Monthly Economic Affairs May 2015

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    The corridor is spreadover entire Pakistanfrom south to northhaving numerousprojects on energy,infrastructure, health,education and cleandrinking water.

    President Xisvisit:

    a game changer

    President Xisvisit:

    a game changer

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    Dear readers,

    Welcome to the April, 2015 edition of e Economic Affairs Magazine.

    is issue is a particularly significant and symbolic one for me as it is my first as

    the Managing Editor of a magazine in which I have been writing since 2012, a

    magazine which I hold in great esteem.

    Just like with most good things in life, we, at Economic Affairs are at a stage

    where we are striving to improve, to grow, to encompass more in terms of

    compelling news coverage, op-ed analyses, stock market and financial reports

    and much more because we know how valuable our readers and writers are to

    us. We intend to continue to be focused on Pakistan's current events in terms of

    politics and the economy. Hand in hand, we will also be focusing on global

    issues and trends more in depth. In addition, this time around and in futureissues, you will notice some articles on social issues.

    We hope to be better, to continue to grow in positive directions and to provide

    the best of our team and our magazine to those who matter the most, our

    readers. To quote Henry David oreau, "ings do not change. We change." In

    keeping with this line of thought, we realize wholeheartedly that in a changing

    global landscape, we must consistently ameliorate and evolve. At Economic

    Affairs, this is our goal.

    ank you for being with us.

    Sabria

    e privatization of national institutions has always been a tricky thing when it

    comes to developing economies like Pakistan. Since 2013, Pakistan has reached

    an agreement with the International Monetary Fund (IMF) on a new structural

    adjustment programme, according to which the IMF has called for

    privatization of various national organizations/institutions so that their

    working could be improved. But it seems the basic purpose of privatization is

    something else. e news of privatization of Habib Bank Limited (HBL), oneof the largest banks of the country, has raised some serious questions. During

    the last year, the profit of HBL was in billions, so the logic of privatization of

    such a well performing financial institution is quite difficult to understand. It is

    pertinent to mention that the government holds 41 percent shares in HBL.

    Many newspapers reported that the per share price of HBL approved by the

    Privatization Commission is about Rs 180 to 190 per share, but the government

    wants to sell these shares at the rate of Rs 160 to 170 per share. e loss of Rs

    20 to 25 per share will never be recoverable. Deals with the IMF have always

    created problems for our economy. e revenue targets suggested by the IMF

    are too high and the government has to do things like privatization. It also

    illustrates the weak taxation system. With every passing year, the Federal Board

    of Revenue (FBR) is becoming a white elephant for Pakistans economy. e

    ever decreasing tax net is creating problems, while corruption and weak working

    within FBR suggests that it is FBR that should be privatized.

    Editorial Board:Dr Ashfaq Hassan Khan

    Dr Abid SulehriShabir Ali NizamiM. Sajid Gondal

    Zubair Malik

    Advisory Board:Haroon Akhter KhanHamidullah Jan Afridi

    Chief Editor:Khalid Mailk

    Managing EditorSabria Chowdhury Balland

    Resident Editor (Islamabad)M. Habib Khokhar

    Resident Editor (Lahore)Taihra Shahzadi

    Resident Editor (Karachi)Yasir Babbar

    General Manager:Faiz Paracha

    Graphics:M. N. Mughal

    Photography:Wahab Chughtai

    Ehtisham Plaza, Office#9, G/8 Markaz,Islamabad - Pakistan.

    Ph: Office: +92 51- 2340 313Email: [email protected]

    Karachi Office:1701, Saima Trade Towers (A),I.I, Chundrigar Road, Karachi.Ph: +92-21-32271965

    Lahore Office:Zaheer Mansion, Lawyers Lane5-Mazang Road, Lahore.Ph: +92-333-4247806

    Publisher:M. SajidPrinters:R.A. Printers

    Price: 250/-

    EditorialNOTE

    Privatization tricks

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    China's Xi visit: a game changer

    Pak China CouncilThe Yemen Crisis

    News in Brief

    The Portrayal of Pakistan

    Meeting Pakistans Budget Deficit

    Foreign Money Playing Big Games

    Operation Decisive Storm

    Solar-powered traffic signals

    The Leist politics

    From TTP to IS: Pakistan's

    Pakistani Students Studying

    Driving Forward Consistent

    NBP signs MOU with Utility Stores

    Khalid Malik Hosted a Dinner

    Golf Tournment

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    D I S C L A I M E RUtmost care is taken to ensure that articles and other information published are up-to-date and accurate. Furthermore,

    responsibility for any losses, damages or distress resulting from adherence to any information made available through the

    contents is not the responsibility of the magazine. The opinions expressed are those of the authors and do not necessarily

    CONTENTS

    ECONOMICAPRIL 2015MONTHLY

    Exclusive

    The YemenCrisis andPakistansDilemma

    PakistansDilemma

    Page: 20

    OperationDecisive Storm

    Page: 26

    From TTP to IS:Pakistan's terror

    landscape evolves

    Page: 28

    Pakistani StudentsStudying in

    Overseas Countries

    Page: 18

    Foreign MoneyPlaying Big Games

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    The corridor is spreadover entire Pakistanfrom south to northhaving numerousprojects on energy,infrastructure, health,education and clean

    drinking water.

    POLITICS

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    6APRIL 2015Economic Affairs

    President Xisvisit:a game changerPresident Xisvisit:a game changer

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    Economic Affairs7 APRIL 2015

    espite too many delays,Chinese President XiJinping's visit to Pakistan hasbeen confirmed. It is hoped

    that his first official visit to Pakistan inthe month of April 2015 would be a

    game changer. Further deepening ofsocio-economic cooperation would bethe first priority of both the countries.Energy cooperation, infrastructuredevelopment, and banking & financewould be thoroughly discussed andexplored. To make his said visitmeaningful a joint working group of theChina-Pakistan Economic Corridoorhas been fine-tuned almost 6,000MW ofpower generation projects for theirsigning during the forthcoming visit ofPresident Xi Jinping. Moreover, matters

    of mutual interest, promotion ofPak-China relations and cooperation indifferent sectors would also be discussedin this upcoming visit.

    Transmission Lines

    It has also been learnt that the two sideshad finalised arrangements for thesigning of an agreement between theState Grid China and NationalTransmission and Dispatch Company ontwo transmission lines, one from Matiari

    to Lahore and the other from Matiari toFaisalabad.

    Coal-Based Power Projects

    e group also finalised the signing of aterm sheet and implementationagreements for setting up a 1,320MWcoal-based power project near PortQasim and tripartite implementationand power purchase agreements foranother 1,320MW coal-based project inSahiwal, Punjab. e meeting expressedsatisfaction over the term sheets from

    Chinese banks enabling the finalisationof implementation and power purchaseagreements for a 660MW coal-basedplant of the ar power project.

    Coal Mining Project

    e two sides will also sign a term sheetfor 3.8 million tons per annum coalmining by Sindh Engro Coal MiningCompany. An agreement for a 900MWsolar power project at Quaid-i-AzamSolar Park in Bahawalpur by Zonery of

    China is also ready for signing.Wind Power Project

    To reduce the energy woes of Pakistan,both the countries have already approvedcontracts with banks for financing a

    100MW wind power project of UnitedEnergy Pakistan (China) at Jhimpir inatta and 50MW each of DawoodHydro of China at Bhamboor and ofSachal at atta. eir groundbreakingmay coincide with Chinese presidents

    visit. Moreover, the signing of a financingagreement for 870MW Sukki-Kinarihydropower project in KhyberPakhtunkhwa and groundbreaking of720MW Karot hydropower project inAzad Kashmir has also been finalized.

    Oil & Gas Sector and China

    In recent times, Chinese oil and gascompanies have expressed deep interestto make contributions in the oil and gassector of Pakistan to cater to the growingdemands of the country. During the first

    workshop between the two countriesheld in Islamabad (March, 2015) on theoil and gas sector, both sides agreed tofoster bilateral cooperation in thepetroleum sector. e workshop wasinformed that Pakistan was blessed withan estimated 160 trillion cubic feet ofnatural gas reserves including 105 trillioncubic feet of Shale gas reserves.Exploitation of these resources requireshuge investment besides application ofstate of the art technology and

    know-how.

    Enhanced Oil Recovery (EOR) Technique

    Representatives from Chinese oil and gascompanies also expressed theirwillingness to restart the abandoned oilfields in the country through theEnhanced Oil Recovery (EOR)technique. Chinese companies wereeager to invest in the exploration ofhydrocarbon techniques including thedeep-water offshore exploration in the

    country.Pakistan-China Economic Corridor(PCEC)

    e Pakistan-China Economic Corridor(PCEC) project is 3,000-kilometer longand a regional development carrier. Itwould not only serve Pakistan and Chinabut would also become the future of thisentire region. It is not a game changerbut a fate changer for Pakistan and forthe prosperity of three billion people ofthe region. e corridor will have special

    economic zones, a railways system, amodel city, an airport and a free port atGwadar.

    e corridor is spread over entirePakistan from south to north having

    numerous projects on energy,infrastructure, health, education andclean drinking water. It wouldeconomically upgrade bordering poorregions of both the countries byconnecting Gwadar Port in southernPakistan to Chinas northwestern regionof Xinjiang via highways, railways andpipelines to transport oil and gas. It willstart in Chinas western region ofXinjiang and run to Gwadar.

    It is a revolutionary initiative, whichholds an unprecedented significance inview of socio-economicdevelopment in Pakistan and China andthe region as well. ere is serious needfor bringing this project to timelycompletion, so the people of both

    countries will benefit from the project.

