Tuesday, April 28, 2015

Pakistan's Fiber Connectivity Growth

A $44 million 820 kilometer fiber optic cable being laid between Pakistan and China will be the 6th high-speed connection to add redundancy and to cater to rapidly growing Internet traffic from-to Pakistan. It is part of the $46 billion Pak-China Economic Corridor project recently agreed between the two neighbors.

Fiber Optic Network in Pakistan Source: KHL
Undersea Fiber Connectivity:

Pakistan is  currently connected with the world through four undersea fibre optic cables. These include India-Middle East-Western Europe (I-ME-WE),  Southeast Asia-Middle East-Western Europe 3 (SEA-ME-WE-3) and Southeast Asia-Middle-East-Western Europe 4 (SEA-ME-WE-4), operated by Pakistan Telecommunication Company Limited (PTCL) and TWA-1, which is owned by Trans-World Associates. A fifth undersea cable called South East Asia-Middle East-Western Europe (SEA-ME-WE)-5 is being laid to connect Pakistan with the rest of the world, according to Pakistani media reports.

Overland China-Pakistan Fiber:

The overland fibre optic cable is being laid by Chinese company Huawei between Rawalpindi and Khunjarab Pass on Pakistan-China border, a distance of 820 kilometers, according to media reports.

When completed, this project will provide Pakistan with a direct telecom access to China and the Central Asian States, and from there to Europe and the United States.

3G 4G Subscription Growth Source: PTA


Internet Traffic Growth:

The launch of 3G and 4G networks has accelerated the growth of Internet users in Pakistan. More than a million subscribers are signing up every month since the 3G and 4G rollout in the country last year. These new users are generating more and more data traffic requiring rapid increases in available bandwidth.

Pakistan ended March 2015 with over 12.07 million 3G/4G subscribers, up from 10.34 million in February, according to data from Pakistan Telecommunications Authority (PTA). Telenor led the 3G/4G market with over 3.53 million subscribers, followed by CMPak (2.95 million 3G/4G subscribers), Mobilink (2.86 million 3G subscribers), and Ufone (2.66 million 3G subscribers). Warid had 66,140 LTE network subscribers at 31 March.

Thousands of kilometers long fiber network is currently in place to deal with the growing domestic bandwidth demand. Several projects are underway to grow this network further.

Redundancy and Reliability:

Pakistan needs multiple fiber connections to the outside world to prevent the kind of major Internet outages the country has suffered periodically for the last decade.

For example, a major disruption occurred in June 2005 when ALL Internet access from Pakistan was lost due to damage to the lone undersea fiber optic cable in the Arabian Sea connecting the nation with the rest of the world. There were satellite links but these links have very limited bandwidth. Even though the number of Internet users in Pakistan was relatively small at about 15-20 million, the impact on business was disproportionate. Traders on KSE reported as much as 80% drop in trading volume from this outage. All call center activities and other BPO vendors were severely affected.

Then there were more episodes of severe disruptions in 2008 when several undersea cables were cut. The Maldives were 100 percent down, followed by India, which had 82 percent disruption. Qatar, Djibouti and the United Arab Emirates were the next most widely affected areas with about 70 percent service interrupted. Disruptions for Saudi Arabia, Egypt and Pakistan ranged from 51 percent to 55 percent.

The increasing number of external fiber connections will help minimize disruptions in Internet connectivity and help deal with its impact on Pakistan's businesses, industry and security.

Summary:

High-speed Internet connectivity is at least as essential as other forms of communication, if not more so. Pakistan is investing in it for its economic and national security. Investments in this area need to be continuously boosted as the user base grows in the country.

Related Links:












Friday, April 24, 2015

Pakistan ETF PAK Trading On New York Stock Exchange

A new country Exchange Traded Fund (symbol PAK) started trading on New York Stock Exchange (NYSE) this week. The ETF will track the price and yield performance of the MSCI (Morgan Stanley Composite Index) All Pakistan Select 25/50 Index.

Pakistan ETF: 

The new Pakistan ETF launch coincided with Chinese President Xi Jinping's visit to Pakistan where he announced massive $46 billion investment in Pakistan's energy and infrastructure. The sectors expected to benefit most initially from the Chinese investment are: energy, cement and financial services.

Pakistan Outperforms Emerging, Frontier Markets Source: Economist

Although the ETF launch timing was fortuitous, it was actually planned well before the Chinese leader's visit. It caters to individual investors seeking outsize returns in Karachi where KSE-100 index has been outperforming both emerging and frontier markets for several years.

