Monday, November 28, 2016

Black Gold of Thar

Majyd Aziz

Pakistan has been blessed with many resources that could thrust the nation into the ranks of major developing nations, reduce dependence on fuel imports, and provide opportunities for foreign exchange accumulation. Gwadar Port and Thar Coal are destined to be knights in shining armor of the motherland. Pakistan's history manifested a serious lack of urgency in developing these bounties. Pakistan has lost considerable momentum in the march towards economic prosperity due to the lackadaisical attitude towards these two projects. Without attempting to discuss conspiracy theories or indifferent mindset of decision makers or even machination of vested interests, it is sufficient to express the opinion, that for whatever reason, Pakistanis suffered.

Gwadar emerged in real time on the radar after the advent of CPEC and the process is moving at desired speed to enable Gwadar to become the game changing catalyst. Despite reservations of some regional countries, the fact is that fast track development and operation of Gwadar is in motion. Then there is Thar coal.

The conventional wisdom over the past many moons was that Thar coal is an illusion and not a reality. The 175 billion tons of coal reserves and the claims of 100,000 MW for the next two centuries, although over-hyped, were considered as soothing pills for the masses. There were loud whispers that, like the Quixotic misadventure of a nuclear scientist to promote underground coal gasification, the mining of coal and generation of electricity would be a far-fetched dream.

However, a well-defined private-public partnership between the Sindh government and a consortium spearheaded by Engro Corporation has taken the bull by its horns and today the dream is rapidly turning into a certainty. Recently, the Sindh Engro Coal Mining Company (SECMC) hosted a visit of 60-member delegation of energy experts, energy activists, and concerned citizens, including this writer, to Thar. The on-ground visit evaporated the misconceptions, doubts, and perceptions to a large extent.

Mr Shamsuddin Shaikh wears two hats. He is CEO of SECMC as well as Engro Power Gen Thar. He epitomizes the real essence of a gracious host. While briefing the delegation, he stated that since its formation SECMC has come a long way. It completed Bankable Feasibility Studies (BFS) on development of a mine and associated power project in Thar Block II. This was followed by a long and arduous journey to achieving Financial Close of the projects including changing perceptions that people had developed about Thar Coal following false starts of development during 1990s and early 2000s. SECMC finally achieved financial close in April 2016 and since then has made remarkable progress and remains on target to complete the projects by June 2019.

There are 13 Blocks within 9,000 square km and SECMC was allocated Block II that contains 1% of Thar coal reserves. This Block has exploitable reserves of 1.57 billion tons and can produce 5,000 MW for 50 years. He disclosed that the heating value, sulphur content, ash, and moisture are comparable to coal mines in Gujarat, India and Hambach, Germany.

The overarching question is whether this mine would be able to provide the required coal to the planned power plants at the mine mouth. Mr Shaikh explained that in 2010, when SECMC completed the initial BFS for 6.5 mtpa, it was decided that it was only a beginning. A conceptual study done by RWE Germany showed that the mine could be expanded up to 22 mtpa. At this size, the mine can cater to 3960 MW of generation capacity. During the development of the project, SECMC has kept updating its knowledge base on expansion. A study was undertaken by DADI Institute China for the expansion of the mine up to 7.6 mtpa to provide coal for the upcoming power plants.
The current approved power plants at the mine mouth are Engro Power Gen Thar power plant of 330X2 mw alongwith HUBCO 330X1 and ThalNova 330X1 who would be supplied coal supply by SECMC. The encouraging news is that three more power plants would be announced shortly. Moreover, Lucky Electric Power recently announced that its upcoming power plant at Bin Qasim would be based on Thar coal because the government has stopped the setting up of new power plants based on imported coal.
The good news coming out of Thar has instilled a bright ray of hope. A trip to the area of activity changes the entire perception many have about Thar coal. The road to Thar is world class, something that one would not expect to find in interior Sindh. The SECMC complex is very efficiently secured, is purpose-built, and is superbly administered. The EPC Contractor is the China Machinery Engineering Company and thus over 400 Chinese are diligently working to meet the targets.
As is usually the case, much ado is created regarding the displacement of Tharis, the critical environmental issues, and the avowed mindset of pseudo-socialists who cannot digest the fact that private sector is concerned about corporate social responsibility and not just profits. SECMC had put paid to this hullabaloo by structuring a Corporate Social Responsibility program that can be termed as a pioneering initiative unheard of previously in Pakistan.
Mr Shaikh, who is leading the project since 2012, is gung-ho about the CSR initiatives undertaken by SECMC. The CSR theme of SECMC is "Towards a Better, Brighter Thar". The company vision is "SECMC, together with its partners and the Government of Sindh, will work to provide its communities with improved quality of life and a better, brighter, and prosperous future for its coming generations". In his presentation, he highlighted the various social projects and, at times, he sounded more like a social activist rather than an enterprising technocrat. The Thar Foundation envisages five areas of CSR activity. These are health, education, livelihood support, infrastructure development, and social preservation.
The Marvi Mother and Child Clinic, that at present provides free medical services and medicines to over 2,000 patients every month, will soon become a 70 bed hospital managed by Indus Hospital. It has covered 100% school going children of Block II from Hepatitis while more than 4,000 people vaccinated under the community vaccination coverage. SECMC and The Citizens Foundation will establish school campuses in each taluka of Tharparkar. The first campus, in Islamkot, would commence in 2017 with atleast 1,000 students.
The company has set up and will continue to place reverse osmosis drinking units in all the community settlements so that Tharis would be able to drink and use quality water instead of the brackish water consumed now. The Green Park has been established with over 150,000 locally grown saplings and this process would keep on continuing. Mr Shaikh informed that for every tree felled, SECMC plants ten trees against the obligated three saplings. A very noble environmental protection gesture. This writer was also invited by Mr Shaikh to plant a tree.
Another laudatory initiative is social preservation. SECMC plans to restore archeological sites that are a part of the rich Sindh history. Moreover, it has collaborated with Sindh Endowment Fund to sponsor and produce a Coffee Book that is a pictorial tribute to Tharparkar and indigenous people of Thar.
A very impressive and highly appreciated project is the resettlement of residents of displaced settlements. SECMC is building custom-designed villages where each home, costing over Rs 3.50 million each and depicting the local architectural heritage, would be handed over to the displaced persons. Initially, 171 such homes are envisaged. Masjids, Temples, community centers, common Otaqs, water tank towers, bus stands, markets, and milk collection centers, etc are part of the resettlement scheme.
The company has assiduously pursued the program to provide meaningful employment to the denizens of the area. At present, nearly 1,000 of them are working on various jobs. Thus, a positive social paradigm shift has evolved for these residents. Most of the drivers of trucks, dumpers, and shovels are locals and the salary they earn is beyond their imagination.
A pertinent concern is that the feasibility plan of the proposed power plants has a clause that in case of shortage in coal supply, they would resort to utilizing imported coal. It is like taking coals to Newcastle! Would this not give credence to the negative reports that full supply may not be possible from SECMC in the short run? Mr Shaikh explained that since mining at this scale is being done for the first time in Pakistan, banks and investors in power projects required an alternative source of fuel to be available in case the mine is unable to fulfill its obligation due to any reason. However, this condition is no different from any other power project where plants are required to show alternative source of fuel. Thus, to make these projects bankable, the government allowed these plants to run on imported coal as a backup during periods of mine unavailability or downtime.

