Profit E-Magazine Issue 66 by Profit (by PT)

welcome

Ego and insecurity Being the best and being good enough are not the same thing, a distinction that the students, faculty, and alumni of the Lahore University of Management Sciences would do well to remember. LUMS is unquestionably the finest academic institution in Pakistan, and its students and alumni are the highest quality of human capital produced in the country. That does not necessarily imply, however, that they are good enough by global standards. Indeed, if the volume of research produced by LUMS faculty, and the international standardized test scores of its students are anything to go by, Pakistan’s best, unfortunately, is not good enough for what the country needs to compete in the global arena. It is middling, at best, compared to the best institutions in the United States and Europe. At some level, we suspect that the people at LUMS know this. The chest-thumping manner with which so many of their number proclaim themselves to be the Pakistani equivalent of Harvard – and their institution comparable to an Ivy League institution in the United States – suggests a degree of over-compensation that betrays deep-seated insecurities. Perhaps, more admirably, even a degree of self-awareness. In this week’s cover issue, we examine what is the most expensive graduate degree in Pakistan: an MBA from LUMS. Our assessment of its educational and economic value – foreshadowed heavily in our headline – come out largely in favour of the degree and the institution granting it.

grounded in their understanding and description of the value they gained from the degree than those charged with managing the MBA program. We hope that sense of self-awareness is something they will retain as they enter the workforce. A common complaint against LUMS graduates by employers is that they are exceptionally talented, but also exceptionally arrogant and either unable or unwilling to accept the flaws in their work. We repeat: LUMS is the best academic institution in Pakistan and its students and faculty the very best that Pakistan has to offer. We also acknowledge that the institution grows better every year, and that one day it will compete against the very best institutions around the world. We just caution them in overstating their case: they are not there yet. Great academic institutions take decades, if not centuries, to mature. Be patient, and confident that you will no doubt get there one day. It is in your DNA.

Farooq Tirmizi In fairness, the students we spoke to were much more

Managing Editor

Executive Editor: Babar Nizami l Managing Editor: Farooq Tirmizi l Joint Editor: Yousaf Nizami Reporters: Syeda Masooma l Muhammad Faran Bukhari l Taimoor Hassan l Abdullah Niazi l Ahmed Jamil Bilal Hussain l Director Marketing: Zahid Ali l Regional Heads of Marketing: Muddasir Alam (Khi) l Zulﬁqar Butt (Lhr) l Mudassir Iqbal (Isl) l Layout: Rizwan Ahmad l Photographers: Zubair Mehfooz & Imran Gillani l Publishing Editor: Arif Nizami l Business, Economic & Financial news by 'Pakistan Today' Contact: proﬁt@pakistantoday.com.pk

FROM THE MANAGING EDITOR

Muhammad Faran Bukhari and Farooq Tirmizi

arachi is still the largest city in Pakistan, but by some measures, the greater Lahore metropolitan area may now be almost equal in size, if not already somewhat larger. Yet for most of its history, Lahore’s residents have shunned the notion of vertical expansion of their city’s size, which is why it is difficult to find apartments in the city. In recent years, however, there has been a move towards changing that, with several real estate developers investing in building up apartment blocks in the city. And indeed, some of them have gotten to become quite high end: it is now possible to buy a $1 million apartment in Lahore, at least insofar as listed prices on Zameen.com are concerned. One set of developers who are trying to profit from this growing trend are the Nagina Group, a textile conglomerate that owns three publicly listed companies: Nagina Cotton Mills, Ellcot Spinning Mills, and Prosperity Weaving Mills. The group now intends to diversify into real estate. “Nagina Group has been in the textile business in Pakistan for a long time – since 1967, in fact,” explains Amin Ellahi, Sheikh, one of the directors of the group. “Our first spinning mill in Pakistan was set up in Kotri, Sindh and is still the bedrock of our business. Since then, we expanded into Punjab, setting up another spinning unit and also diversifying into the weaving sector in the late 1990s and early 2000s”. “A decade later – and with the younger generation of Nagina Group joining management – we pondered the age-old question: do we expand our existing textile footprint or diversify into a new venture? After some deliberation, it became increasingly clear to us that while latent demand existed, Lahore was lacking genuine high-end residential spaces. Sensing that this was a field that we could add value in, we decided to develop boutique luxury apartments in Gulberg.” The group’s first foray into the space is a luxury apartment block in the heart of Gulberg, a neighbourhood that still defines Lahore’s upper-middle-class chic. However, the apartment real estate market in Lahore is not without its challenges, and Nagina – as well as the other investors operating in this market – have had to innovate in order to overcome them.

Lahore’s aversion to apartments

he citizens of Lahore have a famed aversion to apartment living. This is often chalked up to a “Punjabi mindset”, though considering the number

Directors Nagina Group Amin Ellahi Shaikh and Omer Ellahi Shaikh of Punjabis who own apartments in Karachi, Dubai, and other parts of the world, this is perhaps mistaken. Nonetheless, there is truth in the fact that owning the land one lives on is something culturally important to people in Lahore, and one that apartment ownership does not appear to offer. Sheikh, however, has a somewhat simpler explanation: the reason why Lahoris have not historically taken to vertical living is because – until now – they have not needed to. “Some people argue that apartments as an idea are a tough sell in Lahore due to the “Punjabi mentality” and the need to own land. We feel differently. Lahoris have already started appreciating apartment life and it is a matter of if – not when – the larger market recognizes the value as well,” he said, in an interview with Profit. And now that the need has arisen, he believes they will adapt, just as the residents of Karachi did in an earlier era, even though the cities have otherwise different characteristics. “Karachi and Lahore are totally different and very interesting markets. First of all, Karachi is a port city and port cities around the world have unique characteristics compared to interior cities. These cities naturally attract both commerce and travel. Karachi’s population is over 16 million people – almost 50% larger than Lahore’s. Most importantly, Karachi's avenues for expansion are geographically limited,” he said. “[Karachi’s] DHA Phase 8 has reached the geographical limit of Karachi being surrounded by water on three sides. Without land to expand, Karachi’s only option is to expand north or to develop vertically. In the north, Bahria Town is a prominent new development

and DHA City is also coming up. But those are at significantly long distances from the center of Karachi. So I think, by necessity, Karachi had to accept the concept of vertical development faster than Lahore.” he explained. As for Lahore, it now appears to be encountering similar limitations to its horizontal expansion. “Lahore has a physical barrier as well: the northeastern border with India. Thus, the logical places for societies (DHA excluded) has been towards Raiwind and Multan Road in the south, but those developments are becoming extremely saturated and difficult to access. So, Lahore is slowly arriving at Karachi’s cultural acceptance of apartment style living -- it will just take a little longer.”

Housing affordability and financing

he biggest problem for a real estate developer focused on residential real estate is the simple fact that housing is unaffordable relative to incomes. According to Profit’s analysis of data from the Pakistan Bureau of Statistics, the average household in Lahore makes Rs72,300 per month. Personal finance experts believe that an affordable house is four times the annual income of a household, which means that the average Lahori family can afford a home worth just under Rs3.5 million. So how much house can a typical Lahori family afford? According to the real estate price index maintained by Zameen.com, as of April 2019, the average price of a house in Lahore is Rs10,401 per square foot. That implies that a small, 125-squareyard (or 5-marlas, as would be common parlance

REAL ESTATE

“Some people argue that apartments as an idea are a tough sell in Lahore due to the “Punjabi mentality” and the need to own land. We feel differently. Lahoris have already started appreciating apartment life and it is a matter of if – not when – the larger market recognizes the value as well” Amin Ellahi Sheikh, director of Nagina Group in Lahore), house would cost Rs11.7 million (or Rs1.1 crore, for those of you more comfortable with the vernacular terminology of large numbers). Of course, such a house is quite out of the price range we quoted above for the typical Lahori family. Even the top 1% of Lahori households would struggle to buy a home in the city. According to Profit’s analysis of data from the Pakistan Bureau of Statistics, the top 1% of households in Lahore had an income of Rs310,000 per month, which implies that they can afford a home worth Rs14.9 million. To be in the top 2% of households in Lahore, one needs to have an income of Rs247,600 per month, and those households can afford a home worth Rs11.9 million. In other words, that typical 125-squareyard home in Lahore? Only 2% of Lahori families can afford one. And that “four times your annual income” number assumes the availability of housing finance, which is far from guaranteed in Pakistan, which has among the worst rates of mortgage finance availability in the world, including among South Asian countries. As of April 2019, Pakistan’s entire mortgage

market was worth a paltry Rs92.4 billion, according to data from the State Bank of Pakistan, and grew by an average annual rate of just 1.0% per year over the past 10 years. The total number of mortgage borrowers in Pakistan was 62,432, as of the end of December 2018, which is actually down by 8.9% over the previous year, and is significantly below the peak of over 150,000 mortgages reached in mid-2005. “This is a large gap in this industry in Pakistan. Nowhere in the world are people expected to finance their housing needs completely independently,” said Amin. “Financial institutions exist that assist them in bridging the gap. Banks here have a very low risk profile, and as a result the risk level that real estate customers are forced to accept is very high.” “They must give large down payments and pay installments on the hope that the developer is reliable and will complete the project on time and as promised. Sometimes it works out well for the real estate investor, but other times it does not. I hope this new government is able to provide better housing solutions for Pakistani’s because we direly need it. A big part of that solution must focus on a better mortgage finance system.”

