Yemen Conflict: Potential Economic Catalyst for Pak

The following article has been published in Daily Nation, dated 06th April 2015

(E-Paper (Print Edition)http://nation.com.pk/E-Paper/lahore/2015-04-06/page-9 )

(Onlinehttp://nation.com.pk/business/06-Apr-2015/yemen-conflict-potential-economic-catalyst-for-pak )

Yemen Conflict: Potential Economic Catalyst for Pak

Prof Dp

By: Omer Zaheer Meer

Strategic decisions by modern states are based on either some principles, agreements, vested national interests or a combination of the above mentioned. A confusion and lack of clarity often results in ruining of opportunities which could otherwise turnaround the situation of a nation. By now, you’d have most likely heard about the conflict in Yemen, a regional dominance affair portrayed as a Shia-Sunni sectarian conflict by the script writers of the new world order for their own vested interests. While a lot has been written on the Yemen conflict in the past few days, a focus on economic prospects of the potential decisions has been somewhat lacking. We’ll address it in this write-up.

Pakistan currently has a vital economic dependency on Kingdom of Saudi Arabia (KSA) led Gulf coalition. The aid provide during sanctions and the $ 1.5 billion “gift” to Pakistan during current Government just last year maybe one-offs but the continuous provision of oil on “deferred payment” and employment opportunities for millions of Pakistanis in KSA and the Gulf region are of a permanent nature helping sustain Pakistan’s economy. Similarly, Pakistan share important economic ties with United Arab Emirate (UAE) whose companies often invest in Pakistan, albeit of extremely favorable terms in semi-Government or Government owned enterprises. Furthermore Pakistan has recently executed an agreement to import LNG from Qatar to meet its energy needs. The Gulf region is amongst major export destinations of Pakistani products. Annual bilateral trade is in billions of $. In economic terms there is an unfavorable trade imbalance in the trade ties mainly due to the import of oil by Pakistan. Furthermore, there is a convergence on security interests between Pakistan and most of the Gulf countries baring the issues with UAE regarding conflict of interests re Gawadar port as outlined below.

On the other hand, while there are just a few thousands Pakistani employed in Iran (fifteen to twenty thousands), the strategic position of it being a neighbor of Pakistan has serious implications for nation defence and thereby resultant impact on defence spending and national budget. While the past has glorious examples of Pak-Iran collaboration particularly during the 1965 war with India, it is an unfortunate fact that due to the non-convergence of economic and regional security interests, Iran has lately been in partnership with Pakistan’s arch rival India. The process exacerbated due to the divergence of interests in Afghanistan and peaked with the launch of the Gawadar project which directly threatened Iran’s vital “Chahbahar” port just like it threatened the prospects of UAE ports more importantly Dubai. The result has been direct economic costs for Pakistan due to delays in making port operational due to law and order situation supported by foreign interests as well as increased defence spending further straining the national resources.

Keeping in view of the above, perhaps it is high time that the strategic decision makers in Pakistan list the vital national interests that can be secured from both KSA led Gulf region as well as Iran as well as to what extent it can offer its co-operation in return depending on existing agreements. It is vital that we think realistically respecting the support and co-operation we’ve received from our allies over the years but sans undue emotions. USA has done the services expected of Pakistan for years at extremely lucrative terms; it would therefore not be unfair or unethical for Pakistan to pursue the betterment of its inhabitants while supporting its allies.

Below are some proposals in regarding what Pakistan can offer considering its own issues and limitations:

  • Pakistan should focus on its ability play the role of an effective mediator to address the concerns of both Iran and KSA just like it did to bring China and USA closer back in the 1970’s.
  • Deploy air support and commanders to lead Gulf forces within their borders (particularly KSA) to ensure effective defence.
  • Deploying its own forces within KSA to protect its borders from outside attacks.
  • As a last resort conduct targeted air-strikes against local militia on formal request from the Yemen Government and KSA led Gulf coalition on the principle of supporting democratically elected government.

What Pakistan can achieve economically in return may include the following:

  • Assurances from both Iran and UAE to stop stirring up trouble in Balochistan resulting in a quicker start of Gawadar project as well as lower spending on counter-terrorism there.
  • Membership of important bodies including GCC with economic implications.
  • Removal of tariffs on Pakistani imports in their countries, with preferential treatment.
  • Attractive deals to secure reliable LNG, LPG, oil, e.t.c. at cheap rates to ensure Pakistan’s growing energy needs are met effectively. Depending on some key factors Pakistan can secure even free supplies for a long period.
  • Offering special nationality packages to Pakistanis working in the countries involved, which can positively influence the foreign exchange reserves of the country.
  • Writing-off of Pakistan’s debts due towards GCC countries.
  • Paying off Pakistan’s other external debts.

This is yet another historic opportunity for Pakistan and it should not be squandered like many in the past. The demands listed above are all very realistic and possible considering the vital role expected of and the possible costs for Pakistan. They’re also much less then what had been taken by the USA for similar services in the past. So if Pakistan is to play the most important role for one of the richest regions in the world, it may as well get due recognition and rewards. After all the law of the nature is such that even brothers working in brothers’ businesses must get rewarded for their work. And what’s better if the rewards are sufficient for one brother while less then what the other was paying to outsiders.

The author is Director of the think-tank “Millat Thinkers’ Forum”. He is a leading economist, chartered financial analyst, qualified fellow 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

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