Thar coal, like Gwadar, will definitely be the game changer and the engine to drive Pakistan on the avenues of self-dependency, social quality, and economic prosperity. The 220 million citizens are waiting for the electricity generated from Thar coal to light up their homes, roads, and the industries. On a personal note, my company introduced imported coal in Pakistan and our determined efforts enabled cement mills to convert to imported coal. Nevertheless, as a patriotic Pakistani, I am substantially convinced that Thar coal is indeed the savior of Pakistan. A piece of Thar Coal is now in my Archives. Mr Shamsuddin Shaikh very aptly commented, "'It is your destiny to change the destiny of people of Thar.' This was the advice given to me by my President while assigning me to this job."

Monday, November 21, 2016

Exports out of STPF

Majyd Aziz

The Strategic Trade Policy Framework (STPF) 2012-15 was formulated after a reasonable evaluation and analysis of STPF 2009-12. The focus of the three-year strategy was to enhance export competitiveness through an integrated approach rather than jumbling around with piecemeal actions. The vision was to introduce pragmatic and sustainable measures to achieve the objectives. As usual, the regulatory amendments were given priority but incentives for exporters received a lukewarm support, largely due to non-availability of resources.

The increase in the export base during the tenure of the STPF 2009-12 was largely due to the efforts of the private sector and primarily due to global demand rather than any outstanding policies of the government. The figures did give impetus to the Ministry of Commerce to prepare a viable framework rather than a three-year vision. The buoyant atmosphere at Ministry of Commerce and TDAP when exports nearly hit the $25 billion landmark for 2010-11 was all-embracing. That year, exports jumped over 27%.

That was when serious planning as well as adopting a visionary outlook should have been considered. The fundamentals were in place and the time to strike iron while it was hot was then. However, the euphoria faded away when the consecutive years witnessed a dark period in the export regime. There was no handholding between the government and the exporters as envisaged in the three year STPF. The concerned Ministries and TDAP did not realistically harness the global as well as domestic trade dynamics. Blame was laid on factors beyond the control of the decision makers. The ensuing result was that the export regime took a big jolt.

STPF 2012-15 was billed as the most formidable strategy that would catapult Pakistan's exports on a much higher plateau. Exports would definitely be given topmost priority through introduction and implementation of far-reaching incentives and support. The downslide in exports would be addressed seriously and the resultant inflow of export proceeds would reduce dependence on international financing institutions. At the same time, remittances from the Pakistani Diaspora would further strengthen the Foreign Exchange Reserves. Despite infrastructure shortages, intensive competition from regional rivals, and various exigencies in the global marketplace, Pakistan would be able to maintain a rising trajectory in global trade.

The right buzzwords were highlighted in the policy. Fifteen elements were to be addressed and the die was supposedly cast to make exports the engine of growth. TDAP was promoted to be the focal center to ensure that it adhered to its laid down objectives of ensuring a fast moving export regime through a defined linkage between enhancing exports and development of domestic trade and commerce. There was a need to institutionalize the reforms through a sustainable mechanism so that the foundation would be solid and effective. Regional trade was targeted to be the launching pad and it was decided to establish the Pakistan Land Port Authority to ensure effective facilitation. EXIM Bank was another planned initiative. Amendments in the regulatory framework were to be undertaken in a fast mode. In short, a sweeping revamping of the system was to be taken up to achieve the export objectives. The STPF laid down four enablers to achieve the targets: Competitiveness, Compliance with international standards, policy environment, and market access. The sad fact is that there is no progress or sincere initiative to implement these enablers.

However, there is a wide gap between initiating and envisaging policies and incentives and their eventual implementation. The slow pace and the lackadaisical attitude in implementation tightened the noose around the necks of the exporters. In short, the exporters continued to be between the devil and the deep blue sea. The dismal trade figures even today are a direct outcome of the non-implementation of the vision.

Then, as well as now, the hard-boiled, non-support of the Ministry of Finance in releasing Export Development Funds as well as refunds of taxes further exacerbated the travails of the exporters as well as Ministry of Commerce. Thus, exports continue to be depressed and difficult.

The above analysis is more export-focused because the impact of imports is due to the price variations of world oil prices, the increased domestic demand for edible oil, the huge inflow of agriculture products mainly due to floods, low productivity and efficiency of the agriculture sector, unnecessary imports of consumer goods, higher demand for automotives, and informal trade of various essential and non-essential products.

STPF 2015-18 was envisaged as a functional model with clearer targets than what was planned for its predecessor. The export target was $35 billion, rather unrealistic considering the fact that there were declines in the previous years and that the infrastructure situation needed to be properly addressed. Moreover, the oil prices were declining especially when positive news was emanating from the negotiations between P5+1 and Iran on the nuclear issue. At the same time, the Ministry of Finance was adamantly averse to the idea of settling the refunds of the exporters. There was, and is, a blatant disconnect between the Commerce and Finance Ministries.