Average income

Average house price

Rs72,300 Average monthly income of a typical household in Lahore, according to Profit’s analysis of data from the Pakistan Bureau of Statistics

Rs3.5 million The maximum price of a house that a typical Lahori household, with the average income, can afford, according to personal finance experts

For their part, the Nagina Group believe that prices are likely to keep rising because costs have risen substantially over the past two years owing to the rapid depreciation of the rupee against the US dollar. “We started this project about three years ago. Since then, the cost of inputs like cement, steel, sand, and crush have all been rising steadily,” said Amin Ellahi. “And this makes sense. If coal is a significant input cost for cement, and coal has to be imported in US dollars, then the rupee prices of inputs will obviously rise as well if the rupee depreciates. As this happens, the cost of manufacturing cement rises and the manufacturer will pass on this cost increase to the consumer. Going forward, it seems like the pressure on the rupee could continue. So, we feel that while raw land may not be significantly overvalued in rupee terms, developed real estate may be undervalued and definitely has a good chance of appreciating quite significantly in rupee terms.” And the lack of financing is an issue not just for buyers, but also for developers, who cannot borrow for the cost of construction, which results in a peculiar mode of financing called “market financing”.

The 1%

Rs310,000 Threshold of monthly household income to be part of Lahore’s wealthiest top 1%, according to Profit’s analysis of data from the Pakistan Bureau of Statistics

“To put it simply, if you have the money to build and complete the project yourself, it is equity financed. If you require advances and installments to complete construction, it is a market financed project,” said Amin. “When prices rise and projects are well sold, the intrinsic risk of market financed projects slips under the radar. But if real estate prices drop and pace of installments slow down, construction work can stall and projects remain incomplete for long periods of time.” This, in turn, creates problems and a general lack of trust in Pakistan’s real estate market by ordinary consumers who do not know if they can rely on the developer to keep their word in constructing and delivering projects on time. “In Pakistan, sometimes developers focus on the marketing of a project more than its completion,” said Amin. “In fact, some units are sold based on just a brochure and a promise.” Nagina tried to approach the matter differently. “In our case, we chose to take the burden of development risk away from our customer by not selling any apartments until the building structure was already complete and finishing was underway. We wanted the majority of the development approvals from the relevant authorities in hand and we wanted the apartments to be close to their final shape before opening sale. Just like the decision to make only three-beds, this lowers the IRR [internal rate of return] for the developer, but gives the customer a more straightforward product and a realistic timeline.”

Nagina’s target market

he apartments at 19Q (so-named because of the address of the building: 19Q Gulberg 2) have been priced at Rs55 million each. Given the fact

The 2%

Rs247,600 Threshold of monthly household income to be part of Lahore’s wealthiest top 2%, according to Profit’s analysis of data from the Pakistan Bureau of Statistics

that fewer than 2% of Lahore’s population can afford their product, the Nagina Group have given considerable thought to the kind of clientele they are seeking to attract, focusing on families who will make their first development their primary residence rather than people who may purchase the property as a pied-a-terre. “Our target customer is sophisticated, family oriented, financially stable, and aligned with the values of the building,” said Amin. “A year before breaking ground, we sent out a detailed questionnaire to prospective customers to help understand their requirements carefully. Amongst many insightful responses, one thing became clear: while people were ready to accept the concept of apartment living, they felt apprehensive about neighbour risk. Who would they live next to? Would their neighboring apartment be the home of a family-oriented banker or would it be a weekend getaway for an out-of-towner?” That, in turn, meant making decisions which would impact not just how fast the apartments would sell, but also the returns that the developers could expect on the project. “Of course, all project developers will tell you that they interview and vet residents, but we decided to go a step further and designed the project in a way that this issue is minimized to begin with. We decided to remove one- and two-bedroom apartments from the configurations entirely,” said Amin. “This was a unique approach, because the one- and two-bedrooms are actually the easiest to sell and most profitable for developers. Their lower prices attract all sorts of buyers and help with early deposits. The three-bedroom apartments take longer to sell

but the buyers of three bedrooms are more likely to be families and working professionals. So, we think that good planning and design can be just as important as spending money upfront when it comes to creating the right living space.”

The benefits of density

ltimately, however, what the Nagina Group is really betting on is that the benefits of density – both in the form of affordable housing in prime locations and the economies of scale that come with an apartment building – will be attractive to homeowners in Lahore. “An increase in population density helps nearby ancillary businesses greatly,” said Amin. “A family of 5 previously resided in this approximately 12,000 sqft. of covered area. We expect almost 100 residents to live on the same footprint of land but with over 90,000 sqft. of developed space. Even just a handful buildings such as these amplifies this concept greatly and nearby businesses benefit. The hair salons overflow with ladies, the restaurants gain a hustle and bustle, and the cinemas become packed.” And then there is the affordability. “A similarly priced house can be a huge headache to first acquire the land for, then build a house on and lastly maintain. So, the first convenience comes in the ease of acquisition vs buying land and/or building your own house. Maintenance and the cost of that maintenance would be the second most important one,” said Amin. “A house requires multiple security guards to protect, a large number of staff to clean, and generators which require both fuel

Mortgage market

Number of borrowers

The total size of Pakistan’s mortgage market, as of April 2019, according to data from the State Bank of Pakistan; the market has been growing at an average annual growth rate of just 1.0% over the past ten years

The total number of individuals with a mortgage in Pakistan as of December 2018, according to data from the State Bank of Pakistan, down 8.9% from the same period last year

Rs92.4 billion

62,432

REAL ESTATE

and maintenance. If you have a swimming pool, you need a separate person for that. If you have a small gym at home, that equipment needs routine maintenance as well. Managing all this can be a nightmare, and the costs for a single household can snowball relatively quickly. In an apartment building, the management of all this is handled by a building management team.” “Moreover, the economies of scale are shared between the residents. Instead of 3-4 guards for every household, there could be 8-10 guards for 25 households. Lastly, the convenience of location cannot be beaten. Most offices, banks, and the best restaurants are still in Gulberg- the heart of Lahore. 19Q is situated in a secluded residential neighborhood, right off of M.M Alam Extension. The convenience of this location is just unbeatable.”

Conflicting opinion on apartments

ttitudes among Lahore’s homeowners certainly do appear to be changing, at least a little bit. Fatima Bukhari, a Lahore-based psychiatrist and homeowner, can see the value in apartments. “Living in Lahore’s Johar Town area security issues have become a nuisance. Our place has been targeted by robbers twice in the last few years. I feel apartments are much more secure in the sense that they are seldom targeted by robbers,” she said. There does appear to be a consensus that apartments are generally safer than houses. “Apartments are safer when it comes to robbery. People don't tend to rob apartments. Houses are more prone to theft,” said Asad Ehsan, a UAEbased banker with family in Lahore.

However, both Fatima and Asad have a preference towards houses. Fatima explains: “In apartments there is a lack of privacy since most of them are built right next to each other which poses another kind of security concern if the neighbours are not like minded. Moreover, with apartments there is this prevailing concept that they lose their resale value after a period of around 20-30 years, once the building gets old, so in that sense they might be a risky investment.” Asad Ehsan feels much the same way. “In a house you have a lawn you can sit outside. There is more sunlight. In an apartment you cannot sit outside. In a house you don't need a lift. You enter your house and that is pretty much it. In apartments, especially in a city like Lahore, where electricity is a problem and you are living on the sixth floor, so that can be a problem, where you might have to climb the stairs.” n

REAL ESTATE

OPINION

Asif Saad

Islamabad blues: why capital calling is bad business

evening do so with dishevelled and dejected looks. They return realising they had just spent a wasted day similar to many such days in the past and probably many more to come. They will often repeat the same exercise the following week and the week after, endlessly taking their woes to Islamabad in the hope of getting this or that person to listen to their cause. The action speeds up with the onset of the budget season in April and May every year. This saga has been going on forever in Pakistan and there seems to be no change in the modus operandi from one government to the other and from one company to the next. While there is a moral and business ethics question to be raised in this Having a business strategy that relies context, I would like to leave that aside in this piece and instead on favours from the government is a focus on the effectiveness and impact for the policymakers and recipe for disaster the businesses themselves of this entire merry go around. This is certainly not a good way to make policy for the government and is demeaning and wasteful for businesses. In my as anyone ever taken the 7 am PIA flight from view, Pakistan’s current rank at 136 in the World Bank’s Ease of Karachi to Islamabad? If you have, you would Doing Business global rankings, amongst many other indicators, see a line of businesspeople and corporate excan only be improved if Islamabad and businesspeople learn to ecutives holding files (or laptop bags) boarding deal with each other from a distance. the plane. Rubbing their eyes and barely being To start with, somehow Pakistan has ended up with a able to stay awake they are all going to Islamsystem which ensures that all things happen via the ministries abad to attend meetings with one ministry or the other. They and other powerful offices in Islamabad. Even though the days of board the flight in the hope that they will achieve their objective the license raj are supposedly behind us, the powers in Islamabad of making their case to someone important. behave in the same old-fashioned way. Whether it is the bureauHowever, the 7 pm return flight to Karachi actually tells the cracy, politicians or other influential functions of the state or the story of their day. Those who make the return journey the same business community itself, they all believe that solutions to their problems lie with this interface. There is nothing wrong with a ‘consultative process’ as such but when it serves no other purpose than to tick the box it is a futile exercise. Our bureaucracy has perfected the art of doing this Asif Saad – meetings are called, discussions take place, agendas and minutes are issued but hardly anything is a strategy consultant who has ever gets done. Even when decisions are taken, stakeholders who are negatively impacted will previously worked at various not accept the verdict and will continue to run after Islamabad in the hopes of a revision, failing C-level positions for national and which a legal battle will most likely follow. multinational corporations While the government is not entirely to be blamed for this, they shoulder the responsibility of having limited capacity to do proper research and planning to undertake clearly spelt out, sustainable policies and execute these without fear of one sector or another. For obvious reasons, the business community has always believed that their current and future bottom lines are linked to the favours they can obtain from Islamabad. No matter which sector they come from; energy, banking, chemicals, consumer goods, pharmaceuticals, automobiles – you name it and their business model is based on some statutory regulatory order (SRO) embedded in one of the blocks (A, B, P, Q, R, etc.) housing the various ministries at Pakistan

