CNG crisis sharpens, adds woes to public

by Azhar Bukhari
LAHORE: Like other parts of the country, the All Pakistan CNG Association strike on Wednesday added to the public woes, continuing to plague the residents of the provincial capital.
The association announced strike across the country from December 30 for indefinite period against the proposed gas price hike as well as the two-day weekly closure of the filling stations under load management.
Though partial strike was observed in the provincial capital, people had been facing numerous problems like absence of public transport, as hundreds were queued up outside the CNG filling stations, which continued the sale.
The commuters were facing great difficulties due to absence of transport due to strike call by All Pakistan CNG association.
Due to the strike call the transport remained off the roads creating great difficulties for commuters.
People in Punjab and NWFP are suffering great difficulties due to the situation. According to the sources, as many as 80 percent CNG filling stations in Rawalpindi, Islamabad, Murree, Jehlum, Attock, Sheikhupora, Kasur, Okara, Sahiwal, Multan and other areas of the country remained closed.
More than 1,800 CNG stations in Punjab were closed over APCNGA’s strike call, more than 2,800 CNG filling stations are closed under the strike call.
The government has already ordered to close CNG stations for two days in a week. Meanwhile gas supply is suspended to Pothohar region since last two days and now CNG stations in the region have also closed to contribute in countrywide strike while, gas supply to Attock and Jehlum has been suspended from Wednesday.
Talking to The Post, president of APCNGA, Ghayyas Paracha, said over 3,000 CNG filling stations across the country would remain closed as long as the strike is on.
Paracha demanded that the government should revive the difference in CNG and petrol prices according to the 1992 Petroleum Policy in which the price of CNG was set half of that of petrol. He maintained that gas load-shedding for CNG stations be stopped immediately if the federal government accepts their demands.
Paracha said it is the salaried class and others from middle-income groups that would suffer the most financially after the increase in CNG prices.
The APCNGA president accused some petrol dealers for having interests in importing LNG, LPG and other substitutes that may have a role to play in damaging the CNG business.
Ghayyas Paracha also suggested that the government should announce a 10-year gas policy after consulting the CNG association so that investors in this sector could plan their businesses accordingly.
Following the strike thin public traffic was present on the roads, unleashing problems for a large of citizens who were solely dependent on public transport or vehicles only on CNG for commuting.

Wake up to save sinking textile Titanic

by Azhar Bukhari
APTMA Chairman Gohar Ejaz highlights issues facing industry
Says sector capable to shell out 5 time more returns than KLB
If facilitated, textile industry can shell out five time more returns in a fiscal year than the most debated Kerry-Lugar Bill.
This was the upshot of discussion with All Pakistan Textile Mills Association Punjab Chairman Gohar Ejaz other day.
A quite, cool and calm Gohar, who has a thorough command on all the issues being faced by the country, spoke at length particularly on textile industry’s problems.
He was very candid when he said, “we have to establish pro-industrial polices to get back on rails, as people can manage with electricity and gas loadshedding but can’t survive with unemployment”.
“You always need some bitter pills to cure chronic ailments and this time the domestic consumers would have to take some bitter pills, I mean, save energy to run the industry”.
Renowned industrialist, Gohar Ejaz was of the view that there is no acute shortage of electricity or gas, the only thing which the country lacks is dearth of management.
“Things would hardly take any positive turn unless and until both short term and long term policies are evolved,” he maintained.
Gohar, while expressing his concerns over law and order situation said, the nerve-wrecking string of terrorist attacks in the country is virtually proving to be the last nail in coffin of textile industry, which is struggling hard to survive amid unprecedented load shedding, abnormal rise in bank mark and suspension of gas supply to the 400 textile mills in Punjab and NWFP for long five months.
He pointed out that gas disconnection to the textile industry has halted work at the big business houses, as they were not able to keep their wheel moving round the clock due to non-availability of gas to their power plants.
He appreciated first-ever-five-year textile policy in August last, which may take the industry’s exports to $25 billion by 2014, saying that it could extend certain relief to the industry in terms of long term finance, export refinance, and duty drawback if the government be serious to implement this.
“Sadly, the implementation on the relevant SROs is yet a far-fetched idea, as none of the government agencies is in mood of following the guidelines. Even the State Bank of Pakistan has not issued instructions to the banks in order to facilitate the textile industry on LTF and ERF”, he added.
The government now needs to set its priorities and bring about a framework which will give practical meaning to this policy. “Needless to say that this framework should be formulated ASAP, keeping in view that it should be transparent, works fast and should be meaningful to the industry”.
Gohar Ejaz said that more than 200 million people are linked with textile industry and if the government would not implement Textile Policy 2009-14, the 400 textile units would be closed down depriving 2.5 million workers off their jobs.
He maintained that Sui Northern Gas Pipe-lines Ltd (SNGPL) has suspended gas supply to 300 textile mills from October 20 and a notice has been issued that the suspension would be remained till 31 march 2010.
Gohar feared if the government fails to implement new textile policy, mill owners will have no other option left except to close its hundreds of textile units, which may could unemployed 2.5 million people.
He maintained that SNGPL has suspended supply to APTMA’s 90 per cent members in Punjab and NWFP even in the third week of October when the over all gas demand is hanging between 1,600 to 1,700 MMCFD while short fall is of only 160 to 175 MMCFD.
Gohar Ejaz demanded the government to implement Textile Policy initiatives regarding supply of gas to the textile industry by upgrading the priority of gas supply at 2nd place in the Natural Gas Allocation & Management Policy 2005.
He showed grave concern over the gas curtailment of 175 MMCFD of the textile industry in the Punjab in October, as the winter yet to set in.
“Textile industry will lose export of US $ 1 billion to 2 billion per month, about US $ 5 to 6 billion in the financial year, as textile mills will not be able to fulfil export orders for Christmas & Spring season on time”, said APTMA chairman.
“It is high time for the textile industry to get out of recession as the demand for textiles is increasing. Once the orders are lost, international buyers will not depend on us even for the next years,” Gohar said adding that already 90% of the knitwear industry in Punjab with US $ 2 billion export has closed due to terrorism & security concerns.
He maintained that continuous gas supply to the textile industry is of vital importance at this time when industry is poised to recover & meet export orders.
APTMA chairman said that the government has failed to implement the 2nd priority of the textile industry in the priority list of Natural Gas Allocation & Management Policy as recommended in the Textile Policy 2009-14. It is an opportune time to implement the recommendations.
As the domestic load is increasing, it is necessary to educate general consumers to start conservation of gas used in geysers & heaters & save energy to run industry. In the greater national interest.
He urged the federal government and SNGPL to exempt textile industry from gas curtailment and due priority be given to the Export Oriented Textile Industry.
Ha also urged the people to lessen the use of gas during Winter to run the industry. He maintained by promoting gas saver home appliances country can save more than 600 MMCFD gas during the season. He also demanded the government to give subsidy on gas saver home appliances and launch an awareness campaign among masses to keep the wheel moving.
Gohar called upon the government to save the sinking Titanic of textile in order to ensure economic viability of Pakistan.
He said that besides the basic textile, the value-added sector was feeling the pinch hard, as it has received no tangible orders ahead of the Christmas season in Europe, falling within two months from now.

Telecom; a magnet for FDI

by Azhar Bukhari
CFO Warid, Tariq Gulzar portrays a vivid sketch of future communication
Says Warid catering to all segments of society with affordable packages
Country’s telecom sector has remarkable potential to attract huge Foreign Direct Investment (FDI), as the sector witnessed growth even when world was facing one of its worst recession.
If the government continues to facilitate the service providers, the fast and feasible means of communication can be provided to each and every member of the society at very low costs.
This was the upshot of the discussion that took place with Warid’s Chief Financial Officer, Tariq Gulzar at its Head Office in Lahore.
A quite cool and calm Tariq, who has command on telecom sector-related issues, spoke at length on the opportunities in this sector and issues facing service providers.
He was very candid when he said that in 21st century, cheap sources of communication are the basic need of masses and it is as important sector as textile is.
“At Warid, leading telecom company, we are catering all segments of the society including masses, youth, corporate etc through very affordable packages,” Gulzar maintained.
He said that Warid’s best in class and state of art GSM net work, with a comprehensive portfolio of innovative value added services, is empowering its customers to create their own life style networks. He said that Warid has always kept ‘The customer convenience factor’ as its top priority.
Responding to a question, Tariq Gulzar said that Warid Telecom is a joint venture between Abu Dhabi Group and Singapore’s premier telecom group SingTel. Since Warid launched it commercial service in May 2005 in the country, it has invested more than $1.4 billion and has expanded its network to more than 480 cities. Gulzar added that Warid has set a target to extend its existing coverage to far flung and remaining rural areas in the shortest possible time frame.