The Commerce Minister travels all over the world but has not been able to make any progress in exports. TDAP is a redundant organization. Overall, there is no real time ownership of the STPF in the corridors of power. The export package is still gathering dust despite intensive lobbying. Refunds are released by FBR in trickles or droplets rather than clearing the outstanding amounts in one go. Objectives should be achieved through a holistic approach rather than in an ad hoc manner.

There is a need to close down TDAP, TCP, and other such organizations since it is actually the domain of private sector as well as Chambers and Associations to develop the foreign and domestic trade. Private sector organizations should be tasked with marketing and promoting international trade. It should not be left to the bureaucracy to indulge in trade and commerce. Billions can be saved if these redundant and ineffective organizations are closed down for good.

The vision of making a positive transition from the factor-driven mode to efficiency driven structure with emphasis on innovative economy is still a pipedream and not adopted even by the private sector. Moreover, the plans to solidify and enhance regional trade are still tottering. There is no marked progress in intra-SAARC trade and Pakistan has not substantially penetrated the Central Asian States, except in pharmaceuticals. Trade with Afghanistan is moving from the formal sector to the reliable and lucrative informal sector, mainly due to vast experience of the players in moving the goods under the Afghan-Pakistan Transit Trade Agreement. Bilateral trade with Iran is mostly through third countries because of the reluctance on the part of SBP to revisit the banking channels rules.

The comforting hope is that bilateral trade with China would cover the shortfall in regional trade. However, Pakistani exporters have also not had a significant success in this context while importers are having a field day in procuring Chinese goods, raw material, and equipment. CPEC is being promoted as a conduit for increased Pakistani exports but the ground realities negate this premise.

Economic diplomacy cannot be effective when most of the commercial consuls and trade officers in Pakistan's diplomatic outposts are appointed on political grounds or through nepotism rather than on merit. Most of them spend time as protocol officers rather than as business go-getters. This is the general complaint of the private sector and, hence, most of them avoid utilizing the services of these officers. Free Trade Agreements, Preferential Trade Agreements, and other bilateral or multilateral agreements are usually not in the larger interest of the country. In essence, trade diplomacy has been an abject failure.

The STPF is very silent on upgrading, processing, and marketing of minerals. It focuses more on traditional products and goods rather than making a paradigm shift. Rice, horticulture, jewelry, and meat products are to be promoted alongwith textiles, leather, sports goods and specific fruits like mango or kinnow. The export base is still narrow and this is one prime reason why exports have not rushed upwards. Exports of minerals can cross double figures in billions of Dollars within five years if there is a dedicated and determined outreach towards this sector.

Achievement of $35 billion exports by 2018 seems to be a difficult task. A 75% increase in exports in the next 18 months is highly improbable. Therefore, it is important to concentrate on real time projections rather than abstract targets. No action plan can reach fruition if there is a disconnect between policy planners and downstream implementers. Moreover, the volatility of the global marketplace as well as the strong and fierce competition for global market share are large hurdles that need to be surmounted. The decrease in oil prices led to reduction in the value of exportable goods worldwide. Pakistan has not been able to cash in on the new scenario. The Pakistani exporters, by and large, are deficient in marketing, in promotion and in networking. Moreover, the negative image of the nation has been a debilitating factor too.

Despite the grave scenario, Pakistani exporters are persevering and ensuring maximum utilization of their facilities albeit at a lower profit margin. In the short-term, exports would not increase at optimum levels. The pro-active measures, if undertaken by the government, may enable Pakistan exports to rise upto $23 billion by end of fiscal year 2016-17. An upsurge in economic activity, with better availability of utilities, sales tax refunds, lower markup rates, stable oil prices, better law and order situation, political stability, and much needed incentives may enable Pakistan to cross $28 or $ 30 billion by end of fiscal year 2017-18. The government must become a sincere facilitator and must use all resources to implement the framework and its policies. Exporters must get out of their complacent posture and target regional countries and even Russia. The theme should be regional economic integration and this must be the rallying point for all stakeholders. Pakistan may achieve the export target of STPF 2015-18 by end of calendar year 2019 or by end of fiscal year 2019-20 but if all systems are in fast track position, then the upward movement in export figures may become a reality.

Saturday, October 15, 2016

German footprints in Pakistan

Majyd Aziz

PAKISTAN has three seaports. Karachi, the oldest, is the Gateway to Pakistan; Port Qasim addresses the overflowing ship and cargo movements that regularly chokes its senior Karachi counterpart; Gwadar Port in Balochistan is on its way to become the pride of Pakistan and the convenient facilitation center for China, Central Asian Republics, and even Afghanistan. Then there is the futuristic Keti Bunder Port, albeit still on the drawing board and in government files. In essence, Pakistan is endowed with these pearls that are strategically located and obviously of immense importance in the region as well as for the movement of global trade.

PAKISTAN has massive deposits of metals such as antimony, chrome ore, copper, gold, iron ore, manganese, and zinc lead to name a few. In non-metallic, Pakistan has deposits of aragonite, marble, basalt, agglomerate, granite, onyx marble, different kinds of clay, barite, dolomite, feldspar, gypsum, limestone, phosphate, quartz, pumice, rock salt, silica sand, soap stone, and of course, coal. Over the past many decades, the nation has gradually inched her way to become a reliable exporter of minerals and, furthermore, the quality of minerals has been universally accepted as gradually conforming to international quality and requirement standards. The major drawbacks in mining are the non-availability of competent technical workforce, the total reliance on antiquated and manual mining mechanisms that results in inconsistency of quality and productivity, the lack of quality assurance testing services at mine mouth or within the proximity, the low availability of transportation resulting in higher trucking charges, and the difficulty in accessing the mines due to non-existent road network.

PAKISTAN desperately needs huge investments in augmenting the present trucking capacity. The perennial shortage of trucks, dumpers, trailers, and even vans has stymied the movement of goods and commodities all over the country. Road transport has become imperative to cater to the Afghanistan Pakistan Transit Trade Agreement, ISAF/NATO forces based in Afghanistan, and cross-country transportation of petroleum, coal, cement, fruits, and machinery, to name a few essential items. Moreover, with the advent of China Pakistan Economic Corridor and its expected economic potential, there would be a huge demand for vehicles to move the cargo.