Secretariat in Islamabad. The problem is magnified when every individual part of an industry value chain has a different take on things but there is no one to provide a coherent perspective. Individual companies and sometimes their respective industry associations all fight to protect their interests, never realising that whatever they obtain from Islamabad today will remain vulnerable to change. It can change with a new government or a new minister or just with a different bureaucrat. Why would you then continue to invest so much time and energy in trying to ‘win’ in Islamabad?! It is sad to see this phenomenon hold true for all sectors and industries in Pakistan. It is as if everyone has given up on trying to establish a business which can stand up on its own without any support from Islamabad. I tried to wrack my brain to think of a sizable industry which does not depend on Islamabad and I only came up with the nascent IT and technology-based industry as ones being able to do so. However, this impression was quickly quashed when I saw in the media the leadership team of a recent technology success story being photographed with government advisers in Islamabad. Sadly, they have to flock to Islamabad even when their success has primarily been

outside Pakistan. Although lobbying is common in most modern economies (as promised, I have resisted the urge to delve into a moral debate on this), it is done in very different ways. In the United States and Britain lobbying is officially recognised and there are rules which need to be followed. Lobbyists or advocacy or public relations companies have to declare themselves as such. More importantly, most of the influencing is done with Congress or members of parliament (and their staff) to impact legislation which can help a business or an industry. Although far from perfect, the process at least ensures that various sides of an issue being debated in a transparent manner and decided upon by representatives of the people. Unfortunately, in Pakistan, the parliament has been sidelined and is not known to debate issues pertaining to specific industries or sectors. In my work as a strategy partner to companies, I sometimes inquire about how frequently the owners or the top management fly to Islamabad. I get strange looks until I explain the rationale and I suggest that they think about the impact a new strategy or a competent management team can make in a business which is so dependent on Islamabad. I find the younger lot

to be more open to this idea although there are a small number of truly legendary older figures in business who have learned their lessons the hard way. My advice to those who care to listen is to stay away from Islamabad as much as possible. Sure, indulge in photo ops if you must and travel to Islamabad to connect to the beautiful hills but not to venture anywhere near those ministries and power centres if you want to build a truly strong business. Focus on creating value through innovation, high-quality management teams, good governance and most of all learn to operate in competitive markets and develop consumer-centric organisations. Next time, think twice about taking that flight to attend an ‘important’ meeting in Islamabad. For the powers in Islamabad and anyone trying to work sincerely for the public, they must understand and deal with the fact that the capability set in Islamabad across all levels and functions is broken and is slowly and gradually making itself irrelevant to how the world works. One hopes that they will reflect on the country’s 136th position (in ease of doing business) and the role they have played in this and many similar constant under-achievements.

COMMENT

“conventional simply transfer If you

banking mindset to

digital banking, you will be challenged to keep loyalty of clients

Ashar Nazim CEO of Aion Digital talks digital transformation in Pakistan’s banking sector 18

By Habibullah Khan

shar Nazim is the CEO of Aion Digital one of the fastest growing Fintechs in the region. Aion Digital is a platform that helps banks go digital faster, cheaper and with certainty. It’s “digital bank in a box” approach can help augment digital capabilities of existing banks or create digital banks from scratch. As a Senior Partner at Ernst & Young, Ashar had helped transform and launch over thirty financial services institutions globally. Ashar sat down with Profit to talk about digital transformation in banking.

QA &

Our role will continue to be to work with banks and understand their growth strategies, so we can help them go digital optimally and raise their key business metrics Ashar Nazim, CEO of Aion Digital

Q: What is your evaluation of banking digital transformation in Pakistan and where should banks start? A: Digital transformation is a journey and we’re just getting started in Pakistan. We probably have some of the best bankers in the world but our banking can be more customer-centric. Right now we do not have direct SWIFT integration, outward remittances cannot be done without request, cheque truncation is not happening, you can’t fully

open a digital account remotely, and barring a few select premium branches instant issuance of credit card and cheque book is not done. Direct debit is still not happening. However, we have a central switch and central national database for identity so the building blocks for rapid digitalization are in place. The collective will is there and banks are very receptive on the digital dialogue and planning to transform themselves with agility. It’s quite an exciting time.

I feel the first step should be culture. The culture of your organization should be aligned and everyone should be pushing to make digital happen. The buy-in for digital needs to be 3D. This means it must come straight from the board, be owned and driven by the CEO and pushed down, but it must also flow from the edges where frontline staff touch customers and back through middle office and back office. Change is scary and we must recognize people who have been in good positions for 10-15 years cannot become instant cheerleaders. We must constantly communicate and evangelize digital and be mature and empathic enough to get all of them onboard even the ones who are afraid of it. This is doable as the likes DBS and BBVA, and to a lesser degree, Nordea and Deutsche have proven. Q: In your opinion, how will clients interact with their banks in the future? And what is your role? A: We will see most activities that require visits to branch go digital, including specific use cases like opening a business bank account. Aion is already offering that to Gulf Cooperation Council (GCC) banks that use our platform. Majority of banking will be done using digital channels that require a smartphone. In Tier 1 cities there will be less branches but more self-service options in branches. AI will transform banking with powerful insights that help banks make better decision faster operationally and related to market and customers. Banks of the future will be built on User Experience and lifestyle banking, giving all customer-centric digital banks a key advantage. Banks in Pakistan are finding that the right mindset, access to expertise, and ability to personalize products for customer engagement can be challenging. Aion Digital has already delivered accelerated growth in deposits, higher customer profitability and emotionally engaged customers for banks; all of this quickly and at an astonishing ROI. Our role will continue to be to work with banks and understand their growth strategies, so we can help them go digital optimally and raise their key business metrics. Q: How can banks save cost and time with digital banking? And how cam AION help in this regard? A: Aion digital has demonstrated saving cost and time to market with digital banks already. We do this with our “digital bank in a box” model which is a very cost-effective and fast way for banks to go digital. Our “digital bank in a box” has 5 key components: Digital onboarding customers and businesses

DIGITAL BANKING

in minutes not days without the need to visit a branch. It also allows for borderless banking meaning you can open a bank account in any country in the Gulf Cooperation Council area without leaving your home country. In Pakistan obviously the regulatory environment affects this end result but our technology which incorporates everything from biometrics, OCR, Video analytics for identity to MRZ reading, is ready. Open banking makes your bank customer-centric, offering your customers convenient, feature rich and personalized products. It also allows you to respond to market significantly faster than your competitors. We offer powerful integrated payment solutions that power seamless banking experiences including bill payments and QR codes. Our platform is AI-powered allowing for our customer banks to offer hyper personalize offers with greater conversions. We are also the only banking platform in the region focused on creating a digital ecosystem powered by customized customer campaigns that transform your brand and engages emotionally with Millennials and Generation Z. Q: When the bank is totally digital, how it will keep the loyalty of the clients? A: This is a good question. If you simply transfer conventional banking mindset to digital banking, you will be challenged to keep loyalty of clients and win the battle of secondary accounts. The key is to move from a product-centric mindset to a customer-centric mindset and offer products and services that seamlessly embed them into a customer’s lifestyle. For the young, half of the loyalty is convenience. Give it to them by understanding their lives and financial needs and giving them excellent customer service. With Careem, Netflix and several apps providing high levels of convenience and customer service the expectation of customers with banks have become much higher. Banks have to meet these high standards. Data helps greatly. Aion Digital is powered by AI which allows banks to offer hyper-personalized products to customers thus delighting them. Our platform also brings purpose back to banking using our unique loyalty program and inbuilt social nudges which clients have responded to very positively. Q: A lot of digital banking initiatives in Pakistan seem to not deliver intended ben-

efits. Is there a best practices roadmap or a playbook banks can use to better their odds of success? A: Look this is the part of the painful process of digitalization of any category. The central question is how can banks unlock the power of digital banking to realize the opportunities that come from this disruption. You have to be cognizant of the fact that the filters of regulation, economic conditions and domestic conditions of victory affect any global best practice. Having said that the Aion Digital “virtuous digital banking cycle” helps here. Inspired by Jeff Bezos’ flywheel that he used to explain what was powering Amazon, the cycle is a seamless business model which explains how digital banking can augment legacy banking to power the ultimate goal of digital transformation: Customer centricity

that results in growth. Digital banking combines with experience design and AI to result in better products and services which provide a better customer experience. This results in accelerated customer acquisition and cross-sells validating the investment in digital banking which then continues the core cycle. There is a secondary cycle that leads from Digital banking. This uses Open API banking to create FinTech partnerships that result in demonstrated results. You not only get better products and services, but you get to provide financial services at a lower cost allowing you to offer lower fees further powering the customer experience. n Habibullah Khan is a freelance contributor and a PR professional

DIGITAL BANKING

MBA The best

in the country, sure.

