Profit E-Magazine Issue 55

22

10

10 Weekly Roundup 15 Can ITU become Pakistan’s MIT?

18 18 While PSX has a horrible year, one company more than doubled its share price 22 The rupee is falling. Let it crash

29

29 What does Café Zouk know that others in Lahore’s tough restaurant market don’t?

35 200 million people and zero unicorns Zaki Mahomed

29

18

Executive Editor: Babar Nizami l Managing Editor: Farooq Tirmizi l Joint Editor: Yousaf Nizami Reporters: Arshad Hussain l Muhammad Faran Bukhari l Taimoor Hassan l Ghulam Abbass l Ahmad Ahmadani Shehzad Paracha l Haniya Javed 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 l Publishing Editor: Arif Nizami l Business, Economic & Financial news by 'Pakistan Today' Contact: profit@pakistantoday.com.pk

CONTENTS

welcome

THE GREAT CHASM The median age of Pakistan is less than 24 years. Ours is one of the youngest countries in the world, and one governed by old men with even older ideas about how the world works, and how the country should work in it. That stark divide between young and old is never more prominent than one goes from discussing Pakistan’s macroeconomic policies – dominated as they are by the old babus – to talking about the country’s nascent startup scene, filled with young visionaries boldly seeking to build out the new and untested.

We do not mean to be ageist. The old can be open to new ideas and the young can be anachronistic and obscurantist as well. But what is undeniably true is that Pakistan has a government dominated by tired old ideas, and a population that increasingly can no longer afford to be ruled by them. In this issue, we examine the government’s policies with respect to the exchange rate and its relationship to inflation, and discover that the policy was initially put in place in 1949 and has scarcely changed since then!

Were it an effective means of controlling inflation or providing exchange rate stability to the economy, we would not be concerned, but seeing how it is neither, and has over seven decades of failure as its track record, we are left scratching our heads as to how and when the government of Pakistan will abandon the insane policy of consistently trying and failing to defy the

FROM THE MANAGING EDITOR

laws of economic gravity.

Meanwhile, we have stories of entrepreneurs who are seeking to build a globally competitive technology company headquartered in Lahore, a team of ambitious civil servants seeking to build an MIT on the Ravi, and a young Pakistani who has done well for himself in Silicon Valley, reaching out to his compatriots to offer advice, mentorship, and possible connections to resources. Could there be a starker contrast between two groups of people? Could there be a sharper divide between the two directions the country could take?

The current administration has promised a new Pakistan and they may yet deliver. But if they are going to have even a prayer of success, they would be well served by looking to the example of these enterprising young people seeking to build a new Pakistan themselves, whether the government wants to help them or not.

Farooq Tirmizi Managing Editor

9

Federal Minister for Petroleum Ghulam Sarwar Khan

QUOTE

“The government has set priorities of taking highest power production from hydel sources”

“Farmers should not be worried as the government is not shutting down fertiliser plant manufacturing units and there is no urea shortage” Adviser to Prime Minister on Commerce, Textile, Industry & Production and Investment Abdul Razak Dawood

$8.4b

in business losses could be saved by Pakistan via power sector reforms and could increase total household incomes by at least $4.5 billion per annum, says a World Bank report. Almost a fifth of electricity generated in Pakistan is lost to poor infrastructure, faulty metering and theft, the report stated, adding that load shedding is caused by high cost, losses and subsidies, which compromise investments and the ability to procure fuel. The report argues that reforms that focus solely on liberalizing energy prices would lead to an excessively high cost of electricity because of inefficiencies in the system, thus negatively impacting the poor and vulnerable. Reforms must therefore go beyond liberalizing energy prices to address several aspects of the power sector distortions, including prioritizing gas allocation for efficient power generation and adopting tariff mechanisms that encourage performance. For the benefit of consumers, reforms should focus on rationalizing consumer prices for electricity and gas to reflect supply costs; and social assistance to help vulnerable populations cope with increased energy prices. Increased access to reliable power must be made a priority. Pakistan’s power sector suffers from inefficiencies that cost the economy $18 billion or 6.5 per cent of the GDP in the fiscal year 2015, according to a new World Bank report.

30pc

increase in last one year has been registered in the number of taxpayers, said Minister of State for Revenue Hammad Azhar. While addressing a press conference in Lahore, Mr Azhar stated the government was committed to bringing tax reforms and widening the tax net for putting Pakistan on the path of progress and prosperity. Moreover, the minister said it had been decided to translate the Federal Board of Revenue policies and tax laws into Urdu for making the tax system easier to comprehend for the common man. It was reported that the FBR had received 1.4 million income tax returns, said officials at the tax regulators office. In the tax year 2017, there were around 1.733 million taxpayers on the Active Taxpayers List (ATL) and 20% of them haven’t filed their tax returns for the tax year 2018, reports Express Tribune. However, the tax regulator believes it has been able to widen the base by one-fourth, since until 15th December 2017, less than 1.1 million taxpayers had filed their returns. The ATL will be published on March 1st,2019 as per the Income Tax Rules and individuals who aren’t on the list will be unable to purchase cars and properties valued over Rs5 million.

10

5.4pc

is being projected to be Asia’s economic growth next year by the International Monetary Fund (IMF).

Trade frictions between China and the United States are already affecting business confidence and investment in Asia, a senior International Monetary Fund official said, warning that the fund could further cut its global growth forecasts in January. Citing the potential fallout from the Sino-U.S. trade war, the IMF cut its global growth forecast in October to 3.7 percent for both 2018 and 2019, down from 3.9 percent projected in July. It expects Asia’s economic growth to slow to 5.4 percent next year from 5.6 percent projected this year. Rhee said there was a chance the IMF could cut further its growth forecasts when it reviews them in January, given signs of slowdown not just in Asia but in Europe and the United States. “Uncertainty is so large … uncertainty means you have upside potential as well as downside risk. At this moment, we believe the downside risk is a little bit higher,” he said. On China, Rhee said it was not resorting to big-scale stimulus despite growing external headwinds, given the need to deal with long-term challenges such as curbing excess debt.

“Western countries pushed Pakistan into debt trap” Deputy Chief of Mission at the Chinese Embassy in Pakistan Lijian Zhao

5.1pc

QUOTE

$70m

is being invested by Alibaba’s partner Whale Cloud in Pakistan. A world-leading data intelligence company, Whale Cloud was founded in 2003 as the largest subsidiary of ZTE and has been involved in telecom data processing and ICT domains for 15 years. In early 2018, it became a strategic partner of Alibaba Cloud. Today, Whale Cloud provides digital transformation technologies and services for telecom operators, governments, and enterprises in more than 80 countries and regions in the world. Ben Zhou, who was on a short visit to Pakistan, shared his views on how whale cloud could help the Chinese government as well as governments around the globe to develop smart infrastructure using private cloud service to ensure data security and integrity.

$35.5b

are expected to be the profits of the aviation industry in 2019, according to the International Air Transport Association (IATA). Global airlines will see rising profit growth and record carbon dioxide emissions next year as strong demand offsets cost pressures that trimmed profitability in 2018. IATA chief economist Brian Pearce said IATA did not expect a recession ahead but there was a lot to worry about, with trade protectionism and uncertainty around Brexit, although even the most chaotic outcome of Britain’s exit from the European Union was expected merely to slow, not stop, long-term growth. Margins would continue to be under pressure from wage pressures and non-oil costs, although fuel prices had fallen, and airlines around the world had seen dollar-denominated costs rising, he said. Investors’ return on capital was expected to stabilise at 8.6 percent this year and next. Although that would be the lowest since 2014, it would be above the cost of capital – the returns that investors could earn by putting their money elsewhere.

of GDP has been projected by Fitch to be Pakistan’s current account deficit in current FY19. Fitch Ratings downgraded Pakistan’s long-term foreign-currency issuer default rating (IDR) to B- from B previously and maintained the outlook as stable. According to the rating agency, the downgrade was indicative of a heightened external financing risk from low reserves and elevated external debt repayment. Fitch projected GDP growth to fall to 4.2% in FY19, from a 13-year high of 5.8% in FY18, as monetary and fiscal tightening measures begin to weigh on activity. It added the continuing deterioration in the fiscal position with a rising debt to GDP ratio also contributed to the downgrade to B- from B previously. Fitch said successful conclusion of ongoing negotiation on IMF support could help stabilize external finances, however, the programme would then face significant implementation risk. It mentioned successful negotiations with the IMF could help attract more stable and sustained financing by opening up budget support from the World Bank (WB) and the Asian Development Bank (ADB). Also, it could assist in improving access to bilateral lending and global capital markets, it added.

However, execution risks would be high considering uneven conformity to previous IMF programmes and Fitch projected that in its absence foreign exchange reserves will continue depleting to $7 billion by end of FY19. Also, foreign currency reserves continued their decline, touching $7.3 billion as of December 6th, 2018, equivalent to 1.5 months of imports, despite major stabilization efforts by the central bank and new government. The rating agency projected high gross financing needs, with an expected narrowing of the current account deficit which will be counterbalanced by higher external debt service payments compared to last year.

Fitch highlighted sovereign-debt service obligations over the next three years stood at $7 to $9 billion per year, which includes a $1 billion Eurobond repayment due to in April 2019.