Pakistan GDP, CAD Source: Economist

In 2014, the KSE-100 Index gained 6,870 points thereby generating a handsome return of 27% (31% return in US$ terms), making Pakistan's KSE world's third best performing marketTotal offerings in the year 2014 reached 9 as compared to 3 in the year 2013. After a gap of seven years, Rs 73 billion were raised through offerings in 2014 as compared to a meager Rs 4 billion raised in 2013. Foreign investors, that hold US$ 6.1 billion worth of Pakistani shares -which is 33% of the free-float (9% of market capitalization)-remained net buyers in 2014.

The ETF fact sheet shows that the index has 31 holdings in it. Also, the industry weightings are concentrated in financials (32.7%), energy (24.2%), materials (23%) and utilities (10.8%) — roughly 90% in four sectors alone.

The top equity holdings with weightings in the ETF are as follows: MCB Bank, 11.5% Oil and Gas Development (OGDC), 9.8% United Bank, 6.1% Fauji Fertilizer, 5.9% Lucky Cement, 5.7% Hub-Power, 4.9% Pakistan State Oil, 4.8% Engro, 4.7% Bank Al-Habib, 4.1% National Bank Pakistan, 3.7%




Pakistani Shares Valuation:

Even after outperforming both emerging and frontier market indices, Pakistani shares can be bought at deep discounts which make them very attractive, according to Renaissance Capital’s chief economist Charles Robertson.  MSCI (Morgan Stanley Composite Index) Pakistan trades at only 8.4 times forward earnings, a 17% discount to MSCI Frontier Markets. For comparison purposes, fellow frontier south Asia markets Sri Lanka and Bangladesh trade at 13.4x and 21.4x respectively. India, included in the emerging market index, trades at 16.8 times.

Key Sectors: 

Chinese investment in energy and infrastructure will help stimulate all sectors of Pakistani economy. But the sectors benefiting most from the $46 billion investment will likely include banks, energy and building materials, the sectors which are the favorites of  Pakistani billionaire investor Mian Mohammad Mansha.

Being close to the ruling Sharif family makes Mansha the ultimate insider. Beyond his investments in banking, cement, energy and textiles, Mansha is also starting to invest in consumer products sector benefiting from rising incomes, growing middle class and increasing jobs created in Pakistan by the massive Chinese investment. Mansha owns a big chunk of Muslim Commercial Bank (MCB) shares. He has recently been pumping more money into energy, cement and dairy businesses. Mansha's DG Khan Cements has announced plans to build a $300 million cement plant near Karachi. In additions, his Nishat Dairies has imported thousands of dairy cows for a dairy farm in Lahore.

Summary:

The $46 billion Chinese investment in energy and infrastructure has brought attention to tremendous investment opportunities in Pakistan, a nation of nearly 200 million people with rising middle class and growing consumption.  Pakistani military's recent successes against the terrorists and China's massive investment commitments are expected to boost investor confidence in the country. Higher confidence will help draw other significant investors to invest in Pakistan over the next several years.

Full Disclosure: I have personally invested in PAK ETF.

Tuesday, April 21, 2015

China Investment to Pave Way For More Foreign Investing in Pakistan

This (China's $46 billion investment in Pakistan) can not be purely politically driven. Beijing is commercial: CEO’s, not think tank intellectuals, travel with politicians. Barron's Asia

Spurred by Chinese investment, the smart money is taking notice of Pakistan as an attractive investment destination. The investors are looking at the fact that Pakistani stocks have been outperforming both emerging and frontier markets for several years. The benchmark index of the Karachi Stock Exchange (KSE100) is up more than 20% in the last 12 months, according to NASDAQ.com.

Pakistani Shares in 2015:

After a dismal March, MSCI Pakistan rebounded strongly this month, returning 9.1% so far. In April, the iShares MSCI Frontier 100 ETF (FM) rose 4.3%, the WisdomTree India Earnings Fund (EPI) dropped 1.2%, the iShares MSCI India ETF (INDA) fell 1.9%, according to Barron's Asia.

