Volume-II, Issue-VII SEPTEMBER 2013

Brazil 7th largest consumer market

"Its impossible for the world to be oblivious to Brazil"

Exclusive Interview

His Excellency,

Ambassador of Brazil to Pakistan

Mr. Alfredo Leoni

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EDITORIAL BOARD
Dr Ashfaq hassan Khan Dr Abid Sulehri Pervez Amir Shah A Hassan Zubair Malik

Post-flood Relief Operation

Exclusive
Pages 22-23

EDITORIAL

From the Editors Desk

ADVISORY BOARD
Haroon Akhtar Khan Hamidullah Jan Afridi Sajid Gondal

CURRENCY DEVALUATION, ITS

EDITOR
Yassir Rasheed

Deputy Editor
Maria Khalid

IMPACT AND COURSE OF ACTION

Pages 12-13

OPERATIONS
Tausif-Ur-Rehman

MARKETING
Tausif-Ur-Rehman 03335536239

BUREAU CHIEF MULTAN

Muhammad Rizwan Awan

PHOTOGRAPHY
Wahab Chughtai

GRAPHICS
Muhammad Iqbal Qazi

WEBMASTER
Manager Web / IT: Sohail Iqbal

CONTACT

Flat # 5, Block # 23, PHA Appartments G-7/1, Islamabad, Pakistan Office: +92-51-2890168 +92-333-5439495 +92-333-5536239 Multan Office: 4, Mushtaq Centre Abdali Road, Multan Email: info@economicaffairs.info Web: http://www.economicaffairs.info
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urrencies are devalued when countries have no way to correct the economic mistakes done in past. The currency devaluation encourages exports and discourages imports to some extent but that is for a limited time. A government can be forced into devaluation by an ominous trade deficit. Thailand, Mexico, the Czech Republic all devalued strongly, willingly or unwillingly, after their trade deficits exceeded 8% of the GDP. Pak rupee is under pressure against the US dollar. The rupee devaluation would multiply the cost of business, affecting the productivity of economy and competitiveness of exports, lowering the import-substitution process and hurting the trade and industrial activities in the country as import prices for machinery and industrial raw material will be increased. Depreciation of the rupee is intensifying the cost of doing business and badly affecting the industrial and manufacturing sectors as Pakistan has to import fertilizers, food items, oil, machinery and industrial raw material. Pakistan has been expecting to contribute to its deficit by financing the Coalition Support Fund, US aid, 3G auction and Etisalat payments but this wasnt materialized. This exerted pressure on financial account and rupee started weakening against US dollar. However, uninterrupted increase in remittances is helpful in solving the problem of repayments easily and stabilizing the exchange rate. Present pace of the rupee depreciation will push up the inflation to go further high and a common man will hurt badly in these days of growing cost-push inflation. The depreciation of Pak rupee will add in billions in rupee term to the volume of foreign debt of the country which now stands at US $65 billion. Pakistani rupee is losing fast against regional currencies as it has remained just half against the Indian rupee and the Bangladeshi taka also appears much stronger than the Pakistani currency. Bangladesh achieved some good achievements in textile exports but it is not a large economy with good resources. India showed strength in its economy during a year when the global economy was in critical situation because of economic and financial crisis in the United States and Europe which finally absorbed the entire world. The new government is still unable to come up with a much needed long term ambitious plan to put the economy on right track. This should provide a model for exporting value added branded products, buttering the quality and image of existing products, finding new export markets and better aggressive marketing strategy. Furthermore, there is need to further cut the unnecessary government expenditure, improvement in the delivery of service by the government agencies and measures to sustain the budget and trade deficits. For economic stability, multiple and persistent exchange rates are always of great assistance. Merely willful depreciation of currency is not the solution of current economic crisis and should not be resorted to in near future.

Brazil's Beautiful Necklace

Tammy Swofford

Page 18-19

A Veiled Threat
Afrah Jamal

Abundant Clean Electricity...........................14-15 News in Brief......................16-17 Microsoft Bribe Probe Reaches into Pakistan, Russia Deals......24 Snowden and US-Russian Relations.................................25 The Battle for the Soul of Egypt.................................26-27 Conflicts, Contradictions & Confrontations..................28-29 Where is the Paisa.............30-31 What is Shadow Banking...32-33 KSE: Where Foreigners Call the Shots.................................36-37
D I S C L A I M E R

Pages 20-21

Understanding Pashtunwali
Yasmeen Aftab Ali

Pages 34-35

UAE & World Expo 2020

Tausif Ur Rehman

Utmost care is taken to ensure that articles and other information published are up-to-date and accurate. Furthermore, responsibility for any losses, damages or distress resulting from adherence to any information made available through the contents is not the responsibility of the magazine. The opinions expressed are those of the authors and do not necessarily reflect the views of the editor, publisher and the management. Comments and suggestions are welcome.
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Brazil

is the largest country in South America and the fifth largest in the world in terms of territorial area. With continental proportions, it extends over an area of 8,514,877 km. To the north the country is crossed by the equator, while to the south it is crossed by the Tropic of Capricorn. It has a population of more than 190 million, most of whom live in urban areas according to the 2010 Census. The population was formed by a combination of European peoples, negros (Africans brought to the country as slaves between 1530 and 1850) and native Indians. Later, after the liberation of slaves, the country received several waves of immigration (Germans, Italians, Spaniards, Japanese and Syrian- Lebanese) who created the ethnic background of the current population. Most Brazilians are negro (50.74%), with Caucasians accounting for 47.73% of the population.

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INTERVIEW Pakistan possesses a very significant geographic position with very important neighbors, a considerable territory and a substantial population, thus making it impossible for the other countries to be oblivious to Pakistan, said Ambassador of Brazil to Pakistan, His Excellency, Mr. Alfredo Leoni in an exclusive interview with Monthly Economic Affairs. Brazil is very much certain about Pakistans bright future and I believe that Pakistan will soon rise above the problems like energy, slow growth and terrorism and development has to come about, whether Pakistan wants it or not, in fact prosperity of the entire region partially depends upon growth and development of Pakistan thats why Brazil gives special importance to relations with Pakistan and regards it as a vital power of the region.
Your Excellency, please give us your view on the Pak-Brazil relations with respect to todays socio-political environment?
Brazil maintains strong political ties with Pakistan that continue to grow stronger with each passing year. In the past three to four years, we have made bilateral relations with Pakistan much broader in terms of diplomatic and political relations. We have to first promote more trade between the two, then cooperation in different fields may ensue. Ours is the first Latin American country which established its embassy in Karachi in 1952. In all these years, Pakistan and Brazil have cultivated very friendly relations and both countries are supporting each other on many international forums. The trust level that exists amid these two countries is evident from the recently proclaimed visa policy that offers five-years multiple entry visa facility to the businessmen. Recently, Brazils nominee Mr. Roberto Azevdo won the elections for Director General appointment at the World Trade Organization. It was a big boost to Brazil's global clout and I am grateful to Pakistan for its support to Brazils candidate in the WTO elections. Pakistan supported Brazil because Brazil is the voice of developing countries and has set sights on addressing the concerns of developing countries in the WTO.

"We do not believe in exclusive diplomacy, rather we do inclusive diplomacy. We maintain cordial relations with nearly all member countries of the United Nations and have embassies in 130 countries of the world."

Maria Khalid

Brazil
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7th largest consumer market

"Its impossible for the world to be oblivious to Brazil"

What are the dimensions of Brazils foreign policy?

Brazil is a 200 years old country which got independence in 1822. Prior to that, it was a territorial extension of Portugal which was a typical colony that didnt have its own rules of law. However, after declaring independence, Brazil adopted an open diplomatic policy that is friendly to all. Brazil does a lot for cooperation in some major areas such as Latin America, America and Africa which is the most important region for us. We do not believe in exclusive diplomacy, rather we do inclusive diplomacy. We maintain cordial relations with nearly all member countries of the United Nations and have embassies in 130 countries of the world. There are a few countries in the world who enjoy friendly relations with North Korea and South Korea, where as Brazil 9
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His Excellency, Mr. Alfredo Leoni

Ambassador of Brazil to Pakistan

INTERVIEW

Brazil is an emerging power, the sixth largest economy of the world and is the seventh largest consumer market. Brazil is proud to be the first exporter of many commodities including ethanol fuel. Brazils imports are around 220bn dollar and exports are 230bn dollars.
enjoys cordial relations with both of them. Correspondingly, Brazil is a very close partner of Iran but at the same time we have good relations with Israel as well and it is an evident supporter of Palestinian cause. Brazil does not take sides but we support countries on the fundamentals of right or wrong.

Which are the key areas where relations could be enhanced between the two countries?
Since I have been given assignment in Islamabad, I am making efforts to broaden the scope of relations and also searching for new avenues of cooperation. Brazil has many experiences that may help Pakistan and the most interesting area is agriculture, especially the production of sugarcane. You may ask, why sugarcane, let me tell you, because sugarcane can help Pakistan in meeting its energy requirements also. Pakistan just needs to increase its sugarcane production and also the quality of sucrose in it. Most Pakistanis may not know that Brazil is the eight largest producer of motor cars and it has the biggest fleet of cars that run on 100 % ethanol fuel that is produced by sugarcane. It could be a substitute of CNG in Pakistan.

Moreover, like Pakistan, Brazil is an agriculture based economy and it has developed its agriculture technology a lot and the experience of Brazil may be handy for Pakistan, for example, to protect its growing crops from insects, the growers do not use pesticide, instead Brazilian farmers use insecticides to protect their crops from insects. There are such bees which consume plaque and they dont eat crop but the germs. Brazilian agriculturalists have developed the friendly insecticides and created a culture of germs. Brazil can assist Pakistan in creating the germs culture and nourishing of friendly insecticides that suit the soil and weather conditions of Pakistan. Recently, a technical team of Pakistan Agriculture Research Council (PARC) visited Brazil and witnessed the used of insecticides and production of ethanol from sugarcane, its use in cars and generators and they were keen to develop the technology in Pakistan. However, we are still waiting for a ministerial level visit to Brazil from Pakistan so that both countries could sign formal agreements for bilateral cooperation. Earlier, I have made concrete efforts for the visit of ex-foreign minister, Hina Rabbani Khar, to Brazil but it couldnt be materialized, though it was scheduled thrice but every time it had to be cancelled at the eleventh hour. Now, there is more likelihood of a high level delegation visit to Brazil at the earliest as the current Advisor to Foreign Affairs, Mr. Sartaj Aziz is an aficionado of Brazil and has visited many times plus he is a devotee of enhancement of Pak Brazil relations.

pulp among others, while major Pakistani exports to Brazil include textile items, surgical items, soccer ball and manicure instruments including others. Pakistan produces best quality footballs world over which is very popular in Brazil being a soccer crazy nation. Especially, in the area of Biotechnology (from agriculture to pharmaceutical research), development of vaccines and in telecommunication and computer engineering, bio-energy, both countries could explore further opportunities.

Brazil is not a mystery. In order to succeed the investor has to invest in locality, you can try to sidestep the local partner but you cannot sidestep localization. You have to be really focused in the country; you cannot believe that you can succeed by controlling from Islamabad. You have to control your investment from Brazil itself as one has to provide competence and growth together; not just through acquisitions but through acquiring competences and you have to be able to provide services that go along with that.

sector by offering undergraduate and graduate scholarships in various disciplines to Pakistani students.I believe that this country has huge potential which needs to be explored. The embassy has already announced Portuguese language free of cost classes at the embassy. Moreover, Brazil also offers postgraduate level scholarships for Pakistani students. Currently, there are about sixty Pakistani students in Brazil for education on a full scholarship.

Brazil produced 86 % of its energy through renewable resources. Have you offered assistance to Pakistan for meeting its energy needs?
Brazil faced the same energy crisis a few years back and was triumphant in overcoming it by means of Hydropower projects. Importantly, energy is also on top of the list for Brazil. Hydropower is a $2.5 trillion industry in Brazil and I have been talking major companies of this discipline into bringing their representatives to Pakistan. Since its something new for them, it is essential to put them in the picture that how safe it is to come here. It is also important for us to let people in Brazil know how profitable the market over here is. Pakistan is blessed with natural water resources and the solution of power crisis lies in hydroelectric projects by building small dams. These small dams would not only increase power generation but could help chucking flash floods out.