    Karakorum Highway (KKH) is beingextended to Hawelian with Chineseassistance and will be completed withinthree years linking Ratodero withGwadar. It will be the shortest roadconnectivity of Gwadar with the rest ofPakistan and attract substantialinvestment.

    China wanted to get road access toGwadar at least on one route of PCEC in

    the next two years so they decided to useexisting road infrastructure and added afourth alignment that would better servethis purpose.

    Pak-China Economic Corridor has givena new dimension to relations between thetwo sides. China has proved to be a truefriend of Pakistan by extendingmaximum cooperation for thedevelopment of different sectors.Chinese cooperation and role in theexploration of precious mineral reserves

    in Chiniot-Rajwa can never be forgotten.

    One Belt, One Road Initiative

    Chinese President Xi Jinping presentedOne Belt, One Road initiative, whichwas established from e New Silk RoadEconomic Belt and e Maritime SilkRoad to boost global peace anddevelopment through intensive physicaland other forms of connectivity as well ascooperative ties between China and thecountries across Eurasia, Africa and

    beyond. Pakistan ought be part of it.

    Chinese Foreign Minister

    e Chinese Foreign Minister said thatChina attaches great importance to itsrelations with Pakistan and considers

    D

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    8APRIL 2015Economic Affairs

    Mehmood Ul Hassan KhanThe writer is a researchscholar, specializing in

    geopolitical issues of the GCC,CIS and South Asia. He has a

    keen interest in cross-culturaldialogue and conflict

    resolution.

    every issue and problem of Pakistan as itsown. He said that people of Pakistan willalways find China on their side in thejourney toward progress and prosperity.

    Pakistans National Agendae Pak-China friendship is a strategicgame-changer in regional maneuveringand international politics. Rapidlychanging geo-political and geo-strategicscenarios has already forced both thecountries to work jointly in the fields ofenergy, defence, infrastructure, scienceand technology and above all, enhancedeconomic integration in which balance oftrade must not be tilted towards China.Pakistan must seek Chinese help to tapea huge Shale gas reserves in the country.LNG sector should also be explored.

    e best thing/policy Pakistan couldhave is to convince the Chinesegovernment and its private companies toinitiate joint ventures in different parts ofthe country, especially in the energy mix(hydro, solar, thermal, wind, coal, nuclearetc.).

    Signing of unlimited MOUs may achievesome political mileage but it will notbring any good to further deepening ofsocio-economic integration of both thecountries.

    e Pakistan-China mutually extendedmilitary cooperation is a game changerand a balancing act in the region, whichultimately guarantees peace and stabilityin the region. It has an over-archingstrategic dimension. It is multi-facetedand multidimensional. It is a vitalcomponent of bonds of friendshipbetween the two countries.

    It brightens the chances of furthercooperation and coordination in thedifferent fields of military production. Itincreases military capabilities andmodernity in the ranks of armies of both

    the countries. It may further strengthenthe science and technology and spacecooperation between Pakistan andChina. Joint ventures in the fields ofsubmarines, drone, stealth, laser

    technology, space and technology, geneticengineering, bio-tech and agriculturemust be explored. e new experimentsof laser and technology must be exploredjointly by both the countries because itwould be an ultimate means, media andmedian of future warfare. It would reduceour dependency on other. It wouldenhance our joint military capabilitiesand air surveillance.

    Swapping of mutual currencies has notachieved any substantial improvement in

    the bilateral trade which needs to berectified as soon as possible. Cultural andlanguage barriers need to bemarginalized for achieving the desiredgoals of socio-economic integration andenergy cooperation. High officials ofXinjian province are eagerly waiting forthe establishment of an English MediumSchool at Urumqi by NUML as it wouldbe another symbol of Pakistan-Chinasfriendly relations. NUMLs Chinese andConfucius Departments are contributing

    a lot in promoting cultural and academicexchanges between both countries butthe establishment of the school willprovide an opportunity to the populationof Xinjiang, which comprises of 30different races to have interaction andconnection with their Pakistani brothers.

    China has expertise in solar, coal andhydro energy production which must betranslated in the shape of joint ventureswith the promise of technology transferin the country. Promotion of banking and

    financial services would speed-up thebilateral trade, investments, jointventures and the last but not the least,technology transfer in the days to come.

    e Pakistan-China Economic Corridor

    project is a must for the national agendaof Pakistan because it is a comprehensivepackage of cooperative initiatives andprojects, which covers the key areasincluding connectivity, information

    network infrastructure, energycooperation, industries and industrialparks, agricultural development andpoverty alleviation, tourism, financialcooperation as well as livelihoodimprovement including municipalinfrastructure, education, public healthand people-to-people communication. Itshould be promoted in priority and stepby step incorporating the long term,short and medium term needs, based onthe concrete conditions of Pakistan. Both

    sides should also push forward theimplementation of the early harvestprojects as well as the preparation of theprojects of the long term plan in allsectors.

    In order to further integrate developmentof the economy and its different sectors,Pakistan should seek assistance from theChinese lead Asian InfrastructureInvestment Bank the amount of $50bn(AIIB), which is designed to provide

    infrastructure funds to the Asia-Pacificregion.

    On the geopolitical front, Pakistan andChina jointly work for the peace andstability of Afghanistan because it wouldopen greater opportunity of energy andeconomic cooperation with the CIS andbeyond. Pakistani armed forces andparamilitary forces should have jointmechanism to foster the war againstterrorism.

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    Economic Affairs9 APRIL 2015

    CPEC as a "fate changer" for Pakistan,said the CPEC will integrate the entireregion and bring an economic revolutionalso for the three billion population of theregion.

    Chinese Ambassador to Pakistan SunWeidong appreciated the effort toestablish the council and said he believedthe establishment of the council wouldbring more momentum to the futureconstruction of CPEC. Talking about the

    progress of the CPEC, Sun said, "We arenow focused on the four major areas ofenergy, transport infrastructure, industrialparks and Gwadar Port and the CPEC hasgradually entered into implementationfrom planning."

    he Pak-China EconomicCorridor Council (PCECC)is launched to facilitate andassist in the successful and

    quick execution of all the projects underthe Belt and Road initiatives in Pakistan.

    e PCECC is an initiative by seniorPakistani parliamentarians and politicians.Speaking at the occasion,Dr Malik, ChiefMinister Balochistan, said theChina-Pakistan Economic Corridor

    (CPEC) was a window of fresh air, butnow it has been transformed into awindow of opportunities" for Pakistanand the whole region.

    "Planning, performance measuring of the

    Tprojects, coordination between thebusiness institutions of the two countries,playing role to declare twin cities betweenPakistan and China, facilitation andassistance to Chinese investors andexperts, improving health and education,promoting culture and tourism in bothcountries" are the salient features of a12-point agenda of the council.

    Chairman of the council SenatorMuhammad Talha Mahmood said the

    aim of the council is to offer a platform forthe individuals who want to render theirservices and expertise to the CPEC.

    Federal Minister for Planning andDevelopment Ahsan Iqbal, declaring the

    Pak-China Economic Corridor Council launched

    EVENT

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    CONFLICT

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    10APRIL 2015Economic Affairs

    hen the Saudi monarchpersonally requestedPakistan for militaryforces in support of their

    ongoing Yemen offensive, a radio channelinterviewing me asked for my views on

    how Pakistan should react. at dependson the precise nature of the question -what we should do or what we can do inthe prevalent circumstances, I answered.

    If Pakistans economy was not dependenton largesse and goodwill from richfriendly neighbours and the West and if itsruling class had not stashed their wealthabroad, it could have politely declinedthe Saudi request and adopted astrictly neutral stance in a conflictinvolving two powerful Muslim

    nations whose friendships are thecornerstones of Pakistans foreign policy.Based on its own bitter experience ofgetting involved in a subconventionalproxy war in the neighbourhood, it couldhave advised Saudi Arabia that a military

    intervention in Yemen, even if it succeeds,would at best be a pyrrhic victory which isbest avoided.

    e insurgency in Yemen is essentially astruggle among various tribal factions inthe country. However, the Saudi supportto the incumbent Sunni President, AbdRabbuh Mansur Hadi and the alleged

    Iranian involvement with theHouthi rebels, who are believed tobe an offshoot of the Shia sect,has given it a sectarian colour and

    turned it into a proxy war between Iranand Saudi Arabia. While showing anunderstanding, but not necessarilyapproval of the Saudi offensive in Yemen,Pakistan could have offered its services as apeace broker between Saudi Arabia and

    Iran. It could also point out that a conflictbetween a Sunni led coalition against aShia alliance would further split thealready weak Muslim Ummah alongsectarian lines that would benefit theenemies of Islam, particularly Israel.

    Pakistans heavy dependence on friendlyArab states led by Saudi Arabia to keep itseconomy afloat reduces the options thatthe country can exercise in responding tothe Saudi appeal. e question of SaudiArabia bankrolling Pakistans nuclear

    TheYemen

    Crisis andPakistans

    Dilemma

    Pakistans

    Dilemma

    W

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    Economic Affairs11 APRIL 2015

    programme is highly speculative, hence itdoes not merit further consideration.ere is, however, no doubt about theSaudi bailout when the West had imposeddebilitating sanctions on Pakistan when ithad conducted the nuclear explosions way

    back in May, 1998. In addition, the hugetrade gap between the countrys importsand exports are partially made up byremittances of Pakistani expatriatesespecially from the Arabian Peninsula. Anoutright refusal of the Saudi request couldresult in the deterioration of theSaudi-Pak relationship. is couldadversely affect the state of Pakistaniworkers in the kingdom, triggering afinancial crisis in an economy that isalready on life support.