Source: Economist Magazine
KSE-100 Performance:

In 2014, the KSE-100 Index gained 6,870 points thereby generating a handsome return of 27% (31% return in US$ terms), making Pakistan's KSE world's third best performing marketTotal offerings in the year 2014 reached 9 as compared to 3 in the year 2013. After a gap of seven years, Rs 73 billion were raised through offerings in 2014 as compared to a meager Rs 4 billion raised in 2013. Foreign investors, that hold US$ 6.1 billion worth of Pakistani shares -which is 33% of the free-float (9% of market capitalization)-remained net buyers in 2014.

Pakistani Shares Valuation:

Even after outperforming both emerging and frontier market indices, Pakistani shares can be bought at deep discounts which make them very attractive, according to Renaissance Capital’s chief economist Charles Robertson.  MSCI (Morgan Stanley Composite Index) Pakistan trades at only 8.4 times forward earnings, a 17% discount to MSCI Frontier Markets. For comparison purposes, fellow frontier south Asia markets Sri Lanka and Bangladesh trade at 13.4x and 21.4x respectively. India, included in the emerging market index, trades at 16.8 times.

Key Sectors: 

Chinese investment in energy and infrastructure will help stimulate all sectors of Pakistani economy. But the sectors benefiting most from the $46 billion investment will likely include banks, energy and building materials, the sectors which are the favorites of  Pakistani billionaire investor Mian Mohammad Mansha.

Being close to the ruling Sharif family makes him the ultimate insider. Beyond his investments in banking, cement, energy and textiles, Mansha is also starting to invest in consumer products sector benefiting from rising incomes, growing middle class and increasing jobs created in Pakistan by the massive Chinese investment. Mansha owns a big chunk of Muslim Commercial Bank (MCB) share. He has recently been pumping more money into energy, cement and dairy businesses. Mansha's DG Khan Cements has announced plans to build a $300 million cement plant near Karachi. In additions, his Nishat Dairies has imported thousands of dairy cows for a dairy farm in Lahore.

Summary:

The $46 billion Chinese investment in energy and infrastructure has brought attention to tremendous investment opportunities in Pakistan, a nation of nearly 200 million people with rising middle class and growing consumption.  Pakistani military's recent successes against the terrorists and China's massive investment commitments are expected to boost investor confidence in the country. Higher confidence will help draw other significant investors to invest in Pakistan over the next several years.

Monday, April 20, 2015

West Keeps Indian Economy Afloat in Post Cold War World

India runs massive current account deficits. Its imports far outstrip exports year after year. According to the Reserve Bank (RBI) data, in the April-December 2014 period of last fiscal, India's current account deficit stood at $31.1 billion or 2.3% of GDP.



In spite such large recurring deficits, India has built up over $300 billion in foreign exchange reserves. How does it do it? The simple answer is: Foreign money inflows in the form of debt and investments mainly from the West keep the Indian economy afloat.

Sources of FDI in India Source: Financial Express
These inflows have dramatically increased with western support for India in the post Cold War world. Here's how Indian journalist Pankaj Mishra explains the larger western interest driving this phenomenon:

"Seen through the narrow lens of the West’s security and economic interests, the great internal contradictions and tumult within these two large nation-states (India and Pakistan) disappear. In the Western view, the credit-fueled consumerism among the Indian middle class appears a much bigger phenomenon than the extraordinary Maoist uprising in Central India".  

Here's how the Asian Development Bank (ADB) describes the rising inflows of foreign, mainly western, capital into India:

"Gross capital flows have increased nearly 22 times from $42.7 billion in 1991-92 to over $932.3 billion in 2010-11. As a share of GDP, this amounted to an increase from 15.5% in 1991-92 to 55.2% in 2010-11. Much of the increase in financial integration occurred between 2003-04 and 2007-08. Given the impressive economic performance indicated by close to 9% growth rate, higher domestic interest rates and a strong currency, India's risk perception was quite low during 2003 to 2007. Furthermore, this period was associated with favorable global conditions in the form of ample liquidity and low interest rates in the global markets—the so-called period of Great Moderation."

Many other economies have been growing faster and producing higher investor returns than India. So the returns do not justify the increased capital flows. Such flows are driven much more by the changing geopolitics of South Asia region and the world since the end of the Cold War in early 1990s. Without these inflows, Indian economy would collapse and India would be at IMF's door seeking last resort loans.

Lesson: Geopolitics drive economy. It's the reason for over a trillion dollars of western capital flow into India since the end of the Cold War. It also explains China's massive $46 billion investment commitment in Pakistan agreed during President Xi Jinping's state visit to Islamabad.

