Profit E-Magazine Issue 44

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10 Weekly Roundup 16 Is Open Skies really causing trouble for Pakistani airlines?

22 22 Naya minister, meet purani ministry 30 An eye for detail

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36 Facebook got clobbered, why Mark Zuckerberg won’t care 40 Can drip irrigation eradicate Pakistan’s water crisis and food insecurity?

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Managing Editor: Babar Nizami l Joint Editor: Yousaf Nizami l Contributing Editor: Farooq Tirmizi l Business Editor: Agha Akbar Reporters: Farooq Baloch l Kazim Alam l Aisha Arshad l Arshad Hussain l Muhammad Faran l Syeda Masooma l Ghulam Abbass l Ahmad Ahmadani l Shehzad Paracha 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 Illustrator: ZEB l Photographers: Zubair Mehfooz & Imran Gillani lPublishing Editor: Arif Nizami l Business, Economic & Financial news by 'Pakistan Today' Contact: profit@pakistantoday.com.pk

CONTENTS

welcome

WHAT WILL PTI’S ECONOMIC POLICY LOOK LIKE So, it happened at last. The Pakistan Tehreek-e-Insaf, after 22 years of struggle, has finally managed to win an election, albeit with more than just a little bit of help.

And while an unfair playing field is never something that can be completely ignored, the fact of the matter is that Pakistanis of good will must come together and support the government in matters that they agree with, and hold them accountable when they err.

For this issue of Profit, we return to a theme we have previously explored at only a theoretical level: what exactly will economic policy under a PTI government look like. On this front, we are somewhat assured that the likely nominee for finance minister – Asad Umar – is an elected member of the National Assembly and one who has had the confidence of the incoming prime minister for at least the last six years, if not more.

Yet, given the fact the Prime Minister-elect is given to speaking in broad principles, for us to understand where the PTI-led government will take the Pakistani economy requires us to understand the words, experiences, and personal philosophy of Asad Umar in more detail than those of Imran Khan. That is what we have endeavoured to do here, and in as fair a manner as possible. We will not repeat ourselves in this editorial, except to say that we believe that Mr Umar has his work cut out for him, and that he may find that his private sector experience will be of little use

8

to him in managing the federal bureaucracy.

Other themes explored in this issue include the continued crybaby attitude of the state-owned Pakistan International Airlines, this time against the government’s Open Skies policy. The evidence, as we lay out in our article this week, suggests that both foreign and domestic airlines are thriving under the Open Skies policy and that it is only PIA that continues to struggle.

We must, however, concede, that it appears that the Civil Aviation Authority is at best an ineffective advocate for the domestic aviation industry, and must undertake a more robust effort to defend the nation’s interests in the aviation sector.

Farooq Tirmizi Managing Editor

FROM THE MANAGING EDITOR

Readers Say ARE STORIES OF PIA’S TURNAROUND TRUE?: Privatisation, the only way to revive PIA The easiest and quickest way to handle the issue is to do what MCB and UBL did about two decades ago i.e. arrange for the Rangers to be posted at major centres post where staff culling – getting rid of the nonperformers as well as the corrupt employees – is carried out. My father spent about 40 years with PIA (1955 to 1994) contributing to it becoming a force to reckon with, helping a number of airlines Singapore Airlines (PIA staff was deputed in the 1970s), Air Malta, Saudi and the Emirates. My father was project manager Engineering for the Emirates and his heart bleeds to see where PIA is today as opposed to the Emirates which it helped stand on its feet! His level of commitment was such that he ignored various opportunities which came his way during his career with PIA. The rot started with the reintroduction of unions and political appointments, including reinstatement of employees who were laid off for corrupt practices during Benazir Bhutto’s first tenure as a result the slide to mediocrity was set in motion with complete breakdown of discipline, accountability and meritocracy. The only way to revive PIA is to privatise it and let the new owners run it like a commercial organisation as the government doesn’t have the will to fix the problems.

Asim Ali Meerza

How to ContaCt

facebook.com/Profitpk twitter.com/Profitpk linkedin.com/showcase/13251020 profit.com.pk profit@pakistantoday.com

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Over employed in auxiliary services Hey Farooq, you are by far my favorite analyst on business issues in Pakistan. In this interview you should’ve gone more in-depth about the different sectors that the employees are engaged in. PIA has a standard plane to staff ratio for its flying related operational services. Where PIA is over-employed is in its auxiliary services like baggage-handling or ground catering services. Just recalling from what I heard Asad Umar mention once.

Would’ve been great had you quizzed the CEO more on these issues.

Saif Divest it all As a professional investor, I can safely say that no sane investor would ever acquire

PIA. With the current structure no one will buy it, even if you pay them. The only way possible would be if the government gives golden handshakes to PIA’s excessive useless staff and take off all of PIA’s debt. It should divest its entire (not 49%) stake to a buyer so as to be free from political interventions as governments change.

When PPP wanted to do it, the PML-N went against it. Then PTI went against PML-N when they tried it. So, this cycle of opposition will keep repeating itself unless the government gets rid of PIA totally.

Anonymous Supreme Court must intervene I agree with Dr Cyan’s analysis of PIA situation. The government has to take hard decisions. The Supreme Court needs to intervene and instruct lower courts to stop issuing unlimited stay orders on every PIA decision, in favour of employees. How do you expect the CEO to take corrective measures if the concerned staff can easily obtain a stay order for an unlimited period?

Ishaq No keenness to revive it Doesn’t look like that any of them is keen [to revive it]; there is no real will to set things right. All they want to do is sell it at a throwaway price and make money. Don’t forget, PIA was responsible for making Emirates. Where are they and where are we.

Sheikh Ishrat Ali Kidwai THE RETURN OF HUSAIN LAWAI’S LEGAL TROUBLES: Summit Bank, in the service of specific people Having worked for Summit Bank, I can safely say that the bank’s culture and systems were never competent and competitive. It has one of the highest employee turnover due to probably possessing the most underpaid staff for its qualification.

While Mr Lawai was a bully with the top management. The RGMs too were good for nothing. Overall, I realised that the bank served a specific purpose for specific people. It was never inclined towards growth & success. And it’s plans to convert wholly into an Islamic bank fell on its face.

Anonymous

COMMENTS

Senate Deputy Chairman Saleem Mandviwalla

QUOTE

“Artificial measures are not good for the local currency as they backfire, which is evident from the recent rupee devaluation”

“Business community is facing serious economic hardships as prices of raw material have increased manifold” PRGMEA Chief Coordinator Ijaz A Khokhar

74pc

is the expected debt-to-GDp ratio by the end of current financial year 2018-19. The present public debt in terms of the total size of the economy was around 72 percent, which was 14 percent running over the fiscal responsibilities. The figure recorded by the end of PML-N government’s tenure was historic in the last 15 to 20 years exposing the country to many risks. The high ratio violates the Fiscal Responsibility and Debt Limitation Act (FRDLA) of 2005. Talking about the rise of debt, Finance Minister Dr Shamshad Akhtar said, in Pakistan’s case the investment-to-GDP ratio has increased due to development activities. But without domestic resources the ultimate dependance was on more borrowing. The domestic borrowings during 2013 to 2018 have been recorded Rs16.5 trillion while external borrowings were registered at Rs8 trillion in the same period. In terms of the dollar, the external debt has been recorded at $69 billion while the total public debt has swelled to $92.12 billion. She, however, said the public debt should not be measured in isolation whereas it is governed under FRDLA and according to this Act, public debt has to be reduced to 60 percent by 2017-18 and thereafter a 15-year transition has been set towards a debt-to-GDP ratio of 50 percent.

$370m

oil pipeline contract has been awarded to Frontier Oil Company (FOC) by the Oil and Gas Regulatory Authority (OGRA). According to ECC’s decision, the FCO setup

by Frontier Works Organisation (FWO) for managing the oil pipeline project would have to reach out to the federal cabinet with its project plan for the go-ahead. But in violation of ECC’s decision, Ogra awarded the licence to Frontier Oil Pipeline for laying the pipeline on the very same route, the federal government had conferred to state-owned Inter-State Gas Systems (ISGS). In a public hearing conducted by Ogra, ISGS appeared as the aggrieved party. FWO during the hearing said it wanted to construct the pipeline from Machike to Tarujabba at a projected cost of $370 million, which the KP government described as cheap. On the contrary, a government official said the ECC had approved the pipeline at a cost of $280 million, $90 million less than the projection provided by FWO, which was supposed to be built by ISGS.

BRIEFING

Rs79.396m

were released by the government for the automation project of Central Directorate of National Savings (CDNS) under the Public-Sector Development Programme (PSDP) 2017-18. An amount of Rs202.106 was earmarked for the automation project as per the allocations of PSDP (2017-18), official sources said.

The total cost of the CDNS automation project has been estimated at Rs879.8 billion which aims at bringing more branches of the National Savings under the automation system. Meanwhile, the Ministry of Planning, Development and Reform released Rs21,886.308 million for various ongoing and new projects of the Finance division under PSDP. The government in its Federal PSDP had earmarked Rs 27,064.708 million for the Finance division projects, with foreign exchange component of Rs715.402 million, the sources added. According to details, the government released Rs9,555 million for Greater Karachi Water Supply Scheme, which is being developed by the provincial and the federal governments on a cost-sharing basis.

An amount of Rs1,500 million have been released for the Greater Karachi Sewerage Plant (S-III) Karachi which is being developed on a cost-sharing basis. The government had earmarked Rs 1500 million for the project in PSDP 2017-18.

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“Mainstreaming urbanisation is important to lead the country towards sustained development and growth” Caretaker Finance Minister Dr Shamshad Akhtar

QUOTE

23.7pc

increase in oil imports was recorded during FY18 on back of rising global oil prices and the devaluation of the rupee. Energy imports share increased to 23.7 percent of overall import bill of $60.86 billion in FY18 against 20.64 percent of total imports of $52.90 billion in FY17 according to data from Pakistan Bureau of Statistics (PBS). The country is heavily dependent on energy imports due to a dearth of local oil and gas production. According to projections, the country meets over 70 percent energy demand via imports. Pakistan has established two LNG terminal for imports in the last few years, which has seen gas imports soar.