BUT IS IT ANY GOOD?

The degree comes with a steep Rs2 million price tag, the most expensive graduate education in Pakistan. But does it make up for the cost in terms of opportunities and learning experience?

BUSINESS EDUCATION

By Abdullah Niazi and Muhammad Faran Bukhari

hat would you say if someone were to tell you that in the heart of Lahore’s posh DHA, there was standing ready a group of some 60-odd young professionals brimming to storm corporate Pakistan? That over the past two years, these few dozen young men and women have undergone gladiatorial training in the discipline of business, coming out chiseled with a wide range of skills, and ready to take on the world. This is what the Lahore University of Management Sciences (LUMS) would have you believe about their flagship MBA programme, and how it takes cub professionals full of potential, and turns them into corporate wolves. At any given time, LUMS houses thousands of students. By far the largest component of this student body are undergraduates, over a thousand of whom joined the university’s ranks in just the latest admission cycle as part of the class of 2022. Along with these are a smattering of doctoral and graduate studies candidates, all coming together in the famed LUMS ecosystem. In the middle of this vast array of students from all over Pakistan pursuing different levels and degrees of education, the MBA class stands out. This year, there are only 62 of them that will graduate the intense two-year programme. The number seems paltry. The MBA programme is what made LUMS, after all. The LUMS business school, the Suleman Dawood School of Business (SDSB), first opened its doors to an MBA batch in 1986, when the university had just been conceived. But in the push to become Pakistan’s leading undergraduate institution, the MBA seems to have taken a back seat at LUMS. With only an MBA degree and a few years of experience to show for, how much exactly could 62 people do to shake up the corporate world? According to the people at LUMS, a whole lot more than one would imagine. The small batch size is a question of design, not capability they say – only the best get into LUMS, so that by the time they leave, they are the top of the line – being wooed by the market instead of desperately trying to find a place in the world of business. Yet how relevant is a LUMS MBA anymore, and how true are the claims that LUMS makes? What sets it apart from the many other MBA programmes in the country? With how much it costs and the rigour of the admission process, would a person not be better off spending a little more and going to a foreign business

school? What opportunities does it offer its graduates, and more importantly, what do its graduates offer the world? Profit takes a look.

Pakistan’s Harvard and more

“O

ne could say that LUMS is the Harvard of Pakistan, but actually that would be undermining the stature of LUMS,” says Dr Alnoor Bhimani, the recently appointed honorary dean of the Suleman Dawood School of Business (SDSB). This is a somewhat unusual statement, to say the least. The vain, self-important, Harvard-LUMS parallel is one usually drawn by students, not deans. Nearly a thousand MBA

Middling start

grads are released into the corporate world by Harvard every year while LUMS only produces a handful, which begs the question – where’s the comparison? But in the same candour, Bhimani follows up with a surprisingly sound argument. For starters, Harvard has competitors, and with Wharton [and Stanford, Chicago, and Columbia] still around, it is not indisputably the best business programme in the United States. Secondly, according to Bhimani, as an institution, LUMS has the power to affect change like no other university on the planet. LUMS, in Pakistan, supersedes the stature of Harvard simply because it is such a small organisation. With some 4,000 plus students and only 60-65 coming in for the MBA programme each year in a country with a population of 210 million, the

Steep cost

Rs1,614,768

Rs1,918,200

The average annual starting salary of a graduate of the LUMS MBA program, based on 2018 data

The total cost of two years of tuition and hostel fees for a LUMS MBA program, based on 2019 data

“One could say that LUMS is the Harvard of Pakistan, but actually that would be undermining the stature of LUMS” Dr Alnoor Bhimani, Honorary Dean of the Suleman Dawood School of Business at LUMS

impact is absolutely massive. “My view is that whatever we do here at LUMS in terms of the education we provide or in terms of some of the changes that we will talk about later on, I think those are kind of echoed and mirrored by other institutions here” says Dr Bhimani. “Changes that Harvard makes have minimal impact in the US. Changes that LUMS makes in Pakistan have a massive impact in a circular sort of sense.” The students LUMS takes in and hones are destined for the top rungs, and what LUMS inculcates in these few men and women could one day lead to thinking that changes Pakistan. But the influence goes beyond the students that will make their, and in turn, LUMS’ mark on the world. As the leading business school in Pakistan, changes that LUMS makes are quickly emulated or mirrored by other institutions. Thus, LUMS stands in a unique position, where

its actions affect more than just its students. The MBAs that leave LUMS will not only be hot on the market after graduating but will have left LUMS with a range of abilities that they can use to make a difference. For the graduating class, their LUMS education has put them in a sweet spot. But who are these graduates? Where do they come from and what have they done to find themselves in this privileged position? To be graduating with an MBA from LUMS, and in turn poised for the very best.

The best of the best

alman Rashid has a plan, and LUMS is a keystone along the way. He wants to work in the FMCG sector for five years, and then set-up his own start-up in the education sector. With an undergraduate degree in mechanical engineering, he is taking a direction few of his undergraduate class fellows will even have thought of. Standing with his fellow MBAs, Salman and the rest of the MBA batch paints an impressive picture – crisp collars, neatly tucked in shirts, easy smiles and a hint of swagger – all giving the indication of a group of people not just willing to take on the world head-on, but who have been rigorously trained to actually do it. Salman is on the Dean’s honour list at LUMS, and before joining the MBA he was making a six-figure monthly salary at the Fauji Fertilizer Company as a plant maintenance engineer. But his clarity and professional success are not unique. Mohsin Obaid was on the Dean’s honour list during his undergrad at the Lahore School Economics, after which he worked in supply chain management for AzkoNobel. After an impressive showing at his first job, he was made an offer by Nestle, but instead of sticking around there, he came to LUMS for his MBA. Shehreyar Ali started his own business during his undergrad and used it to fund his MBA. Jawad Nasir was sitting on offers from Brown, USC, and Rochester for his MBA, instead, he chose LUMS. Zain Rahman is a mechanical engineer with much to show for. He made an electric car that was showcased in the Philippines, winning Pakistan the 6th position globally. He also made

Young achievers

Middling scores

Average age of the entering class

Average GMAT scores for the LUMS MBA class of 2020

600

Pakistan’s first all-terrain wheelchair as a social project for handicapped people in rural Pakistan. He came to LUMS for a career switch from engineering to the commercial world. Mishaal Mubasher, one of the few women that are part of the programme, came to the LUMS business school with a degree in English and teaching experience at a school. She also came to LUMS for a change in career trajectory, and wants to work in a managerial position for a non-profit. Qasim Asad is a gold medalist swimmer at a national level; he came to LUMS simply to be more of an asset to the family business, which he plans on joining after graduating. For LUMS, it clearly is a case of selecting the best of the best. With an average age of 25, the LUMS MBA is mostly taken up by engineers, more than 50% of whom make up the entire batch. With an average work experience of two-and-a-half years, and a GMAT score of 600, the people admitted to the MBA programme are the academic elite of Pakistan. [Editor’s Note: That a GMAT score of 600 gets you counted as the academic elite of Pakistan is rather sad for Pakistan.] And after their two years at LUMS, they are looking at better prospects than they could have before. Many of the graduating class have already received job offers, and others are either weighing their options or have already accepted employment somewhere.

Return on investment – is it worth it?

ut the LUMS MBA comes at a cost, and with a price tag of more than Rs2 million, prospective MBAs have a lot of introspection to do about what their return on investment will be. The average salary that the batch of 2019 was getting before joining the MBA programme was around Rs 100,000. Their expectations for what they will get after graduating is not much higher, ranging from around the same amount up to a maximum expectation of Rs 200,000. With the salary forgone in the two years taken for the MBA added to the cost of the MBA, there seems to be a long road ahead until there is a basic return on investment. This also forces one to wonder, why not just spend the extra money and go to a business school in the US? LUMS does not offer any significant financial aid to its MBA applicants, and the only scholarship it offers is for anyone that manages a score of more than 700 on the GMAT – the American standardised test that is the basis for admission into LUMS. For applicants with such outstanding scores, one thinks whether or not they would be better off shooting for aid at an American school rather than being contented

BUSINESS EDUCATION

“I wanted to join my family’s business and realised that the networking potential of graduating from an esteemed institution can help me stand out from the rest. Any company you go to, any significant work you have to deal with in the business world, and you will find someone from LUMS there that will be of service to you, that is how the alumni network works” Qasim Asad, LUMS MBA, Class of 2019 with LUMS. “The GMAT score is a small element of what we consider. It is just one small variable. One small part of the equation. You know if somebody came in with a GMAT score of 780, and said well I want you to finance the whole thing, I would say let’s look at your other abilities before we do that,” explains Dr Bhimani on the LUMS scholarship question. He also claims that just a score of 780 is unlikely to mean getting a scholarship at Harvard or Stanford, and the only schools that offer such scholarships are the ones looking to increase their GMAT profiles – an approach LUMS wants to stay away from. “Besides, we are doing very well as far as GMAT scores go.” On the question of return on investment, Dr Bhimani says that one must look at the whole impact of the education, rather than just in purely economic terms. “The return on LUMS is very high, simply because a starting salary translates into huge number of possibilities. A wide alumni network. And with the AACSB now we’ll be interacting with other business schools” he says. “The pure focus on salaries vs tuition fee captures a very small element of what we offer here.” Indeed, for a lot of the people at LUMS, it isn’t just about the monetary return that an MBA from LUMS gives them. “I wanted to join my family’s business and realised that the networking potential of graduating from an esteemed institution can help me stand out from the rest,” Qasim Asad tells Profit. For him, LUMS was not a question of monetary return on investment, but of making the right connections. “Any company you go to, any significant work you have to deal with in the business world, and you will find someone from LUMS there that will be of service to you, that is how the alumni network works,” he explains. “The networking opportunities at LUMS and its brand name made me choose the university. But it has provided me with the knowledge about best practices being used around the world

today.” Similarly, for Jawad Nasir, his offers from Brown, USC, and Rochester all paled in comparison to LUMS simply because of the vast alumni network that the university has in Pakistan, and many other parts of the world. “The LUMS alumni network is second to none, present all over the world. I had other offers, but nothing can beat the return on investment that the LUMS network gives you,” he said. For others, it was not just the network but the weight that comes with the LUMS brand name. Employers in Pakistan of all sorts will give first preference to graduates from LUMS. Furqan Tariq says that in addition to the LUMS brand, having an MBA from LUMS provides a stamp of approval that is seen by corporations as something worthy of their attention.