    Constitutionally the final decision on thecourse of action the country will eventuallyadopt rests with Prime Minister NawazSharif and his cabinet. Nawaz owes a hugedebt to the Saudi royals who bailed himout when he was incarcerated in jail, gavehim shelter during his exile period andwere instrumental in his return to Pakistanbefore the expiry of the ten year statutoryban that Nawaz had signed under duress.For him refusing the Saudi request wouldbe very difficult and in the topsy-turvypolitical world of Pakistani politics, thewishes of the party leader becomes acommand for the workers.

    Critics and cynics would argue that in thecurrent milieu it is the military (aka theestablishment) of the country that calls allthe shots in crises of such nature, hence itis important to assess their mindset. emilitary is mindful that antagonizing theArab friends could damage the nationaleconomy, which in turn would have anegative impact on the national defence. It

    is also aware that any direct intervention inthe conflict in support of the Arabcoalition would further split the Pakistanisociety along sectarian lines. Besides, thereis almost a unanimous consensus amongthe Pakistani public that while Pakistanshould dispatch its troops and forces todefend the integrity of Saudi Arabia, itmust scrupulously avoid being a part ofany offensive inside Yemen. In theHobsons choice being confronted, themilitary for once would prefer to let thepolitical leadership take full responsibilityfor any decision in this regard and let themhandle the negative fallout that is likely toaccrue.

    e Yemen offensive by the Arab coalition

    is looking more like a military chess gamebeing played in the battlefield. Accordingto some defence experts and analysts, theHouthi rebels ostensibly being supportedby Iran have gained the upper handagainst the elected President Abd Rabbuh

    Mansur Hadi because ex President AliAbdullah Sa, who was earlier replaced byHadi has joined the Houthis along with asizeable number of-Yemeni fighters.Sana'a, the Yemeni capital, fell to therebels in August 2014, forcing PresidentHadi and his ministers to resign. ByNovember 2014 they (the Houthis)declared themselves in full control of thegovernment, dissolving the parliamentand putting up a RevolutionaryCommittee in charge of the country.

    President Hadi fled the country and whilein exile in Saudi Arabia, has set up hisinterim government in the countrys keyseaport, Aden. On March 26, 2015 SaudiArabia and a coalition of regional stateslaunched airstrikes against Houthipositions in Yemen in an operationcodenamed Operation Decisive Storm.e key seaport of Aden is under siege bythe Houthis and the fall of Aden would bea major setback for the Arab coalition asthe strategic shipping lines of the Red Sea

    would come under Iranian influence. Forthem, the fall of Aden to the adversary hasto be prevented at any cost and SaudiArabia is seeking the support of thebattle-hardened Pakistani troops to helpprevent such a debacle.

    e Saudi rulers are aware of the dilemmabeing faced by Nawaz Sharif on thesubject of Pakistani troop deployment inSaudi Arabia and making it an integralpart of the Arab coalition force. e morelikely scenario would be the deployment of

    a sizeable Pakistani military contingentalong the Saudi Arabia and Yemeni bordersupposedly to defend the kingdomsterritorial integrity. An unwritten, underthe table understanding that they could

    also be employed in the offensive roleinside Yemen if the situation becomescritical cannot be totally discounted.

    Saleh is believed to be an opportunist andit is assumed his siding with the rebels is

    primarily based on his assessment that atpresent they (the Houthis) are holding theupper hand. e presence and thepossibility of the offensive employment ofthe Pakistani military within strikingdistance of Aden would significantly addto the land offensive capability of thecoalition forces. is in turn couldconvince Saleh about the changing tideand he could well switch sides again.Without the Saleh force, the Houthirebellion could be subdued without theneed of a major land invasion from Saudi

    Arabia and a negotiated settlement whereHadi remains in power but the genuinegrievances of the Houthis are addressed isa possibility. e Pakistani militarycontingent would be the proverbial queenin the battlefield chessboard whose merepositioning could force the adversary tosue for peace.

    In conclusion, if the crisis lingers on, thegovernment of Nawaz Sharif would havelittle choice but to accede to the Saudirequest. A potent Pakistani military landforce contingent would be made availableto them and these will be positioned alongthe Saudi-Yemeni border for defensiveduties with the possibility of an unwrittenpledge that under special circumstancesthey could be used in the offensive role.

    If the mere positioning of the Pakistanitroops along the border results in aceasefire, Pakistan would have dodged abullet and would come out smelling ofroses.

    Jamal Hussain

    The writer is a defence analyst and

    director of Centre of Airpower

    Studies and can be reached at

    [email protected]

    Houthi areas of influence

    Control

    Influence

    Presence

    Assessed freedom

    of movement

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    NEWS IN BRIEF

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    12January 2015Economic Affairs

    e International Monetary Fund says Pakistan has succeeded instabilizing its economy through implementation of reforms that

    would be vital for it to find a place in growing world markets.

    A week prior to spring meetings, the IMF released a survey whichpoints out that Pakistan has made a good progress, saying it hasaverted balance-of-payment crisis and its State Bank reserves

    were rebounding. e survey conducted an interview with theoutgoing mission chief for Pakistan, Jeffery Franks, who said thefiscal deficit - which was large at over eight per cent of GDP two

    years ago was on track to get down below five percent of the GDP.

    Not only is the deficit lower, but financing conditions have easedconsiderably, Franks said, adding e economy grew about fourpercent last year, and the agency was expecting a similar figure in

    the current fiscal year. However, he said it was not enough tosubstantially improve income levels because of the highpopulation growth rate.

    Commenting on the structural reforms, Franks said the keyachievements were tackling costly and inefficient electricitysubsidies. ose subsidies came down from almost two percentof GDP to 0.7 percent this year, and they are expected to fall to0.3 next year. He said government was also making progress onimproving tax system. Pakistan has these so-called StatutoryRegulatory Orders, which grant tax exemptions and concessions,riddling the tax system with loopholes. Earlier, the government asignificant number of SROs, and its expected to improve tax

    collection by 0.3 percent of GDP, Franks said.

    e outgoing IMF mission chief was of the view that Pakistancan do more to increase revenue collection at the provincial level.e division of taxes and responsibilities between the federalgovernment and the provinces in not balanced, and theauthorities need to revisit that to avoid future problems.

    Karachi: Opening up investment opportunities for small investorsin an otherwise illiquid property market, Pakistans first ever realestate investment trust (REIT) scheme is expected to be listed onthe stock exchange by the end of May.

    REITs are collective investment schemes that pool investorsfunds for onward investment in real estate.

    Regulatory approval for Dolmen City REIT has already beenobtained by Arif Habib Dolmen REIT Management, which is

    the management company behind the initial public offering(IPO) of the countrys first REIT on the Karachi StockExchange. Arif Habib Dolmen REIT Management CEOMuhammad Ejaz said the IPO will raise approximately Rs22.6billion.

    Islamabad: Pakistan government approved a 23-year tax holidayfor the China-run Gwadar Port in an attempt to make thedeep-sea port a hub of commercial activities besides allowing the

    Arif Habib Group to invest $300 million in the United States.

    e decisions were taken by the Economic CoordinationCommittee (ECC) of the cabinet. On a proposal moved by theMinistry of Ports and Shipping, the ECC decided to extend thetax holiday period for Gwadar Port and the Gwadar Port freezone from 20 years to 23 years.

    e extension was given on the request of China Overseas PortHolding Company that took over the port from the SingaporePort Authority in February 2013.

    e Gwadar Port Authority Board had also recommended23-year tax holiday. e decision was taken to attract national and

    foreign investors and to enhance overall foreign direct investmentin the area, said the Ministry of Finance.

    e Gwadar Port is described as the most significant strategicpearl in Chinas plan of expanding its influence in the region.

    Pakistan has stabilizedits economy: IMF

    Harbour Front, DolmenMall: Arif Habib, DolmenGroup to sell their stake

    ECC approves 23-year taxholiday for Gwadar Port

    e Arif Habib Group, one of the countrys largest businesshouses, and the Dolmen Group, a prominent real estate developer,have equal shareholding in the REIT management company(RMC).

    Small investors have traditionally been unable to take part in real

    estate investments in Pakistan, as the property market isconsidered to be highly illiquid and capital intensive. ere arefew publicly listed property developers in Pakistan while REITshave practically been non-existent so far.

    Arguably among the most expensive commercial properties inKarachi, Dolmen City Project is located on the seafront. eproperty which has five components, namely Harbour Frontbuilding, Executive Tower, Dolmen Mall and twounder-construction towers is owned by International ComplexProject (ICP). e Arif Habib Group controls 20% shares in ICP

    while 80% ownership rests with the Dolmen Group.

    Every REIT fund needs to have separate underlying assets inorder to qualify for a public listing. Dolmen City REIT isacquiring two components of Dolmen City Project: HarbourFront building and Dolmen Mall. e resources that the fund willuse to acquire the two properties will be provided by unit holdersthrough the IPO.

    e pre-IPO phase will consist of the placement of 75% of theoffers total units with the sponsors of the ICP and RMC at Rs10per unit.

    e rest of the 25% units will be publicly offered during the IPOin two separate phases. ree-fourths of the 25% units on offer

    will be sold to institutional investors and high net worthindividuals through book building. e remaining one-fourthunits will be sold to retail investors at a strike price determinedduring the preceding book building phase.