To facilitate and provide maximum choice to mobile subscribers, PTA has already introduced Mobile Number Portability (MNP) regime in Pakistan. MNP gives freedom to a subscriber to move to any network in the country whilst retaining their original mobile number along with the prefix. Warid has lately been a major beneficiary of MNP regime and has ported-in large number of subscribers from other mobile companies on its Best Quality Network in Pakistan, the CFO said.
Well informed Gulzar observed that the telecom landscape in Pakistan is evolving quickly in the backdrop of lower tariff’s and stiffening competition. The country’s industrial and population growth rates have led to forecasts that the sector over the next 10 years may grow at a double digit rate, offering significant opportunities for both local and foreign investment. For the record sake, a FDI of $400 Million per quarter was made in the telecom sector in the year 2008 alone.
To a query, the Warid CFO said that Abu Dhabi Group is a leading business group of Middle East and the single largest foreign investor in Pakistan. He maintained that Abu Dhabi Group has diversified business interests, offering strong financial resources and extensive management expertise that result in commercial success for several institutions.
Of Law & Order and economic slow down in the country, the energetic Youngman and Outspoken Gulzar believes that creating jobs and economic opportunities are an effective way to combat militancy. “Creating and providing employment will prevent alienation and give people a reason to ensure that the system runs smoothly,” said Gulzar.
“Pakistan has the potential to attract mega investment in telecom which could also ascertain to revive economy, but this requires focusing on out-of-box solutions and facilitating local and foreign investors by providing more incentives,” he said.
Elaborating on possible solutions, Gulzar said that part of the answer lay in facilitation of existing service providers to motivate others. He said country’s telecom sector has the potential to improve it services and introduce innovations to compete with any developed country.
The chief financial officer said that Pakistan offered high returns on investment and this was the reason that foreign companies were investing their capital and resources in the country, particularly in the telecom sector. “The fact that the economy was largely impervious to the social turmoil of the last few years is evidence of the fact that our economy is far more resilient than we would like to think,” said Tariq.
“There is nothing worse than Pakistanis talking down their economy and their country, which then becomes a self-fulfilling prophecy.” He said there was a mighty disconnect between the perception and reality of Pakistan as a place to do business in. “We have our problems, but we are better off than many countries,” he said adding that criticism of Pakistan’s economy, society and government should only be done on facts.
Profile:
Tariq Gulzar is Chief Financial Officer at Warid Telecom.
He has a combined professional and industry background gained from over 19 years experience, primarily in Europe & North America, in Finance, enterprise-wide risk management, corporate governance, control assurance and general consulting in telecommunication, media & technology industries.
Gulzar is a Fellow Chartered Accountant (Pakistan), a Certified Public Accountant (Colorado, USA) and a Certified Internal Auditor (New York, USA).
Prior to joining Warid, Gulzar was working as the Assistant Vice President in Risk & Regulatory Advisory practice of PricewaterhouseCoopers (PwC), Canada., where he was responsible for delivering internal audit, sustainable process improvement and risk management services to organizations in terms of increased revenues, decreased costs, improved efficiency, control and organizational and process agility in a range of industries.
He has also worked with Mobilink (Pakistan), Millicom International Cellular S A Luxembourg and Modern Times Group AB (Sweden) before joining PwC in Canada.

Exploring alternate energy sources

by Azhar Bukhari
Opportunities are in abundance
Pakistan only needs a committed push to set right foot for a sparkling era
Pakistan has recently indicated its commitment to renewable energy sources, but realising these in practice could still be a long way off.
The country is blessed with an abundance of renewable energy potential, but so far this remains unharnessed except for a few large hydroelectric projects.
The country, historically an energy importer, is facing serious energy shortages while global fossil fuel prices continue their upward spiral. The effects on the economy are marked: interruptions in energy supply to industry, for instance, have hit the country's exports hard.
Experts are of the view that Pakistan needs to initiate a transition towards greater use of renewable energy as an indigenous, clean and abundant resource.
But the government drive for renewables has its critics. The problem, says an energy expert, is that the alternative energy initiatives have been offered at a stage when the damage has already been done to the economy.
"The gap between demand and supply of power has been allowed to grow by not addressing the interrupted supply to the domestic and agriculture sector as much as the industrial sector," he said. As a result, the cost of energy and energy production has already made Pakistan's products uncompetitive compared with those of India.
He suggested that all the country's power plants should be coal-fired, and all industries that need fuel for heating purposes, such as cement factories, should use coal, a suggestion he justifies on the basis of the huge reserves of coal in the provinces of Sindh and Punjab. The coal reserves’ quality is good and it can be a better substitute than high-priced oil imports.
Ali Zulqarnain, an engineering professor and alternative energy researcher at NED University of Engineering & Technology in Karachi, writes in an article, "There are areas in and around Karachi suitable for installing both solar and wind energy plants to produce cheap electricity. Many science activists also advocate the use of hydropower, since Pakistan is a water-abundant country.”
Interestingly, despite having the world's best water resources, the production of hydropower has been sidelined by the government. If the government had properly exploited hydropower, the country could now be enjoying a 5,000 megawatt power supply from the Kunhar-Neelum-Jhelum river system in Azad, Kashmir, as hydropower projects could also reduce the cost of electricity.
It is worth to mention here that, in 2001, the Water and Power Development Authority of Pakistan identified 22 sites for launching hydropower projects to meet the ever-increasing demand for cheap power. It indicated that about 15,074 megawatts could be generated on the completion of these projects, which would also meet the water irrigation requirements for the growing agriculture sector.
In terms of social equity, renewable energy could also raise Pakistan's present low per-capita consumption of energy and improve access to modern energy supplies, helping to alleviate poverty and reduce the burden on rural women, who collect biomass for fuel.
In the future, Pakistan may adopt other technologies for generating power from renewable energy sources, such as municipal waste and landfill methane geothermal recovery, anaerobic biomass gasification, biological fuels, fuel cells and ocean waves.
Currently, Pakistan is witnessing a serious power crisis due to the depletion of conventional sources of energy. Experts believe that global warming and deteriorating environmental conditions are adversely affecting Pakistan’s water resources. The rivers are dying out at a slow but steady pace and with them, Pakistan’s chances of producing cheap hydropower are diminishing as well.
Although huge coal reserves that can be used for power generation and for resolving the prevalent power crisis have been discovered lately in Sindh, but mining these resources requires immense amounts of investment. Moreover, this is by no means an environment-friendly solution to the problem.
The most appropriate answer, according to some experts, is exploring renewable sources of energy such as wind, solar and even tidal energy. These not only have huge power-generation potential, but are also extremely environment-friendly and are successfully being used for electricity-generation in various countries of the world.
Unfortunately, not much research is being carried out in Pakistan for utilizing renewable sources of energy for power production. This is despite the fact that an Alternate Energy Development Board (AEDB) exists in the country. The purpose of this board is to raise awareness about renewable energy sources and to promote them in the country.
According to some other experts, the total solar energy available to the earth is approximately 3,850 ZetaJoules (ZJ) per year while the worldwide energy consumption was 0.571 ZJ in 2005.
Another area with respect to renewable energy resources is the exploration of wind power, the conversion of wind energy into electricity, using wind turbines. By the end of 2008, the worldwide capacity of wind-powered generators was 95.9 GigaWatts (GW).
Currently, wind produces just over one percent of worldwide electricity use, and accounts for approximately 19 percent of electricity production in Denmark, nine percent in Spain and Portugal, and six percent in Germany and the Republic of Ireland. Pakistan however, lags behind in this area as well, despite the fact that in neighbouring countries, such as India and China, the potential of wind power is successfully being used for electricity generation, albeit at a small scale. More importantly, extensive research is being carried out in this area in these countries.
Another area which needs the immediate attention of local authorities concerned is tidal power, also known as tidal energy. This is a form of hydropower that exploits the movement of water caused by tidal currents or the rise and fall in sea levels due to the tides.
Tidal power is yet to be widely used anywhere in the world, but it also has the potential for future electricity generation. Experts even believe that it is more profitable than wind energy and solar power.
In Pakistan, which has been gifted with over 700 kilometers of coastline, tidal power can prove to be a solution to the perpetual power crisis. In order to do that, however, authorities concerned will have to change their mindset and attitude towards emerging as well as environmental-friendly technologies.
Interestingly, at a time when extensive research is being carried out around the globe for finding cheap sources of energy, many people in Pakistan have not even heard of unconventional technologies being used elsewhere in the world. These include geothermal power, which also has the potential to contribute towards eliminating the persisting power crisis in the country.
Geothermal power is energy generated by heat stored under the Earth’s surface or the collection of absorbed heat in the atmosphere and oceans.
Similarly, biofuels, biomass and wave power are some other potential energy sources which need to be explored by authorities concerned, researchers, and investors, in order to provide electricity to far-flung and remote areas of the country, as well as to meet the growing demand of electricity for industrialization and agriculture.
Most importantly, thousands of tonnes of domestic waste produced daily produced in the country is poorly managed and is dumped without keeping in view its effects on the local environment. This waste can also be used for electricity production by using waste heat electricity generation technology. Even though this method would not be as environment-friendly as renewable energy sources, but it can help diminish the gap in demand and supply of the electricity to Pakistan.