21pc

increase in car sales was witnessed during the just concluded financial year 2017-18. In June 2018, auto sales were up 20 percent YoY to 15,662 units whereas it was down 15 percent month-on-month (MoM) due to the Eid holidays during June.

For the fiscal year ended 2018, Pakistan auto sales (including LCVs vans and jeeps) rose by 21 percent year-on-year (YoY) with growth seen in all segments. Honda witnessed the highest growth amongst its peers clocking in at 31 percent YoY to a total of 51,494 units. The growth is mostly attributable to 302 percent increase in BR‐Vs sold due to the low base of BR‐V units in 2016-17 as sales of the said SUV were initiated in 4QFY17. Disregarding BR‐V, the company still posted 16 percent growth originating from its City and Civic models. The Pak Suzuki Motor Company (PSMC) also posted strong growth of 26 percent, cumulatively selling 144,070 units. The bulk of this can be accredited to the swelling growth of Wagon‐R (up 65 percent), while Cultus (up 20 percent) and Mehran (up 22 percent) were other significant contributors.

2pc

plunge was witnessed in textile exports in June 2018. The fall in exports has been blamed to an increase in cotton prices this year and textile exports were recorded at $1.19 billion in June 2018, down 2 percent from a year ago. In June 2017, shipments from Pakistan had been recorded at $1.22 billion. The 22 percent depreciation of the rupee against the greenback since December last year has made it profitable for cotton dealers to export the commodity, increasing its prices domestically. For the last 1.5 years, the government has been trying to enhance exports and extended the Prime Minister Export-Package to rein in the ballooning CAD and dwindling foreign exchange reserves to a 3.5 year low of $9.06 billion.

$3.9b

of exports from Pakistan went to the United States, the top most destination for shipments during the just concluded FY18. Around 50 percent of the country’s entire $24.2 billion exports in FY18 were shipped to six countries, according to data released by the State Bank of Pakistan (SBP). The central bank data disclosed that export shipments exhibited a rise during FY18. The US, UK, China, Afghanistan, UAE and Germany topped the destination list for Pakistani exports with receipts exceeding $1 billion of goods each in FY18. Exports receipts only comprised 7.7 percent of the overall size of the economy, the fastest growth in exports was recorded to Sri Lanka, increasing 35.6 percent to $339 million, followed

by Afghanistan which grew 30 percent to $1.5 billion. The US, the biggest economy globally, received the highest amount of Pakistani exports, with over $3.86 billion in proceeds being received by the national exchequer.

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90pc

of financing under China-Pakistan Economic Corridor (CPEC) during FY18 was disbursed to three projects.

Official documents showed other social-sector and infrastructure projects remained behind completion deadlines. During the beginning of the previous financial year 2017-18, the country had projected to receive $1.6 billion in Chinese loans and grants for over one and a half dozen projects.

However, data compiled by the Ministry of Finance and Economic Affairs revealed disbursement had surpassed the target but projects that received 90 percent of loans amounted to only three. Analyzing the financial inflows into Chinese-funded projects reveal no significant development has occurred on the western route that crosses through Pakistan’s remote areas and on Gwadar schemes.

“Belt and Road Initiative (BRI) offers the prospect of enlarged trade and prosperity for the entire global community” Former Prime Minister Shaukat Aziz

QUOTE

0.68pc

increase was recorded in food imports in FY18, touching $6.185 billion. Data released by the Pakistan Bureau of Statistics on Friday revealed food imports increased meagerly by 0.68 percent from $6.143 billion during FY17. However, traders and analysts believe the country needs to shift focus on home-grown crops to replace imports. Edible oil imports stood at $2 billion, palm oil exports rose 7.1 percent year-on-year (YoY), touching $2.04 billion during FY18. Soybean imports rose 11 percent, touching $136 million and the country’s cotton imports surged 33 percent, touching $1.1 billion during the recently concluded FY18.

Rs577b

of foreign assets have been declared under the latest tax amnesty scheme unveiled in April this year. At least 55,225 declarations have been filed in which the declared value of foreign assets is around Rs577 billion and that of domestic assets is around Rs1,192 billion. The Ministry of Finance said the public response to the schemes has been positive. The declarants have paid around Rs97 billion out of which around Rs36 billion have been collected on foreign assets and Rs61 billion on domestic holdings. In addition, $40 million has been repatriated. This response to the amnesty schemes has been unprecedented, the ministry claims. For payment of tax on foreign assets, State Bank of Pakistan has devised a procedure, whereby tax in USD is deposited into SBP’s account through wire transfer. The government has issued Government of Pakistan’s US Dollar-Denominated Amnesty Rules, 2018, whereby SBP has been authorized to issue these bonds having a maturity period of five years and annual profit of 3 percent to be paid bi-annually.

19.44pc

increase was recorded in mobile phone imports, touching $847.654 million in FY18. Mobile phone imports in June 2018 which were $87.717 million increased by 20.91 per cent than $72.55 million imports in June 2017, and increased by 7.81 per cent as compared to $81.362 million in May 2018, revealed latest data released by Pakistan Bureau of Statistics (PBS). Overall telecom imports saw an increase of over 13.48 per cent during the fiscal year 2017-18 as compared to the same period of last year. Total imports were recorded at $1.534 billion during this period as compared to $1.351 billion in 2016-17.

Telecom imports went up to $127.908 million in June 2018 and registered a 34.15 per cent growth, as compared to $102.798 million during June 2017. Other telecom apparatus import also witnessed a growth of over 6.9 per cent in 2017-18 as it stood at $686.432 million against $642.119 million during the same period of last year.

14.57pc

increase was recorded in fish exports, touching $451.026 million in FY18. Seafood exports during July-June (2017-18) were recorded at $451.026 million against the exports of $393.662 million in July-June (2016-17), showing a growth of 14.57 per cent, according to latest data from the Pakistan Bureau of Statistics (PBS). In terms of quantity, Pakistan exported 198,420 metric tons during the period under review against the exports of 155,091 last year, showing growth of 27.94 percent. However, on year-on-year (YoY) basis, the fish exports from the country declined by 7.31 per cent by going down from $29.181 million during June 2017 to $27.047 million in June 2018.

$38m

was the price fetched by Engro Corporation for divesting a 29 percent stake in Elengy Terminal to Vopak LNG Holding B.V. Elengy Terminal is Pakistan’s first liquefied natural gas (LNG) terminal which commenced operations in 2015. It comprises of an LNG jetty and a pipeline connected to a Floating Storage and Regasification Unit (FSRU) and leased by ETPL for a duration of fifteen years. Engro Vopak Terminal Limited is a joint venture of Royal Vopak of The Netherlands and Engro Corporation Limited. Elengy Terminal Pakistan Limited (ETPL) operates a terminal for storage, handling, regasification, treatment, and processing of liquefied natural gas (LNG), regasified liquefied natural gas (RLNG), liquefied petroleum gas (LPG).

BRIEFING

“The project will go a long way in developing telecom infrastructure in Pakistan’s northern areas as well as along CPEC” Caretaker Prime Minister Justice (retd) Nasirul Mulk

QUOTE

9pc

increase has been recorded in exports, touching $13.53 billion during FY18. According to data available from PBS, textile exports during FY17 were recorded at $12.45 billion as rupee depreciated around 20 percent against the greenback since December last year. Last year, the previous PML-N ruled government had announced Rs180 billion of several tax concessions for the export-oriented sector. Knitwear exports grew 15.2 percent, touching $2.719 billion during FY18, exports of bedwear grew 5.8 percent to $2.3 billion. Readymade garments exports grew 11.22 percent during FY18, fetching $2.6 billion.

8.14pc

increase was recorded in Pakistan’s palm oil imports during the first eleven months of FY18.

Pakistan imported palm oil worth $1,888.321 million during July-May (2017-18) against the imports of $1,746.104 million in July-May (2016-17), showing growth of 8.14 percent, according to the Pakistan Bureau of Statistics (PBS) data. In terms of quantity, Pakistan imported 2,619,837 metric tons of palm oil during the period under review against the imports of 2,408,723 metric tons last year, showing growth of 8.76 percent. Meanwhile, the soyabean oil imports also increased from $112.533 million during FY 2016-17 to $125.181 million in first eleven months of FY 2017-18, showing growth of 11.24 per cent. In terms of quantity, the soybean imports increased from 104,245 metric tons to 143,343 metric tons, showing growth of 37.51 percent. Meanwhile, on a year-on-year basis, the palm oil imports into the country slipped down by 18.50 percent during May 2018 against the imports of May 2017. The palm oil imports during May 2018 were recorded at $159.112 million against the imports of $195.237 million, the data revealed.

$313.13b

was the size of Pakistan’s economy during FY18. A weaker rupee had an impact on the gross domestic product (GDP) in dollar terms and the economy registered a 13-year high growth rate of 5.8 percent during FY18. However, the size of the country’s economy in terms of dollars fell as the rupee nosedived against the greenback in four rounds of devaluation since December 2017, with a 5.8 percent growth rate falling to 2.7 percent. The central bank utilized a period average month-to-month (MoM) exchange rate to determine the GDP, which as per calculation came to Rs108 to a dollar. Due to further rupee devaluation, the size of the economy would contract more in dollar terms. Presently, the rupee stands around Rs128 against the greenback, as declining forex reserves and an increasing current account deficit create a problem for the country’s economic managers.

$11.4b

of record loans were obtained by the previous PML-N led government during FY18. Pakistan acquired $11.4 billion loans during FY18, including a cash addition of $500 million by China’s State Administration of Foreign Exchange (SAFE), shared officials in the Ministry of Finance and Economic Affairs. The SAFE cash injection was provided by China to stem a decline in foreign exchange reserves in June. During FY17, Pakistan got $10.1 billion loans and the amount during the just concluded FY18 acquired record loans of $11.4 billion, the highest since its independence in 1947. Around $4.5 billion or 39.4 percent of overall external borrowing was received from China which included $2.2 billion in commercial loans, $1.8 billion under the China-Pakistan Economic Corridor (CPEC) and $500 million in SAFE deposit.