The case study methodology

ut what is it about the LUMS MBA that commands such respect from corporations and employers? Why do the graduates of this programme pique such interest from the market? There are countless other MBA degrees on offer in the country, including from places such as IBA, but none are as prestigious or sought after as LUMS. For many of the students at LUMS, at the core of what makes its MBA programme so special is the case study methodology. Mohsin Obaid, the LSE topper who left Nestle for LUMS, says that he did not have to look anywhere else because there was nothing beyond the LUMS’ case study method. “I did not apply for any other program because LUMS is by far the best business school of Pakistan. Their case study methodology and experiential learning component makes the program practical in approach and helps speed up learning,” he says. There are different takes, of course. Furqan, for example, believes that it is the ‘DR culture’ that sets LUMS apart from other institu-

tions, but even this is an extension of the larger ‘LUMS way’ that is geared around case studies. “The usual answer is case study but I would say the DR (discussion room) culture – it’s closely linked to cases but the DRs play a role in bringing together people and inculcating that culture of working together to achieve goals by discussing and listening. It can be tough but it mimics the work environment. And for me it was a source of friendships I will treasure for the rest of my life.” For LUMS, the case study is a defining feature. During the two years at LUMS, students work on over 500 cases, and once a case is presented in class, the students become the decision makers in various business management scenarios. They are divided into study groups who work in a Discussion Room prior to joining their peers in the classroom. By the time they return, they are expected to have analysed the situation according to the given limited information, identified problems and issues, and defined alternatives amongst the study group. After this they are supposed to bring thought framework to the class for further exchange of ideas on a larger scale led by the professor, and then draw conclusions and recommend viable solutions. These rapid, action packed, often tense and high intensity exercises give students the ability to think on their feet and become risk takers and gain crucial practical experience with no real world consequences but their own grades. To say that the case study method was the foundation on which LUMS was established would not be inaccurate. “The way this school was founded was drawn on lessons from the University of Western Ontario and Harvard University which used the case study approach. And alliances were created and these universities came in and they set up a certain set of principles on which we have operated. And we have maintained that and today in Asia we have

“I did not apply for any other program because LUMS is by far the best business school of Pakistan. Their case study methodology and experiential learning component makes the program practical in approach and helps speed up learning” Mohsin Obaid, LUMS MBA, Class of 2019 the biggest bank of case studies anywhere” Dr Bhimani explains. With more than 600 cases in their reserves, LUMS does indeed boast the largest bank of case studies in all of Asia. But for all the hype and the glowing testimonials, many of the students grumbled off the record that the case study method, while brilliant, was not as up to date as it could be, and that there remained room for improvement. Off-the record, some of the more seasoned faculty also felt that the case study methodology was losing its importance in LUMS. But if the significance of the case study is waning, does that mean LUMS is losing its essence? Is the university taking for granted the very thing that gave it its edge? For Mishaal Mubasher, the earlier mentioned English undergrad and LGS teacher trying to change her career trajectory, not only was the case study method is one of the things that brought her to LUMS, and sitting through lectures from professors such as Dr Arif Rana, Dr Ehsan and Dr Jamshed, were some of the best experiences of her life. Over the past few years, LUMS has lost some these veteran instructors. Dr Imran Ali, and Arif Rana, - longstanding pillars of the LUMS faculty that were integral to discovering the formula that has made LUMS so successful, and stalwarts of the case study methodology. Dr Ehsan ul Haque, another giant of the SDSB faculty and the case study method, also parted ways with LUMS. While he has been rehired, it seems that his importance has waned, with fewer courses on his plate and a more honourary role at the university. Dr Jamshed, while still an active SDSB legend, has also been taking some heat from campus activists and the university’s extra-curricular life. Some also believe that while LUMS is the best Pakistan has to offer and has seen a meteoric rise, it seems to have become stagnant. The university has achieved great heights, and the credit for that goes to these founding professors and the university. But there was a time when LUMS was embroiled in a fierce competition with IBA, something that kept pushing it to improve. But ever since IBA has lost much of its

vigour, LUMS too seems to have lost some of its former hunger to be the best. Could this be complacency? LUMS might be the best in Pakistan, but could its current position have more to do with the failure of its rivals than with its own success? Not only has LUMS lost these old war-horses, their replacements have been of a different ilk. Dr Bihamani claims that there has been an influx of a huge number of PhDs coming back to the country in the past decade, and this has meant LUMS has had to change its orientation. “We wanted to expand management education, so we hired a lot of these PhDs. In order to attract PhDs who had chosen an academic career path, they of course need to publish, so to carry on an intense focus on teaching would not have met their needs. From then on, teaching counted for a lot, but scholars wanted to build their research profiles, and so the mood here began to change, and with that there was a change in the criteria for promotions. Since then, SDSB has instituted a regime whereby you could actually thrive by publishing in top journals.” With this introduction of research oriented faculty and exodus of the builders of the LUMS methodology, it is easy enough to wonder whether the case study methodology was facing a slow death. Profit set to find out how many case studies LUMS had produced in recent years - and whether the number of cases had fallen since the new research oriented hirings in the faculty. Despite multiple attempts to get these numbers, and repeated assurances from LUMS, no figures were provided, making one wonder just how lax the university had gotten in this department. Dr Bhimani also only gave cursory answers, unable to deny the shift in focus, but also trying to defend it at the same time. “I think at a time to teach cases you need to have outstanding teachers. We are actually sort of the beneficiaries of the bad fortune of not having been able to attract intensely research oriented scholars. It was pretty much outstanding teachers who were then taught how to teach using cases and that has remained our forte for a very

long period of time.” And as the Dean explains, LUMS is just trying to keep up with the times, because even the case study method has its set-backs. According to him, the case study method is almost exclusively geared towards providing managerial instruction – something that LUMS was founded on. But now, the business school is looking towards finding its footing in more theoretical ground as well. “The secret formula changes, it never remains the same. The case study is core to SDSB, but it cannot be the only source of sustenance for managerial education. All the case-based schools are also increasing the range of teaching approaches” Bhimani tells Profit. The case study method might be what LUMS was built on and still is its primary attraction, but it is not all that LUMS has to offer as it tries to evolve with the times. The most recent example is their newfound focus on experiential learning, in which students are given the opportunity to apply their academic learning in a real business context outside of their day-to-day learning environment. Another recent innovation is the global module, the idea of which is to send students abroad. “We have done it in Silicon Valley, for some time where they go to Google, they go to Facebook and they might attend some courses at Berkeley and they come back really charged because they have had a certain amount of LUMS MBA base education and then they are seeing very different things which to that,” the dean explains. “So, they come back with a fire in their belly for what it is that they can do. Pakistan desperately needs to generate greater entrepreneurial drive. That module exposes them to possibilities that they just do not see here.”

The death of entrepreneurship?

ut what do these techniques breed? For sure, LUMS is providing its MBAs with priceless managerial knowledge, skills and most importantly experience,

BUSINESS EDUCATION

but is that all LUMS is producing? Troops upon troops of managers to handle already established businesses? With job offers knocking at the doors of about-to-graduate MBAs, many of these students simply cannot pass up the opportunity for jobs in big companies such as McKinsey. Most of the batch we interviewed said that their dream job was to one day have their own company, but none of them wanted to work on this dream right off the bat. Work for five years in this industry and make enough to strike out on your own. Have a business at the end of this many years. Open up a small thing on the side and see how it goes before devoting yourself to it fully. In such bright young minds, there was no doubt alive and roaring the entrepreneurial fire – but had their two years at LUMS trained them to be prudent managers and drained them of the daredevil instincts of entrepreneurs? “My view is that you are right to a great degree” Dr Bhimani admits. “LUMS has been seen as a funnel into a great employment situations. Low hanging fruits are what graduates often aim for, and jobs provide a good income right away.” “So even if you have entrepreneurial intentions when you come in, you say thanks be to God I have got an offer from McKinsey or Bain. You think, I cannot turn down the salary that they are offering, so maybe I will come back to entrepreneurship one day and maybe such individuals do.” But the problem is one that LUMS intends on tackling head on. They already have one of the five National Incubation Centers (NIC) stationed on campus, which is all set and running, as well as a huge entrepreneurship center that the university wants to set-up. The scale of this center would be large enough that the issue they are facing for this project is a lack of space. “My view is that ultimately entrepreneurship powers the economy of any nation and there is not enough of it here. We are entering a world where technology allows us to have very low barriers to entry in startups,” the dean explains. “The Pakistanis that I meet who are entrepreneurially motivated have ideas that you don’t see anywhere else because they are a product of their context. There are things about Pakistan which are so unique that I cannot help but think that we are going to see entrepreneurs go a very, very long way, but it won’t happen unless we have that educational infrastructure that focuses on entrepreneurship.”