Do you see any chances of extending co-operation in the defense sector and enhancement of defense relations between the two countries in near future?
The scope of defence related relations between the two countries is quite vast and needs to be extended. In last few years, there has been a significant increase in the military relations. Both sides have exchanged some high level visits in this regard. Recently, the naval chief of Pakistan visited Brazil. Pakistan bought some small sized airplanes from Brazil in 2008 and another deal for procurement of defense aircrafts is being negotiated. The military aircrafts manufactured by Brazil that are safe to fly are available for Pakistan at competitive prices. A Brazilin team also participated in naval exercise held last year in Pakistan. Brazil has also sold 100 MAR-1 anti-radiation missiles to Pakistan despite India's pressure.

Pakistan imports from Brazil 2012 Products Cotton Machinery, boilers, etc Plastics & articles thereof Soya-bean oil & its fractions Iron and Steel Paper & paperboard Tobacco Pepper Rubber and articles thereof Others Total: Million US $ 113 15 12.7 16 10 8 5 3.3 2.2 6.8 192

Do you see potential in bilateral trade?

Brazil is an emerging power, the sixth largest economy of the world and is the seventh largest consumer market. Brazil is proud to be the first exporter of many commodities including ethanol fuel. Brazils imports are around 220bn dollar and exports are 230bn dollars. As an ambassador of Brazil, my efforts are aimed at promoting Brazil and to make it available here. There is no obstacle for trade with Brazil and let me assure you that it is a profitable market. Brazil has lots of stake in this region. It has a trade balance of $11 billion with India;its $1 billion with Bangladesh; $850 million with Sri Lanka; and with China,being the largest trade partner of Brazil,we havea trade balance of 75 billion dollar per annum. Unfortunately, the bilateral trade volume of Pakistan and Brazil is as low as $300 million per annum. However, we are eyeing to enhance the bilateral trade to at least one billion dollars in next three years and the potential is there. The major Brazilian exports to Pakistan include cotton, fuel pumps, plastic, iron and steel, tobacco and

Pakistan's export to Brazil 2012 Products Textile Made Ups (Apparels, Home text, cotton Yarn) Soccer Balls Medical and Surgical Instruments Mucilage & thickeners derived from locust beans or guar seeds Articles or leather Manicure and pedicure article and Scissors Ball point pens, pencils and crayons Million US $ 53.1 9.7 7 5 4 4 2.5

Ethanol fuel is a success story in Brazil, how would you describe it?
Brazil's ethanol program started in 1975 when soaring oil prices had put a chokehold on the economy. Sugar cane was an obvious candidate, given Brazil's almost endless amount of arable land and favorable climate. As of now, Brazil is the second largest producer of ethanol in the world and the largest exporter of its fuel. Most car makers in Brazil sell flexible-fuel cars, trucks, and minivans that can use gasoline and ethanol blends ranging from pure gasoline up to 100% ethanol (E100). In 2009, 90% of cars produced ran on sugarcane ethanol. Over half of all cars in the country are of the flex-fuel variety, meaning that they can run on 100 percent ethanol or an ethanolgasoline mixture. Ethanol accounts for more than 50 percent of current light vehicle fuel demand, and the company expects this to increase to over 80% by 2020. This is an area in which we can collaborate and on behalf of my government, I have conveyed to my counterparts here that Brazil is open to share its indigenous technology to produce ethanol fuel with Pakistan. It took Brazil 48 years to develop the technology to run motor cars on 100 % ethanol fuel. Ethanol is used for tractors, generators etc and we would soon start using it for planes because its clean energy.

Is the Brazil cost the high cost of doing business in Brazil being addressed?
Yes, cost of doing business is high in Brazil but the profits are even higher. The cost of living is also high because of high taxes thats known as Brazil Cost but believe me it is a very profitable country that is why Pakistans export to Brazil have doubled during last two years.

What efforts has the embassy been doing to build stronger peopleto-people interaction between our countries?
Various cultural activities have been organized between the two countries for promotion of each others culture through art exhibitions and conducting musical programmes. We have invited Pakistani artists in the past to visit Brazil and experience its diverse culture, Furthermore, Brazil is also promoting Pakistans education

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Brazils Beautiful
Necklace
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f a nation is likened unto a mother watching over her children, then Brazil is the mother who wears a beautiful necklace. This multicolored strand contains 200 beautiful gemstones. They are unique and distinct. Each gem represents one of the many indigenous tribes who call this nation their home. Within this demographic are approximately 188 different languages and (an estimated) sixty-seven uncontacted tribal groups that are blissfully unaware of the world as it exists beyond the confines of their habitat. Brazils indigenous population presents as an ethnographers paradise. Culture and social mores, natural habitat and survival skills, and sociolinguistics and human behavior can be observed. But the research laboratory is far removed from the sterile confines of the halls of academia. The laboratory is located within the basin of the Amazon River, nestled into the Guiana Highlands, and within remote areas where explorers of past eras have given of their blood and personal treasure. To explore Brazil is akin to Helen Keller touching the face of Anne Sullivan for the first time. Delight and a sense of wonderment await the visitor. The very presence of these remote, indigenous groups function as a living testament. The romanticized myth of lone survival makes for pleasant reading and the script of an occasional film. But the manner in which indigenous cultural moorings demonstrate the survival of the human spirit is the ancient tale of man. This survival and maintenance of micro-societies which remain unchanged throughout their centuries of existence must be secured. Brazils necklace is a beautiful one. Policies which assure non-interference by outside interests are the clasp on the necklace. It must not be allowed to break. In past decades, initiatives to diminish the extrinsic impact of broader-based culture on indigenous tribal cultures have been provisioned within the constitution. Common streams of missionary endeavors and outreaches seeking to extend humanitarian kindness have been balanced through the restraint provided by Brazils constitution. While social anthropologists and ethnographers may rant a bit against missionary proselytization and forward stationing into the tribal regions, their own voices are hollow reeds of self-incrimination. Observation can change the behavior of the one who is being observed. And cultural immersion research which involves prolonged patterns of indwelling between the researcher and his laboratory can create subtle cultural changes. These changes may adversely impact the survivability of Brazils microsocieties. One hard truth which can be difficult to digest is that of generational continuity. Simply put, the survival of micro-societies is dependent on the affirmation of the indigenous culture by the children moving into an age of procreative capability. If they are excessively impacted by outside forces, if the allure of modernism reaches their doorstep, the tribe can be one generation away from biologic annihilation. There are those who will continue to split hairs regarding the interface of missionary zeal or secular humanitarian efforts within the tribal belts of Brazil. But a much greater danger is shaping up to rob the

mother of her necklace. This danger is firmly established within the Tri-Border Area shared by Brazil, Argentina and Paraguay. This danger will eventually engulf a greater number of the 200 indigenous groups who call Brazil home. This peril has a name and presents as a 21st century reality. Hybrid narco-terrorism organizations present the most significant danger to the survival of the micro-societies which are dependent on both their isolation and unspoiled habitats to maintain their generations. This nexus of drug cartel old-school evil and terror organization new-school evil is a symbiotic relationship based on criminal financial greed and the need to fund terror. According to the U.S. Drug Enforcement Agency, nearly fifty percent of the designated foreign terror organizations have traceable links to the global narcotics trade. These hybrid entities are dependent on movement within the shadow lands of nations where palsied law enforcement efforts are noted. Whether looking at remote regions of Brazil, Pakistan or Mali, the ripple effects of narco-terrorism activities on indigenous cultures are the same. Erosion and erasure of culture occur whenever a protective cordon is lacking. Whether it is a connection between Lebanese terror organizations and drug cartel financiers or any other hybrid accommodation, the challenges remain the same. Brazil has stewardship over a vibrant human puzzle. This stewardship is not based on human initiative but on a unique interface between geography with human biology. How can this great nation maintain policy initiatives which function as two hundred separate protectorates over rights of the indigenous groups to maintain their lives in peace? Brazils constitution gives the nod toward the tribal diversity within her borders. The government acknowledges the right of the indigenous tribes to benefit from their resources, and maintain their generational traditions. Their removal from the land is forbidden. Narco-terrorism organizations do not abide by constitutional restraint. They blaze their trails across forested paths and leave behind the signs of psychological infestation. Narco-traffickers despise the human race of which we are all a part. They embrace a dangerous hybrid organizational culture of their own. It is one of predatory exploitation. A world with boundaries and no trespass zones does not exist within these criminal accommodations. Is annihilation of any tribe worth a shipment of cocaine? Drug traffickers have long forgotten their own mothers. They have even less regard for the vulnerable children of Mother Brazil. Government is tasked with the stewardship of national resources. Today the stewardship of Brazil is noted when considering that the nation sustains an enviable and robust economic environment with the sixth strongest national economy in the world. Beyond the stewardship of national economy Brazil remains uniquely different regarding her challenges as the sentinel of her gene pool. The need to maintain protected status for the 200 distinct and separate indigenous tribal cultures is a guardianship challenge which requires wisdom. A strong backbone is required to eradicate -in efficient manner- the narco-terrorism routes which trouble the people. My best wishes are extended. And may the beautiful necklace of indigenous culture remain draped across the shoulders of a nation.
The writer is a freelance journalist and author of the novel Arsenal. She can be reached at tammyswof@msn.com

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ABUNDANT CLEAN ELECTRICITY

Helena Lobato da Jornada

FUELS BRAZILS GROWTH

installed capacity of electric power generation in Brazil was of 121,000 MW, of which 84,000 MW came from hydropower plants. Overall, almost 90% of the electric energy produced in Brazil is renewable, against only 20% of the worlds average. Hydropower in Brazil comes not only from massive projects, like the Itaipu dam (which produces more than 14.000 MW), but also from very smalls hydropower plants, which are able to produce the amount of needed energy for small communities with a low social and environmental impact. For the generation of electric energy, Brazil is also investing heavily in other renewable sources, such as wind power. Although it still does not count for much of the energy matrix, the numbers are quite impressive, as wind power production grew 24.2% from 2010 to 2011. Brazil hosts the ideal conditions for the production of wind power and many new wind farms are being built. Investment in this area is proving to be extremely attractive, especially because it also counts with the support from the Bank of Brazil and the National Bank for Social and Economic Development. The support of the Federal Government and the emphasis on large scale investments to overcome the energy crisis played an essential role in Brazil. It was only through public incentives that the private sector and international investors were able to see Brazil as a lucrative alternative. Also, Brazil has established a research and regulatory structure which enabled the country to focus on specific policies. In this sense, not only the general production of energy increased in the last few years, but also the productivity, meaning that energy production in Brazil is becoming more efficient. Brazil also has one of the worlds most successful experiences in the field of biofuels. The country is the largest exporter of ethanol, a biofuel produced indigenously since 1974 from sugarcane, in a sustainable and efficient way. Due to some strict policies and to the agroecological zoning determined by the Brazilian government, sugarcane can only be produced in specific regions, far from the Amazon, in order not to invade any forest or reserved area.

