Faith, Hope and $50 Billion

Majyd Aziz

Pakistan’s 200 million denizens, atleast nowadays, are convinced that they live in an unique country and, in their opinion, they are the Almighty’s Chosen Few. It is this conviction that has enabled the huge majority of citizens to bear the disparities in their livelihood, to sustain the impact of natural calamities, to tolerate the perennial shortages of water, power, gas and gasoline, to endure the deteriorating law and order situation, and to put up with the false promises made by politicians. 

At the same time, the nation’s exporters who trot the globe to market their excellent products and services have to, more often than not, stomach the negative image of their motherland. Even before they are able to make their sales pitch, they have to answer about Pakistan’s heavy load of international allegations. Even delegates attending exhibitions, conferences and forums in different countries have to patiently deal with these accusations and brickbats. Terrorism. Extremism. Sectarianism. Human Smuggling. Money Laundering. Narcotics. Environment.  Nuclear Proliferation.

On the diplomatic front, Pakistani officials debate in a manner that is, to say the least, not encouraging and definitely not inspirational. Politicians are still in a juvenile mode, and thanks to TV talk shows, the citizens get their daily dose of hilarity and oral wrestling. Lawyers and jurists have taken to streets or frequently boycott the courts. State-owned enterprises are in a race to hemorrhage scarce financial resources faster than the FBR tax collection. The defenders of the faith have involved themselves in acrimonious demagoguery, confrontational fanaticism, blatant bigotry and organized militancy. For the hapless members of trade and industry, the government officials have become their invisible partners who extract their flesh of blood in advance. It is a rare government employee or a politician who does not roll over with a derisive laughter whenever the term Good Governance is talked about.

What is the future of Pakistan and the way forward? This is an everyday topic of intensive debate between those who manifest optimism and those who are either compulsive doomsday theorists or are sitting in their cozy cubicles at various think-tanks around the world. If there is a Dr Strangelove in the guise of Ajit Duval across the Line of Control, then there is a Karzai mentality west side of the Durand Line. If there is a pseudo human rights activist in Lahore, then there is a misguided liberal fascist in Islamabad. If there is a Baloch separatist safely ensconced in the environs of London or Geneva, then there is a so-called socialist Sindhi nationalist hedonistically enjoying the pleasures of life financed through bullying landlords or traders. They regularly regurgitate venom against the country, against her traditions, and against her importance in the comity of nations. Sadly, they manage to generate detrimental media hype resulting in emboldening their stance against Pakistan.

Pakistan will be a failed state. Pakistan will default on its financial obligations. Pakistan will let the strategic national assets fall into the hands of terrorists and extremists. Balderdash. These scenarios are not going to happen because of the determination and resilience of two prime stakeholders in the country. The Armed Forces of Pakistan and the entrepreneurial spirit and exuberance of the industrial and commercial community of Pakistan. The rallying cry is “When no one can do it, Pakistan can.”

In this chaotic state of affairs, there is a comforting presence of sanity. This is emanating out of the citadels of the guardians of the borders, seas, and the skies. Pakistan is said to be the most geo-strategically situated nation on earth. But this status imposes an onerous burden on the nation’s defenders to deploy personnel in each and every area of the borders. Seldom has any country continuously faced such a sensitive and a tense situation of keeping armed forces on alert at the borders. The highly-touted Global War On Terror has catapulted Pakistan into a frontline state and the ensuing ramifications have created havoc on the fragile threads of the nation’s fabric. Knowingly, Pakistan also suffers enormously as a powerless victim of the proxy war between two large Middle Eastern countries representing the two major sects of Islam. From death of thousands of precious civilian and military lives, to billions spent on this war instead of development of civic facilities, to the creation of local and alien hardcore terrorists, and to the damaging dissemination of anti-Pakistan propaganda by forces inimical to the country’s sovereignty and influence, Pakistan survived, survives, and will survive. This is what makes this nation so great. Oh yes, Pakistan is a nuclear country too. Make no mistake about it.