Related Links:

Haq's Musings

India's Soaring Twin Deficits

Xi Jinping's Pakistan Visit

How Strategic Are China-Pakistan Ties?

India Pakistan Economic Comparison in 2014

Pakistan's KSE-100 Outperforms India's Sensex

India's IT Exports Highly Exaggerated

Is India Fudging GDP to Show Faster Growth Than China?

Sunday, April 19, 2015

Xi Jinping in Pakistan: Shifting Alliances in South Asia?

“America has no permanent friends or enemies, only interests.” Henry Kissinger

Rapidly unfolding events confirm shifting post-cold-war alliances in South Asia. Chinese President Xi Jinping is starting his first state visit to Pakistan to commit investment of over $45 billion in Pakistan, representing the single largest Chinese investment in a foreign country to date.

This investment is part of China's “One Belt, One Road” initiative, which is a global project in character and scope representing China’s inexorable rise on the world stage as a superpower. The Pakistan part of it is variously described as Pakistan-China "economic corridor""industrial corridor", "trade corridor" and "strategic corridor".

Pak-China Industrial Corridor Source: Wall Street Journal


Chinese and Pakistani naval forces have also agreed to boost maritime security cooperation in the Indian ocean with the sale of eight diesel-electric AIP-equipped submarines capable of carrying nuclear weapons. This cooperation is aimed at defending against any threats to shipping lanes in and out of Pakistani ports serving the planned Pak-China Corridor.

Russia, too, has lifted arms sales embargo on Pakistan and agreed to sell weapons and make energy infrastructure investments.  Plans are in place for first-ever Pakistan-Russia military exercises.

These development come on the heels of US President Barack Obama's second visit to India and Indian Prime Minister Narendra Modi's recent tour of Western capitals with the signing of deals confirming Modi's India's status as the West's latest darling.

How strategic are China-Pakistan ties? I am reproducing the following post I published about two years ago:

China's new Prime Minister Mr. Li KeQiang has just ended a two-day visit to Pakistan. Speaking to the Senate, Li declared that "the development of China cannot be separated from the friendship with Pakistan". To make it more concrete, the Chinese Premier brought with him a 5-points proposal which emphasizes "strategic and long-term planning", "connectivity and maritime sectors" and "China-Pakistan economic corridor project".


Source: China Daily




From L to R: Premier Lee, President Zardari and Prime Minister Khoso
Here's a recent report by  China's State-owned Xinhua News Agency that can help put the Chinese premier's speech in context:

“As a global economic power, China has a tremendous number of economic sea lanes to protect. China is justified to develop its military capabilities to safeguard its sovereignty and protect its vast interests around the world."

The Xinhua report has for the first time shed light on China's growing concerns with US pivot to Asia which could threaten China's international trade and its economic lifeline of energy and other natural resources it needs to sustain and grow its economy. This concern has been further reinforced by the following:

1. Frequent US statements to "check" China's rise.  For example, former US Defense Secretary Leon Panetta said in a 2011 address to the Naval Postgraduate School in California: "We try everything we can to cooperate with these rising powers and to work with them, but to make sure at the same time that they do not threaten stability in the world, to be able to project our power, to be able to say to the world that we continue to be a force to be reckoned with." He added that "we continue to confront rising powers in the world - China, India, Brazil, Russia, countries that we need to cooperate with. We need to hopefully work with. But in the end, we also need to make sure do not threaten the stability of the world."


Source: The Guardian


2. Chinese strategists see a long chain of islands from Japan in the north, all the way down to Australia, all United States allies, all potential controlling chokepoints that could  block Chinese sea lanes and cripple its economy, business and industry.





Karakoram Highway-World's Highest Paved International Road at 15000 ft.


Chinese Premier's emphasis on "connectivity and maritime sectors" and "China-Pakistan economic corridor project" is mainly driven by their paranoia about the US intentions to "check China's rise" It is intended to establish greater maritime presence at Gwadar, located close to the strategic Strait of Hormuz, and  to build land routes (motorways, rail links, pipelines)  from the Persian Gulf through Pakistan to Western China. This is China's insurance to continue trade with West Asia and the Middle East in case of hostilities with the United States and its allies in Asia.


Pakistan's Gawadar Port- located 400 Km from the Strait of Hormuz


As to the benefits for Pakistanis, the Chinese investment in "connectivity and maritime sectors" and "China-Pakistan economic corridor project" will help build infrastructure, stimulate Pakistan's economy and create millions of badly needed jobs.

