Corporations that Control World

On June 13, 2016 "Information Clearing House" has posted a list of surprisingly small number of corporations that control massive global market shares. How many of the brands below do you use? Please take some time to go though the list by clicking this link http://www.informationclearinghouse.info/article44864.htm

Allow me to say that these corporations control assets bigger than many countries have and therefore these entities enjoy the power to install and topple governments in many countries.

Is Pakistan inching towards isolation?

On June 19, 2016, I posted a blog titled "Need to revisit Pakistan's foreign policy". My concluding remarks were, “It is feared that tweaked foreign policy is pushing Pakistan towards isolation. It may be true that Pakistan enjoys geopolitically important position but it has not been able to take advantage of its location. 

Pakistan needs a vibrant foreign policy and a young and more articulated full-time Foreign Minister. The current advisors are part of past legacies and also see the world with tinted glasses”.

Many of my critics termed this a sweeping statement as they still insist that getting the funds from IMF and other multilateral donors is an evidence of the commitment of these institutions towards Pakistan. This support would not have been there had the lenders didn’t have confidence in the ruling junta and economic potential of the country.

My immediate and most candid reply is, “These institutions are there to bail out countries which even face more precarious economic outlook as lending is their business. These institutions never allow any country to commit default. They lend only that much which is enough for the survival of the borrowing countries but the policies are never aimed at making these countries financially strong.

Since the readers are not ready to spend more than a few minutes, I have the following brief assertions to make in support of my apprehension that Pakistan is inching towards isolation. I also believe that many readers may not agree with my inferences but I am sure it can start a healthy debate and let those at the helm of affairs to revisit the policy and come up with a more articulated one.

1-     Since independence Pakistan’s foreign policy has remained under the foreign policy of the United States. As a result Pakistan never enjoyed cordial relations with the then USSR and Russia of today.

2-     Over the last four decades Pakistan has been fighting a ‘Proxy War’ in Afghanistan. This can be divided into two phases. In the first phase Pakistan along with Taliban fought a war with USSR that was termed Jihad. In the second phase, starting in 2001, Pakistan has been fighting a war with Taliban, a friend turned foe.

3-     Pakistan has earned hate from various Afghans groups, Taliban as well as Northern Alliance. This paved way for India to enter Afghanistan as a facilitator. The recent alliance of Afghanistan with Iran and India is not liked by the hawks present in Pakistan.

4-     Since independence in 1947 Kashmir has remained the biggest thorn in normalizing relationship between Pakistan and India. They have fought three wars and both the countries have attained the status of atomic powers. Every year both the countries spent billions of dollars on the purchase of lethal armaments, only to attain supremacy on each other.

5-     After the Islamic revolution in Iran Pakistan’s relationship with the country went into the shadow of foreign policies of United States and Saudi Arabia. Despite the lifting of sanction imposed on Iran, Pakistan has not been able to trade with Iran. It has not even succeeded in establishing banking links, a prerequisite for normalizing international trade between the two countries.

6-     China is often termed time test friend of Pakistan and has been supporting the country in overcoming its economic problems, the latest being CPEC. However, many groups having vested interest are trying to sabotage the project.

These are just a few bullet points that need an open debate in the National Assembly and Senate of Pakistan. Ironically, the absence of independent ‘Think Tanks’ in the country is a serious problem. It is believed that over 3,000 Think Tanks are operating in the United States, but not even one is operating in Pakistan.

WAPDA issues Rs100 billion Sukuk for Neelum-Jhelum Hydropower Project

Water & Power Development Authority (WAPDA) has signed an agreement with a consortium of 16 commercial banks for the flotation of Rs100 billion Sukuk for Neelum-Jhelum Hydropower Project. This has been termed the country’s biggest ever funds mobilization for a public sector entity through Shariah compliant instrument.

The signing ceremony for the financing agreement was attended by Syed Iqbal Ashraf, President national bank of Pakistan (NBP), Zafar Mahmood, Chairman WAPDA, Muhammad Zubair, CEO Neelum-Jhelum Hydropower Company (NJHPC) and representatives of 16 commercial banks were also present on the occasion.

Addressing the ceremony, WAPDA chairman said, “This is the biggest ever funds mobilization for a public sector entity in the history of Pakistan. Achieving this milestone reflects not only investors’ confidence in Pakistan and WAPDA, but also indicates the potential of investment that hydropower sector offers”. This issuance will go a long way in arranging funds for other hydropower projects as well to be initiated in the near future, he added.

NBP is not only the lead arranger but also has the largest share (around Rs35 billion). According to Mufti Ahsan Waqar, Head of NBP Shariah Board, the financial close has been achieved and the Sukuk would be ready to trade at Pakistan Stock Exchange after completion of other formalities.

Other banks in the consortium are HBL, Allied Bank, United Bank, Bank Alfalah, Meezan Bank, Faysal Bank, Bank of Punjab, BankIslami Pakistan, Askari Bank, Bank Al Habib, Bank of Khyber, Dubai Islamic Bank, Pak-Brunei Investment Company and Pak-China Investment Company.