$2b

of liquefied natural gas (LNG) imports is being sought by Pakistan on deferred payments from Qatar. Sources in the Petroleum Division informed Pakistan has been considering bringing LNG from Qatar on one-year deferred payment to meet country’s energy needs, adding that the finance minister, currently on a visit to Qatar, would float this proposal before the Qatari authorities. They said the incumbent government is hopeful of clinching a fresh deal on LNG import with Qatar. At present, Pakistan is importing $4-5 billion worth LNG from Qatar to the country. It is relevant to mention that Islamabad has been importing LNG from Qatar under a 15-year agreement, despite the severing of diplomatic ties between Qatar and Saudi Arabia.

BRIEFING

“Pakistan, China agree to initiate projects in less developed areas; Balochistan will be given adequate share” Planning and Development Minister Makhdoom Khusro Bakhtiar

Rs148

QUOTE

29pc

stake has been successfully divested by Engro Corporation in Elengy Terminal Pakistan Limited (ETPL) to Vopak LNG for $31.378 million. In a notification sent to the Pakistan Stock Exchange (PSX), Engro Corporation said the share purchase agreement reached in July this year for the divestment of up to 29% stake of ETPL to Vopak had been completed on December 13th, 2018.

Moreover, Vopak LNG has also acquired a further 5% stake from International Finance Corporation (IFC) pursuant to IFC’s tag-along rights under the shareholders agreement that it has in place with Engro Corporation. The total foreign direct investment (FDI) from this deal is expected to be around $31.4 million dollars.

4.3%

has been projected by Moody’s to be Pakistan’s real GDP growth for current FY19. ue to policy measures taken to address the external imbalance. For addressing the external imbalance, Moody’s stated policymakers have tightened domestic monetary conditions by allowing the rupee to depreciate by around 30% since the start of December last year. It added, the hike in interest rate by 425 basis points to 10%, tightening fiscal policy and imposition of regulatory duties on imports of non-essential goods was initiated to address the external imbalance. Due to a sharp depreciation of the rupee since December last year, higher electricity and gas tariffs, Moody’s said it expects inflation to increase to an average of 7% over FY19 before moderating to an average of 6.5% in FY20. Due to higher remittance inflows, which rose 15% year-on-year (YoY) during the first four months (July-October) of FY19 will support private consumption, said the report. It projected Pakistan’s current-account deficit to narrow slightly, in part as a result of the policy measures, to 4.7% in fiscal 2019 and 4.1% in fiscal 2020, from the wider-than-expected deficit of 6.1% in fiscal 2018.

to a dollar is projected to be the rate of the rupee by the end of the financial year 2018-19, said Fitch Solutions. Notwithstanding, the report forecast the rupee to weaken further against the US dollar over the coming quarters, as the IMF would typically require the central bank to build up its foreign reserves’ buffers. Thanks to the collapse in oil price witnessed in October and November, Fitch Solutions said it provided the Pakistani economy with a huge helping hand since it is a net importer of oil. It added that a combination of low oil prices and an eventual IMF bailout would assist the economy in regaining some of its footings. In the near-term, the rupee is expected to stabilize against the US dollar at around the current level of Rs140 per US dollar, said Fitch Solutions. According to Fitch Solutions, the IMF has adopted a stricter stance on Pakistan against the previous rounds of the bailout. Also, the report stated the country was unlikely to receive an $8 billion bailout package from the IMF by the next board meeting scheduled for January 15th next year, as the lender wants the government to adopt stricter measures to address the country’s economic imbalances before sending the country’s case to its Executive Board. Moreover, the research agency believes the IMF is putting the new government through its paces to assess as to why previous reforms failed to bear fruition.

Talking about the trade deficit, Fitch Solutions highlighted it remains deeply in the red, it has narrowed from all-time highs seen in June. It added, the latest data for November indicated that the trade deficit was recorded at $2.8 billion, bringing the cumulative figure to $34.6 billion (more than 10% of GDP) in the first eleven months of 2018. Pakistan’s oil imports constituted just over half of this deficit figure in October and comprised of 31% of total imports for the month, said the report. It anticipates the trade deficit to narrow over the coming months irrespective of oil price dynamics taking the country’s dollar shortage and recent rupee weakness into context.

12

Rs5.4

billion is provided to Radio Pakistan and it earns only Rs200 million, said Federal Minister for Information and Broadcasting Fawad Chaudhry.

Sharing his experience of visiting the Radio Pakistan Museum, the info minister told the parliament that there was no alternative but to introduce reforms in the institution.

Fawad said that the government was working on a comprehensive plan to merge the management system, promising to make PTV and Radio Pakistan profitable institutions within the next few years. Meanwhile, Minister of State for Climate Change Zartaj Gul informed the parliament that the federal government provided an opportunity for inter-provincial coordination. She added that the relevant organisations and departments used their own resources.

“Economic and trade policies are being framed to ensure development of agricultural and industrial sectors” Finance Minister Asad Umar

$284m

QUOTE

$2b

may be deposited in Pakistan’s foreign exchange reserves during this month. The official said the $2 billion to be received from China will come in one-go. He explained that the government was working on purchasing 15 million renminbi’s (Yuan) at a commercial rate at an approximate cost of over $2 billion for trade with China in domestic currency which will assist Pakistan in easing pressure from the greenback. The official said China doesn’t want Pakistan to highlight its help for bolstering the country’s foreign exchange reserves. Moreover, the official stated the recent statement by Finance Minister Asad Umar that Pakistan was in no hurry to get an International Monetary Fund (IMF) bailout highlights imminent relief from UAE and China to bolster forex reserves is on the cards.

$7.5b

lending will be provided by the Asian Development Bank (ADB) for various development during the next three years. In its new Country Operations Business Plan (COBP) for Pakistan 2019-21, which disclosed the ADB has proposed sovereign lending program worth $7.528 billion for next three years, consisting of $5.37 billion from regular Ordinary Capital Resource (OCR) lending and $2.158 billion from Concessional COR Lending (COL). COL includes a carryover of $600 million from 2018. The non-lending program for 2019–2021 is $21.7 million, including transaction technical assistance for various pipeline projects. An amount of $2.245 billion in ADB loan financing is allocated for the energy sector, which is 29.8 per cent of the total pipeline for 2019–2021.

The pipeline includes a multi-tranche financing facility for Transmission Strengthening (tranche 1) for National Transmission and Despatch Company (NTDC), Hydropower Development Project for Water and Power Development Authority (WAPDA), and support for the Turkmenistan-Afghanistan-Pakistan-India Gas Pipeline Project.

agreement for power transmission enhancement has been reached between Pakistan and Asian Development Bank (ADB). It comprises of a $280 million loan from ADB’s ordinary capital resources and a $4 million grant from the High-Level Technology Fund (HLTF) to assist the National Transmission and Dispatch Company Limited (NTDC) to meet Pakistan’s electricity demand of 1,150MW efficiently and reliably. To attain this target, the NTDC will deploy high-level technologies and climate-resilient transmission systems via load centres in Punjab. NTDC is the implementing agency of the tranche 3 project under the existing Multi-tranche Financing Facility (MFF) amounting to $810 million. Certain components of the investment program will be implemented by the Central Power Purchasing Agency (Guarantee) Limited (CPPA-G) including certain capacity components, as set out in the legal agreement for each tranche.

Its objective is to attain improved coverage, reliability, transparency and quality of the power transmission service in the project areas and is expected to be completed by June 2023. According to ADB, this is the first investment of its kind by the Manila-based lender in Pakistan which will pilot large-scale, grid-connected battery energy storage system and assist NTDC to conform to national standards and best practices in power distribution. The agreement was signed by ADB Country Director for Pakistan Ms Xiaohong Yang and Secretary of the Economic Affairs Division (EAD) Mr Noor Ahmed at a ceremony in Islamabad. Speaking on the occasion, Ms Yan said, “The project will help provide a more stable and secure electricity supply, so people and businesses can continue their productivity and contribution to the economy.” She added, “ADB is working with the government and the private sector to further develop Pakistan’s power supply chain, including expanding the power transmission network.”

35pc

plunge in foreign direct investment (FDI) to to $880.7 million in the last five months (July-November) of the current fiscal year (FY19) as compared to $1.359 billion received in the same period last year. Out of the total direct investment, the investment from China alone stood at $584 million in the last five months, according to the data released by the State Bank of Pakistan on Monday. The inflow of dollars from China stood at $911 million during the same period last year. The country’s FDI dipped by 35.2pc or $478.7 million in July-November 2018-19 and stood at $880.7 million, while the country’s total investments stood at $550.1 million after a decline of 54.5 per cent as compared to the last year.

BRIEFING

Readers Say Reading this article, reaffirms my belief that the Dawood's have become too conservative for their own good. It started with the ridiculous audit done by McKinsey which made them sell everything and bet everything on energy. Now they seem to have chickened out of it, which brings us to their current predicament. The amount of money involved will ensure that they come out of this doing just fine.

But what a wasted opportunity. (Apropos: Engro’s Rs60 billion question) Anonymous Many drivers are selling their cars purchased on loan from banks at throw away prices to Afghanis or to local spare marketers. We can’t see any yellow cabs given by the Sharif government. All gone to Afghanistan or black market. 2019 year would a disastrous year for banks and insurance companies on account of the loaned cars. (Apropos: The taxi driver in the age of Careem) An ex-Uber driver Great point of view and true indeed. Although I do believe Pakistan is at the very early stages of the start-up incubation process and young entrepreneurs will drive the next revolution. Once these start-ups gain momentum & profitability, the basic billionaires will probably invest and drive their scalability – hence in the process making new ‘tech billionaires’.