Clearly, China-Pakistan ties have now become much more strategic than the US-Pakistan ties, particularly since 2011 because, as American Journalist Mark Mazzetti of New York Times put it, the  Obama administration's heavy handed policies "turned Pakistan against the United States". A similar view is offered by a former State Department official Vali Nasr in his book "The Dispensable Nation".

Related Links:

Haq's Musings 

Haier Pakistan to Expand Production From Home Appliances to Cellphones, Laptops

Pakistan Bolsters 2nd Strike Capability With AIP Subs

3G, 4G Rollout in Pakistan

Pakistan Starts Manufacturing Tablets and Notebooks

China-Pakistan Industrial Corridor

US-Pakistan Ties and New Silk Route

Can Pakistan Say No to US Aid?

Obama's Pakistan Connections

Seeing Bin Laden's Death in Wider Perspective

China's Investment and Trade in South Asia

China Signs Power Plant Deals with Pakistan

Soaring Imports from China Worry India

China's Checkbook Diplomacy

Yuan to Replace Dollar in World Trade?

Friday, April 17, 2015

Animal Droppings Help Catapult India's GDP Growth Rate Ahead of China's

"The estimated “evacuation (defecation) rates” are 0.3 kilograms per day for goats and 0.8 kilograms per day for sheep. The study, titled “Positive Environmental Externalities of Livestock in Mixed Farming Systems of India,” was conducted jointly by the Central Institute for Research on Goats, in Makhdoom, Uttar Pradesh, and the National Center for Agricultural Economics and Policy Research in New Delhi. With all those “droplets” added in, the value of India’s livestock sector in the new GDP series is 9.1 billion rupees, or $150 million, higher than it was in the old series."  Wall Street Journal on India's GDP Revisions
Animal droppings (BS) is just one of many innovations of Central Statistical Office (CSO) that are being used to support India's claim to be growing faster than China. Until early February, when CSO changed the way it measures economic activity, India was enduring its weakest run of growth since the mid-1980s. Now it is outpacing China, having grown an annual 7.5% in the fourth quarter of last year, reports Business Standard.

Indian Livestock GDP Calculations. EOG=Edible Offals, Glands. Source: CSO Via WSJ


While India's boosters in the West are not only buying but applauding the new figures, Indian policy professionals at the nation's Central Bank and the Finance ministry are having a very hard time believing the new and improved GDP brought to the world by Indian government. Dissenters include Morgan Stanley's Ruchir Sharma, an Indian-American, who has called the new numbers a "bad joke" aimed at a "wholesale rewriting of history".


Based on the latest methodology,  it is claimed that the Indian economy expanded 7.5 percent year-on-year during the last quarter, higher than 7.3 percent growth recorded by China in the latest quarter, making it the fastest growing major economy in the world, according to Reuters. Is it wishful thinking to make Indian economy look better than China's?

India GDP Revisions. Source: Financial Times


The GDP revisions have surprised most of the nation's economists and raised serious questions about the credibility of government figures released after rebasing the GDP calculations to year 2011-12 from 2004-5. So what is wrong with these figures? Let's try and answer the following questions:

1. How is it possible that the accelerated GDP growth in 2013-14 occurred while the Indian central bankers were significantly jacking up interest rates by several percentage points and cutting money supply in the Indian economy?

2. Why are the revisions at odds with other important indicators such as lower industrial production and trade and tax collection figures?  For the previous fiscal year, the government’s index of industrial production showed manufacturing activity slowing by 0.8%. Exports in December shrank 3.8% in dollar terms from a year earlier.

3. How can growth accelerate amid financial constraints depressing investment in India?  Indian companies are burdened with debt and banks are reluctant to lend.

4. Why has the total GDP for 2013-14 shrunk by about Rs. 100 billion in spite of upward revision in economic growth rate? Why is India's GDP at $1.8 trillion, well short of the oft-repeated $2 trillion mark?

Questions about the veracity of India's economic data are not new. US GAO study has found that India's official figures on IT exports to the United States have been exaggerated by as much as 20 times.