Commerce and Industry are the precious jewels in any nation’s crown. The crown is not worth its value if these two jewels are not genuine but instead are ersatz replicas placed haphazardly on the crown. Commerce and industry has to flourish in order for the country to earn foreign exchange, have a strong presence in the global marketplace, provide huge opportunities for employment, and contribute to the social welfare of the citizens. Thus it is incumbent upon the government to ensure that commerce and industry are shielded from infrastructure shortages, protected from corrupt, conspiratorial and lethargic bureaucracy, safeguarded from criminals and extremists, and provided facilitation, whether in the financial, taxation, diplomatic, or political domains.

Notwithstanding all such deficiencies, shortages, blockades and other negative influences, the fact is that there is surely a way out. There are many less fortunate countries that are coping with difficult conditions and are managing to come out of their precarious position. There are many less fortunate countries that lack the entrepreneurial spirit and business acumen of the Pakistani businessmen. There are many less fortunate countries that envy the skills, talent and ingenuity of the Pakistani worker and professional. There are many less fortunate countries that are not endowed with a wide array of natural resources that Pakistan has.

The recent announcement emanating out of Chiniot in Punjab is that substantial resources of iron ore, copper, and even gold have been discovered. Massive reservoirs of coal in Thar still need to be extracted and turned into energy. Alternate renewable energy, wind or solar, has gigantic potential. Operation Zarb-e-Azb is showing spectacular results while military courts are being set up to decide the fate of hardened criminals. Politicians are gradually coming to terms with protection of democracy instead of exercising radical adventures. For the first time after a gap of five years, bank financing to the private sector has shown a positive figure. The privatization process is gradually gaining momentum. The local bourses are showing spectacular optimism and foreign portfolio investors are making a bee-line to mop up blue chip scripts. Inflation has been controlled while the deep dip in world oil prices has been a source of relief for the citizens as well as the government. Findings coming out of various studies highlight a bright economic future for the country.

Can Pakistan make it? IMF, World Bank, Asian Development Bank, etc are cautiously giving a rosy prognosis. Relations with Afghanistan have made a U-turn after President Ashraf Ghani made a memorable visit to Islamabad. Iran and Saudi Arabia are in a race to be on favorable terms with Pakistan. Turkey has renewed her close fraternal ties too. Russia is making overtures to forget the past and instead wok with Pakistan. China is willing to open her coffers to encourage economic prosperity. India under Narendra Modi has, with obvious traditional reservation, sending out feel-good indications. Yes, Pakistan can make it.

Pakistan is once more in the center of the geo-political environment. The world knows that peace in South Asia, in fact even in Middle East, can never be a reality unless Pakistan is stable and prospering. This is the plus point. The world knows that the Pakistanis are resilient and have strong Islamic values. The world knows that Pakistan urgently needs financial outlays to make that paradigm shift towards a better, secure, and vibrant society. There is faith in Pakistan’s capabilities while Pakistanis have faith in their religion and their country. There is hope that Pakistan is the key player in the global arena while Pakistanis have profound hope about themselves and their country. There is global money to lend or aid while Pakistan is struggling with her financial resources. Hence, Pakistanis must sincerely heed the advice of Quaid-e-Azam Muhammad Ali Jinnah who said, “You will have to make up for the smallness of your size by your courage and selfless devotion to duty for it is not life that matters, but the courage, fortitude and determination you bring to it.” The message to the international community is that to make Pakistan zoom up on a fast track, all that Pakistan needs is Faith, Hope, and $ 50 billion.