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    January 2015 Economic Affairs

    Karachi: e State Bank has restored advance payment facility(up to $10000) for importers without requirement of letters ofcredit or bank guarantee. In a circular to all banks on April 8, itsaid that in order to facilitate importers to cater to their genuinesmall import needs, it has been decided to restore the advancepayment facility up to $10000 per invoice for import of all eligibleitems without requirement of letters of credit or bank guarantee.

    In April 2008, the State Bank had restricted advance paymentagainst import invoices to specific goods or sectors only. eCentral Bank has put some condition to avail this facilityprovided after a gap of seven years.

    e bank will take all possible measures to verify the bonafidesof the importer and genuineness of the transaction whileprocessing the advance payment request, said the circular.

    e bank will obtain an undertaking from the importer that incase goods are not received within a period of four months for anyreason, the bank will recover a penalty at the rate of 1pc permonth or part on the amount of advance payment from the dateof remittance till the date of submission of shipping documents orrepatriation of advance payment.

    It seems that the step has been taken in view of growing foreignexchange reserves of the country, but it has the risk of furtherincreasing the import bill causing widening of trade imbalances.

    Lahore: Swiss food giant Nestle plans more than $37 millioninvestment this year to improve production capacity andreliability of its Pakistans operation.

    Pakistan continues to offer great opportunities for foreigninvestment and growth, Waqar Ahmad, head of corporate affairsat Nestle Pakistan, said. However, consistent implementation ofprudent economic policies by the government remains crucial tounlocking the countrys full potential.

    Ahmad said the company has earmarked approximately Rs3.8billion for 2015 to increase operational reliability and capacity tomeet the consumer needs.

    Nestle Pakistan, in which the worlds leading nutrition, healthand wellness company Nestle holds 59 percent equity interest,

    wants to shield its milk supply chain from relentless energy crisis.

    Energy shortfall is adversely affecting the farm-to-fork milksupply chains of food processors collecting milk from villages andtowns in Punjab, which accounts for nearly three-fourths of the

    milk production in the country.

    A few initiatives in milk collection we are focusing includeinstallation of solar water geysers, hybrid solar panels and biogasplants, Ahmad added. We will continue to do that.

    SBP restores advancepayment facility

    Pakistan approves $1.2billion HBL divestment

    PDFL to be made

    operational

    Nestle plans $37mlninvestment

    Nestle has been investing in its factories for over two decades. elargest annual investment was Rs10 billion ($100 million) madein 2013 to deploy a modern milk drying facility at itsSheikhupura factory.

    e worlds fourth largest producer, Pakistan annually produces

    over 36.2 million tons of milk. Over 95 percent of dairy industryis informal and undocumented.

    Karachi: Pakistan has approved divesting all of its state-ownedshares in top private bank HBL for $1.2 billion, in what officialssaid is the country's largest-ever equity offering. e governmentreceived $1.6 billion of offers for its 41.5 per cent in HBL duringthree days of book-building at London, New York, Singapore and

    Dubai, the privatisation commission said.e [cabinet] committee has approved the selling of whole lot ofits shares at 168 rupees a share, Minister for PrivatisationMohammad Zubair said after the meeting.

    It was the largest-ever equity offering out of Pakistan andlargest-ever equity offering in Asian frontier markets, whichfetched demand of $1.6 billion. e Privatisation Commission ofPakistan said in a statement $1.2 billion of bids were accepted ofthe total $1.6 billion of offers.

    HBL, formerly known as Habib Bank Limited, waspart-privatised in 2004, with the Agha Khan Foundation buying

    the bulk of the shares. e current offering is the largestprivatisation deal since 2006, when the then government raised$712 million from selling its stake in Oil and Gas Development(OGDCL).

    e government had planned to offer 250 million base shares inHBL, with an option of selling 390 million more depending onthe response.

    Islamabad: Finance Minister Ishaq Dar was informed media thatall requisite documents had been prepared to make the PakistanDevelopment Fund Ltd (PDFL) functional and fully compliant

    with the Companies Ordinance 1984.

    e documents were under submission to the Securities andExchange Commission of Pakistan (SECP) for grant oflicence as Non-Bank Finance Companies (NBFCs), according toa finance ministry statement.

    e Board of directors also authorised the chief executive officer(secretary finance) and the company secretary (additional

    secretary) to manage, operate and draw amounts from the PDFLaccount to comply with the requirements of SECP.

    Dar was chairing the second meeting of PDFL the firstmeeting was held in December last year.

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    14January 2015Economic Affairs

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    Karachi: e State Bank of Pakistan (SBP) has been empoweredto prescribe the amount of paid-up capital as in case of banks,microfinance banks, payment system operators, exchange

    companies etc, an SBP statement said on April 9.Senate Standing Committee on Finance, Economic Affairs,Statistics and Privatisation has approved the Draft CreditBureaus Act 2015.

    e committee recently held a meeting for deliberation on thedraft in order to provide for the incorporation, functioning andregulation of credit bureaus in private sector.

    SBP Deputy Governor Saeed Ahmed briefed the committeeabout the contents of the proposed law and submittedcomparison of main clauses of ten other countries, as advisedearlier by the committee.

    After detailed deliberations, a sunset clause has been inserted inthe draft law to oust the eCIB of SBP and Section 33 regardingdispute resolution amended, said the SBP.

    Karachi: Car sales recorded a growth of 21.93 per cent to 105,344units in the first nine months (July-March) of 2014-15 ascompared to 86,395 units in the same period last year.

    In March 2015, sales went up to 16,806 units as compared to14,041 units in February, Pakistan Automotive Manufacturers

    Association (PAMA) data revealed on April 10.

    New Toyota Corolla provided much impetus to the overall carsales, with 36,238 units sold in July-March 2014-15 as comparedto 23,026 units in the same period last year. Its sales in Marchalone stood at 5,196 units as compared to 4,449 units in February.

    Honda Civic struggled with sales of 5,656 units during the periodunder review as compared to 7,206 units in the correspondingperiod of last year. However, Honda Atlas Cars got enough

    support from the sales of Honda City which improved to 10,749units as compared to 9,586 units in July-March 2013-14.

    Suzuki Swift sales remained laggard with 2,589 units ascompared to 3,705 units. In 1,000cc category, Suzuki Cultus salesfell to 10,502 units from 11,075 units, while the sales of Wagon Rstood at 3,337 units in July-March 2014-15.

    In 800cc segment, Suzuki Mehran sales inched up to 22,269 unitsfrom 21,312 units, while Suzuki Bolan sales went up to 13,932units from 10,263 units. Deputy Head of Research at ToplineSecurities, Muhammad Tahir Saeed, anticipated car sales to growby 24 per cent in FY15 and by 17pc in FY16, particularly due toPunjab

    Taxi scheme, diminishing inventory of used cars, improvingfarmer economics, decline in oil prices leading to higherdisposable income and reviving car financing.

    SBP to fix paid-up capital

    Kuwait to give $32m loanfor Neelum-Jhelum project

    Pakistan, Afghanistan,Tajikistan near to finalizeTrilateral Transit Agreement

    Car sales up by 22pcin July-March

    He said that the earnings of car assemblers may grow by 47pc in2015, owing to the expectations of strong volumetric growth,depreciation of Japanese yen by 16pc year-on-year against the USdollar and strong pricing power of local assemblers.

    Islamabad: Kuwait would provide an additional loan of $32million for Neelum-Jhelum Hydropower Project under anagreement signed on April 9. Secretary Economic AffairsDivision (EAD) Saleem Sethi and Deputy Director GeneralKuwait Fund for Arab Economic Development (KFED) Hamad

    Al-Omar signed the agreement on behalf of their respectivegovernments.

    Finance Minister Ishaq Dar and Kuwait Ambassador NawafAbdul Aziz Alenezi were also present. Kuwait has already been

    co-financing this project with an amount of $42m. e 969MWproject has a total cost of Rs274 billion with a planned foreignfunding of $1.585bn.

    An amount of $1.11bn has been committed by various donorsincluding Islamic Development Bank (IDB), Saudi Fund,Opec Fund, Kuwait Fund and China Exim Bank. Dar welcomedsigning of the agreement, saying it was another chapter inPakistan-Kuwait economic cooperation.

    Islamabad: Pakistan, Afghanistan and Tajikistan have almostneared on the finalization of draft of the Trilateral Transit

    Agreement among the three countries (PATTTTA). In Januarythis year Pakistan handed the draft of the proposedPakistan-Afghanistan-Tajikistan Trilateral Transit Agreement(PATTTTA) to both the Afghan and Tajik governments andsought their seeking proposals. e working group headed by

    Additional Secretary Ministry of Commerce dispatched the saiddraft to the relevant ministries of Afghanistan and Tajikistan. Inthe meantime, three governments held internal discussions on the

    said draft.

    Ministry of Commerce officials told Economic Affairsthat threecountries had almost neared on a consensus on the draft ofproposals for the said trilateral agreement on the ongoingnegotiations of the working groups of all three countries atDushanbe. Pakistani delegation comprising four higher officialsfrom the MoC and most probably some other departments or

    wings is being led by Additional Secretary Ministry ofCommerce (MoC) Rubina Athar in the two days negotiations.

    MoC had made slight amendments in the existingAfghanistan-Pakistan Transit Trade Agreement (APTTA) and

    forwarded to the relevant governments and it would not benamed as Pakistan-Afghanistan-Tajikistan Trilateral TransitTrade Agreement (PATTTTA). With the passage of time thisagreement would also be extended to other Central Asian Statesbecause provisions in this regards have been incorporated.