Nokia providing low-cost durable cell phones

Azhar Bukhari talks with Nokia Care Manager Pakistan, Reza Burney to discuss future opportunities in telecom
It is the need of the hour to enable provision of affordable mobile phones for masses. We will soon collaborate with different cellular phone companies that can offer low-cost services along with a connection to bring to our customers a mobile phone package that would give true value for money.
This was the view point of Nokia Care Manager Pakistan and Afganistan, Reza Burney while exclusively talking to The Post.
Reza said that Nokia has introduced a network of showrooms bearing the name of Nokia Care Centre to provide convenience to Nokia mobile phone users all over the country. He maintained that the facility is currently in Karachi along with other major cities like Lahore, Faisalabad, Islamabad, Multan and more where mobile phones are serviced under the vigilance of highly-skilled and experienced engineers.
He said that Nokia Care has been operative in Pakistan for the past three years. Nokia Pakistan initiated this facility to offer reliable customer service to Nokia users all over Pakistan. To date, 85% Pakistani Nokia consumers have utilized their one-year warranty given to them by different dealers and got their damaged Nokia phones fixed by Nokia Care Centre where all mobile phones are repaired under the supervision of well-experienced engineers who repair mobile phones with the help of latest software which are then returned to Nokia Care customers.
Responding to a question, Reza Burney said that those cities in which Nokia Care is not physically present, Nokia customers are entertained by using the support of a reputable, local courier company that transports the damaged phones of the area to the Nokia Care Centre located in the nearest city. Once refurbished, the mobile phones are returned to customers by using the assistance of same courier company.
He added that cellular phone companies operating in Afghanistan have signed an agreement with Nokia that would make available to Afghani consumers affordable Nokia mobile phones that come pre-loaded with a connection to facilitate easy acquiring of a cell phone which has turned into an essential in today’s world of fast-moving technology. Nokia wants to provide the same ease of acquiring a cell phone for Pakistani consumers in just the same way. To make this possible, Nokia in Pakistan is already in talks with cellular phone companies.
Reza Burney further added that Nokia devices are the first preference of Asian as well as European citizens. Keeping this in mind, a complete range of latest and beautiful Nokia mobile phones belonging to different series are available in the market and need no introduction. All Nokia Care Centre services are completely online and performance details of every Nokia Care Centre are monitored by Nokia Company itself which is great news for customers.
Answering a question, Reza Burney said that apart from warranty claims, smuggled and stolen mobile phones are never repaired or serviced in any way because Nokia Mobile Phone Company wants to maintain its high-standards and reputation all over the world. After a short verification process, we even entertain those mobile phones at our Care Centers that have no warranty claim. We check such phones and try to fix them if possible. For this particular reason, we serve thousands of customers not in Karachi but all over the country. According to an estimate, currently each Nokia Care Centre is catering around four thousand Nokia mobile phone users in a timely and efficient manner.
Speaking about stolen mobile phones, Reza Burney said that cell phones that are stolen and reported to CPLC (Citizen Police Liaison Committee) by customers are brought to the notice of Nokia Care Centre. Using the IMEI number, which is a unique number to identify a cell phone, the stolen cell phone is remotely blocked and rendered futile for usage. All the details of such stolen cell phones are maintained online by Nokia Care Centre. The entire software system of Nokia Company is kept under high security and this, in essence, is the secret of our success. He maintained that along with promptly fixing the mobile phone brought to Nokia Care Centre by Nokia Customers, we also replace mobile phone parts such as LCDs and various kinds of ICs if required. Damaged mobile phone parts are replaced by our experienced engineers who repair the cell phone and make it ready for regular use. No compromise is made on quality standards while servicing a Nokia mobile phone because Nokia is renowned world over due to the high level of consumer confidence in Nokia products and services.
“To further strengthen consumer confidence and offer greater convenience to our consumers, Nokia will soon establish state-of-the-art labs in different mobile phone markets in Karachi.” Reza maintained that the facility will be equipped with the most advanced tools to fix Nokia phones that will be collected from the mobile phone market everyday.
He said that Pakistan is amongst the top priority countries for Nokia as it is now very much on the global map and up to the mark on everything that is happening in the world.
“Therefore, in Pakistan, the price band for mobile phones may be slightly smaller but there are people who have both the money and the desire for expensive gadgets and that is what we are targeting,” he maintained.
Raza said, Pakistan is a very critical market for Nokia and with a clear market leadership, Nokia has commitment to ensure that its customers are getting quality after sales service for their devices. Nokia Care centers are striving to achieve the objective of servicing the local market with the help of trained technicians backed by company original components, he added.
Burney said that the current era is all about who has the information first. Therefore nowadays people are spending a lot of time online and since they are globally connected at one time, information is at their fingertips. He elaborated that Nokia based their strategies on consumer needs and as marketing strategies were an evolutionary process, it also constantly evolved their techniques based on what the consumers were focusing on.
He believed that the new technologically advanced and expensive products were not creating an undesirable demand in the society but were rather catering to already existent needs of the consumers.
“If we don’t do it, somebody else will,” he further expressed.
Burney said at Nokia they ensured that their products were meaningful and had context rather than being just another expensive product in the market. He said that all their staff was trained in advance to provide after-sales services and customer care.
He said that yet consumers in Middle East and Africa are very conscious about the look of the mobile than the features that were available in it. He voiced that in Pakistan, consumers were more into colors being vibrant due to the bright traditional cultures here, while he added that in Europe, consumers preferred more conservative colors such as black and white.
Burney also put in that since Pakistan was an emerging market, bulk of the consumers segment were those who purchased low cost mobile phones whereas there was also a significant segment that did nothing except make or receive calls.
“Pakistan is following the trend of any emerging country but this time with the launch of N97, Pakistan is ahead of more developed countries,” he added. The Nokia Care Manager also spoke about the pirated versions of their mobile phones that cheated the consumers of their money.
“I feel very passionate and hurt when loyal customers get deceived which also damages the company’s name,” he said. “Because the government has imposed taxes that make no sense, consumers are paying the price, for this country is infested with the grey market,” he added.
He informed that to identify an original cell phone, mobile dealers have a number displayed in their stores which reads ‘SMS warranty check’. A consumer can send in the mobile’s IMEI number to the stated SMS number which would reply back saying that it had original warranty in Pakistan, which in turn help the consumer to identify an authentic mobile phone.
Raza said that Pakistan needs to reduce duties on cell phones to encourage original products to enter the country. He also said that one way to identify a fake was if the product was being sold for half the price, then consumers should be wary of it.
To a question regarding Nokia’s investments into the country, the Care Manager stated that Pakistan was a very important portfolio for the multinational company as with a significant population, it made a lucrative consumer market.
However, Nokia already had nine plants all over the world that were fulfilling their mobile phones demand in the market.
While applauding federal government’s efforts, Burney said that it is fully committed to the development of telecom sector and has taken a number of initiatives aimed at supporting the mobile sector to leverage its strength for growth of economy and social inclusion of all sections of population.
He said that Pakistan has become a destination for investments in IT and has attracted US$ 9 billion Foreign Direct Investment (FDI) which clearly reflects the confidence of the investors.
He said that telecom sector is a high potential area as more and more people are subscribing to the mobile telephone services.

