everywhere.

In fact, you see more of India than Switzerland in Davos this year.

The buses wear Indian colours, the bus shelters have Indian advertisements, and key bars, pubs and hotels in the city where the economic meet began Wednesday evening are serving up Indian snacks and Indian wines and beer.


Reports from the World Economic Forum at Davos in 2011 offer a very different narrative.

Coming after the massive multi-billion dollar telecom corruption scandal in 2010 and expression of deep concern by some prominient India businessmen about the nation's governance deficit in 2011, India's presence at the World Economic Forum 2011 was decidedly lower key when compared with the heady days of 2006.

Summing up the sentiment at Davos, an Indian journalist opined as follows: "..such a forthright disregard for the so-called "India story" may understandably offend nationalist sentiments and bring on the "west versus rest" polarization that keeps many public intellectuals in business. But the harsh truth is that India has been sold, resold and re-re-sold in so many samosa and Sula evenings that it has lost novelty."

Here's a video clip on India's massive corruption:



Related Link:

Haq's Musings

Indian Economy: Hard or Soft Landing in 2011?

Pakistani Economist Saadia Zahidi at World Economic Forum

Inaction Against Corruption in South Asia

2G Corruption Scandal in India

Musharraf at Davos 2008

Imran Khan at Davos 2011

Delhi in Davos: How India Built its Brand at the World Economic Forum

FDI India, Pakistan, China and Vietnam 2003-2010

China's Trade and Investment in South Asia

India and Pakistan at Davos 2009

India's Twin Deficits

Pakistan's Economy 2008-2010

Inflation Hits India

Goldman Sachs India Warning on Twin Deficits

India's Nov 2010 Imports, Exports

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