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    EDUCATION

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    Economic Affairs15 APRIL 2015

    he media's wings cannot beclipped when it comes toinfluencing and interpretingevents. is reliable, fast and

    effective method is able to transmitinformation to millions. Reaching out toeveryone, including the illiterate, theeducated and even the poor. Along withthis great power exists possibilities ofviolations and the proliferation of

    unreliable information. e media'sunfettered power to report anynewsworthy event that is of public interestcan be trampled on. e spiral effect of themedia, the scapegoating and thevilifications are all experiences of ourgeneration. Permitting an organisation tohave such enormous responsibility can letsubjective decisions and bias seep throughthe hands that protect the interests of thepublic. us, allowing bias to stretch theimage of issues, countries and people.

    Despite the huge power and it's violations,the media cannot simply be labeled as bad;in fact, it plays a fundamental role ininforming, highlighting and raisingawareness of issues and dangers. Not onlydoes the media merely inform the public, itplays an active role and has helped improveroad safety, smoking and global warming.

    Today the number of Pakistanis living inthe United Kingdom exceeds 1.17 millionwith London encompassing the largest

    Pakistani Muslim community. With theindependence of Pakistan, the number ofPakistani immigrants to the UK increased.Britain faced a labor shortage post-SecondWorld War and the Pakistani immigrantsaided in its resolution providing labor in

    the British steel and textile industries aswell as with the National Health Service.

    e Pakistani community has madesubstantial economic progress over time.Today, the Pakistani community isestablished and well- represented in theBritish society, with many boomingPakistani businesses as well as acommunity which owns restaurants,

    newsagents and taxi bases to small andmedium-sized manufacturing units, legaland financial firms. Not only this, thePakistani community has also made aprominent progress in UK's political andlegal system with many MPs, councilors,lord mayors and deputy mayors havingsome roots in Pakistan.

    Since the War on Terror, the media hasfocused on young British Pakistanis andradicalism. As the coverage of BritishMuslims increased in 2000, so did the

    coverage of Pakistani Britons. isincrease is somewhat clarified by thegrowth in coverage devoted to terrorismand terrorism-related stories. Recent yearsshow the focus has shifted storiesconcentrating on religious and culturaldifferences between Islam, Pakistan andthe British. e coverage of assaults on orproblems facing Muslims and Pakistanishas gradually deteriorated as a comparisonof coverage.

    Pakistan has been a hot topic in the Britishmedia; infamous for the radical Muslims,the harsh treatment of women andpoverty. Somewhere deep down, I havealways felt that Pakistan has so much moreto offer than the inter-family marriages,

    stoning of women and the delinquentjuveniles. Of course, based on my summervisits and bedtime stories, I have imaginednothing short of a flourishing and colorfulnation inhabited by cultured people inwhich animals run free, whilst the colorful

    buses haste through the mountains andchildren play alongside their neighborsgiving no importance to any social class.

    Sadly, in most cases, the media fails toreflect the picture I hold dearly of Pakistanand presents somewhat a negative view.Not only does it criticize the inter-familymarriages blaming these 'forced andarranged' marriages for birth defects butfurther entrenches the prejudice againstPakistani immigrants. It is not that peoplelive in cocoons and thus have no real idea

    about the magic of Qawwali, the historicalsites, and the cuisine but the fact is thatother issues steal the limelight from theprogression of Pakistan, issues that paintthe country as one of myriad troubles.

    is representation is having a negativeeffect on the Pakistani community.Research shows an increase in racialattacks and the Independent article of2003 states that, "On average, a Pakistaniis more than eight times as likely to be the

    victim of a racist attack in Britain assomeone who falls under the wide-rangingethnic category of "white". is is not alltrue. ere is also discrimination in themarket, and not only against the Pakistanicommunity but other ethnic minoritiestoo. However, according to a 2014 articlein the Independent, "it is hitting thePakistani community the hardest".

    ere is so much more than cricket, thefestivals and the spicy food. Unfortunately,issues such as our sexually exploited

    children, the stoning to death of womenand the injustices to the transgender are inmost cases, the only coverage Pakistangets. ere is no doubt that these issues areof the utmost importance, but surely thereare other ways to improve our basic humanrights without having the countrydefamed over and over again. Let's notdismiss our responsibility or in otherwords, put the blame on others. After all,the picture painted by the media has somebasis.

    T

    Sarash Nazis a British- Pakistani Law

    graduate from the CityUniversity London, UK. Currently

    studying Masters in HumanRights, Hacettepe University,Turkey. Can be contacted on

    [email protected]

    The Portrayal ofPakistan

    inThe British Media

    The Portrayal ofPakistan

    inThe British Media

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    ECONOMY

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    16APRIL 2015Economic Affairs

    he real issue of Pakistan isnot the lack of resources butits mismanagement andmisplaced priorities. e sky

    high election campaign sloganeering,budget figures, ground realities and

    effusive claims of the politicians have nosymmetry. Masses always stick to manyhopes but they all despair when thebudget is announced. It is always thepoors slayer and the richs affable.Earlier, we had annual budgets based onshrewd planning but unfortunately nowwe have quarter ly budgets because ofill-vision and a great deal ofincompetence. Pakistan is the victim ofeconomic, social, political, religious andcultural misgovernance. It strongly

    needs a systematic and structuraloverhauling. Articles 3 and 38 of theConstitution-1973 state each accordingto his ability, to each according to hiswork and promotion of 'social andeconomic well-being of the people

    irrespective of sex, caste, creed or racerespectively. Does our budget take intoaccount these articles?

    e annual budget being the mostpowerful fiscal instrument, determinesthe length of progress and recession of acountry. e annual budget 2015-16 inPakistan is imminent and will probablybe announced on the 19th of May.Estimated receipts are 3000 billionrupees whereas the expected borrowings

    Trise to 1500 billion rupees. e totalGDP of our country is around $245billion of which 4.8% can be taken asdebt for deficit budgeting but it alwaysexceeds this amount. In our annualbudget of 3945 billion rupees for

    2014-15, 1325 billion rupees have beenfixed for debt servicing, 700 billionrupees are allocated for defence (it isother than pensions of the retiredmilitary men and military procurementsfrom abroad), 291billion rupees arereserved for the luxury spending of thefederal government, 574 billion rupeesare named as so called transfers, grantsand subsidies, and just 525 billion rupeesare given to the Public SectorDevelopment Program (PSDP). Even in

    MeetingPakistans

    Budget Deficit

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    Economic Affairs17 APRIL 2015

    the PSDP allocation, most of the fundsare going to be spent on water andenergy projects and the least amount isleft for health and education, which aredirectly related to the public.

    In the ongoing budget year, the totaldevelopment budget of AJK is 11 billionrupees, and that of GB is 9 billionrupees, of Baluchistan it is 50 billionrupees whereas of Metro Bus ProjectLahore it was 1.5 Billion USD in 2013,of Ring Road Lahore it is said 100billion rupees and of Metro Bus ProjectRawalpindi it is 60 billion rupees. etotal budget of three projects is 310billion rupees whereas of 55 %ofPakistani land including AJK, GB andBaluchistan it is just 70 billion rupees.Ever ignored and deprived SouthernPunjab has no due allocation as it seemsthe step progeny. e legitimacy,farsightedness and competence of thegovernment are thus questionable. Bythe way, is Metro Bus not a PSE?Movements do not start on their own;they have always reasons behind them,such as exploitations and deprivations.

    e government of the Punjab haswaived off bed tax commonly known as

    hotel tax in the whole province but thehotel businesses have not lessenedstaying charges and instead haveincreased manifolds. Reportedly, it isbecause the family members of thepresent government in the province havetaken this business under their umbrella.Taking Murree as instance, this tehsilused to generate more than 50 millionrupees as hotel tax annually beforeannulment. What about the rest ofaround 150 tehsils of the province? Do

    PC hotel, Avari hotel and countlessothers qualify to be exempted fromtaxes? Hats off to the previous PMShoukat Aziz who abolished wealth taxin 2002 just to save his own propertyfrom being taxed. e FederalGovernment has levied 17% as sales taxin the federal capital but unfortunately,the Chief Commissioner of Islamabadhas no time to consider the importanceof the matter to charge sales tax at 17 %to equate with the tax rate charge by

    FBR as in ICT tax rate is still ofprevious years rate that is 16%. It is veryunjust that the agriculture sector whichis 21 % of the GDP contributes 0.22 %to the exchequer as direct taxes. e

    agriculture income of the Punjabgovernment was just 0.830 millionrupees and of Sindh 0.426 billion rupeesduring 2013-14. Why are landlords andfeuds tax exempted? Why are luxuryvehicles such as those above 1800 cc

    least taxed only because they belong tothe upper class?

    e budget is composed ofgovernmental receipts and expenditures.ere are three basic heads ofexpenditure generally known as 3D:debt, defence and development. Receiptsare collected through taxes, remittances,loans, etc.

    How to meet the budget deficit? egovernment must lower its expenditure.

    In the incumbent budget, the federalgovernment has reserved 291 billionrupees for its personal expenditure. Itcan easily reduce it if it takes economicmeasures and adopts frugality andausterity. Lavish expenditure onincompetent and gluttonous ministriesand foreign tours ought to be cut down.Bailout packages given on Public SectorEnterprises like Pakistan Steel Mill,Pakistan Railway and PIA, etc. shouldbe abolished and instead of packages,

    their management should be madeeffective and efficient. Privatization is nosolution as it is just a one time income.Calculatedly, it furnishes more loss thanbenefit in the long run.

