monthly economic affairs march, 2014

MARCH 2014Volume-III, Issue-III

– Shahid Khaqan Abbasi

Energy security &affordabilityInvestors flocking to stable policies

Exclusive Interview

Pages 8-9

Pages 10-11

MAR 2014 4 http://www.economicaffairs.com.pk MAR 20145http://www.economicaffairs.com.pk

EDITORIAL

Had it been asked “how wise would it be to invest in an economically crippled and terrorized country?” the reply would be “suicide”. Unfortunately, Pakistan is a country which could not be termed a stable country, yet a number of opportunities are available for inves-

tors and execution on many projects is pending due to financing is-sues. If these projects get materialized successfully, it would pull the country out of the darkness caused by energy crisis.

The projects of Thar coal, IP, TAPI and LNG import aren’t new but under consideration for many years. The successive governments were unable to make progress on these projects due to inconsistent policies. Considering the much-talked-about looming energy crisis and the oil import bill of $14 billion, earliest completion of these projects is essential.

No doubt Pakistan has always been a great market for invest-ment; especially its geo-strategic position has always been of big attraction to businessmen. It hasn’t been a year since the new govern-ment took charge. It’s a good omen that their policies have started showing positive signs, foreign investment has started pouring in Pakistan, the KSE is making new records of its bullish trend, GDP is likely to grow.

What needs to be appreciated is the enforcement of the petro-leum 2012 policy of previous government which the former govern-ment couldn’t. It is a good precedent that the present government is carrying the feasible projects and policies of the last government, addressing the short comings of those policies to make them more liberal and result oriented. This behavior was also keenly noticed by the international watch dogs compelling them to break the conven-tional ambit of their thoughts about Pakistan.

Government shouldn’t take decisions in isolation but keep the provinces and other stakeholder’s cognizant of all the develop-ments.

Today’s Pakistan is different and so is its future. Recent an-nouncement from China to invest 20 billion dollars on the Pakistani projects is a historical achievement. This will no doubt add confi-dence to other foreign investors and will be a very strong economic indicator.

In order to prove that the foreign investors have made a right decision choosing Pakistan for investment, government has to act vigilantly to ensure that its institutions are on the same note with the government policies to facilitate foreign as well as local investors. Government must ensure that delays in procedure, corruption and other ill practices are not being followed.

LNG import is a quick and good solution to gas shortage but government should keep the process open so that it isn’t hurt by controversies like many projects in the past. We need to rationalize prices as subsidizing gas to consumers isn’t good for long term. The prices may increase but the government should keep the supply go-ing so that the wheel of economy keeps moving.

Pakistan, making out of crisis

FEBRUARY 2014

Pages 18-19

The adolphus complex

– Tammy Swofford

Pages 22

5th Karachi literature festival

– Afrah Jamal

D I S C L A I M E R

Utmost care is taken to ensure that articles and other information published are up-to-date and accurate. Furthermore,responsibility for any losses, damages or distress resulting from adherence to any information made available through thecontents is not the responsibility of the magazine. The opinions expressed are those of the authors and do not necessarily

reflect the views of the editor, publisher and the management. Comments and suggestions are welcome.

Exclusive

EDITOR– Tausif-Ur-Rehman

Deputy Editor– Maria Khalid

Correspondents– Aamir Rizvi– Muhammad Bilal Khan– Shiraz Nizami

ADVISORY BOARD– Haroon Akhtar Khan– Hamidullah Jan Afridi

Marketing

– Khurram Agha (Islamabad) 0334-7957571

PHOTOGRAPHY– Wahab Chughtai

GRAPHICS– Qazi

WEBMASTER– Manager Web / IT: Sohail Iqbal

Flat # 5, Block # 23, PHA ApartmentsG-7/1, Islamabad, PakistanOffice: +92-51-2890911 +92-333-5439495 +92-333-5536239Lahore Office: 18-A, first floor Releigh House, Nila GumbadEmail: [email protected]: http://www.economicaffairs.com.pkPublisher: M Sajid Printers: R.A. Printers

CONTACT

EDITORIAL BOARD– Dr Ashfaq hassan Khan– Dr Abid Sulehri– Shabbir Ali Nizami– Sajid Gondal– Zubair Malik

Pages 14-15

Pakistan’s energy economics and geo-politics

Pages 20-21

– Khurram Agha

A fashion for a cause

– Mehmood Ul Hassan Khan

Outlook for 2014........................6-7

Oil and Gas..............................12-13

How to succeed in 2014..........16-17

The Ali Zafar experience...............23

Privatization; salvation or an incomplete truth.....................26-27

Is the wolf at the door?..........28-29

Taxation reforms in Pakistan and way forward.................................30

Stand your ground when the law causes injustice............................31

Go green Pakistan...................32-33

Commercial agriculture in Pakistan.................................................34-35

The cyber side of social media.....37

PRICE: 250

Pakistan: A gold mine for investors

Pages 24-25


OIL & GAS

At the dawn of 2014 the global oil and gas industry faces a

host of questions about the year ahead. To what extent will increasing US oil and gas production reshape global markets? How will uncertainty over emerging market growth feed into global oil and gas prices? How severely will tougher regulations in some markets affect operating costs? How will project costs affect project approvals? All told, while the overall outlook remains exceedingly strong, it is also clear that the year ahead will demand greater focus and discipline among operators. This research highlights seven key trends for 2014.

Skill gaps, rising costs and tougher competition will define the industry’s barriers to growth in 2014. A shortage of skilled professionals is a top worry for all regions, but especially for North America and Europe. In Asia, high operating costs tops the list.

More cautious and targeted capital expenditure will be evident in 2014. There are more firms planning to increase spending in 2014, than those who will cut back, but there are clear signs that spending will be even more closely monitored than ever. Over three-fifths(62%) of respondents say they face growing pressure to extend the life of existing assets and increase the return on these investments.

A confident outlook for 2014, but with signs of caution. About nine in ten (88%) survey respondents are optimistic about the outlook for2014, but several signs of caution are also visible.

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SEVEN KEY TRENDS

Uncertainty over oil and gas pricing will be more prevalent in 2014. Nearly one in four(23%) industry professionals think oil and gas pricing will weaken this year, while 36% are unsure.

The industry will consolidate in 2014, with larger organizations coming to the fore. A majority of survey respondents (55%) expect to see a greater focus on larger companies, with a drive for both greater industry consolidation and supply chain standardization.

The US, Brazil and Australia are the top investment destinations for 2014. Frontier markets will also feature high up on the list. Survey respondents worry most about the political challenges of new target areas, ahead of the technical difficulties, as many look to push into East Africa, the Arctic and new deepwater locations.

A deeper industry safety culture is taking root. Six in ten industry professionals expect their firms to prioritize a stronger safety culture in 2014, with half (49%) noting that their leaders will be deeply engaged in this.

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THE OUTLOOK FOR 2014:


The oil and gas sector outlook 2014 is very encouraging. What special measures and policies have been adopted to attract investment in this area?

It is almost after a decade that a proper comprehensive petroleum concession policy has been implemented. I want to make it clear that we have not made any new policy. It is the same petroleum concession policy 2012 which was developed by the previous gov-ernment. Petroleum concession policies were made in 2007 and 2009 but earlier govern-ments remained unable to implement them.

We enforced that already developed policy which has raised the investors’ confidence that they would get the promised return.

What are the estimates for oil and gas production and how much is the shortfall?

The total oil production of the country is 90,000 barrels per day which is only 15 per-cent of the total consumption and the gap is being filled by imports. The gas production is 3.7 billion cubic feet against the constrained demand of 6 BCF. The current demand is con-strained because we don’t allow it to expand by not issuing further gas connections. The estimates for non-constrained demand for gas are 8 billion cubic feet.

The previous government has announced auction of 50 concession blocks out of which leasing licenses are being issued by your government. Does your government have plans to auction any new blocks?

The previous government has auctioned

50 concession blocks but they couldn’t issue leasing license to any of them.

After the 18th amendment, all the prov-inces became partners of 50 percent in explo-ration wells therefore federal government is bound to get the consent of provincial govern-ments for issuance of lease licenses to explora-tion companies for already auctioned blocks. We took up the matter with provinces imme-diately and up till now we have issued licenses to exploration companies for 28 blocks. Leas-ing license for 22 blocks would be issued in few weeks. The issuance of leasing licenses for 50 blocks will be transformed into a guar-anteed investment of $450 million in the next 3 years.

Yes, we are also considering auction of new concession blocks. We are also consider-ing canceling the auction of such concession blocks where the exploration companies have not made any investments. We will re-auction these blocks. Currently we are consolidating the areas and new auctions will be made in next three to four years.

According to recent estimates of EIA of the US, Pakistan has the highest reserves of shale gas

that is 105 trillion cubic feet. Are you also working to tape this potential?

Yes according to EIA, Pakistan has 9th largest reserves of shale gas and we really want to utilize these resource. We have engaged a US consultant to prepare a concession policy for shale gas. The consultant will provide the policy draft in 6 months that includes some attractions and incentives for those who work to explore shale gas. Meanwhile, to attract ex-ploration companies, we are going to offer an attractive price for first four or five shale gas wells. The current well head price for tight gas is $8 per mmbtu whereas it is $10 for offshore. The offer price for shale gas wells would defi-nitely be more than the offer price of tight gas and offshore.

After taking up the charge of petroleum ministry, you have announced that work on offshore exploration will be started in March this year. What is the progress in this area so far?

Yes, I was excited to start work on off-shore exploration and we tried to engage the ship to execute the work on this ultra-deep well but it wasn’t available. As you may know that offshore exploration is not done by rigs but it is done via specialized ships built for these purposes which carry equipment to drill deep in sea and there are only 4-5 such ships available in the world.

Now the ship will be available in Janu-ary 2015 and they will start work immediately as the exploration would be needed to com-plete before the monsoon rains start. So the exploration consortium will have 4 months period to finish the job. It will be a $1000 mil-lion project and to divide the risk, four compa-nies namely, OGDCL, ENI, PPL and UEP will have 25 percent share in it.

The LNG is considered as one of the shortest solution to overcome energy crises and your government is also working on import of LNG from Qatar. What is the current status for this project?

Pakistan does not produce enough gas to fulfill consumer demand. The exploration suc-cess ratio in Pakistan is 3:1, which is a high probability but the new discoveries of gas are small. The import of gas is the ultimate solu-tion that is why the government is working on all options for import of gas including IP gas

pipeline, the TAPI and import of LNG. As I announced earlier, the first delivery

of LNG will hopefully be made in November 2014 from Qatar. To move fast on this project, we have unbundled the project of LNG ter-minal and the import of LNG. The ECC has approved the award of contract to Engro for construction of LNG terminal at Karachi port which will be signed in the mid of March.

The task to import LNG has been given to Pakistan State Oil, which is a financially stable organization and already involved in import of oil. PSO will have two options to import LNG, either it can import LNG under PPRA rules for government to government arrangement or it can outsource the import to any third party. It is a decision to be taken by the PSO Policy Board.

Critics are of view that the import of LNG from Qatar is not a wise decision as government will buy it at expensive rates?

I always welcome positive criticism, but I will request these critics not to speculate about projects of national importance. I want to make it clear that Pakistan will import LNG from Qatar at market price and those criticiz-ing the government for import of LNG have no knowledge of international business.

Let me explain that the imported LNG will be inserted in the SSGC gas pipeline sys-tem through the terminal being built by Engro at Karachi port. The LNG will be supplied by the gas pipeline system to industry, fertil-izer factories, CNGs and domestic consumers. Therefore the stability of the supply is very important in this project. Qatar is the largest producer of LNG and is at a distance of only 4 day shipping, so Qatar suits us most and LNG from Qatar will be purchased at a price lower than the international market price.

Recently, you stated that the IP gas pipeline project would not be followed because of US sanctions. There is a clause in the contract that Iran will charge a penalty of 1 to 3 million dollar per day if Pakistan delayed the project?

The import of gas from Iran suits us more as we are next door neighbors. We are still committed to IP project and we did our job, the designs are completed, we organized bidding but ultimately the project was hit by US sanctions.