Brazil is a pioneer in the development of the flex fuel technology, which was launched in 2003 and allows cars to run on both gasoline and ethanol in any proportion. Currently, multinational car assembly corporations produce nearly 100 different models of flex-fuel cars in Brazil, thus ensuring the country the largest fleet of flex-fuel cars in the world.
The region of So Paulo and its surroundings is where the majority of the sugarcane plantations are actually located, not occupying more than 1.4% of the countrys agricultural area. The energy and environmental balance of sugarcane fuel makes it one of the worlds most efficient and sustainable sources of energy. The Brazilian production of ethanol totaled 27.6 billion liters in 2010 - an increase of 7% over the previous year. According to estimates by the Ministry of Mines and Energy, it could reach 64 billion liters in 2019. It is important to stress that the increase on the amount of ethanol produced was due much more to the increase in productivity than to the expansion of cultivated areas, which proves that it can be sustainable. Besides the export potential, there is great demand for biofuels in the domestic market. Brazil is a pioneer in the development of the flex fuel technology, which was launched in 2003 and allows cars to run on both gasoline and ethanol in any proportion. Currently, multinational car assembly corporations produce nearly 100 different models of flex-fuel cars in Brazil, thus ensuring the country the largest fleet of flex-fuel cars in the world. Between 2003 and 2010, 12.5 million flex-fuel vehicles were sold, with an estimated participation of 39% in the total light vehicle fleet. Ethanol is a green-fuel from scratch, as it generates 90% less emission of greenhouse gases as compared to gasoline. With the development of new technologies, ethanol from sugarcane is expected to record negative emissions. The benefits start at the very root of the cycle: ethanol from sugarcane generates approximately nine times more renewable energy than the fossil energy used in its production, while ethanol produced from corn yields only 1.4 units of renewable energy for every fossil energy unit used in its production process. Brazil is also the third largest consumer of biodiesel in the world. The 2004 National Program for Biodiesel Production and Usage (PNPB) mandates the gradual mixture of alternative fuel with diesel. A special program for the sustainable production of palm oil was also launched in May 2010. The palm oil program includes an agro-ecological zoning initiative and offers an interesting alternative for deforested areas in the Amazon region. Additionally, this initiative has a very important social aspect, as the crops for the production of biodiesel can be cultivated in small properties. Thus, the production of this kind of fuel is not only environmentally friendly, but also economically viable and socially relevant. Through these governmental programs, biodiesel production is actually being used as a tool to foster social development. Brazils success story may be a good example for Pakistan, a country that, like many others, struggles with energy problems that affect peoples lives and the economy as a whole. Following some of Brazils strategies like focusing on a varied energy mix; investing in hydropower; investing in new and sophisticated technologies and fostering the use and development of new energy sources, such as biofuels, will be a good slant for Pakistan to begin unraveling its energy conundrum in order to start a brighter period of its history. Helena Lobato da Jornada is the Head of the Commercial, Press and Energy Section in the Embassy of Brazil, Islamabad

n the late 1990s, Brazil endured a rigorous blackout, which left almost 90 million people in the dark for some hours. It was the first precursor of the chink in Brazilian energy systems armor, caused by a combination of drought, bad planning and years of lack of serious investment in the energy structure of the country. With a series of massive investments and a wide-spread public awareness campaign, Brazil was able to overcome those dark moments and now, a decade later, enjoys a very comfortable energy situation. Pakistan could certainly take benefit from some of the Brazilian examples to overcome its energy crisis. Brazil has done it, Pakistan can also do it. Brazil, as Pakistan, has many different kinds of water formations, which can easily be transformed into an efficient source of energy. The Brazilian energy matrix relies mainly on this kind of energy, hydropower, which accounts for almost 70% of the production of electric energy in the country. In the beginning of 2013, the

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News in Brief
D
Sindh govt performance outshined
uring the fiscal year 2012/13, the Sindh government performance outshined all provinces. Sindh has presented a surplus budget of Rs 41.42. The accumulated revenues of the Sindh government were Rs 445.67 billion against the overall expenditures of Rs 404.25 billion. According to the finalized figure for the fiscal year 2012/13 released by the finance division, the province of Punjab has come up with a surplus of Rs10 billion, Baluchistan with Rs 14 billion and the surplus of KPK was only Rs 4 billion, whereas Sindh has presented the largest surplus of Rs 41 billion. The provinces share in federal revenues was Rs 320.73 billion and the province generated Rs 68.14 billion from provincial taxes and Rs 24.67 billion from the nontax revenues. The current expenditures of the government were Rs 301.92 billlion whereas the Sindh government spent Rs 102.32 billion of development work. While talking to Economic Affairs, information minister for Sindh Sharjeel Memon said I see a vital potential in the province for extending the tax revenue but deteriorating law and order is the biggest challenge to deal with. The initiative Triple Bottom Line (TBL) is meant to make and project the entire textile supply chain environment-friendly and socially responsible industry towards the people. APTMA has already hired a Dubai-based Pakistani businessman and lobbyist, Raza Jaffar, for implementing the TBL (Planet, People and Profit) initiative and improving the image of the industry. It also plans to organise textile shows in the US and European countries to create contacts with major buyers in those markets. APTMA chairman Ahsan Bashir said a comprehensive strategy was being evolved to take full advantage of the free market access under the EUs GSP+ system. He said the new government had largely solved the energy problem of the textile industry in Punjab, at least for the time being, which has helped capacity utilization to 90pc. Now growth in textile trade is our next target. We are aiming for $30bn exports. Bangladesh, which purchases cotton, yarn and fabric from Pakistan and elsewhere for its industry, has increased its textile exports from $5bn to almost $27bn in last eight years after obtaining free market access from the EU and is aiming for $40bn in next few years. APTMA leader Gohar Ejaz said the decrease in Chinas share in the world textile trade to $270bn from $300bn in last one year and the EUs GSP+ trade incentives for Pakistan had opened a big window of opportunity for Pakistan to not only push its textile exports to the world but also produce a trade surplus to help the government overcome its current account woes in the next 3-4 years.

Gas price hiked for captive power plants

he government has increased gas price for captive power plants by Rs85/mmbtu, however it has decided to maintain the price at current level for domestic, commercial, industrial and Compressed Natural Gas (CNG) consumers. The decision was taken during a meeting chaired by Petroleum Minister Shahid Khaqqn Abbasi here in the premises of petroleum ministry on Friday, sources said. Ogra has issued a notification to this effect. Top officials of the ministry, Sui Northern Gas Pipelines Limited (SNGPL), Sui Southern Gas Company Limited (SSGCL), Oil and Gas Regulatory Authority (Ogra) attended this meeting. The sources said the meeting approved the price hike for the captive power plants (CPPs), which are owned by the affluent millers and industrialists of the country. With this approved Rs85/mmbtu increase the price of gas for CPPs has surged to Rs573/mmbtu from its earlier price of Rs488/mmbtu. A source disclosed that a decision to maintain the gas price for rest of the users was taken only because some six months ago the Islamabad High Court (IHC) had suspended the Gas Infrastructure Development Cess (GIDC). Had the incumbent regime stick to its price rationalisation plan, the gas price for all users would have witnessed a big surge as the plan envisaged bringing it at par with the price of furnace oil/alternate fuels. However, the petroleum ministry last week challenged the suspension of GIDC by the IHC in the Supreme Court and the government is most likely to increase the gas prices as soon as it gets a favourable decision.

significant progress has been made in the bid to arrange funds for the project. The PFF had launched a campaign against mega water projects, entitled Keep Rivers Free Movement, in March 2010, which included a 14-day Long March from Kharochan, in the Indus Delta, to Jamshoro, located on the bank of the River Indus.

LCCI to hold moot on Halal food export on Sept 9

World Bank ready to provide support to Pakistan, says new VP

hilippe Le Hourou, new vice president of World Bank Groups South Asia region, said the lending agency will provide policy and performance-based support to Pakistan. The World Bank Group stands ready to assist the government in reform implementation through policy and performance-based support, said Le Hourou. The complex challenges facing the country call for not only implementation of multi-sectoral fundamental reforms and investments but also their careful sequencing, he added. In the difficult current economic situation of the country, Le Hourou agreed with the governments economic plan. He assured the government of the World Banks support for stabilizing the macro economy, deepening the needed structural reforms and implementing needed sectoral investments. He also discussed the governments development priorities and the programming of $1.5 billion International Development Assistance (IDA) support to Pakistan for the next 10 months, in the areas of policy reforms and investments, particularly in energy, revenue mobilization, governance and social sectors.

KESC accused of violating deals

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APTMA initiative to double exports

ll-Pakistan Textile Mills Association (APTMA) would launch a new initiative from Jan 1, 2014 to improve the image of Pakistani textiles around the world to double the industrys exports to $26 billion over the next three to four years in the wake of free market access from the European Union. 16

s the management of the Karachi Electric Supply Company (KESC), as well as its former and present buyers stayed away, a Senate panel noted on Friday serious violations of different agreements by the utilitys management and criticized government representatives on its board of directors for staying silent. The sub-committee of the Senate Standing Committee on Water and Power, led by Senator Shahi Syed, sought legal opinion of the law minister on a couple of key questions within a week so that the committee could submit its final report to Senate for action before Sept 2. The ministry of law was asked to explain from the legal standpoint if the amended agreement signed with the KESC in 2009 to change the original 2005 agreement was valid given the fact that the original buyer, Al-Jomahia Group, was defaulting on its contractual obligations and if the government could have taken over the utility as provided in the original sale agreement. The law ministrys view was also sought on whether re-bidding was not necessary for the KESC when a defaulting original buyer transferred a company having government shares to another private entity and also to explain if the water and power ministry was authorised to provide incentive package to the new buyer Abraaj Capital, a private entity -- after the original buyer failed to meet contractual obligations. The law ministry was also asked to give its opinion if rules of business 1973 allowed implementation of decisions of the ECC without proper endorsement by the cabinet or the prime minister and if the ECC was authorised legally to take such decisions to provide incentive package to a privatised entity by bypassing the cabinet committee on privatisation or Council of Common Interests. And if the ECC decisions were not ratified by the federal cabinet then what was the legal status of the agreements signed with the KESC management.

PFF calls for reviewing Bhasha Dam construction plan

ahore Chamber of Commerce and Industry (LCCI) is organising a conference on Halal Food Export on September 09, 2013 to discuss the potential of exports of Halal food products from Pakistan, issues hampering its growth and devising a way forward to guide the local industrialists in this regard. This was stated by the LCCI Standing Committee on Halal Food Naseeb Ahmad Saifi here on Friday. He said that his company is sponsoring this conference to highlight problems faced by the Halal meat and food industry and reaching to a solution to these issues which can lift the present exports to US5-6 billion dollars. He said that the government should make its economic officers more active in missions abroad for ensuring access of Pakistani Halal meat and other food products in the international market which could help increasing the Halal exports of the country by three times. He said Pakistani meat is liked world over due to its quality and taste but government patronage is needed to enhance its exports. Naseeb Ahmad Saifi said that increasing price of electricity and gas had increased the input cost of the exporters manifold due to which they are facing it difficult to compete with India and African countries in the international market. He said that the government should take immediate measures to stop smuggling of live animals to Iran and Afghanistan as it is not only causing huge loss to the Halal meat industry but also to the national exchequer.

Karachi

he Pakistan Fisherfolk Forum (PFF) has expressed concerns over the Pakistan Muslim League (PML-N)-led governments plans to reinitiate controversial schemes such as the Diamer-Bhasha Dam, a project that was previously shelved after widespread protests across Sindh. PFF Chairman Mohammad Ali Shah, on Friday, called for the government to not only reanalyse the ecological impacts of the dam, but also its negative effects for communities inhabiting the area. He said that the government, which is looking towards two of the worlds largest multilateral lenders for the $12 billion Diamer Bhasha Dam project, is inadvertently putting its main economic sources at risk. At a time when reports of mass suicides by farmers, over being deprived of their water share for cultivation, are circulating, politicians are working to secure funds from world lenders, said Shah. The consent of the communities settled in the area, for whom the water is a basic source of livelihood, is essential, even for projects of such magnitude. There is no justification for this project to be re-launched, he stated. Shah reiterated the PFFs dedication to honourably represent not only the three million small-scale fish workers of the country, but also farmers and herdsmen. These poor workers are the real victims of mega water projects, which destroy fertile land, wetlands and forests, consequently forcing mass migrations, he said. Finance Minister Ishaq Dar, reportedly, recently told the media that

Pakistan, Thailand vow to double trade; enhance economic partnership

akistan and Thailand Tuesday expressed the resolve to build a strong economic partnership, double their trade figures to US two billion dollars in next five years and eventually enter into a Free Trade Agreement. Prime Minister Muhammad Nawaz Sharif and Thai Prime Minister Yingluck Shinawatra Pakistan addressing a joint press stake out after a round of bilateral talks also expressed their commitment to collaborate in the field of trade, culture, infrastructure development, science and technology, defence, education and tourism. Prime Minister Sharif said the two sides held a "comprehensive discussion" on wide range of issues and noted the convergence of views on important bilateral and international issues. The two sides also discussed regional and international issues of mutual interest. Prime Minister Shinawatra extended her country's support to Pakistan in becoming a Full Dialogue Partner with the ASEAN, as Prime Minister Sharif appreciated Thailand's "consistent support" for Pakistan's enhanced partnership with the regional forum.