    Tax evasion and fraud must becontrolled by synchronization of thepublic and taxpayer record. e CNICnumber of every person should be madethe NTN of that person. It will help inidentifying the looters and evaders. Tax

    net and base both must be broadenedand other taxes like carbon tax, tax onservices, agriculture tax and tax onwealth like shares of stock exchange andproperties should be charged increasingthe tax to GDP ratio as well. Income taxis charged on services sector whichaccounts for around 54% of the GDPbut no services tax is taken. If thegovernment charges tax on the servicesof a poor juice seller why cant it levytaxes on the services of doctors,

    engineers, consultants, lawyers etc.?e local government system must bemade fully functional to reduceadministrative costs, to fulfill the spiritof real democracy and to develop the

    populace at a core level. Under Balanceof Payment, the government shouldenhance the tapping of its naturalresources to ease the current accountbalance. It should increase its exportsand FDI by alleviating water and energy

    crises and overcoming security threats aswell as minimizing the importsespecially of the luxury items. Bymanaging well the resources, the gulfbetween imports and exports must bebridged to balance the balance ofpayment and trade. Agriculture taxwhich is levied with a ratio of 5% since2001 must be revised and be made equalto the sales tax rate. Pakistan faces hugecorruption which amounts to 500-700billion rupees annually. It must be

    controlled and the culprits be surelypunished with an iron hand. Electricand gas thefts have augmented but thedirty hands are reluctant to scuff. eymust be halted at any cost.

    India has recently tabled theUndisclosed Foreign Income and Assets(Imposition of Tax) Bill, 2015 in itsparliament. It is aimed at nettingbillions of dollars of undisclosedincomes parked on alien lands.Reportedly, more than $200 billion of

    Pakistani politicians, business tycoons,military men, bureaucrats, models andreligious pundits are parked on alienlands. ere must be a legislation to atleast bring them back. We need tostabilize our currency, to controlinflation and to curb the business ofmoney laundering. It is hard to cutdefence expenditure and debt servicingbut we can indubitably reduce furtherdebt taking. All the non custom paidvehicles should be registered. is willgenerate billions of rupees. egovernment has spent around 500billion rupees to pay circular debt butthe issue of energy crisis seems moresevere. PM Youth Loan Scheme isproved of no gain. e coming budgetmust be aimed at the socio-economicwell-being of the masses as enshrined inthe constitution instead of meeting thevoracious political interests andscreening puzzled figures.

    Zulqarnain Sewaq

    Zulqarnain Sewag is a poet and

    freelancer for different English

    Dailies. He is also a Research

    Scholar at National Defense

    University, Islamabad. Email:

    [email protected]

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    ECONOMY

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    18APRIL 2015Economic Affairs

    arch is always considered tobe the most volatile monthin the history of Pakistansequity market because

    many a times, the stock market has seen anegative double take during the thirdmonth of the calender year. However, thistime, foreign investors were the mainreason for spreading panic in the marketas they offloaded equities worth $72million during the month, forcing localinvestors both institutional andindividual to resort to panic selling.

    Efforts by the State Bank of Pakistan,rating agency Moody's and a sudden risein oil prices in the international marketcould not cool it down.

    e country's main shares market, eKarachi Stock Exchange's benchmark100index witnessed the worst month inMarch after reaching an all time high of34826.51 points in February of 2015.

    e last week of March was the worst for

    the market as panicstricken investorsoffloaded their investments, resulting inthe benchmark KSE100 Index toplummet 1,842 points (5.8 percent) toclose at 29,957.

    It was the KSE100s worst single week's

    performance since July of 2011 as theindex fell for four successive days in ashortened week due to a national holidayfor Pakistan Day. e frightfulperformance came despite a series ofpositive news flows, which would haveotherwise provided a boost to the market.

    e KSE100 Index fell below the crucial30,000 points barrier on Fridaythe lasttrading day of the week. e selloff waswitnessed across the board with themarket failing to react to the discount ratecut, an improved credit rating by Moodysand a sudden rise in oil prices ininternational market.

    Local institutional and individual sellingwas the biggest cause of the decline as

    investors resorted to panic selling in lightof continued foreign selling, especiallyafter the announcement of a leadingforeign hedge fund winding up itsinvestments in emerging markets.

    Foreigners also continued to offload their

    positions at the bourse. ey sold a net of$15 million worth of equity during theweek, bringing the monthly total outflowto $72 million.

    e State Bank of Pakistans (SBP)decision to cut the discount rate by 50basis points (bps)over the weekend failedto have any positive impact on the marketas the KSE100 Index opened theweekwith a sharp decline.

    During the week, Moodys announced

    that it was improving Pakistans ratingfrom a stable to a positive outlook, butinvestors paid no heed to theannouncement as the market continued toplummet. On the other hand, Moodysdowngraded the rating of Pakistani banks,

    M

    Foreign MoneyPlaying Big Games In

    Pakistan's Equity Market

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    Economic Affairs19 APRIL 2015

    which had a negative impact on thebanking sector.

    e oil and gas sector also failed to benefitfrom the increase of oil prices after SaudiArabia launched a military operationagainst Yemen. e sector, however, did

    manage to outperform the broader marketand also received a boost from theOGDCLs discovery of oil at the Pallifield. Average trading volumes shot up by23.7 percent to 174.7 million sharestraded per day as selling pressure built up.However, average daily values onlyimproved 11.7 percent and were recordedat Rs 9.43 billion. e Karachi StockExchanges market capitalisation fell Rs343 billlion and ended the week at Rs 6.71trillion ($67.30 billion).

    Despite the downwards trend on theKSE100 Index, which has droppedapproximately 13 percent since the start ofFebruary, a relief rally was expected in thecoming weeks. Let us look at weeklyactivities on the stock market.

    e first week, ending on March 7:

    e Karachi Stock Exchange remainedvolatile with its continued bearishmomentum during the week. eKSE100 Index lost 368 points or 1.10

    percent and closed down at 33,264.

    Average Daily Turn Over (ADTO)remained largely flat, up 0.7 percentWoW to 173 million shares, whileAverage Daily Value (ADV) rose by 15percent to $103 million. Foreign InvestorsPortfolio Investment (FIPI) registered yetanother net outflow of$4.4 million,though lower than last weeks outflow ofabout $ 10 million.

    e second week ending on March 15:

    e Karachi Stock Exchange continuedits losing streak during this week also asthe KSE100 Index lost 335 points or1.01 percent and closed at 32,929 points.Average Daily Turn Over (ADTO)remained largely flat, down 18 percent to142 million shares, while Average DailyValue (ADV) was down by 22 percent to$80 million. Again, Foreign InvestorsPortfolio Investment (FIPI) registered anet outflow of $28.4 million, much higherthan the previous weeks outflow of about

    $4.4 million.

    e third week, ending on March 21:

    e Karachi Stock Exchange remained inthe red zone for the entire week thefourth consecutive negative week. e

    KSE100 Index lost 1129 points or 3.43percent and closed at 31,800.

    Average Daily Turn Over (ADTO) wasflat at 142 million shares, while Average

    Daily Value (ADV) was up by 3.5 percentto $83 million. Foreign Investors PortfolioInvestment (FIPI) registered another netoutflow of $23 million against last weeksoutflow of about $28 million.

    e State Bank of Pakistan announced amonetary policy cutting key rate by 50basis points (bps) to 8 percent, which isthe lowest in 13 years. However, the policyrate cut could not contain the market. Onthe other hand, bank stocks declined 7.9percent during the week on the news that

    a target interest will be introduced andinterest rates will come down in theupcoming monetary policy meeting.

    If we look at the performance of the stockmarket during the month of March, itreveals that some corrections after Januaryand February rallies were expected butmajor role in the drastic declin was theselling spree by foreign investors.

    Who are these foreign investors?

    Citizens of ther countries investing in

    Pakistans equity market, are known asforeign investors. But according to marketsources, bourse experts and evenwellplaced people in the Ministry ofFinance and concerned regulatoryauthorities, many such socalled foreigninvestors are mostly Pakistani businesspeople, who are establishing theircompanies in foreign countries withEnglish names solely to deceive theregulatory authority and the FederalBoard of Revenue to save tax money

    which they would have been subjected topay if they had invested as Pakistaniinvestors. ey prefer this system becauseof the governments extremely favourablepolicies towards foreign investors as theyare offered taxfree investments into the

    share market.

    To benefit from this policy, local investorsare establishing investment companies onforeign soil, depriving the country ofrevenue and young people are losing jobopportunities.

    According to reliable sources in theMinistry of Finance, in the recent past,some of such foreign investors had towind up their foreign companies orchange their names when they wereexposed. One such foreign investor hadliterally defrauded when he used the nameof a Hong Kong based company where hewas working as an employee for his owninvestment in Pakistans stock market.

    is gentleman was saved as he is aleading stock market player and also hasgood relations with governmentfunctionaries.

    Keeping in mind such incidences, theregualatory bodies like the Securites andExchange Commisson of Pakistan(SECP) should take strict actions againstsuch shadow investors so as to save thecountrys precious foreign exchange andrevenue. It is easier said than done ascompanies established by such investors

    have multilayer affiliations from HongKong to Singapore and from Dubai toLondon and Switzerland.

    It is not only imperative to take actionagainst such socalled foreign investors toplug the revenue but it is more necessaryas they have power to pull the strings ofcapital markets to pressurize thegovernment to reach their ultimate goals.Recent heavy ups and downs in equitymarkets are ample examples of theirdesigns.