No way out of increase in power tariff

by Azhar Bukhari
The countrymen, willingly or unwillingly, will have to pay Rs 12-14 per unit, if the government continues following the current electricity generation process, as 70 per cent of total power production is coming from thermal power plants either using Natural Gas or Furnace oil, while the cost of furnace oil for generating one unit of electricity is about Rs 16-18.
The experts of energy sector have revealed that total installed power production capacity in country is about 19,500 MW, out of which Hydel Power is only 6,000 MW, balance of 13,500 MW is thermal using Furnace Oil. Currently, total demand of power in country is stood at 15,000 MW and the production is varying between 11,000 to 12,000 MW, as the gap between demand and supply is of about 3,000 to 4,000 MW.
A prominent analyst on power issues, on the conditions of anonymity as he considers advocating increases in tariff could go wrong to his repute said either the present government nor the previous government was responsible for current power crisis, it was the entire electricity generation system which brought up an issue to a young crisis.
He said that a comparatively cheaper fossil fuel, natural gas was to be provided for 5,800 MW to various thermal plants, but in actual fact much less gas is being made available, the deficiency is being filled through high-cost furnace oil. It is worth to mention here that in the recent past, only furnace oil was used as fuel for about 9000 MW generation.
Current price of furnace oil is about Rs 39,500 to 40,000 per ton, which amounts upto Rs 39.5 per kg. On an average one kg of furnace oil produces 3.8 kWh of electricity. Therefore, one unit (kWh) of the electricity produced by all thermal plants using furnace oil is Rs 16 per unit. According to WAPDA/IPP agreement, the private power producers will charge WAPDA the actual fuel cost for which they have a direct contract with PSO.
Focusing only how to counter terrorism, the federal government is also constantly ignoring writing on the wall, which is clearly indicating that Pakistan has entered into an arena of power crisis. Admitting this reality, Prime Minister Gilani has told the countrymen that electricity was not such a thing which could be bought from the market it is to be generated and the process of electricity generation takes time. This is why the elected opposition is hesitant to stand with the people on the issue.
Thus, coping with energy problems is no longer a matter of days or months, even though the government would enhance the production yet it could not sustain current power tariff, as the only solution lies in complete overhauling of electricity generation structure.
However, the production cost of furnace oil electricity is Rs 16 per unit but adding to it the transmission, distribution cost (including loses), the total cost of such electricity works out to approximately Rs 20 per kWh. The difference between WAPDA tariff and the furnace oil electricity is Rs15 per kWh. It is estimated that the country consumes at least 27 billion units of electricity produced annually through furnace oil, which amounts to the total deficit of Rs 435 Billion. If WAPDA has to balance its books it would require a subsidy of Rs 435 Billion. This deficit is somewhat reduced due to cheap power produced through hydel energy and natural gas, but the deficit cannot change substantially, unless bulk of electricity is produced through hydel energy.
A deficit of Rs 300-350 Billion cannot be sustained, the government does not have resources to pay such a huge subsidy, the only remaining way to decrease the deficit is to increase the power tariff, which would not earn good name for the federal government and could also cost its regime. The cost of production is already high at red level in the country, if the government decide to further increase power tariff, it could reversely effect large scale manufacturing sector resulting more difficulties both for countrymen and the federal government.
In the absence of extremely heavy subsidy, WAPDA has to delay payments to IPPs and also to the oil companies. The result is that IPPs are now producing much less electricity than their capacity.
Thus Pakistan can’t afford electricity produced through oil, but interestingly Prime Minister, Yousaf Raza Gilani has directed Ministry of Water and Power to ensure daily delivery of 35,000 tons of furnace oil for power plants, which would cost Rs 41.475 billions per month.
According to the experts, another factor of increasing cost of power production is that the IPPs, and WAPDA owned thermal plants are averaging about 50 percent plant factor, as they are not being used to their potential level. It is estimated that 70 to 80 percent plant factor is quite feasible and require only better maintenance of such plants. Moreover, a higher plant factor on these power stations can provide 20 to 30 percent more energy, which could evade the current shortage to a certain extent. Improving the plant factor of the existing plants is far more economical than setting up new plants, although new plants will still be needed.
The current power crisis is grossly due to high dependency on precious fossil fuels, since the government is busy only to counter terrorism the country has to prepare itself at least for the next several years to cope with power crisis, as no immediate cheaper alternate solutions are available. The only residual way for the government to decrease both fiscal and WAPDA deficit is to increase the power tariff.
Moreover, prominent Hydel Projects have not been undertaken, neither the indigenous coal mining has started, investments in the existing as well as new gas field have been lacking. The policy orientation needs a drastic modification and indigenous resource like hydel energy production as well as development of coal mining and new gas fields should be the top priority.

Textile industry, kicking the bucket

by Azhar Bukhari
Textile industry, kicking the bucket
Long-hours power outage, PKR decline trashing investment in textile sector
Share in total exports continues to fall off
Azhar Bukhari
The prolonging power crisis and significant decline in PKR against the US dollar, have smashed the investment in textile sector, as the share of textile exports in the total exports of the country has decreased to 50.2 percent from 62.6 percent.
A decade before, the textile export was at 80 percent of the total exports of the country. Despite enjoying subsidies worth over Rs 25 billion, the share of textile exports in the total exports of the country is continued to decrease.
According to a research study, more than 300 big and small textile and spinning units have been closed or merged after the martyred of former Prime Minister Benazir Bhutto. The industry has not been able to reap the benefits arising out of the depreciation of the rupee by 30 percent, and textile exports have registered a negative growth of 7.2 percent in the 3rd quarter of current fiscal year.
But on the other, when the food crisis is hitting the world’s major economies, here in Pakistan, without any government support, the share of non-textile exports have increased to 49.6 percent from 37.4 percent. The share of non-textile exports in the total exports of the country have increased to $2.730 billion in the Jan-March 2009.
Due to the unending power crisis, the local textile sector has not been able to develop its capacities and product development and meet international challenges.
The reliance of the local textile sector on textile quotas, duty drawback, refund and rebate culture has had a negative impact and its inefficiencies have exposed its capacity in the post-quota era.
In Pakistan, the textile sector commonly uses the locally produced cotton, yarn and raw materials and relies less on imports, but even than it has not been able to increase its exports at par with the last fiscal year. Experts in the government also argue that utility prices like gas, electricity and petroleum products have increased and are having a negative impact on all export-oriented industries.
The rupee witnessed a downslide soon after the Pakistan People’s Party-led government took charge of the affairs of the country. It depreciated from Rs 62 a dollar to Rs 80 a dollar during the last few months leaving export-oriented industries with no option to import or buy imported raw materials at higher costs.
In the recent past, the country’s exports have been witnessing marginal growth and imports have been registering sky rocketing increase, which has created balance of payment problems for the country. Availability of locally produced industrial raw materials would be the key to enhance country’s exports in future as the overall inflation and depreciation of rupee and rising power tariff would be limiting growth in exports.
The continued high prices of cotton yarn may cause a setback to the ongoing progress in the investment tempo of extensive-scale modernization replacement and expansion in the value-added section of the textile industry.
It is estimated that the export of one kg. of cotton yarn earns $2.70 as against which the similar quantity of cotton yarn/polyester fibre would earn $7.50 if exported after conversion into a value-added product. In order to achieve the best results on the textile front, it would be advisable that quotas may be imposed for the export cotton yarn so that the commodity could be made comfortably available to the value-added industry.
The demand for textiles in the world is around $21 trillion, which is likely to be increased by 6.5% in 2010. China is the leading Textile exporter of the world's total exports of US$ 500 billion in 2007. Country wise major market shasres of the textile exporting countries are: China: $ 55 billion, Hong Kong:$ 38 billion, Korea: $ 35 billion, Taiwan:$ 16 billion, Indonesia:$ 9 billion.
Though Pakistan has emerged as one of the major cotton textile product suppliers in the world market with a share of world yarn trade of about 30% and cotton fabric about 8%, having total export of $ 7.4 billion which accounts for only 1.2% of the over all share. Out of this Cotton fabric is 0.02%, Made-ups is 0.18% and Garments is 0.15%.
This is mainly due to the laxity towards the promotion of value added sector. Pakistan should learn a lesson from Bangladesh, which, by importing yarn and fabrics from Pakistan and other countries, has increased the export volume of Textiles made ups. If we desire to achieve the target of Textile Exports as envisaged in Textile Vision 2009, we will have to promote Value added sector in Textiles.

Role of textile industry in national economy
Textile products are a basic human requirement next only to food. This industrial sector in Pakistan has been playing a pivotal role in the national economy. Its share in the economy, in terms of GDP, exports, employment, foreign exchange earnings, investment and contribution to the value added industry; make it the single largest determinant of the growth in manufacturing sector. Textile share of over all manufacturing activity is 41%, export earning is 50.2%, value addition is 7% of GDP and as a provider of employment 32%.
In spite of the government's efforts to diversify exports as well as industrial base, the textile sector remains the backbone of industrial activity in the country.
Bottlenecks & deregulation strategy for investment
1. Poor infrastructure
2. Delay in sales tax refund causing serious cash flow / liquidity problem to the industry.
3. Pakistan's bad image portraited by the international media.
4. Adverse travelling advice by the foreign countries to their citizens discouraging travel to Pakistan.
5. Pakistan to sign international agreements, providing protection to intellectual property rights and international arbitration agreements.
6. Non-availability of good quality soft water for the textile industry.
7. Arrangements to provide Insurance guarantees to U.S. investors on their investment in Pakistan

Cost overrun, a setback for construction sector

Cost overrun, a setback for construction sector

Azhar Bukhari

Cost overrun is a very frequent phenomenon in country’s construction sector and is almost associated with all projects of construction industry. A research study has revealed that 9 out of 10 projects had overrun.
World commodity prices for basic materials, the current state of the local economy, the quality of materials and poor supply and demand have contributed to dramatic price fluctuations in the sector.
At the time when masses are facing sever power crisis and ever increasing inflation rate, it is a pipe dream for common men to buy a house for their families.
In big cities like Lahore, Faisalabad, Karachi, Quetta etc, a large population is residing at rent making the cities very congested place. To overcome the shortage of housing units, the town planning and management departments, without following the rules, have granted licenses for establishing housing schemes to every Tom, Dick and Harry, which have made the situation more critical.
It is learnt that 80 out of 100 housing schemes are either fake or hide the facts. However, all the field is not barren, as few developers like Eden Developers, Lake City, Bahria Town, Urban Developers, TajMahal Marketing and Wocland International are still providing low-cost housing units both in cash and installments. Busy in metro life, a common man prefer to buy a unit in housing scheme to save time and money as well.
In Pakistan, construction sector is an important sector although not working to its fullest potential but still of prime significance to the country. Growth in this sector is critical for growth in national income as it is among the largest sectors that generates employment within the country as well as a key driver for economic development of Pakistan. Like many other developing countries, Pakistan is also facing critical project management related issues among which cost overrun is quite prominent.
A research study has indicated that the majority of cost overrun factors (88%) lie in medium severity impact zone, signifying that major attention needs to be given to these factors as they collectively cause considerable cost overrun. It is evident from the findings that both internal and external aspects of business setting are present as the prime contributors to cost overruns.
According to the study, the major cost overrun factors were fluctuation in prices of raw materials, unstable cost of manufactured materials, high cost of machineries, poor project (site) management, incorrect/ inappropriate methods of cost estimation, additional work, improper planning, and unsupportive government policies.
Cost has its proven importance as the prime factor for project success. A completed project may not be regarded as a successful endeavor until and unless it satisfies the cost limitations applied to it.
Management Factors
Some cost overruns are unavoidable because they cannot be reasonably prevented, such as those due to unanticipated events, however overruns due to design plan or project management problems are avoidable because they could have reasonably been foreseen and prevented. The project control procedure can help management identify its current position related to a future position.
Majority of constructors are small players who have weak financial positions, out-dated labour-intensive technology and poor organizational structures.
It is need of the hour to encourage investment in the real estate sector and facilitate the developers like Eden, Wocland, Bahria Town, TajMahal, Urban Developers etc which are establishing modern housing schemes with all basic facilities for a common man.