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PERSPECTIVE
in parts of Pakistan have been enslaved by invading bands of good/ bad/ evil Taliban running amok. Ordinarily, this would be a stroke of genius that helps its character maintain a low profile but in a bid to steer away from one stereotype the super hero in the ill-fitting body armour the creators have inadvertently opted for another - that of the invisible woman associated with this part of the world. Interestingly enough, there will be no burkas in Jiya - the school marms closet. She is a free spirit with moxie aplenty, not inclined to cover her head or conform to that standard issue image on conservative brochures which is a refreshing sight in this era of creeping radicalization and holierthan-thou mugs plastered across the media. The super hero community typically does not rummage through attics or go shopping for that perfect off-the-rack number and while they may trade looks for comfort, their iconic suits stay in view through-out the journey. There is Batman, in the reboot seen ordering those customized Made in China masks that would not survive a POW to the head; or the Man of Steel known for re-using his baby blankie for its invincibility but not his design sense. The creative should have considered the fall-out when rolling out the recycled collection. Perhaps Jiya had a similar epiphany when she was raking her brains for a suitable dress to wear at the coming out party for her alter-ego and saw a chance to remake the cumbersome burka into a fetching guise. Her creators would have been within their rights to let her put her own spin on the name and saved themselves a lot of grief and time spent in explanations. The girl behind the mask, who casually bonks her foes with books, uses pens to impale and cut through the haze of mixed messages, propaganda and murky morality. But Jiya, the courageous educator who refuses to conform and holds on to her ideals deserves to be lauded and is someone to look up to. The lady in black as she has been referred to in the theme song is on a worthy mission. Instead of her formidable abilities, and an unambiguous stance on crucial issues which is more than most politicians can say, the spotlight continues to remain on her fashion choices. In hindsight it might have been wiser not making

A Veiled Threat

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Afrah Jamal

he Avenger phenomena hit Pakistan sometime in late July 2013. The choice of the name had an instant effect loud cheers, inaudible gasps, startled looks and a few boos were reported, things were said. A musician, composer and most recently Campaign Ambassador for Save the Children's Everyone Campaign, who reigned in the 1990s as the front man for Awaz, and nowadays goes by the name of Aaron Haroon (redundancy alert!) is responsible for these seismic changes in the national topography. Back then the band made history when Janeman became the first Pakistani song to air on MTV; now another precedent has been set as Pakistans first animated, female super hero takes the stage. It is different because the secret identity goes undercover in a burka. It is controversial for the same reason. A school teacher by day, Jiya dons the invisibility cloak before setting out to conquer the world. A burka has been used here as a symbol of empowerment - more on that later. A Young Jiya aka the Burka Avenger who happens to be faster than a speeding Tez-gam, leaps over short buildings or telephone poles, defies gravity and 18

could well be Pakistans newest ally on the frontline of terror. That she is a firm believer in the pen is mightier than the sword adage gives her an advantage. Stationary makes for handy weapons in B.A universe and her costume allows her to wander the countryside undetected, like most women in that region and maybe a few Most Wanteds from across its borders. In reality, this would not be functional as a uniform and is likely to put an end to those flying squirrel moves. Fantasy has rushed to the aid and an invincibility clause has been quietly added to the conservative mix. Regardless of the snazzy makeover, using the b - word as a centerpiece has drawn focus away from the shows noble cause and bold agenda. The 22 minute segment uses a slick mix of humor, music and martial arts to sound the alarm and alter perceptions. The upbeat tone is padded by an endearing line up of characters including heroic young uns and baddies with imaginative names like Baba Bandook (a mean magician), Vadero Pajero (a mean feudal). Haroon, along with other well known singers will make an appearance during the course of the show. As far

as super heroes go, this is pretty standard fare but for the ladys choice of attire and real life implications of her work. There are plenty of monsters to choose from and territory to reclaim and the storylines are set against a somber backdrop. A few basic strokes have been used to render the life of an orphaned little girl raised by an adopted father figure/ resident Obi One Kenobi who trains her in the art of Takht Kabaddi, used to restore balance in a topsy-turvy world. Go Avenger. That she reaches for the most logical item to conceal her identity is understandable in many ways. Where super heroes stand out in their mitts, hoodies, capes and /or bunny/ bat/ cat ears, Jiya can melt into the crowd, and would be impossible to trace - a covert operators dream. Being outsmarted by someone in medieval gear is an added insult. It enters a contentious zone when tools of oppression are shown to be interchangeable with power. Some might argue that fighting extremism in the one thing used to subjugate women would be considered poetic justice. Others would continue to glare at the offending burka and be reminded of tales where women

That she is a firm believer in the pen is mightier than the sword adage gives her an advantage. Stationary makes for handy weapons in B.A universe and her costume allows her to wander the countryside undetected, like most women in that region and maybe a few Most Wanteds from across its borders

the crusaders cape the lynchpin - a protagonist forced to navigate a hostile terrain while trying to talk her country-men down from the ledge, makes for a far better headline. The show offers fun-sized doses of kid friendly entertainment wrapped in layers of comedy topped with a public service message, and will tackle other issues along the way. Taliban are never named directly and are not the only threat out there; a dangerous void that allowed extremism to take root needs to be countered and thus far the media has been unable to stir up support for an environmental cleanup. When the burial of a martyred Ahmedi soldier who receives full military honor becomes news as if his religious beliefs are in any way relevant to his sacrifice, it is time to rally around. But the call to arms often gets lost in the din and stories about the persecution of Christians, the murder of liberal crusaders, or ethnic cleansing resurface with depressing regularity. Sending the invisible

woman behind enemy lines marks the beginning of the resistance. Since she is an educationist, female literacy remains at the forefront. The Burka Avenger was reportedly conceived before Malala (Pakistans real life superhero) became the spokeswoman for literacy and girls rights and a universal symbol of resistance. Our heroine is up against the same horrors with bigotry at its peak and justice in short supply but unlike real life, here she can get away unscathed and live to fight another day. The show is broadcast in Urdu, available in English and there is a global audience breathlessly awaiting the Avengers debut. According to one report, Haroon is in talks with European broadcasters to have the series translated into 18 languages and broadcast in 60 countries. 13 episodes are set to air on Geo Tez every Sunday though it is unclear if these airwaves can reach remote regions that need it most. It may be time to place an order for a stronger sounding board to avoid setting off multi-cultural minefields in the future.
The writer is a freelance journalist who blogs at http://afrahjamal.blogspot.com. She can be reached at afrahjh@hotmail.com and on twitter @Afrahjh

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Understanding

Khushal Khan Khattak, the great Pashto poet, warrior and soldier was not far off the mark when he said, Let the head be gone, wealth be gone but the honor must not go, because the whole dignity of a man is due to this honor.

OPINION

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ating back to the preIslamic era, Pashtunwali is the code of conduct every proud pathan follows, may he live in Afghanistan, Pakistan, or as a refugee anywhere in the world. The native Pashtun is fiercely independent and loyal. In the backdrop of the importance of FATA, owing to its geographical location to Afghanistan, it is important to understand the code of the pathans. Pashtuns believe that their social code produces men who are superior to those produced under the Western model, and they have no desire to have a new 20

social system imposed on them by outsiders. (Thomas H. Johnson and M. Chris Mason, No Sign Until the Burst of Fire, 61.) Melmastia (hospitality) is a key component of Pashtunwali. Melma means a guest. However, hospitality is not to be interpreted in the manner a westerner would interpret it. It means offering hospitality to a guest transcending race, religion and economic status. It also means once under the roof of his host, the guest should neither be harmed nor surrendered to an enemy. This will be regardless of the relationship between the guest and the host enjoyed previously. In this regard Melmasthia takes precedence over Badal (yet another principle of Pashtunwali), so even the enemy who comes seeking refuge must be granted it and defended against his pursuers. Elphinstone in 1815 observed: The most remarkable characteristic of the Afghans is their hospitality. The practice of this virtue is so much a point of national honor, that their reproach to an inhospitable man is that he has no Pushtunwali (Elphinston 1969: 226). Simply put, Badal means to seek justice or take revenge against the wrongdoer. There is no time limit to when the injustice can be avenged. If Badal is not exercised, the offended man or his family will be considered

stripped off honor. The exercise of this principle can lead to generations of bloodshed, feuds, hundreds of lives lost for one insult. It requires a violent reaction to the insult, death or injury inflicted. A Badal usually ends with a Badal. An action elicits or demands an equivalent response and the cycle goes on. Khushal Khan Khattak, the great Pashto poet, warrior and soldier was not far off the mark when he said, Let the head be gone, wealth be gone but the honor must not go, because the whole dignity of a man is due to this honor. Nanawatai (sanctuary) is another pillar of the Pashtunwali code. It allows a person to seek refuge in the house of another, seeking asylum against his enemies. The host Pashtun is honor bound to offer that protection, may it be at the cost of his own family or fortune. Traditionally, the protection is extended only till such time as the refuge seeker is on the property of the person whose refuge he seeks. The protection will be considered withdrawn once he is off the hosts property. William Mastrosimone, witnessing a team of mujahideen capturing and executing a Soviet tank crew in 1986, wrote a stage play Nanawatai, about a tank driver captured in the Soviet invasion of Afghanistan and his resulting plea for sanctuary from those who

find him. The story was later adapted into the the Pashtuns. A Jirga is an assembly of tribal old as time itself to conduct themselves as inelders who take decisions on issues based on dividuals and a society in their dealings. Even 1988 film The Beast of War. A Pashtun at all times is expected to consensus. Disputes between two or more stateless societies need certain laws to conduct defend his land, family, women and property people are heard by this council of elders. In affairs of the state. To this date, Frontier Crimes against invaders. Honor of his name must be tribal regions the Jirga is still used as a court Regulation- a body of law based on six chapdefended. Lives are laid down to defend the for criminal offences.The respect awarded to ters, sixty-four sections three schedules governs honor associated. This is Tureh (bravery) that tribal elders is phenomenal. When Mullah Nazir FATA, a British-era colonial act that empowis another component of the Pastunwali. Other Ahmed moved away from the loose construc- ers a political agent to take all actions on behalf tenets include Sabat (loyalty); towards ones tion of Taliban Movement in 2007, one reason of the Pakistan government and decisions once friends and family and members of the tribe. was because of the Uzbeks in the region. They taken cannot be appealed against or questioned under any law. Imandari (righteousness); striving Pashtunwali has struggled and sucfor goodness both in word and in A Pashtun at all times is expected to ceeded in establishing a uniform code of deed. Respect towards all. Ghayrat conduct in a society where justice is not (courage/honor); at all times a Padefend his land, family, women and and in reach of most people. State shtun must display courage. If he property against invaders. Honor of his easy laws have minimal reach and the Frontier has no ghairat or honor, he fails name must be defended. Lives are laid Crimes Regulation is a unique set of laws to make the grade as a Pathan. Nagoverning the rest of Pakistan. Conversely, mus (sexual honor of women);for a down to defend the honor associated. of honor may create situations where man and his family, namus means This is Tureh (bravery) that is another norms eruption of conflicts may be more frequent. sexual integrity and chastity of component of the Pastunwali. It also makes outsiders completely at sea women in the family. The Pashwhen dealing with the Pashtun. Understandtun must defend the namus of the ing Pashtunwali does not offer the map to women of his household. This extends to the namus of his external family as undermined the tradition of showing respect to control Pashtun tribes. It is no such magic powell. Nang (Honour); a Pashtun must protect the the tribal elder - an unforgivable sin to the Pa- tion. It does however help to understand the Pashtun. With the spread of Talibanization, layers shtun culture. Once understood, the framework honor of those around him. By no means is the list exhausted. How- of authority were scraped off the Jirga in many can help in formulating a strategy for engaging ever, it gives a good insight to the values that instances. In Khyber Agency example of Mufti with the tribals. The writer is a lawyer, academic and govern the Proud Pathan. Pashtunwali is not a Shakir from Lashkar-e-Islam, setting up its own legal code as we see. It is more a code of honor sharia court to dispense vigilante justice being political analyst. She has authored a book, A Comparative Analysis of Media and Media one. by which a Pathan will live by- and die for! The Pashtuns have relied on a code as Laws in Pakistan. The Jirga is obeyed without question by 21
SEP 2013

