Monday, 13 February, 2012

The energy dilemma Page 23

profit.com.pk

ali Rizvi

P AKIStAN’S central bankannounced on Saturday that itwould keep the policy rateunchanged at 12 per cent for thenext few months in order to

contain expected inflation in the secondhalf of the fiscal year. the central bankhad in an earlier decision cut the policyrate by 200 basis points, a decision thatwas welcomed by the private sector andinvestors alike. However, the State Bankof Pakistan is in a precarious situationwhere traditional economic paradigmshave failed them. the contractionarymonetary policy employed by theCentral Bank has failed in serving its duepurpose.Inflation remains high, while crowdingout of the private sector is chokingbusiness and industry. Private sectorsinvariably require stimulus through theeconomy and this can be provided in theform of easy access to finance, pragmaticgovernment policy and low interest rates.Foreign investment assists in theformation of human capital, leads tointernational trade integration and aids increating a conducive environment forbusinesses. While traditional economicsdictates that raising interest rates controlinflation, this policy has not worked inPakistan where only food inflation in thelast year propelled to a massive 45 percent. Excessive borrowing from the SBP isdiluting interest rates leading to

crowding out of the privatesector.

therefore,

instead of increasing the supply of creditto the private sector, the authorities havebeen financing unproductiveexpenditures through excessiveborrowing. A state bank report mentionshow policy makers have been effective incontaining their spending by cuttingdown on ‘development expenditures’. theState Bank further notes in their reportthat inflationary pressures haveaccumulated mainly owing to the “laggedimpact of government borrowings fromSBP, frequent upward adjustment inutility and POL prices, increase incommodity; and rising house rentindex.” If one were to scrutinize thesituation, it would be easy to concludethat inflationary challenges are inherentlysupply side constraints that can be dealtwith even in the face of an expansionaryfiscal and monetary policy. In the recentlyreleased report of the SBP the externalaccount posted a deficit of a mammoth1.7 billion dollars during Jul-Nov FY’12compared to a surplus of $100 million inthe corresponding period last year. theCentral Bank has been brutally honest inits observation of the emerging scenario.“Although deterioration in currentaccount was on the cards, the timing andmagnitude was unexpected. this largerthan expected worsening was mainlyconcentrated in the month of Sep 2011

when simultaneous surgein trade deficit

and fallin

current transfers led to over a billiondollar deficit in the current accountduring this month alone,” the recentlyreleased first quarterly report of the SBPstates. With foreign aid drying out, theSBP has had to rely on drawing from theforeign exchange reserves to curb theexternal account deficit. On account ofdebt repayments and absorbing theexternal account deficit, Pakistan’sforeign reserves declined to 16.69 billiondollars in the week ending Feb 3,compared to a record 18.31 billion dollarsin July. With Pakistan’s oil prices linkedto the international crude oil prices, it isexpected that inflation while still undercontrol at 10.10 per cent year on year inJanuary will rise more than projected.Pakistan has even opted out of the IMFprogramme where the latter expressedconcern over the lack of progress in fiscalreforms. While the State Bank of Pakistancan go all out in its efforts to controlinflation and try to manage the brewingeconomic disaster, the situation cannotimprove without concerted efforts toprudentially manage fiscal affairs. theramifications of the decision from theState Bank to keep the policy rate at 12per cent may be justified in the shortterm; however, this will merely spelldisaster in the coming months. Allow me