Approximate construction material prices in Lahore market
during April 2009
Construction including material per square ft Rs 1250 to 1500
Labour cost without material per square ft Rs 150 to 200
Electricity & Plumbing per square ft Rs 10 each
Cement bag Rs 325
Stone crush Rs 40 per square ft
Sand Truck Rs 12,000
Bathroom Tiles Rs 300 to 1200 per square meter
Marble Rs 20 to 80 per square ft
Bricks Rs 3600 to 4000 per 1000
Approximate covered area for single storey house
5 Marla 1125 square ft
10 Marla 1800 square ft
1 Kanal 3200-3600

LSM continues to decline ahead weak demand, heavy load-shedding

LSM continues to decline ahead weak demand, heavy load-shedding

Azhar Bukhari

The Large Scale Manufacturing (LSM) has recorded negative growth throughout fiscal year 2008-09, which is the longest period in production fall continuously.
Moreover, 21.2 percent (YoY) decline in the month of May 2009 is the highest ever fall in LSM production.
Weakness in domestic demand, worsening power shortages, structural problems and deterioration in law & order situation are some important factors responsible for the decline in LSM production.
According to the data released by the State Bank of Pakistan Large Scale Manufacturing registered negative growth of 7.7 percent during Jul-May FY09 compared with a 5.0 percent rise in the corresponding period of FY08. The persistent disappointing performance is a reflection of various adverse domestic and external developments.
However, this continuous fall in manufacturing sector has more domestic factors than the affects of global recession.
In particular, automobiles industry witnessed sharp slide mainly due to high cost of consumer financing continued upward prices of cars, tight liquidity position of the banks as well as risk averse behaviour after facing substantial Non Performing Loans (NPLs) in consumer finance.
Further, slow income growth and high inflation impaired consumers’ ability to spare funds for purchasing durables. While higher cost of consumer financing was an important reason for softer demand for household electronics, weaker demand for transformers and electric meters by the power distribution companies resulted in a poor performance by this industry.
Growth in cement production though helped contain free fall of LSM growth, weakened in recent months. Cement production rose by 4.8 percent during Jul- May FY09, the lowest growth in the last six years. A sustained double-digit growth in cement production was achieved by addition in production capacity and exploitation of export markets.
The impact of global recession on domestic LSM is most visible in the textile industry. Growth in textile industry fell by 0.1 percent over the same period last year. Textile sector was badly hit by power shortages and weak external demand. Both cotton yarn and cloth industries, which have the largest shares in the textile sector, posted negative growth of 0.27 percent and 0.33 percent respectively during Jul-Mar FY09.
With respect to exports promotion measures All Pakistan Textile Mills Association has proposed the federal government to make duty and tax remission schemes workable, easy to operate and manageable. It has also stressed on industry friendly anti-dumping laws with raw material relating provisions i.e. competing interests should be balanced.
On market access, the APTMA has stressed on trade diplomacy, image building of the country and compensation to the industry for losses being made out of present distort image.
Consequently, Pakistan Industrial and Traders Associations Front (PIAF) has also decried the six to eight hours suspension of electricity supply to Independent Feeders of Large Scale Manufacturing Units saying that it would hit the exports hard.
Talking to The Post, Chairman PIAF, Irfan Qaiser Sheikh said that the duration of suspension of electricity should be minimized to help Large Scale Manufacturing units that are major foreign exchange earners for the country.
The PIAF chairman maintained that there is a dire need to implement innovative ideas for the economic revival of the country at this point in time when the economic activity is already at its lowest ebb. He said that the government should intervene to avoid prolonged economic slow down that is bound to give birth ills like poverty and unemployment.
Sheikh said that the Large Scale Manufacturing units need facilitation as they are supplementing the government efforts aimed at economic prosperity but it seems that some circles are hell-bent to defame the government. He said that the electricity is one of the basic raw materials for the industry and the repeated increases in its prices even without proper consultation of business doing people are badly affecting the over all production.
Similarly, electronics sector is not only going through weak demand created by financing gap and increased prices of products, but also due to frequent power outages.
People are forced to spend on alternate power supply equipment (UPS and generators) to streamline electricity supply, which do not support a number of household electronic appliances.
As global textile demand declined, quantum of yarn exports shrank by 7.8 percent over the same period last year, and the average export unit value of yarn fell by 8.7 percent. Similarly, export unit value of cotton fabric dropped by 1.0 percent in this period. The combined impact of domestic and external factors has resulted in closure of about 20 percent spinning mills in the country.
In contrast to a declining trend in overall manufacturing activity, fertilizer production posted a significant growth of 20.7 percent in last 12 months after a dismal performance during the preceding two years.
In addition, a slower pace of decline in international prices of phosphatic rock (major input for DAP) squeezed the margins of the firm. While, current production of both phosphatic and nitrogenous fertilizer are insufficient to meet local demand, with the completion of plants by Fatima Fertilizer and Engro, shortage of urea is expected to turn into a surplus during FY11.
However, DAP shortage will continue due to lack of raw material in the country and large investment required to setup a new plant.
Similarly automobiles industry is facing significant contraction in demand (except for tractors where domestic production is low). In particular, jeeps & cars subsector is the worst hit by the sluggish demand due to three factors: continued increase in prices, (2) rise in cost of financing, as well as (3) lower availability of institutional financing given risk averse policy of banking sector amid increasing NPLs and liquidity problems with the banks.

Scope for Islamic banking seen

Scope for Islamic banking seen
Financial soundness, solvency of Islamic banks remained strong despite global financial crisis

Azhar Bukhari
The promotion of Islamic banking and finance is the need of the hour.
Islamic finance is a system based on strong economic and social considerations, envisaging equitable distribution of rewards and risks among the stakeholders.
However, it is very encouraging that the Islamic finance is being practised by Muslims as well as a few non-Muslim countries. The United Kingdom had taken significant initiatives in the development of Islamic finance by adopting an open door policy.
The investors from Middle East, Far East and UK have shown keen interest in the establishment of Islamic banks in Pakistan. The total assets of Islamic banks in Pakistan are increased to Rs340 billion. There are 170 branches of six licenced Islamic banks and more than 13 commercial banks are also offering Islamic banking services.
Moreover, the financial soundness and solvency of the domestic Islamic banks remained strong despite constraints and global financial crisis as the total assets of the industry increased to Rs 340 billion during the third quarter of FY 2008-09.
From 01 January to June 2009, the deposits of the Islamic banks surged to Rs 140 billion, financing and investments mounted to Rs 176.4 respectively while the number of full-fledged Islamic bank branches including stand-alone branches of conventional banks extended to 341 as of end-FY 08-09.
A detailed performance review on Islamic banking revealed that Islamic banking in Pakistan has grown rapidly in the last few years. Keeping in view the small size of the industry and its evolutionary nature, the growth achieved so far has been impressive and has persistently outpaced its conventional counterparts.
The consistently high average growth rate is attributed to the entry of four new players in the market in FY07 and FY08. At present there are six Islamic Banks (IBs) operating in Pakistan with 238 branches.
Though the performance in terms of growth of assets is impressive, it has not translated into a proportionate increase in profitability as reflected in the ROA and ROE for Islamic banks. At 0.6 and 3.3 percent for CY07 respectively, these ratios for Islamic banks are below the overall banking sector average.
Notably, these indicators do not portray the actual picture due to the entry of four new banks in the market which started operations as recently as CY06 and 156 CY07, and are still in the process of establishing their business, expanding their deposit base and enhancing the scope of their operations.
It would normally take a new bank 3-4 years to become profitable and start operating efficiently, i.e. once the start-up costs and the expenditure on the development of management systems and related infrastructure, start to yield results.
This shows a higher ROA (2.6 percent) and ROE (16.3 percent) in CY05, when there were only 2 dedicated Islamic banks operating in the industry. Both indicators declined sharply in the subsequent year (with a marginal improvement in CY07) simply due to the enhanced capital and asset base effect: the new banks contributed a significant amount to the total capital and asset base of the Islamic banking industry, but the earnings are still largely concentrated in the two previously established banks in the sector. Both ROA and ROE for the industry are expected to increase in coming years, as the new banks establish themselves on a sound footing. That said the current strains on the macroeconomic environment might exacerbate this process.