(Exclusive for Special Supplement of 50 years of Business Recorder newspaper)

Investing across the Border

Majyd Aziz

“I am confident that India–Pakistan economic relations will touch newer heights . . . . CII will continue its efforts to strengthen economic engagement with Pakistan and work closely with all the stakeholders.” ~ Adi Godrej, Former President CII, in an exclusive for The News, May 22, 2013

The Chairman of the Godrej Group had led an 80-member business delegation to Pakistan in April 2013. The speeches and presentations made by leading business stalwarts of India at the Aman ki Asha Conference in Lahore were extraordinarily bullish and visionary, and there was an urgency of purpose among all participants. The Conference was heralded as a progressive venture, more so because of the pronouncements made by the Indian mega-tycoons. It was a manifestation of their pragmatic business strategy and reflected their understanding of future business potential. They were well aware that dependence just on bilateral trade would not bring about the paradigm shift in normalization of trade nor would it be a rosy path to traverse when the excessive baggage of past animosity, oozing distrust, myopic approach of bureaucracy, rabble-rousing of religious extremists, proliferation of undocumented and informal trade, and national protection of industries and businesses against perceived deluge of Indian goods into Pakistan were back-breaking and burdensome.

These prickly factors were and still continue to be stinging thorns in hampering the liberalization and normalization of trade between the two SAARC neighbors. Despite the bonhomie evident among the business community, the normalization process moves at a snail’s speed and is meekly susceptible to the ramifications of contentious and hostile issues that plague both nations. The common declarations emanating out of various conclaves, seminars and conferences on India-Pakistan trade stress home the need for letting trade and investment find their own dedicated course and should not be entirely subordinate to touchy political, military or territorial disagreements and concerns. However, for the proponents of trade liberalization, the avenue is infested with potholes, blockages, and narrow-minded decision makers zealously guarding their check posts.

Are India and Pakistan missing out on lost opportunities due to all the factors enumerated in the narrative above? Is there a possibility of embarking upon another channel in tandem with the ongoing process of trade normalization? Would the impasse be a normal feature of bilateral relations depending upon the outcome or mood of the environment at any particular moment, be they border skirmishes, be they allegations about interference across the Line of Control, be they political, media or religious demagoguery or accusations, or be they just be wearisome resignation that bilateral trade normalization process is idealistic and that it is a long and winding road.

The dark clouds continue to shadow the lush green terrain. But, this is where entrepreneurial spirit flourishes. The industrialists and businessmen of the sub-continent are known to prosper in adverse conditions. This is their hallmark that is universally acclaimed. Persuasive lobbying by trade organizations and think tanks has convinced the decision makers to shed all inhibitions and delete obsolete country-specific regulations and rules and allow investment across the border. The die has been cast but entrepreneurs still await the favorable policies and guidelines from various Ministries and from the Reserve Bank of India and its counterpart, the State Bank of Pakistan. Thus, it is time for trade organizations to start playing aggressively on the front foot and get the ball rolling since the target is achievable and a win-win situation.

Indian entrepreneurs have been going on the multinational circuit with full force and have become major investors in the global businesses and industries. The aggressive pace of Indian foreign investment has enabled India to rapidly become a formidable source of foreign investment internationally. The composition of Indian investors is not just limited to mega private sector corporations but even many medium-sized companies as well as state-owned enterprises are increasingly establishing their footprints globally through strategic direct investments. Studies undertaken by various consulting firms have projected that by 2030, over 2,500 Indian firms would have set up entities abroad or would have acquired or merged businesses overseas. Indian firms have exhibited prudence and resolution in investing in foreign countries and have targeted and invested initially through mergers and acquisition transactions.

Comparatively speaking, the mega-corporations in India have huge financial resources as well as the critical mass to generate substantial financial support from lending organizations. It is also a fact that the outreach of these Indian entrepreneurs is considerable compared to their Pakistani counterparts. It is also a matter of record that Indian corporations have either made large strategic investments in foreign enterprises or have outright bought them out. Moreover, support and facilitation from New Delhi is very apparent. The Indian government is making efforts to integrate the country's economy with the rest of the world. To help the country's firms raise capital abroad, the government will facilitate unlisted Indian companies to list on foreign markets without having to be publicly traded on domestic exchanges. The advantage of having a large Indian Diaspora is a strong and enabling element in foreign investment by Indians. 