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$18b

was Pakistan’s current account deficit during the recently concluded FY18, a 43 percent surge compared to FY17. CAD has jumped by 5.7 percent of total country’s gross domestic product (GDP) this year, however, the deficit remained at $1.84 billion in June compared to $2 billion in May. During the last fiscal year, the widening deficit has indicated poor financial management of the previous government as it failed to overcome rising imports.

Further, in the most recent round of devaluation, the Pakistani rupee fell by around 5.5 percent in the interbank market to Rs128.50 this week, making it the fourth devaluation since December 2017. The rupee has fallen by 21 percent against the dollar so far.

BRIEFING

Domestic aviation industry experts insist that liberal aviation policies are hurting their competitiveness, but the truth is much more complicated

16

M

By Muhammad Faran Bukhari & Farooq Tirmizi D is about to get on a plane at Karachi Airport. His destination: London’s Heathrow Airport. He could have chosen several airlines that would have taken him there, including a direct flight on the state-owned Pakistan International Airlines. But, as most readers have probably guessed by now, that is not the airline he is flying. Instead, he is stepping into an Emirates plane, a Boeing 777 which will take him to Dubai, where he will board an Airbus A380 directly to London.

As Pakistan continues to liberalise its airspace based on its Open Sky policy, the three major airlines from the Gulf Arab countries – Emirates, Etihad, and Qatar Airways – look set to benefit, taking market share in the lucrative international long-haul travel sector away from the already struggling local players.

MD may be fictional, but people like him are not.

As incomes rise among Pakistani households, the country’s upper middle class is now increasingly able – and more than willing – to travel internationally.

Pakistan’s overall aviation market has expanded by an average of 4.4% per year in terms of the number of passengers in the 10-year period between

‘AS PAKISTAN CONTINUES TO LIBERALISE ITS AIRSPACE BASED ON ITS OPEN SKY POLICY, THE THREE MAJOR AIRLINES FROM THE GULF ARAB COUNTRIES – THE EMIRATES, ETIHAD, AND QATAR AIRWAYS – LOOK SET TO BENEFIT, TAKING MARKET SHARE IN THE LUCRATIVE INTERNATIONAL LONG-HAUL TRAVEL SECTOR AWAY FROM STRUGGLING LOCAL PLAYERS’ fiscal year 2007 and 2017, according to data from the Civil Aviation Authority (CAA). Nearly all of that growth has come from a rise in international travel

by Pakistanis. The total number of international passenger flights (number of passengers in each flight) rose by an average of 7.3% per year during that same period, compared to an average of just 0.3% per year

AVIATION

for domestic passenger flights.

The bulk of that growth, however, appears to have been captured by foreign airlines, with local airlines, particularly the national airline PIA struggling to keep pace. In 2006, for instance, the Gulf carriers operated 90 flights a week from Pakistan. By 2013, they were operating 250 and by 2015, that number went up to 395, while all Pakistani registered airlines operated only 55 weekly flights to United Arab Emirates (UAE).

The Open Sky policy was initiated in 1992 during Nawaz Sharif’s government, and has been continued thereafter by subsequent governments, but one that many local aviation experts, in particular those affiliated with the PIA, are not in favour of.

“The open sky policy creates problems. We are against it,” says PIA Chief Executive Officer (CEO) Musharaf Rasool Cyan, insisting that Gulf airlines that are heavily subsidised by their respective governments and enjoy cost advantage over local airlines.

The argument that the Gulf airlines have an unfair advantage is belied by a simple fact, however: of the three airlines with the fastest growth in international passenger traffic to and from Pakistan, two are domestic airlines that just happen to not be PIA. Shaheen Air International has seen the fastest growth in its international passenger traffic since 2007, growing at an average of 22.7% per year, while Air Blue has registered a growth in its international passenger traffic by 18.8% during that same period. By comparison, PIA has seen its international traffic go down by 0.8% per year on average between 2007 and 2017.

Indeed, measured both by international passenger traffic and total passenger traffic, PIA is the worst performing airline in Pakistan. Only

‘THE OPEN SKY POLICY CREATES PROBLEMS. WE ARE AGAINST IT’ Musharaf Rasool Cyan, PIA CEO PIA and Kuwait Airways carried fewer passengers to and from Pakistan in 2017 than they did in 2007.

Emirates and A380s

I

n the international market for the period January-December 2017, Emirates share stood at 15 percent, with PIA’s share only a mere 7 percent greater, standing at 22 percent.

According to industry sources, Emirates share is expected to increase as it plans to use its Airbus A380 aircrafts on the Dubai to Islamabad route.

“An A380 aircraft carries approximately 615 passengers – much greater than the load carried by the Boeing 777s currently used by Emirates on the route. If the CAA allows Emirates to operate the existing weekly schedules without restricting them to the capacity they were carrying prior to the start of A380 operation to Islamabad, then all Pakistan registered airlines would no longer be viable for continued operation,” says Malik Tariq Ali, an aviation expert.

Malik Tariq Ali appears to believe that the local industry needs a strong dose of protectionism from the CAA, despite the evidence suggesting that the only airline that is struggling is PIA. “What should happen is that Emirates frequencies on the Islamabad-Dubai route should be cut down according to the capacity increase on each flight to ensure a level playing field for the domestic airlines. Nothing

‘NEARLY ALL OF THAT GROWTH HAS COME FROM A RISE IN INTERNATIONAL TRAVEL BY PAKISTANIS. THE TOTAL NUMBER OF INTERNATIONAL PASSENGER FLIGHTS (NUMBER OF PASSENGERS IN EACH FLIGHT) ROSE BY AN AVERAGE OF 7.3% PER YEAR DURING THAT SAME PERIOD, COMPARED TO AN AVERAGE OF JUST 0.3% PER YEAR FOR DOMESTIC PASSENGER FLIGHTS’ 18

of the sort, however, is under consideration,” he said.

Currently, Emirates operates Boeing 777 aircrafts on its 13 weekly flights to Islamabad.The Boeings have a capacity of 427 seats. By replacing the Boeings with the much larger Airbus A380s, Emirates is hoping to fly in more passengers without having to apply for extra flights on the route, further solidifying its competitive advantage.

PIA on the other hand operates 14 weekly flights on the same route using the much smaller A320 that can seat a miniscule 168 passengers in comparison.

According to sources in PIA, the existing Air Service Agreement (ASA) of Pakistan with foreign carriers is primarily based on the number of weekly flights.

Apart from granting weekly flight capacity, many countries like India and Japan also put a cap on the maximum number of passengers to be carried by designated airlines of other countries – something that PIA officials believe CAA should consider. Contacted for its response on the issue, the CAA did not respond to Profit’s repeated requests.

Interestingly, the Airbus A380 aircraft is a long haul aircraft and is not designed for short routes such as the three-hour Dubai to Islamabad flight. According to aviation experts, the Airbus A380 is most economical if it operates on routes exceeding 8 to 9 hours flying time.

“By operating on short to medium sectors the A380 landing cycles are likely to expire before their hull life. Dubai may be able to absorb this additional impact because of its foreign exchange reserves and revenues generated from tourism etc,” says Malik Tariq Ali.

The Emirates / Airbus symbiosis

Y

et there may be a method to the madness of the Emirates’ decision to fly the A380 on the shorter Dubai to Islamabad flight. And that has to do with the symbiotic relationship between Emirates and Airbus, the manufacturer of the A380.

The A380 is the world’s largest passenger airliner, and given its design for long-haul travel, it can only really be used by airlines that have a bulk of their traffic going on long-haul flights.

While there are theoretically many possibly customers for the aircraft, in practice, there has been one big one: Emirates.

As of June 2018, a total of 228 Airbus A380s have ever been produced, and Emirates owns 104 of them. And of the 62 orders for the A380 that Airbus currently has on its order book, 58 are for Emirates. Indeed, so important a customer is Emirates for the A380 that when it did not place a new order for A380s at the Farnborough Airshow in the UK in December 2017, there was immediately speculation that Airbus may be forced to shut down production on the A380 altogether.

The reason for Emirates declining to place an order is interesting: Emirates wanted Airbus to guarantee that

‘...EMIRATES FREQUENCIES ON THE ISLAMABAD-DUBAI ROUTE SHOULD BE CUT DOWN ACCORDING TO THE CAPACITY INCREASE ON EACH FLIGHT TO ENSURE A LEVEL PLAYING FIELD FOR THE DOMESTIC AIRLINES. NOTHING OF THE SORT, HOWEVER, IS UNDER CONSIDERATION’ Malik Tariq Ali, Aviation Expert. the A380 would remain in production for at least the next 10 years, and preferably 15 years. Emirates realised that it had staked the future of its growth on a single aircraft, a risky proposition with few other buyers of that aircraft, and no guarantees that the manufacturer would continue to produce it.

After talks between Emirates and Airbus broke down in December 2017, it appeared that the fate of the A380 was sealed. Then, in early July, Emirates announced that it would fly the A380 on the short-haul Dubai-Islamabad route.

While the two developments appear unconnected, it is plausible to assume that Emirates is doing Airbus – and itself – a favour by collecting data on how the A380 performs on shorthaul flights. If the A380 performs well on the short-haul routes, that data can be used by Airbus to begin marketing the A380 as a more versatile aircraft

than it is currently perceived to be.

That, in turn, may get the manufacturer more customers placing orders for it, which would allow them to continue the plane’s production – an event that would greatly benefit Emirates.

In other words, Emirates has built its competitive advantage on having more A380s than any other airline, but in order to sustain that competitive advantage, it now needs more of its competitors to buy the A380, and it may actively be collecting data on short-haul flights to help Airbus sell more of that aircraft.