A Brief History
Modern banking system was introduced into the Muslim countries at a time when they were politically and economically at a low ebb, in the late 19th century. The main banks in the home countries of the imperial powers established local branches in the capitals of the subject countries and they catered mainly to the import export requirements of the foreign businesses. The local trading community avoided the “foreign” banks both for nationalistic as well as religious reasons. However, as time went on it became difficult to engage in trade and other activities without making use of commercial banks.
With the passage of time, however, and other socio-economic forces demanding more involvement in national economic and financial activities, avoiding the interaction with the banks became impossible. As countries became independent the need to engage in banking activities became unavoidable and urgent. Governments, businesses and individuals began to transact business with the banks, with or without liking it. This state of affairs drew the attention and concern of Muslim intellectuals. The story of interest-free or Islamic banking begins here. Interest-free banking seems to be of very recent origin.

Renewable energy: only way to survive

Renewable energy: only way to survive

Azhar Bukhari

Summer has brought terrible news regarding energy availability and access to ordinary Pakistanis. While most Pakistanis have been aware for a while that their country faces long term energy shortages, they had not expected the problem to be as acute and severe as it demonstrated itself to be this summer.
There is a severe energy shortage in Pakistan, particularly in the urban areas, and most parts of the country are experiencing heavy load sheddings, i.e. periods with no electric power, designed to distribute load and conserve energy. Karachi, the major port city and industrial hub, is experiencing nearly 110 degree weather with 10-12 hours of load shedding a day in some parts.
The situation has turned bleak, and even the more skeptical are re-assessing their opinion on renewable, distributed, and localized energy generation for Pakistan major population centers.
When it comes to Pakistan, an entire gambit of renewable energy sources can be considered plausible. Solar (PV and concentrator PV/thermal) and (onshore-off-shore) wind appear to make most sense, primarily given the geography and climatic conditions as well as the maturity of the technology worldwide, but biofuels, coal-to-gas and coal to-liquid fuels, biowaste to syn-gas, tydal power and small hydro are all valid technologies to be researched and looked into. The biggest impediments, of course, remain rather similar to many other developing countries: lack of technological resources, lack of government incentives and support, mistrust of the financial sector for long term financing, inadequate infrastructure. It is no wonder that even when utility industry was deregulated, the only thing the population learned about the process was how contracts were awarded to foreign firms without proper financial due diligence.
India is fast gaining serious experience in renewable energy production not only for domestic consumption but also to become an international player in this area. India today has an installed capacity of over 6.27 GW of wind power.
As renewable energy technologies are getting better traction in the world, prices per KwH are coming down. Wind energy is now almost competitive with natural gas derived electricity, and solar is not that far behind as well. Germany and Spain have made huge inroads in both these sectors. But pakistan will be left behind if it doesn’t quickly start climbing the experience curve.
Technologies for renewable energy industry, from wind turbines to solar panels to power electronics and enzymes for cellulosic biofuel synthesis are being researched and implemented at pilot scale in countries whose problems are not too dissimilar to ours. While renewables will not provide the full answer to Pakistan’s energy crisis in the short term, a strong and committed push will set the right foot forward for the country’s future.
There are certainly individuals and organizations, researchers, policy-analysts, and entrepreneurs that are very interested in participating in the energy future of Pakistan. But the government will need to systematically remove blockages that have kept the real geniuses away from this industry. Financing/investing, funding, tax/rebate incentives, infrastructure upgrade, and energy buy-back contracts from independent energy providers on the national grid are among some of the things that government can do to promote energy entrepreneurship.
The wind energy projects in Pakistan have been run into snags and delays for more than a year following the government’s apathy in providing the assured subsidies to the higher tariff against the conventional gas/oil-fired power plants, a root cause hampering physical progress.
Wind power projects of total 100 mw capacity are being established, on BOOT (Build, Own, Operate and Transfer) basis, at Keti Bandar and Gharo in Sindh.
Pakistan has recently indicated its commitment to renewable energy sources, but realising these in practice could still be a long way off.
Pakistan is blessed with an abundance of renewable energy potential, but so far this remains unharnessed except for a few large hydroelectric projects.
The country, historically an energy importer, is facing serious energy shortages while global fossil fuel prices continue their upward spiral. The effects on the economy are marked: interruptions in energy supply to industry, for instance, have hit the country’s exports hard.
Many now believe that Pakistan needs to initiate a transition towards greater use of renewable energy as an indigenous, clean and abundant resource.

Solar Panels

Solar panels;
A way out of power crisis

Azhar Bukhari

CAN sunny Pakistan deal with its crippling energy crisis?
In fact, Pakistan is an exceptionally sunny country. If 0.25% of Balochistan was covered with solar panels with an efficiency of 20%, enough electricity would be generated to cover all of Pakistani demand.
Photo-voltaic solar power panels are often used for local and distributed power generation capability, such as on rooftops of homes and buildings. It is generally on-grid but it can be off-grid for remote places. Unlike the solar panel's relying on photo-voltaic cells, solar thermal power is centrally generated from thousands of curved mirrors in the desert focusing sun's light on to water pipes to generate superheated steam which is then used to generate electricity.
Solar energy makes much sense for Pakistan for several reasons, firstly, 70% of the population lives in 50,000 villages that are very far away from the national grid, according to a report by the Solar Energy Research Center (SERC). Besides, the country's creaky and outdated electricity infrastructure loses over 30 percent of generated power in transit, more than seven times the losses of a well-run system, according to the Asian Development Bank and the World Bank; and a lack of spare high-voltage grid capacity limits the transmission of power from hydroelectric plants in the north to make up for shortfalls in the south. Connecting these villages to the national grid would be very costly, thus giving each house a solar panel would be cost efficient and would empower people both economically and socially.
Pakistan has reported practical examples of the use of solar energy as seen in some villages of Pakistan where each house has been provided with a solar panel that’s sufficient to run an electric fan and two energy saving bulbs. Prior to this arrangement, the whole village used to be plunged in darkness at night. In Narian Khorian, a village about 50 kilometers from Islamabad, 100 solar panels have been installed by a local firm, free of cost, to promote the use of solar energy. With these panels, the residents of 100 households are enjoying light and fan facilities. This would not have happened for decades as the supply of electricity from the national grid would be difficult and costly due to the mountainous terrain.
In addition to renewable energy from the sun, Pakistan is also fortunate to have something many other countries do not, which are high wind speeds near major centers. Near Islamabad, the wind speed is anywhere from 6.2 to 7.4 meters per second (between 13.8 and 16.5 miles per hour). Near Karachi, the range is between 6.2 and 6.9 (between 13.8 and 15.4 miles per hour). In addition to Karachi and Islamabad, there are other areas in Pakistan that receive a significant amount of wind.
In only the Balochistan and Sindh provinces, sufficient wind exists to power every coastal village in the country. There also exists a corridor between Gharo and Keti Bandar that alone could produce between 40,000 and 50,000 megawatts of electricity, about twice the current installed capacity in Pakistan, says Mirian Katz who has studied and written about alternative energy potential in South Asia.
In recent years, the government has completed several projects to demonstrate that wind energy is viable in the country. In Mirpur Sakro, 85 micro turbines have been installed to power 356 homes. In Kund Malir, 40 turbines have been installed, which power 111 homes. The Alternative Energy Development Board (AEDB) has also acquired 18,000 acres for the installation of more wind turbines.
The village of Ghulam Muhammad Goth, north of Karachi with population of 800, about 10 km from the national power grid, now receives power from a small windfarm consisting of 18 wind turbines each capable of generating 500 watts of electricity. Installed by the state-run Pakistan Council for Renewable Energy and Technologies (PCRET), the farm produces enough to power for each home to have two low-energy bulbs, a fan and, most importantly, a television set.
In addition to high wind speeds near major centers as well as the Gharo and Keti Bandar corridor, Pakistan is also very fortunate to have many rivers and lakes. Wind turbines that are situated in or near water enjoy an uninterrupted flow of wind, which virtually guarantees that power will be available all the time. Within towns and cities, wind speeds can often change quickly due to the presence of buildings and other structures, which can damage wind turbines. In addition, many people do not wish for turbines to be sited near cities because of noise, though these problems are often exaggerated. Wind turbines make less noise than an office and people comfortably carry on conversations while standing near them.
As Pakistan grapples with its crippling Energy Crisis, it is important for the country to take advantage of its precious natural resources such as the high winds and the bright sunshine, and bio-fuels as byproducts of its sizable sugar-making industry. Such a strategy will lead to lower costs of generation by reducing the need to import oil. It'll also help reduce carbon emissions, a major environmental concern.