(Apropos: Pakistan’s basic billionaires) Kamil Shahid

How to ContaCt

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

14

The author has very rightly pointed out that people here rarely think out of the box. Business should not be solely restricted to making money, it should also bring change and make life of ordinary citizens better. On the other hand, most of our businessmen are stacking heaps of cash without paying taxes , buying properties abroad so instead of doing good for others, they’re further damaging the economy. However, exceptions always exist.

(Apropos: Pakistan’s basic billionaires) Usman Billionaires are not different species, so their investment patterns more or less reflect the investment thesis of the broader population. The entire population has a

mentality of investing in safe asset classes like real estate, or non-innovative operational businesses with limited social value addition. The author is correct that there is an immense opportunity cost to society in this. The government should introduce measures to disincentivize hoarding wealth in real estate, or conversely, to incentivize investment in more productive asset classes. Technology is undoubtedly the biggest potential accelerator or growth and social development so greater support for the tech sector is essential.

(Apropos: Pakistan’s basic billionaires) Anonymous A very third rate article. I’ve worked with a couple of people who fall in this category (the basic billionaires), and I can vouch for the fact that I found all of them to be very enterprising. The issue with this article is that it is very easy to critique others, but when it’s your turn to invest your own money, and invest billions which if lost, cannot be easily recovered, you start to lose sleep like a salaried man could never imagine. The same goes for every other thing that’s become the rage in Pakistan.

People have an opinion on everything, from politics to hydroelectric projects and just don’t talk about realities with them.

(Apropos: Pakistan’s basic billionaires) Omar Dar Basic billionaires are an outcome of Pakistan’s strengths in cheap labour and agriculture. Pakistan does not have the human capital, sophistication or infrastructure to generate futuristic billionaires. There’s only so much one man can do alone. Mark Zuckerberg, had he launched Facebook in Pakistan, would never have been able to scale like he has done in the US. (Apropos: Pakistan’s basic billionaires) Anonymous ”The United States government is there only to create an enabling environment, in order for these amazing individuals’ entrepreneurship and ideas to flourish.”

There’s the answer. Give an enabling environment and we can also get tech billionaires. (Apropos: Pakistan’s basic billionaires) Zubair Parekh

COMMENTS

Umar Saif’s brainchild is meant to be a research-focused institution.

But it remains to be seen whether it has the ingredients necessary to be globally competitive

I

By Muhammad Faran Bukhari and Taimoor Hassan

n 2001, when Umar Saif arrived at the Massachusetts Institute of Technology (MIT) for the first time in his life to deliver a lecture, he was dealt with a surprise. The university, one of the best in the world, essentially had a relatively small urban campus, especially when compared to his alma mater at the University of Cambridge and even his high school, Aitchison College. “It was raining on that day and I had to reach the fifth floor of the building to deliver a lecture. The lift was out of order, so I had to take the stairs. By the time I started speaking, I started to recognise people in the audience as I had read text books written by them. There was a person who had invented RSA, a person had written the first operating system. Those were the kind of people that were present in the audience.�

TECHNOLOGY EDUCATION

15

That was the day Saif realised that MIT was not what it was because of the facilities that it offered or its campus, but what made it great was the kind of people there, students and staff alike. In the 153 years it has been in existence, MIT has produced some of the best minds in all of human history, including 93 Nobel laureates, 25 Turing Award winners, and 8 Fields Medalists who have been affiliated with MIT as alumni, faculty members or researchers.

In addition, 34 astronauts and 16 Chief Scientists of the United States Air Force have been affiliated with MIT. That experience in 2001 set the inspiration for Umar Saif to set up an MIT-like university in Pakistan, which could produce people who could impact the world at large. An inspiration, and perhaps the successful incarnation of what was once a dream is reflected in the fact that Saif’s brainchild, Information Technology University (ITU), does not have a campus, and is established only on two floors inside a government owned building on Lahore’s Ferozpur Road, but has already started making an impact despite being in the nascent stages of its existence.

“In Pakistan the first thing they do is build a campus. The government has built a myriad of campuses in a short time frame,” Saif said, insisting that the priority should be focused on attracting competent human resources instead.

“When was the last time someone from Punjab University became a professor at Harvard? Never. That cannot be said of Indian universities. Their professors are all over the place. Pakistan has never produced anyone of that calibre.”

A research-oriented university

T

he original purpose of a university is to impart and produce new knowledge and be the guardian of reason, a sense that has been lost to the struggle for social mobility.

The situation is particularly worse in Pakistan. Creating new knowledge has never been a purpose of Pakistani universities, according to Saif. Historically, universities have very quickly degraded into teaching colleges, only left with a purpose of teaching a very large number of students.

“They never aspired to become universities,” he argued, stressing that the universities’ mainstay is its faculty and the faculties’ ability to produce

16

independent knowledge: in essence, research.

Saif sees that as a lack of vision on part of the government as there was no policy aligned with promoting and encouraging research at universities.

Why? Because universities were used as bastions of political power, turning students into political mercenaries rather than scholars.

“The biggest gangsters used to live in universities and arms would be recovered from the campuses. So we politicised and weaponised the university students for our political gain.

Politicians extracted what they wanted from the universities and then just let them be,” he said.

It is fairly easy to observe, and to speak from experience, that during the time a student invests at a normal Pakistani university, there is nothing different over the course of four years except getting taught trivial courses in an equally trivial manner. So how is ITU different?

Out of the 112 faculty members working at ITU, 86 hold a doctorate degree and are given full liberty to focus on research. “The faculty members only teach one course per semester. How can you expect someone to do research if they are teaching seven courses in a single semester? In addition, they get all the facilities for conducting research,” he said, adding that even the PhD students are paid a monthly stipend of Rs80,000 for research.

Hassaan Faisal, an ITU student enrolled in the Data Science programme, said that he chose ITU for a masters because of its faculty. “The amount and quality of research here convinced me not to go abroad. The level of teaching, the curriculum is all up to the mark. I think I made a good choice joining this institute. It is different here, students are valued.”

Traditionally in Pakistan, university faculty members have been reluctant to work under an evaluation framework, that has led to a deteriorating standard of higher education. “Even if a tenured track pays more, people teaching in universities are scared of the accountability and would rather opt to work as a lecturer earning Rs75,000 a month as it is a pensionable job,” said Saif.

Even if the university management is able to convince the faculty to work under an evaluation framework, they run the risk of getting deceived. “The professors start gaming the system. In

Pakistan there are lots of embarrassing stories. The professors start their own journals and publish plagiarized papers.

Even If they get caught, you cannot fire them, because they hide behind the protection of court or a political party. Hence, Pakistani universities were destroyed and are non-entities internationally,” he said.

In contrast, ITU’s faculty gets the support they need to travel, to buy equipment and to hire people from the market for research, promoting an environment more conducive to research, structured more like MIT, as Saif envisioned. Moreover, the faculty has no constraints on how to perform, are independent and hired on a tenure-track system. “They get a six-year clock within which they have to publish a top-tier conference or journal in their field twice.”

A testament to ITU’s research endeavours was this year’s Conference on Human Factors in Computing Systems (CHI), considered the most prestigious in the field of human–computer interaction and is ranked one of the top conferences in computer science, published four papers from Pakistan, all from ITU. “One of those papers is the second highest rated paper in the entire conference, out of about. 2,500 submissions,” a visibly excited Saif said.

But research is expensive and not many universities in Pakistan are able to spend a significant amount of money on it. Unlike Pakistan, universities in the United States are usually supported by endowment funds, financed by philanthropic donations from family foundations. Billionaires, as an act of philanthropy, create foundations which then support Stanford, Princeton, and the likes of them.

“We are very charitable in Pakistan but we have hardly any family foundations. Most [wealthy] people hand over their wealth to their kids when they die.

All the [major] American universities run on the support of these foundations. All these foundations have put money into the endowments of these universities and [some of] their endowments are bigger than Pakistan’s whole budget.”

Currently, ITU does not have any privately funded endowments, but has a Rs500 million endowment fund that has come from the government. But no one spends this money and it keeps adding up as a saving of the university to help it in the time of need.

“IN PAKISTAN THE FIRST THING THEY DO IS BUILD A CAMPUS. THE GOVERNMENT HAS BUILT A MYRIAD OF CAMPUSES IN A SHORT TIME FRAME. [BUT] WHEN WAS THE LAST TIME SOMEONE FROM PUNJAB UNIVERSITY BECAME A PROFESSOR AT HARVARD? NEVER. THAT CANNOT BE SAID OF INDIAN UNIVERSITIES. THEIR PROFESSORS ARE ALL OVER THE PLACE. PAKISTAN HAS NEVER PRODUCED ANYONE OF THAT CALIBRE” Umar Saif, former vice-chancellor of Information Technology University (ITU)

The spirit of entrepreneurship

A

study commissioned by MIT in collaboration with BankBoston in 1997 summarised the impact the MIT alumni had on the world, and one of the indicators they had was their entrepreneurial skill. The report noted that the 4,000 MIT-related companies employed 1.1 million people and had annual world sales of $232 billion. If all the companies founded by MIT graduates and faculty formed an independent nation, the revenues produced by the companies would make that nation the 24th largest economy in the world.

That is roughly equal to a gross domestic product of $116 billion, which was a little less than the GDP of South Africa and more than the GDP of Thailand.

Building on the same spirit, Umar Saif says that ITU’s culture has been ingrained with entrepreneurship. Our professors are also entrepreneurial. “We have a policy here at ITU according to which anything that the professors invent is yours. The university has no right over their intellectual property.

Pakistan needs innovative ideas to form new companies. It does not need ITU’s ownership of intellectual property, which other universities require of their professors,” said Saif.