to explain my understanding of thesituation at hand. While

the problems

may be many, it is high time for the SBPto believe in omens. And, with thepreferential trade agreement with the EUto be implemented by March, it is awonderful opportunity for the powersthat be to facilitate exporters and theindustry to ensure penetration in theEuropean Market.By resolving the issues of the domesticindustry, and providing them with a levelplaying field against its competitors,Pakistan can tap into the opportunity andsignificantly increase exports to the EUmarket. Other similar opportunities areon the horizon, with a plethora of marketspromising great potential for localexporters. In the meanwhile what isrequired is of the Central bank is tofacilitate the industry by providing themwith easy credit. Stimulating the industryis the only way for Pakistan to moveforward, and the stimulus must not be aninjection of subsidy, but theestablishment of an environment thatattracts foreign investors and supportsthe local producers.By keeping the policy rate fixed at 12 percent, and not demanding of the powersthat be to put their house in order andrein in the budgetary borrowings, the SBPis doing the people of the country a hugedisfavour. How can the governmenthandle the precarious situation? Well theyshould work in a transparent andcompetent manner to privatize the lossmaking Public Sector Enterprise that aregobbling up a humungous chunk ofmoney and still making losses. So SBP, Ithink its time for you to believe in omens.

For comments:ali.rizvi7957@gmail.com

Time for the central bank to believe in omensSBP Policy announcement

Hammad malik

I t is quite rare to findeconomies with limitedscope coupled with an itchystance towards prosperity

and progress. However, havingaccess to almost everything andstill not making use of it isunfortunate. While our capitalmarkets continue to emerge, westill have miles to cover before aproper debt market comes intoexistence. the rapid popularitygained by the banking system inthe ‘90s and the succulent returnsadvertised by them has givenbirth to a tendency among themasses to deposit their holdings,or savings for that matter, in bankaccounts. I am not against thisculture, but productivity is what Iwant to emphasise upon. At thesame time, we need to learn fromthe banking culture of inducingas well as attracting peopletowards them, something whichthe capital markets have failed to

do. While I maintain my stance ofrating stock market as the safestmode of investment, given that itis a mirror of the economy,investing in debt instrumentsshould also be promoted byconcerned authorities. By debtinstruments, I refer to thecorporate debt certificateswhich are issued with a pre-defined rate of return and incase of bankruptcy, get theirshare even before theshareholders. In Pakistan,companies have tried their bestto promote this mode of raisingcapital, but lack of knowledgeamong the general masses hasnot helped their cause.talking specifically about theAsian belt, emerging economiesand potential financial hubs haveensured that corporate debt addsup a decent percentage towards

the GDP of the country. thenationalisation saga during the 70sand a subsequent regression of thesame can be quoted as a majorreason for the slow development inthe same cause, but not the onlyreason. Frequent changes ininvestment policies and anirregular system of the existingmarkets has not done wonders tothe investor confidence and theSBP, along with SECP, need to finda permanent solution to infuse asense of stability among investors.2002 saw Karachi StockExchange being named the BestPerforming Stock Market of theWorld, attracting a sea of foreigninvestors thereafter. thisperformance continued till 2008,when KSE was nominated thebest performer among majoremerging markets. However,record high inflation and political

instability forced the index torecord low levels, imposing a five-month floor thereafter. theinconsistent monetary policystance coupled with the rapiddepreciation in the localcurrency has served a hefty blowto the local as well as the foreigninvestor. A rise in discount ratesunnaturally pulled funds out ofthe stock markets, directingthem towards saving schemesand money market. With majorinvestors fleeing to other havens,there was little incentive forretail investors to invest in thethen prevalent circumstances.Now that the inflationary trendis opposite and the SBP isreducing the discount ratesteadily, a sense of calm seems totake cover. the relationshipbetween interest rates and debtinstruments is vital to

understand before making aninvestment choice in the existingscenario. the inverselyproportional nature of the twosuggests that money should flowinto the stock market with adecrease in the discount rate,which increases prices of bondsand thus reduces the yield.However, if there is asentiment of an increase in theinterest rate, investors shouldre-direct their savings towardsthe debt instruments in orderto avail maximum returns. Arapidly depreciating rupee doesnot help investors. It might beof advantage to exporters, butquality production is pre-requisite. With energy crisisnot allowing industry tofunction, I doubt its advantage,if any, at this stage.