UBL Liquidity Plus Fund

UBL Liquidity Plus Fund;
A step towards prosperity

Farooq Ahmed, Head of UBL Retail Sales, discusses options to get rid of crisis
Says NPLs of banking system to stabilize soon

Azhar Bukhari

United Bank Ltd (UBL) has launched UBL Liquidity Plus Fund (UBLPF) as a money market fund to provide investors with tailored and need based investment solutions. The fund has a unique feature where a same day redemption can be honoured, subject to the fulfillment of certain conditions.
This was the upshot of the dialogue took place with UBL Head of Retail Sales, Farooq Ahmed here at its office.
“In continuation of our vision we are committed to provide our investors innovative, low cost investment solutions with safety of principal and liquidity as primary ingredients. Therefore the tradition continues and we are launching our new product UBLPF it’s a true money market fund”, Farooq maintained.
As far as the target audience goes, this product caters to the needs of individuals, SME’s and a large scale of corporate’s who are looking for low risk, liquidity, capital preservation and competitive but better market returns, he said.
Farooq revealed that minimum investment amount in UBLPF is as low as Rs 5,000 and there is no holding period which means an investor can liquidate his investment at any time and can completely take advantage of the Same Day Redemption Facility that the fund provides.
UBLPF is ideal for investors looking for placement of their savings or idol cash for less those 90 days (short-term) while they decide on their long-term financial decision, he added.
“UBLPF will try to provide its investors with competitive tax free returns which vary with money market but would generally be higher than bank deposits” Farooq said.
He maintained that UBL aim to be the first choice investment solution provider, renowned for quality, added value and innovative service at an affordable cost to its investors.
Therefore there are no charges in UBLPF, which means no charges are applied at the time of investment or withdrawal, he said.
Faroqq elaborated that the fund would be investing mostly in a combination of Government Securities and Tenor/PLS Placements with a minimum AA rated banks. The weighted average time for the maturity of fund assets will not exceed 90 days and the maximum time for the maturity of any single asset at the time of placement will not exceed six months.
Farooq said that the fund would mostly target investors looking at liquidity management solutions and who wanted to earn competitive after-tax returns on their surplus funds.
The portfolio would comprise mostly of an exposure to short-dated Treasury Bills which are also very liquid instruments from the entry / exit perspective. A certain part of the portfolio will be placed in other avenues such as reverse repos (against eligible Government Securities), tenor placements with high rated commercial banks and DFIs, he said adding that it would also be active in short tenor (overnight) placements with banks and DFIs, as and when opportunities of earning a spread over traditional bank account rates arise.
However, he maintained that the fund would be a low risk fund and would be providing quick liquidity to clients. Since the minimum credit rating of the underlying asset classes is quite high and weighted average time to maturity of the assets cannot exceed 90 days, the interest rate risk is somewhat mitigated, he added. He said that other risks such as the Re-investment Rate Risk, Credit Risk, Price Risk and Government Regulation Risk exist that are there in all investment avenues.
UBL Head of Retail Sales, Farooq Ahmed said that the allowable asset classes for this fund are relatively limited as compared to an income fund, which is for investors with a long-term holding period in mind. Investment in CFS and spread transactions would be prohibited in such a money market scheme (by regulation). The fund strategy would therefore be very different as investments would be made in shorter tenor assets as opposed to an income scheme, where the fund manager can invest in longer tenor assets, he added.
This is also evident from the allowable maximum weighted average maturity of four years permitted under the SECP categorisation for income schemes. The minimum rating criterion for income schemes is also more relaxed when compared to money market schemes where a minimum AA rating is required for entities with whom funds are being placed (generally, as placements are made with higher rated entities, the rate of return declines), said Farooq .
Responding to a question regarding current financial crisis, Farooq said that Non Performing Loans (NPLs) of country’s banking system are expected to stabilize with the improvement in macroeconomic fundamentals as the recent macroeconomic pressures, which eventually led to a slowdown in economic growth in FY09, indicate that the increase in NPLs of the banking system is as largely of a cyclical nature.
“The sensitivity analysis undertaken at SBP suggests that the banking sector is well placed to withstand credit risk shocks of a modest nature,” he said and added that the provisioning coverage ratio of around 70 percent at end March 2009 also showed a prudent and proactive approach towards credit risk management.
He said that in response to the emerging dynamics in the macro-financial environment, SBP had rationalized the Minimum Capital Requirement (MCR) and the time period in which it was to be implemented, thus providing the much required breathing space to the banking industry in this difficult macroeconomic environment.
“Pakistan is currently standing at a juncture where long-term investment in infrastructure is crucially needed to facilitate the process of economic growth,” he said.
Referring to sustainability of the banking sector, he observed that banks in Pakistan had been able to withstand the headwinds from the weakening macroeconomic fundamentals since FY07. “Now that the economy is poised for a remarkable turnaround, the banking sector has an even greater role to play in supporting the real sector by meeting its financing needs,” Farooq said.

High energy prices, a root cause of economic turmoil

High energy prices, a root cause of economic turmoil

Mian Kashif Ashfaq, Managing Director ChenOne highlights issues facing business community

Says govt should announce incentive packages for manufacturing, textile industries to compete in international market

By Azhar Bukhari

AFTER the recession in the world economy, problems are escalating with every passing day for exporters of Pakistan particularly in textile sector.
Ever increasing rates of Oil, gas and electricity as well as the less availability of these energy resources, are pushing the local exporters to the corner in the international market.
It was the viewpoint of renowned business man and Managing Director ChenOne, Mian Kashif Ashfaq, which he expressed this in a meeting with The Post.
“In my opinion, the federal government should announce incentive package for industrialists related to export sector without any further delay to get the economy back to rails. The prolonging power crisis and high fuel prices have already damaged the local manufacturing industry, which could only be restored if government take some practical steps in this regard,” Mian Kashif observed.
He maintained that the most dangerous factor facing by the business community is the law and order situation and the terrorist activities in country.
These activities disturbing the both national and international businesses as no foreign company ready to invest in Pakistan.
“A fund should be announced to explore the more international markets especially TDAP and ministry of Industry should apply the serious efforts to branding of Pakistan in the world and promote the industrial and commercial image,” MD ChenOne said.
However, the federal government would have to give priority to continuity of electricity supply as well, he maintained. “In the absence of proper policy planning, no package would work,” he added.
He stressed the need for identification of the areas for the guidance of the foreign investors besides only focusing on manufacturing sector.
An energetic business activist, Mian Kashif said that there is no need for being pessimistic as every crisis has in its fold some opportunities as well. “The country is facing severe energy crisis, from electricity shortage to high fuel prices, problems and hurdles are everywhere, but it is also an opportunity for businessmen to put their money in power projects,” he elaborated.
Mian suggested the government to fix the electricity and fuel prices for at least 5 years for the revival of economy.
“I have always been of the opinion that commerce related policies should be fixed for a certain period of time.”
He was of the view that a strong liaison between the policy makers and the stakeholders could also be helpful in bringing the country out of mire.
He said that the incentives being offered to the foreign investors by the Board of Investment should also be given to the local businessmen so that they could be able to put their money in new ventures.
He maintained that drastic cut in government expenditures and enhanced productivity were the answers to the liquidity crunch. He urged the State Bank of Pakistan to announce cut in interest rates without any further delay as it is a prerequisite to enhance industrial production. At a time when the whole industry is badly suffering due to high cost of doing business and complaining of being uncompetitive in the global market, the SBP has taken a totally otherwise step, he added.
He was of the view that imbalances in the economy such as increasing trade deficit, current account deficit, high saving and investment gap, huge government borrowing and persistent high inflation including food inflation would leave a very negative impact on the national economy.
Renowned industrialist Mian Kashif said that the government should evolve long-term and short term plans to enhance electricity production in consultation with real stakeholders. He stated that long term plan include utilizing all hydel resources by building big water reservoirs and power generation units which is a cheaper way to produce energy. He said that government should also go for alternative energy resources like other countries. He mentioned that Germans are producing more than 21000 MW and while India are producing more than 7000 MW power through wind energy.
Furthermore, Mian strongly criticized NEPRA decision to allow power distribution companies to increase in power tariff. He said that this decision would be last nail in the coffin of industrial sector.
He said that only because of huge undiscovered potentials in Pakistan and for having a unique food basket, a number of foreign investors are ready to come to Pakistan.
He called for revival of freight subsidy to give boost to exports as the freight subsidy was making Pakistani exports uncompetitive in the global market which has a huge potential for Pakistani goods, particularly chicken meat.
He was of the view that compliance to all international norms and standards is a must to get competitiveness and only those organizations would be able to get a respectable space in the global market that are world standards compliant.
He said that industrialists training through such seminars and training sessions would help them meet the challenges of 21st century.



Profile

Mian Muhammad Kashif Ashfaq is Managing Director/Head of ChenOne Stores Ltd and ChenOne WorldWide Travels.
ChenOne is a subsidiary of Chenab Limited, formerly Chenab Fabrics and Processing Mills Ltd.
Chenab Group is one of the largest exporters of home textiles, apparel & value added products from Pakistan.

In 1997, ChenOne opened its first branch in Jinnah super, Islamabad. At present ChenOne has opened its branches in Karachi Park Tower, Tariq Road, Lahore Gulberg, DHA, Islamabad, Rawalpindi, Peshawar, Abbottabad, PC Bhurbun, Faisalabad, Multan, Sialkot, Gujrat & Rahim Yar Khan.
With the target of opening 50 stores in Pakistan by 2015, ChenOne will maintain its status of largest Chain of Stores in Pakistan.