I have conveyed my Iranian counterpart that we can’t work further due to sanctions on

Iran but we will definitely move on after the relaxation of sanctions and will complete it within 36 months after sanctions are lifted.

I want to make it clear that there is NO pressure from USA, KSA or Dubai. It’s just that because of US sanctions we are unable to award contract to any ABC contractor to build the pipeline and then we also have to obtain fi-nancing for it. Every agreement has attribution clause for issues which are beyond control. Countries never go for penalties against each other; there are ways to resolve these issues.

What is the future of TAPI? Do you consider it a practical project keeping in view the security threats in Afghanistan?

The IP gas pipeline and TAPI are equal-ly important for Pakistan. If allowed by the circumstances, Pakistan will implement both the projects.

The new development in TAPI is that Afghanistan has shown its interest to buy gas from the pipeline. Earlier Afghanistan was only interested in transit benefits. You may know that the gas field from which TAPI will import gas has yet not developed and Turk-menistan was insisting to develop the gas field herself.

Now, the positive development is that the Turkmenistanis agreed to award the con-tract to a third party for development of the gas field and construction of gas pipeline, How-ever, Turkmenistan has yet not awarded the contract to any firm.

Do you think security issues are hampering the oil and gas exploration?

All the oil and gas exploration projects are associated with risk and security threat is another risk factor like many. It just increases the cost of the project. Around the world, ex-ploration companies also work in threatened circumstances such as in Africa. The oil com-panies go for risk assessment and make safety arrangements to secure the project site. In Pakistan exploration companies also hire FC soldiers to secure their sites.

The major factor that is considered im-portant in exploration business is the stability in government’s policies. If a country has a stable policy, the exploration companies will prefer to invest. Any government with incon-sistent policies cannot attract investments.

Before the start of next winter, Pakistan will start the import of 400mmcdf LNG from Qatar, which will be 25% of our pipeline supply. Though it will not completely fix the gas crises, but certainly would reduce the gas shortage in Punjab as witnessed now, Pakistan Minister for Petroleum and Natural Resources, Shahid Khaqan Abbasi said in an exclusive interview with Economic Affairs.

Sajid Gondal

The writer is a team member of Economic Affairs. He can be reached at [email protected]

INTERVIEW

– Shahid Khaqan AbbasiInvestors flocking to stable policies

Pakistan is facing an unprecedented energy crisis due to surging demand and supply gap. Its current energy needs are heavily dependent on oil and gas and the demand far ex-

ceeds its indigenous supplies. The present energy scenario suggests

that an affordable and sustainable energy road map for the country is essential to capi-talize the use of indigenous resources in coun-try’s energy mix. Development of indigenous energy resources such as coal, oil, gas, hydro and alternative sources are critical for Paki-stan’s economic growth.

Power sector

The share of hydro power was 30% of total generation in 2012-13 as compared to nearly 70% in the 1980s. Hydro power devel-opment suffered a slowdown due to linger-ing controversies about major hydro power projects despite a large potential of hydro power available in the country. According to estimates, Pakistan has a hydro potential of about 60,000 MWs, of which only 6556 MW has been tapped. Consequently, thermal power was relied upon, initially, as natural gas was abundant and cheaper than oil, it was the preferred fuel for generation. However, a shortage of gas has resulted in a greater use of expensive furnace oil and high speed diesel oil. As a result, the cost of electricity has also increased substantially.

Power load shedding continued in recent years, around 25% of the system de-mand, and has led to a substantial decline in potential economic growth. The average sup-ply remained 12,400 MW against the demand of 17,400 MW and the average shortfall of 5000 MWs is witnessed during summer days, primarily due to fuel supply constraints and low hydroelectric generation.

Oil and gas sector

According to the last Economic Survey, Pakistan has estimated recoverable reserves of 27 million barrels whereas Pakistan’s an-nual oil production stands at around 4 million tons. That is a little less than what is imported every year to meet demand. In fiscal 2012-13, Islamabad spent $5.392 billion to import 6.939 million tons of oils.

During the seven-month period of cur-rent fiscal 2013-14, 4.22 million tons have been imported against $3.3 billion, according to Pakistan Bureau of Statistics. During 2012-13, the expected local crude oil production was 74,000 barrels per day (BPD) against a target of 69,000 BPD.

The domestic gas production is expect-ed to be 4,200 MMCFD against the target of 4,791 MMCFD. A total of only 83 wells (30 exploratory and 53 appraisal/development wells) are expected to be drilled against the target of 100 wells.

Petroleum industry generally believes Pakistan’s geology is gas-prone rather than having any substantial oil potential. The fact that companies have to drill deep wells to find hydrocarbon reserves adds credence to this argument.

Energy Strategy

Pakistan’s primary energy supplies heav-ily depend upon the imported crude oil and petroleum products due to which the coun-try’s oil import bill has exceeded US$ 14.5 billion, which is a huge burden on the econ-omy. In order to curtail the oil import bill to a sustainable level and to cater for the energy needs of all sectors, the government is pursu-ing policies of attracting private investment in the energy sector with greater reliance on indigenous resources.

Pakistan has introduced Petroleum Pol-icy, LPG Policy, LNG Policy, Tight Gas Policy to attract investment and ensure energy security at affordable price. Fiscal regime of new pe-troleum policy provides level playing field to domestic and international companies to in-vest in oil and gas sector of the country.

In order to initiate work on implementa-tion of these measures, power sector reforms, mainly covering governance, pricing and legal areas which were envisaged for sustainable, affordable and reliable power supply, need to be put in place.

The following policy measures were taken to enhance Exploration and Production (E & P) activities:

• New Petroleum Policy 2012 has been implemented by the current govern-ment wherein further incentives have been provided to attract local and multi-national companies for investment in oil /gas sector of Pakistan.

• Following the bidding of 50 blocks for exploration of oil & gas reservoirs, new explo-ration licences have been issued to 28 compa-nies on competitive basis.

• Currently 126 exploration licences for exploration of oil & gas reservoirs are be-ing operated by various exploration & produc-tion companies.

• In offshore ten (10) exploration li-cences have been awarded for exploration of oil & gas reservoirs.

• Tight Gas (Exploration & Produc-tion) Policy, 2011 offers 40-50 % premium over the respective zonal price of Petroleum Policy 2009. Moreover, an additional 10% pre-mium would be given for those Tight Gas vol-umes that are brought into production within 2 years of announcement of this policy.

• Low BTU Gas Pricing Policy, 2012 also has been enforced wherein additional


Energy Security and Affordability

OIL & GAS

incentives to the investors have been given to develop Low BTU fields as soon as possible.

• Basin study has already carried out to co-relate entire data of different basins which would help to identify new play types.

• Marginal/Stranded Gas Fields-Gas pricing criteria and Guidelines 2013 Policy was approved.

• Shale Gas Framework for first three pilot projects has been approved in principal by the current cabinet.

These policies have started bearing fruit as Pakistan has received foreign direct invest-ment (FDI) of $523 million in the first seven months of 2013-14. Specifically, there was a sharp increase in FDI in January alone, as it amounted to $106.9 million. In contrast, there was an outflow of $40.5 million in the same month of the preceding fiscal year.

Outlook 2014

Pakistan’s crude oil output is expected to increase to 130,000 barrels per day in one or two years, a sharp rise from the stagnant 66,000 bpd seen in the last few years. It has already risen to all-time high of 91,000 bpd in recent weeks, according to latest Pakistan Pe-troleum Institute (PPIS) statistics. That comes months after the highest level of 84,650 bpd was achieved.

Average oil production was at 81,000 bpd in 2013, up to 13% over the previous year with most of the increase coming from the wells lo-cated in Khyber-Pakthunkhwa, especially the Tal Block. A target of 130,000 to 140,000 bpd has been fixed to achieve in next two years.

The 130,000 bpd level appears very much reachable because of the substantial rise in drilling activity. Around 76 wells were drilled last year alone.

The writer is editor Monthly Economic Affairs. He can be reached at [email protected]

Pakistan’s primary energy supplies heavily depend upon the imported crude oil and petroleum products due to which the country’s oil import bill has exceeded US$ 14.5 billion, which is a huge burden on the economy.

Tausif Ur Rehaman


OIL & GAS

Pakistan-Iran pipeline not possible due to Western

sanctions

Pakistan said that work on a pipeline to import gas from Iran cannot proceed because of sanctions imposed by the United Sates and the European Union on Tehran.

The Iranian side of the $7.5-billion project is almost com-plete, but Pakistan has run into repeated problems paying for the 780 kilometre (485 mile) section to be built on its side of the border.

Last year, Pakistan had asked Iran for $2 billion in financ-ing to build its side of the controversial gas pipeline.

Iran has the second largest gas reserves in the world but has been strangled by a Western embargo that has seen its crude exports halved in the past year.

US officials had earlier warned that the Iran Pakistan pipeline project would risk triggering sanctions aimed at Iran.

Pakistan’s federal minister for petroleum and natural re-sources Shahid Khaqan Abbasi informed the parliament that the work on the pipeline was not possible because it falls under the sanctions imposed by the US and EU. “The work on the Pakistan Iran gas pipeline project is not possible because of the sanctions imposed by the US and EU,” Abbasi said. Iranian Oil Minister Bijan Zanganeh said that his country was ready to go ahead with the pipeline agreement.

“Iran is committed to this gas agreement but until Paki-stan has not officially relayed its stance, we cannot react and make a decision,” he was quoted as saying their national news agency.

Pakistan has about 105 trillion cubic feet of shale gas and over nine billion barrels of oil - far larger untapped reserves than previously known, according to a media report.

Pakistan believed to have record gas, oil reserves

The estimates by the US Energy Information Administration (EIA) are greater than Pakistan's proved hydrocarbon reserves of 24 TCF for gas and about 300 million barrels of oil. The country cur-rently produces about 4.2 billion cubic feet of gas and about 70,000 barrels of oil a day.

According to June 2013 estimates of the EIA based on surveys conducted by Advanced Resources International (ARI), a total of 1,170 TCF of "risked" shale gas are estimated for the India-Pakistan region, including 584 TCF in India and 586 TCF in Pakistan.Techni-cally recoverable shale gas is estimated at 201 TCF, with 96 TCF in India and 105 TCF in Pakistan.

The recoverable shale oil resources for the two countries esti-mated at 12.9 billion barrels, including 3.8 billion barrels for India and 9.1 billion barrels for Pakistan.

The southern and central Indus basins are located in Pakistan, along the border with India and Afghanistan. They are bounded by the Indian shield on the east and highly folded and thrust mountains on the west, the report said.

23pc More earnings of Govt from oil and

gas sector

About 23 per cent increase in six oil and gas related tax-es and a substantial budget surpluses by the provinces helped the federal government contain half-yearly defi-

cit at Rs540 billion compared with Rs624bn of same period last year.

The country’s overall fiscal deficit was, therefore, worked out at 2.1pc of gross domestic product (GDP) for the first six months (July-December) of this fiscal year against 2.6pc in the same period last year, according to details of half-yearly fiscal op-erations released by the ministry of finance.

The ministry said it collected Rs139bn in first six months of 2013-14 on oil and gas compared with Rs113bn of same period last year, an increase of about 22.75pc. This does not include sales tax that is charged on sale of all petroleum products and natural gas at the rate of 17pc.As a consequence, the government collected Rs51.6bn as petroleum levy in first six months of FY2014 com-pared with Rs57.6bn of same period last year, a reduction of about 10pc.

On the other hand, the government collected Rs29bn as de-velopment surcharge on gas compared with Rs7.5bn in the same period last year, an increase of about 287pc.The collection on ac-count of Gas Infrastructure Development Cess (GIDC) tumbled to Rs6bn in July-Dec 2013-14 against Rs24.6bn collected in the corresponding period last year because of litigation.The ministry said the total revenue in first six months of the current year stood at Rs1684 billion compared with Rs1462 billion of same period last year, an increase of 15 percent.

The tax revenue in six months amounted to Rs1,172bn this year as against Rs1,012bn the same period last year, an increase of 15.8pc.The defence expenditure stood at Rs295bn against Rs256bn the same period last year, an increase of 15 percent.