The writer is Head of Strategyat First National Equities and

can be reached athammadmalik@fnetrade.com

Of economistsand pessimism

It is unfortunate that although the societyhas amassed education to the brink, as acomplement (in the economic sense) it

has nurtured self assurance and confidencethat bar it from paying heed to any competingclaims. While this has gone historicallyunchecked within this country at least, theresults are ostensible from all angles viewed;the stock of knowledge has not grown despitea large multiplication in the number ofdegrees doled out. And hence there has beenonly regression. thereby, the writer hasdedicated the article to bringing all those whowish to read on the same backgroundplatform, which she hopes will aid to betterunderstanding of, in short, an economist’spoint of view. In the list of lessons, the firstwill hopefully take us all back to our freshmanyears; there is a great tendency to treat stockand growth variables as the same. So, intheory, while the output produced by thetextile, cement and auto sector may be at thesame level as last two years, the stock has not‘grown’ or shown improvement. this can beconsidered a worrisome indicator, as it showsthat the demand for a particular sector’sproduct is stagnant, thus limiting theopportunities for job creation and mostimportantly the incentive to invest in theindustry. And while it is true that Pakistan isthe fourth largest market for mobile phones,most analysts would point to the saturation inthe sector, explaining why network providersand the government have delayed theintroduction of new technology, 3G/4G, etc.the non-creation of demand in the sector hasled to increased competition, decliningaverage revenue per user (ARPU) and a lowerspace to make profit. Moreover, on theinvestment front, the total FDI in the telecomsector during FY11 amounted to $496 milliondown from $1,138 million in the precedingfiscal year. And, while the prospect of growthand more FDI lies through the 3G front, restassured the government is looking forward tothe auction license revenue for financing itsdeficit. Coming to the second claim andsource of much pride; our ‘booming’ realestate market standing high in the face ofeconomic challenges. Why an economistwould not pay much heed to this sector is thatrising land prices in the face of laggingeconomic growth implies that the extraliquidity in the economy is being channeledtowards purchasing land! Unless investmentgrowth in productive enterprise is revived, theeconomy will be a victim of greater debt,international dependence and moreimportantly brain drain. Analysts also claimthat the billion dollar remittance that isbuttressing the external account is primarilyfeeding land prices. What are we going to dowith a rising stock of houses for a segment ofthe population when the larger segment lacksaccess to food, healthcare and education? Athird lament, which gets counted as a hugeplus, is that consumer demand in theeconomy is strong. the main source ofconsumer spending documentation relies onprice data multiplied by the amount of goodssold. A steady growth in this multiplicativenumber implies that the 200 per cent growthin prices is far less than the fall in demand.And that too is demand for basic necessitiessuch as food, fuel, clothing, etc, which isbasically fixed, less responsive to price hikesor inelastic in nature. Aside from investment,positive indicators to judge any economysurround the prospects of improvement forthe larger population. these could be highreal income per capita, job creation, realimprovements in state spending on healthcare and education. Give economists areason to be happy?

The writer is an economic researcher andfreelance financial journalist. She can be

reached at sakina.husain@gmail.com

NEWS ANALYSISSakina HuSain

Developing the debt market

PRO 13-02-2012_Layout 1 2/13/2012 12:57 AM Page 1

news22Monday, 13 February, 2012

PC Peshawar organises grand musical event

PeSHaWar: In collaboration with Sonic PeaceMakers, the Pearl Continental Hotel Peshawar or-ganised a grand musical event at its elegant KushallHall, there were about 750 guests that includedlarge number of families, elites of the city and musiclovers. Immense discipline was demonstrated by theaudience. the performers on the occasion wereAmerican vocalist todd Shea, famous local group ofyoungsters Khumarian along with a Chinese singer,pop star of Pakistan Farhan Saeed and legendaryfolk singer of Khyber Pukhtoonkhwa Zarsanga whois also the recipient of the highest civil award of Pak-istan “Pride of Performance”. PRESS RElESE

PTCL inaugurates ‘Family MovieNight’ for employeesISLaMaBaD: President and CEO of Pakistantelecommunication Company Limited (PtCL),Mr. Walid Irshaid, has said that his Company iscommitted to share its successes with all itsemployees as well as their families. “At PtCL,we want to make sure that our Company’s divi-dends and successes are not only shared with

our employees but also with their families,”said Mr. Irshaid while inaugurating the ‘PtCLFamily Movie Night’ for employees. “the wel-fare and well-being of the families of our dedi-cated and hard-working employees is equallyimportant to us.” PRESS RElESE