The place to be?

F 28

or a young professional with nothing but ambition and a few years of experience, making the decision to pursue an MBA has one goal – improving your

Across the border, the IIM lays a claim on the business education crown of Asia

n India, the network of Indian Institutes of Management (IIM) stands parallel to the country’s famed Indian Institute of Technology (IIT) network. Initiated by Jawaharlal Nehru himself, there are currently over 20 IIMs all over India. The flagship degree of the institutes have been the two year Postgraduate Diplomas in Management (PGDM) - an equivalent of the MBA. Recently, IIMs have also branched out into providing MBAs. Much like LUMS, IIM follows the case study methodology. Despite being older and much vaster than LUMS, they have not managed to foster as impressive a bank of case studies as LUMS has. However, IIM is still a major success story, especially institutions like IIM Ahmedabad, which has taken its place as a business institute of global standing. One of the factors in which IIM has had more success than LUMS is with global rankings. The Financial Times has ranked IIM Ahmedabad #16 in its Masters in Management Ranking 2016 and #29 in its Global MBA Ranking 2017. The QS Global 250 MBA Rankings 2018 ranked it 49 in the world and 7th in Asia, Australia and New Zealand. In comparison, LUMS has had a tumultuous relationship with rankings. It was raked 111th in Asia and among the top 700 in the world. It is also ranked by QS as among the top 300 universities globally for business. On a national level, QS has ranked LUMS as the top varsity in Pakistan. However, the university has often been snubbed by Pakistan’s Higher Education Commission repeatedly, not even making it to the rankings up until a couple of years ago. Why has LUMS not been able to achieve this kind of success on global rankings? According to Dr Bihamani, the honourary dean of SDSB, the reason LUMS is not ranked as the top business institute in Asia is because the rankings are flawed. “The first thing that one has to understand is that these are rankings that are primarily developed in the west, my view is that those rankings are immensely flawed, because they are applied on a global sort of set of constituents, not taking into consideration the problems that are very localised within certain countries” he says.

life. As most of the MBA candidates we spoke to said, whether it was for a career shift or to have better opportunities through networking and practical knowledge and skills, the MBA was their way to step up in the world. For someone making the decision to do an MBA, the natural goal might be looking towards Harvard and INSEAD – schools that command respect and grant prestige. Yet for anyone wanting to make their way in Pakistan, LUMS is not only definitely on the list, but might even be the best bet. “LUMS basically provides a gateway to understanding everything about business in Pakistan as well as infusing the education provided here with ideas that come from the globe over. that is uncontested,” Bhimani says. Despite him having some vested interest as the Dean of SDSB, one feels that he speaks in earnest. LUMS gives corporate hopefuls an insight into the world of Pakistani business that no foreign degree could ever impart. It is, quite simply, the best training camp for people wanting to make it in corporate Pakistan. And as Bhimani puts it, “LUMS is where you need to be.” Just recently, LUMS hit a new milestone when it was accredited by the Association

to Advance Collegiate Schools of Business (AACSB), one of only 850 schools globally to be accredited – an impressive achievement to say the least, but one that comes from decades of commitment to a long-standing methodology. The accreditation reflects the history of LUMS - it was first proposed nearly a decade ago, around the time when LUMS was first making its shift towards a research oriented faculty. A formal application to the AACSB was made six years ago. LUMS is beyond any doubt the best business education Pakistan has to offer, and what this accreditation proves is that LUMS also has the muscle to be an institution of international standing. What is to be seen is whether the current model is sustainable. The LUMS that applied to the AACSB was clearly a university worth the label, but when the Association’s reviewers inevitably roll in five years later, will LUMS still be at the same perch, or will it have to go through the embarrassing spectacle of being stripped of the accreditation? “Very major schools have seen their AACSB accreditation come under threat. So it has happened before. Excellence has to be continually engendered” says Dr Bihamani. The past may have gotten it where it is now, but LUMS has some introspection to do if it wants to maintain its stature.

BUSINESS EDUCATION

OPINION

Nadeemul Haque

Why are we subsidizing car-use?

high-rise public transport that impedes walking and biking while destroying the city skyline is the preferred alternative for our leaders. For decades, I have been writing that we need to follow the rest of the world and rethink cars in cities. What we need in cities is mobility without traffic congestion that wastes time and pollutes the environment. Mobility is also for all and not just cars. When cities grow in size and people and their activities crowd into dense neighborhoods, cars hinder mobility rather than enhance it. Space for cars in the form of roads and parking is never enough as density increases. hen I write about going high, everyone responds, “what Large cities have struggled with the growth of people and cars and have about parking?” My response “we don’t need parking!” reached the conclusion that the answer cannot be continually making more is met with shock. space for cars. Congestion seems to increase even as roads are expanded and We are making cities for cars. There was a time people underpasses and overpasses are developed. Efforts to increase traffic flow walked or biked in most of our cities. Since then an obsession with often come to naught after a while despite large expenditures of car infracars has widened roads to huge urban highways that are impossible structure. Pakistan has some of the largest cities in the world and all of them to cross, an abundance of flyovers and underpasses for signal-free are struggling to cope with cars even as a huge housing shortage persists. corridors has made biking and walking impossible. Not to mention The largest item in the development budget of all levels of government is that all sidewalks are eliminated and there are no bike lanes. Even road-building. worse bikers and walkers are required to walk or bike 3 floors up Most large cities have now accepted the idea that for equity in mobility to cross a road. In one mile in Lahore, I had to go up three of those as well as faster mobility within a city, cars have to be limited. The thinking overhead road crossings. It was a quite an exercise which would goes something like this. In the city the cheapest and healthiest forms of making it impossible for all but the fittest to use this city for walktransport are walking and bicycling. The next cheapest form of transport is ing or biking. the elevator as people move in the neighborhood of high-rise buildings. Yet our quest in Pakistan remains signal free corridors, wider Linking walking, biking and elevators to transit systems that connect and wider roads, flyovers and underpasses to facilitate faster and dense centers of flats, commerce, work, education and entertainment is now faster cars. Bear in mind in a city like Lahore with a population of seen to be the approach to a healthy and nurturing city life. over 10 million there are about 300,000 cars. And all this effort is for But then what about cars? Cars are a luxury and not a necessity as our them. planners seem to think. They take a up a huge amount of space that otherwise Even the public transport that is being built is on platforms could be used for human activity. It is estimated that one car takes the space to provide more room for cars. Pedestrians have to walk up three of about 100 pedestrians when you consider the space that must be kept free floors after dodging cars in very wide signal-free corridors. The ugly in front back. In that space 15–20 bicycles can be operated. A bus with a about 80–100 passengers takes about the space of 3 cars. Most major cities have begun to price the use of cars to curtail its use. This is done as follows. n Meaningful metered parking charges for use of appropriately designated parking spaces. n F ast track lanes: In dedicated lanes, they can go faster but at a price. They can even be charged for every Nadeemul Haque mile they use dedicated fast lanes. is an economist and the n Congestion charges to enter and operate in a city center — the denser more commercial parts of the city. former Deputy Chairman of Technology allows such charges to be collected very cheaply through mobile phones. Well-planned the Planning Commission of use of charges rationalizes car use while encouraging other forms of transport. Space on roads will easily be Pakistan, and the former Vice freed up for: Chancellor of the Pakistan n Paths for pedestrians and cyclists. Institute of Development n Provide more dedicated bus routes without building elevated tracks. Economics. He previously n Provide space for street commerce with kiosks for poor entrepreneurship. worked for decades at the With this little tweak in policy we could have better cities and provide cheaper more people friendly International Monetary Fund. metro buses; provide people with more choices of transport such as walking and bicycling. No need for ugly elevated tracks and flyovers — expensive city dividers. If done right this will be a significant source of revenue for the city.

COMMENT

By Farooq Tirmizi

n Pakistan, we are not used to the words “fast” and “efficient” being used with respect to anything our government does. Which is why when it does so, it is an absolute treat and is newsworthy on its own. The policy in question is the online visa policy, introduced by the government earlier this year, and one that has already been used by thousands of people with ease and success. What makes this remarkable is not just that the policy works, but that the government formulated, planned, and executed it all within a matter of months and that it is – broadly speaking – working as intended. Here is a timeline of how it happened: In December 2018, Abdul Razzak Dawood, Advisor to the Prime Minister on Commerce and Investment, announced that the government was considering a new policy that would ease visa restrictions and make it easier for foreign travelers to apply for visas to visit Pakistan. The policy was presented to the prime minister in January 2019, and approved almost immediately, with minor modifications taking place in February. On March 14, 2019, just a few weeks after its existence was approved, Prime Minister Imran Khan formally inaugurated Pakistan’s online visa application system. Within the next two months, the system has already been used by nearly 3,000 people and appears to largely be working well.