PAKISTAN does have political, economic, social, and technological (PEST) issues that are a matter of grave concern and have dampened the desired progress. Reliance on external financing with unachievable conditionalities, continuous shortages of infrastructure, ineffective population control mechanism, influx of over 3.50 million Afghan refugees that have been a perpetual burden on resources, the ominous threat of terrorism and extremism, and lack of vision in providing employment opportunities for the youth bulge are overarching factors that are negatively impacting and desperately needing pragmatic solutions.

PAKISTAN however has natural and physical resources that are now being progressively harnessed to get the 200 million strong nation out of the economic morass and propel it into the domain of emerging developed nations. CPEC, a $46 plus investments, loans, and joint ventures package from China, is not just a small step but also a giant leap towards economic deliverance. The two most important projects for Pakistan are the Gwadar Port and Thar Coal. The third project that would bring fabulous benefits, if properly and realistically managed, would be the minerals that are in abundance all over the country, especially in Balochistan and Khyber Pakhtun Khwa Provinces.

The success and long-term viability of these projects, and many more, depend highly on the efficient operations of all the three seaports as well as the readily availability of multi-modal transportation. These ports have to be working 24/7, with advanced equipment and processes, with addition of new facilities such as berths, modern warehouses, utilities, with trained and skilled manpower, and with a focus on globally competitive rates. These ports require continuous entry/exit of trucks to ensure fast track movement of discharged cargo. The minerals sector can become a substantial provider of foreign exchange through exports if the mines are modernized, accessible, and cost effective.

 These are areas where investors, suppliers, and financiers from Germany have to zero in, more so if they want to take long term profitable and worthwhile advantages. It is meaningful to understand that German manufacturers are well placed to provide top of the line machinery, equipment, and vehicles that are essential to upgrade these sectors as well offer the technology, skills and experience that are crucial for Pakistan's economic drive.

Karachi Port is a deep natural port with an 11.5 km-long navigable channel and a 12.2 meter-deep approach channel and provides round the clock safe navigation to tankers, modern container vessels, bulk carriers, and general cargo ships upto 75,000 DWT. The port has 30 dry cargo and three liquid cargo handling berths including a privately operated modern container terminal – the Karachi International Container Terminal (KICT). In financial year 2015-16, the port handled 50 million tons of cargo comprising 15 million tons of liquid and 35 million tons of dry cargo, registering a growth of over 15% compared to the previous year, and closing at nearly 2 million TEUs. 1893 ships berthed at the port in 2015-2016 compared to 1732 in 2014-2015.
Port Qasim is Pakistan's second busiest port and currently caters for more than 40% of seaborne trade requirements of Pakistan. The port is accessible through a 45 km long channel marked by channel buoys up to 11-meter draught vessels. It has excellent multi-modal connections with rail/road network and in future, when the Coal Terminal becomes operational, it would be the port of call for ships laden with coal cargo.
Gwadar port is set to be at "full operation" by the end of 2016, and will handle roughly one million tonnes of cargo going through it by 2017, most of which will consist of construction materials for other CPEC projects. Gwadar is projected as the heart of CPEC and the Chinese management company plans to expand the port's capacity to 400 million tons of cargo per year. Long terms plans for Gwadar Port envisages upto 100 berths to be built as and when demand increases. Under CPEC, Gwadar Port will expand its infrastructure with construction of nine new multipurpose berths on 3.2 kilometers of seafront to the east of the existing multipurpose berths. There will also be cargo terminals in the 12 kilometers of land to the north and northwest of the site along the shoreline.
Reputable German companies, such as Liebherr or SANY, are globally recognized as specializing in the development and manufacturing of high tech port equipment. According to its website, Liebherr supplies a wide range of high-quality maritime cranes for all types of goods handling in ports and at sea. The products include ship-to-store container cranes, rubber-tired and rail-mounted gantry cranes, straddle carriers, mobile harbor cranes, reach stackers, ship cranes, floating cranes and offshore cranes. In fact, one mobile crane is already installed at Karachi Port by a private cargo handling company. It is estimated that the country realizes a saving of $8-10 per ton if this crane is utilized. SANY informs on its website that they are assembling the Reach Stacker range and producing Empty Container Handlers and Heavy Duty Forklifts. It currently offers the best paint quality in the industry and its paint shop is equipped with the latest technology and guarantees the highest painting standards by applying four layers of coat to the machines. An intensive marketing and orientation campaign must be initiated by these companies for the introduction of their equipment at all three Pakistani ports.

PAUS is a company that specializes in mining equipment. It makes a Telescopic Swivel Loader that can transform the antiquated mode of mining prevalent in Pakistan. The road accessibility to most of the mines is a harrowing experience and requires movement of smaller vehicles for loading the minerals, thus adding to the cost. This Loader has multiple functions including an articulated steering that makes maneuverability easy even at restricted road conditions. For coal miners, there is a higher risk of explosion in mines due to the development of gas. PAUS vehicles are therefore also available with explosion protection. PAUS dinting machines cut tension relief slots into the roof, to minimize bed convergence, tunnel construction, and to improve gallery safety and impact resistance. Liebherr specializes in equipment for extraction of minerals in opencast mining environment and its hydraulic excavators are internationally known for their performance and productivity.
Pakistan has less than 400,000 mini trucks, light trucks, medium, heavy, as well as super heavy trucks including loaders, dumpers, and trailers. As per conventional wisdom, taking into account the flow of cargo and commodities traffic as well as the obsolete and unserviceable vehicles, there is a shortage of between 90,000-100,000 vehicles at this moment. The world's top two truck manufacturers are Daimler AG and Mercedes-Benz, both highly recognized German brands. Number four is Volkswagen Group that markets under the brand names Volkswagen, MAN, and Scania. German investors and even these brands could set up trucking joint ventures to cater to the increased cargo traffic.
The reason for mentioning these various German companies is to demonstrate the huge potential available for enhancing German presence in Pakistan. Germany is a valuable bilateral trade partner and it is imperative that Germany must and should participate in Pakistan's progressive economic future. Moreover, the biggest reason for Pakistan’s immense geo-strategic importance is quite simple: its people. Pakistan has one of the largest, youngest, and most rapidly growing populations in the world.

