Gas-Shedding: 18th Amendment Strangulating Pakistan

The following article has been published in Daily Nation, dated 29th December 2014

(E-Paper (Print Edition): http://nation.com.pk/E-Paper/lahore/2014-12-29/page-9)

(Online: http://nation.com.pk/business/29-Dec-2014/gas-shedding-18th-amendment-strangulating-pakistan)

Gas-Shedding: 18th Amendment Strangulating Pakistan

Prof Dp

By: Omer Zaheer Meer

Energy is the lifeline of any modern economy and country. The great games of regional and global powers mostly revolve around securing energy sources for their nations due to various other implications. From USA’s past reliance on some Arab countries to China investing heavily in African Nations, these’re all efforts to ensure energy security. The energy needs not only impact a country’s economic outlook but the entire modern national life.

Despite well-known electricity and water woes due to years of mismanagement, Pakistan has been blessed with natural gas reserves commonly referred to as “Sui Gas” by common man, linking it to the largest natural gas field of Pakistan located in Sui, Balochistan. Until recently the mismanagement in this energy sector did not bite the masses much due to abundant reserves discovered in the past. However nothing lasts forever. Unfortunately a lack of strategic foresight, inadequate investments for exploration of more reserves and improper management of limited resources by encouraging CNG fuel have, besides other factors, led to a state of crisis-like shortage of natural gas in Pakistan. The worst affected is Punjab.

As winter approached the gas outages started increasing for domestic, commercial and industrial users. With the winter almost peaking now, the situation has become unbearable with only 4/5 hours maximum availability for domestic users while outage for industries varies in number of days. SNGPL (Sui Northern Gas Pipelines Limited), the company catering to gas supplies in Punjab is facing a shortfall of 700 MMcfd which is almost 27% of the total requirement as per the official Government figures while unofficial sources placed the shortage at 40%.

The impact has been horrible for Punjab. Households are struggling to cook, wash and in some worst affected areas to perform minor tasks as ablution. Industry is hit hard with exports falling resulting in layoffs. All Pakistan Textile Mills Association (APTMA) recently made public plea for exemption from gas load shedding claiming exports of the textile industry alone dropped 4% to $3.4 billion in the last quarter. Textile production has already dropped by 25% in the province due to gas shortages while 2,000 plus surgical manufacturing units have been lying closed too. Many industrialists have threatened to move out if the situation persists. Thousands of households have become unemployed as a result of the above. Agriculture sector while less affected directly due to more reliance on electricity has also been negatively impacted indirectly. This situation is leading to lesser efficiency, unutilized capacities, wasted labor hours, increased unemployment, lost revenue and lost taxes.

To fully appreciate the economic impact one needs to realize that despite abundant claims to the contrary, Punjab actually contributes 65 % of the national GDP and contains 60% of all national industry with more than 48,000 units on record and many unrecorded. It also houses 56% of the national population. We need to ask ourselves whether any country can progress economically while strangulating 65% of its GDP? The answer is an unequivocal “No”. The severe, non-uniformed and negatively biased gas load-shedding in Punjab is effectively leading to an economic strangulation of the national economy. The question then is how did we reach here and what can be done about it?

First of all the 18th Amendment resulted in a highly negative impact for Punjab as the actual needs and population based requirements were totally ignored in favour of giving precedence to the province where a well-head of natural gas was situated over the rest of Pakistan. This apparently was another short-sighted knee-jerk reaction aimed at the unrest in Balochistan province. Secondly the much needed exploration investments were not done on the scale required. Thirdly the scarce resource was wasted mercilessly for short-sighted benefits by encouraging the nation to use CNG (compressed Natural Gas) as alternate fuel to Petrol (Gasoline Fuel). The drive succeeded due to the immense price disparity in the fuels with highly attractive savings on 2.5 times cheaper CNG. Even within CNG sector, mismanagement peaked as licences were issued as if of a local sports club. Last but not the least even the incumbent administration like the ones before it, procrastinated on the steps it decided to remedy the situation. The much trumpeted import of LNG (Liquified Natural Gas) has been delayed to March 2015 per Government sources.

As far as rectifying the situation is concerned many steps are needed. First of all immediate focus should be shifted to serious exploration of more indigenous energy resources. The management of existing resources needs to be planned properly while taking into account the impact of any action-plan upon all sectors of economy and public life. For the short-term the alternate energy sources to be utilized should be quickly planned and spurred into use. A constitutional amendment is also needed to ensure a just treatment across Pakistan. All federating units should bear their share of the brunt to make the situation more bearable for everyone instead of piling up the entire burden on just Punjab. Other federating units should be educated of the overall economic benefits to them as a result of Punjab contributing more to the national exchequer, the benefits of which will be passed on to them in the form of the increased share of income as per 18th Amendment. They should also be made aware that there are already dissenting voices in Punjab questioning whether Punjab should also follow a similar policy at large re crops and right of way as is enforced on it regarding natural gas. This certainly would be a very unwelcome and costly scenario for other federating units.

Another issue to consider is the protection of the consumer. Throughout the world largest consumers are given rights and privileges. However, despite being the largest consumer of power and gas, Punjab has no control over the quantum, duration and usage of either gas or power. This needs to be addressed in manners suggested above and with at least equal if not more say of the largest consumer in the affairs affecting it the most. All people are asking for is a just treatment for everyone as strangulating Punjab is effectively strangulating Pakistan.