PSO earnings rise by 150 percent in half-yearly report

Pakistan State Oil after-tax earnings rose by 150% per-cent to Rs 15.8 billion as compared to Rs 6.31 billion during the same period last year.

PSOs share price recorded an impressive growth, out-performing KSE 100 share index by 11% during the second quarter ended December 31, 2013.

The Board of Management of Pakistan State Oil Com-pany Limited was convened at the PSO headquarters, to re-view the Company’s performance for the first half of finan-cial year 2013-14.

The report says that PSO’s revenues rose 15% to Rs 727 billion for the half year ended 31st December 2013 as com-pared to Rs 630 billion during the Same Period Last Year (SPLY).

The Board expressed gratitude to customers and busi-ness partners of the company as well as the Government of

Pakistan for their unwavering support to PSO in achiev-ing all-time best results in terms of revenue

and profitability.

Pakistan to become member of SCO

energy club

As energy politics is gain-ing momentum across the world, Pakistan is going

to become a member of the energy club of the Shanghai Cooperation Organisation (SCO), an initiative taken by Russia for providing sup-port to energy projects in different countries including Pakistan.

Pakistan is expected to get financing for gas import projects like the Iran-Pakistan pipeline, Turkmenistan-Afghanistan-Pak-istan-India (TAPI) pipeline and LNG supplies to overcome the en-ergy crisis.

SCO is an inter-governmental organisation founded in Shanghai on June 15, 2001 by six countries including China, Russia, Kazakh-stan, Kyrgyzstan, Tajikistan and Uzbekistan. Afghanistan, India, Iran, Mongolia and Pakistan have been accorded observer status.

India, Iran, Pakistan and Tur-key are aspiring for full member-ship of the SCO. Both China and Russia have endorsed this status for India and Pakistan.

At present, gas politics is gaining pace across the world with Russia and United States being major competitors. After discov-ery of shale gas, the US is expected to start exporting LNG; so many countries are in the race to capture the Pakistan market, which is fac-ing acute energy shortages.

GE to hike pro-environment energy research by $10 bn

US industrial conglomerate General Electric said it would boost spending on environmentally friendly energy research by $10 billion by 2020, in-cluding on fracking technologies and wind turbines.

The new investment extends and builds on a research and development (R&D) program launched in 2005 aimed at finding technologies that reduce costs and environmental impacts for GE's customers and its own operations, the compa-ny said. GE said the new investment will support research in alternative technolo-gies to replace water in hydraulic fracturing, known as "fracking", and improve wind turbine and power plant efficiencies. The program, "ecomagination", has already generated more than $160 billion in revenue, and reduced GE's green-house gas emissions and freshwater use, said the company, whose wide portfolio of products includes aircraft engines, power plants, geospatial systems and house-hold appliances.

GE has invested $12 billion to date of its $15 billion commitment on the R&D program through 2015. Jeff Immelt, GE chairman and chief executive, said the now $25 billion program was one of the conglomerate's most successful cross-company business initiatives. "Bold investments in ecomagination research and development have resulted in strong returns for shareholders and improved cost and emissions savings for our customers," he said in a statement.


ENERGY

Energy is life to economic development and Paki-stan’s energy sector is at cross-roads. Energy sparks the socio-economic prospects of the country where its shortage has already spoiled our GDP (4 %) tremendously. It has also forced the closure of

hundreds of factories (including more than five hundred alone in the industrial hub city of Faisalabad), paralyzing production and exacerbating unemployment.

Although government of Pakistan announced new national energy policy 2013-2018 along with so many incentives and priorities but its overall energy economics and geo-politics is a complicated and complex phenomenon. It has internal dynamics, regional spillovers and international repercussions too.

Pakistan’s mix of energy production has been tilted to-wards thermal power as compared to hydro-power by successive governments and eventually the government and as well as com-mon people are in the line of fire, continuously facing the unbear-able heat, humidity and price hike around the clock particularly in the summer season. Expensive energy mix, circular debt and inefficiency of distribution companies are the major reasons for the current energy crisis in the country.

Line losses (20-35 percent due to poor infrastructure, mis-management), lack of capacity building costing taxpayers an ad-ditional Rs2.70 per unit over and above the cost of generation (averaging around Rs12) and theft of power supplies (20-25 %, power theft alone amounts to more than Rs140 billion per an-num) has already produced ripples in the fabric of Wapda and its associated subsidiaries.

Geography of provinces is also not so friendly with Paki-stan’s energy production mechanism and national requirements. Intra-province conflicts, confu-sions and con-frontations have been one of the main reasons of its energy re-sources progress and production as well. Moreover, lack of strategic visions and vested

interests of the ruling elite badly damaged the energy sector of Pakistan. Imbalanced national preferences and priorities have weakened the energy sector in all parts of the country.

It seems that unlike the global prac-tice of producing electricity through cheap-est energy sources, Pakistan is still fulfilling its energy needs through expensive oil and gas-based power plants, whereas in India and China, 68 percent and 79 percent of electricity is produced from coal respectively.

Pakistan’s Energy Production Mix %

Thermal 36

Gas 29

Hydro 29

Nuclear 5

Source: Federal Ministry of Industries

Now national economy has been com-promised due to energy deficit. Social devel-opment has not been up to the mark due to looming energy shortage. Foreign reserves (import bill up to $15-16 billion a year) have been utilized on the make-shift arrangements of energy production in the name of IPPs or rental power. Pakistan’s energy fuel mix is not sustainable and measures such as setting up hydel and coal plants and replacing oil-fired plants with coal plants to bring down the over-all cost of power generation are required.

World’s Energy Production Mix %

Coal 41

Gas 21

Nuclear 13

Oil 5

Renewable Sources 3

Source: Global Energy Report (2012-2013)

For the last so many years government has been doing its level best to import energy from other countries in order to fulfill the gap of energy. In this regard, so called dream gas pipeline (Iran-Pakistan-India) confined now to Iran-Pakistan, Turkmenistan, Afghanistan, Pakistan and India (TAPI) and Central Asia South Asia (CASA)-1000 have been rigor-ously followed. Nothing has yet been materi-alized.

The TAPI gas pipeline is based on mu-tual friendship, respect, and need. The project will also result in the economic prosperity, re-gional cooperation and above all smooth and easy availability of energy resources i.e. gas. The availability of gas will help build eco-nomic growth, development and eventually a stronger Pakistan.

TAPI specifications

TAPI is a 1,680-km 56-inch diameter gas-pipeline starting from Dauletabad field in Turkmenistan to Fazilka at the Pakistan-India border, passing through Herat and Kandhar in Afghanistan and Multan in Pakistan. It is estimated that the pipeline will carry $3-5 tril-lion in oil and natural gas from the Caspian Sea basin via Turkmenistan, Afghanistan, and Pakistan. It will be profitable for investors. The project cost was initially estimated $3.3 billion in 2004 which has now been increased to $7.6 billion in 2008. Despite high inflation-ary ratios the project is still considered eco-nomically and financially viable. The Pakistan government has already awarded the contract for laying the TAPI gas pipeline project to the US-based International Oil Company (IOC).

IP gas pipeline

The IP gas pipeline ($ 7.4 billion) has apparently been finalized. It would initially transport 60 million cubic metres of gas (2.2 billion cubic feet) daily to Pakistan. Talks on the 2,600-kilometre (1,615-mile) Iran-Pakistan-India pipeline began in 1994 but have been stalled by tensions between India and Pakistan and disagreements over transit fee. Transit fee ranges from $400 million to $750 million a year and Pakistan may be able to earn, as much as $500 million a year if the proposed gas pipeline is materialized. In fact, Pakistan stands to earn about $14 billion in 30 years, including $8 billion in transit fee, $1 bil-lion in taxes and $5 billion in savings.

Bitter ground realities

Call for accelerating power imports from neighboring nations like 1,000MW from Central Asian states, 500MW from India and 1,000MW from Iran would not easily work. Supply of energy from Turkmenistan, Afghan-istan, Pakistan and India (TAPI), Iran-Paki-stan dream pipeline (IP) and even India would badly suffer from the emerging geo-political and geo-strategic trends in the region. Durable peace and political stability in Afghanistan would be crucial for importing energy from the CIS. In case of IP, US legislations and dip-lomatic pressure would not be easy to crack. Even after the lifting of sanctions from Iran, this project would not be easily processed due to ill designs.

Strategic policies of the recent regime

Prime Minister Nawaz Sharif launched the construction of the country’s biggest

atomic power plant. The 2,200-megawatt plant is to be built with Chinese technical assistance on the Arabian Sea coast at Paradise Beach, 40 kilometres west of Karachi. . Pakistan Atomic Energy Commission engineers will work on the project with help from the China Atomic Energy Authority. It will make nuclear pow-er as the biggest source of energy in Paki-stan which is already operating three nuclear plants, supplying 740 megawatts of power, in the country for the last several years.

The fourth one is now also being built. The new project will be the fifth one. The con-struction of the 2,200 megawatt plant, the fist of the new series of six, has just been started. This $10 billion Coastal Power Project called K-2 and K-3 is scheduled to be completed in six years.

Government has already started work on wind energy generation of 2,500 megawatts, 1,000 megawatts under the Central Asia-South Asia project, and Tarbela-Five expansion proj-ect which is to be completed by 2017. Many Chinese, Korean, and many other countries are visiting Pakistan in order to explore win-win situation. Many projects have already been started with the help of China especially in the fields of coal, solar and wind energy in Punjab. Its biggest solar and coal projects are being carried out in different parts of Punjab. The government has also started work on the Pakistan Power Park at Gaddani, on the Ara-bian Sea Coast close to Dubai. It consists of 10 coal-based electricity projects. Each project will generate 660 megawatts of power.

The government also plans to import liq-uefied natural gas (LNG) from GCC to over-come the outages and load-shedding of natural gas, that especially hits the country’s indus-try. Cooperation and collaboration with UAE (Masdar, solar energy), Saudi Arabia (shale gas) and Qatar (LNG) would be win-win situ-ation for all the countries.

Pakistan’s energy economics and geo-politics

The TAPI gas pipeline is based on mutual friend-

ship, respect, and need. The project will also result in the

economic prosperity, regional cooperation and above all

smooth and easy availability of energy resources i.e. gas.

The availability of gas will help build economic growth, development and eventually

a stronger Pakistan.

The writer is a research scholar, specializes in geo-political issues of the GCC, CIs and South East Asia. He has keen interests in cross cultural dialogue and conflict resolution. Mehmood Ul Hassan Khan

MAR 201417http://www.economicaffairs.com.pk

Clamping down on costs will absorb the industry’s attention in 2014, with efforts ranging from greater supplier competition through to introducing more flexibility in the labour force. It may be crucial to recognize the scope for cost savings and act on this, since during 2014, cost will be a prime determinant of which projects will go ahead and which won’t get off the ground. “Major players can see that the dollar per ton per year capex has the potential to be reduced considerably in over heated markets,” says Worley Parsons’ Sullivan.

OIL & GAS

HOW TO SUCCEED IN 2014While the outlook of 2014 remains robust overall, it’s clear that greater attention is being given to soaring costs and a greater focus on challenging new environments. Those firms that are likely to succeed will do well to bear the following in mind:

Find innovative cost solutions to maintain margins

Narrow the focus of spending

Standardize global procurement

Maintain a frontier spirit

Be Safe, not sorry

More firms are targeting their capex more carefully, such as through more targeted deployment of capital across geographic locations. There is also greater pressure to drive up return on investment. “Against a background of rising expenditure amid low production growth, it should come as no surprise that companies will be focusing their efforts on targeting their capital expenditure far more effectively,” says Statoil’s Waemess.

Growing cost-consciousness will prove a trigger for shifts in the supply chain, with standardized procurement terms becoming increasingly common. This is also underpinning a move to larger, and fewer, suppliers for many companies. Fluor Offshore Solutions’ Daigle says that now oil companies are under such pressure on quality management, they should use standardization of global procurement as a way to assist on this. “Jumping around between different vendors is not always good if your processes require an element of quality control,” says Daigle.