Aggressive pricing strategies

H

amaad is an Emirati businessman living in the UAE. He frequently travels by Emirates between Dubai and New York

AVIATION

for business trips. However, instead of taking a direct flight to New York from Dubai, he prefers flying to Karachi and then books a flight from there to New York, which would again take him back to Dubai, before finally flying off to New York. He does this because while a business class ticket from Dubai to New York costs around AED23,845 (PKR830,000), business class tickets

from Dubai to Karachi and Karachi to New York combined cost around PKR490,000, hence saving him approximately AED9,700 (PKR340,000).

“You see how airlines make money on the longer routes, is by selling economy at a lower fare and really earning revenue from the business class, so unless you fill up the business class its very hard to make profits on longer

hauls,” explains the PIA CEO. By attracting Emirati customers like Hamaad, Emirates is able to fill up its business class on the longer routes, and hence is able to offer more aggressive pricing in the Pakistani market for economy class passengers travelling to and from Pakistan.

US travel woes

“A

part from the competition coming from Gulf airlines, PIA is required to make a stop in Europe (at Manchester) on all its New York-bound flights, since no airport in Pakistan Is cleared by the United States Transportation Security Administration (TSA) for direct flights to the US,” says Abdulllah Haseeb Khan, PIA spokesperson.

Since a large component of the fuel cost is associated with landing and take off, the flight costs rose considerably, and the New York route became unfeasible for the national carrier which had to shut it down in October 2017.

Now, with the advent of the A380 to Islamabad, and dramatically increased passenger capacity, PIA officials worry that the Gulf airlines, particularly Emirates, will take ever greater market share from them on the lucrative European routes.

“Islamabad is the hub for Europe

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and UK operations from Pakistan, which is a high-yield market. Their increase in capacity will force the market to lower the fares and yields will drop.

As a result, it will severely impact the overall revenues of PIA and hence the financial crunch is likely to increase,” read an official PIA statement in response to questions sent via an email.

ASAs and CAA

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ven beyond the calls for protectionism, however, many local aviation experts and PIA officials believe that the CAA is not effective in negotiating equitable Air Service Agreements (ASA) between Pakistan and other countries. ASAs are agreements, frequently bilateral, that govern air traffic rules between two or more countries.

They point to an example from 2013, when Turkish authorities with-

‘EMIRATES HAS BUILT ITS COMPETITIVE ADVANTAGE ON HAVING MORE A380S THAN ANY OTHER AIRLINE, BUT IN ORDER TO SUSTAIN THAT COMPETITIVE ADVANTAGE, IT NOW NEEDS MORE OF ITS COMPETITORS TO BUY THE A380, AND IT MAY ACTIVELY BE COLLECTING DATA ON SHORT-HAUL FLIGHTS TO HELP AIRBUS SELL MORE OF THAT AIRCRAFT’ drew 5th freedom traffic rights for Pakistani airlines. Fifth freedom flights allow an airline from one country to operate flights between two different countries. So, in this case, the Turkish government had previously allowed Pakistani airlines to operate a flight from Istanbul, for example, to London, which would have allowed Pakistani airlines to not just refuel in Istanbul, but

‘APART FROM GRANTING WEEKLY FLIGHT CAPACITY, MANY COUNTRIES LIKE INDIA AND JAPAN ALSO PUT A CAP ON THE MAXIMUM NUMBER OF PASSENGERS TO BE CARRIED BY DESIGNATED AIRLINES OF OTHER COUNTRIES – SOMETHING THAT PIA OFFICIALS BELIEVE CAA SHOULD CONSIDER’

also pick up Turkish passengers flying to London as well. This right was taken away in 2013.

That same year, rather than pushing back against the Turkish curtailment of Pakistani flight rights, the CAA increased the number of allowed flights for Turkish Airlines from 7-a-week to 47 weekly flights.

Meanwhile, Japan has denied PIA’s request for the removal of restrictions on capacity and fifth freedom carriage between Beijing and Tokyo and has refused to hold bilateral Air Services Agreement (ASA) talks, German authorities have restricted PIA to operate only up to four weekly flights, and despite repeated requests, the UK authorities do not allow more than 10 flights per week to London Heathrow.

AVIATION

22

NAYA MINISTER, MEET

PURANI

MINISTRY

The minister is already inheriting the purani ministry and if he fails to come up with a strategy for raising revenue, he will be the same as the purana minister himself

S

By Farooq Tirmizi

ince April 16, 2012, the day he announced his resignation as CEO of Engro Corporation, it has been widely known that if the Pakistan Tehreek-e-Insaf were ever elected to office, Asad Umar would be federal finance minister.

But back then, barring the die-hard supporters, the idea of a PTI-led government seemed so farfetched that hardly anyone gave it any serious thought as to what an Imran Khan administration would look like, and what it would mean to have Federal Finance Minister Asad Umar.

Well, that seemingly far-fetched idea has now become reality, and the nation’s economic decision-makers – from business leaders to managers to ordinary consumers – need to begin to think, in clear and specific terms, about what

that means. While many commentators have written about how the 2018 election is a milestone in Pakistan’s democratic development in many ways, not many have appreciated just how groundbreaking it has the potential to be on the economic policy front.

As we will examine further below, the job of finance minister is not to be liked. It requires making some of the toughest choices the government has to make, and to be the public face of those tough choices. (We hope Asad Umar has enjoyed being a beloved public figure. That is about to end abruptly and permanently.) To do the job well requires more than just personal competence and commitment to principles. It requires two other ingredients that have too often been missing on the economic policy front: democratic legitimacy, and the absolute trust of the prime minister.

COVER STORY

Here is one fact that may get lost in all the noise about the PTI-led administration: if he is appointed and serves out his full term in office, Asad Umar will be the first full-time federal finance minister to be a member of the National Assembly since the Zulfikar Ali Bhutto Administration.

We have had members of the National Assembly take on the role of full-time finance minister temporarily (Naveed Qamar, for example), we have had senators serve as finance minister (Ishaq Dar), and we have had Benazir Bhutto serve concurrently as finance minister for almost the entirety of her time as prime minister, but to have one person who has both the legitimacy of being personally directly elected by the people (and not through other representatives, as in the case of senators) and is also the full-time finance minister has been surprisingly rare in Pakistani history.

Why is that important? We will explain below. But in order to lay out what is likely to happen next, we at Profit have laid out three things that we believe our readers need to know: who is the man? What is the job? And what are the challenges facing the man in doing the job successfully?

The man himself

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sad Umar’s biography and career achievements are well known, but they are worth revisiting in detail in order to place them into the context of how they might be relevant to the job to which he is about to ascend (or the pit he is about to descend into, whichever metaphor you prefer).

Umar likes to speak of himself as being a person from an ordinary middle class background who rose to the highest ranks of Corporate Pakistan before leaving a lucrative private sector job to run for public office. In many respects, that story is true, but in

‘...THE JOB OF FINANCE MINISTER IS NOT TO BE LIKED. IT REQUIRES MAKING SOME OF THE TOUGHEST CHOICES... TO DO THE JOB WELL REQUIRES MORE THAN JUST PERSONAL COMPETENCE AND COMMITMENT TO PRINCIPLES. IT REQUIRES TWO OTHER INGREDIENTS THAT HAVE TOO OFTEN BEEN MISSING ON THE ECONOMIC POLICY FRONT: DEMOCRATIC LEGITIMACY, AND THE ABSOLUTE TRUST OF THE PRIME MINISTER’ some respects, it elides several important details.

For instance, while it is true that he is not from a wealthy family, Asad Umar is by no means from an ordinary family. His father was retired Major General Ghulam Umar, a man who was one of the seven senior-most officers in the Pakistan Army during the Yahya Khan administration.

General Umar’s career has been the subject of significant controversy long before his son became famous, and we will not delve into that controversy in any length here except to note that, while his name is mentioned in the Hamoodur Rahman Commission Report as a person who should face trial, it appears to be mostly as a function of his rank, and does not necessarily have anything to do with his specific individual behaviour. In fairness to Asad Umar, while he has defended his father against the insinuations leveled against him in the media, he has not in any way tried to whitewash the atrocities committed by the government, and specifically the military, during that era.

The reason we bring up Umar’s father’s career is to note the following fact: yes, they were middle class, but being the youngest son of a high-ranking Army officer in Pakistan does not qualify a person by any means as ordinary. One is, almost by default, a highly

‘TO HAVE ONE PERSON WHO HAS BOTH THE LEGITIMACY OF BEING PERSONALLY DIRECTLY ELECTED BY THE PEOPLE (AND NOT THROUGH OTHER REPRESENTATIVES, AS IN THE CASE OF SENATORS) AND IS ALSO THE FULL-TIME FINANCE MINISTER HAS BEEN SURPRISINGLY RARE IN PAKISTANI HISTORY’ 24

privileged member of the country’s ruling elite, even if one is not necessarily from a wealthy family.

Nonetheless, Umar’s own career appears to have been largely the result of success in meritocratic environments. He secured admission to the Institute of Business Administration in Karachi during its heyday, graduating with an MBA in 1984. His first job out of college was at HSBC Pakistan, though he did not seem to enjoy banking enough to stay there very long (or quite possibly, it is because HSBC has never had a clue as to what they were doing in Pakistan, but we will revisit our grudge against HSBC another time.)

He does, however, remember being well-paid there. “I still remember the exact figure of my first salary: Rs8,170 per month. My boss at the time said ‘Well, frankly they are paying you too much.’,” he said in an interview with The Express Tribune in 2012. The equivalent amount in today’s terms, adjusted for inflation, would be Rs106,225 per month. We are inclined to agree with his old boss.

In 1985, he joined Exxon Chemicals Pakistan, the predecessor company to Engro. He was clearly a high-performer because he was given highly coveted assignments, including becoming the first non-engineer to be a business analyst at the fertilizer plant in Daharki, and being offered a secondment to Exxon’s facilities in Canada, the only Pakistani employee at the time to have been offered that opportunity.

In fact, he was in Canada in 1991 when the legendary management buyout of Engro happened. He returned to Pakistan to join the new management team build out what would become one of Pakistan’s most admired com-

panies. In 1997, at the age of just 36, he was appointed the CEO of the company’s new petrochemical arm, Engro Polymer & Chemicals. And in 2004, at the age of just 43, he was appointed the CEO of Engro Corporation.