The dividend for both countries could be summarized in a PEST analysis. As the largest economy in European Union, Germany can play a prominent and defining role in impressing upon Pakistan the political imperatives to maintain the democratic environment in order to obtain maximum support in continuation of the GSP Plus status. Germany can, and does, offer economic assistance through substantial financial credit at low markup rates for procurement of German products, especially machinery and equipment. Germany is already a major supporter of social projects through Gesellschaft für Internationale Zusammenarbeit (GIZ) to institute pragmatic reforms in skill development of workers, in formulation of world class curricula, in health, in family planning, and in basic education sectors. At the same time, Germany is assisting in transfer of technology through vocational training, through imparting and providing access to technological innovations and ideas via various mechanisms, and through programs where experts provide knowledge-based information at seminars and orientation events. In March 2016, Germany agreed to provide €125.70 million comprising of grant of €98.7 million and soft loan of €27 million in various sectors including health, energy, and technical and vocational training.

I want to conclude this write-up on a personal note that is a manifestation of German excellence in quality, technology, and reliability. It was in 1956 when my family became owners of our first Mercedes-Benz. We used to live in Mithadar, the old section of Karachi, with its narrow lanes, with the hustle-bustle of pedestrians walking on these lanes, with donkey and camel carts obstructing traffic, and with cyclists moving in all directions. We were the only ones in the neighborhood to have a car, what to talk about Mercedes-Benz.

What can one say about Mercedes-Benz? When one is a small kid, it is just another car, albeit bigger than the previous one. When one is a teenager, it is an ego trip. When one enters adult life, it is royalty without a realm. This is what Mercedes-Benz really means to people like me.

There has been, except for a gap of few years, a Mercedes-Benz in our garage. It was my grandfather's prime choice of a vehicle. It was my father's desire to own one. And, it continues to be our precious asset to possess this car. Notwithstanding the importance of owning a Mercedes-Benz, the fact is that it also creates a favorable impression when we escort our foreign guests on their visits to Pakistan and to our businesses.

As I complete my 66 years and enter a new phase in my life, I have now few objectives to attain and few targets to meet. One of these is to present a Mercedes-Benz to my spouse. Why? Well in the early 1970s, when I returned after studies in USA, I gave driving lessons to my then fiancée in our Mercedes-Benz. How many Pakistanis do you know who would even dare to take this risk? But then, the lady was going to be my wife, and for her, everything should be the premier grade.

I have many memorable moments of our various models of Mercedes-Benz. All I can say is that not only Mercedes-Benz is in a class by itself, it is the ideal car in so many respects. This fact . . . only the owners of Mercedes-Benz can recognize and appreciate. As the famous American singer said, "Oh Lord, won't you buy me a Mercedes Benz." Need I say more?

Army, Corruption and Terrorism

Majyd Aziz

The definition of an Army is that it is "a large organized body of armed personnel trained for war, especially on land". The words of Quaid-e-Azam to the Army are very indicative of his vision of its role. He stated, "You will have to be alert, very alert, for the time for relaxation is not yet there. With faith, discipline, and selfless devotion to duty, there is nothing worthwhile that you cannot achieve".

Today, the Pakistan Army has widened the landscape of its activities due to myriad factors that in more ways than one have had an impact on the survivability and sustainability of the motherland. Its primary assignment as the defender of the borders has been compounded significantly with various exigencies that have necessitated direct involvement either in a supporting role or, when it became imperative, from a vantage position.

Pakistan's status as a geo-strategically important country, with many advantages and benefits, unfortunately has been affected by the belligerence, hostility, and meddling of countries on the western and eastern borders. Pakistan was propelled into being the frontline state in the Global War on Terror. The war is being fought not only at the borders but also within the country. Inimical forces, boosted by foreign funding and support, have created havoc with serious repercussions to the integrity and sovereignty of the nation. The colossal loss of men, material, and money has seriously damaged the progress and prosperity of Pakistan.

Terrorism and extremism filtered down to Karachi, the economic hub of the nation. Karachi was in the throes of near anarchy where the City of Lights was ruthlessly relegated to become the City of Doom. Militancy and breakdown in the law and order situation stained the image of the metropolis and its citizens became captive to the will and might of desperadoes, especially those who had the backing of political parties or extremist organizations. The politicized Police Force was unable to exercise its writ. The City, Province, and Federal governments were over-involved in political squabbling and point scoring, much to the chagrin of the Karachi residents.

The private sector was between the devil and the deep blue sea. Investment, commerce, and industry became hostage to the twin menace of terrorism as well as corruption. These two heads of the hydra headed-monster damaged the comfort zone enjoyed by private sector, forcing them to seek safer foreign avenues of doing business as well as securing a safe environment for their families and finances. Trade and industry graph nose-dived, educational institutions were under attack, and foreigners made a hasty retreat.

The induction of Pakistan Rangers in Karachi was much desired and welcomed by trade and industry. Karachi Chamber of Commerce and Industry hierarchy was vociferously demanding the implementation of a plan to eliminate terrorism as well as corruption. The men and vehicles of the Pakistan Rangers have been a ubiquitous sight in Karachi for nearly a quarter of century and are gradually implementing Operation Clean-up. Despite calls for a fast track response and action, the Rangers have proceeded at their own real time pace and the effectiveness of their operations has restored normalcy to a large extent. In fact, the successes of the last two years have transformed Karachi into a relatively peaceful metropolis as is evident from the upsurge in real estate prices, the huge presence of customers in shopping districts, markets, and plazas, and the booming and bullish activity at the Pakistan Stock Exchange in the city.