Plan Pakistan to strengthen childbirth registration unit of DMA, CDA

ISLaMaBaD: Memorandum of understanding wassigned between National Database And Registration Au-thority (NADRA), Directorate of Municipal Administra-tion (DMA) of Capital Development Authority (CDA) andPlan Pakistan at federal level. At this moment Mr. RashidJaved-Country Director Plan Pakistan, Mr. Col. (R) KhalidKhatak-D.G.CRMS, NADRA & Mr. Mansoor from CDAwere present. Objective of MOU is to standardize vital sta-tistics registration system including child birth registrationat Directorate Municipal Administration (DMA) of CapitalDevelopment Authority (CDA) and link it with the nationaldatabase and will be considered a role model for allNADRA Registration Centres. PRESS RElESE

CORPORATE CORNER

A signing ceremony took place at NIB’s head office wherein a

Glocal Trade Finance Programme Agreement was signed by Mr

Badar Kazmi, President and CEO – NIB Bank, Mr Shafquet Asim,

Head-FI of NIB Bank and Mr Khwaja Aftab Ahmed Director

Financial Markets – Europe and MENA of IFC. PRESS RElESE

kaRaCHi

STAFF REPORT

B ULLS continued todominate theproceedings from theonset of the week as

the benchmark gained 302points with in two tradingdays as KSE-100 indexreached 12,284 points.Volumes were fairlyencouraging as average dailyvolume for the week stoodtall at 169.6mn shares. Fromthe onset of the 2012 thebenchmark has gained 7.8per cent with considerablyencouraging volumes.Individual investors arereturning towards themarket after theannouncement of relaxationof CGt announced by theFinance Minister.Furthermore majority of theresults declared by thecorporate sector were fairlyencouraging. Majority of theinvestors are expecting adiscount rate cut in theupcoming monetary policystatement due on Saturdaywhile majority of the analystcommunity believe SBP willmaintain the status quo.In a recent economic reviewof Pakistan by IMF stated“Pakistan’s near and mediumterm prospects arechallenging and growthwould remain too low toabsorb the large number ofnew entrants into the laborforce. In FY12 the real GDPgrowth is projected at 3.4 percent and average CPIinflation at 12 per cent.Deterioration in the currentaccount balance due to lowercotton/textile prices and asharp slowdown inremittances growth,continued difficulties inattracting external financingand the beginning ofrepayments of IMF will likelyto put further pressure onthe balance of payments thisyear, with reserves projectedat USD12.1bn by end ofFY12”. ‘We agree withmajority of the projections ofthe IMF except the GDPgrowth and remittances flow.Hopefully the governmentwill be able to capitalizefunds from 3G licenseauction, PPL public offeringand Etisalat payments, saidBilal Asif at HMFS.In case all the abovementioned transactions

materialized; thegovernment will be availablewith ample funds to managethe current account andbudget deficit. During theweek PSO results wasannounced which was wellbelow the analystexpectation, hence the stockprices turned volatile.HUBCO results can beconsidered as a surprisepackage as the stockannounced a dividend of Rs3/share. Major bankingstocks were fairly active asannual results are expectedto be announced soon. NBPgained on the back of healthydividend announcementwhile second tier banksincluding AKBL and FABLalso registered healthy gains.‘We believe benchmark maycontinue its upward journeyin the upcoming days alongwith minor hiccups,’ headded.Money Market: Duringthe week SBP conducted t-bill auction where it raisedRs 146bn against the targetof 125bn creating the netdrainage of Rs 26bn. Afterdecline in yield in theprevious two auctions, cut-off rates climbed back up asstate bank’s quarterly reviewcreated further excitementover the upcoming MPS. theauction witnessed rise in cut-off yield across all tenor withhighest participation in 6months paper.Highest rate cut waswitnessed in 6 months paperby 18bps to 11.81 per centfollowed by 3 and 12 monthspaper by 16bps to 11.74 percent and 11.89 per centrespectively. Albeit ease-offin inflation have ignited thehopes of further DR cut inthe upcoming MPS,‘We expect SBP to maintainstatus-quo as further DR cutremains contentious withunwavering monetization,depreciation of PKR againstgreenback and rise in energyproduct prices to likely causeinflationary pressures toresurface as low base effectpan out,’ said SalmanVidhani at HMFS.For the week ending Jan 27,2012 GoP retired funds,lowering outstanding duestoward SBP however foreignflows strengthened NFAwhilst money supplyremained unchanged at 4.25 per cent.