It is his track record as CEO that bears close scrutiny, because his perceived success there has been seen as the basis for his reputation as an intelligent technocrat who has made the transition towards politics. On that front, the numbers are certainly highly admirable. Under Umar’s leadership, Engro’s revenues grew from Rs13 billion in 2004 to Rs114 billion in 2011, growing at an annualised rate of nearly 36.4%. (Inflation during that time averaged 12.6% per year.)

But there is more to a CEO than just numbers during his tenure, though that is certainly an important yardstick. There has now been enough time since his departure to judge Umar’s tenure as CEO on a more holistic level.

On that front, while he made several important decisions as CEO, there are two that were larger and more important than all of the others: the first was to enter the food business by creating Engro Foods, and the second was to invest $1.1 billion in a new fertiliser plant.

The consequences of those two decisions can be described, mostly, as a mixed bag. Engro Foods, notwithstanding its recent stagnation, was clearly a smashing success and the result of Umar knowing what he did not know and hiring the right talent for the job, and then giving them the autonomy and the capital to take risks.

The investment in the fertiliser plant (called Enven in company parlance), notwithstanding its recent comeback, can only be categorised as a disaster. The company may well end up recovering the amount it invested in

‘NONE OF THOSE FACTORS WILL BE TRUE IN THE JOB HE IS ABOUT TO TAKE ON, AND HE WOULD BE WELL ADVISED – IF HE HAS NOT ALREADY DONE SO – TO UNLEARN HIS CORPORATE WAYS AND LEARN HOW GOVERNMENT WORKS. VERY FEW PEOPLE WHO HAVE BEEN SUCCESSFUL IN BUSINESS HAVE MANAGED TO TRANSLATE THAT SUCCESS INTO SUCCESS IN GOVERNMENT’ that project, but the amount of capital and management attention it sucked up in trying to get the government of Pakistan to honour its commitments to provide natural gas to the plant may not have been the best use of the company’s – and the country’s – resources.

Umar has acknowledged that the plant was not something he would have agreed to build in hindsight, but points out that there was no information at the time the decision was made (in 2006) that would have predicted the problems the plant would run into later, problems that had entirely to do with the government’s mismanagement of the country’s natural gas resources, and not necessarily any technical or management problems at Engro itself.

We revisit this career to point out the following fact: in every position he has held thus far where he has had success and failure, Asad Umar has had the ability to hire and fire whomever he pleased, he has worked alongside some of the most talented people in Pakistan, and he has had considerable authority over creating the incentive structures that his subordinates respond to.

None of those factors will be true in the job he is about to take on, and he would be well advised – if he has

‘WE HAVE NEVER MET THE BUREAUCRATS WHO WILL GIVE UMAR HIS INITIAL BRIEFING WHEN HE WALKS INTO HIS OFFICE IN Q BLOCK FOR THE FIRST TIME, BUT WE ARE ALMOST ABSOLUTELY CERTAIN AS TO WHAT THEY WILL SAY: THE COUNTRY IS COMPLETELY OUT OF MONEY, WE ARE ON THE VERGE OF BANKRUPTCY, AND THERE IS A MOUNTAIN OF PROBLEMS ALL OF WHICH NEED TO BE SOLVED IMMEDIATELY’

not already done so – to unlearn his corporate ways and learn how government works. Very few people who have been successful in business have managed to translate that success into success in government.

The deliberately impossible nature of the job

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e have never met the bureaucrats who will give Umar his initial briefing when he walks into his office in Q Block for the first time, but we are almost absolutely certain as to what they will say: the country is completely out of money, we are on the verge of bankruptcy, and there is a mountain of problems all of which need to be solved immediately.

Umar may be inclined to believe them because there is a lot of truth in what they say. The government of Pakistan is fundamentally insolvent, and virtually every previous administration in the country’s history has run macroeconomic policy very badly. In addition, every previous administration has also fudged the numbers to look better than they really are, and the bureaucrats will gleefully point this out as a problem, all the while pretending that they had nothing to do with any of these problems, and that they were just following orders of the previous government.

Like all good lies, most of what they say will be true. It will just not be the whole truth.

How do we know? The author of this essay has been following politics since at least 1996. Take a look at the tapes of the first press conferences about the economy given by Sartaj Aziz in 1997, Pervez Musharraf in 1999, Ishaq Dar in 2008, Hafeez Shaikh in

COVER STORY

2010, and Dar again in 2013. They will sound eerily familiar: the government is out of money, the numbers are fudged, and there are mountains of problems that all need to be solved immediately.

How and why is that the case?

Because you may be the minister, Asad Umar, but your job was designed by the bureaucrats under you. And they deliberately designed it to be impossible for a single individual to do, so that you would be reliant on them to do most of the work, and make most of the important decisions.

Why? Because the finance ministry is the single most important ministry in the government, and the finance minister is the de facto deputy prime minister. Anything that happens in government needs money, and anything that needs money requires sign off from the finance ministry. The stakes are simply higher there. All people in proximity to power want more of it, and the bureaucrats who run the finance ministry are simply closer to more power than the bureaucrats in any other ministry.

Incidentally, the only ministry where financial decision-making is fully delegated after the budget? The Ministry of Defence.

And so, the more work that can be piled onto the finance minister’s desk, particularly at the beginning of his tenure, the better. The bureaucracy sees politicians like a body sees a virus: a foreign object that has no business being there and must be relentlessly attacked.

They do this by overwhelming the minister at the beginning of their tenure, bombarding them with issues that need to be addressed and tasks that need to get done. The goal is to get the finance minister to be exhausted by their job and then to catch them in a moment of weakness and offer to start taking tasks off their plate. In order to do that, the bureaucrats have

‘BECAUSE YOU MAY BE THE MINISTER, ASAD UMAR, BUT YOUR JOB WAS DESIGNED BY THE BUREAUCRATS UNDER YOU. AND THEY DELIBERATELY DESIGNED IT TO BE IMPOSSIBLE FOR A SINGLE INDIVIDUAL TO DO, SO THAT YOU WOULD BE RELIANT ON THEM TO DO MOST OF THE WORK, AND MAKE MOST OF THE IMPORTANT DECISIONS’ designed the job to be impossible for one person to do.

The following is a partial and incomplete list of responsibilities of the Minister of Finance, Revenue & Economic Affairs of Pakistan: * Lead of the Economic Coordination Committee (ECC) of the cabinet, which is effectively the most active part of the cabinet that makes all key economic policy decisions * Lead the Executive Committee of the National Economic Council (ECNEC), the body that decides government spending priorities, particularly as they relate to development expenditure * Supervise the process of budget creation and strategy for revenue generation by the Federal Board of Revenue * Manage the perennial basket cases that are most state-owned companies, even if they are technically managed by other ministries, since all of those ministries will be reliant upon the finance ministry to provide technical expertise and guidance * Effectively manage the country’s energy chain because so much of it is reliant on the government paying out subsidies to energy companies in order to be able to make up for the cost of theft; the finance minister is effectively making decisions on which companies get paid first, and thus making decisions about the fuel mix of the country’s power generation system

‘IT IS HIGHLY LIKELY THAT ASAD UMAR’S CAREER IN THE PRIVATE SECTOR HAS GIVEN HIM THE SKILLS HE NEEDS TO DO THE JOB, THOUGH HE WILL NEED ONE ADDITIONAL QUALITY WHICH HE MAY OR MAY NOT HAVE: A NEAR-INFINITE AMOUNT OF PATIENCE WITH OBSTRUCTIONISM, LETHARGY, INERTIA, AND INCOMPETENCE’ 26

The job is at least three separate ministries combined into the job of one person and it is kept so structurally by both the bureaucrats who want the minister to hand off more of their powers to them, and the ministers themselves who do not want to delegate any powers to their cabinet colleagues.

To succeed at the job, one needs the following set of skills: an extremely strong work ethic, a very high sensitivity to bureaucratic nonsense, and a clear vision for precisely what one wants to achieve out of their tenure as finance minister.

It is a job where everyone will want to push their own agendas and make them seem urgent. Some of them truly will be urgent and hence the strong work ethic is needed. But many are things that can be reprioritised downwards.

It is highly likely that Asad Umar’s career in the private sector has given him the skills he needs to do the job, though he will need one additional quality which he may or may not have: a near-infinite amount of patience with obstructionism, lethargy, inertia, and incompetence.

The PTI has promised many structural reforms, but changing the fundamental structure of the Civil Service of Pakistan is explicitly not one of them.

That means that the bureaucrats that the minister will be working with cannot be fired. He can try the Shahbaz Sharif technique of rapidly transferring bureaucrats until he finally gets one he likes, but that has its own problems. For starters, it assumes there are enough competent bureaucrats to fill all key positions and you just have to find them.

We have some very bad news.

There are not.

That means making do with some of the most exceptionally incompetent human beings on the planet and hoping that the few competent officers

around them will inspire them to work harder. That can sometimes work, as it appears to be in the case of Punjab and Khyber-Pakhtunkhwa’s education and health departments. But finance is another beast entirely.

The core challenge of the job

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e do not know how the minister thinks about his job.

He did not respond to our requests for an interview with him, and his public statements do not give a detailed enough indication about his approach to the task at hand.

So the best we can advise is that he think of his job as two things, and see every task he is presented with in light of those two overarching goals: cutting out wasteful spending, and increasing the government’s tax revenue.

That is it.

If he can put in place sustainable policies that will do that, then he will be the most successful finance minister in the country’s history. Everything else is gravy.

This is the part where having the absolute trust of the prime minister is key. Because the finance minister has to do things that will not be popular, and will dent not just his own personal popularity but that of the government as a whole. The prime minister needs to be convinced that the actions being undertaken by the finance minister, while unpopular temporarily, will yield long-term benefits that will be good for the country, and thus good for the political fortunes of the ruling party.

The prime minister, in turn, has to be a skilled enough politician to be able to sell the short-term pain for long-term gain that is the basis of any successful path out of the kind of economic morass that Pakistan finds itself in.