It was assumed that the operation against militants and terrorists would be expanded to Interior Sindh and that within a specified timeframe the success in Karachi would be replicated there too. However, political roadblocks, parochial vested interests, and the aversion of the government hierarchy thwarted all notions of Operation Clean-up in Interior Sindh. The rationale is still unpalatable, and for Karachi residents, unacceptable and creating a profound sense of acrimony. This also gave rise to the oft-repeated allegation that the entire Operation Clean-up was only specific to Karachi and an urban-based political party.
Chief of Army Staff General Raheel Sharif reiterated Pakistan Army’s resolve in breaking down the nexus between terrorism and corruption. He very rightly established that there is an organic link between corruption and terrorism and hence targeting corruption would diminish the hold of the terrorists since these ill-gotten funds are channelized to terrorists too. Corruption is not just Pakistan-specific since it is endemic in most of the Third World countries and in some developed nations too. However, the magnitude of corruption has spread ominously and has ensued into a sinister situation where local citizens as well as foreign investors have placed corruption at the top of the list of the damaging factors affecting Pakistan's economic progress and prosperity. The disclosure by the COAS gives further credence to this negativity.
Moreover, the China Pakistan Economic Corridor is a welcome initiative and is heralded as the beginning of global confidence in Pakistan. In today's difficult times, CPEC has instilled hope that its success would be a showcase that Pakistan could exhibit to attract global investment and interest in Pakistan. This is further encouraged by the fact that Pakistan Army is fully behind its implementation and that a special security force has been established to provide security, safety, and confidence to those Chinese citizens who are or will be based in Pakistan. The essence of these measures is akin to the security of the country's strategic assets and is a manifestation of the success of Zarb-e-Azb and other measures.
Corruption is a defining factor that should be termed as economic terrorism. Under National Action Plan, corruption has to be tackled on a war-footing basis. Pakistan Rangers Sindh has hinted at nabbing the corrupt in government, in political parties, and in other sectors. However, influential and high profile personalities, known for amassing huge ill-gotten wealth were deliberately permitted to leave the country or are still unabashedly allowed to continue their nefarious activities. National Accountability Bureau is a toothless tiger catching small league players while cases against top-notch persons are gathering the proverbial dust.
The resolve of the Army to arrest the corrupt, whether high profile or not, is yet to be seen in genuine reality. The question arises whether there is seriousness in this matter or are there other compelling reasons. There has been no let down in the corruption syndrome and, like termites, it is eating away the moral fabric of the nation. Citizens are taking the announcements of arresting the corrupt by NAB, FIA, or through NAP with a pinch of salt. At present, these are hollow claims since no tangible effort has commenced.
Recently, there was a renewed call from GHQ for a full-force implementation of NAP, since it has so far been a lackadaisical process and since the fruits of the Plan have not been fully realized. It must be implemented in letter and spirit all over the country because the dastardly impact of extremism and terrorism are not isolated cases but the tentacles are spread from Karachi to deep inside North Waziristan Agency. Operation Zarb-e-Azb, despite a heavy toll of men, material and money, has indiscriminately eliminated many areas from the menace of terrorism and militancy. Notwithstanding these successes, it is a fact that terrorism and militancy is still entrenched in many parts of Pakistan.

The 200 million citizens of Pakistan have always looked up to the Pakistan Army. Their trust in this institution is indisputable. There are anti-state campaigners who continue to deride the Army and attempt to damage its credibility and integrity. These elements must be exposed, castigated, and shunned. At this present moment, when tensions at the borders are threateningly escalating, where national leaders from neighboring countries are indulging in blatant anger-jingoism, where efforts are made to directly interfere in the internal affairs of the country, and where economic terrorism is being openly contemplated, the private sector demands that politicians, media and social activists must strengthen and support the role of Pakistan Army in undertaking all measures to counter these terrorism and threats. The Founder of Pakistan's message is so true today. He said, "Let us now plan to build and reconstruct and regenerate our great nation…. Now is the time, chance and opportunity for every Pakistani to make his or her fullest and best contribution and make the greatest sacrifice and work ceaselessly in the service of our nation and make Pakistan one of the greatest nations of the world".

Thursday, August 11, 2016

"Who killed Cock Robin?"

Majyd Aziz

It is time to forget what happened in the past . . . who killed Liaquat, Benazir, or how did Jinnah die, or even the circumstances that led to the death of prominent personalities. Conspiracy theories, accusations, and suspicions are floated off and on but only those who committed or authorized the act know the truth. Today, one suicide jacket or one drone or one missile attack kills thousands. The grief is there, but soon the names of victims become numbers and the world moves on. The past is past. It is time to focus on solutions to eliminate or reduce modern day killing with sincerity of purpose and full accountability. 

Maintenance and monitoring of law and order situation should not become a shuttlecock between law enforcers and political hierarchy. The privileged few who exert influence are the root cause for the deterioration of a peaceful environment. This is nothing but a tragedy perpetrated on the citizens of Pakistan. This has also sullied the positive image of the nation all around the globe. This pathetic scenario, as well as the general apathy and attitude of authorities, remind one of a Nursery Rhyme learnt in Kindergarten school. "Who killed Cock Robin?"

"Who killed Cock Robin?" "I," said the Sparrow,
"With my bow and arrow, I killed Cock Robin."
"Who saw him die?" "I," said the Fly,
"With my little eye, I saw him die."
"Who caught his blood?" "I," said the Fish,
"With my little dish, I caught his blood."
"Who'll make the shroud?" "I," said the Beetle,
"With my thread and needle, I'll make the shroud."
"Who'll dig his grave?" "I," said the Owl,
"With my pick and shovel, I'll dig his grave."
"Who'll be the parson?" "I," said the Rook,
"With my little book, I'll be the parson."
"Who'll be the clerk?" "I," said the Lark,
"If it's not in the dark, I'll be the clerk."
"Who'll carry the link?" "I," said the Linnet,
"I'll fetch it in a minute, I'll carry the link."
"Who'll be chief mourner?" "I," said the Dove,
"I mourn for my love, I'll be chief mourner."
"Who'll carry the coffin?" "I," said the Kite,
"If it's not through the night, I'll carry the coffin."
"Who'll bear the pall?" We," said the Wren,
"Both the cock and the hen, we'll bear the pall."
"Who'll sing a psalm?" "I," said the Thrush,
"As she sat on a bush, I'll sing a psalm."
"Who'll toll the bell?" "I," said the bull,
"Because I can pull, I'll toll the bell."
All the birds of the air fell a-sighing and a-sobbing,
When they heard the bell toll for poor Cock Robin.