Post-flood relief operation hits snags amid aid dearth

Trail of destruction escalates as deluge moves southward
As the monsoon brings seasonal downpours and floods across Pakistan, Sialkot - 192 km (122 miles) from Islamabad is the worsthit district in Punjab province, in terms of fatalities and property damage. An estimated 200 villages in Sialkot are waist-deep in floodwater, which has damaged homes and public infrastructure, as well as rice, cotton and vegetable crops on thousands of acres, according to local disaster officials. Emerging from Himachal Pradesh state in northern India, the Chenab River enters Pakistan after passing through Indian-administered Kashmir. It flows through Punjab provinces northeastern districts and joins the Indus River in Multan district in southeast Punjab. According to Asjad Imtiaz Ali, chairman of the Federal Flood Commission, Chenab has experienced its first flood in 30 years, following exceptional rains in its catchment area. The river broke its banks at different places as the water level rose, particularly after India released (on Aug. 14) surplus floodwater into the river in its territory, to the sheer surprise of the Pakistani authorities concerned and without prior intimation as required under the Indus Waters Treaty agreement, said Imtiaz Ali. Pakistan has suffered economic damages of more than $16 billion as a result of consecutive monsoon floods each year since 2010. Some 4,000 people were killed, thousands injured and millions displaced

DISASTER BUDGET 2013-14

from their homes, according to the Economic Survey of Pakistan 2011-12. This year, again, the swelling floods in the Indus River and its tributaries in Pakistan the Chenab, Jhelum, Ravi, Beas and Sutlej are leaving behind a trail of devastation. As of Aug. 21, 118 people had been killed, 812 injured and over 399,000 affected in different parts of the country. An estimated 1,700 villages have been hit by flash floods, with many of them vanishing completely, according to the latest loss and damage report from the National Disaster Management Authority (NDMA). Around 11,200 houses have been damaged fully or partially, and summer crops rice, Syedan, a town in Rawalpindi district, a few kilometers east of Islamabad. Nawaz Suleman, a resident of Dhoke Mistrian, one of the flooded suburbs, said the area looks like a collection of islands but local officials have not responded to pleas for families to be relocated to a

Saleem Shaikh

aleema Bibi died at the age of just 29 when the roof of her house in Talwandi village in northeast Pakistans Sialkot district collapsed under heavy monsoon rains. Her husband and three children were badly injured. The roof of our house, where we all were sitting on a cot-bed, caved in after failing to withstand torrential rain that lasted for five hours, sobbed Bibis husband, Muzzamil Raza, describing the tragedy that hit his family on Aug. 14.

Around 11,200 houses have been damaged fully or partially, and summer crops - rice, cotton, sugarcane, maize, peanut, millets, sunflower and vegetables on over 325,000 acres of land have been devastated by heavy rains and flash floods.
SEP 2013

cotton, sugarcane, maize, peanut, millets, sunflower and vegetables on over 325,000 acres of land have been devastated by heavy rains and flash floods. Iftikhar Ahmed, chairman of the Pakistan Agriculture Research Council, noted that prices of vegetables used in daily cooking have jumped 300 percent, raising a serious threat of food insecurity if damaged road and rail networks are not repaired urgently and financial support is not provided for farmers to re-sow their crops. All rivers, including the Indus, are now flowing at full capacity, while the countrys two largest reservoirs, Mangla and Tarbela, in northern Pakistan are close to their maximum volume for the first time in many years. People living near the reservoirs fear that their homes will be washed away, as government authorities have asked them to vacate the areas, amid the latest forecast for another spell of torrential rain during the last week of August in southern Punjab, eastern Balochistan and southern Sindh provinces. The Punjab Disaster Management Authority said Mangla Dam and Jehlum River had already overflowed on Aug. 15, flooding at least 500 houses in 12 residential areas of Kallar

safer place. Flood Commission Chairman Imtiaz Ali said the coming bout of rainfall which is due in the last week of August and first week of September is predicted to be most intense of the ongoing monsoon so far. It is likely to be catastrophic, as all the rivers are already in high flood and the reservoirs are brimming. Disaster management authorities have to take all possible measures to relocate people from vulnerable areas to safer locations and arrange for food items, medicines and water for emergency needs to avoid further death tolls, he told this scribe from Lahore, the capital city of Punjab province. The floodwaters are now rushing southwards into Sindh province. Sharjeel Memon, a spokesperson for the Sindh government, said that the provincial authorities have declared an emergency at three main barrages - Guddu, Sukkur and Kotri and have asked the Sindh Provincial Disaster Management Authority (PDMA), the Sindh Irrigation and Drainage Authority and the Sindh Irrigation Department to remain on high alert to cope with the emerging flood situation and provide relief. Patchy aid responses by the disaster management authorities have drawn criticism from flood victims, humanitarian agencies and disaster risk management experts alike. NDMA officials say they have taken adequate relief measures in flood-hit areas, but this claim has been met with skepticism. The NDMA said 60 relief camps have been set up, housing 2,800 people. It has distributed nearly 23,000 tents among flood-hit families and provided them

with 500 blankets. But flood relief expert Sattar Zangejo said no substantial aid operations are being undertaken by the PDMAs in Punjab, Sindh and Balochistan, where he has been travelling to survey the situation for international humanitarian groups. Zangejo worked with Oxfam and Plan International on relief and rehabilitation operations during the last three monsoon floods. In Punjab, more than 90 percent of people have not received any assistance this time, and have had to relocate independently, he said. Despondency among the flood victims fleeing affected areas in Punjab and Sindh provinces was visible on their faces, he said. There is a clear absence of arrangements by the PDMAs for food items, medicines, clean drinking water and safe sanitation. There may be a bureaucratic reason for the delay in launching relief operations. On Aug. 17, Ahsan Iqbal, Federal Minister for Planning and Development and Deputy Chairman of the Planning Commission of Pakistan, told media in Islamabad that Rs. 16 billion (about $154.8 million) is urgently required by the NDMA for emergency flood operations. The federal finance ministry has been requested to make the required funds available and we hope it will release the funds soon to expedite relief and rehabilitation operations in flood-hit areas, Iqbal said. Saleem Shaikh is climate change and development journalist

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WORLD POLITICS

CHRISTOPHER M. MATTHEWS and SHIRA OVIDE

Microsoft Bribe Probe Reaches into Pakistan, Russia Deals

Justice Department Reviewing Allegations Involving Deals in Five Countries

SEP 2013

U.S. investigation into Microsoft Corp.'s relationships with business partners that allegedly bribed foreign officials in return for contracts includes activity in Russia and Pakistan, a sign that the probe is wider reaching than previously known, according to people familiar with the matter. The Wall Street Journal reported this year lawyers from the U.S. Justice Department and the Securities and Exchange Commission had been conducting a preliminary investigation into kickback allegations made by a former Microsoft representative in China, as well as the company's relationships with certain resellers and consultants in Romania and Italy. In Russia, an anonymous tipster told Microsoft that resellers of its software allegedly funneled kickbacks to executives of a state-owned company to win a deal, the people familiar with the matter said. In Pakistan, a tipster alleged that Microsoft authorized a consulting firm to pay for a five-day trip to Egypt for a government official and his wife in order to win a tender, the people familiar with the matter said. The two contacted Microsoft directly in the last eight months, the people said. The government hasn't accused Microsoft or any of its business associates of wrongdoing. Such investigations can end with no charges being filed. The Justice Department and Securities and Exchange Commission declined to comment. John Frank, Microsoft vice president and deputy general counsel, said the company takes all allegations brought to its attention seriously and cooperates fully in any government inquiries. "We sometimes receive allegations about potential misconduct by employees or business partners and we investigate them fully regardless of the source," Mr. Frank said in a statement. "We also invest heavily in proactive training, monitoring and audits to ensure our business operations around the world meet the highest legal and ethical standards."

The probe is one of dozens being conducted by U.S. officials under the Foreign Corrupt Practices Act, a 1977 law that prohibits U.S. traded companies from paying bribes to foreign officials. The law also holds companies liable for improper payments made by others on their behalf. Microsoft has opened an internal investigation, according to people familiar with the matter. Companies often spend millions of dollars investigating themselves for potential violations of the FCPA, then turn over the results to the government in the hope of getting lighter penalties or none at all. One tipster emailed Microsoft in January alleging executives at Microsoft's Pakistan operations paid for a December 2009 trip for a Punjab Provincial government official and his wife to win a three-year contract to supply the government with its Microsoft Office software, according to documents reviewed by The Wall Street Journal. The trip, which was allegedly booked by a travel consulting firm on behalf of Microsoft, included business class airfare and a stay at a luxurious hotel, the tipster alleged in the documents. According to the tipster, Microsoft won the partnership, worth roughly $9 million, three months later. The Punjab Government didn't respond to a request for comment. Another tipster mailed allegations to Microsoft concerning its Russian branch in March, said a person familiar with the matter. That tipster alleged that a Microsoft reseller paid kickbacks to executives at a statecontrolled telecommunications company for a contract, according to documents reviewed by the Journal. Efforts to reach Russian officials were unsuccessful. A whistleblower program at the SEC, established in the summer of 2010 with the passage of Dodd-Frank, provides cash incentives for employees to blow the whistle on securities violations, including breaches of the FCPA. If the SEC gets involved and finds wrongdoing after a whistleblower complaint, a tipster stands to gain as much as 30% of any monetary sanction the agency recovers. Courtesy: The Wall Street Journal

Snowden and US-Russian relations

Here's my strategy on the Cold War: we win, they lose. President Ronald Reagan

A Warm War?
countries. The signal being sent to the United States is that Russia has taken this opportunity to embarrass the United States and that possibly, there is nothing that the US is willing to offer Russia which is considerably important enough to balance Snowden's asylum request. The message was received by Washington loud and clear. However, another very essential message may have been ignored in the process: the very reasons why Edward Snowden is wanted as a criminal in the United States. How much different is the United States than Russia in the fact that it has been caught red-handed spying and collecting intelligence data on its own citizens? Furthermore, to deem the one person who has dared to divulge this information to the public, for the good of the public, it seems to be a statement which goes against the very core of what the United States may consider itself to be so different from Russia; its extremely high regard for free speech human rights. Granted, Edward Snowden was a government employee in secret service agencies bound by the rules and regulations of conduct of such agencies. However, he violated and exposed military secrets which jeopardize the United States in any way. His actions were based on informing the general public of illegal measures taken by their government, violating their privacy, to keep intelligence tabs on them, that too knowing full well the risks it entails with regards to his own life. The tensions in US-Russian relations seen are obviously based on vast differences in political ideology in general. However, it would seem that the appearance of Edward Snowden in the US-Russian diplomatic scene has exposed a new twist in the situation. From the perspective of the United States, how far can it go in preserving its position of viewing differences in its bilateral agenda with Russia based on something which it has firmly stood against Russia for and is doing itself; standing against the principles of free speech? Whatever the future holds, there may be one very positive outcome on the horizon. There are many voices claiming that Snowden can at least be credited with forcing a debate and dialogue on what constitutes legitimate boundaries of privacy and government surveillance. The United States has been forced to take stock of its diplomatic relations with Russia. This may also be an opportune time for the US to reflect on where its fool proof system of surveillance went utterly wrong and what the parameters of privacy actually mean. The writer is an English and French professor and columnist residing in the USA and France. She can be reached at scballand@gmail.com 25
SEP 2013

Sabria Chowdhary Balland

ussia's granting of temporary asylum to ex-NSA employee Edward Snowden has held significant meaning to US-Russian relations. However, the time that it had taken Russian President Vladimir Putin to do so (with Snowden waiting in the transit zone of Moscow airport for a whole 38 days for a response to his request for asylum) raise considerable questions as to where these US-Russian relations are headed. The sudden chill in US-Russian relations may hold obvious consequences for Snowden obtaining permanent asylum in Russia. The reason for Putin's delay in granting Snowden this temporary asylum at all was, as he put it, to not offend the United States. However, there are evidences to the contrary. For instance, last year, Russia banned adoptions of Russian children by US families. This was a clear sign of how Putin possibly views the state of Russia's relationship with the United States. This raises the question of whether there were ever any intentions of having better relations with Washington. As a consequence, President Obama cancelled a meeting with Putin before the G20 summit, the White House stating that "there was not enough recent progress in our bilateral agenda." From the US perspective, there may be several issues to consider in making such a statement. There is US frustration over Russia's reluctance to confront Iran over its pursuit of nuclear weapons. There is also Russian support of the al-Assad regime and the consequent civil war in Syria, which has evolved into a human rights catastrophe. The US administration's impatience with the Russian standstill on the reduction of nuclear weapons also adds to these frustrations. As it is can be seen clearly, the "bilateral agenda" referred to by the White House was quite heavy as it was and with the addition of Russia's granting of a temporary asylum to Snowden sends a very potent and obvious diplomatic message to the United States and has possibly escalated the tensions between the two