    M. Habib KhokharHabib Khokar is currently the

    Bureau Chief Islamabad for DailyTrade and Financial News. He is also

    responsible for publishingEconomic Affairs Magazine and itsreview of Pakistan's stock market.

    He is a seasoned journalist and canbe reached at:

    [email protected]

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    OPINION

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    20APRIL 2015Economic Affairs

    peration Decisive Storm, ledby the Kingdom of SaudiArabia and its 10 coalitionpartners against the Shia

    sponsored and trained Houthi militantsin Yemen is going through air strikes.Riyadh, Islamabad, Istanbul, Tehran andCairo are very busy in the lengthy spellsof diplomatic activities. Stakes ofsocio-economic bounties, geo-political

    superiority and geo-strategicmaneuverings are very high andcomplicated and the drive of conflictresolution is still far away.

    Yemen, the Afghanistan of the MiddleEast, has once again flashed theunending tussle of the so-called SunniStates and Shiite Crescent as usuallyprojected by the Western media outlets.It is now being carried out through fierceproxy wars in different parts of the GulfCooperation Council (GCC) and theMiddle East, which is a bitter reality.

    Shiite rebels, the Houthis, have takenover the capital, Sanaa, and much of thenorth, and are storming south in a bid to

    secure their hold on the country.President Abed Rabbo Mansour Hadiwas first driven out of Sanaa, then triedto make a last stand in the southern cityof Aden. Now he fled the city and thecountry.

    Iranian Navy Commander Rear AdmiralHabibollah Sayyari says two Iranianwarships have secured in the Gulf of

    Aden where Saudi Arabia is continuingair strikes against the Houthi rebels. eAlborz destroyer and Bushehr logisticvessel have arrived off the Yemeni coastfor patrolling the Red Sea. He says thewarships will ensure safety of Iransshipping lines and protect Irans interestsin the region. Now, Saudi Arabia and theGCC are no longer comfortable withIran.

    Saudi Foreign Minister Prince SaudAl-Faisal:

    According to Saudi Foreign MinisterPrince Saud al-Faisal, the Houthi rebelsand their ally, the former president ofYemen, Ali Abdullah Saleh, decidedwith the support of Iran to destabilise

    Yemen."

    We have evidence that Iran trainedHouthi militias on operating fighter jets,Saudi Brigadier General Ahmed Asiritold reporters, noting that militia cannoton their own have picked up the skills.

    Ironically, one of the members of theGCC, the Sultanate of Oman, stayedaway. Oman refused to join the war onYemen as Muscat has friendly relationswith Tehran.

    e Kingdom of Saudi Arabias Stance:

    Saudi Arabia attacked Yemeni rebels atthe request of deposed PresidentAbd-Rabbuh Manour Al-Hadi. SaudiArabia's first air strikes on the Houthistrongholds in Yemen have fullydestroyed all Houthi air defences, AlDailami base, SAM missiles batteriesand four warplanes, without any losses to

    the Saudi Air Force. It is a courageousmove by the Kingdom, which would helprestore the legitimate government inYemen and protect this country.

    Saudi led coalition air strikes were a clear

    O

    Operation

    Decisive Storm

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    message to Iran that it must end itsstrategy of expanding its regionalinfluence through Shiite proxy groups. Itdescribed it as necessary to confront anunacceptable growing threat. eHouthis' wild adventurism threatened

    sea trade through the Red Sea.Saudi Arabia is taking all possiblemeasures to mitigate the regionalrepercussions of Shia Iran which iscurrently supporting Lebanon, Syria,Iraq and Yemen. Moreover, the Irannuclear deal may reduce Saudi Arabia'spre-dominated role in the region. 40% ofthe Saudi armed forces' personnel are ofYemeni origin and that is why Riyadhlooks towards Pakistan for its army. ereare already about 750-800 Pakistani

    servicemen in Saudi Arabia but none arecombat troops. But according to eLondon Post, a large number of Pakistanisoldiers are already in Saudi Arabia.

    Saudi Arabias action in support of theYemeni government is motivated by thedesire to uphold its important status inthe Middle East. Saudi Arabia and itsallies wanted to make sure that it couldcontrol the Bab Al-Mandeb, the Gulf ofAden, and the Socotra Islands. e BabAl-Mandeb is an important strategic

    chokepoint for international maritimetrade and energy shipments thatconnects the Persian Gulf via the IndianOcean with the Mediterranean Sea viathe Red Sea. It is just as important as theSuez Canal for the maritime shippinglanes and trade between Africa, Asia, andEurope.

    Saudi Arabia requested five countries,including Pakistan and Egypt, to provideassistance to their forces in the action.Egypt and Pakistan have both askedtheir navies to move towards the Yemenicoast to defend the Saudi Arabianmaritime frontiers to stop any incursion.

    e Saudi Arabian led coalition,Operation Decisive Storm, is not meantto destroy the Houthis or evenmarginalise them. Rather, it intends tobring all the Yemeni parties back on thedialogue table, since it is known toeveryone that the Gulf States have noambitions in Yemen. e Gulf

    Cooperation Council countries, alongwith Egypt, are only eager to ensureYemens safety and security. According toSaudi Arabias Foreign Ministry, theSaudi-led offensive will continue untilYemen is returned to security, stability

    and unity.

    But it is a bitter reality that Iran ismeddling in Yemens conflict andelsewhere in the region. e ForeignMinister of the UAE, Sheikh Abdullahbin Zayed, added at a news conferencethat a Saudi-led coalition now attackingIranian-allied Houthi fighters in Yemenwanted a UN Security Councilresolution requiring all parties to takepart in dialogue and impose a ban onarms purchases by the Houthis and othergroups that are out of line.

    Iran is not carrying out this activity onlyin Yemen; it is doing the same activity inLebanon, in Syria, Iraq, and Afghanistanand in Pakistan," he added.

    Pakistans Stance:

    e two houses of Pakistans parliamentadopted a 12 point unanimous resolutionon the Yemen conflict, calling upon thegovernment to maintain neutrality so asto play a proactive diplomatic role in thecrisis. It advised the government to stayneutral on the Yemen conflict. It

    expressed unequivocal support for SaudiArabia and zero tolerance for anyviolation of its territorial integrity or anythreat to the two Holy Mosques(Harmain Sharifain).

    Unconditional Support to Saudi Arabia:

    It further said Pakistan would standshoulder-to-shoulder with Saudi Arabiaand its people in case of any threat. Italso desired that the government shouldtake steps to move the United Nations

    and the Organisation of IslamicCooperation (OIC) to bring about animmediate ceasefire in Yemen. It calledupon the warring factions in Yemen toresolve their differences throughdialogue.

    Regional & International Peace Efforts:

    It supported regional and internationalefforts for restoration of peace andstability in Yemen and underscored theneed for continued efforts by theGovernment of Pakistan to find a

    peaceful solution to the crisis, whilepromoting the unity of the MuslimUmmah in cooperation with the leadersof other Muslim countries.

    Warning to Terrorist Groups andNon-State Actors:

    Moreover, the resolution expressed deepconcern over the increasing threats posedby different terrorist groups andnon-state actors to the security andstability of the region and advised thegovernment to enhance its friendshipand cooperation with the GCC and allother regional countries to combatextremism and terrorism.

    Stand with the Solidarity & Integrity ofSaudi Arabia:

    e civil and military leadership ofPakistan has decided to act proactively toward off any threat to the solidarity andintegrity of Saudi Arabia and exploit allits resources to protect the brotherlycountry from any external threat to its

    security. Prime Minister Nawaz Sharif soffice stated that any threat to SaudiArabia would evoke a strong responsefrom Islamabad.

    e civilian and military leadership ofPakistan has also urged the UnitedNations, the Organisation of IslamicCooperation (OIC) and the worldcommunity to play a constructive andproactive role in finding a politicalsolution to the crisis in the Middle Eastfor the sake of the establishment of peace

    and stability in the region.

    Concluding Remarks:

    Irans systematic actions in Yemenconstituted a major provocation to SaudiArabia, especially given that Yemen islocated on Saudi Arabias southern flank.It has posed a grave security threat.Operation Decisive Storm was launchedon the request of deposed President ofAbed Rabbo Mansour Hadi.

    On March 7, General Hussein Salami,Deputy Commander of the IranianRevolutionary Guards (IRGC), claimedthat the [power] of the IslamicRevolution has been stretched to Yemenand added that the Islamic Revolution

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    has influenced states and people from theMediterranean Sea to the Babel-Mandeb in Yemen.

    Later, Mohsen Rezaee, the first IRGCChief Commander, applauded theHouthis fight against the Saudi-ledcoalition and stated that the Iran-ledresistance front is fighting with theinvasion front of Israelis and Saudis in

    Iraq, Syria, Lebanon, Bahrain, and nowin Yemen.

    Earlier, Alireza Zakani, a member of theIranian parliament who is close to theSupreme Leader, declared, three Arabcapitals [Beirut, Damascus, andBaghdad] have already fallen into Iranshands and belong to the Iranian IslamicRevolution, and Sanaa is the fourth.

    Houthis, Shiite rebels advancementtowards the north and Sana'a was the

    wake-up call for Saudi Arabia and theGCC. Its march towards the southneeded an immediate response fromSaudi Arabia and its allies. e Houthisnow find themselves in a positionequivalent to that of Hezbollah inLebanon. Both groups are the mostpowerful force in their countries andneed to be curtailed for the safety andsecurity of the GCC and MENA.