The message in this poem is loud and clear. The whole forest got into the act to honor Cock Robin, to do whatever needed to be done, offering their expertise and resources, but no one accused, arraigned, or arrested the sparrow. Maybe the sparrow was forced to admit that he did the killing whereas it is not known who ordered the killing. Notwithstanding the fact that the sparrow is a small bird, the other bird species, as well as concerned fish and animals, were ready to do everything for the dead Cock Robin. A few offered to sing eulogies or toll the bell, but they did not light candles, they did not go on a protest march, nor did they demand exemplary punishment for the sparrow. Amazingly, the poem does not mention even one line about the role of the lion, the King of Jungle, nor did any monkey, giraffe, or elephant come forward to do a good deed. Not even one condolence message.

In Pakistan, we have developed a new tradition by lighting candles to mourn or protest a killing. Usually less than 50 social activists gather at a place, light candles, post strong messages on Facebook, Twitter or Whatsapp, put the pix of the deceased as DP, and one week later, they all forget and bide their time waiting for another such cause. Like Sabri or Sabeen who are no more prominent in the news. Even Edhi, who did die of old age complications, is no more on their radar. Of course, death anniversaries are observed religiously and politically, and the speakers pledge to carry on the cause of the deceased. Gradually the tide ebbs, and the intensity and commitment to the cause lessen. The police as per SOP round up a large number of suspects and after interrogation or after offerings of sweeteners, or after both options, release them. The political leaders have already given a 72-hour deadline for apprehending those who committed the dastardly act. 

The killers of the high profile personalities are still on the Most Wanted list, and like the sparrow, totally confident that they will live out their lives in total freedom, unless their string pullers have not already bumped them off. They smugly enjoy the contents of the heavy purse given to them on completion of their mission. The truth stays hidden and safe. "They used not to prevent one another from wrongdoing that they did. How wretched was that which they were doing" (Al-Quran 5:79)

Monday, July 25, 2016

Gridlock on the Waterfront

Majyd Aziz

Karachi is blessed with two major Ports, Karachi Port and Port Qasim, that are operating at full capacity.  A modern Port is designed to cater to the demands of the economy, whether more imports are entering the country or whether goods and commodities are destined for exports. It is imperative that a strategic framework be in place to regularly upgrade and improve the infrastructure, eliminate unnecessary bottlenecks, ensure productivity and efficiency of dockworkers, stevedores, and the Port management and operational staff, and to make the Ports user-friendly in real time.

The Karachi Port is the lifeline of Pakistan's economy. This is the first entry for imports and this is where Pakistan's exports are shipped around the world. It is important that all essential steps are undertaken so that the Port users are not handicapped with exorbitant and ad hoc dues and charges. The present Chairman of KPT, Vice Admiral (R) Shafqat Jawed, has often stressed the need for creating an enabling environment and introducing a corporate and efficient culture at the Port. However, decisions must be taken to rationalize the tariff and dues structure. A review is presented alongwith some viable suggestions.

The first issue that crops up is that the Karachi Port tariffs for ships are very high and frequent changes are made without any information to Port users. Due to high port tariffs and excessive light dues, KPT earns huge surpluses and then the Trustees become generous in advancing huge money to build flyovers, underpass in Clifton, water fountains, and donating large amounts here and there. Port dues are Dollar-based and for every increase in Dollar value, KPT earns a bonanza. These resources are then used to finance projects that are not Port based. Ministry of Ports and Shipping must issue explicit orders that Port cash surplus cannot be used for non-KPT projects and events.

Light dues, which are based on Net Registered Tonnage (NRT) of the vessel, were Rs 0.50 per NRT, but some five years ago, these were raised to Rs 3 per NRT and again in 2012/2013 increased to Rs 7 per NRT. These excessive dues are levied to maintain the Lighthouse. An example is that a ship carrying coal with 27000 NRT is billed $1,948, adding Rs 5 per metric tonne (PMT) of cargo. However, no proper accounting of the maintenance cost is provided to users. No one is consulted and no one knows where the money is spent. This has resulted in Port dues and Light dues for the vessel propping up to $1/1.50 PMT whereas, in actuality, Port dues should be lower.

All this is eventually paid by users, while the business community gets to know later that freight costs are increasing for their imports and exports.  They are thus paying excessive container Terminal Handling Charges (THC) since Port dues ensue into increased freight charges. Nobody in any trade organizations nor even the Private Sector Trustees on the KPT Board monitor Light dues and Port dues and nor do they attempt to get these reduced. Resultantly, these are costing Billions in supplementary cost to trade. 

In fact, Port charges should be bifurcated into local - those incurring Port costs like salaries of KPT, maintenance and repairs, etc, and foreign - where foreign exchange is involved. This would save Billions in cost of handling rapeseed, canola, wheat, coal, etc for exporters, importers, and even government.

The container terminals, PICT and KICT, have been given carte blanche to charge whatever they want in blatant violation of the contractual agreement. A vivid example is at Port Qasim where FAP Terminal, that quoted Rs 390 PMT for the first ten years in the initial Tender, is now unilaterally charging Rs 469 PMT and upto $14 PMT. These container terminals are minting record profits and, no wonder, foreigners grabbed the PICT shares at abnormal prices since the profits are phenomenal. Shares of container terminals are akin to the money made by LNG and fertilizer companies, profits at tremendous cost to businessmen and farmers.

In the same manner, shipment of edible oil and crude oil is subject to higher than market rates because PNSC has been given the mandate of higher rates thus adding millions to the prices that the nation pays out for crude oil and petroleum. Private tanker owners worldwide are offering cheaper transportation freight rates on long-term based index but due to PNSC, oil cost rises. The modus operandi adopted by PNSC is that it is given first refusal rights on the Tender for transportation. Instead of operating its own vessels, PNSC charters vessels from the open market at lower rates and skims the differential as its profit. Moreover, the PNSC dry bulk fleet was procured at higher rates and the operating losses of dry bulk carriers are enormous but these are camouflaged in the huge profits made from tankers.

KPT resources must be invested to upgrade the berths, introduce modern equipment, plant mangroves, clean up the polluted water and Port area, and building high ceiling edifice at Groyne Yard so that environmental issues emanating from coal stored at the Groyne Yard are seriously addressed and eliminated. It is reiterated that a total ban be placed on utilizing KPT money for fountains, underpasses and flyovers in Karachi.