Similarly, French economist Thomas Piketty has argued in his best seller "Capital in the Twenty-First Century that the GDP growth rates of India and China are exaggerated.  Picketty writes as follows:

"Note, too, that the very high official growth figures for developing countries (especially India and China) over the past few decades are based almost exclusively on production statistics. If one tries to measure income growth by using household survey data, it is often quite difficult to identify the reported rates of macroeconomic growth: Indian and Chinese incomes are certainly increasing rapidly, but not as rapidly as one would infer from official growth statistics. This paradox-sometimes referred to as the "black hole" of growth-is obviously problematic. It may be due to the overestimation of the growth of output (there are many bureaucratic incentives for doing so), or perhaps the underestimation of income growth (household have their own flaws)), or most likely both. In particular, the missing income may be explained by the possibility that a disproportionate share of the growth in output has gone to the most highly remunerated individuals, whose incomes are not always captured in the tax data." "In the case of India, it is possible to estimate (using tax return data) that the increase in the upper centile's share of national income explains between one-quarter and one-third of the "black hole" of growth between 1990 and 2000. "

T.C.A. Anant, the chief statistician of India, has told the Wall Street Journal that “there’s a large number of areas where we have deviated (from the United Nations’ latest guidebook on measuring GDP) for a large measure, because we are simply, at the moment, unable to implement those recommendations.”

Related Links:

Haq's Musings

Is India Fudging GDP to Look Better Than China?

India's IT Exports Highly Exaggerated

India-Pakistan Economic Comparison 2014

Pakistan's Official GDP Figures Ignore Fast Growing Sectors

Challenging Haqqani's Op Ed: "Pakistan's Elusive Quest For Parity"

State Bank Says Pakistan's Official GDP Under-estimated

Pakistan's Growing Middle Class

Pakistan's GDP Grossly Under-estimated; Shares Highly Undervalued

Fast Moving Consumer Goods Sector in Pakistan

3G-4G Roll-out in Pakistan




Sunday, April 12, 2015

Growth of Pak-China Special Economic Zones

Haier-Ruba joint venture in Pakistan has announced plans to start manufacturing laptops and smartphones in Lahore this year, according to the JV chairman Shah Faisal Afridi. The Haier-Ruba group is one of the largest manufacturers of polyester yarn and home appliances in the country.



“We are not relying on importing mobile phones from China but our focus is the transfer of technology in the country so that we could manufacture our own product here. We have already started an assembly line for the laptops in Pakistan”,  Afridi said in an interview with More magazine.

Haier Pakistan is currently producing refrigerators, deep freezers, washing machines, home air conditioners, commercial air conditioners, television sets, microwave ovens and  other small appliances in a special economic zone (SEZ) on the outskirts of Lahore.

“Pakistan is one of eight countries around the world where the Chinese government plans to help its investors set up and operate SEZs, to use the country as a major base for manufacturing and exporting goods to the rest of the world. These zones have to be privately owned and operated,” said Afridi, who also heads the Haier-Ruba SEZ Company, according to Pakistan's Dawn newspaper.

Haier entered the Pakistan market in February 2001 by jointly establishing a facility with Pakistan-based Panapak Electronic Company to produce Haier air conditioners.  The Group opened Haier (Pakistan) Industrial Park in Lahore in April 2001. In 2004, Haier was the first foreign brand home appliance manufacturer in Pakistan to obtain the ISO9001:2000 Certification, according to Andrew Delios, the author of "International Business: An Asia Pacific Perspective".

After 13 years in Pakistan, Haier has become the second most popular home appliance brand in the country. Haier Pakistan has maintained the highest market share for air-conditioners and washing machines for several years while Haier  refrigerators curently enjoy the second highest market share. According to a Millward Brown survey in 2013, Haier has achieved 94% brand awareness, the second highest in the country.

Haier has 8 industrial complexes, two of which are foreign--one in the United States, and one in Pakistan,  according to  Xiaofei Li, the author of "China's Outward Foreign Investment: A Political Perspective". In these Special Economic Zones, Haier does localization to suit the needs of the consumers.  For Pakistani market, Haier especially designed a washer that can hold 15 long gowns at one time. There are many more such Special Economic Zones envisaged as part of the CPEC (China-Pakistan Economic Corridor).  It will be essentially an industrial corridor spanning almost the entire length of the country from the Arabia sea coast to the Karakorams where it enters China via the Karakoram Highway (KKH), the word's highest paved road.

Under the agreement signed by Chinese and Pakistani leaders at a Beijing summit recently, $15.5 billion worth of coalwind, solar and hydro energy projects will come online by 2017 and add 10,400 megawatts of energy to the national grid.  An additional 6,120 megawatts will be added to the national grid at a cost of $18.2 billion by 2021.