24

WORLD

The battle

for the soul of Egypt

anything wrong in the military coup against a freely elected government and in the cold blooded massacres of the Egyptian people committed by the Egyptian security forces. The third layer of support for the military coup lies in some of the regional countries, which probably see in the strengthening of democracy in Egypt a threat to their dynastic rule, and the Western countries which would rather support a dictatorial but pro-West government in Egypt than a democratically elected government which may have Islamic leanings or which may have the courage to defy their commands. If this is not true, one may ask why the US, the champion of democracy, has so-far failed to condemn unequivocally the military coup in Egypt or even to declare it as a military coup which would automatically result in the termination of the US military assistance to Egypt. This, however, should not come as a surprise to anybody familiar with the role of the CIA in the overthrow of Muhammad Mossadeghs government in Iran in August, 1953 or the way some of the Western governments supported the military coup by the Algerian army in 1992 to block the democratic process in Algeria after the Islamists won the election in the country. Pitched against this formidable combination of forces are the majority of Egyptian people, who want democracy and constitutional rule in the country reflecting their Islamic cultural values as against the despotic regimes of the Egyptian military rulers which denied them their basic human rights and freedom. They won both the parliamentary and presidential elections in Egypt after Hosni Mubaraks ouster. It is these people who have been cheated out of their democratic right to govern Egypt by the Egyptian army. The Egyptian armys claim is that the demonstrations preceding its coup against Morsi gave it the right to overthrow a democratically elected government is problematic on several counts. Firstly, there is no legal, moral or political justification of the Egyptian armys claim that it is the guardian of the will of the Egyptian people. This right has been asserted in modern times by the military establishment in many Muslim and other Third World countries to the detriment of political stability, democratic and constitutional rule, economic progress, and welfare of the people at large. In actual practice, this claim has been exploited by the military establishment in these countries for strengthening its stranglehold on political power and for safeguarding its vested economic and commercial interests and privileges. The sooner this misguided notion is consigned to the dust bin of history, the better it would be for these countries, particularly those in the Muslim world. Secondly, the point made by the Egyptian army and its supporters in Egypt and among the

The Egyptian armys claim is that the demonstrations preceding its coup against Morsi gave it the right to overthrow a democratically elected government is problematic on several counts. Firstly, there is no legal, moral or political justification of the Egyptian armys claim that it is the guardian of the will of the Egyptian people.
Western governments and media that Morsi had lost the support of the majority of the Egyptians because of the admittedly large demonstrations by his opponents lacks veracity. Further, a democratic system cannot function in an orderly manner if large scale demonstrations against a democratically elected government are considered to be sufficient justification for its army to topple it. One wonders how the US and other Western governments would react if their armies claim the same right to stage a coup against them if their popularity ratings go down or if they have to face large scale demonstrations. In short, the change of government in a stable democracy must take place through elections and not through

demonstrations followed by military coups. Finally, the criticism that Morsis one-year rule did not bring about any significant economic improvement in the life of the Egyptian people is almost laughable. Hosni Mubaraks three- decade old military rule left Egypt in a political mess and its economy in shambles. The subsequent year and a half after Hosni Mubaraks departure, when Egypt was under the rule of the generals, further worsened the Egyptian economy and the living conditions of its people. According to this criticism, Morsi, in one year, should have brought about an economic miracle in the difficult conditions of a transition from a dictatorial regime to a democracy. Even in the best of circumstances, governments are given at least two to three years before their economic performance is judged by the electorate. Certainly, the Egyptian army, which was responsible to a large extent for the mess that it left for Morsi to clean up, is in no position to sit in judgment on the Morsi government.

T
SEP 2013

Javid Husain

he Egyptian armys coup in July to overthrow the countrys first democratically elected President, Muhammad Morsi, and the subsequent clashes in which hundreds of his supporters have been brutally killed by the Egyptian security forces reflect the battle being fought for the soul of Egypt. Arrayed on one side in this battle are the forces defending the authoritarian rule of the Egyptian army, which has already lasted more than six decades, and its vested economic and commercial interests. They are supported by the westernized and the so-called liberal classes of the Egyptian society who, while championing democracy and human rights, fail to see 26

The fact of the matter is that the Egyptian army and security agencies saw in the strengthening of democracy in the country a threat to their power, privileges and economic interests. They had gone along with the overthrow of Hosni Mubaraks dictatorial and despotic rule reluctantly in the face of the overwhelming demand of the Egyptian people for a change. Therefore, they used the first opportunity which came their way to topple Morsis democratic government. In view of the pervasive power of the military establishment in Egypt, it is possible that it may even have clandestinely encouraged and facilitated anti-Morsi demonstrations. In this effort it was supported by the remnants of Hosni Mubaraks ancient regime and the westernized and so-called liberal sections of the Egyptian population. Unfortunately, Egypt is likely to remain in turmoil for quite some time at a tremendous cost in the form of loss of precious human lives and the deterioration of its economy because of the battle being waged for the future political, economic and cultural directions of its society. The recent developments in Egypt may also have the unfortunate effect of encouraging the Islamist elements to resort to the use of violent means to capture political power since their efforts to do so through peaceful means have been thwarted by the Egyptian army. It is in the interest of durable stability and progress of Egypt that its various political groups including the liberals and the Islamists are able to synthesize their divergent views about the future of Egypt. Only such a synthesis and the withdrawal of the Egyptian army from politics will enable Egypt to restore democracy and realize its full potential.
The writer is a retired ambassador and president of the Lahore Council for World Affairs and can be reached at javid.husain@gmail.com

27

SEP 2013

POLICY

At national level, the country recently saw itself gripped in a wave of widespread terrorism incidents and sabotage activities in many parts of the country. From Damadola to Hamzola, Karachi to Islamabad, Peshawar to Punjab, the horrible incidents broke the basic fabric of our society and economy alike.

C
W
SEP 2013

onflicts, ontradictions & onfrontations

the people and public servants at large are being implemented at every level. New cronyism, compromises, and concessions are being institutionalized throughout the country which has already shaken the confidence of people and potential businessmen alike. The current regime is consuming its every day like a pregnant woman, hoping for the best after nine months, perhaps. Many mega national institutions do not have any corporate leadership. Corporate cleansing is widespread, diminishing rays of hopes, ratios of profitability and levels of efficacy in every corporation, business entity and financial institutions in the country. New alleged Nandipur scam report, hybrid cars scandal, circular debt payment miracle and unduly projection of a specific corporate house would bring nothing but bad name to government. Sanctioning of IMF loan has already brought series of tough economic conditions, damaging the basic socio-economic fabric in the country. Moreover, recent increase in power tariff up by Rs2 to Rs6.59 per unit would bring unstoppable inflationary trends, making the lives more miserable. At national level, the country recently saw itself gripped in a wave of widespread terrorism incidents and sabotage activities in many parts of the country. From Damadola to Hamzola, Karachi to Islamabad, Peshawar to Punjab, the horrible incidents broke the basic fabric of our society and economy alike. Unsuccessful suicide attempt in Abi Talib Masjid, Bhara Kahu unearthed a frightening aspect i.e. involvement of youth in terror. In the latest plot of conspiracy and confusion, a lone gunman identified as Sikandar, kept the federal capital hostage for over five hours, exposing the lack of preparedness of the Islamabad Police against terror attacks. Lyari, where eleven people, including

Mehmood Ul Hassan Khan

e are passing through a series of conflicts, contradictions and confrontation internally, regionally and internationally. New government, new hopes, new rhetoric and new ways of squeezing revenues/taxes from 28

several children, were killed and 24 others were injured from a bomb blast. Thirty-eight people, including 21 police officials, were also killed and 40 others were injured in a suicide blast at a funeral in the Police Lines in Quetta. Militants armed with heavy weapons stormed the Central Prison Dera Ismail Khan, one of the main jails of Khyber Pakhtunkhwa (KP). These horrible incidents are achieving nothing but instead are seriously negating the diversified but integrated efforts of the government especially of prime minister of Mian Nawaz Sharif and Finance Minister Ishaq Dar towards promoting a soft image of Pakistan. In fact, both are making sincere efforts to attract more foreign direct investment volumes, foreign portfolio investment deposits, infrastructure, exports, free trade agreements, regional trade agreements and above all joint ventures in the country. Today, survival of any nation depends on economic prosperity, political stability and regional/provincial harmony. Tolerance and belief in humanity also plays an important part. And these inhuman acts of suicide attacks, bomb blasts, sectarian glorification and above all deteriorating law and order are the main hurdles in achieving the desired socio-economic, geopolitical and geo-strategic goals in the days to come. It is imperative that all political parties and especially religious parties realize the sensitivity of the matter and say no to all these antidevelopment, anti-humanity and anti-prosperity and above all anti-Islam activities once for all. It is a fact the government has achieved some meaningful space in shape of further strengthening of bilateral relations i.e. energy based cooperation with China, Saudi Arabia and

resumption of strategic dialogue with USA that would enhance our GDP, GNP, FDI, FPI, industrial production, role in regional and international world trade but there is a long way to go. These integrated economic/commercial diplomacy endeavors are also expected to create lots of job opportunities which would be instrumental in reducing the widening ratios of poverty and high levels of unemployment. Unfortunately one bomb blast, one incident of killing a foreigner engineer, worker or dignitary, one act of religious intolerance, one barbaric phenomena of violent street power and continuation of strikes puts the economy on a back track and all efforts of the government come dashing to the ground. According to many latest research-oriented studies of the World Bank, IMF, IFC, and ADB, there is direct correlation between a stable law and order situation and economic prosperity. The prime examples are Egypt, Tunisia, Algeria, Sudan, former Yugoslavia and many countries of Eastern Europe and even Bangladesh. All these countries saw the paradigm drastically shift from prosperity to poverty and plunged into economic turmoil. The ongoing activities of terrorism, religious intolerance, target and ruthless killings, disguised struggle for power political survival in the name of religion and democracy are badly damaging the soft image of Pakistan. Exports to Afghanistan, Iran and some CIS have gone down due to anti-economic activities and antidevelopment elements and it is likely that other projects might suffer as well if these damaging activities continue. Manpower exports to Gulf and the Middle East region is on the rise. The levels of FDIs,

FPIs from the Gulf and Middle East region are going up. The chances of joint ventures have increased manifold from Far East, EU, UK, and many other countries. Widening of tax base, export oriented policies, diversification of economy and trade and institutionalization of healthy and fair competition among the local businessmen and investors would be useful in the future. We must confess that we do not have skilled human resources as of Cuba or Brazil (doctors, agriculturalists, food technologists or engineers). The country does not have any international event like of World Football (Brazil & Qatar) to boost its sinking economy. Again, we are not blessed with the natural reservoirs i.e. oil & gas. Even we do not have any attractive tourism points right now due to deteriorating law and order situation. So, what we must follow? Rigorous commercial diplomacy, regional reconciliation and elimination of proxy war with in the country would pay dividends in the days to come, surely. Let us say no to all these anti-development activities because our present and future socio-economic survival, geo-political strength and geo-strategic cushion heavily depends on our macro-economic growth. The top political leadership should think beyond their personal monetary goals and hot pursuit of power and work for the betterment of the country.