The author is Director of the think-tank “Millat Thinkers’ Forum”. He is a leading economist, chartered financial analyst, qualified accountant and anti-money laundering expert with international exposure who can be reached on Twitter and www.myMFB.com @OmerZaheerMeer or omerzaheermeer@hotmail.co.uk

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Economic Impact of Terrorism

The following article has been published in Daily Nation, dated 22nd December 2014

(E-Paper (Print Edition): http://nation.com.pk/E-Paper/lahore/2014-12-22/page-9)

(Online: http://nation.com.pk/business/22-Dec-2014/economic-impact-of-terrorism)

Economic Impact of Terrorism

Prof Dp

By: Omer Zaheer Meer

The menace of terrorism engulfing Pakistan culminated in the worst tragedy in recent history with the barbarian killing of children in the Army Public School Peshawar. While Pakistan was dragged in this quagmire by a dictator searching for the legitimacy of his rule, the complicated regional “grand game” has now reached the stage where the country is tearing itself from within, something the enemies always desired.

Leaving aside all other complicacies and debates, killing children can never be condoned no matter what the reason. Islam’s fundamental war principle baring one unique incident has been the strict instruction to not harm the children, women, elderly and even the non-combatant men of the non-believing enemy let alone the Muslims. The massacre in Peshawar was therefore anything but Islam. It was infact an effort to tarnish the image of Islam and a direct assault not just on Pakistan or Islam but entire humanity. Having said that, let’s focus on the lesser examined aspect of the terrorism faced by Pakistan, the economic impact.

The USA-started war on terror that General (R) Pervaiz Musharraf brought into Pakistan while claiming as his success, the meager assistance from USA had actually negatively hammered Pakistan’s economy to the tune of well over $ 103 Billion as per National Economic Survey and various other reputable studies. The loss in addition to the direct costs resulting from infrastructure damage and cross-border attacks involves loss of investor confidence, loss of productivity, wasted time, reduced exports due to increased security costs, business loss due to law and order situation, lack of developmental funding due to diversion to security-related expenses, e.t.c.

Although most of the above costs couldn’t be fully monetized and the biggest factor, the human cost has not been considered, still the conservative estimate of over $ 100 billion should be an eye-opener. To fully appreciate the significance of this, compare it to the total foreign debt of Pakistan currently standing at around $ 64 billion. This would mean an extra $ 39 billion to spend on development and betterment of the lives of the people of Pakistan even after paying off all the foreign borrowings to date. These borrowings as of now account for most of our national budget on account of debt servicing, even much higher than the total defense budget.

Meanwhile the total US aid to Pakistan during the above mentioned war has been under $ 20 billion. It touches the mark of $ 25.9 billion as per the most lavish US claims which still results in Pakistan ending up $ 77.1 billion in red. What’s ironic is that a lion’s share of this “aid” was actually the reimbursement of expenses directly incurred by Pakistan for the conduct of US-led coalition’s war operations. This means the actual truly no-strings attached aid was even less than $ 10 billion as per the most lenient studies, against a loss of over $ 100 billion. It is therefore no surprise that the US embassy in Pakistan vehemently opposed Pakistan’s decision to reveal the economic cost of terrorism in the economic survey of Pakistan released earlier this year, a fact revealed by reputable officials privy to the discussions.

However, with the Peshawar school massacre this American started war on terror has turned a new chapter. It is now closer to home and has turned into a war for the survival of Pakistan. It is an established fact that no country can thrive economically without peace. Therefore the deteriorating law and order situation in Pakistan has a huge economic cost and is burdening an already shaky economy guided by a policy based on failed measures from the past.

The fact of the matter is that there isn’t a sector left in Pakistan which has not been affected by terrorism, either directly or indirectly. Agriculture which is the backbone of the national economy has taken hits over the years with uncultivated lands captured by non-state actors besides law and order issues making people leave their lands for their lives. This is in addition to the water and energy crisis already pushing this sector to the brink. Manufacturing has also been crippled resulting in lower exports. No foreign business personnel are ready to visit Pakistan and such meetings now normally take place in UAE. But even worse than all this, culminating from the Peshawar school attack, is the wide-spread panic with resulting shockwaves across all segments of the society as well as the economy. If not checked the ramifications of this can be much more than what we’ve already faced.

While the economic impact briefly outlined above is important, the immeasurable cost of the lost lives and the related potential can never be monetized. Therefore, now that the American started war on terror has turned into the foreign-sponsored TTP menace engulfing Pakistan, we’re faced with a problem we’ve to resolve ourselves. The benefits of resolving this amicably will not just be economic but the social positives from such a strategy can be manifold. Though for such a drastic step to succeed we’d need to rid ourselves of the American interferences and subjugation too. It is high time that the overwhelming majority of Pakistanis take control of the national narrative to direct the course of action as the extremes of the society, both right and left, have harmed the country enough. The way of the Prophet PBUH followed by the majority of Pakistanis, one of maintaining balance and level-headedness, is the need of the hour.

The author is Director of the think-tank “Millat Thinkers’ Forum”. He is a leading economist, chartered financial analyst, qualified accountant and anti-money laundering expert with international exposure who can be reached on Twitter and www.myMFB.com @OmerZaheerMeer or omerzaheermeer@hotmail.co.uk