“Even our professors are encouraged to be entrepreneurs and they own their intellectual property. They get one day off a week from the university to do consulting, work in the industry or work on their own entrepreneurial ventures.

Several of them have their own companies going on.” Almost 85% of ITU’s first batch of graduates was hired by companies owned by ITU’s own faculty members.

And then there is Plan9, Pakistan’s first and the fully organised tech incubator, located in the same building as ITU, nurtures and provides the students with a platform to develop their entrepreneurial ideas. Plan 9 has thus far graduated over 160 startups with their collective valuation standing at almost $70 million.

But not all graduates venture into their own startups. There are some graduates who choose to enter the job market, hoping to work with established giants in the tech industry for a lucrative career, as IT jobs are considered to be fairly well-paid.

Profit reached out to software firms to get an idea about their preference when it comes to ITU graduates compared with old universities such as FAST and NUST. A software company in Pakistan, considered to be among the top firms in the country with a global presence, disclosed that it preferred graduates from FAST and NUST over ITU and LUMS graduates, for entry-level positions.

Another employer, also considered to be among the top names in Pakistan’s IT industry, disclosed that they do not have a specific preference of graduates from a particular university, but revealed that the number of applicants to their firm from ITU was far less and there was no ITU student working with them at present.

It is pertinent to note, however, that only two batches of students have graduated from ITU since its establishment in 2012, so the number of applicants from ITU would understandably be far less than other established universities.

Surmising that ITU does not have a fair share in the Pakistani IT industry related jobs will, therefore, be premature.

A recent graduate of ITU told Profit that employer preference in the IT industry is based on the skills, academic record and the work a graduate has done. Being among the graduates of the only two batches that have graduated from ITU so far, he said that they bear the responsibility of building the preference among employers for ITU graduates, based on the work they’ll deliver.

Interestingly, he revealed that he was also working on two startups, corroborating with Saif’s claim of inculcating entrepreneurship among ITU students. “It’s not just me, many others from my batch, and even my juniors are working on startups.” He, however, lamented that not everyone can be an entrepreneur so for those who struggle to become one and prefer doing a job, there are no formal career placement programmes in the university.

While the university aspires to be Pakistan’s MIT, it is currently without a head after Umar Saif’s abrupt removal from vice-chancellorship by the new Pakistan Tehreek-e-Insaf (PTI) government in Punjab. The problems have already started emerging. A source told Profit that the university has now been operating without a head for over a month, which is a bad omen. Many of the contract employees have been forced to leave due to non-renewal of their contracts, which requires a vice-chancellor’s approval. To make things worse, the government is still mum over appointment of a new VC. In Umar Saif’s own words, the ITU faculty, most of whom came to Pakistan because they valued the ideals behind ITU, if that changes drastically, many of them might not want to stay. “Building institutions is very difficult, destroying them takes one notification,” he said. n

TECHNOLOGY EDUCATION

Avanceon Ltd’s CEO Bakhtiar Wain gears up for even faster expansion as cash flows in

A

By Taimoor Hassan

vanceon – a hybrid of French word ‘avance’ and ‘eon’, which translates literally into ‘progressing, forever’ – is an enterprising name for a company. As the name goes, it requires ruthless ambition to justify its parlance, a challenge which Bakhtiar Wain, the founder and CEO of Avanceon Ltd, seems to have readily accepted as the company gears up for expansion.

Created in 1989 in Pakistan by Wain as Innovative Automation and Engineering Ltd (IAEL), the company provides turnkey automation, instrumentation and engineering solutions.

In 2003, Engro Corporation acquired majority stakes in the business with Wain as its CEO. In 2007, Engro acquired stakes in Advanced Automation Associates (AAA) as part of its entry into the North American market. Subsequently, the entire operations of IAEL and AAA were merged and rebranded as Avanceon.

“After developing a successful business and critical mass in Pakistan,

18

the company developed an international business plan with an objective to expand into the Middle East. There was keen interest by several private equity firms. However, the company opted for the offer by Engro, which acquired 51% stake in the company,” Wain told Profit.

But Wain was able to regain majority ownership of the company after Engro Corporation divested its shareholding in Avanceon to Wain and his associates. The sell-off was finalised under a global restructuring agreement in 2012. The decision to divest by Engro, according to Wain, was a part of the conglomerate’s strategy to realign its business interest to focus on core manufacturing segments, allowing the sponsors to buy back the shares.

At present, Engro does not own any shares in Avanceon and the share split at this point in time is 70% sponsors, 5% employees, and 25% the general public.

Developing the skill-set

I

t was Bakhtiar’s cousin, Amir, who had started a company called Innovative Computers which Bakhtiar joined. “I had worked in Exxon Chemicals and Fauji Fertilizers and also

ICI for a little while in Lahore. Amir had just started his company and I joined him. We kept on working on it. Avanceon was an opportunity that came to us itself.”

The concept, Wain explained, was led by the fact that industrial automation is not a transactional business but rather a skill-set which was not available in Pakistan, and which, once developed, would eventually become their niche and the core of their business.

“The idea was to develop a skill-set which will give industrial automation solutions. That would take some time but once that was developed, it would become a unique proposition. It would also eliminate the competition since you would be the only ones with that skill-set.”

The vision also included taking that skill-set outside of Pakistan. “It took some time but we were able to achieve what we had thought of,” he said.

Today, after three decades in business, Avanceon, listed on the Pakistan Stock Exchange (PSX) as Avanceon Ltd, claims to have a strong presence in the Middle East and operates there through its wholly-owned subsidiary

“JANUARY 1, 2019 IS THE LAUNCH OF MISSION 2020, WHICH ENTAILS ACHIEVING THE FOLLOWING IN 2 YEARS: DOUBLING BUSINESS ORDER GENERATION IN PAKISTAN, INCREASING MIDDLE EAST ORDER GENERATION BY 50%, DEVELOPING RECURRING REVENUE THROUGH SERVICE BUSINESS WITH A KPI OF GROSS PROFIT EQUAL TO 50% OF THE FIXED COST, AND MAKING THE NEW DIGITAL BUSINESS SUCCESSFUL” Bakhtiar Wain, Founder and CEO, Avanceon Ltd

Bakhtiar Wain Avanceon FZE and Avanceon Automation and Control WLL Qatar. The company’s focus industry is oil and gas, water and waste water, food and beverages, specialized infrastructure, rail and metro systems. It considers the likes of Siemens, ABB and Schneider to be its competitors and its signature projects in the Middle East include the Dubai Metro, the Riyadh Metro, the Doha Metro, Hamad Port in Doha and Aramco in Saudi Arabia, among others. In Pakistan, names like Nestle, Fauji, Procter & Gamble, Engro, Shell and OGDCL are on its client roster.

Mission 2020

A

vanceon’s business is very specifically concentrated in certain areas, i.e. automating industrial processes, which involves both

electronics expertise as well as a software component.

“If you go into any industry now, most of them are being managed through a control system. A simple example of such a system would be a thermostat of an air-conditioner. But that is just one thing that controls the temperature of the air-conditioner. If you go to an industry, whole processes are to be run. Most of the industrial plants are being run through a central control system now and people don’t go out to start and stop machines. So that work, in a nutshell, from the field down to the computer and everything that is involved, we have automated that.”

“We have developed a lot of software to define how the industry [undergoing an automation] will op-

erate. This is our core business, which has taken quite some time to develop.

From the last 5-7 years, a big portion of [our] work comes from that, which is slightly high-end. We have also developed a services model in which we provide the customers after-market support. Under this model, we provide these customers long-term contracts in which we keep the system up and running,” said Wain.

The services model, according to Wain, has been so successful that it takes away 50% of their fixed cost in Pakistan. “The contribution margin of the service business that we have in Pakistan is very high now. This was the KPI [key performance indicator] that we set for ourselves at the IPO [initial public offering]. Now we are planning to replicate that business model in the Middle East.”

Wain is now poised to venture into what he calls digital transformation of the industry, also known as Industry 4.0. Under the new model, the firm’s customers will be able to move

TECHNOLOGY

“AVANCEON LIMITED HAS SHOWN STABLE SALES AND PROFITS IN THE PAST THREE YEARS WITH AN UPWARD TREND. SINCE ITS IPO, IT HAS BEEN ABLE TO GIVE INVESTORS A CAPITAL GAIN OF 400%. EVEN IN THE PAST YEAR, WHERE THE MARKET HAS BEEN CONSISTENTLY DECLINING AND STOCKS HAVE WITNESSED MASSIVE DROP IN PRICES, AVANCEON STOCK HAS BEEN ABLE TO GATHER OVER 120% RETURN” Maha Jafer Butt, Capital Stake Research Director the data onto the cloud, allowing them access to information anywhere where they are present, enabling them to make good decisions, improving their production and optimizing their costs.

All this is a part of Wain’s future vision and strategy for the company, which he ebulliently called Mission 2020. “January 1, 2019 is the launch of Mission 2020, which entails achieving the following in 2 years: doubling business order generation in Pakistan, increasing Middle East order generation by 50%, developing recurring revenue through service business with a KPI of gross profit equal to 50% of the fixed cost, and making the new digital business successful,” Bakhtiar Wain told Profit.

Expanding on the plans, Avanceon is ready to setup a fully owned subsidiary which will foster the digital business in Pakistan. “We will now actively hold partnerships with Microsoft and Amazon and we believe that

20

in five years, it will become as big a business as the services model. From there, we will take it internationally.

We have enough organic cash to invest and we will do that.”

An outstandingly sweet spot?