Technological advances are helping to open up new acreage for production in in hospitable terrains, with the subsea a particular focus of activity. The commercial success rate in the Barents Sea is now extremely high, according to North Energy’s Karlstrom, whose firm is active in that region. “There is no doubt that we are facing a breakthrough, and I think we will see activity levels this year that we have never seen before,” he says. While these frontiers throw up complex new challenges, they offer the potential for outsized returns for those with the necessary risk approach and investment capacity.

Successful firms will be those that make safety and HSE issues a core part of their culture, both internally and throughout their supply chain. They will ensure that these issues are embedded in their leadership, and those contractors, vendors and operators are all aligned. “While it’s great to have the procedures and the processes, the key to success is to have people who are personally committed to safety – and that the corporate leadership is personally committed to executing those systems effectively, every day, all day long,” says the US Center for Offshore Safety’s Williams.

MAR 2014 16 http://www.economicaffairs.com.pk


REPORT

lines. These men are able to instill camarade-rie. As men begin to align as part of a soldier's camp the goal is to see the development of a lethal fighting force. The United States Marine Corps has a distinct training program which first strips the individual of identity. The train-ers then begin from the bottom up, and craft the Marine to a new identity, that as a member of the soldier's camp. Once identified with the camp, the art of war is quickly taught.

Effective professional military leader-

ship grids efficiently corral talent pools which include lethal personalities. When properly identified and tasked for the needs of a nation, such individuals can perform acts of great per-sonal sacrifice and cause others to follow their lead. But the stuff of greatness is not far re-moved from acts of great evil, when deployed against innocent civilians. Let's move to docu-ment analysis.

* Analysis of Jihad against Jews and

Crusaders: The percentiles for this document fall

into a predictable range.

There is a strong leaning toward the need for credibility, hence, the voice of an Alpha male, a dominant guardian. The noble wolf speaks of crusader armies spreading like locusts, plundering riches, attempts at annihi-lation of the Muslim people.

To further strengthen the document, ideology is used to make the words of Usamah bin Ladin read like an authoritative mandate.

Although the percentile for the soldier's camp (art of war) is small, the author identifies every living Muslim as a member of the camp. “The ruling to kill the Americans and their al-lies – civilians and military – is an individual duty for every Muslim who can do it in any country....” This broad-based strategy was a dangerous proposition then and continues to be a dangerous thought today. To erase the boundaries between combatant and civilian tramples on the work of Jean Jacques Rous-seau and other philosophers who suggested that a medieval order of military operations which pillaged, raped and looted – was mor-ally repugnant.

* Analysis of Document from Chech-

nya: Movladi Udugov: “It is war for the way of life....”

The percentiles for this document are statistically similar to the first:

While “Jihad Against Jews and Crusad-ers” maintains a revolutionary tone, the inter-view of Movladi Udugov has a stronger geo-political cadence. The noble wolf speaks with tremendous bravado and almost a baiting tone. This is even noted within the doctrine of war. But the title “It is war for the way of life....” clearly establishes that self-determination and national autonomy continue to drive Chechen forces into an asymmetrical battle space. The soldier's camp has long been established within the Caucasus. Chechen fighters are renowned for the strong discipline within their ranks and for hardened military prowess. So remarks which address the soldier's camp in Chechnya also make the jump to address the challenges and hurdles of camps outside the region.

Toward the end of the interview there is an interesting statement: “Democracy has appropriated the monopoly to legitimate use of force. Everybody else is denied that right.” This calls for a response. What is a legitimate

use of force? Does it include lethal acts against non-combat-ants?

* Analysis of Statement of Abu Bakr al-Baghdadi: Re-lease date January 2014

The percentiles for this document fall in a different range than the prior two as shown in below pie chart.

Dangerous. Predictably

unpredictable. Is there an inner circle quest to wrest the title of Amir from al-Baghdadi? These are the things I ponder when reading the document and crunching the numbers. Al-Baghdadi has little concern for real issues of state, or the fruit of diplomacy. His strong ideological leanings have given him the ability to harness a lethal force which is highly de-pendent on bomb-makers to inflict maximum carnage. A wave of car bombings and targeted

assassinations attest to his war standard. But his January 2014 statement shows a consistent effort to both rally and unify the ranks which serve under his command. He addresses both the offensive and defensive posture of the sol-dier's camp. Does he need to bolster the ego of his soldiers? The weeks ahead will prove interesting in Iraq.

The Adolphus Complex is a rudimenta-ry model. Drilling deeply into the documents after the establishment of percentages is the more tedious work. What voice does the noble wolf use in defense of his arguments? What is the nature of his doctrine of war? How is he able to unify a command, instill loyalty, and accomplish his mission? Of utmost impor-tance, what part of the personality has the big-gest draw for any given demographic? While some are drawn to message, others are drawn to mission. There are other individuals who become soldiers of fortune because of an ach-ing psychological lack. They want the war ex-perience within the context of the camaraderie of the ranks. The alarming movement of young Muslims from the West into Syria is probably driven by psychological lack and a poor sense of well-being. The stable powers work with another weapon. It is an active denial endeav-or based on legal action. The individuals who make the mad dash to war are placed on a no fly list and stripped of legal status.

War never really makes good sense. The

toll on mankind and on the human spirit can-not be measured. But if there is to be war, let it be confined and contained within legally and internationally recognized chain of command structures. Simply put, the world can be a safer place when professional standing armies fulfill

their duties. But the world is a more dangerous place when men with an Adolphus Com-plex become non-state players within the asymmetrical battle space. When the commerce of non-state players is funded from interested national enti-ties, the civilian population is the ultimate prey. And it is men with lethal personalities who are capable to speak, instruct, and command. The Adolphus Complex. It exists.

https://en.wikipedia.org/wiki/Gustavus_Adolphus_of_Sweden

http://faculty.history.wisc.edu/sommerville/351/swedish%20invasion.html

The Adolphus Complex

Lethal personalities. Every pro-fessional standing army retains leadership with lethal person-alities. The doctrine of war, a command and control environ-

ment, and need for strategic depth lock these individuals into a trajectory of service. Within state-mandated chain of commands which fall under the authority of a Commander-in-Chief and parliamentary body such men are highly prized. But asymmetrical attack is the new order of business. Eviscerating attacks are targeting civilians. The urban warfare tac-tics create unmanageable humanitarian crises across the Middle East and African continent. So it becomes necessary for both soldier and scholar to share their weapons. For the soldier, the basic weapon is one of lethal force. But the scholar has an equally formidable weapon. It is the pen. Today I will profile three lethal

personalities, who exhibit an Adolphus Com-plex. One document will be used for each profile.

The first is the well-known “Jihad Against Jews and Crusaders”, released on 23 February 1998. The second document is based on an interview coming out of Chechnya in June 2008. The third offering is recent. The time stamp is January 2014 and makes it way to my desk from a very active jihad portal. En-ter the Intellectual Battlespace (IB) with me.

The triad model is a simple one. Let's

identify the traits.

NOBLE WOLF: Statesman Leaders with the strength of a noble

wolf have a strong sense of destiny regarding their place in the world. They consider them-selves as both statesman and guardian of the greater good. Their sense of guardianship of the values and the culture require defense at all costs. This preservation of values includes bloodshed. When they enjoin the fight they believe in the right of their cause, in fact, the utter nobility of their cause. The belief in their own moral superiority and infallibility make them hard to subdue. They are not averse to risk. Each new risk, runs like adrenaline in their veins. These men display strong nar-cissistic tendencies. As they rise within the

chain of command they function as a magnet for other narcissistic personalities. The “noble wolf” personalities benefit chain of command structures. A bifurcated chain of command doctrine of nurture and cordon keeps them in check. But the nobles wolves exist. We do not easily note their presence outside the lair.

WOMB: Doctrine of War Men with a strong doctrine of war value

the ideology which is invested within them. This ideology can be self-generated, taught in the formal classroom or formulated dur-ing the heat of battle. Out of this womb of knowledge they show formidable leadership qualities which draw others to join them from quarterdeck to theater of battle, and onward.... to the grave. Men with a heavy reliance on a doctrine of war demand unquestioning loy-alty regarding their command and control of the battlefield configuration. Good order and discipline is mission essential. A strong doc-trine of war and distinct ideological tethers are needed to maintain mission focus.

SOLDIER'S CAMP: Art of War Men with an ability to unify others un-

der a banner of common cause and mission accomplishment use a distinct skill set to build the soldier's camp and replenish the battle

Tammy Swofford

The writer is a freelance journalist and author of the novel Arsenal. She can be reached at [email protected]

Wolf 39 %

Wolf 39 %

Womb 45 %

Soldier’s Camp 16 %

Soldier's Camp 13 %

Wolf 40 %

Womb 47 %,

REPORT“A fashion show for a cause”

A good candidate for miracles is the story of this young social activist who has given these women with physical disability a way to become sole breadwinner of the family by doing wonders out of mere paper. Touched by the massive victimization of the horrendous earthquake of 2005 and inspired by the strength of these earthquake victims who found shelter at a village on the outskirts of Islamabad, the Rotary Club of Islamabad Renaissance (RCIR) introduced the paper bead-making at the paraplegic centre in order to generate income. Strips of waste paper are rolled in order to make a variety of paper beads supported by chains and strings which finally takes the form of necklace, earrings and bracelets.

To put this beautiful miracle in the picture and pull funds together, a successful fashion show was organized by Paper Miracles, in collaboration with RCIR Renaissance and Hunar Entrepreneurs at Marriot Hotel, Islamabad. The objective of the event was to raise funds, primarily through ticket sales, to support the beneficiaries of Paper Miracles which is a social enterprise and a flagship project of the Rotary Club, specializing in high-quality hand-crafted recycled paper

jewelry. The reach of this pioneering social enterprise continues to expand beyond Islamabad to communities in northern and southern Pakistan, directly impacting the lives of women with limited employment opportunities

and mobility access.The models walked in style showcasing outfits from leading designer labels: Bina N Sultan, SNS,

NAZ Collections and NZK. Tariq Amin’s Saloon, led by Ms. Fayeza Amin, managed the choreography, hairstyling and make-up with great enthusiasm and sheer professionalism.

The show was finely balanced between glamour, modesty and surprise, with well-timed filler ac-tivities that allowed models time to change outfits. This included a documentary showing and a well-coordinated mime performance that moved the crowd, along with raffle prizes from the sponsors of the event for the lucky supporters of the movement. Generous sponsorships from RCIR member organizations and Paper Miracles supporters ensured the seamless execution of the event.

Three paraplegic beaders who were severely injured in the earthquake were introduced to the audience along with the Paper Miracles team that works to create the jewelry and at

the very end Ms. Elli Takagaki, the founder of Paper Miracles and president of Rotary Club, shared the inspiration behind the movement:

Displaced from their homes and forced into wheelchairs, one would think their spirits would be broken. But these women have demonstrated inspiring resilience and

unyielding commitment demonstrating their courage and desire to rebuild their lives,” said Elli. “Regardless of experiencing immense pain and trauma, these

women continue to move forward with a positive attitude and an increased will to lead a normal life, a miracle in itself.”

The highlight of the event was when Chief Guest Peter Heyward, the Australian High Commissioner, along with his wife, Susan Heyward, appeared on the ramp along with the spouses of Ambassadors of the Eu-ropean Union, Hungary and Bulgaria to advocate for the movement. The diplomatic and expat communities showed up in large numbers along with

other influential members of the community ranging from the field of jour-nal- ism to philanthropy.

“I have had a wonderful evening. I felt like a princess in that long green dress! And it was my privilege to support the wonderful work of Paper Miracles. It is a great project!”

– Susan Heyward, Goodwill Ambassador for Paper Miracles

Khurram Agha

MAR 201421http://www.economicaffairs.com.pkMAR 2014 20 http://www.economicaffairs.com.pk


Like Rick’s from Casablanca, people tend to gravitate towards the Karachi Literature Festival (KLF). To rendezvous with authors, (global & regional), journalists (foreign and local), diplomats, filmmakers, celebrities, publishing giants, analysts & social me-dia pundits. To hail divergent views and forge lifelong connec-

tions while sprinting from session to session; at author signings by make-shift book stalls, in the midst of earnest discussions, during lively Q/A’s and at coffee stands.