Mehmood Ul Hassan Khan is a research scholar, specializes in geo-politics and geostrategic issues of the GCC, CIS and South East Asia. He has keen interests in cross cultural dialogue and conflict resolution 29
SEP 2013

WHERE IS THE PAISA

An appraisal of Pakistans Declining Economy

ECONOMY

S
SEP 2013

Brig. (Retd) Samson Simon Sharaf

centric. It relegated the responsibility of economic development to bureaucrats and technocrats, more interested in showing short term indices. Hobnobbing with international financial institutions, tours and studies was their major pre occupation. There was unawareness that what could not be lost on the battlefield could be easily conceded through bad planning? An indicator to describe this meltdown is the fact that the rupee-dollar parity of 3.30 in 1955 now stands as 104 a 31.5 fold slump. For those who lived in 1955, life is now 31 fold more expensive. Pakistan is in serious crises and the Prime Minister despite two tenures in the past has no hesitation in admitting that his election manifesto was a wishful dream. After the coup of 1999, I was charged with the responsibility to monitor the entire government from GHQ. One of my biggest concerns was Pakistans spiralling debt with a declared foreign component of 32 billion dollars. Yet no one in the Ministry of Finance or State Bank could confidently tell the volume and breakdown of this debt with relation to countrycountry borrowing, multi-lateral loans, bonds and encashment to provinces and autonomous bodies. Having encountered blank faces, we

omehow, I live with the hypothesis that Pakistans bureaucracy, technocrats and the military operate in exclusive hard shelled bubbles in chagrin to long term strategic and economic interests of Pakistan. The imperatives of a broad policy spectrum with synergised instrumentalism never formed the basis of any brainstorming or analysis. Inevitably, the bubbles burst, compromising Pakistans national security. In the quest for short term advantages and strings tied with international financial institutions, the bureaucracy and technocrats have remained content in putting the national interests on the back burner. Due to absence of operational research and system analysis including SWOT, the end results were never their consideration. Application of Harvard and Westminster Models theorised on western political economy divorced them from the compulsions of ground realities which are Pakistans nightmare. Despite the fact that the military has repeatedly intervened in politics, it lacked the capacity to impact on long term sustainable development. Its perspective was always India 30

After the coup of 1999, I was charged with the responsibility to monitor the entire government from GHQ. One of my biggest concerns was Pakistans spiralling debt with a declared foreign component of 32 billion dollars. Yet no one in the Ministry of Finance or State Bank could confidently tell the volume and breakdown of this debt with relation to countrycountry borrowing, multilateral loans, bonds and encashment to provinces and autonomous bodies.
decided to get reports from all ministries, provinces and autonomous bodies to determine the correct volumes. As reports and files continued to pour in, the figures collected cross checked and verified, were startling. Pakistans debt was

over 38 Billion US Dollars and continued to grow through the IMF borrowing and the sinking Rupee. The single biggest recipient of loans was the water and power sector, accounting for approximately 70% of the loan component. The shocker was that 60% of it was spent on feasibilities most of which never translated into development. Approximately, half of Pakistans foreign debt has been gulped on drawing boards, visits, lodgings and expert studies. Result is that Pakistan has the worlds worst record in water management, conservation and power generation. Despite this huge wastage of expensive loans, Pakistan relies for the bulk of its power production on independent power producers. It was a very incisive study that left everyone in the Musharraf Cabinet stunned and aghast, but this is where this revealing study ended. There was no follow up. Gradually, patriotic and concerned officials were shown the door. The study got lost in the sea of bureaucracy and thereafter it was business as usual. Pakistan was destined to sink deeper into the financial quagmire and by consequence the lowest human resource indices of the world. I was convinced then and sure now that these economic managers and experts are all part of an international cartel that controls financial institutions and hence destinies of misgoverned countries like Pakistan. The study vindicated international political economists who viewed IMF and World Bank as exploitative instruments of neo-imperialism and masters of creating bubbles. Non-state corporatists who transcend international borders and whose loyalties lie with their pay masters rather than their moorings are Pakistans biggest threat; more than India or militants. Some of the biggest effects of this economic manipulation and mismanagement are appended below and will form the subject of subsequent articles. The water and power managers of Pakistan despite being the biggest recipients of foreign loans have not exercised vigilance on Indian water development projects, mainly because they were guilty of corruption, negligence and technical insufficiency. These water managers have remained stuck in the politics of mega projects and

failed to exercise imagination in creation of alternate water reservoirs and hydro power generation in Pakistan. The seizure of FCAs in 1997 however negative proved that a weak rupee was not a pre requisite to boost exports. After 9/11, despite 13 Billion Dollars in the system and an appreciating rupee, the Central Bank ignored the lesson of WEAK RUPEE VERSUS EXPORTS and devalued the national currency. Successive governments should have made efforts towards restoring rupee dollar parity and controlled devaluations. Under the pricing mechanism of 1994, IPPs with tax exemptions had recovered investments and begun remitting profits and outsourcing costs abroad. They were the new energy manipulators destined to earn windfalls. Reorganisation of PSO in 2004 facilitated the IPPS, creating a new goliath and nourishing conditions for the circular debt crises. The imposition of GST as a VAT was abandoned by CBR in 2000-1 converting it into an easy way to collect levy. The incomplete GST regime did not help in documentation of the economy, served to boost inflationary trends, encourage consumerism and discourage small sector domestic production. Agriculture growth and pricing mechanism in Pakistan is deliberately

manipulated by inelastic forces and cartels. The circular debt issue in the energy sector is an inbuilt mechanism with the potential to trigger a meltdown. This cannot be resolved unless monopoly of PSO is not challenged. With such a bleak depiction of Pakistans economic performance, the effects of which are visible in every nook and corner of Pakistan, something has direly gone wrong. This is not what the fate this country deserves, with one of the steepest water gradients of the world, four seasons, diversity of flora and fauna, abundant natural resources, skilled and semi-skilled manpower and best philanthropy record in the world. The response is reflected in the fact that Pakistan hopelessly lacks a War Front on its political economy. Its economic statisticians and managers need to concentrate on economic policies rich in socio-political thought. Pakistan needs a paradigm shift in which a strong, robust and sustainable economy becomes the basic template of its national security. Unless economic policies built around a re definition of Pakistans currency are not implemented, the Paisa and Anna will never regain its value. To be continued..
Brigadier (Retired) Samson Simon Sharaf is a political economist and a television anchorperson. Email and twitter: samson.sharaf@gmail.com

What is complacent?
Contented, yet unconcerned, and uneager to improve or change. "He had been getting decent grades, mostly Bs, for so long that he had become complacent and unwilling to try any harder to improve his scores up to an excellent level."

31

SEP 2013

BANKING

Shadow banking?

What is

Stijn Claessens, Lev Ratnovski

here is much confusion about what shadow banking is and why it might create systemic risks. This column presents shadow banking as all financial activities, except traditional banking, which require a private or public backstop to operate. The idea that shadow banking is something that needs a backstop changes how we think about regulation. Although it wont be easy, regulation is possible. There is much confusion about what shadow banking is? Some equate it with securitisation, others with non-traditional bank activities, and yet others with non-bank lending. Regardless, most think of shadow banking as activities that can create systemic risk. This column proposes to describe shadow banking as all financial activities, except traditional banking, which require a private or public backstop to operate. Backstops can come in the form of franchise value of a bank or insurance company, or a government guarantee. The need for a backstop is a crucial feature of shadow banking, which distinguishes it from the usual intermediated capital market activities, such as custodians, hedge funds, leasing companies, etc. It has been very hard to define shadow banking The Financial Stability Board (2012) describes shadow banking as credit intermediation involving entities and activities (fully or partially) outside the regular banking system. This is a useful benchmark, but has two weaknesses: First, it may cover entities that are not commonly thought of as shadow banking, such as leasing and finance companies, credit-oriented hedge funds, corporate tax vehicles, etc. (Figure 1). 32

Second, it describes shadow banking activities as operating primarily outside banks. But in practice, many shadow banking activities, for instance, liquidity puts to securitisation structured investment vehicles, collateral operations of dealer banks, repos, and so on, operate within banks, especially systemic ones (Pozsar and Singh 2011, Cetorelli and Peristiani 2012). Both reasons make the description less insightful and less useful from an operational point of view.

Figure 1. Spectrum of financial activities

Note: see Claessens et al. (2012) for more discussion of the mechanics of shadow banking processes. An alternative functional approach

treats shadow banking as a collection of specific intermediation services. Each of them responds to its own demand factors (e.g., demand for safe assets in securitisation, the need to efficiently use scarce collateral to support a large volume of secured transactions, etc.). The functional view offers useful insights. It stresses that shadow banking is driven not only by regulatory arbitrage, but also by genuine demand, to which intermediaries respond. This implies that in order to effectively regulate shadow banking, one should consider the demand for its services and crucially understand how its services are being provided (Claessens et al. 2012). The challenge with the functional approach is that it does not tell us what the essential characteristics of shadow banking are. While one can come up with a list of shadow banking activities today, it is unclear where to look for shadow banking activities and risks that may arise in the future. And the functional approach is challenged to distinguish activities that appear, on the face of it, similar, yet differ in their systemic risk (e.g., a commitment to provide for credit to a single firm vs. liquidity support to structured investment vehicles). Related, most studies focus on the US and say little about shadow banking elsewhere. In Europe, lending by insurance companies is sometimes called shadow banking. Wealth management products offered by banks in China and lending by bank-affiliated finance companies in India are also called shadow banking. How much do these activities have in common with US shadow banking?

which require a private or public backstop to operate. This description captures many of the activities that are commonly referred to as shadow banking today, as shown in Figure 1. And, in our view, it is likely to capture those activities that may become shadow banking in the future.

Why do shadow banking activities always need a backstop?

Shadow banking, just like traditional banking, involves risk transformation specifically, credit, liquidity, and maturity risks. This is well accepted by the existing literature, and fits all shadow banking activities listed in Figure 1. The purpose of risk transformation is to strip assets of undesirable risks that certain investors do not wish to bear. Traditional banking transforms risks on a single balance sheet. It uses the law of large numbers, monitoring, and capital cushions to convert risky loans into safe assets bank deposits. Shadow banking transforms risks using a different mechanism. It aims to distribute the undesirable risks across the financial system (sell them off in a diversified way). For example, in securitisation shadow banking strips assets of credit and liquidity risks through tranching and providing liquidity puts (Pozsar et al. 2010, Pozsar 2011, Gennaioli et al. 2012). Or it facilitates the use of collateral to reduce counterparty exposures in repo markets and for over the counter derivatives (Gorton 2012, Acharya and nc 2013).1 While shadow banking uses many capital markets type tools, it differs also from traditional capital markets activities such as trading stocks and bonds in that it needs a backstop. This is because, while most undesirable risks can be distributed away, some residual risks, often rare and systemic ones (tail risks), can remain. Examples of such residual risks include systemic liquidity risk in securitisation, risks associated with large borrowers bankruptcy in repos and securities lending, and the systematic component of credit risk in non-bank lending (e.g., for leveraged buyouts). Shadow banking needs to show it can absorb these risks to minimise the potential exposure of the ultimate claimholders who do not wish to bear them. Yet shadow banking cannot generate the needed ultimate risk absorption capacity internally. The reason is that shadow-banking activities have margins that are too low. To be able to easily distribute risks across the financial system, shadow banking focuses on hard information risks that are easy to measure, price

A new way to describe shadow banking: all activities that need a backstop
To improve on the current approaches, we propose to describe shadow banking as all financial activities, except traditional banking,

and communicate, e.g., through credit scores. This means these services are contestable, with too low margins to generate sufficient internal capital to buffer residual risks. Therefore, shadow banking needs access to a backstop, i.e., a risk absorption capacity external to the shadow banking activity. The backstop for shadow banking needs to be sufficiently deep. First, shadow banking usually operates on large scale, to offset significant start-up costs, e.g., of the development of infrastructure. Second, residual, tail risks in shadow banking are often systemic, so can realise en masse. There are two ways to obtain such a backstop. One is private by using the franchise value of existing financial institutions. This explains why many shadow banking activities operate within large banks or transfers risks to them (as with liquidity puts in securitisation). Another is public by using explicit or implicit government guarantees. Examples include, besides the general too-big-to-fail implicit guarantee provided to the large banks active in shadow banking, the Federal Reserve securities lending facility that backstops the collateral intermediation processes, the implicit too-big-to-fail guarantees for tri-party repo clearing banks and other dealer banks (Singh 2012), the bankruptcy stay exemptions for repos which in effect guarantee the exposure of lenders (Perotti 2012), or implicit guarantees on bank-affiliated products (as widely described in the press regarding so called wealth management products in China (see The Economist 2013, Bloomberg 2013a, 2013b)) or on liabilities of non-bank finance companies (as noted for India, see Acharya et al. 2013).

The need for a backstop as a litmus test for shadow banking

Assessing whether an activity requires access to a backstop to operate could be used as the key test of whether it represents shadow banking. For example, the usual capital market activities (in the right column of Figure 1) do not need external risk absorption capacity (because some, like custodian or market-making services, involve no risk transformation, while others, like hedge funds, have high margins), and so are not shadow banking. Only activities that need a backstop because they combine risk transformation, low margins and high scale with residual tail risks are systemically-important shadow banking.