    It also appears that the Saudi Arabia-led

    coalition against the Houthis is one ofthe outcomes of political and securitysteps taken by Riyadh in response to thenew geopolitical reality that will arisefollowing a presumed agreementbetween Tehran and the West. e

    opening of a direct flight between Sana'aand Tehran for the first time in February2015 epitomizes Irans success inachieving a major inroad into SaudiArabias backyard and its historic weakpoint.

    Despite Saudi Arabias request, thegovernment of Pakistan is not ready tosend its troops inside the land of Yemen.It has many reasons. Pakistans continuedwar against terrorism, ongoing militaryoperations Zarb-e-Azb, Khyber-I & II,hostile neighbors (India, & Afghanistan),and the last but not the least, terriblebacklash in the earlier militaryengagements with Saudi Arabia forced itto stay away from the turmoil of Yemen.Chinese massive economic stakes and

    geo-political and geo-strategic interestsin Yemen may also be in the minds ofpolicy makers sitting in Islamabad andRawalpindi.

    Pakistan rightly has preferred to play a

    neutral role of mediator. It mustinitiate steps to move the UNSecurity Council and the OIC tobring about an immediateceasefire in Yemen. Jointdiplomatic efforts in collaboration

    with Turkey, China, Indonesia andMalaysia must be initiated. But itwould be more appropriate torebuke the illegal occupation ofthe Houthis with the strongwarning to stay away from SaudiArabian soil.

    Saudi Arabia and the GCC mustformulate a united Armed Force(40,000) as soon as possible tostrengthen its military presence inthe region. e Cold War between

    Saudi Arabia and Iran is not likelyto end in the days to come.

    Incidents of infiltrations, conspiraciesand political manipulations ought to bemonitored by utilizing a joint mechanismof information sharing, spying systemand last but not least, better HRMs. eassertive role of the United ArabEmirates (currently in place) is aguarantor to GCC security and stability.e government of Pakistan has alreadypurposed its Joint Security Shieldwhich needs to be rationalized by all theGCC.

    e ugly side of diplomacy is that italways cares about its own interests. Inthe game of power movers and shakersdo not care about helpless humanity andmorality because these are not cashablecommodities. Deliberate efforts andmedia campaigns always achieve certaingoals of disinformation and discredit.Religion is a holy motivateditem/idea/way/mean which must not be

    used to settle conflicts. Sect, faith, beliefand ideology must be used to promotediversity and prosperity and notdestruction because humanity beautifiesin diversity. Iran must realize that proxywars have already produced enoughhavoc in the region and preliminarynuclear agreement with the West will notachieve any substantial dividends in thedays to come until and unless Iranamends its policies towards e GulfCooperation Council and MENA.

    Mehmood Ul Hassan KhanThe writer is a researchscholar, specializing in

    geopolitical issues of the GCC,CIS and South Asia. He has a

    keen interest in cross-culturaldialogue and conflict

    resolution.

    e two houses ofPakistans parliamentadopted a 12 point

    unanimous resolution onthe Yemen conflict, callingupon the government tomaintain neutrality so as

    to play a proactivediplomatic role in thecrisis. It advised the

    government to stay neutralon the Yemen conflict.

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    Akthar said his department is in touchwith different potential corporatesponsors to fund installation andmaintenance of solar panels at all 138traffic signals.

    If the plan works, it will help address ouraggravating traffic mess withoutbecoming any financial burden on thegovernments pocket, he maintained.

    Pakistan is grappled with one of the worstenergy crises in its history, with around a4,000-megawatt shortfall. Authoritieshope that can be plugged by tapping intoPakistans huge solar energy potential.

    Right now, Pakistan uses only 7megawatts of solar power, out of itsestimated potential of 2.9 millionmegawatts, Gholamreza Zahedi, anassociate professor of chemicalengineering at Universiti TeknologiMalaysia, told this scribe in an emailinterview.

    He said that attracting local investmentsin small- and medium-size renewableenergy plans and launching localmanufacturing of basic components, withthe help of European countries andChina, which have more advancedrenewable technology, could make a bigdifference in expanding Pakistans solarenergy production.

    Business has picked up forAbdul Latif, and he credits toan eco-innovation in Pakistanscapital: the solar-powered

    traffic signal. Latif runs a shoe shop inAabpara, a bustling main shopping areain an upscale sector of the heart ofIslamabad.

    e traffic signal at the Aabpara

    intersection used to regularly fall darkbecause of frequent and protracted powerfailures, causing massive traffic jams onthe road that passes by his shop.

    e traffic jam had become a nuisanceequally for shoppers and shop owners inthe market. Customers would avoidcoming to the market for fear that theywould become entangled, he said.Business activities were sufferingseriously. But the installation ofsolar-powered traffic signals has resolved

    the problem and business is now boomingagain, a happy Latif told this scribe.

    Traffic jams on Islamabads main arteriesand at intersections have become routinein the power-starved capital, which seesregular power outages, particularly whenenergy demand is high. Outages can leadto traffic signals going dark for hours,leading to massive traffic snarls.

    But in July, the citys CapitalDevelopment Authority launched a pilot

    project to power traffic signals using solarpanels. Solar-powered signals are nowworking at the Aabpara roundabout andat two other busy locations in the city.

    Officials at the Authoritys engineeringwing said that if the pilot project iseffective, the solar-powered signals wouldbe installed at more intersections orroundabouts where traffic jams are aserious problem when the signals go dark.

    Navid Hassan Bokhari, director of solar

    energy affairs for the Pakistan AlternativeEnergy Development Board, said boardhad put together a plan to install solarpanels at 25 traffic signals in Islamabad.

    Welcome Changes

    B

    Frustrated traders, fed-up drivers andexhausted traffic wardens welcomed thechanges. When traffic signals shut downduring load-shedding hours, it is thewardens who have to handle vehiculartraffic congestation for hours, said BilalRaza, a 45-year-old traffic warden,standing beneath the solar-poweredtraffic signal at the Aabpara roundabout.

    e solar-powered signals are helping usmanage traffic jams that are a nightmarefor us, he said.

    Jacob Joseph, who runs a smartphoneshop at the Jinnah Super market inanother upscale residential andcommercial sector, said he believed solartraffic signals could help managebusiness-destroying congestion at a rangeof shopping areas across the city.

    Hit by worsening power crises, thecountrys other provinces, such as Sindhand Punjab, also are mulling installingsolar traffic signals and street lights.

    Saeed Akhtar, chief engineer for Punjabprovinces Traffic Engineering andTransport Planning Agency said thatcontracts have been signed with threelocal firms for the conversion of trafficsignals to solar power at five roadintersections in Lahore, the capital city ofPunjab province.

    e costs of installing solar panels will bepaid for by private firms in return forsmall advertisements at the signals,noting which firm had backed the project,he said.

    Solar-powered traffic signals

    helpPakistan tackle road jams

    ENVIRONMENT

    Saleem Shaikh

    is a climate change and

    development science correspondent,

    based in Islamabad, Pakistan.

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    akistans leftist politics andprogressive movement have acheckered history. No doubt,in the past, they played a major

    role in shaping the directions taken bythe state and the government of Pakistan.But what does the left actually mean? Allare blank except a few. Let me defineleftist politics for my readers. It's anoutlook or specific position that acceptsor supports social equality, often inopposition to social hierarchy and socialinequality. For years, this concept of the

    left has gained fame all across the worldand especially in Pakistan.

    We all are familiar that the wordrevolution comes from the Latin wordrevolutio which means a turnaround.

    In other words, it is a fundamentalchange in power over a short period oftime. Basically the word "left" startedfrom the French Revolution but inPakistan from 1947, it has been used in apositive and a negative sense by differentthoughts of people.

    e question here is: can Pakistans leftbring a revolution which is home todivergent and dissimilar cultures andwhere people are constantly atloggerheads on different issues? Second,

    the question which usually gets on mynerves is does the Pakistani left actuallyexist? ese are a few questions which aregoing through my mind and other newlyturned young comrades. Sadly, till now, Ihave asked various personalities linked

    Pwith left politics, civil society and otherstakeholders but no one has answered iton a serious note.

    However, history reminds us that the lefthas always been a marginal actor inPakistans national scene. Its a reality thatin the past, many enormous sacrificeswere made by progressive individualswho helped the working class byunionizing them, specially the railwayworkers, helped peasants organizeagainst powerful landlords, inspired

    Pakistans minority provinces to demandtheir rights. I am simply saluting themand admire their sacrifices.

    But currently in Pakistan, many leftpolitical forces are working with an aim

    Politics of PakistanNothing Left?

    The Leftist

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    and motto to work for the betterment ofthe working class and for social justicebut sadly speaking, they always remain infantasies, their ideology and concepts areshaky, their interest is bourgeois, their lifestyle is luxurious, they prefer to visitforeign countries on donations but yetthey oppose imperialism. Without anyharsh feelings, the left in Pakistan alwaysdoes some ineffective exercises for theirown benefit and profits. It is true thatliberal-left political forces have beenbleak in recent years. Many times in pastand history also reminds us that theseso-called intellectuals take a seat down inan air conditioned drawing room andsettle their ideas and merge with a newparty but within months, they separate.But in Pakistan, presently they have been

    hijacked by capitaliststs and we need anew spearhead. Let me state the nakedtruth: Pakistans left itself needs reform,not revolution. e left needs to knowthat there is not a chance in a million ofcapturing state power in the foreseeablefuture. Leftists