Pak-China Industrial Corridor Source: Wall Street Journal


The transport and communication infrastructure—roads, railways, cable, and oil and gas pipelines—will stretch 2,700 kilometers from Gwadar on the Arabian Sea to the Khunjerab Pass at the China-Pakistan border in the Karakorams.

Starting in 2015, the Chinese companies will invest an average of over $7 billion a year until 2021, a figure exceeding the previous record of $5.5 billion foreign direct investment in 2007 in Pakistan.

Beyond the initial phase, there are plans to establish special economic zones in the Corridor where Chinese companies will locate factories. Extensive manufacturing collaboration between the two neighbors will include a wide range of products from cheap toys and textiles to consumer electronics and supersonic fighter planes.

The basic idea of an industrial corridor is to develop a sound industrial base, served by competitive infrastructure as a prerequisite for attracting investments into export oriented industries and manufacturing. Such industries have helped a succession of countries like Indonesia, Japan, Hong Kong,  Malaysia, South Korea, Taiwan, China and now even Vietnam rise from low-cost manufacturing base to more advanced, high-end exports.  As a country's labour gets too expensive to be used to produce low-value products, some poorer country takes over and starts the climb to prosperity.

Once completed, the Pak-China industrial corridor with a sound industrial base and competitive infrastructure combined with low labor costs is expected to draw growing FDI from manufacturers in many other countries looking for a low-cost location to build products for exports to rich OECD nations.

The CPEC will not be just an economic or industrial corridor; it'll also be a strategic corridor for both China and Pakistan in countering the growing US-India alliance and Obama's Asia Pivot both of which are seen as a threat to the regional stability of South Asia.

Clearly, China-Pakistan ties have now become much more strategic than the US-Pakistan ties, particularly since 2011 because, as American Journalist Mark Mazzetti of New York Times put it, the  Obama administration's heavy handed policies "turned Pakistan against the United States". A similar view is offered by a former State Department official Vali Nasr in his book "The Dispensable Nation".


Here's a video about Haier laptop assembly in Pakistan:

https://youtu.be/K2H9BC1G3J8?list=PLZIgsmZfIYkq3VjROsXyBMkEmEuul2uLL




Related Links:

Haq's Musings 

3G, 4G Rollout in Pakistan

Pakistan Starts Manufacturing Tablets and Notebooks

China-Pakistan Industrial Corridor

US-Pakistan Ties and New Silk Route

Can Pakistan Say No to US Aid?

Obama's Pakistan Connections

Seeing Bin Laden's Death in Wider Perspective

China's Investment and Trade in South Asia

China Signs Power Plant Deals with Pakistan

Soaring Imports from China Worry India

China's Checkbook Diplomacy

Yuan to Replace Dollar in World Trade?

China Sees Opportunities Where Others See Risk

Chinese Do Good and Do Well in Developing World

Can Chimerica Rescue the World Economy?




Thursday, April 9, 2015

Pakistan Air Travel Forecast to Grow Faster Than South Asia, World

IATA (International Air Transport Association) forecasts Pakistan domestic air travel will grow at least 9.5% per year, more than 2X faster than the world average annual growth rate of 4.1% over the next 20 years. The Indian and Brazilian domestic markets will grow at 6.9% and 5.4% respectively.

Source: CAA Via Express Tribune 

In a clear sign of Pakistan's rising middle class choosing air travel,  the number of domestic and international air travelers in Pakistan grew by 8% to 17.9 million in fiscal year 2013-14 compared to previous year, recording the fastest growth in passenger traffic in the last three years, according to data provided by the Civil Aviation Authority (CAA) and published by Pakistan's Express Tribune newspaper. Growth in air travel is pushing new airport upgrades and new construction to handle more passengers. Examples of new or upgraded airports include Islamabad, Multan and Sialkot.

Chinese domestic air travel market will surpass the US market to claim the number 1 spot by 2030, according to figures released by by IATA. Currently the ninth largest market, India will see a total of 367 million passengers by 2034, an extra 266 million annual passengers compared to today. It will overtake the United Kingdom (148 million extra passengers, total market 337 million) to become the 3rd largest market around 2031.

Pakistan International Airlines, the nation's state-owned carrier, is continuing to lose both market share and money in the midst of explosive growth in air travel. Pakistan's private carriers Shaheen, Air Blue and Indus Air and foreign carriers like Emirates and Saudia have benefited at the expense of PIA.