T

he CEO claimed that 2018 has been their best year so far and 2017 was their highest in terms of financial performance. But the year 2012 recorded a greater profit for the company than 2017. In fact, the company’s profits fell after 2012 — the year Avanceon entered into a restructuring agreement with Engro – and only regained their previous peak in 2017. In 2012, the company reported an after-tax profit of Rs763 million, which nosedived by a staggering Rs352 million to an after-tax profit Rs411 million in 2013.

Wain attributed the Rs763 million profit in 2012 to one-time financial re-

structuring gain, which was explained when the company went for an IPO in 2014. “We had also mentioned that a very sizable contribution had come from just one project considered as a spike in our business, which skewed the growth profit very positively as it was a two-year project. It was projected to overflow at that time to 2013 also,” he clarified. “We had also explained what the base business was, excluding the spike, and how we would use the proceeds to build a sustainable pipeline in Middle East and Pakistan. This is exactly what happened in subsequent years.”

The company’s financials, however, affirm its upward growth trajectory now as for the nine months of 2018, Avanceon raked in a revenue of Rs2 billion, against a revenue of Rs1.7 billion in the nine months of the previous year. The basic earnings per share were reported to be Rs3.23 in 2018 against Rs2.07 for the same period in 2017. The after-tax profit was reported to be Rs353.7 million for the nine months of 2018, compared to Rs329.2 million during the same period in 2017.

The company posted a 70% increase in profits in 2017 (Rs583 million) as compared to 2016 (Rs333 million).

“This year again we are showing about 30% growth. In the last investor brief, we projected it to be around $35-37 million. We have met our projections from the last three years.

In our business, a way to look at our financials is what is our backlog? We will end with a backlog of over US$50

million in 2018, which essentially means that we can continue meeting our profit target even if we get zero business in the next 18 months. However, as we move along, we’ll certainly sign more contracts.”

“We are at an outstandingly sweet spot,” an upbeat Wain said.

The Avanceon stock has been bullish ever since the company went for an IPO in 2014 at an initial price of Rs14 per share. It touched Rs100 a month ago and is hovering around Rs80 at present.

Capital Stake Research Director Maha Jafer Butt concurred with the Avanceon’s growth assessment and said, “Avanceon Limited has shown stable sales and profits in the past three years with an upward trend.

Since its IPO, it has been able to give investors a capital gain of 400%. Even in the past year, where the market has been consistently declining and stocks have witnessed massive drop in prices, Avanceon stock has been able to gather over 120% return.”

According to company’s financial report, Avanceon kicked off 2018 with an all-time high backlog of orders at US$ 25 million, a 25% increase in the order backlog value from 2017. Moreover, in May 2018, Avanceon signed contracts worth Rs101 million with infrastructure and energy companies in Saudi Arabia, Qatar and Pakistan, explaining out of ordinary performance of the company in 2018.

Earlier in 2017, the company observed a huge increase in other incomes from Rs32m to Rs105m due to a sudden devaluation of rupee against the US dollar which contributed exchange gain amounting Rs 88 million

on translation of foreign receivables, according to company’s statements.

But as Avanceon gets ready for expansion full-throttle, Profit asked if the company really had the capacity to meet its zealous targets. Wain convincingly elucidated that their Human

Resource (HR) department, the linchpin of company’s success, has setup training plans to improve the skill set of their employees to meet targets.

“For this expansion, HR is working parallel with the management. We are going to decrease our training wrap time. Our HR is a central component and our capacity limitation would be if we do not effectively manage our HR plan.”

“Moreover, we have one of the best stock options in Pakistan for employees. The new engineers, after completing five years, get stock options. That was one reason we did the IPO. In fact, all the financial consultants were saying that you should delay the IPO by 3 years. We said no, we have committed to our team and we have to do it. We are very HR centric,” he added.

Nonetheless, can Bakhtiar Wain keep the sweet spot from turning sour is what remains to be seen. n

TECHNOLOGY

rate e g n a exch y c n e ll) of r a r t u o c n g the ome (but n i t t omy e n l s o y c x h i e f W help aws in the y a m fall ral fl u t c u r the st

22

I

By Farooq Tirmizi

n the 1968 Hollywood movie The Lion in Winter, King Henry II of England fears his three sons are plotting against him, and so he imprisons them for treason. As they sat in their prison cells, his sons fear that Henry will go so far as to sentence them to death. In one scene towards the end of the movie, the sons are locked in the dungeon, and think they hear their father approaching their cell, about to order their execution.

“He’s here. He’ll get no satisfaction out of me. He isn’t going to see me beg,” says Prince Richard (who would go on to become King Richard the Lionheart of England).

“My you chivalric fool... as if the way one fell down mattered,” says his brother, Prince Geoffrey.

“When the fall is all that’s left, it matters,” replies Richard.

The value of the rupee is falling, and the squeamishness around what that will mean for inflation and ordinary consumers has now been dominating the national economic discourse for the last several weeks, if not months.

What is less appreciated is the view that many, if not most, economists hold about the matter: if the rupee is falling, the government should not resist its fall.

This view has its critics, who will argue – correctly – that a sharp fall in the value of the rupee will cause inflation, which in turn has a tendency to hurt the poorest sections of the population the most, and that resisting that pain is worth government effort and resources.

The problem with this critique, though, is that it fails to take into adequate consideration the structural flaws not just in Pakistan’s economy, but also in our policymakers thinking, including some flawed ideas that have managed to stay in vogue in the halls of power in Pakistan since Partition: that somehow, the absolute level of the rupee’s exchange rate is a reflection of the government’s success in economic management.

This highly erroneous idea has resulted in now several cycles of the government trying to keep the rupee’s value constant, until finally realizing that expending scarce foreign exchange reserves (which Pakistan rarely ever has enough of to begin with) to maintain the value of the rupee is just not tenable, and then allowing the rupee to crash in sudden fits and starts, rather than a smooth, but manageable, descent. Why governments choose this inane policy is an open question, though one that we hope some historical context will shed some light on.

A brief history of a terrible idea

O

n September 18, 1949, the Bank of England made a monumental decision that set off a series of events that has permanently reshaped the Pakistani economy.

MACROECONOMIC POLICY

On that day, the British government announced that it would be devaluing the pound sterling by 30%.

In those days, while the US dollar had already taken over as the default currency of global commerce, most former British colonies still pegged their currencies to the British pound. As a result, when the British government decided to devalue the pound relative to the US dollar, the government of India decided to follow suit. Crucially, however, (and this, in hindsight, was a blunder of monumental proportions), Pakistan did not follow suit.

The government of Pakistan at the time felt that it did not want to devalue the rupee because it felt that Pakistan’s own macroeconomic indicators did not justify such a move. That decision, however, had a serious negative impact on the Pakistani economy.

At the time of Partition, well over 60% of Pakistan’s foreign trade was with India. This makes intuitive sense: until August 13, 1947, all of that trade had just been intra-country trade. After Partition, those economic linkages did not disappear overnight, and all that intra-country trade became international trade.

However, in 1949, when Indian devalued its currency and Pakistan did not, suddenly Pakistani goods became more expensive to produce relative to their Indian competitors, by a factor of 30% (both currencies had a pegged exchange rate of 1:1 at Partition, which continued for the next two years). This

24

made Pakistani goods and services relatively uncompetitive, and Pakistan’s share of the Indian market started to fade over time.

This is important to remember: Pakistan lost its biggest export market not as the result of the 1965 war – which did result in more legal restrictions on trade between the two countries – but as the result of the much earlier decision not to maintain exchange rate parity with India. Given the fact that the two countries had been managed by the same central bank, and had effectively the same currency until just two years prior, it was not at all unjustifiable for Pakistan to keep the exchange rate parity.

By choosing to prioritise the absolute level of the exchange rate over the consequences for the rest of the economy, specifically the country’s nascent export industries, the government permanently altered Pakistan’s economic trajectory. Instead of integrated regional supply chains (which, by the way, survived the 1948 war just fine, suggesting that Pakistan and India can go to war and continue to trade at the same time), Pakistan is now mostly cut off from its regional markets and has set back the development of its export industries by decades.

Here is where things get interesting: the government of Pakistan did ultimately have to devalue the Pakistani rupee. In August 1955, the rupee declined by 44.2% relative to the US dollar in just one day, more than it would have, had the government decided to

retain its parity with the Indian rupee and maintain its exchange rates with its main trading partners.

The government was not able to “save” the value of the rupee and it lost out on economic competitiveness anyway. All the pain, and nothing to gain.

By that point, however, it was too late. The economic linkages that had existed before Partition were now permanently broken, and India and Pakistan went their separate ways with respect to global trade. The Pakistani rupee remained part of the Bretton Woods system of fixed exchange rates until that system broke down in August 1971 (largely due to imbalances that the United States had allowed to grow within its own economy, a story that is not directly relevant to that of Pakistan).

However, it took Pakistan more than a decade to fully convert over to the system of a “managed” floating exchange rate, a system which began on January 1, 1982 and has largely remained in place since then. The State Bank of Pakistan lets the rupee trade within a certain range, and intervenes by buying or selling dollars to keep it within the range the government of the day wants it to be.

Trying to control inflation through the exchange rate

S

ince 1982, almost every single government (with only one exception) has tried to artificially control the price of the rupee as

a means of keeping inflation lower than it naturally would be if the exchange rates were left alone.