Talent needs mentorship

Talent needs mentorship

Interview By Azhar Bukhari
TALENT alone is not enough, it needs mentorship, which Pakistan lacks, stresses Brig (r) Zubair Rehan, Managing Director of Creative Junction, a noted ad agency.
In an exclusive interview, Rehan disdains the rise of mediocrity and compromise on quality, particularly in the advertising industry.
As the Managing Director of Creative Junction, he observes, mediocrity on single factor – the dearth of leadership, saying “The lack of leadership in fact the acute absence of guidance has restricted the growth of advertising to an institution despite availability of immense talents and resources.”
He observed that most of the people dealing in the ad industry inherited running advertising agencies from their ancestors here in our country, though they are incapable of seeing beyond their noses to realise that they have to return something to the system they got benefit.
“There has been no attempt to make an investment in people. To develop, nurture and groom the raw talent that we have in abundance,” Rehan maintained.
These concerns need to be taken seriously by the advertising industry, or what passes for it, as Rehan has worked his way up since he started his career in advertising “by an accident” even before his past belongs to such a profession where following the strict discipline is only way to survive. He also explains why he feels that it gives his “un-inherited” agency a “professional edge.”
Besides the lack of leadership another major deterrent to groom the talents is the economic reality itself, adds Rehan. “It is not that there is a dearth of talents. This is obvious from one simple fact: Despite jobs being in short supply everybody seems to be looking out for quality employees. And yet the search remain futile as while advertising is all about common sense, I myself did not know anything about it when I started my career with Creative Junction, there are no venues to find, develop and groom the inherent talents.
There are no schools specialising in advertising to groom the natural-born talent for advertising.
“Merit did not matter, what matters more are the connections. Things are being definitely changed for better due to wider penetration of airwaves by the satellite channels changing the way the consumers think. They have become more educated and informed to become more demanding in turn. The exposure has made advertising companies, and for that matter their clients, more sensitive to the needs of consumers realizing that old formulae would not work anymore.”
“Advertising in Pakistan still keeps reeling from the creative flair and the execution it requires. An advertising agency is good if it is sincere with its client. If a client is good agency would also be good and vice versa. However, don’t expect an advertising company to turn a concept into an affective commercial if the client is not willing to provide the environment, the people, the frame-work and the last but not the least the appropriate funds? Demanding quality output without providing quality input can hardly be expected to work. Quality has a price.”
He maintained that it is also important to understand that unlike many other countries, including India, lack of professionalism and creativity in the Pakistani advertising industry can also be attributed to dearth of technical skills. It is an established fact that advertising industry draws its strength from the film industry. We are all aware of the lack of professionalism and technical know-how in our film industry and thus our ad-industry is unable to draw the needed technical backup, Rehan said.
MD creative Junction observed that restricted growth of the ad-industry could also be attributed to the ground realities of the Pakistani market. The industry’s performance depends heavily on the performance of the other sectors of the economy and the reason for the changing role of the advertising agencies from that of mere providers of traditional services as print and audio-visuals. In the digital world of today, they have to provide a range of services like marketing, event manager and brand builder all wrapped up in one.
While the expansion has helped many advertising agencies to diversify their business to find alternative sources of revenue to achieve economies of scale it has also put an enormous burden on work on them, Rehan expressed his concerns over clients’ attitude, as they try to take an advantage of this situation by pressing the advertising agencies to do the consumer research as of it is part of the job. Is consumer research a part and parcel of an advertising campaign, he said candidly.
“Consumer research is a specialized job which requires money. Asking the ad-companies to carryout consumer research is unfair indeed. We at Creative Junction have done such researches but it’s just not fair for a client to expect an advertising agency to do it without paying for it,” he maintained.
Answering the question regarding future of advertising industry in Pakistan, Rehan observed that it belongs to ‘brand development.’ We must realize that advertising is just a part of brand building and not the other way around. Look around; even war is brand development today. ‘Shock and Awe’ and ‘Operation Liberation Iraq’ are brand building advertising campaigns. However, it must also be realized that advertising can-not sell a bad product. In fact, advertising would do increased damage to a bad product.”
“I strongly believe that the future of brand marketing lies well beyond the traditional advertising form that revolves primarily around TV spot and print ads at present. Definitely advertising will change its shape and form in the future.”
However, Rehan said that the future would be about the unusual, not the usual. Brands in the future would need liberating, re-defining brand ideas, which would matter more than the form in which they appear.
To be a successful brand in the future, Rehan believed that it is important to embrace this “beyond advertising” attitude as a marketing mantra. However, he urged the government to promote the ad-industry by giving it ads purely on the basis on merit.

Profile

Brig (r) Zubair Rehan is Managing Director of Creative Junction, a premier full-service ad agency operating from Lahore.
It has a range of services with operations running all across Pakistan.

Baverage, Shandy Cola

Take vertical actions to arrest inflation

MD Shandy Cola, Ahmed Arif expresses his concerns over negative growth of LSM


By Azhar Bukhari


The country’s economy direly needs wholesome measures to arrest fast increasing inflation as surge in inflation has eroded the purchasing power of masses.
Everyday rise in the inflation could only be controlled by enhancing productivity and by putting curbs on undue expenditures.
Ahmed Arif, Managing Director, Shandy Cola expressed these views in an exclusive interview with The Post.
Ahmed said that the situation had turned so bad that industry has no money to pay the salaries and utility bills, as the steps should be taken on war-footing to avert mass lay-offs. He added that a large number of industrial units had already closed down their operations due to acute shortage of electricity and gas while the remaining were on the verge of closure.
The MD Shandy Cola expressed his grave concern over negative growth in Large Scale Manufacturing Sector (LSM) saying that rationalization of duties are the steps to bring the LSM sector out of mire but despite repeated request no attention was given.
He added that the decline in LSM sector that has shown a negative 7.7 per cent growth is an eye opener and there is a dire need to identify the root cause of this meltdown.
He said that the most worrying factor in the overall scenario is that the growth rate of 2 per cent is the lowest in the region, as Bangladesh had a growth rate of 5 percent, India 4.5 percent and even Sri Lanka experienced a growth rate of 2.2 percent.
He maintained that there was nothing wrong with the policies but the poor level of implementation deteriorated the industrial production. “Had a little attention been given towards the proper implementation of policies the situation would have not been so bad.”
He urged the government to take immediate and concrete measures to control deteriorating law and order situation which is hurting the whole business atmosphere and nobody would be ready to put money in any new venture if the situation remains the same.
Ahmed also suggested the government to take steps to cut rate of markup, ensure continuous supply of energy to the industrial sector, wear off inflationary pressure, improve law and order situation and above all steps need to be taken to bring political and economic stability.
Elaborating his suggestions, he said that the existing high markup rate was not only hitting the country’s competitiveness in the global market but was also coming in the way of industrialization which is a prerequisite to progress and prosperity.
He added that at the moment when the rate of interest was showing downward trend in most of the developed and developing countries including US (0.25 per cent), UK (1.5 per cent), Canada (1.5 per cent), Australia (4.25 per cent), Japan (0.1 per cent), China (5.58 per cent), India (5.5 per cent)and Bangladesh (7.61 per cent), the interest rate in Pakistan has jumped to 13 per cent in November 2008 to 15 per cent plus banking spread up to 8.3 per cent that is putting a very negative impact on industrial sector.
While quoting the example of GDP growth in China and India, Ahmed Arif said that the government should provide level-playing field to Pakistani manufacturers so that they could be able to earn much needed foreign exchange for the country.
“If immediate measures are not taken the situation would get out of hands and economic turnaround would become a dream,” he observed.
“There is no doubt in it that the government is seriously monitoring the economic situation and taking appropriate measures but it should convene a meeting of representatives of all trade bodies to ensure proper implementation of its policies,” he added.
He stressed the need for strengthening of institutions for being a prerequisite to economic stability, progress and prosperity. He maintained that only strong institutions could guarantee good governance. He cited the example of the United Sates where the economy is still on the wheels despite unprecedented economic recession and credit goes to a strong institutional framework over there.
“Had their institutions been not strong enough, the American economy would have not sustained the shocks it has received.” He said that weak institutions mean weak system and no country could achieve its targets with weak system.
“High inflation has chopped down the purchasing power of even middle class, as the crisis would not be over until and unless the government would introduce trade friendly policies to decrease cost of doing business,” Ahmed observed.
However, he strongly condemned increase in power tariff adding that it would be an anti-trade step and could add to economic woes.
“Another hike in power rates means more troubles for the common man and the industry,” he observed.
He said that it was beyond the understanding of the businessmen that despite cut in oil prices in the international market, why the government was reluctant to pass on the benefit to the people while the electricity shortage was going up with every passing day.
Such decisions, he said, would not only create unrest among the masses but would also hit the entire industrial sector even harder.
“Things would hardly take any positive turn unless and until both short term and long term policies are evolved,” he maintained.
He said that trade sector already passing through a very critical period. Power shortage has broken the backbone of industry, thousands industries have been closed leaving a large number of workers jobless.
He said that electricity prices in Pakistan are already very high and posing several challenges for businessmen and economy.
He urged upon the government to come out of the influence of International Financial Institutions, stop following their orders and make efforts to enhance the cheap electricity production.