KLF, which became a part of Karachi’s social scene in 2010, is a por-tal to a realm where discourse is welcome and diversity is celebrated. Where elitism gets shunned, and cultural bonds are reinforced.

Those who ventured out might have come upon beloved idols sans entourage mingling with the common folk, calmly standing by a pillar if they couldn’t find a seat; Zeb (other half of Haniya) or Tina Sani humming to the beat of something called a Shurti box under the canopy, Shanaz Ramzi by the sea-front bravely recreating recipes from her book on Pakistani cuisine or Gandhi’s gracious grandson engaged in a diplomatic dance after an awkward encounter with an audience member.

The 3 day event (7 - 9th February 2014) held at Beach Luxury Hotel welcomed an estimated 70,000 visitors, despite the strike and the per-petually grim backdrop. It comes once a year and is free. Inside it mirrors a miniaturized global village (of sorts) that uses its literary credentials to pay homage to the arts through energizing conversations, steer free flow-ing ideas to safe harbour and raise the stature of regional languages.

This year, 11 nations were represented, 280 speakers hosted, and 28 books launched. Also, 3 Pakistani books were honored - with the KLF Coca Cola Best Non Fiction (Osama Siddique), KLF Embassy of France Prize (Uzma Aslam Khan) & the KLF Peace Prize (Akber Ahmed). KLF 2014 was sponsored by HBL, and co-sponsored by Consulate General of the Federal Republic of Germany & the Goethe Institute. The festival, which came to Islamabad in 2013, is the brainchild of Ameena Saiyid OBE, MD OUP (Oxford University Press) & Asif Farrukhi. The next Islamabad Liter-ary Festival will be held in April 2014. Afrah Jamal

The writer is a freelance journalist who blogs at htp://afrahjamal.blogspot.com. She can be reached at [email protected] and on twiter @Afrahjh

KARACHI DIARY

Afrah Jamal

A forlorn figure making portraits in hotel lobbies may not be newswor-thy. The flash-forward of him wan-dering his old stomping grounds however can make headlines. By

then he has acquired some elegant titles that go well with stardom, while retaining a measure of humility that keeps him grounded.

Renowned musician and actor Ali Zafar has been in the game for a decade. His name is listed in ‘Wall Street Money Never Sleeps’ (2010) - sound-track section. He has an array of awards under his belt and a line-up of movies & songs to his credit.

He saunters on stage to take his place as the star of the evening but happily shares the spotlight - with a fan, randomly chosen for a photo-op, with nimble footed celebrities who waltzed in and in some cases, leapt out, and Shahbaz – the surprised looking technician who got his 5 minutes of fame in exchange for some bottled water.

The singer scores with his generosity and en-dears himself to listeners by doling out mini doses of philosophical musings inlaid with self deprecat-ing humour. A string of surprise cameos follow. All this takes place in the backdrop of Hum TV’s Valentine day celebrations, aptly titled ‘Dil Jhoom Jhoom’ held on 31st January, 2014 in Pearl Conti-nental, Karachi.

The Ali Zafar experience becomes interactive when Faisal Qureshi, of the ‘Dr. & Billa’ fame now seen in U-fone adverts, who hasn’t attended a live show in years appears on stage, full of praises, and slightly apprehensive at what the singer might say. Ali has a reputation of being blunt. But other than a humorous dig at not writing a film for him, Faisal escapes unscathed. Occasionally Ali lapses into ‘no woman no cry’, spliced in with random political observations. He believes that enmity between 2 warring nations gets them nowhere and advocates talent exchange programs insisting that collabora-tion would solve many problems. His film, ‘Total Siyapaa’, due for release on 7th March is reportedly patterned after a similar theme.

Junaid Khan, with whom he performed an impromptu little duet, believes that there are few who have mapped their own destinies and Ali is one of them …’ An aspiring singer, sketch pad in hand with no money to record a song, and no prospects on the horizon, qualifies.

Sound Check:



INTERVIEW

Dr. Miftah Ismail is a prominent industrialist and economist who is currently serving as the Chairman, Board of Investment. He holds a PhD degree in Public Finance and Political Economy from Wharton School of Business, University of Pennsylvania and worked at International Monetary Fund as a professional economist.

Pakistan: A gold mine for investors

For the year 2014,oil and gas sec-tor could be investors’ heaven. Some of major projects such as Thar coal mining, Sindh wind power and Gadani power proj-

ect have been inaugurated while a number of projects are in the pipeline. The government is providing an investment friendly environment but bringing substantial investment to finance these projects is a Hercules task as security is the foremost challenge being faced by inves-tors, said Dr. Miftah Ismail in an exclusive interview with Economic Affairs.

What investment opportunities do you see in the oil and gas sector of Pakistan?

As a result of these financial and struc-tural reforms, this sector has already emerged as one of the most attractive sector for invest-ment in the country. Pakistan is rich in natu-ral resources having huge sedimentary basins stretching over 825,000 sq. kms., offering im-mense potential for exploration and develop-ment of natural resources with an exploration success ratio of 1 : 3.5.

If we look at the existing options then coal in the deserts of Sindh is like gold mines. Every coal mine in Sindh is worth billion dol-lars. The largest coal reserves of Pakistan lo-cated in Thar has approximately 184.623 bil-lion tons of coal. Furthermore, there are gold mines along Tethyan belt of Baluchistan that contains 25 million ounce of gold, 332 billion pounds of copper, 25 billion tons of marble and 1.5 billion tons of granite. Not having seized the opportunity yet, mainly due to secu-rity issues in the region, paints a murky picture of Baluchistan.

What are the factors hampering investment inflows?

You may wonder that the return on in-vestment in Pakistan is 17% and investors are allowed to takeaway hundred percent of their profits but still the FDI inflow are not impres-sive. Unfortunately, Pakistan has lost almost all positive indicators of the Global Competi-tiveness Index (GCI) which measures com-petitiveness of an economy on the basis of 12 major indicators. On account of poor perfor-mance, Pakistan is ranked 133 out of 148 in the global competitiveness for which I don’t want to blame the previous government. It was mainly the energy shortfall and the law and or-der issues hampering investment inflows.

What measures have been taken by the BOI to boost foreign direct investment (FDI)?

In order to boost FDI in Pakistan, spe-cific investment policies and procedures have been designed for individual sectors, to cre-ate an investor-friendly environment. Various incentives have been offered to attract FDI, including repatriation of capital, capital gains, dividends and profits.

Pakistan is a huge consumer market and a big attraction for investors. To cash this po-tential of our country, the BOI is planning to organize an investor’s conference in Islam-abad in May this year. In this conference we will showcase the variety of investment oppor-tunities to our foreign investors.

Moreover, BOI would try to improve Pakistan's ranking of ease of doing business which is currently 110th among the 189 world economies. We would like to see Pakistan at 80.

BOI is vigorously pursuing the target of raising the investment to 20 percent of the GDP in the next four to five years, which has been dropped to 12 percent at present.

How is our agriculture sector potential for foreign investors?

Our biggest sector having potential is the agriculture sector. I think it is still unexplored or it has not been really looked at by the real investors who are in the agriculture business. It is a vast area with a number of fields and busi-nesses which can attract massive investment. If we take the example of milk, Pakistan is the 4th largest producer of milk and 80% of our milk is still sold loose. So it means all this 80% requires investment. Similarly we need huge investment in storage and warehousing. We

still store our raw materials in open storages places. These days it is stored in silos around the world which maintains a certain tempera-ture and moisture for every product. Hence exponential potential still exists in milk, meat, rice and fruit markets.

How successful was your visit to China?

It was the first state visit of President Mamnoon to China. A delegation led by Chief Minister Punjab Shahbaz Sharif was also vis-iting and there was JCC (Joint Cooperation Committee) meeting to attend. During the visit we held series of meetings with the top leadership of China and discussed a whole gamut of issues ranging from strategic bilat-eral relations to further cementing economic and trade relations.

The purpose of this visit was to strike agreements with China for joint energy and infrastructure projects that includes construc-tion of a motorway from Lahore to Karachi, upgrading a stretch of road from China's bor-der to Islamabad, an airport near Islamabad, Gadani power plant, new roads in Gwadar and to upgrade rail infrastructure between Lahore and Peshawar.

The most focused thing during the visit was the Pak-China Economic Corridor that would prove to be a game-changer in ushering a new era of socio-economic development not only for the people of the two countries but also for the entire region. Generously, China agreed to extend its cooperation in all areas.

The economic corridor is a compre-hensive infrastructure package worth $18-20 billion with a wide range of aspects including Gwadar-Kashgar Highway, construction of motorway from the eastern city of Lahore to the southern port of Karachi, upgrading rail-way infrastructure between Lahore and the northwestern city of Peshawar, bullet train, new roads in Gwadar, fibre-optic cabling and gas and oil pipelines. Work on these new proj-ects will open enormous employment oppor-tunities and generate demand for raw material e.g. cement, steel and subsequently give a new life to our industrial sector.

Within 3-4 years you would see roads on ground from China’s border to the Pakistani capital. Thus this mutual cooperation between both countries will be beneficial in terms of improving our economy and will take Pak China friendship to a next level.

Maria KhalidPakistan is a huge consumer market and a big attraction for investors. To cash this potential of our country, the BOI is planning to organize an inves-tor’s conference in Islamabad in May this year. In this conference we will showcase the vari-ety of investment opportunities to our foreign investors.– Dr. Miftah Ismail

The writer is the Deputy Editor of Economic Affairs. She can be reached at [email protected]

These days with the news of the government’s agenda of privati-zation, many questions are mak-ing the rounds.Why privatize? Why might privatization fail?

What is needed to make privatization work? To answer these questions, it is usually ar-gued that government’s intervention causes economic inefficiencies. There are many who support privatization and there is no dearth of those who are protesting and arguing against it.

The debate on the issue is raging and both the camps are putting forward their argu-

ments. According to PIDE Vice-Chancellor

Dr Rashid Amjad,

“Policy stances which reflect our best econom-ic interests and take into account the political economic dimensions should be adopted.” In his view, there is a need for a refurbishment of the system for increasing efficiency and pro-ductivity of loss making public enterprises

There are many pro-privatization experts like, NUST Dean Ashfaq Hassan Khan, “Ben-efits of privatization help reduce the country’s debt burden and also help improve the alloca-tion of resources.”

State owned enterprises (SOEs) are gen-erally considered unproductive all around the world, primarily because they serve the politi-cal masters and the bureaucracy more than the business and the owner (state) they represent.

The privatization of these SOEs is con-sidered to be the solution on the premise that the private sector is more efficient and cost effective than the government. The role of

government should be narrowed down to policy making and ensuring that the right business environment exists. Efficiency of a government in running any busi-ness can be captured in these words of Milton Friedman, “If you put the fed-eral government in charge of the Sahara Desert, in 5 years there'd be a shortage of sand.”

Present government has embarked on a strategy for privatizing a number of SOEs. Why should these organizations, like Pakistan Steel or Pakistan International Airlines (PIA) be privatized? They are inefficient and poorly managed and on top of that they are a heavy burden on the national kitty as they are costing Rs400-Rs500 billion annually. They wear the crown of destabilizing the budget adding bur-den to the national debt. How can a financially poor country like Pakistan continue to foot the bill of the inefficiencies of these institutions? In the words of Margaret Thatcher “The prob-lem with socialism is that you eventually run out of other peoples' money.” Same is the case here that we are running out of other people’s money to fund these giant government owned businesses.

The debate on the point of “to be or not to be”; “To privatize or not to privatize” is relatively simple. For this part of the debate,


ANALYSIS

it is easy to see the writing on the wall. These SOEs cannot survive without budgetary sup-port from the government. They are the mega employment exchanges for the kith and kin of the high and mighty. Do we really want to add thousands of workers to already bankrupt in-stitutions? For how long can we rely on our friends and masters to help us with funding support, debt and grants to keep these giants afloat? Privatization is the answer to many of these woes. But privatization as an ideology is not the solution to all the ills that befall the public sector.

Privatization for the sake of privatization is not the answer. Privatization has worked in many cases and it has failed in many other in-stances. According to Kevin R. McDonald who published his article “Why Privatization Is Not Enough” in Harvard Business Review; that most newly privatized companies need domi-nant, experienced shareholders to compensate for the weaknesses of managers. Without the backing and nudging of such shareholders, companies tend to operate in the same ineffi-cient ways they have learnt over the years.