Every time, the cycle is exactly the same: the government raises foreign debt as a means of securing more dollars, which is slowly sells over time so that it can create an artificially high supply of dollars in the economy and artificially high buying of the Pakistani rupee. This is obviously unsustainable, largely because the government is using borrowed money not to finance investment into future income opportunities for the economy but present consumption. Eventually, foreign lenders want their money back and are not willing to refinance, and hence the government’s ability to prop up the rupee ends, causing the currency to suddenly crash.

What makes this worse is that Pakistan ends up with more foreign debt and nothing to show for it. Instead of financing investments into future income – in the form of infrastructure that ultimately increases the productive economic activity of the country – the government is effectively financing the monthly electricity bills and automobile petrol costs for the urban middle class by using borrowed money to artificially deflate the cost of imported energy. A significant portion of Pakistan’s electricity generation relies on imported fuels.

The critical thing to remember is that this debt and inflation cycle is not something that is imposed on the

government of Pakistan by an external lender. It is a policy choice made by the government itself, one that many international lenders – including the International Monetary Fund (IMF) – would like Pakistan to get out of.

But a look at the history of the country’s inflation and exchange rates reveals that this exercise only has the effect of creating unnecessary shocks.

It does absolutely nothing to arrest inflation, or the exchange rate. A substantial proportion of the variation in exchange rates and inflation – including the size of the subsequent economic shocks – can be explained by just how much effort previous governments have put into trying to control both.

A brief history of Pakistan, as told through inflation

S

ince August 1947, the Pakistani rupee has depreciated at an average rate of 5.38% per year, according to data from the State Bank of Pakistan (SBP). The Pakistan Bureau of Statistics (PBS) does not make inflation data available for that same period of time, but since January 1958, the country’s inflation rate has averaged at around 7.55% per year.

Those averages hide significant variations. However, we are able to surmise at least one significant inference from the historical data: the longer the government uses artificial means to keep inflation below 5%, the worse the

subsequent increase in inflation. Reversion to the mean, in the case of the Pakistani economy, is a mean, chaotic, highly disruptive process.

The first government for which there is complete data on inflation is the Ayub Khan Administration, during whose time inflation averaged 2.8% per year. However, once again, the average hides considerable variations. The late 1950s and the early 1960s were a period of sharp volatility in prices and inflation rates, with deflation setting in through most of 1959, resulting in the lowest ever recorded inflation number in Pakistani history of -10.3% in February 1959. However, by February 1960, inflation was up to 13.3% before dropping back down to deflationary numbers for most of 1962 and 1963.

Inflation jumped sharply after the 1965 war, reaching 10.2% in December 1966 before declining for the remainder of the Ayub era. Contrary to popular perception, inflation was actually quite low for most of the time that agitation against the Ayub administration took place from 1967 through 1969. In March 1969, the month that President Ayub was forced out of office, inflation was a timid 3.6%. Some of the anti-Ayub slogans shouted by the protestors in those years may have been about the rising prices of potatoes, but the economic reality suggests that overall prices were hardly skyrocketing.

The Yahya Khan administration was marked by civil war, followed by international war, but inflation remained

MACROECONOMIC POLICY

relatively muted during that time. It is possible that war-time price controls and rationing helped make the numbers look better than they might have been, but inflation during the Yahya era averaged just 4.7% per year.

It is highly likely that the next government – the Zulfikar Ali Bhutto Administration – had to bear the brunt of all of those distortions in prices created by war and the Yahya government, because inflation suddenly skyrocketed shortly after Bhutto came into office.

From January 1972, the first full month that Bhutto was in office, until December 1973, almost two full years later, the rate of inflation rose almost every month. It peaked in December 1973 at an annualised rate of 37.8%, the highest ever recorded in Pakistani history.

The Bhutto Administration was never fully able to get a grip on inflation, and no doubt was not helped by the 1973 oil crisis, which raised international oil prices sharply, causing

inflation to skyrocket worldwide. By the time Prime Minister Bhutto was deposed in a military coup on July 5, 1977, the Bhutto Administration had averaged 16.0% inflation per year during its time in office, the highest of any government in Pakistan’s history.

The Zia Administration did better, and was able to contain average inflation to 7.2% per year during their tenure, though they were helped by more stable global commodity prices, and a steady influx of American money, which kept the exchange rate with the US dollar relatively more stable.

Nonetheless, the Zia government did repeatedly try to control the exchange rate as a means of controlling inflation, and repeatedly failed at the effort until the president’s death / assassination in August 1988.

Both of the tenures of both Benazir Bhutto and Nawaz Sharif in the late 1980s and throughout the 1990s were marred by the exact same cycle.

However, as commodity prices fluctu-

PAKISTAN LOST ITS BIGGEST EXPORT MARKET NOT AS THE RESULT OF THE 1965 WAR – WHICH DID RESULT IN MORE LEGAL RESTRICTIONS ON TRADE BETWEEN THE TWO COUNTRIES – BUT AS THE RESULT OF THE MUCH EARLIER DECISION NOT TO MAINTAIN EXCHANGE RATE PARITY WITH INDIA 26

ated somewhat more frequently in the 1990s, inflation was also more volatile than in the Zia era.

The most egregious attempt to control both the exchange rate and inflation was in the Musharraf Administration, which sought to maintain an exchange rate of approximately Rs60 to the US dollar for nearly the entirety of its term in office. Inflation during that time averaged a relatively tame 6.6% per year, though the rate had started coming down under the latter part of the second Nawaz Administration and started creeping up in the last year of the Musharraf Administration.

The full extent of the pain caused by the Musharraf government, however, was not felt until the Pakistan Peoples Party, led by then-President Asif Ali Zardari came into office in 2008.

In the very last month that President Musharraf was in office – August 2008 – inflation hit 25.3% on an annualised basis. The rupee lost a third of its value in one year.

The only government that made almost no attempt to control the rupee’s exchange rate was the Zardari administration, which let the rupee be a truly market-based free float. Unfortunately, its tenure also coincided with a sharp rise in global oil prices right when Pakistan’s need for imported energy hit its peak. As a result, despite making no attempts to control the exchange

rate, inflation remained higher than the historical average, and clocked in at an average of 13.2% per year. Even if one excludes the first year (which was really the spillover effects of the Musharraf administration’s decisions), the Zardari administration averaged a 10.9% annualised inflation rate during its tenure.

The third Nawaz Administration famously tried to peg the rupee at Rs100 to the US dollar, and mostly succeeded in doing so, though at the cost of rapidly increasing the foreign debt burden of the country. While inflation averaged just 4.9% during their tenure between June 2013 and July 2018, it is too early to tell just how much the damage will be in terms of currency depreciation and inflation, as a result of Prime Minister Nawaz Sharif and Finance Minister Ishaq Dar’s decisions.

The choice facing the Imran Khan administration

S

o what are the government’s options under the current administration? Is defending the value of the rupee even an option? And if it is, is it even desirable? And if the rupee should be allowed to fall, how much farther will it fall, and what will be the impact? Why is it considered a desirable outcome to let the rupee find its own level without any government intervention?

Here is the simplest answer to all of those questions: the government is already so far in debt, and has so much of its debt maturing in the coming months, that it simply does not have the option of trying to prop up the value of the rupee as a policy option. It absolutely has to let the rupee find its own level.

So the only question remains: why is this a desirable outcome? Because maybe, just maybe, the Imran Khan Administration can inculcate into the government of Pakistan a tradition of leaving the rupee exchange rate alone, which in turn will mean that while the rupee’s value will continue to depreciate every year, there will much fewer – if any – sudden and sharp declines in the value of the currency that we witnessed this year, and in 2008, and in several years prior.

Here is the logic behind why that makes sense: if businesses and individ-

uals know that the rupee will decline by between 5% and 7% in value every year, then they can plan for that. If inflation consistently averages between 7% and 9% a year, that makes prices and interest rates much more predictable, and thus easier to plan around.

High inflation The average annual The average annual is not good, and rate at which the rate of inflation in certainly having a Pakistani rupee has Pakistan since tamer level of infladepreciated in value January 1958 tion would be a good against the US dollar thing for the econosince August 1947 my. Sub-5% inflation consistently would certainly be highly desirable. But achievinflation has averaged 8.28% per year, ing that level of inflation would require and rupee depreciation has averaged two things: the fiscal deficit remaining 6.92% per year. If those numbers conconsistently and significantly below tinue with relatively little variation from the real (inflation-adjusted) economic year to year, the economy would be growth rate, and for Pakistan’s exports better off than it is now, when it incurs to be significantly higher as a percenta massive shock to the system about age of GDP than they are now. once every five years.

Both of those preconditions More importantly, however, the require a decade or more of sustained government would be wise to recognise policies to achieve, and in the absence that structural changes in the global of those, the least the government can energy markets mean that it is entirely do is avoid the situation we are about likely that oil prices will remain relativeto have, where the inflation rate is less ly low for the foreseeable future, and than 5% in 2018, and likely to close out 2019 well north of 10%. Two years of 7% may never rise again. This is because global demand for petroleum products and 8% inflation are better than that is in secular decline as more and more kind of volatility.

Hence, the Imran Khan Administra- cars become all-electric and renewable energy takes a greater share of global tion would be better off letting the ruelectricity production. pee collapse to whatever level it needs As a result, allowing depreciation to, and then let it trade completely of the rupee will not have nearly the freely. Nobody will blame the governsame inflationary impact now that it did ment for what happens in its first year.

And in any case, the government would in previous years.

How do we know this is true? Bebe wise to let whatever pain needs to cause the rupee just dropped in value happen occur in its first year in office by a greater percentage (33%) in 2018 so that it can spend the remaining four than it did in 2008 (29%) and inflation is years building up a better track record going to be much tamer: 25% in August to eventually campaign on in 2023.