On that front, we would suggest that Umar needs to focus on key areas of government expenditure that he can and should cut. We recom-

‘SO THE BEST WE CAN ADVISE IS THAT HE THINK OF HIS JOB AS TWO THINGS, AND SEE EVERY TASK HE IS PRESENTED WITH IN LIGHT OF THOSE TWO OVERARCHING GOALS: CUTTING OUT WASTEFUL SPENDING, AND INCREASING THE GOVERNMENT’S TAX REVENUE. THAT IS IT. IF HE CAN PUT IN PLACE SUSTAINABLE POLICIES THAT WILL DO THAT, THEN HE WILL BE THE MOST SUCCESSFUL FINANCE MINISTER IN THE COUNTRY’S HISTORY. EVERYTHING ELSE IS GRAVY’ mend starting with federal subsidies on energy and the constant bailouts given to state-owned companies every year. The PTI has already pledged to restructure state-owned enterprises, though the party is distinctly not in favour of privatisation. However, they have made no mention of subsidies and how they plan on dealing with those.

We can understand why. Privatisation means telling public sector union employees that their cushy, well-paid jobs that require them to do very little are going to be gone very soon, and they might – heaven forbid – actually have to work for a living like the rest of the country.

And cutting subsidies means telling the urban middle class – the core of the PTI’s support base – that they do not need or deserve to have the government paying a substantial chunk of their electricity bills and that they should pay their own bills, thank you very much.

You can see why any minister who successfully did that would need the prime minister to stand firmly behind them and not back out of those decisions.

But, as difficult as it may be, cutting expenses is child’s play compared to trying to raise revenue.

Let us ignore for a moment the fact that the PTI has explicitly refused

‘ALL PEOPLE IN PROXIMITY TO POWER WANT MORE OF IT, AND THE BUREAUCRATS WHO RUN THE FINANCE MINISTRY ARE SIMPLY CLOSER TO MORE POWER THAN THE BUREAUCRATS IN ANY OTHER MINISTRY’

to pledge to reform the civil service, and instead focus on the core of the problem: rich and upper middle class Pakistanis do not like to pay their taxes and need to be made to do so by force.

That means dragging some of the wealthiest, most educated people in the country out of their beds, kicking and screaming in front of their spouses and children in the middle of the night, and mercilessly throwing them in jail, and vigorously prosecuting them until they pay their fair share of taxes.

This does not need to be done with every tax thief in the country, but with just enough to put the fear of God and the FBR in the hearts of the rest of them.

Here is where you run into the big problem: almost every person who would matter as an example is also by definition very well-connected, and influential. The prime minister would be endorsing raids on the homes of every person who either already financially supported his campaign, or has the potential to be a major donor to his next campaign.

Needless to say, the political incentive to raise revenue does not align with the economic reality of needing to undertake the necessary reform.

And on this front, the PTI has been almost absolutely and completely silent.

In short, whatever else Asad Umar may say, unless he can answer where the tax money will come from, everything else will be more of the same.

The minister is already inheriting the purani ministry. If he fails to come up with a strategy for raising revenue, he will be the same as the purana minister himself.

COVER STORY

JUNAID AHMED,

CEO/EXECUTIVE DIRECTOR, DETAILING CREW

AN EYE FOR DETAIL

Passion for the vintage stuff – from cars to guns – provides an opening to Junaid Ahmed to pioneer in lucrative car detailing business

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By Muhammad Faran

nsconced in the comfort of his well-appointed office in an upscale locality in a corner of a 60 kanal school meant for the sons and daughters of the elite amongst the elite, surrounded by his favourite memorabilia, Junaid Ahmed talks about his passion that he has turned into a lucrative business.

Car detailing is something new in this neck of the woods, so Profit sat with Junaid Ahmed, the CEO and Executive Director of Detailing Crew, to get to know its nuances and also how and why he took the plunge.

Profit: Car detailing… it’s not something common around these parts, is it?

Junaid Ahmed: It’s not common at all. For me, the business stems from a very deep-rooted affection that I’ve always had for things mechanical.

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Q: Like vintage cars?

JA: Vintage cars, and also motorcycles – the ones that are rare and unique. Personal interest aside, a very important bit is restoring history... our history. You’ll see many items scattered around my office that are restored, brought back to life to speak. This little table fan is from the 1930s, the telephone set used to be at the East Pakistan governor’s house. I have restored these, and use them.

Q: How do you procure such stuff?

JA: I’ve been at it for 20-odd years… I’ve always had the passion for it, though it’s a very expensive passion and needs to be backed by money. In my early days, I used to go for small but historically significant things. There are a lot of junkyards around here. And then with time you obviously make some contacts. I’m very fond of vintage guns, and I’ve [in my collection] pieces from Anglo-Afghan war, the French war etc.

Things come by when you spend time in the field and make contacts. But paramount amid all this is vintage cars [pres-

‘WHAT THEY DO TO A NEW CAR AT THE SERVICE STATION IS BEYOND HORRENDOUS. THEY PUT THE COMPOUND WITH THEIR HAND, THEY RUB THE CAR... COMPOUNDING IS BASICALLY TAKING PAINT OFF THE CAR. PEOPLE DON’T KNOW THAT. THEY THINK IT’S CLEARING SCRATCHES. HOW DO YOU CLEAR A SCRATCH? YOU TAKE OFF A LAYER OF PAINT AND THE CAR HAS NO SCRATCHES AND THAT’S WHAT HAPPENS’

ently he owns 16].

My car detailing crew at the moment is working on three cars with proper history: a 1948 Wolseley which belonged to Syed Wajid Ali, a 1971 bulletproof Mercedes of a senior US diplomat who got assassinated in Karachi in the early 1980s as he stepped out of it at what was then Intercontinental Hotel, and a 1948 model A-4 – one of the oldest cars in Pakistan right now.

So, from this passion emanated this realisation that I can make it commercial.

In 2010, there was no one doing it professionally. I had a vacant lot at Ferozepur Road, so I thought why not start something of our own and see how it does commercially. Now it is a most viable business, with outlets in

three cities – along with principal office at Lahore, at Islamabad and Faisalabad, with Sialkot and Multan on our radar.

From detailing we’ve moved to protective coatings – a Nano-coating on top of car paint, saving it from scratches and degradation that happens naturally because of its interaction with the environment. We represent ceramic pro – a huge company dealing specifically in protective coatings – in the North of Pakistan.

Personally, I believe that even the new cars must be in mint condition.

They have to look shiny, blingy, wellkept – inside and outside. Initially I started doing it myself: polishing, compounding and everything.

Q: You must have tremendous powers

of persuasion to land Wajid Ali’s car because his polo-playing son Shahid Ali himself is a vintage cars aficionado...

JA: Yes, I landed it through Syed Shehryar Ali, as he wanted his grandfather’s car to be restored. This actually is the third car after a 1938 MG [the same model that Prince Phillip drove] and a Mustang that I am working on for Shehryar. Car restoration, I only do for passion, without charge to friends.

For me the satisfaction is in seeing the a vintage piece restored, and not the money. Detailing is different; that is my commercial concern.

Q: How does car detailing work?

JA: It’s very complicated actually. We have always lived with the concept of

AUTOMOBILES

service stations… Getting the car done in 15 minutes or one-hour max. Car detailing [in contrast] is a very complex process. It can involve from four to 40 steps. And that really depends on the kind of work the client wants, what kind of work is required on the car, how well he wants it to come out. It can be an old car, or a new one. It can be his grandfather’s car and he may want it detailed to the point where it will stay functional for another 5-10 years, with its paint and the interior protected.

So, it’s very multifaceted, not a [rudimentary] concept like what you see at a service station. If I were to explain car detailing in short, it is basically the restoration of the paint, interior, exterior in multiple steps and it usually

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‘BEACONHOUSE IS DOING A SERVICE TO THIS NATION BUT IN A DIFFERENT WAY. THEY ARE EDUCATING CHILDREN OF A CLASS THAT IS MASSIVE THROUGHOUT PUNJAB. WE EDUCATE [THE PROGENY OF THE ELITE], FROM BIG BUSINESS, POLITICS AND INDUSTRY’ takes about a day or two. We’ve done cars that have taken us five days to finish. So, detailing is more of an art… of cleaning and restoration and the paint and interior and the plastic and the rubber and the chrome of the car. It’s a very multifaceted and multidimensional process.

Q: And what kind of financial costs does it involve?

JA: Obviously the human resource cost is the most expensive. We need very trained people. My people are trained from Dubai. My people are trained locally with tons of experience; because we usually do this … we don’t do hand-work as such. This is machine work. So, you have to be very trained in machine. You have to know what speed you run the machine on or the pressure do you run the dual applicator on. Then you also have to have knowledge about the paint depth, the paint condition, the integrity of the paint, what kind of scratch are we looking for that needs to be taken out? That’s the most expensive bit of it. Otherwise, the products that we use …. Our most expensive line of products are the ceramic pro products; they’re very expensive. The base starts from around $120. This is one product that I am talking about that goes in one car.

So, our usual cost for one car starts from $350 and that’s where we start from and go on above. So, basically, primarily, the main cost is of the human resource.

Q:: Is it getting any traction in the market?

JA: Yes, lots of it. We work at capacity every day. That’s why we had to increase our footprint into other cities. If it were not going to get any traction, it won’t make commercial sense, right? In fact, now we are also in the process of expanding, like I said before, to Sialkot and Multan. We started our mobile detailing arm as well, which is doing really well. Basically, we’ve got couple of cars equipped with machines, products and everything. They go to people’s houses.

That’s where they finish the work. So, if people don’t want it spread over two days and instead need to get it done in 3-4 hours, then we send a team to their place. This was a very small startup but making good revenue annually, so much so that I’m seriously thinking of putting in more investment.

appreciate the engineering that goes into every molecule of the paint… It’s visible to the naked eye. It is vastly different… and that stimulates my interest and passion.

Q: How cumbersome is it?

JA: It’s just work. As long as you love doing what you’re doing, it’s not cumbersome at all. We have been at it for 7 years plus, and we know this job like the back of our hands.