Kevin further noted based on his re-search that the positive effects of privatization are not spontaneous. Investors earn outstand-ing returns only when they themselves add value in the form of leadership, systems, expe-rience and direction.

Privatization taken as the salvation of all the woes of state-owned enterprises, seen as a panacea for improving corporate governance, management, and performance may be an in-complete truth and therefore, in Kevin’s words “it’s like a runway that is just a bit too short, extremely dangerous.”

Developing on the stories that Kevin R. McDonald put forward through his research in Poland, there were many success stories like Thomson Polkolor which was a joint venture post privatization between Thomson, the French electronics giant that acquired RCA in 1987, and Polkolor, a Warsaw-based producer of picture tubes for color television sets. Problems were the same as we see in our SOEs, very big payroll and no cash to pay the employees. There was urgent requirement of capital, better management, better work attitudes, and an injection of basic business skills and procedures. The main sources of operational difficulties were the lack of sense of responsibility in the employees and lack of motivation to improve productivity.

Nevertheless, the Thomson Polkolor joint venture achieved impressive financial re-sults in first 16 months of operation. Its sales doubled, the joint venture generated an operat-ing profit in the same period. It started paying taxes, whereas the former state-owned enter-prise paid no taxes at all.

An example of privatization gone wrong

is Krosno Glass Works (Krosnienskie Huta Szkla). Krosno was privatized in November of 1991. Important aspect of this privatization was the way the ownership was distributed between the government, employees, develop-ment bank and general public. After the gov-ernment which held 35% of the shares; 28% of the shares were widely dispersed among the public. The remaining shares were held by the employees, bank and another company pur-chasing the products from Krosno.

Krosno’s revenues fell dramatically af-ter privatization. One of the reasons was the worldwide recession but that was not the only reason. The management of the company failed to respond to the falling sales and was unable to exploit the only profitable business of hand-blown glass.

Management’s failure to exploit their profitable line of business hurt the company. Unfortunately, there was no dominant investor with sufficient experience to turn this around. Replacing the company president twice in two years was the board’s response to this prob-lem. The inadequacy of the corporate gover-nance revealed itself and the dispersed share ownership was seen as the reason behind this lackluster performance. Contributing reasons were no market-oriented governance; board members lethargic participation, government nominated members failing to attend the key board meetings. This pointed to one big flaw that there was no strong third voice in the shape of strong sponsor guiding the management.

In various other studies it has been point-ed out that certain positive effects are evident from all privatizations, many of these related to sales effort. But the overall performance is more linked to a dominant shareholder whose intervention is the key to improving corporate performance and governance.

Privatization as an ideology that has to be followed for the sake of it would not work. Also the experience of privatization has given out mixed results all across the globe. Evi-dence suggests that privatization which results in distributed and fragmented share holding has less chances of success as compared to the instances where we have a strong, capable shareholder in the form of a local or foreign business house with sound expertise and expo-sure in the same sector.

So the debate is not about privatization

itself, rather it is about how we do it. Privati-zation is more akin to selling the family silver. We can do it once. It will surely give us the much needed funds but we must do it right the first time. Otherwise the future generations will find neither the silver nor the benefit of the funds. Privatization can energize the econ-omy and put right many institutions that were once great. We may find PIA again training the leading twenty plus airlines in the world or we may find Pakistan Steel turning the wheel of our infrastructure and economy.

In the words of top manager of one of the privatized entities in east Europe, “Privati-zation alone is like throwing a person into the water and calling it a swimming lesson.”

Privatization alone is not the answer. We have to be very careful about the process and the results both. Just throwing the share hold-ing away to scattered shareholders may result into a change in the ownership but it will not result into a change in the performance of these institutions. Privatization must be done in a manner that results into new management thinking and active board governance by the new shareholders. Otherwise our institutions will remain rudderless and drift away on the currents of economic distraction one after the other.

The writer is the CEO of a power project and can be reached at [email protected]

Management’s failure to exploit their profitable line of business hurt the company. Unfortunately, there was no dominant investor with sufficient experience to turn this around.


Kashif Mateen Ansari

salvation or an incomplete truth

Privatization;

Privatization taken as the salvation of all the woes of state-owned enterprises, seen as a panacea for improving corporate gover-

nance, management, and performance may be an incomplete truth and therefore, in Kevin’s words “it’s like a runway that is just a

bit too short, extremely dangerous.”


ENERGY

and wider institutional reforms in the economy across different groups of developing coun-tries. Research shows that when panel-data econometrics based on bias corrected dynamic fixed effect analysis (LSDVC) was used to as-sess the impact of reforms on macroeconomic and power sector outcomes. The results indi-cated that power sector reform is highly inter-dependent with wider reforms in other sec-tors of the economy. These findings indicate that failure to harmonize inter-sector reforms leads to power sector reform measures being ineffective. Hence it can be concluded that the success of power sector reforms in develop-ing countries largely depend on the extent to which they synchronize inter-sector reforms in the economy.

How real and long lasting is the current energy crisis? There is reason to believe that domestic fossil fuels will not continue to be available, due to slowly declining reserves and no alternate energy resources found in adequate amounts to support total anticipated energy consumption in Pakistan. Worryingly, if energy sources take an increased proportion of the load, the fossil fuels will not last cor-respondingly longer. Thus, the current energy crisis, although very real, should be viewed as a transient perturbation of the long term tra-jectory of our energy economy. Estimates of energy resources and projections of future en-ergy consumption show that the country has limited fossil fuel reserves. The energy prob-lem is more political than economic in nature, and underlying political differences must be understood in order to appreciate the effects on world-wide interdependence of petroleum supplies and prices.

Energy future studies can be a useful tool for learning about how to induce and manage technical, economic and policy change related to energy supply and use. The private sector has successfully deployed them for strategic planning, examining key parameters such as markets, competition and consumer trends. However in public policy, most energy fu-ture studies remain disconnected from policy making. One reason is that they often ignore

the key political and institutional factors that underpin much of the anticipated, wished-for or otherwise explored energy systems devel-opments.

We know that institutions and politics are critical enablers or constraints to technical and policy change. It is critical to examine how an-alytical insights into political and institutional dynamics can enhance energy future studies. It requires developing an approach that com-bines technical systems change scenarios with political and institutional analysis. Using the example of a back casting study dealing with the long term low-carbon transformation of a national energy system, it applies two levels of institutional and political analysis; at the level of international regimes and at the level of sec-toral policy. This study examines how future systems changes and policy paths are condi-tioned by institutional change processes and finds that the systematic application of these variables significantly enhances more useful back casting studies of energy futures.

Nowadays, ambitions of a comprehen-sive energy policy make developing counties one of the most interesting regions with regard to energy security. However, not only the Eu-ropean Union (EU) but also the International Atomic Energy Agency (IAEA) and the North Atlantic Treaty Organization (NATO) are or will be relevant actors in the global struggle for affordable, sustainable, and sufficient sup-plies of energy. All three have developed more or less distinctive instruments to secure their members access to energy. Nevertheless, there are three problems that prohibit the Europeans from being important players in global energy politics. First, the EU Member States do not have sufficient indigenous reserves of energy and thus are dependent on foreign suppliers. Second, Europe and its partners lack, as of yet, a comprehensive strategy for dealing with the external aspects of energy politics, including supply security as well as the political and economic challenges of import dependency and energy cut-offs. Third, the problem of en-ergy security can be resolvable only if inner-EU coherence and later on, regional and global

energy governance can be established.Energy security has again become an

important public issue amid concerns about high energy prices and the occurrence of re-gional supply shortfalls. An assessment of the current state of oil security indicates that the risks of supply disruption have not dimin-ished. The oil market outlook for the next two decades suggests an even greater need for oil security protection. With growing significance of global gas demand and trade, gas security is also becoming increasingly important. In conclusion, although no global energy crisis appears to be on the horizon, some serious security concerns do exist and will likely in-tensify in the future. This means that there is no room for complacency on energy security. The existing oil emergency measures need to be extended to cover the developing countries and other energy sources.

World conventional oil supply will soon be at physical risk. The Middle-East countries have only little spare operational capacity, and this will be increasingly called upon as oil production declines elsewhere. Large invest-ments in Middle-East production, if they oc-cur, could raise output, but only to a limited extent. A partial exception is Iraq, but even here, there would be significant delays before prospects can be confidently confirmed. If de-mand is maintained, and if large investments in Middle-East capacity are not made, the world will face the prospect of oil shortages in the near term.

Even with large investments, resource limits will force Middle-East production to decline fairly soon, and hence also global conventional oil production. The date of this resource-limited global peak depends on the size of Middle-East reserves, which are poorly known, and unreliably reported. Best esti-mates put the physical peak of global conven-tional oil production between 5 and 10 years from now. The world contains large quantities of non-conventional oil, and various oil sub-stitutes but the rapidity of the decline in the production of conventional oil makes it prob-able that these non-conventional sources can-not make fast enough to fully compensate. The result will be a sustained global oil shortage. For conventional gas, the world's original en-dowment is probably about the same, in en-ergy terms, as its endowment of conventional oil. Since less gas has been used so far com-pared to oil, the world will turn increasingly to gas as oil declines. But the global peak in con-ventional gas production is already in sight, in perhaps 20 years, and hence the global peak of all hydrocarbons (oil plus gas) is likely to be in about 10 or so years.

The writer works as a consultant forensic psychiatrist with the HUNTERCOMBE Group UK.


The life-style of 20th-century man has been influenced more by oil and gas than any other natural resource, and indications are that oil and gas reserves will in-

crease in importance during the remainder of this century. Oil and gas production provides inexpensive portable energy and supplies feedstock to an international petrochemical

industry that manufactures synthetic textiles and medi-cines and supports world ag-riculture. Crops are planted,

cultivated, treated with pes-ticides, fertilized, harvested,

moved to market, and cooked with oil and/or gas. Wars have

been fought to ensure petroleum availability, and reserve estimates

have dictated actions of governments, entire industries, individual companies,

lending institutions, and private investors. Almost all applications of oil and gas reserve

estimates require, in the final analysis, an eco-nomic evaluation that considers the predicted production capacity and the capital and operat-ing cost estimates.

Examining the reform experience and lessons in the developing countries it is obvi-ous that they have to consider technically and financially less efficient electricity sectors than developed countries with less resources and weaker institutions. Private participation and key reform steps such as restructuring, competition, and regulation would be sig-nificant. The role of contextual factors such

as system size, institutional endowment, and international organizations become important and it is then argued that there is a need for redefining the role of the state rather than a full withdrawal from the sector and that many countries like Pakistan should adopt simpler reform models and gradual implementation.

During the past one-and-a-half decade, Pakistan has introduced varying mixes of in-stitutional reforms into the electricity sectors. The emerging international evidence suggests that the standard reform model, privatization, vertical and horizontal unbundling, and the introduction of performance-based regulatory mechanisms, if implemented correctly, can lead to significant improvements in several di-mensions of operating performance.

When examined there is often a poorly explored link between power sector reforms

Dr. Fawad Kaiser

Is the wolf at the door?

Energy Crises:


The matter of appropriate sources for additional sources of revenue is of central im-portance to many developing countries including Pakistan.

Under the International Monetary Fund (IMF) agreement, Pakistan has also agreed to undertake tax reforms, with one percent rise in tax to GDP ratio every year to get additional $6.6 billion under 3 years of Ex-tended Fund Facility (EFF).

Some might argue that in terms of tax to GDP ratio, we are at the same level as India, Bangladesh and China, but for these economies, other sources of income are much higher than Pakistan. In the global tax payers’ index, Pakistan is ranked 162. Huge burden of debt and with the current IMF loan facility, debt to GDP ratio is going to rise above 60% this year. The question arises, from where are we going to fund this whole debt with ever rising unemployment and poverty.

In a policy symposium organized by

Sustainable Development Policy Institute (SDPI), three major issues related to tax re-gime were highlighted by the experts in the tax collection system of the country, which are i) Exemptions, concession and preferen-tial treatments under SROs, ii) Narrow Tax Base and, iii) Malfunction Tax Administra-tion System.