2008 versus a much tamer 13% peak inflation expected some time next year.

That difference is entirely due to oil prices staying low in the global markets.

Simply put, there is no point in hat would the economy look wasting any government energy or relike if the government left sources in managing the exchange rate. the rupee alone?

Let the rupee float. It will sink first, but An indication of what it will eventually find an equilibrium that that might look like is visible in the works for the economy. n numbers from the post-Zia era, when

The coming structural change

W

MACROECONOMIC POLICY

How one of the oldest surviving restaurants in Lahore has been able to retain its competitive advantage over the last 24 years RESTAURANTS

29

I

By Muhammad Faran Bukhari

f you happen to visit Lahore’s MM Alam Road, you would notice an overwhelming presence of restaurants on both its sides.

According to an estimate, in the last 10 years alone, more than 25 restaurants have opened up here and closed down, and the failure rate in the restaurant industry still remains high. At one end of this road is a restaurant called Cafe Zouk, which has been there since 1995 (or almost 24 years), a rare feat in an industry with such a high failure rate.

Despite the odds, the restaurant is still a hot favourite among the food loving Lahoris, while almost all its competitors from the 1990s, have succumbed to the test of time. So why has the restaurant been such a hit and how has it been able to keep itself relevant in the grueling and unforgiving market for restaurants in Lahore? Profit sat down with Cafe Zouk’s owner, Shahzad Khokhar to find out.

The recipe for success

A

ccording to Shahzad, the secret of success lies in his dedication and a hands-on approach to managing the restaurant, making it possible to tailor and adapt to a target market that has evolved over the last two and half decades. “Your interest in the business must remain the same compared to when you first started it.

What happen is that the interest of the owners generally slides after the first year or so and they tend to leave the business to be run by the managers.

I am hands on in that sense. I decide

everything, along with my consultant ranging from the theme of the restaurant to the menu,” he says.

Over the years the restaurant has experienced substantial increase in its share of the market segment that it serves. In the beginning Cafe Zouk was primarily targeted at a younger audience (people in their teens and early 20s). However, over the years, the original target market grew up and started bringing their families (parents and children) along with them to the restaurant.

Hence the restaurant was no longer catering to only the same target audience that it was when it first started.

“We initially targeted our offerings towards teenagers and youngsters. And gradually our market segment grew. We got the older people who were in their 30s and the youngsters who had settled down and gotten married. Now we also have parents and people in their 60s and 70s coming to our restaurant,” says Shahzad Khokhar.

Since the target market has grown now, Shahzad has had to adapt accordingly and make some changes to his restaurant that included but were not limited to the food menu and even the music. “Cafe Zouk was the first restaurant in Lahore to introduce Thai Food.

We brought a chef from abroad, he stayed here for a couple of years and he trained our people. In the beginning, the majority of the food served was of Thai food and we had a very small section of continental dishes. However, now we have a very good mix of dishes on our menu,” he says.

Currently, the restaurant offers a mix of almost 200 dishes, a huge jump from the minimal 12 dishes that it started with back in the 90s. However, the

“YOUR INTEREST IN THE BUSINESS MUST REMAIN THE SAME COMPARED TO WHEN YOU FIRST STARTED IT. WHAT HAPPEN IS THAT THE INTEREST OF THE OWNERS GENERALLY SLIDES AFTER THE FIRST YEAR OR SO AND THEY TEND TO LEAVE THE BUSINESS TO BE RUN BY THE MANAGERS. I AM HANDS ON IN THAT SENSE. I DECIDE EVERYTHING, ALONG WITH MY CONSULTANT RANGING FROM THE THEME OF THE RESTAURANT TO THE MENU” Shahzad Khokhar, Owner Café Zouk

30

key lies in not just expanding the menu, but also in maintaining a certain consistency. “It is about maintaining what you have started. We have dishes here that are 20 years old. Not only do we want to improve and come up with new stuff.

But we also want to maintain whatever we came up with. Lots of people have favourites that we simply cannot do without,” explains Khokhar.

Asad Sheikh, a Lahori food critic and enthusiast, who runs the famous Facebook group Foodies R’ Us, also agrees. “If you go to Zouk after 10 years, they will have the same taste and flavour. I have seen many restaurants, whose taste change with time, but Zouk is one place which is always consistent,” he says.

Copper Kettle, Zouk’s biggest competitor from the 1990s, closed its doors to customers in 2017. Shahzad feels that its closure had to do more with it being unable to adapt with time. However, Asad Sheikh says that it had something to do with its location.

“When Copper Kettle opened up in the basement of the Empire Center at Gulberg Main Boulevard, there weren’t many other options in Lahore for a younger audience to hangout. But as the time passed, location mattered.

Parking was always a serious issue there,” says Asad.

Copper Kettle’s second branch in Liberty Market also had the same issue with parking. On the other hand, Zouk’s location on a corner plot at the end of Lahore’s MM Alam road meant that it had ample parking space at not one, but at least two sides of the restaurant. And the presence of a public park right next to it meant that even when Zouk’s own parking was filled, customers always

“WHEN COPPER KETTLE OPENED UP IN THE BASEMENT OF THE EMPIRE CENTER AT GULBERG MAIN BOULEVARD, THERE WEREN’T MANY OTHER OPTIONS IN LAHORE FOR A YOUNGER AUDIENCE TO HANGOUT. BUT AS THE TIME PASSED, LOCATION MATTERED. PARKING WAS ALWAYS A SERIOUS ISSUE THERE” Asad Sheikh, Lahori food critic had access to the park’s parking space.

Shahzad says that running a restaurant is not an art, but a science.

“A restaurant has its own costing and a unique financial mechanism. Food costs plays an important role. For a successful restaurant the food cost should be maintained between 35% to 40% (of total sales volume). According to Shahzad, the trick is finding the right balance between pricing and the purchasing cost.

“You have to balance it in a way that the customer does not feel a pinch and your food cost remains maintained as well.”

And it’s not just maintaining the food cost that is essential, but maintaining other overheads is also important.

“You have to keep your overheads down as well. The cost can be a killer. If you only a few tables are occupied at a particular time, then you can shut some air conditioners down and save on electricity costs.”

And then there are those small details, attention to which is essential for the success recipe to work. Initially the restaurant was based on a night club like theme, and had dim lights and loud and trendy music appealing to the taste of the young market segment it was targeting. However, since the target market has expanded, things have changed

now. “I make the music selection myself according to the crowd. If there is a young crowd in the restaurant, I put on songs that they will like. If I have an older crowd I put on music from the 1980s and 1990s. So you have to keep improvising all the time.”

“And then what we do is that occasionally like on New Years’, Christmas or Halloween, we get some ornaments (to decorate the interior). At Halloween we get masks and we bring a DJ and keep things exciting for the customers.”

“Even the suits and uniforms worn by the managers are selected by me.

Obviously when they come here, they need to have a trendy look. I don’t go up to the tables. They are the only people who come into communication with the customer. They have to be properly dressed up and they have to be polite,” he explains.

The expansion dilemma

W

hen it comes to marketing, Shehzad, almost in a complacent manner, quickly dismisses the relevance of the much-hyped food festivals to his business. “If after 24 years, people do

not know Cafe Zouk, then they will never know Cafe Zouk. These food festivals are more important to food businesses that are just starting out,” he says stressing on the fact that the restaurant’s Facebook page that has a following in excess of 600,000 people is his main tool for marketing. “Going to these food fests is not going to make people come to Zouk more.

People just go to the festivals because it is a fun thing to do.”

However, even after 24 years of being in the business, Cafe Zouk is thriving on the MM Alam road, but that is still the only legitimate branch of the restaurant in the country.

Shahzad seems hopeful about the prospects of expanding his business in the future, given certain conditions are met.

“We have people coming in and asking us (for a franchise). But we are looking for the right kind of people who should be able to keep up the same kind of reputation that we have here,” he says. Currently, matters related to Cafe Zouk Karachi – which was opened by one of Shahzad’s business partners – stand disputed in court.

Shahzad alleges that his partner did not run the restaurant according to the standard that was required.

Simply put, the hands-on approach that Shahzad has used until now might be feasible for operating a single restaurant outlet, but when it comes to running multiple branches finding the right people (franchisee, managers, etc.) becomes all the more important for the simple reason that you can be only at one place at a given time. n

RESTAURANTS

OPINION

Zaki Mahomed

200 million people and zero unicorns A successful Pakistani Silicon Valley entrepreneur opens up about building the next great startup in Pakistan ver the last few months, I have been able to spend a significant amount of time in Pakistan -accounting for the largest continuous period I’ve spent in the country in the past 15 years. I took the opportunity to learn more about the emerging startup ecosystem here, and wanted to jot down my thoughts on what I’ve learnt after speaking to dozens of founders, operators and investors over the last 4 months.

Firstly, I’m very encouraged by the excitement around technology companies in Pakistan and none of what follows should take away from that. It’s not uncommon now to sit next to a passionate group of founders discussing the problems of the day at a coffee shop in Karachi or Lahore. Startup focused events seem to be popping up everywhere, too. I was at 021Disrupt in November and found it to be well attended, with thoughtful speakers and engaged participants. Even the government is getting behind the idea, although much of that is still to materialize (I wouldn’t hold my breath).

It’s important to state that my thoughts are naturally biased because of my experiences founding or operating early stage companies in Toronto and Singapore during periods when the ecosystem was on a rapid upswing. Each country was unique and had its own localized challenges, but there are still pat-

O

Zaki Mahomed The writer is a serial entrepreneur based in San Francisco.