Why a new visa system is necessary

f you have seen any of those articles about how Pakistan has among the least “powerful” passports in the world, you may have also seen the opposite of those stories: how passports of countries like Germany, the United Kingdom, the United States, and Canada are among the most ‘powerful’ in the world,

VISA-FREE ACCESS

The number of countries whose citizens are now allowed to enter Pakistan as tourists with minimal documentation requirements and on just 48 hours’ notice

allowing their bearers the right to travel without a visa to over 170 countries each. Now think about the issue from the perspective of the government of Pakistan: the citizens of those countries tend to among the richest in the world, on average, and hence the ones who are most likely to spend the most amount of money when they do come to Pakistan. Why would they choose to come to Pakistan when there are, for them, over 170 other countries they could go to without the hassle of a visa? In order to make Pakistan more accessible to the global tourist public, the country needs to become accessible without a visa to a large section of the global population. And that is precisely what the current policy is meant to achieve. Almost overnight, Pakistan has gone from being one of the most difficult countries in the world to travel to in terms of legal documentation to being among those that are significantly easier for the vast majority of the world. For the citizens of 50 countries, it is now possible to travel to Pakistan as a tourist on 48 hours’ notice. They no longer need to apply for visas, but instead simply fill out a relatively simple and straightforward online form which serves the purpose of telling the government of Pakistan of their intent of visiting the country. This category of countries includes most countries in Western Europe and the Gulf Arab states, as well as a few countries in Latin America and Africa. Oddly enough, it does not include the United States or Britain. (Yes, it is probably because of the Raymond Davis episode.) For business travelers, there is a consider ably longer list of 95 countries whose citizens can travel to Pakistan with minimal paperwork. That list includes all countries in North America, most countries in South America, nearly

BUSINESS TRAVEL

The number of countries whose citizens are now allowed to enter Pakistan on business with minimal documentation requirements and on just 48 hours’ notice

all of Europe and the Middle East, almost all of East Asia, and about one-third of Africa. And the citizens of all but 14 countries (including most countries in South Asia, such as Afghanistan and India) can apply for a visa online using a relatively straightforward application process.

How the system works

here is a clear hierarchy of countries for which Pakistan has made travel to the country easier, and the documentation required is incrementally more difficult for every country outside that inner circle. The inner circle is obviously that list of 50 countries that get what the government is calling “visa on arrival” although it requires a little more documentation than a simple visa on arrival. Citizens of these countries are required to upload a JPG scan of their passport, photograph, and their hotel or tour booking. That is it. Once they upload it, the government of Pakistan is promising that they will receive a response within 48 hours, and it is usually an approval. If one is not from these 50 countries, the process is the same, except that the government promises a response within 7 to 10 business days rather than 48 hours. I recently invited several of my friends – who are mostly US citizens – to visit Pakistan. Their experiences in the application process suggest that the time it takes to process an application can vary somewhat, but does not take any more than the 10 business days that the government promises. For instance, for my friends who applied at the Embassy of Pakistan in Washington DC, the process took approximately 7-9 days for most people, though one person was able to get it in less than two days. The Consulate of Pakistan in Los Angeles was considerably faster,

EVERYONE ONBOARD

175

The number of countries whose citizens can apply for a visa online and expect to get a response from the government within 10 business days without having to send in their passport to a consulate or embassy

TRAVEL AND LEISURE

getting a visa to my friend within 48 hours of applying, and at least part of those 48 hours were on a public holiday in the United States. I had issued all of my friends invitation letters, notorised on stamp paper, which they scanned and uploaded into the online visa application system run by the National Database and Registration Authority (NADRA). They also uploaded scans of their passports, and photographs. For their passport scans, most of the applicants used their phones to scan their passports. And for their photographs, they simply took selfies from their cellphones against relatively plain walls. At no point did anyone from NADRA or the embassy create a fuss about the documents they uploaded. Crucially, at no point did they need to send in their passports to the Embassy or Consulate. For people who are used to having their passports stamped on arrival, they are not used to the idea of not having possession of their passports for several days or weeks to get a visa, and hence this feature of the new process has been particularly attractive for them. “I applied using the online system,” said one US citizen who applied for a Pakistani visa in May. “And they sent an e-mail when it was done, telling me to log back into [online] account and download the visa letter. The visa letter has a QR code on its and you just need to bring it with you. You don’t have to go to a consulate without your passport at all. You can keep the passport in your own possession the whole time.” “Seriously, the best visa process I’ve been through,” she said, comparing her experience applying for a Pakistani visa to other countries she has traveled to. “I e-mailed the consulate asking questions and they were insanely helpful and even dug up my application, told me everything was in order, and said I should receive an approval soon.”

How and why the policy is succeeding

t is heartwarming to be able to host my friends in Pakistan and to know that – far from being a pain – my government has been welcoming to them. The incredible

hospitality that is the hallmark of Pakistani culture may finally be seeping into how our government treats visitors as well. But the reasons for the success of this policy need to be examined in a little more detail: why did this policy succeed while others that the government has tried have had far less success? There are two key reasons why this is so: Firstly, this is a policy that involves the government changing its own internal policies, which is generally easier to do than other policies that involve the government seeking to induce a specific set of behaviour from other parties. It is simply easier to get this right than, say, fixing the massive mess that is the country’s tax policy. Secondly, and most crucially, the task of implementing this policy was not given to the Civil Service of Pakistan. Instead, it went to NADRA, which – because it is not part of the regular civil service – has the luxury of being able to hire highly talented individuals who are able to take a simple policy and implement it within a matter of weeks rather than getting mired in months and years of red tape. NADRA’s efficiency is proof that Dr Ishrat Husain’s attempts to reform the civil service are absolutely necessary. Husain’s central thesis is one that has been proposed by economists for several decades now: the civil service needs to be much more flexible about letting enter and exit government service so as to allow talented people from the private sector to serve in the government and then leave to resume their private sector careers. While NADRA is technically part of the Ministry of Interior, which handles all matters relating to immigration and is also responsible for passport issuances, to get a job at NADRA, one does not need to pass the Civil Superior Services (CSS) examination. One also does not need to be a government lifer: you can work at NADRA one year and go off and do something else the next. Conversely, you could be working at an IT company one day and apply for and get a job at NADRA the next. The flexibility means that the level of talent at NADRA is comparable to a well-paying private sector organisation. Hence, NADRA

The task of implementing this policy was not given to the Civil Service of Pakistan. Instead, it went to NADRA, which – because it is not part of the regular civil service – has the luxury of being able to hire highly talented individuals who are able to take a simple policy and implement it within a matter of weeks rather than getting mired in months and years of red tape 36

“I applied using the online system. And they sent an e-mail when it was done, telling me to log back into [online] account and download the visa letter. The visa letter has a QR code on its and you just need to bring it with you. You don’t have to go to a consulate without your passport at all. You can keep the passport in your own possession the whole time.” One recent visa application from the United States works better than a regular government organisation. And this is not simply a case of NADRA, but also other non-civil service organisations. The best economic minds in Pakistan who are on the government’s payroll do not work at the Finance Ministry or the Economic Affairs Division but the State Bank of Pakistan, an autonomous institution which is far more flexible about its ability to hire people from the private sector at any stage of their careers. And while they are not as independent and powerful as they need to be, the regulators at the Securities and Exchanges Commission of Pakistan (SECP) and the Competition Commission of Pakistan (CCP) tend to be better at their jobs and somewhat more likely to bring enforcement actions against entities they regulate than the civil service-dominated Oil and Gas Regulatory Authority (OGRA) or the National Electric Power Regulatory Authority (NEPRA). This is not to suggest, of course, that the Civil Service of Pakistan should not exist, merely that it should not be a complete monopoly on senior government jobs. People who treat their government jobs as part of their career rather than an exercise in political empire-building are more likely to focus on actually achieving the government’s public service goals rather than increasing their own power base. n

TRAVEL AND LEISURE

By Bilal Hussain

t is a story more familiar in the popular imagination as having played out on the campuses of Stanford or Harvard in the United States: a few smart, curious, driven young students get together in a dorm room and create a product that becomes the foundation of a major tech company. Except the dorm room in this story is at the Lahore University of Management Sciences. And the startup in question is FindMyAdventure â&#x20AC;&#x201C; Pakistanâ&#x20AC;&#x2122;s sole tourism market-place, which connects vendors and tour operators with tourists.

The idea for creating the company first came to CEO Komail Naqvi, who used to lead universityâ&#x20AC;&#x2122;s official excursion party. It was 2016, and the first idea the five founding members Husnain Habib Malik, Khawaja Raza Abbas, Komail Naqvi, Shozab Naqvi and Syed Haider Raza thought about doing was to start their own tour operating, but they quickly came to the realization that a tour operator on its own is not a scalable business. Instead, they decided to establish a marketplace for tour operators, giving options to tourists from a much larger menu of both operators and destinations. The idea has been a relatively quick success, with the company already earning

revenue from three main sources: a percentage of revenue from tour operators when they are able to get referrals from the website, directly selling customized tourism packages, and through facilitating B2B clients. Since its founding in 2016, three of the five founding members are now earning their livelihood entirely from the startup, which has been making them more money than had the three of them been working for the banks or multinational companies like Procter and Gamble. And meanwhile, the company has attracted capital from foreign investors as well as the United States Agency for International Development (USAID).