Exemptions, concessions and prefer-ential treatments result in huge loss to the economy. Huge amount of customs tariff lines are affected by SROs that leads to rev-enue leakage of 3-4% which amounts to Rs. 600-800 billion every year. Government has the authority to issue these subsidies with-out an approval from the parliament. Re-sultantly no legal requirement to report the value lost due to these exemptions, conces-sion and preferential treatments.

Secondly there comes the issue of nar-row tax base. No efforts have been made so far to improve them over the years. There are only 0.7 million tax payers in the coun-try. According to the recent report issued by Mr. Omer Cheema (Investigative journalist), legislatures are among the major defaulters of tax. With few tax payers in the country, this leads to average tax rate to be higher than other South Asian countries.

Thirdly, inefficient, fragmented and rent seeking behavior in tax administration system is putting the system of tax collec-tion to a standstill. It takes 560 hours for fil-ing tax returns which is a huge loss of time for our tax payers. According to a survey conducted by SDPI, 68% of people said that tax system is not fair, 60 % firms said that

corruption is the biggest issue, 10% said new sectors need to be held accountable for and 4 % said that filing tax is a very dif-ficult job.

FBR had recently highlighted 176,000 people, those who have multiple bank ac-counts, houses and international travelling but they aren’t paying any tax. Now this list has expanded to 3.2 million people. At the first stage, FBR intends to send notices to 100,000, but the irony is the current system of FBR, it is going to take 32 years.

Having said this, let us now come to some short-term measures that are going to save our tax system and economy. There is a dire need to revisit SRO regime and it must be subjected to an approval from the parlia-ment. Complete autonomy must be given to FBR and provincial revenue collection de-partments must be strengthened. If FBR is thinking towards moving to increase VAT, it must inform the business community at the earliest. Government must take steps towards accountability from the informal sector that is rapidly expanding in the coun-try. It is undeniably not a good omen for a country like Pakistan. Now it is time to re-consider taxing agriculture income, property and capital gains in stock exchange. None-theless, trained and well capacitated human resource in FBR is a prerequisite for addi-tional tax collection which will also help in improved accountability and transparency.

The writer is a researcher at Sustainable Development Policy Institute (SDPI), Islamabad.

Taxation reforms in Pakistan and way forward

Muhammad Hamza Abbas

FEB 201431http://www.economicaffairs.com.pk

REPORT

Laws are supposed to solve prob-lems, not create them. Laws are supposed to provide clarity and objectivity, not create am-biguous uncertainties leading

to questionable justice. Laws are meant to provide practical guidelines to the society for living together peacefully and harmoniously, not to create discord among racially and ethni-cally different people in society. In all these respects, it is clear that “Stand Your Ground Laws” are a failure.

A “Stand Your Ground Law” states that a person may use deadly force in self-defense without any obligations to retreat when faced with a reasonable perceived threat. These last three words are operative in understanding the illogical aspects of this law, not to men-tion the abusive ways in which it has been ap-plied. More than half of the states in the United States have some sort of “stand your ground law” in the books.

Controversies stemming from “stand your ground laws” reached a boiling point in the shooting of a 17 year old Florida teen, Trayvon Martin, by a neighborhood patrol watchman, George Zimmerman. The latter had perceived Martin to be armed and a po-tential threat, even citing that he was attacked

by the teen, therefore applying the “stand your ground law”, shooting and killing Martin. However, at the time of his death, it was found that Martin was far from being armed. In fact what was perceived to be a weapon was actu-ally a bag of candy and iced tea. Martin lost his life at the age of 17 due to this. Zimmerman was acquitted of his crime. Justice?

Once again, the controversy and irratio-nality of “stand your ground laws” has been seen in the shooting of another 17 year old Florida teen, Jordan Davis by Michael Dunn. In this case, Dunn shot and killed Davis, af-ter an altercation over the loud music Davis and his friends were playing. There are no accounts of Dunn being attacked by Davis or any of his friends, no threats and no questions of self-defense. What resulted however due to the Dunn’s application of “stand your ground laws” was the murder of an innocent teenager. To add to the injustice of the case, Dunn was recently convicted on three counts of “second degree attempted murder” for a clear case of murder!

Both Martin and Davis were African American teenagers. Should it be surprising that the African American community fears that the law does not protect young males of color when in a confrontational situation with white people? This once again opens a can of worms and creates discord among races in so-ciety rather than what a law is clearly expected to do…to create harmony and provide justice. That is a far cry from what the definitions of a law entails.

The basis of “stand your ground laws” is that individuals should be able to use deadly force when they believe that they are con-fronted with a dangerous situation and remove themselves from harm’s way. In fact, it appears more often than not that “stand your ground laws” encourage acts of retaliation through the use of deadly force. Having said that, in the case of Trayvon Martin, the circumstances leading to his death are hazy and in the case

of Jordan Davis, there was clearly no basis for any application of this law by all accounts as he and his friends did not present any danger to Michael Dunn.

Therefore, what “stand your ground laws” imply is that a person merely imagines or believes that he or she is in danger. How-ever, believed perceptions of being in danger are arbitrary and rely on a person’s subjective reasoning. Permitting this line of reasoning to use deadly force clearly demonstrates that “stand your ground laws” are clearly flawed and unfortunately increase the potential for in-creasing violence leading to wrongful deaths based on misunderstandings, miscommunica-tions and racial prejudices. Is it therefore le-gally and morally responsible for an individual to assume a situation of danger and act as the judge, jury and executioner? It would lead any sane person to question this principle of “shoot first and ask questions later”.

According to the police and prosecutors, “stand your ground laws” have allowed count-less individuals to literally “get away with murder” by claiming self-defense, using dead-ly force in situations that have led to unneces-sary deaths. Furthermore, such absurd lines of reasoning, for lack of a better word, have re-sulted in unjust rulings such as the acquittal of Gorge Zimmerman and that of attempted mur-der charge against Michael Dunn (“attempted” murder for having committed murder).

Clearly, when both these very tragic in-cident occurred, had the state of Florida not have these “stand your ground laws” in place, two seventeen year old boys would still be alive today, not to mention the countless num-ber of other individuals who have lost their lives in vain due to these laws.

The writer is an English and French professor residing in the US. She is a columnist on American political and legal issues for several international publications. She can be reached at [email protected], Twitter: @SabriaBalland

Sabria Chowdhury Balland

Stand Your Ground When the law causes injustice

"If a law is unjust, a man is not only right to disobey it, he is obligated to do so."

– Thomas Jefferson


ENVIRONMENT

towards the plains in mammoth fury.” These mountains, gorges and gulley are the usual areas of upper Indus River track, meaning thereby the Kohistan, Hazara and lower Gilgat-Baltistan regions. Traditionally, the riverine forests have always been a check on floods but unfortu-nately, in the last two decades or so, massive deforestation has taken place. Once dense forests are now totally denuded giving pathway to floods and devastation. The article quoted expounds, “Relief workers said bridges, homes and people were destroyed and swept away by the hurtling and swirling logs before the waters spread on to the plains be-low, engulfing an area of more than 60,000 square miles, more than twice the land area of Scotland.”

On the flip side, there have been campaigns for tree plantation. In June 2013, the Pakistan Reconstruction Program of the United States Agency for International Development (USAID) held one for planting trees. Though many laws exist both on the national and provincial level to protect the environment but the degree of their implementation is questionable. To quote one example only; Sindh Plantation, Mainte-nance of Trees and Public Parks Ordinance of 2002 states, “no person shall remove, cut, damage, or displace any plant, shrub, tree or a branch at any public place, including parks.” A local newspaper on the other hands comments, “The data collected by the International Union for Conservation of Nature, which according to their website, is the oldest global environmental organization since 1948, states that only about 2.5 per cent of Karachi is green.” (Published April 18, 2013)

To our pride; “ Pakistan set the Guinness World Record for tree planting, 541,176 young mangroves trees planted by 300 volunteers from the local fishermen communities just in one day, the country broke the previous 447,874 record held by historical rival India,” according to a report published in June 2009 on the official website of WWF Global.

Trees are important for many reasons. Trees prevent soil ero-sion; they strengthen the soil thereby reducing the impact of rain and wind, they protect the banks of streams when floods come. They give out oxygen while absorbing carbon dioxide. According to a report by the Intergovernmental Panel on Climate Change (IPCC) “eleven of the last twelve years (1995 to 2006) rank among the 12 warmest years in

the instrumental record of global surface temperature (records since 1850)". These changes in Earth's temperature have correspondingly been associated with increased atmospheric carbon dioxide (as well as methane and nitrous oxide) levels in the atmosphere,” states Steve Nix a professional forester and natural resource consultant.In places hav-ing snow fall, trees can have a noticeable reduction on snowdrifts. In warmer climates, trees help reducing temperature; this in turn can re-duce electricity costs. In urban areas, beautifully laid out residences and residential areas enhance the value of the property.

Due to increasing urbanization, more and more trees are being cut away to provide space for expanding population needs. They are being cut also to provide much needed firewood in extreme cold. Increasing population has led to increased consumer demand; demand for furni-ture is one.Wood consumption for industries is another reason. In any case, these trees are not being replaced with more trees being planted.Chanting slogans, promising the sun, moon and stars to the people who entrusted the winning political candidates and made them successful is just not good enough. They want change. Change is not just related to passing resolutions in the National Assembly for Protecting Paki-stan but the will to do so must be reflected in actions and not in words alone.

Government can support and promote tree plantation in many ways. It can encourage multinationals and local organizations to pro-mote plant a tree campaign in given areas. The government may offer

incentives to the organizations involved in tree plantation. The companies can hold a Tree Plantation Day, which can be used as a sales promotion springboard offering excel-lent publicity opportunity and product(s), service aware-ness their company offers. Company giveaway kits can be given to participants. The government can start a website as done by the’ Billion Tree Campaign’ by United Nations to growing a billion (1 000 000 000) trees all around the world during 2007. Pictures of people planting trees can be sent and posted on the website.

What is needed for the government is not to keep the initiative at the political level alone. But to involve companies, organizations, people at mohalla levels to get involved. Earth Day may be a great time to organize Tree Plantation events around the country. It can be turned into an exciting national activity.

I am reminded here of Franklin D. Roosevelt, “A nation that destroys its soils destroys itself. Forests are the lungs of our land, purifying the air and giving fresh strength to our people. ”

The writer is a lawyer, academic and political analyst. She has authored a book, ‘A Comparative Analysis of Media and Media Laws in Pakistan.’

PAKISTAN

Unfortunately our leaders are not investing in our biggest

asset: our children. There is a lack of vision, a lack of sense of direction one

observes at every level


When I was a child, I often heard my elders saying, “Do a good deed. A good deed is akin to planting a tree in heaven.” The elders are no more, the pri-orities have changed, and so have the slogans. Ev-erything that is environment friendly, everything

that involves the people in owning their country in form of steps that help them integrating as a nation has gone flying out of the window. In its stead are sectarian divides, attacks and criticism between parties. When calls are given by parties for its supporters; it’s to protest against this or that. When was the last time they came together to do something positive for the country? Or for their province? Or even for the area representatives live in?

Unfortunately our leaders are not investing in our biggest asset: our children. There is a lack of vision, a lack of sense of direction one observes at every level.

But then, I use the term leader. A leader influences people to work towards and achieve a certain goal. A leader does not work from the back benches. He (or she) leads from the front, letting others follow his example. The leader must also have the vision; to view an orga-nization or his country at different year-benchmarks down the road. Jack Welch Chairman and CEO of General Electric for two decades talks about being a leader to be, “Before you are a leader, success is all about growing yourself. When you become a leader, success is all about growing others.”

Tree plantation is one such method of being productive on ground.