nEW YORk

REUTERS

a reduced oil demand growthforecast from the InternationalEnergy Agency (IEA), the sixthconsecutive monthly report withdiminished growth expectations,

also helped pressure oil.the euro fell and the dollar index. DXYstrengthened after the leader of the far-right party in Greece’s coalition declinedto back a bailout agreement, once moreraising concerns about the risk of a default. “today’s selloff acrossthe complex waseasily explainable asoil simply becameentrenched in abroad basedrisk-off traderelated tocontinued lack ofprogress on a Greek debtdeal,” Jim Ritterbusch,president at Ritterbusch &Associates, said in a note.Brent March crude futures fell$1.28 to settle at $117.31 abarrel, snapping a string of eightstraight gains and following theprevious session’s close at$118.59, the highest settlementsince late July.the stumble still left Brent up 2.38percent for the week, its thirdstraight weekly rise.U.S. March crude, after threeconsecutive higher settlements, fell$1.17 to end at $98.67 a barrel, butpreserved an 83-cent weekly gain.Speculators raised their net longpositions in U.S. crude futures andoptions in the week to February 7,Commodity Futures tradingCommission data released onshowed.Brent’s premium to U.S. crude waslittle changed, hovering around $18.65a barrel.Brent’s retreat ahead of the weekend,after the recent sharp price rise, wasnot unexpected after its RelativeStrength Index pushed above 70 thisweek, signaling an overbought conditionfor investors watching technicalindicators.“the market has paused for breath afterits sustained rally,” Mark thomas, head ofEuropean energy at brokerage Marex

Spectron in London, said.U.S. equities also were pressured by thewrangling over Greece’s debt problems,along with news of a drop in consumersentiment in early February.

IEA TRIMS DEMAND VIEWGlobal oil demand will grow by less than 1percent in 2012, the IEAsaid in its

monthly oil report, saying a weak globaleconomy may limit demand growth thisyear. the IEA cut its 2012 global oil demandgrowth forecast by 250,000 barrels perday (bpd) to 800,000 bpd.the IEA’s view followed monthly reportsfrom OPEC and the U.S. EnergyInformation Administration, with OPEClowering its demand growth forecastbecause of economic weakness in Europeand the United States. the EIA raised itsexpectations, if by only 50,000 bpd, the

first boost since October.

FRAGILE CHINAChina revealedsigns ofslowingdomestic

demand as data showedimports slipping to theirlowest in more than two yearsand weaker-than-forecast banklending.But customs data on Fridayshowed China’s crude oilimports in January reached thethird highest level on record asstate refiners increasedprocessing after several newrefining facilities began

operations.Chinese demand could see a boostfrom strategic reserve purchasesafter an expected completion oftwo new strategic crude oil storagesites this quarter, the IEA said in itsreport on Friday.

IRAN TENSIONS SIMMERHelping limit the oil market’s losses

were ongoing tensions between theWest and Iran over tehran’s disputednuclear program.Sanctions are already affecting Iran’soil production and a fall in its outputand exports is likely to accelerate,industry analysts say.China on Friday said it would send a

senior official to tehran to discussIran’s nuclear standoff with the West,

and India indicated it would also weigh in,as two of Iran’s key crude oil customers tryto head off new sanctions already playinghavoc with trade.