According to the global consulting firm Grant Thornton, “Indian companies announced Merger and Acquisition transactions worth US$ 8.4 billion in July 2014, from 110 deals, an increase of 36 per cent in transaction value and 23 per cent in volume over July 2013.” Reserve Bank of India data states that “Direct investments abroad by Indian companies stood at US$ 1.59 billion in May 2014. The investments in the form of equities, loans and guarantees were US$ 155.69 million, US$ 182.59 million and US$ 1.26 billion, respectively, during the month.” The global advisory firm Kroll Advisory Solutions reported that “in 2012 Corporate India acquired 72 companies abroad worth $11 billion, while in 2011 the figure was around $ 7 billion.” Market intelligence data revealed that “since 2003, USA and UK have ranked as the top two investment destinations for Indian capital. Emerging market economies are also a hot favorite for Indian companies and they are utilizing best practices learnt domestically to acquire assets in markets in Central and Southeast Asia.”

Some significant acquisitions by Indian companies include Corus Group (UK) by Tata Steel for over $ 12 billion, Zain Africa Mobile Telecommunications by Bharti Airtel for $ 9 billion, Novelis, an aluminum company, by Aditya Birla Group for $ 6 billion, Imperial Energy (UK) by Oil and Natural Gas Corp for $ 2 billion, Jaguar Cars and Land Rover (UK), the two iconic British automobile brands by Tata Motors for $ 2.30 billion, Honiton Energy Holdings (China), a wind energy firm, by Tanti group for $ 2 billion, Abbot Point Coal Terminal (Australia) by Adani Enterprises for $ 2 billion, Algoma Steel (Canada) by Essar Steel Global for $ 1.85 billion, Marcellus Shale (US), a natural-gas properties company, by Reliance Industries for $ 1.70 billion, and Minnesota Steel (US) by Essar Steel Holdings for $ 1.65 billion. There are other publicized acquisitions, mergers, and offers to buy by Indian companies since India has rapidly become a major source of foreign investment for the rest of the world.

The above narrative is highlighted to impress upon the fact that while Indian companies are expanding their footprints all over the world, it is imperative that these companies, as well as hundreds of other companies, take advantage of the relaxation of rules for cross border investment as announced by Reserve Bank of India and State Bank of Pakistan. The potential can be gauged from the fact that investment in Pakistan can open up the direct routes for exports to Afghanistan, Central Asian Republics as well as the Middle East. Moreover, these products can be marketed in Pakistan and also exported under the formal trade regime to India too.

In 2008, the Pakistan Japan Business Forum, of which I am one of the Founders, floated the concept of a Special Economic Zone in Karachi for Japanese investors. The Board of Investment spearheaded this concept and in September 2012, then President Asif Ali Zardari inked the Special Economic Zone Act 2012 at a glittering ceremony at the Presidency. This opened new vistas for foreign as well as domestic investors. In early 2013, at a Conference on India-Pakistan Trade held in New Delhi, I proposed that there should be an India Special Economic Zone on the Pakistan side of the Wagah-Attari Border. As Senior Advisor for the Transnational Strategy Group based in Washington, I made a suggestion to Dana Marshall, President, and my other colleagues in TSG that it should initiate a study to determine the feasibility and importance of an India-SEZ. TSG prepared a detailed initial “Study of the Benefits of Establishing a Pakistan-India Cross-Border Special Economic Zone” that has been commended as a pioneering, pragmatic and doable approach.

The focus on cross-border investment helps in underscoring a fundamental point. The field is wide open and attractive. It is upto the private sector who has the determination to reach those goals best by removing the obstacles to growth, and letting things grow by themselves. Two-way investment, unhampered by government protectionism and restrictions, would go a long way towards realizing that potential. To put in a nutshell, private sector leaders are the future architects of ushering in peace in the region through trade and investment. It is time to shed the primordial mindset and strive for regional economic integration in a fast-mode. SAARC, with all its merit, can become a formidable force if Pakistani and Indian trade and industry become sincere game changers. Milton Friedman poignantly stated that “History suggests that capitalism is a necessary condition for political freedom.”