Literally. According to a local newspaper, the floods in 2010 and heavy rains of 2011 damaged thousands of trees. An absorb-ing article by the Sun-day Herald Scotland states, “If Pakistan’s authorities continued to allow the country’s timber mafia and a benighted and op-pressed peasantry to strip the country’s forests at a faster rate than anywhere else in Asia, as is happening; floods of Biblical proportions would be inevitable. They would not be acts of God but man-made catastrophes.” Published Au-gust 29, 2010 it goes on to say, “Trees felled by so-called illegal loggers – an infamous “timber mafia” that has representatives in the Pakistan Parliament in Islamabad and connections right to the top of govern-ment and the military – are stacked in the innumerable nullahs [steep narrow valleys], gorges and ravines leading into the main rivers. From there they are fed into the legal trade, earning the mafia billions of dol-lars yearly. But this month the mud and water deluge cascaded off the tree-bare mountains and hills with exceptional force and barreled down

PAKISTAN

Yasmeen Aftab Ali

To our pride; “ Pakistan set the Guinness World Record for tree planting, 541,176 young mangroves trees planted by 300 volunteers from the local fishermen communities just in one day, the country broke the previous 447,874 record held by historical rival India,” according to a report published in June 2009 on the official website of WWF Global.


REPORT

Pakistan’s agriculture sector is a major contributor to the country’s economy in terms of GDP, foreign exchange earnings, employment generation, raw material for man-

ufacturing industry (primarily textile) and the national food security. Despite its overall im-portance, this sector has for years been ignored by the policy makers. This mind-set prevailed for decades and notwithstanding the progress made in enhancing production, the sector re-mained to a great extent neglected nurturing several inefficiencies. The farming commu-nity on the whole remained under-privileged and financially constrained that gave rise to numerous problems that Pakistan’s agriculture

is facing today.The country has a vast natural resource

base and diverse ecological zones that help producing a variety of agricultural crops in a stretched seasonal window starting from south to the north. Majority of the farms are fairly small and out of 22 million hectares of cropped area in Pakistan, about 79% farms are below 20 hectaresof which 53% farms are below the size of 5 hectares. The small farm size cou-pled with resource stretched condition of the farming community has made the use of good quality inputs and machinery out of reach of the farming community in general. This also restricts the farmers’ ability to adopt new tech-niques, diversification to high value crops and social networking. He is therefore forced to continue with the subsistence farming.

There are numerous challenges that im-pede development of a competitive agriculture sector, most important of these are briefly ex-plained below:

Subsistence agricultural farming is one of the numerous challenges of the sec-tor. The main reason for subsistence agricul-ture is fragmented small-scale farming units who are resource constrained and remain in the production process only to cater to the family

needs. Traditionally every farming household keeps 2 to 5 milk animals; mostly buffalos, cows, goats and in some regions camels or a mix of these animals (in addition to cultiva-tion of crops) for its domestic needs. The crops produced are mostly consumed by the family and depending upon the size of the farm, after storage of crop for own needs, the balance is sold in the local market or to the middleman. These farmers are poorly organized and they do not have bargaining capacity in marketing their produce. The focus of the government as well as donor agencies is mostly on capacity building of farmers. However marketing of their produce or linking farmers to the mar-kets has always remained unattended. There is therefore need to develop a sustainable model by linking a group of farmers to a processor/ buyer, and if possible, also to a donor agency. Under this model, the group of farmers would be facilitated in opening their individual bank accounts and getting loan facility against mortgage of land. The buyer / processor would provide inputs to farmers and present invoice to the bank for payment through disbursement of loan amount booked in the name of each farmer in the group. The farmers will produce the crop and the buyer would purchase the entire crop by making payment into the bank

and showing bank receipt to each farmer. The loan would be repaid and the balance available in the bank account of each farmer would be his profit. The entire transaction would be se-cured by way of a contract to be signed by the buyer / processor and each farmer. The role to be played by the donor would be (a) capacity building of farmers and processors; (b) help-ing in establishing a certified nursery; (c) con-necting farmers to the research and extension personnel.

Access to Finance by farmers is a big hurdle that does not allow them use of good quality inputs. The banking system compris-ing of 34 commercial banks, 4 specialized and 9 micro finance banks disbursed PKR 231 bil-lion to agriculture sector during current year which is hardly 6 percent of total lending by the country’s banking system and around 30 percent of the sector’s credit requirement, thus leaving a huge gap to be filled by the middleman who undertakes timely provision of inputs to farmers and yet exploits them by taking away the output at his own terms. The cost of utilizing middleman’s services is estimated to go beyond 60 percent per an-num. Yet the farmer is inclined to fulfill his requirements from the middleman as the sys-tem allows convenient and hassle-free access to resources as compared to banks. Due to his short term profit mind set, the middleman is also least concerned about the qualitative and quantitative improvements in the sector. It is therefore necessary to substitute middleman with a system that is equally or more efficient but non- exploitative. There could be the fol-lowing three possibilities of substituting the middleman system.

a) Establishing Non-Banking Financial Institutions (NBFIs) to work on the pattern of middlemen. State Bank of Pakistan should develop regulations for such NBFIs and the middlemen who become compliant could also be given license of NBFI. The middlemen who are not compliant should be brought under the ambit of a separate set of regulations of State Bank of Pakistan (to be formulated) by issuing them license. The regulations to be developed by State Bank of Pakistan should ensure that the exploitative role is completely wiped out.

b) Introducing a partial credit guarantee scheme for banks to raise their comfort level

in agricultural lending. Capacity building of banks would be necessary for understanding the agriculture system, its credit requirements and development of innovative financial prod-ucts.

c) Introducing and promoting commu-nity based Venture Capital Fund concept to make financing available to farmers on a col-lective/cluster basis.

Agriculture Supply Chain is full of issues, impeding development of the sector. There are no checks over seed companies with regard to the seed quality; there are issues in pesticides’ quality and usage; fertilizers have become out of reach due to high prices; irriga-tion facilities are decrepit and inefficient; land degradation is on the increase with over 16,000 hectares of land becoming redundant owing to salinity problem without any tangible rem-edy; quality control testing facilities for soil, inputs and produce are non-existent; storage, logistics and markets are inefficient and insuf-ficient; power supply is unreliable and expen-sive; growers’ outreach to markets, market in-formation systems and marketing networks is limited; formal credit availability is restricted; crop insurance is nearly non-existent; relevant laws are outdated; government departments’ role is non-supportive; farm mechanization is insufficient; research facilities are supply driven and extension is inefficient. Although factors influencing the supply chain of each commodity may slightly differ, improvement can be brought in by promoting:

a) Contract farmingb) Corporate farmingc) Cooperative farming

These however require legislation and its enforcement to create a win-win situation for everyone.

Research & Development as well as extension in Pakistan is responsibility of the government and the system lacks capac-ity both in terms of manpower and finances. The funding level is among the lowest in the

world that works out to 0.2% of the National GDP. The system is supply driven and does not have the capacity to cater to the present day requirements of the sector. Majority of the research institutions face serious capacity constraints not being able to meet the dynamic requirements of the world whereas continu-ity of R&D is essential for development of agriculture sector. Private sector involvement in research can be made possible upon enact-ment of Intellectual Property Rights. Other possibility could be through provision of fi-nancial support for R&D to non-profit orga-nizations having linkages with international research organizations. Priorities should be set for conducting research, for example, wheat, rice, maize and sugar cane are essential food items and should be given priority in food crops segment and to cotton as a value crop due to its importance for the export industry. In horticulture citrus, mango, potato and onion may be given priority over other crops as out of more than 30 fruit crops grown in Pakistan. Citrus and mango cover more than 56 % of the production and area and of more than 40 vegetables grown in Pakistan; more than 55% is covered by potato and onion. If such a pri-ority is set, it would make R&D much more efficient both with regard to food security and export enhancement. In addition, a technology foresight exercise must be conducted at inter-vals of 5 years to make an assessment of tech-nological needs. The extension system is also deficient in resources and does not serve the sector well. It requires structural administra-tive changes backed by use of technology such as radio, television, cell phone and printed ma-terial.

The much needed development in agri-culture can be achieved by making it attrac-tive for the domestic and foreign investors and that can be attained only by making the sector commercially viable.

The author is an agribusiness, investment & banking professional who worked for 30 years in senior management positions in Pakistan and abroad. He is currently working as a freelance consultant.

NEED TO MOVE TOWARDS

In Pakistan

COMMERCIAL AGRICULTURE

Akram Khalid


WORLD

The growing use of social media as a tool for spread-ing hateful messages and graphic details of gory in-cidents is fuelling the fire

of Pakistani extremism.Such messages, according to academics

and communication analysts, can warp young readers, particularly those who already have an aggressive attitude.

Dr. Erum Irshad, chairwoman of the Uni-versity of Peshawar Psychology Department, says that the Negative information can affect their minds because they don't understand the underlying meanings of such messages.

Modern communication tools can con-tribute to society, but these networking sites are being used to promote negative messages, which can increase psychological problems, says Irshad.

According to Peshawar-based social ac-tivist and academic Adil Zareef , Pro-Taliban elements and others who want to spread ex-tremist ideology rely on social networking websites such as Facebook and Twitter.

For one, the Tehreek-e-Taliban Pakistan (TTP)'s media wing posts videos, pictures and pamphlets on such sites. Former TTP spokes-man Ihsanullah Ihsan, who was fired in June but refused to stay silent, has been known to operate a Facebook page.

But the message of hate doesn't appeal

to everyone.Rukhsana Jamil, 36, a housewife and

Facebook user, said "The moment I come across such a video or a picture, I quickly scroll down to avoid ruining my moments of pleasure [socialising with friends and family on Facebook]”.

Others try to use settings on their com-puters to block such content. "I don't bother 'liking' or commenting on or sharing them [ex-tremist messages] in any way,"Ayaz Abbasy, a Pakistani migrant in Jeddah, Saudi Arabia, said, "and the friends who do share extreme stuff, I observe for a while and then I just hide their notifications."

The militants, however, have ways of forcing their message on readers.

Naushad Khan, an Islamabad-based spokesman for a public sector development project, for example, said he tried to keep his Facebook friends from posting extremist con-tent on his Facebook "wall," but some mes-sages slipped through his stringent privacy settings anyhow.

"I … just don't want to be associated with anything that does not go with my thoughts," he said. Khan removes his name from such material whenever it appears on his Facebook wall, he added.

Observers are concerned about social media users who don't try to block hate-filled content. For instance, the TTP posted a vid-eo of former TTP chief Hakimullah Mehsud (who was killed in North Waziristan earlier in November) fatally shooting an elderly hos-tage, Col. Imam, in January 2011.

"The clip of the colonel's slaying has been shared by 1,396 people," an Islamabad-based IT consultant Qazi Abid said and 206 Facebook users "liked" the video.

"But that doesn't mean everyone ap-proves of this ghastly act," he said, because Facebook doesn't have an option for viewers to express "dislike."

However, an all-out assault on such mes-sages is a dicey proposition, because there are those who contend that some good can come out of extremist postings.

"Individuals with mature minds and se-rious thinking can benefit from such messages as they can adopt strategies to safeguard them-selves from these messages' adverse effects," Irshad said, citing efforts to protect one's personal safety as an example. Although of-ficials would have to walk a fine line between protecting vulnerable people and infringing on free speech, observers say Pakistan could use cyber laws to stop the hate-mongering.

The Pakistan Telecommunication Au-thority (PTA), a regulatory and monitoring agency, is authorized to remove "unwanted" material it finds on the internet, either on its own or through complaints from citizens.

PTA has an inter-ministerial commit-tee that reviews complaints and recommends blocking of objectionable sites, Mohibullah Kakakhel, a senior Peshawar-based lawyer, said.

"Anything that is offensive to people's religious ideologies or ignites hatred or causes religious extremism, PTA will move to block," Kakakhel said, adding, "It has blocked numer-ous Web pages, including YouTube."

And while the Pakistani government is capable only of blocking an entire site, Face-book can shut down pages, as it did with Ih-san's page this month, Kakakhel said.

Kakakhel in the past has gone to court to challenge Islamabad's blocking of the You-Tube site. But he conceded that Pakistan, which has battled insurgents for years and has signed several international pacts on fighting terrorist messaging online, had to protect its cyber space from that threat.

"Pakistan is vigilant about its cyber space … it receives a lot of unwanted Web material, so it keeps a close watch and blocks unwanted material," Kakakhel says.

Muhammad Bilal Khan

The cyber side of social media


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