"It is an exciting prospect to think that in the next 20 years more than twice as many passengers as today will have the chance to fly. Air connectivity on this scale will help transform economic opportunities for millions of people," IATA chief Tony Tyler said in his comments on the report. In 20 years' time, "we can expect aviation to be supporting around 105 million jobs and USD six trillion in GDP," he said.

Sensing the opportunity, the government of Pakistan has recently announced a new national aviation policy, NAP 2015, to attract new investments in the aviation sector. It reduces or eliminates a number taxes and duties on investments.  Announcing the policy, Prime Minister Nawaz Sharif said: “The present taxes and duties on the aviation sector are unjustified, and a major hurdle in the growth of travel and cargo handling through air.”

The NAP 2015 offers a bilateral “Open Skies Policy” to other countries, based on reciprocity; a level playing field for domestic and national airlines, and the liberalized aviation sector by allowing markets to determine the price, quality, frequency and range of air services options; and taxes structured and simplified in line with the best international practices to promote transportation,  spur GDP growth and create jobs.

It's good to see that the aviation sector in Pakistan is finally beginning to get the attention it deserves as a growth market to increase investment, improve service to travelers and create new jobs.


Related Links:

Haq's Musings

Pakistan's Middle Class Grows to 55% of Population

Saving PIA, Education and Railway

E-Commerce Growth in Pakistan

Pakistan's Official GDP Figures Ignore Booming FMCG Sector

Musharraf Accelerated Human and Economic Development in Pakistan

Pakistan's Growing Middle Class

Pakistan's GDP Grossly Under-estimated; Shares Highly Undervalued

Fast Moving Consumer Goods Sector in Pakistan

3G-4G Roll-out in Pakistan



Mobile Money Revolution in Pakistan

Wednesday, April 8, 2015

TieCON 2015: Top 5 Reasons to Stay Away From Pakistan

Guest Post
by Monis Rehman, CEO of Rozee.pk
Based on Presentation at TIECON 2015 in Karachi



#5: Pakistan is the World’s most dangerous country

You are 50 times more likely to be murdered in St. Louis than killed in a terrorist attack in Pakistan

You are 10 times more likely to be killed in a car accident in the US than killed in a terrorist attack in Pakistan

*** 75% of VC funded startups fail - worried about 0.0009%? Really? ***

#4: Pakistan is small market with little purchasing power

■ 190 Million People

○ World’s 6th most populous country

 ■  (PPP) of $835 Billion in 2013

○ World’s 24th largest GDP

○ Higher than Netherlands, Malaysia and UAE

 ■ 54% of Population is youth

○ Rapidly growing middle class consumers

○ Motorcycle sales increased 4X over last 10 yrs

 ■ 37M people with GDP per capita > $12,200

○ Comparable to South Africa and China

#3: Pakistani economy is failing

■ Retail Sector is BOOOOMING

○ Clothing, electronics, food, healthcare, FMCG, automotive

○ GDP growth rate does not reflect market

■ Real Estate Prices are doubling

○ 50% to 100% growth quite common in USD terms

○ Still undervalued compared to India

■ KSE World’s 2nd Best Performing stock market in 2013

#2: Pakistan lacks scalable payment mechanisms

Rapid emergence of branchless products

○ UBL Omni, EasyPaisa, Mobicash, TimePey

○ Bank Alfalah, JS Bank, Others

■ IBFT Web Banking Huge Success

○ Secure account to account transfer across all banks

○ Online APIs

■ COD Logistics Providers

○ TCS, BlueEx, Leopard

○ Entrepreneurs rushing to fill this space

#1: Pakistan is not online

30 Million Internet Users

○ Growing to 65 Million over next 5 years

○ Larger than UK, Australia, South Africa, Saudi Arabia

■ 10 Million 3G Users

○ 15 Million smart phones

Related Links:

Haq's Musings

Major Tipping Point: Pakistan Middle Class Grows to 55% Of Population

E-Commerce Growth in Pakistan

Pakistan's Official GDP Figures Ignore Booming FMCG Sector

Musharraf Accelerated Human and Economic Development in Pakistan

Pakistan's Growing Middle Class

Pakistan's GDP Grossly Under-estimated; Shares Highly Undervalued

Fast Moving Consumer Goods Sector in Pakistan

3G-4G Roll-out in Pakistan



Mobile Money Revolution in Pakistan