Acknowledging the need for a backstop as a critical feature of shadow banking offers useful policy implications: First, it gives direction on where to look for new shadow banking risks: among financial activities that need franchise value or government guarantees to operate. Non-traditional activities of banks or insurance companies are prime suspects. It is hard to point to the shadow banking-like activities which may give rise to future systemic risks conclusively, but one example could be the liquidity services provided by sponsor banks to exchange traded funds, or large-scale commercial bank backstops for leveraged buyouts. Second, it explains why shadow banking poses significant macro-prudential and other regulatory challenges. Shadow banking uses backstops to operate. Backstops reduce market discipline and thus can enable shadow banking to accumulate (systemic) risks on a large scale. In the absence of market discipline, the one force which can prevent shadow banking from accumulating risks is regulation. Third, it suggests that shadow banking is almost always within regulatory reach, directly or indirectly. Regulators can control shadow banking by affecting the ability of regulated entities to use their franchise value to support shadow banking activities (as was done in the aftermath of the crisis by limiting the ability of banks to offer liquidity support to structured investment vehicles). Or by managing the (implicit) government guarantees (as is attempted in the US Dodd-Frank Act by limiting the ability to extend the safety net to non-bank activities and entities; or by general attempts underway to reduce the too-big-to-fail problem). Finally, it suggests that the migration of risks from the regulated sector to shadow banking often suggested as a possible unintended consequence of tighter bank regulation is a lesser problem than some fear. Shadow banking activities cannot migrate on a large scale to areas of the financial system that do not have access to franchise values or government guarantees. This by itself does not make spotting the activity occurring within the reach of the regulator necessarily easier, but at least it narrows the task. Editors note: The views expressed are those of the authors and do not represent those of the IMF.

Policy implications

What is a fixed cost?

A periodic cost that remains more or less unchanged irrespective of the output level or sales revenue, such as depreciation, insurance, interest, rent, salaries, and wages. While in practice, all costs vary over time and no cost is a purely fixed cost, the concept of fixed costs is necessary in short term cost accounting. Organizations with high fixed costs are significantly different from those with high variable costs. This difference affects the financial structure of the organization as well as its pricing and profits. The breakeven point in such organizations (in comparison with high variable cost organizations) is typically at a much higher level of output, and their marginal profit (rate of contribution) is also much higher.
33
SEP 2013

SEP 2013

TRADE
economies access to unlimited new opportunities on the world stage. Keeping in view all the important socio-economic-political indicators i.e. country risk, political risk, management risk, credit risk, economy and the last but not the least, ability to host it successfully, it appears that United Arab Emirates (UAE) is ahead in the race. It is inching towards its final official nomination every passing day. Comparative study of the candidate cities reveals that in real socio-economic-political sense, the UAE has the brightest chance for winning the World Expo 2020. One of the competing countries, Brazil is currently confronting the massive public protests and processions in its many small and big cities. Levels of anger, frustration and agony are on the rise despite some cosmetic arrangements pledged by the Brazilian government. Moreover, miracle of BRICS is fading day by day. Russia, another important countrys macro-economy is not so stable and sustainable, that is why its president has recently reshuffled his entire economic team. Turkey, one of the most important countries in the race of hosting World Expo 2020 is now sieged with many Taskim square series which has already produced serious dints in its national economy. Rations of international tourists have been reduced due to poor law and order situation in the country. Moreover, since Turkey has been indulged with Kurds conflict for so many years due to which the chances of any deadly terrorist incident is imminent anytime, anywhere. In his televised address to 3rd Annual Global Entrepreneurial Summit (GES) in Dubai, the US President Barack Obama highly

Tausif ur Rehman

s the final countdown begins for the right to host World Expo 2020, the diplomatic players of respective countries have also become active behind the stage and are making extensive efforts to get maximum support in the form of votes, and the host will be decided in November 2013. All the four most potential candidate cities i.e. Dubai (UAE), Sao Paulo (Brazil), Yekaterinburg (Russia) and Izmir (Turkey) have already submitted their final presentations/proposals to Bureau International des Expositions (BIE) whereas Thailand has been disqualified. The UAEs strategic position as a bridge between East and West, and North and South, provides a powerful platform for the world to come together and unlock the potential of the future. Dubai 2020 would be the first Expo to be held in the Middle East, North Africa and South Asia region, giving these vibrant and dynamic

appreciated the UAE leadership and its people to achieve high standard of development. French President also pledged his countrys support to UAE for hosting World Expo 2020 in Dubai. Even UK extended its support to vote for UAE in World Expo 2020. Admirations from the world leaders would be helpful for Dubai to win the race of World Expo 2020 in the days to come. On the contrary, in recent times Turkey faced tough time from the European Union (EU_ especially from Germany and France on the issue of its succession with EU. So, road from Ankara to Brussels to get support from the EU on the issue of World Expo 2020 has already been marginalized for Turkey. On the other hand, UAEs stable and sustainable macro-economic indicators, fiscal surplus, booming external accounts, high ratios of GDP, stable foreign currency reserves, booming exports ratios and above all qualitative infrastructure automatically makes it the most

UAE & World Expo

SEP 2013

suitable country to host the World Expo 2020. Its country risk is zero. There is no fear of political uncertainty or social unrest in the country in short, medium or long term period. On economic fronts, the latest published report of the World Bank has ranked UAE 28th worldwide among the largest economies of the world in terms of gross domestic product (GDP). According to the World Banks estimates, the UAEs gross domestic product stood at US$360.25 billion (Dhs1.32 trillion) in 2011. The A T Kearney Index report (2013) titled Retail Trade Growth in 2013 has rated the UAE 5th, which again shows the strength of its sustained macro-economy. The World Economic Forum for Global Development (2011) awarded 5th position to the UAE for its financial stability in the standard index. It was also classified 25th among the best world financial systems. The UAE was also ranked first among the Arab countries and 19th globally in the Global Enabling Trade Report for 2012, issued by the World Economic Forum. All these reports of international agencies and institutions clearly uphold the strong indicators of UAE economy which is on the way of further prosperity, productivity and diversification. The World Bank (October 2012) report titled Doing Business Report for 2013 again rated the UAE first among the Arab countries and 26th globally out of 183 countries. Kuwaitibased inter-Arab Investment Guarantee Corporation (IAIGC), a key Arab League organization recently classified UAE among the top 10 countries in the field for efficient import and export procedures and physical security. It has also been on the ideal destination of FDIs. According to international FDI magazine (2013), foreign investors pumped nearly $9.6 billion capital in the UAE in 2012, allowing the country to maintain its position as the second largest Arab recipient of foreign direct investment (FDI) after Saudi Arabia. Moreover, according to Mercer the UAE is the world's 7th

most popular destination for international assignments. And the last but not the least, Brand Finance, an independent intangible assets and brand valuation consultancy said that the UAE has 15 brands out of the top 50 brands in Mena region in 2013, with a brand value touching $14.48 billion. According to the study, the value of UAE brands constitutes 37 per cent of the total value of $39.33 billion of the top 50 Mena brands. The comparative study of these reports and figures strongly indicate the healthy and progressive nature of the UAE economy which has rightly projected it as the most ideal country for hosting World Expo 2020. The country is also well prepared against any unseen threats from the nature. UAE is one ideal destination for international tourism. Official data shows that more than 60 million people travel through the emirate in 2012 while 10 million visit the city of Dubai every year due to a world-class airport and a global airline. It has become hub of all kinds of regional and international expos, conferences, seminars and exhibitions. Successful holding of Dubai Air Show, International Defence Exhibition

(IDEX), Gitex (Middle Easts largest consumer IT and electronics show) and more than 200 other trade shows as well as international sporting events, for World Expo 2020 are the prime examples of its preparedness. Its infrastructure has comparative advantage on other competitors. Its hoteliers have international standards of accommodation and hospitality. According to World Travel and Tourism Council report (2013) the UAEs hospitality market is geared up to record 67 per cent growth in revenue to US$7.5 billion by 2016 up from US$4.5 billion in 2011. Hotel supply is expected to increase from the current 96,992 hotel rooms in Dubai and Abu Dhabi, to a total of 125,383 hotel rooms by 2016. Last year, the UAE drew an estimated 10 million tourists. Furthermore, the report says that the UAE accounts for 41 per cent of total investment in the travel and tourism sector in Middle East. The UAE now has more hotels per head of population than any other country in the world. With the UAEs tourism map now incredibly diverse, Dubai Expo 2020 would offer an opportunity for millions of transit passengers to visit the Expo.

2020

What are Keynesian economics?

A school of economic thought founded by the UK economist John Maynard Keynes (1883-1946) and developed by his followers. In 1936, at the height of the great depression, Keynes' landmark book The General Theory Of Employment, Interest And Money caused a paradigm shift for economics: it suddenly replaced their emphasis on study of the economic behavior of individuals and companies (microeconomics) to the study of the behavior of the economy as a whole (macroeconomics). The main plank of his revolutionary theory is the assertion that the aggregate demand created by households, businesses and the government and not the dynamics of free markets is the most important driving force in an economy.
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KSE: Where Foreigners Call The Shots! F

SEP 2013

ECONOMY

Jawad Hussain

oreign investors have always been a power to reckon with when it comes to trading at Pakistans premier bourse Karachi Stock Exchange (KSE) but in the ongoing calendar year, they have really imposed their authority over the indexs movements. The ongoing year has been a phenomenal one for the Karachi bourse as it has achieved unprecedented landmarks and milestones as foreign and local investors were eyeing better economic policies from the new government after previous regime failed to deliver the goods in presenting a solid economic action plan. The impact could easily be seen on movements of the KSE 100-Index, the benchmark index in Pakistans top equity market, which began the Calendar Year 2013 at 16,905.33 points, went on to register an all-time highest level of 23,946.00 on July 24, 2013, an increment of

7,040.67 points in just less than seven months. The main compellers behind such a massive bullish streak were once again foreign investors who had elevated Pakistani stock markets to its all-time highs during General Pervez Musharrafs tenure. For better analyzing how foreigners played their cards at the Karachi Stock Exchange, we should look at the bourses performance in two phases, i.e. pre-polls and post-polls. Pakistan, for the first time in its history, entered general elections after completion of a democratic governments five-year tenure on May 11, 2013 and this indeed was a big achievement for all the participants of the political setup. The offshore investors translated this achievement into stability and consistent government policies and associated high hopes of a better economic management by the new government setup. For first three months of CY13, the offshore investors came up with net investment of 6.878 billion rupees (70.190 million U.S. dollars) in the KSE. However, it gained momentum as the South Asian country headed towards the General Elections 2013 and foreigners net invested

12.926 billion rupees (131.907 million U.S. dollars) from April 1 till May 11, 2013. Especially during the month of May till the polls day, the foreign investors did massive net buying of 10.183 billion rupees (103.916 million U.S. dollars) in the countrys biggest stock market. From the Election Day till August 22, the foreigners had net invested 11.510 billion rupees (119.604 million U.S. dollars), showing a gradual decrease in numbers when compared to the period from April till May 11. However, if we take a look at the foreign investment in KSE from a different perspective, it is interesting to note that they have net offloaded a total of 9.0008 billion rupees (89.698 million U.S. dollars) during first half of the Financial Year 2014 (1HFY14), which clearly tells the end of the foreign interest in the Pakistani stocks. Nevertheless, Pakistani stock markets are still trading quite close to their all-time highest points and despite of recent foreign selling, local buyers have turned up in good enough numbers to sustain the bullish momentum at the bourse. During the last five fiscal years from FY09-FY13, the foreign investors poured in whopping 66.863 billion rupees (692.794

million U.S. dollars) in Pakistani premier equity market. They net offloaded 34.263 billion rupees (445.004 million U.S. dollars) in Financial Year 2008-09 (FY09), net invested 47.419 billion rupees (567.562 million U.S. dollars) in Financial Year 2009-10 (FY10), net invested 24.021 billion rupees (280.181 million U.S. dollars) in Financial Year 2010-11 (FY11), net divested 16.576 billion rupees (189.123 million U.S. dollars) in Financial Year 2011-12 (FY12), before recording the best year in the last five fiscal years in Financial Year 2012-13 (FY13) with net investment of 55.263 billion rupees (568.876 million U.S. dollars). On the other hand, local individual investors did net selling of 6.796 billion rupees (82.224 million U.S. dollars) from Financial Year 2009 to FY13. This clearly depicts the whole picture as how foreign investors have a lions share in the KSE pains and gains and how it is heavily dependent on the foreign money to scale new highs.

The writer is an anaylist and business correspondent based in karachi.

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