Another area where costs are negatively affected and is a very serious concern is the stranglehold that the truckers have on movement of goods from the Port. They do not accept or agree to long-term commitments and hence arbitrarily jack up the per ton rates at will. They often resort to strikes with the result that Port users suffer huge demurrage charges, stoppage of export shipments, shortage of essential items and commodities, and negative image of the Port and country. Nowhere in the world, except Pakistan, is essential cargo blocked or movement hampered. The government must monitor this situation regularly and take immediate steps to control this menace.

KPT can reduce and control its maintenance expenses if there is strict monitoring and accountability on the utilization of tugs, pilot boats, dredgers, and other equipment. Furthermore, a functional and pragmatic system must be in force to monitor lethargic and bureaucratic attitude of many personnel, especially officers, who are always in one meeting or the other. This slows down Port work and creates avenues of corruption and other ills of society. Thus, it is crucial that the majority of the Board of Trustees should be nominated by Port users rather than asking for nominations from trade associations or appointing irrelevant persons, whether on political basis or due to their high profile. KPT is the pride of Pakistan and it will always have the critical mass, even after Gwadar, Port Qasim and the futuristic Keti Bunder. 

Business Leadership Potential

Majyd Aziz

Business community is considered a very strong and potent force anywhere in the world. The opinions, views, and concerns of business/industry community are taken with all merit. A united business community can do wonders and zoom up the nation's economy. The sad fact is that despite all the announcements coming out of Pakistani trade organizations, the ground reality is that business community is rudderless in turbulent seas. What has been the real time achievement of business leadership in the last 8 years? Has it done any soul-searching to grasp the reality? They profess thru bombastic statements and press releases that they have done wonders whereas they are seldom taken into confidence by policymakers and powers that be.

Moreover, the business leadership, primarily due to its own fault, has been divided like never before. Those external forces who wanted this situation have succeeded beyond any doubt. Business leaders have been relegated to making Welcome Addresses, presenting plaques, and singing high praises of people who are guests of trade organizations. Lunches and dinners, laudatory phrases, photo-ops, and making irrelevant statements are the tools employed to lobby with people who matter. Former State Bank of Pakistan Governor, Dr Ishrat Hussain, once very candidly warned the business community about the perils of this approach. He has been proven right.

The Federal Budget is anxiously awaited every year and as per Standard Operating Procedures, the trade organizations get their act together and present their proposals. Every year they find out that most of their proposals have made it into the waste paper basket instead of in the Budget papers. Business leaders make a beeline to Islamabad to remove anomalies or get clarifications and come back either empty-handed or hollow assurances. Millions spent on airfare, hotels, and transportation due to this tedious process of rushing to Islamabad. The double jeopardy is that most of the business leaders are hostage to those who are non-tax filers who have strong street power and they manage to prevail upon the leadership to toe their line. There is obviously a downward spiral of segregation between the documented economy and those who are out of the tax net. More often than not, the registered businessmen and industrialists get the lower end of the stick.

On the other hand, inimical forces in bureaucracy conspire to create serious issues for industrialists. Recently, SITE Karachi, the largest industrial estate of Pakistan, that has 30% of Pakistan's textile processing mills, faced a severe water crisis. As it is, SITE requires 42 million gallons daily to cater to the 3500 industries and commercial establishments. Karachi Water Supply Board has never provided even 9 MGD despite the increased demand. The textile processors managed to convince the authorities to allow them to pipe in sub soil water from the periphery of the estate. Thirty-two suppliers pump in around 2 MGD to many industries. SITE Karachi was on the verge of closure due to the conspiratorial attitude of KWSB higher-ups and the Minister who, sad to say, is very ignorant of the dynamics of water supply to industrial areas. The right message was not been seriously conveyed to the decision makers. SITE Association of Industry organized protest meetings, press conferences, and even a sit-in at the Sindh Chief Minister House. The octogenarian Sindh Chief Minister did step in and ordered the status quo. Billions were lost in this anti-industry decision of the KWSB.

One vivid example of business leadership was witnessed in 1986, during the draconian days of Gen Zia. The then CBR came up with a so-called "Simplification of Excise Rules" opera. The actual conspiracy was to stab the industrialists deeper in the back and to create a chasm between General Zia and the business community. SITE Association of Industry, led by the dynamic and bold Mian Ejaz Shaffi, got its act together and mobilized the industrialists. For nine days, the affected factories remained closed and 500-600 industrialists were daily present in the Association office. Despite threats of all kinds, Ejaz Shaffi and his defiant colleagues held their ground. The protest was front-page news in all newspapers every day. Prime Minister Muhammad Khan Junejo had to fly to Karachi and meet the industrialists and ordered CBR to back off. This is real power. Alas, those were the days and there was a strong leader, Ejaz Shaffi.

Why cannot this be done today? Federal Budgets are routinely approved by a Parliament that does not understand the ABC of finance and taxation. What has been the result? Exports have dipped, taxes on the rise, non-filers still out of the tax net, anomalies still not addressed, wealth being diverted to real estate rather than productive areas, and despite all firewalls, capital continues to shift to safe lands. And, more such negative signals that one can carry on enumerating.

The time has come to take stock of the situation. And time is running out. There are very positive opportunities on the highway to economic progress and there are still dangerous roadblocks along the way. CPEC is a golden opportunity if it is shielded from political and parochial attacks. Gwadar Port and Thar Coal are avenues of economic and social prosperity if pragmatically managed. Low Inflation, reduced Discount Rate, achievement of MSCI status, etc are signs of reassurance. Brexit is a serious concern. Corruption is talked about but not attacked seriously. This is eating away the nation's moral fabric. Political instability is on the ascent. Another negative signal. Deterioration of civic amenities and infrastructure are impacting on economic progress. Export culture is just a mirage while there is official enthusiasm for imports.

Therefore, the business and industry leadership have to come out of the cocoon and get their act in shape. This is the time for assertiveness. This is the time to forge real unity. This is the time to restrain from meekness, misplaced ego, and inertia. This is the time to show the strength and power of the engine of economic growth - - - the business and industrial community. It's now or never. The decision lies with the business leaders. Walt Disney very rightly said, "The way to get started is to quit talking and begin doing"