Oil falls on Greece dealdoubt, but up on weekoil PriceS fell on friday, But PoSted gainS for the week, aS the lateSt hitcheS in negotiationSon a greek Bailout Package PreSSured oil, the euro and equitieS

Bulls dominate proceedingsthroughout week

PRO 13-02-2012_Layout 1 2/13/2012 12:57 AM Page 2

O NLY a strong domestic industrialand agriculture base can ensure astrong economy of Pakistan,presently, at a critical stage in the

wake of rising twin deficits — fiscal deficit and cur-rent account deficit.

the planning commission has estimated that thetotal investment of about $4 billion per annum is re-quired to meet the country’s energy needs which are pro-jected to grow at a pace of 2.0 GW per year in the nextfive years. According to an updated version of PakistanIntegrated Energy Model Policy Analysis Report, almost12 GW of new capacity will be added to the system by

2015, of which over 8.0GW is in the planningstage. the report repre-sents a least cost develop-ment path for the Pakistanenergy sector that sup-ports the government’sprojections for GDPgrowth.

However, the projec-tions depend on many fac-tors, such as the demandprojections, prices assumedfor fuel, cost and perform-ance of future technology

options, future characteristics of the existing and commit-ted power plants, and demand sector end use technologychoices. Growth of Pakistan economy has become a trickybusiness. No foreign investment can be chipped in with-out a reliable and affordable supply of energy. Further-more, as the past several years of load-shedding havedemonstrated; not just the economy, but the quality oflife of the people of Pakistan will also at stake if the coun-try is not able to identify a reliable roadmap for its energyfuture. the options are many, and major decisionsneed to be made by policy makers. the energy require-ments would become double than present and itwould cross the figures of 120 MtOE (million tonnnesof oil equivalent) in 2015, if the government plans toachieve the growth target. It may be mentioned herethat Pakistan meets 80 per cent of its energy require-ment through import.

On the other hand, international prices of oil havenot only broken the past records, but touching new

heights which are directly or indirectly affecting theblack gold industry badly. Moreover, the speculatorsestimate that the oil prices would reach to $100 perbarrel, very soon. WAPDA, for producing electricity,purchases oil at a high price and shifts the financialburden on the consumers. High electricity tariff hasalready imbalanced the entire economy. there is ageneral impression among the concerned circles thatthe basic reason of energy crisis is the irrational,short-term and wrong policies of the government.the government should focus to develop and promoteother resources of energy like atomic energy, search,and use of natural gas, import of natural gas, solar en-ergy, coal and wind energy, apart from oil.

Energy crisis has declined the industrial produc-tion by 50 per cent due to which the rate of unem-ployment has increased. Pakistan economy is understrong pressure of energy crisis. Agriculture sectorhas also taken the hit, impacting the farming capac-ity due to short supply of energy.

Meanwhile, high inflationary pressure, likely tostay at 12 per cent during current year, has shed eco-nomic growth further due to limited availability ofcredit to the private sector. textile industry is ex-pressing its inability to export inflation.

A dismal industrial growth has resulted in massiveunemployment. the textile industry is pursuing thegovernment for sustained gas supply to the CaptivePower Plants. the government is unable to do so be-cause of high demand from domestic consumers onSNGPL network. Closing down of gas-dependent millsis leaving labourers out of job on a large scale. As a re-sult, the street crime is on the rise. Many industrialistsare receiving threats of kidnap for ransom.

One way of tackling the ongoing energy crisis ispermanent closure of gas-dependent Captive PowerPlants (CPPs), particularly in textile industry, rela-tively a cheap fuel against furnace oil to generate elec-tricity. there is a tariff difference of about Rs3 per unitbetween the mills with gas-dependent CPPs and thePEPCO-fed units. CPPs consume 600MMCFD gaswith low efficiency, which means more wastage of pre-cious fuel in generation of electricity. All these CPPsshould be handed over to PEPCO for power genera-tion. It should be mandatory for Pepco to ensure 24/7smooth supply of electricity to the industry. PEPCOcan also introduce special tariff for industry, a bithigher than what costs these mills on CPPs. the in-dustry circles have only one apprehension on thisarrangement that the government would not be ableto ensure priority of electricity supply to industry.they are of the view that they would not only be de-prived of their present share in gas, but also electricitysupply. the government should act fast and legislateon this point for prudent use of gas as a fuel to producecheap electricity and keep the industry wheel running.