“We are in the initial phase [of launching our nationwide Guides program] and it has been very satisfactory experience so far. [As a result], I was among only five people from Pakistan, who were selected to attend Alibaba’s entrepreneur program” Komail Naqvi, CEO of Findmyadventure

Overcoming the security factor

ccording to the World Trade Organization (WTO), international tourism is a bigger business than the global trade in oil, food, or automobiles. Tourism has become one of the major players in international commerce and represents at the same time one of the main income sources for many developing countries. This growth goes hand in hand with increasing diversification and competition among destinations. Unfortunately for Pakistan, the security situation in the country has not let it develop a robust tourism industry, though there are also other reasons as to why there are so few tourists in the country. Fortunately, the improving security situation and, more importantly, the perception about security in the country has increased tourism in Pakistan three-fold in the last few years, says Husnain Habib Malik. He is right: as recently as 2013, there were just 566,000 foreign tourists in Pakistan. In 2019, the World Travel and Tourism Council estimates Pakistan will get 1.4 million tourists from outside the country. About half of those come from Britain, the United States, and Canada, with over one-third coming from Britain alone. (Now you know why British Airways is resuming direct flights between London and Islamabad.) And those tourists are beginning to generate serious economic value for the country. The total value of the spending by foreign tourists within Pakistan is expected to exceed $1 billion this year. The growth is beginning to result in much more business for tour operators in the country. Rocket Tourism’s Fahd Vohra said that last year, his company sent 150 people to the Northern Areas and this year, he estimates that the number will be roughly 300 people. However, Vohra said that rupee devaluation can be one of the reason as well for increase in domestic tourism as people may

have skipped their trips to places like Thailand and have opted for local tourist destinations. Meanwhile, Josh Tours took almost three times the number of tourists it took to New Years’ Night to Kund Malir in 2018 as compared to the tourists it took on the same event in 2017.

Carving a niche in tourism

LUMS graduate and a former banker, Malik is one of the co-founders of FindMyAdventure, which has entertained over 8,000 tourists in less than three years so far since its inception in 2016. The startup has so far generated more than $1.2 million in gross revenue in its two and half years of operations. Revenue streams are through retail trip bookings and corporate sales. The startup aspires to become a one-window solution for corporate clients. “The industry has great potential as there are a lot of places, which are yet to be explored properly. More accurately, the industry in Pakistan is yet to fully develop so yes there is great potential. We have a lot of places from beaches to mountains. Pakistan has great potential and almost have all the ingredients to become a successful tourist destination,” Husnain said. FindMyAdventure was awarded USAID’s Small and Medium Enterprise Activity and Innovation Grant in recognition of its efforts to improve livelihoods and socio-cultural vibrancy in Pakistan in Pakistan last year. The funds it received from USAID has helped them launch their pilot Guides Program and now they have 30 guides in the country. However, the startup wants to increase the number of guides and the vision is to have a guide at all tourist destinations in the country. “We are in the initial phase and it has been very satisfactory experience so far. I was among only five people from Pakistan, who were selected to attend Alibaba’s entrepre-

neur program,” Komail said. Alibaba e-founder fellowship was a 14day learning intensive fellowship structured around the formation of Alibaba and the tech ecosystem of China. It is designed to help entrepreneurs from other countries in Asia learn and adapt their techniques. FindMyAdventure started off with a 6% net revenue margin in 2016, going up to 8% in 2017 and 10% in 2018. Revenue generated from gross bookings has multiplied significantly over the span of three years, starting from around $100,000 in 2016 to over $1,000,000. At the moment, FindMyAdventure have over 100 vendors. Recently, the startup has raised over $100,000 in funding from a Pakistani Angel investor based in the Middle East. The investor comes from a vast experience in private equity in the Middle East. The travel startup allows individuals and groups to choose from planned itineraries or customized trips, along with offering accommodation, transport, and convenient payment options in a one-window operation.

The clientele

indMyAdventure has also catered foreign tourists. Komail Naqvi says that one out of every 10 clients are foreigners, and they contribute 7% of the company’s revenue in 2018. The startup counts local corporate clients, who may have several persons included for one trip, as a single client. That difference in record-keeping is what accounts for the difference in the share of foreign tourists by number of persons and total spending. Yet despite accounting for a small fraction of overall tourist volume for the company, they tend to account for the majority of certain types of tours: for instance, 98% of the people who attempt to climb K2 are foreign tourists. According to the financial records of of FindMyAdventure, made available to Profit,

TRAVEL AND LEISURE

60% of tourists that FindMyAdventure has catered to booked tours in the North region, 35% in the coastal regions, and 5% for religious tourism.

Global players entering the industry

part from startups like FindMyAdventure, large international tourism companies have also started to focus on Pakistan’s underperforming tourism industry. The London-based International Hospitality Investment Group (IHIG) has recently started its operations in Pakistan with a different brand name – Happily, offering what they claim is a cost-effective vacation home ownership system in Pakistan. Happily CEO Noorul Asif said that IHIG has already acquired two hotels and upgraded facilities with modern amenities in Shogran and Bhurban. IHIG will be investing $118 million in the tourism industry of Pakistan with focus on mainly providing accommodation. “We believe that the best time a family spends together is during vacations. We want to make then an experience of a lifetime,” Noorul Asif said. However, Happily operates on a different model from hotels. It offers a membership fee that allows families to share the ownership of vacation properties with other families. A person selects an offering for one, two or three families. They also have to choose from three seasons: peak (red), mild (white) and off season (blue), with pricing varied for the time of the year. The package allows the person to have an ownership stake in the vacation home of their choice, which allows them to spend a week or two per year over a period of 15 or 25 years. However, one would not be restricted to vacationing in that one spot for the next few decades. Owners of Happily’s shared vacation homes can also exchange their week with IHIG’s partner hotels in 80 countries. “If you want to exchange your week with a four-star in Dubai, you only have to pay a nominal amount of around 200$ for a week in Dubai. According to my research, you will have to pay otherwise $200 for one-day stay at a comparable hotel,” a sales representative said. Asif said that shared vacation homes and exchanges are common throughout the world but Happily has brought the concept to Pakistan for the first time. Bookit 247 is another such company that is looking to tap Pakistan’s tourism industry. The company is looking to tap Pakistan market by facilitating foreign tourists to book hotel rooms through their online portal, bookit247. com.

“We believe that the best time a family spends together is during vacations. We want to make then an experience of a lifetime” Noorul Asif, CEO of Happily “The company will be starting its operations in next few months in Pakistan. The tourism industry has been growing so that certainly has enticed us to start our operations for foreigners touring Pakistan as well,” Bookit 247 Business Development Manager Wasif Arshad said. The company has been facilitating Pakistanis who travel abroad by helping them find hotels online. The company is a joint venture between Treet Corporation’s Syed Sheryar Ali and Netsol Technology’s Omar Shahab Ghauri. At the moment, Bookit 247 is signing agreements with different hotels in Pakistan, ahead of starting its operations in the country. Government policy towards tourism The industry has reasons to rejoice as the present government is seemingly taking interest in the tourism sector too. Prime Minister Imran Khan earlier this year has approved National Tourism Coordination Board (NTCB), led by his Special Assistant on overseas Pakistanis Zulfi Bukhari as acting chairman. He has now been made chairman of Pakistan Tourism Development Corporation (PTDC). The board will coordinate with national and international organizations to boost the tourism sector in the country. The board would also work for promotion and marketing of tourism spots and would provide a platform to devise a comprehensive strategy on tourism. NTCB would also provide technical assistance to the provinces in the field of the tourism sector. The Imran Khan Administration has been focused on promoting tourism in Pakistan and has also taken several steps to facilitate travelers. The government has relaxed the visa policy and announced the offering of online visas to visitors from 175 countries last year. The government has also taken keen interest in promoting religious tourism too. Prime Minister Imran Khan laid the foundation stone of the Kartarpur crossing last year that would give opportunity to Sikh pilgrims from India to visit their sacred sites in Pakistan. The prime minister has also sought to help create sufficient infrastructure to facilitate tourists.

The challenges that remain

owever, despite government’s seemingly keen interest in helping the tourism industry, there is a long way to go for the industry to reach its true potential in the country. Erum Khan, who heads Odyssey Travel Company, said that Pakistan has all the ingredients to have a potential thriving tourism industry but the present infrastructure is either of por quality or nonexistent to expect a turnaround from the industry. She said that government can facilitate the industry by e-visa or on arrival visa for tourists but it will not increase the capacity of the country to host tourists. There is a lack of guest houses and hotels on the way to tour destinations proper in the north. “One has to travel for around 18 hours to reach tourists in Hunza and Skardu. I can tell you there are not enough guest houses on the way. Some people want to relax and can’t travel for so long in one go,” she said. Erum says that the industry could help resolve Pakistan’s chronic foreign exchange problem if the industry is not only promoted but hard work is also done. Infrastructure has to be established to accommodate inflow of tourists. “Otherwise, the industry has not been established for seven decades. If the bull is not taken by the horn then nothing would happen for another fifty years.” Director Marketing of IHIG Group’s initiative in Pakistan, Zohaib Hassan said that the company has been facing challenges to convince people in Pakistan that tourism in the country can also be a big thing. “Our agriculture yield is dropping and almost every sector is struggling. People need to understand the tourism against his backdrop. It can play a big role for us. Look at Dubai. It’s completely sand and one can see where they stand. How their tourism industry has facilitated overall economy. We also have a lot of beaches and mountainous regions. We must exploit these natural offering in the country,” he said. n

TRAVEL AND LEISURE