Q: How difficult is it to acquire the missing parts...

JA: Quite difficult… but with the advancement in communication, in particular internet, life is far easier than it used to be 10 years ago. Parts you can

source online. Obviously bringing in the parts is always a pain, because there’s no set pattern, no certain procedure at customs. At first it was difficult because we did not have internet, we had to check with everyone and we didn’t know what kind of pictures were there of the parts. Now everything’s available on the internet so it’s far easier. Not less expensive but far easier.

There are some cars with parts that are ridiculously expensive like the couple of Mercs that I own are very expensive to restore. I mean I have to spend about $1,000 just to get bits of the windows. Maybe $300 for the rubbers.

Q: What has been your growth trajec-

Q: So, your passion is your business now...

JA: Yes, it has worked really well [financially]. And it has given me a lot of exposure to a lot of different cars.

Sometimes the cars that come here are insane, you know. We’ve done Rolls Royces, Ferraris and Lamborghinis.

Name the car and we’ve protective coated it. Sometimes even I go and work on them. I don’t need to but I go, out of sheer love and to understand the paint quality, or to understand what kind of engineering goes into this vehicle. Even the paints, we usually use that spraying technique in Pakistan. There’s no science, there’s no logic. But when you look at a German or Italian car, these Rs15 million plus cars, one can

AUTOMOBILES

tory from 2010 up to now?

JA: Initially it took us 3-4 years just to make the niche… to make our clientele, to make people understand what professional detailing could do for their car. Our progress remained slow, even stagnant, for 2-3 years, but we learned a lot. It has to be very clear that I had no intention of making money out of this business initially. I said to my people, don’t worry about the revenues, make your name. Make people aware of the fact that what professional detailing is I mean it’s been in America since 1960s. Pakistan only got aware of it after 2005. Before that, it was just the service station. What they do to a new car at the service station is beyond horrendous. They put the compound with their hand, they rub the car... Compounding is basically taking paint off the car. People don’t know that. They

think it’s clearing scratches. How do you clear a scratch? You take off a layer of paint and the car has no scratches and that’s what happens. So, for the first few years we stuck to creating a brand. Making a name in terms of quality, in terms of consumer commitment, in terms of after care. And after that we started acquiring the protective coating business bit. That was a huge leap in our growth. We got into ceramic pro. A lot of people were very wary of handing us their new Rs20 to Rs30 million cars. But we were on Facebook and Instagram. We invested in marketing, we invested in customer enrichment; tons of knowledge that we gave them regarding how important our business is for their cars.

Q: In car detailing, what sets DC apart?

JA: In business, there are two types of people. One, who’s in it for the money and there’s one who’s in it for the name.

I am in it for the long haul. I don’t want this business to die down. For the people who came after me, I am the pioneer.

In at least Punjab. Before us, no one was doing professional detailing in Punjab.

So, I was the pioneer here and ones that came after me, there were very good ones also. I have friends of mine who opened up detailing centers. But for some reason or the other, it always came down to how much money we make. I didn’t look at that. Well, you can say I was blessed because I didn’t have to because my livelihood didn’t depend on detailing. I wanted detailing to be a household thing. Whatever we earned, we invested back into it. Major chunk of what we got, we invested in marketing and our facility. You need to keep adding quality. This is what sets us apart.

Q: In the school business, you’re not big enough to compare to Beaconhouse or LGS...

JA: But we’re a very expensive school.

Not everyone can afford it, we have 3,500 kids in our schools, in two cities and we cater to an extremely niche market. Beaconhouse is doing a service to this nation but in a different way.

They are educating children of a class that is massive throughout Punjab. We educate [the progeny of the elite], from big business, politics and industry.

Q: What are you offering in return for upscale fees?

JA: What we’re offering is clearly reflected by the fact that we don’t have space.

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AUTOMOBILES

FACEBOOK GOT CLOBBERED,

WHY MARK ZUCKERBERG WON’T CARE Failure figures prominently in his definition of success

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By Simon Targett and John Butman

acebook stock collapsed Thursday, with share prices plummeting nearly 19 percent. The falling stock prices wiped out $119 billion of the company’s market value, the largest one-day loss in American history.

It was not a great day for Mark Zuckerberg, who, alone, lost $15 billion.

And yet, it’s unlikely that Zuckerberg will wake up on Friday chastened. Setbacks such as these may look

36

like grave errors or existential crises to some observers, but entrepreneurs often argue that they are just missteps along the road to success.

In his most recent letter to shareholders, Jeffrey P. Bezos, Amazon.com founder and owner of The Washington Post, wrote that, along with many successes, “we’ve also had billions of dollars’ worth of failures along the way.” Tesla founder Elon Musk has written that “failure is an option” at SpaceX, his out-there company that is aiming to send humans to Mars. And Musk goes further: “If things are not failing, you are not innovating enough.”

Zuckerberg likewise told a Facebook community that “if you’re successful, most of the things you’ve done were

wrong.”

Although such comments may be characteristic of the successful entrepreneur’s penchant for self-mythologizing, persistence in the face of failure is embedded in the very idea of America. Americans believe that, with persistence, the application of hard work and an unquenchable belief in ourselves, a solution can be found to every problem. This belief has held for over four centuries, despite the fact that, for many people, failure is final: There is no second chapter, no second chance.

What is striking is that, in America, there is no shame in failure. Of course, no one wants to fail. But while in some countries failure is a source of humiliation, in America, it is regarded, if not quite as a badge of honor then, certainly, as a learning experience.

Why is it that the idea continues to resonate? Because the country was founded on it. Even before the Pilgrims landed on Cape Cod, a group of brilliant English merchants and their associates mounted a series of voyages and expeditions that led, eventually, to the settling of America in the early 17th century.

Famous in their day, these people — a constellation of venture capitalists, politicians, aristocrat-investors, scientists, chroniclers and buccaneer-sailors — are rarely remembered for their part in America’s founding story. They began their quest in 1551, when a drastic economic crisis left London’s leading merchants facing financial ruin and forced them to look beyond Europe for new markets. Obliged to take action, the merchants mounted a daring expedition to China, then the world’s largest economy, to sell their main product — woolen cloth — and purchase silks, spices, intricately woven carpets, exotic foodstuffs and the like for the English gentry.

At first, the merchants went east, hoping to find a quick route over the top of the Eurasian landmass. That didn’t work, so they switched directions and headed west through the icy Arctic waters of the fabled Northwest Passage. Again, they failed to reach their goal. But instead of China, they found America’s Eastern Seaboard and began an era of exploration that resulted in a 50-year run of failed ventures and lost lives.

But a few — some of them particularly skilled, some of them just lucky

— survived to live another day, to enjoy some success and to pass on their lessons to others. From the first voyages in the 1550s, there was a conscious effort to record what worked and what didn’t, so that successive generations could learn how to do things differently and better. In this way, they began to stitch multiple threads of failure into a fabric of success.

The classic story of how the early adventurers overcame a long string of setbacks is Jamestown, the first permanent English settlement in America.

In April 1607, just over 100 settlers, many of them indentured servants, landed in what is now Virginia, establishing a rudimentary fort on a swampy island off the north bank of a river they named the James, after the king of England. Over the next 2½ years, many died from disease, hunger and battles with local Indians. The merchants, eager to keep the settlement going, sent over several ships carrying more settlers and supplies.

And then a string of disasters struck.

In July 1609, the Sea Venture, the flagship in a fleet of nine vessels, was caught in a vicious hurricane. Remarkably, although the ship struck reefs off the little-known islands of Bermuda, everyone survived and made it to shore. The merchants back in England learned from the others in the fleet that the flagship had been lost, but they urged their investors not to lose faith in the Jamestown initiative. “Is he fit to take any action whose courage is shaken and dissolved with one storm?”

They sent out more ships the following spring, only to discover that the population of Jamestown had been reduced to some 60 settlers who were hanging on after a brutal winter, violent confrontations with the Powhatan Indians and a lack of supplies.

Desperate with hunger, the Jamestown settlers had resorted to eating anything they could catch: cats, dogs, horses, mice, rats, snakes and, finally, their fellow settlers, in what became known as the Starving Time.

For those who survived, the experience was transformative. As a community, they had come through the toughest of times, and it instilled in them a new belief that they could overcome the most difficult challenges that life in America could throw at them.

The merchants learned from the

experience, as well, and rethought the way they were running Jamestown.

They realized that the settlers had to have some measure of autonomy and an opportunity to personally benefit from their efforts, beyond the earning of wages. Four years after the events of the Starving Time, the survivors who had arrived as indentured servants were released from their obligations and rewarded with plots of land on which they could enjoy the fruits of their own labor. And five years after that, some of them were sitting at the first meeting of America’s first representative assembly — Jamestown’s House of Burgesses.

These Jamestown settlers were arguably the first people to create the idea of the American Dream that has since animated our country’s mythology. In England, they had faced the grim prospect of living their entire lives in the grinding poverty endured by their forefathers. In America, with its promise of reinvention, they could be reborn. They might start with nothing, but through dint of hard work, determination and an entrepreneurial willingness to take risk, they could make their own luck, becoming tenant farmers with a voice in local government — something unimaginable when they lived in England.

Zuckerberg, Musk, Bezos — they are the entrepreneurial descendants of these early venture capitalist-merchants. They accept and acknowledge their setbacks, even claiming them as essential to the creation of their success.

But for all their wealth, they are not unique. They are merely standout exponents of an idea that has become deeply entrenched in American life.

Across the country, people in all walks of life understand that failure isn’t a bad thing — it’s something to learn from and to bounce back from. “I’ve been up and down and over and out/ And I know one thing” crooned Frank Sinatra in “That’s Life”: “Each time I find myself flat on my face/I pick myself up and get back in the race.” In a way, America stands as a testament to humankind’s ability to overcome failure.

The question now is: What have Zuckerberg, Musk and Bezos learned from their setbacks, and what will they do with that learning?