STARTUPS IN PAKISTAN NEED TO ALSO WATCH OUT FOR WHOM THEY LET IN ON THEIR CAP TABLES. I’VE MET A FEW COMPANIES THAT WERE OFFERED – AND IN SOME CASES ACCEPTED – TERM SHEETS ASKING FOR 50%+ IN EQUITY FOR A FEW THOUSAND DOLLARS. VULTURE CAPITAL IS ALIVE AND WELL HERE AND SUCH TERMS ARE REGRESSIVE AND SURELY GOING TO BE RESPONSIBLE FOR MORE THAN A FEW PROMISING STARTS BEING WASTED

terns that emerged which I feel Pakistan can learn from.

Venture capital activity in Pakistan: not on the map When you talk about venture capital activity, Pakistan is simply not on the map.

According to the 2017 KPMG Global Analysis of Venture Funding Report, approximately US$155 billion was invested by venture capital firms across the world. These funds involved deals across all stages of the funding lifecycle including seed, series A, and onwards. Of this, Pakistan’s share was a measly $23.1 million in the same period.

Yet, there’s been a surge in venture capital activity in Pakistan lately, so this year’s numbers are likely far higher than last years. Sarmayacar officially announced the close of its $30 million fund dedicated to Pakistan. I2i ventures is also in the throes of closing a $15 million early stage fund of its own. Furthermore, regional funds are starting to take notice and directly investing in local companies.

But I feel this is still a drop in the ocean for Pakistan – a country of over 200 million people and 60 million 3G/4G connections. After all, Pakistan seems responsible for a large part of the Middle Eastern companies’ healthy valuations. Pakistan has, in fact, grown so rapidly

ENTREPRENEURSHIP CULTURE

35

that it’s a priority market for Uber now with over 30,000 drivers plying its roads. “The country has surpassed all expectations and goals,” said Anthony Le Roux, Uber regional manager for Middle East and North Africa while talking to The Express Tribune.

Some naysayers may postulate that a lack of exits in Pakistan has been a key deterrent to the emergence of private venture funding. But the fact is that foreign companies that have been willing to take risks and wade out into the unknown are emerging victorious.

The example of German incubator Rocket Internet is pivotal here. It first started up in late 2012 when ecommerce in the country was virtually nonexistent and mobile consumers had to contend with 2G speeds. Daraz, its flagship venture, enjoyed the bulk of funding but its other ventures such as FoodPanda, Lamudi, Carmudi, Easytaxi, and Kaymu were also similarly encouraged to grow. Some failed but some didn’t as is standard with venturebacked companies across the world.

Daraz was recently acquired by Alibaba in a $200 million deal, which is a 10x return on investment for Rocket from what I understand. The exits will come once investors start deploying capital early, just like they’re supposed to. A similar refrain was very common in Singapore circa 2009, but no one talks about the lack of exits less than a decade later. This is within range of expected venture capital shareholding period before exit, so an argument that it may be too early doesn’t pass the sniff test entirely.

At the same time, startups in Pakistan need to also watch out for whom they let in on their cap tables. I’ve met a few companies that were offered – and in some cases accepted – term sheets asking for 50%+ in equity for a few thousand dollars. Vulture capital is alive and well here and such terms are regressive and surely going to be re-

sponsible for more than a few promising starts being wasted.

But despite these funding gaps and in spite of what local founders will often tell you, I don’t believe that capital funding is the only – or even the biggest – challenge that needs addressing before the startup ecosystem really comes into its own here.

What else is missing besides Capital?

“If you want to build a ship, don't drum up people to collect wood and don't assign them tasks and work, but rather teach them to long for the endless immensity of the sea.”

– Antoine de Saint-Exupery A common problem whether you’re building your company in San Francisco, Shanghai or Karachi is finding, hiring and retaining really great people who want to work on your dream. The smartest Pakistanis graduating from the best local colleges don’t want to

DARAZ WAS RECENTLY ACQUIRED BY ALIBABA IN A $200 MILLION DEAL, WHICH IS A 10X RETURN ON INVESTMENT FOR ROCKET FROM WHAT I UNDERSTAND. THE EXITS WILL COME ONCE INVESTORS START DEPLOYING CAPITAL EARLY, JUST LIKE THEY’RE SUPPOSED TO. A SIMILAR REFRAIN WAS VERY COMMON IN SINGAPORE CIRCA 2009, BUT NO ONE TALKS ABOUT THE LACK OF EXITS LESS THAN A DECADE LATER 36

work at early stage startup companies.

This can change, especially since larger companies are notorious for their terrible culture. From my experience hiring local talent for back offices, I’ve come to realize that Pakistani employees value job security and stability over most other perks that can be offered.

Large families, low wages, culture and few breadwinners make for an environment that compels well educated folks to not take risks. I have been successful in hiring here when focusing on finding the few who are willing to take risks. I don’t see a concerted effort by founders here to identify, hire and reward those folks, even though almost every founder I spoke to agrees that talent is a huge issue for them.

There is some good news on the horizon: as larger technology companies (Careem, Daraz, etc.) get built in Pakistan – not to mention large offices for Silicon Valley companies with Pakistani founders such as Keep Truckin’, Elastica and Affiniti – the “Paypal Mafia” effect should kick in and supply experienced leadership talent (and future founders) for the next generation of startups.

Employee shareholding is usually not offered, and startups tend to try to hire just like large corporates do: through LinkedIn, job posts and their own network. This is not an optimal

strategy when trying to identify a small subset of pirates who are willing to buck the trend and do something exciting with their careers.

In fact, if I was a talented twentysomething curious about startups but not ready to take the plunge, I wouldn’t even know where to start looking short of landing up at a paid, expensive event. There are no community outreach efforts such as job fairs, open houses and other active ways to investigate what startup careers could look like. This seems like an easy win to me.

Furthermore, Pakistani society tends to be very cliquey and people move in their own (perceived) socio-economic strata. Sadly, this means founders don’t coalesce together often in social settings, and aren’t able to trade notes or collaborate on solving some of the common problems they face. It seems as if startup folks here view the market as a zero-sum game; as if there simply isn’t enough room for everyone to succeed. I hosted a mixer for local founders and operators and was surprised how they tended to stick to their own socio-economic strata even when in the same room as others who have the exact same problems as them. This knowledge sharing is vital when operating in an emerging ecosystem – serendipity and a strong network help you short-circuit problems when you don’t have the funding to afford too many mistakes.

In addition, I believe there isn’t enough focus given to mentorship. Or more accurately, a lot of the mentorship being offered is of dubious value. This is a sad result of a lack of experienced founders and seasoned operators in Pakistan. This is partially because the industry is young, but also because unlike India and China, there is no large stream of overseas Pakistanis looking to come home from Silicon Valley to start their next companies.

Equally worryingly, there is no shortage of tech incubators in Pakistan

touting expertise but other than fancy photo-ops and terrible term sheets, what are these funded entities actually doing? I hope first time founders realize that just because an individual is being touted as an expert does not make them one. I’ve seen these “mentors” try to upsell startups on paid consulting services, such as engineering support. Do your research and critical thinking before getting in bed with such actors.

Lastly, because of the acute lack of talent and capital, as well as these other systematic problems I’ve tried to outline here, I believe founders are stretched so thin and are so operational in their companies they have a hard time conceptualizing the larger vision. I’ve only met a handful of startups that are even thinking about how their ideas would fare beyond Pakistan’s borders. Even hyperlocal ones have a tendency to simply copy what’s working in other countries and apply it to a Pakistan context, with little thought given to localization.

I know it’s tough to zoom out and think big when you need to do nearly everything yourself, but this stuff was never meant to be easy. Thinking

THE STARTUP FRENZY IS REAL. KARACHI, LAHORE, AND ISLAMABAD ARE ALL UPWARDLY MOBILE CITIES WITH YOUNG GRADUATES EAGER TO GROW AND LEARN. OUR GRANDPARENTS KNOW ABOUT UBER, CAREEM, AND DARAZ AND ACUTELY AWARE OF THE POWER OF THE INTERNET. IT SURE WILL BE VERY EXCITING TO SEE HOW THIS PLAYS OUT OVER THE NEXT FEW YEARS

through where things are going and being able to articulate your vision passionately and defend it logically is key to fundraising, recruiting and a lot of the other problems outlined here.

I don’t see this as an optional luxury.

Here’s why: unlike other large countries, the Pakistani startup scene is maturing at a time when neighboring China is starting to flex it technological muscle globally. Companies here will have to actively compete with wellfunded ones from China – not to mention Silicon Valley and elsewhere – looking at international markets to compensate for slowing domestic growth. This inevitable global competition is a self-inflicted wound and I wonder how many great Pakistani startups were lost because Pakistan arrived shockingly late to the 3G/LTE party in 2014.

To be clear, I’m pretty bullish on Pakistan’s prospects. The startup frenzy is real. Karachi, Lahore, and Islamabad are all upwardly mobile cities with young graduates eager to grow and learn. Our grandparents know about Uber, Careem, and Daraz and acutely aware of the power of the internet. It sure will be very exciting to see how this plays out over the next few years.

On a personal note, I’m interested in helping Pakistani companies grow and scale. If you’ve got an idea you’re contemplating, are already a startup founder in the thick of things, or just have an opinion you’d like to share, find me on Twitter (DMs open) or email me. And if you’re an investor looking at Pakistan seriously, I’m happy to connect you with some great companies here. n

ENTREPRENEURSHIP CULTURE