The writer is President American BusinessForum, Chairman and CEO NetSol

WHEtHER or not theforeign minister’ssurprise Moscow visitprimarily focused ongenerating requisite

funding for the Iran-Pakistan gas pipeline, asspeculated in sections of the press, remains tobe seen. But there can be little doubt thatIslamabad has finally requested friends inRussia to place energy at the centre of the‘enhanced bilateral and trade ties’ posture.the timing is important.Both Pakistan and Russia have incorporated apronounced disregard for western sanctionsas their respective equations with the US haveworsened, the latter much more so. Islamabadhas been more outspoken of its rejection of theridiculous tAPI alternative to accommodateUS apprehensions since the check-post attackthat resulted in halting nato supplies intoAfghanistan. Russia has been extremelycritical of America’s influence near Moscow’scomfort zones ever since Putin chose politicsof confrontation at the height of America’sIraq misadventure. Now, with US-led pressureon the verge of cracking its crucial Iran-Syriaalliance in the Levant-Persia sphere, theKremlin seems again positioning to facilitate

its falling allies where it can, and Iran’sbusiness with Pakistan is mission critical fortehran’s ayatollahs to make up, at least inpart, for the sanctions choke-hold. So therumours may well be true for once. Interestingly, with the magnitude of spill-overcosts of partnering with America becomingmore evident with time, the government’ssudden tilt towards Russia is reminiscent of anold debate, one that featured intellectuals andworkers of the then new Islamic Republicmaking a passionate case for siding withRussia just when the cold war was heating.Fast-forward half a century, and there’s stillmuch to gain for both sides, albeit in adramatically changed environment. Pakistanneeds energy to forestall crippling economiccollapse. Russia has just spent the last decadeflexing its energy muscle to regain lostinfluence in Europe and beyond. It’s very likely that a resurgent Putin, bitter atwestern actors for fanning discontent in hishinterland, will round off his Andropoviangambit – play Russia’s energy card – in a showof defiance marked by his return to thepresidency. Pakistan stands to benefit in bothenergy and business terms. Surely the calculuswith America is not reverting to widely

To Russia with love

energy crisis hasdeclined industrialproduction by 50 percent due to which therate of unemploymenthas increased

The energy dilemma

Salim ghauri

SKEPTICISM ABOUTTRADE

I have been following Profit’s articlesfrom a while now. this is in response tothe news item published on February2nd, about Pakistan’s trade deal withthe European Union, and also inresponse to the news item published onFebruary 9th, about IMF blaming theSBP for inflation. Regarding Pakistan’seconomic policies, although thepreferential trade agreement with theEU seems beneficial on the surface, I amskeptical about the amount of differenceit can make to Pakistan’s terms of trade.the news item did not specify details ofthe trade pact, like which items were tobe traded and how much tariffs wouldbe lowered. No matter how lenient trade

agreements seem, if Pakistan is onlyexporting primary commodities and inturn purchasing value added goods fromthe EU, Pakistan’s export will remainvulnerable and low priced. In the globalsystem imposed on third worldcountries today, and under current IMFregulations, Pakistan has no option butto focus on export led growth. thesituation is not extremely bleak though,and there is opportunity in the EU dealwaiting to be seized. My suggestion topolicy makers is that they should focuson improving terms of trade with theEU, and use the export profits to investin diversifying future exportcommodities. the government shouldalso make sure that there are no latent‘strings attached’ that could harm ouralready fragile economy.

e d i t o r i a l

Marriages are made in Washington

UNFORtUNAtELY, we allhave to stumble uponthose fiddly little momentswhen we have to take lifedefining decisions. Some of

us prefer to take the backseat and let otherstake those decisions for us, hence, conjur-ing up a scapegoat for the inevitable failurein judgment – while others choose to keepthe decision-making powers within theirown hands. Either way, there is no doubtthat one such earth-shattering decision isthat of earmarking one’s spouse; a choice

that undoubtedly has lifelong ramifica-tions.