Courtesy: The Washington Post

SOCIAL MEDIA

To save water, the country needs to replace its age-old method of irrigating crops with improved yield and quality being tangible benefits

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By Eleazar Bhatti

aced with one of the most crucial issues of all time – food and water shortage, Pakistan now more than ever needs a solution to tackle this menace. With over 200 million people depending on depleting water reserves to be refurbished, some experts believe that this would be the biggest challenge for the just-elected government.

Agriculture constitutes the largest sector of Pakistan’s economy, with the majority of the populace directly or indirectly dependent on this sector.

To the extent that it contributes about 24 percent of Gross Domestic Product (GDP), accounts for half of labour force employed and is the largest source of foreign exchange earnings.

Feeding both rural and the urban areas of the country, it also accounts for sizable exports. Realising its importance, planners and policy makers are always keen to have reliable area and production statistics of agricultural crops well in time. Policy makers primarily need accurate and timely statistics for the important crops such as wheat, cotton, rice, sugarcane, and maize etc.

In recent years, owing to price increases of essential commodities – pulses, onion, potato, chili, and tomato – these crops have also gained in economic importance.

While agriculture accounts for over 90 percent of all freshwater consumption in Pakistan, nearly 50 percent of it is wasted due to poor and profligate irrigation practises.

According to Pakistan Bureau of Statistics (PBS), in 2013-14 a total of 18.63 million hectare metres of land was irrigated through various sources including tubewells, canals and wells.

According to the World Bank estimates conventional irrigation methods such as flood irrigation render significant water losses of 20 to 25 percent. Meanwhile, uneven fields and poor farm design further add to agricultural losses.

Under the Water Accord 1991 between provinces, Punjab receives 6.9 million-hectare metres, though less than half of that, only 3.2 million-hectare metres ever makes actually it to the farms due to losses in canals and watercourses.

‘UNDER THE WATER ACCORD 1991 BETWEEN PROVINCES, PUNJAB RECEIVES 6.9 MILLIONHECTARE METRES, THOUGH LESS THAN HALF OF THAT, ONLY 3.2 MILLION-HECTARE METRES EVER MAKES ACTUALLY IT TO THE FARMS DUE TO LOSSES IN CANALS AND WATERCOURSES’ Drip Irrigation: Less water, greater yield

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rip irrigation is a relatively modern micro-irrigation system that has the potential to save water and nutrients by allowing water to drip slowly to the roots of plants, either from above the soil or buried below the surface. The goal is to place water directly into the root zone and minimise evaporation. Drip irrigation distributes water through a network of valves, pipes, tubing and emitters.

Depending on how well designed, installed, maintained, and operated it is, drip irrigation can be more efficient than other systems, such as surface or sprinkler irrigation.

Drip irrigation is used in farms, commercial greenhouses, and residential gardens. It is extensively adopted in acute water scarcity areas – especially for crops and trees such as coconuts, containerised landscape trees, grapes, bananas, ber, eggplant, citrus, strawberries, sugarcane, cotton, maize, and tomatoes.

A local farmer managing a smallish 9.5 acre orchard, Abdul Tariq told Profit, “Drip irrigation is revolutionary...

The efficient application and use of water for every plant is very important, as it not only increases the yield but also affects the quality of produce.

“It used to take me two days to irrigate the orchard through flood irrigation. Now, it takes me around 2 hours to 3 hours and my yield has not only increased by at least 35 to 100 percent but the quality too has improved.”

Explaining further, Tariq said, “Drip irrigation allows better fruiting on every plant. Plant health does not get compromised, while the survival rate of saplings too has significantly increased – to 97 percent from 60 percent.”

Drip irrigation has increased water efficiency by 50 per cent, Tariq added, saying drip irrigation is the best solution to cope with Pakistan’s water

crisis and food insecurity. Agriculture experts believe that the implementation of modern irrigation methods allow uniformity among crops in terms of colour, size and shape, while reducing physical labour by at least 20 to 30 percent.

Corporate Social Responsibility

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n collaboration with the World Bank and the Agriculture Department, Nestlé Pakistan has expedited its efforts to promote drip irrigation to tackle water scarcity in the province, while ensuring a sustainable supply chain.

Visiting a farm near Okara that has been set up as a pilot project with the help of Nestlé to understand drip irrigation, Naeem Hafeez, the farm owner, shared with Profit about how he was saving at least 50 to 70 percent water through drip and sprinkler irrigation system, as water was being provided in right measure direct to the roots, eliminating wastage.

Having installed the drip system at his 38 acre farm, Hafeez told Profit that per acre installation cost was Rs70,000 to Rs100,000, but the long term savings and benefits by far outweigh the initial setup tab.

“I am saving almost 50 percent in fertilizer cost. Fertilizers are directly mixed with the water and then distributed to the roots of the crops. Now, these savings coupled with water saving, increased production, reduced labour input and other operating costs, make one recover the initial outlay within one single season.”

According to Hafeez, flood irrigation, not only consumed higher quantity of fertilizer but also supported weeds detrimental to high-yield. In drip irrigation, he said, weeds would not receive water or fertilizer.

Moreover, under the pilot project Nestlé has covered 40 percent of the

WATER

farmer’s cost of putting up equipment for drip irrigation while the Punjab Agriculture Department covers 60 per cent of the cost through the World Bank SMART Programme.

Nestlé Sustainable Agriculture Specialist Allah Bakhsh told Profit, Nestlé Pakistan’s team has developed smart soil moisture sensor that can read the moisture and water level in the soil and send regular data updates to a cloud from where farmers receive information regarding where and when the crops need to be irrigated. And also how much and which area to irrigate, keeping the farm from under or over-irrigation. Nestle expects another 20 per cent reduction of water as a result of Water Sense Technology.

These sensors have been developed by Nestlé’s Milk Collection and Dairy Development (MCDD) team in collaboration with Waziup in Italy, University of Pao in France and Lahore University of Management Sciences (LUMS) in Pakistan.

And this is not all, Hafeez is also working on installation of solar pumps on his farm with the help of Punjab government with 80 percent contribution from the provincial government and 20 per cent by the farmer. In parts of Punjab where unannounced power outages last up to 8 hours disturbing the irrigation schedules, solar panels are now becoming a necessity.

According to another Nestle farmer Mustapha, “Solar power, in Punjab is estimated to be operational for 330 days in a year. If we rely only on traditional grid network, the drip irrigation system would run for only 150 days in a year.”

Moreover, the project has also received support from the Punjab Agriculture Department and is actively being promoted throughout the region.

Allah Bakhsh stated that the government was encouraging the adaptation of technology under ongoing Punjab Irrigated-Agriculture Productivity Improvement Project (PIPIP) to overcome scarcity of water.

Under this project, he said, the Agriculture Department installs drip and sprinkler irrigation on subsidy

‘AGRICULTURE EXPERTS BELIEVE THAT THE IMPLEMENTATION OF MODERN IRRIGATION METHODS ALLOW UNIFORMITY AMONG CROPS IN TERMS OF COLOUR, SIZE AND SHAPE, WHILE REDUCING PHYSICAL LABOUR BY AT LEAST 20 TO 30 PERCENT’ basis. With this technology, he said, the farmers could save 60 per cent electricity and diesel costs while augmenting per acre yield by 100 per cent.

Currently, the system was used for small scale cultivation, however, other techniques and methods are underway to extend the programme to large scale cultivation.

“With automated drip irrigation system powered by a solar pump, we are able to optimise water use for agriculture keeping in view dwindling groundwater resources in Punjab,” Allah Bakhsh explained.

Nestlé has installed drip irrigation on 68 acres in 2017, saving up to 140 million litres of water, with an aim to take this acreage up to 118 by the end of 2018. Moreover, Nestle aims to deploy this technology to at least 185 acres till 2020 and is constantly bringing farmers onboard to achieve this vision.

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Food Exports

griculture experts believe that by implementing techniques and strategies such as drip irrigation, Pakistan can not only solve its water crisis but also boost food exports. Innovative steps like drip irrigation not only improve produce, as mentioned earlier, it also gives uniformity to the produce. Moreover, it is cheaper.

Farmers essentially do not control prices, but they can control costs, essentially increasing profits both locally and internationally.

Despite weak exports, Pakistan has managed to increase food exports by 29.28 percent during the outgoing fiscal year 2017-18 against the exports

‘WHILE AGRICULTURE ACCOUNTS FOR OVER 90 PERCENT OF ALL FRESHWATER CONSUMPTION IN PAKISTAN, NEARLY 50 PERCENT OF IT IS WASTED DUE TO POOR AND PROFLIGATE IRRIGATION PRACTISES’ 42

of the same period of last year. Food exports were recorded at $4,797.936 million during July-June (2017-18) against exports of $3,711.159 million during July-June (2016-17), showing growth of 29.28 percent, according to the latest data of Pakistan Bureau of Statistics (PBS).

Among food products, rice exports have increased by 26.78 percent from $1,606.834 million last year to $2,037.075 million. Among the rice varieties, export of basmati increased by 19.14 percent while the exports of other rice commodities increased by 29.78 percent.

The fruit exports increased by 5.08 percent going up from $184.016 million to $241.426 million. Likewise, vegetable exports have increased by 30.56 percent, from $184.916 million to $241.426 million. Sugar exports on the other hand increased by 215 percent, from $161.039 million to $508.333 million while wheat exports went up from $1.038 million to $236.339 million, showing growth of 22668 percent.

Meanwhile, imports into the country during the period also increased by 15.10 percent by going up from $52.910 billion in FY 2016-17 to $60.898 billion during FY 2017-18. Based on the figures, the external trade deficit during the outgoing fiscal year 2017-18 increased by 15.95 compared to last year and the trade deficit during FY 2017-18 was recorded at $ 37.670 billion against the deficit of $32.488 billion in FY 2016-17.

Drip irrigation, water sense technology and solar panels combined reduce costs exponentially, ultimately allowing a small step to make a major impact.

The bottom line is, improved agricultural productivity depends on efficient use of resources; principally land and water. However, the key to successful change rests with the large landowners owning 40 percent of the arable land and controlling most of the irrigation system.

WATER