Nuptial historians classify marriagesinto two primary categories; love mar-riages and arranged marriages. However,there is a painful sub-category of the latter,in which one is pressurised into walkingdown the aisle with the trophy wife – onethat the family has chosen – in lieu of one’slongtime sweetheart. Pakistan is at thecrossroads of taking a plunge into one suchheartbreak scenario, as our uncle is twist-ing our arm and forcing us into opting outof a decision that we have long set ourheart upon. In this little world of energycrisis driven metaphorical matrimonies,the uncle in question is of course our dearUncle Sam, with the Iran-Pakistanpipeline playing the high school sweet-heart to tAPI’s trophy wife. And with theenergy shortage in our neck of the woodswell documented – six billion cubic feetnatural gas requirement being met withmerely 4.1 bcf per day, and gas shortfall ofone billion units per day – it would be an

understatement to suggest that Pakistan isin desperate need of gas pipeline wedlock.

the IP love affair began in May 2009,with the project expected to bring in around750 million cubic feet of gas to Pakistan andproviding around 5,000 megawatts powergeneration capacity. Considering their labelof being wobbly and indecisive, our govern-ment’s uncharacteristically firm stance onthe IP pipeline divulges an unprecedentedlevel of passionate affection. Couple thiswith the global antagonism over all thingsIranian, and the devotion becomes all themore momentous. All the same, if there is a‘Romeo and Juliet’ tale in the global geo-po-litical scene, the Iran-Pakistan pipeline storyis that. With Uncle Sam being our godfather,and the final authority on most family mat-ters, the Washington-tehran-Islamabad tri-angle is reminiscent of Shakespeareantragedies; with unfulfilled promises ofteenage lovers mortifying under worldly an-imosity. Washington’s wide array of sanc-tions on Iran, owing ostensibly to its civilnuclear programme, has ensured that Is-

lamabad is under esca-lating pressure to aban-don the pipeline project,even though the reper-cussions for Pakistan areas conspicuous as anAfrican elephant slip-ping over a banana skin.And with every potentialbride shunned by those at the helm of thefamily, there is an alternate better half thathas been identified to distract the Romeoaway from his Juliet. Cue tAPI pipeline.

tAPI is your typical ‘other woman’ fromepic love stories; good looking, strong familybackground, alluring for one and all barringthe protagonist of the tale. However, a closerlook suggests that all is not quite as well. WithtAPI, it’s the ‘A’ that stands out as the biggestthorn; and any project that traverses the pre-carious land of Afghanistan falls short of therealm of safety by a good few light years. Also,with the eventual price tag of tAPI gas tow-ering way above that of IP, our uncle’s choicehas proved to be more high-maintenance

than earlier perceived tobe. Nevertheless, it is easyto discern the reasons be-hind Uncle Sam and hischums’ desire of unitingIslamabad and tAPI,with western multina-tional companies’ hege-mony over Dauletabad

gas reserves. It’s the lust for monopoly overoil and gas; a skewed nuclear proliferationpolicy; an embarrassing war on terror; andthe new great game all thrown into the Mid-dle Eastern/Central Asian cauldron as Wash-ington plans on stamping Islamabad’smarital future. Considering all the afore-mentioned twists in this dramatic tale, dowe actually take the IP project as our law-fully approved gas pipeline for better forworse, for richer for poorer and in sick-ness and in health, to love and to cherishtill death do us part? It seems as if we do.

The writer is Sub-Editor, PakistanToday. He can be reached at

kunwar khuldune Shahid

for comments, queries and contributions, write to:

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m o n d a y, 1 3 f e b r u a r y, 2 0 1 2

if there is a ‘romeo andJuliet’ tale in the globalgeo-political scene, theiran-Pakistan pipelinestory is that

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