The Sukuk has a tenor of 10 years and it is backed by the sovereign guarantee by the Government of Pakistan (GoP). The Sukuk enjoys a preliminary rating of ‘AAA’ from JCR-VIS and it is expected to have a wider impact on the financial market of Pakistan, helping augment a funding format that has been predominantly constrained to smaller deals with shorter tenors. The Sukuk is expected to provide avenues for Islamic banks and mutual funds to invest their liquid funds in a tradable GoP guaranteed Islamic instrument.

NJHPC has an installed capacity of 969 megawatts and the project is located in Muzaffarabad (Azad Jammu and Kashmir). The project envisages diverting Neelum River water through tunnels which fall into Jhelum River after producing power. On completion, the project will be capable of producing 5.15 billion units of electricity each year.

This mega hydropower project has been undertaken long after completion of Mangla and Tarbela dam projects. This ‘green energy’ project will fetch up to Rs50 billion annually for WAPDA as per existing tariff. The first turbine will commence generation by the end June 2017.

According to the details made available, 90 per cent construction work is under high mountainous overburden and only 10pc above the surface. The construction work on the project is progressing at a fast pace and overall progress of the project is around 82 percent so far.

Brexit keeps Pakistan market under pressure

To begin with, it may be true that the local equity market remained under pressure due to Brexit, which was an overreaction. The decision by the public is yet to be approved by the British parliament. It will be a long drawn process but meantime the business will continue ‘as usual’.

The panic trickling down to Pakistan Stock Exchange plunged the benchmark PSX-100 index to 37,390 levels, down 3.58%WoW, after losing 1,412 points intraday. Regional markets also witnessed similar trend while crude oil tumbled, along with other commodities on a stronger dollar.

Barring Friday, lack of triggers kept market activity dull during the week where average daily volumes declined by more than 15%WoW to 155.7 million shares. Foreign participation remained under pressure, with foreigners selling equities worth US$20.6 million during the week against a net buy of US$19.58 million last week.

Key news flow impacting the market included: 1) National Assembly finalizing amendment in 2016 Finance Bill, 2) Current Account deficit for May’16 rising US$792 million as against a surplus of US$23 million a month ago, 3) the World Bank approving US$1.02 billion in developmental loans for Pakistan under the CGDPF and Sindh Resilience Project, while ADB approved US$100 million loan for the construction of Shorkot‐Khanewal section of the M4 motorway, 4) yields slipping by 3‐ 5bps in the latest Market Treasury Bills auction with the GoP raising Rs138 billion and 5) news source indicating rise in petroleum prices in the range of Rs1.75‐Rs4.5/ltr for July’16. Leaders at the bourse were: MTL, FATIMA, HMB, FCCL and AGTL; while laggards included: BAFL, MCB, AICL, NML and NCL. Volumes leaders were: KEL, DCL, PAEL and DFML.

Bouts of volatility are likely to be witnessed in the week ahead as investors react to uncertainty in the global outlook following ‘Brexit’. Negative implication for the bourse can also emanate from any extended downside in commodities, particularly crude oil. With volatility in major currencies, Autos on (JPY) and Textiles (on EUR and GBP) could see further downside.

After recording surplus for three consecutive months, current account balance returned to the red zone in May'16 recording a deficit of US$792 million expanding, consequently, 11MFY16 current account deficit to US$2.48 billion, up 1.2%YoY higher than the balance in 11MFY15, primarily reflecting a worsening trade deficit. The trade data depicts 22.6%YoY widening in the trade deficit in May'16 as rising imports (up 7.6%YoY) added to the burden of declining exports (down 6%YoY). With similar trends to continue analysts expect current account deficit to further deteriorate. Resulting pressures on current account and hefty debt repayment in FY17 can likely have spillover effects on the Pak rupee exchange parity. However, rising foreign exchange reserves and improving foreign investment outlook should keep erosion in rupee value limited.

Resolving Pak Afghan Conflict

Afghanistan started a new era of relationship with Pakistan, after the fall Taliban government and appointment of Hamid Karzai as new President of the country. Now there is a new president and a ruling junta which does not consider Pakistan a friend. The situation got real precarious lately after exchange of fire in which people from both the sides were killed.

One of the prime reasons for Afghan hostilities was construction of a gate at Torkham border. Ironically Karzai’s allegation that Pakistan does not want good relations between India and Afghanistan and wants ‘no bilateral trade and no access to Central Asia for India’ sound completely illogical.

Historically, Pakistan has offered transit trade facility to landlocked Afghanistan. The situation is likely to change to some extent after construction of Chabahar port in Iran by India, which offers an alternate route to Central Asian countries through Afghanistan. Now, there remains no binding on Afghanistan to use Pakistan’s ports, road and railway links. It is at liberty to undertake its international trade through Chabahar.

Therefore, the accusation that Pakistan is a hurdle in Afghan trade is completely baseless. Knowing that Afghanistan is no longer dependent of Pakistan it is trying to open Pandora’s box by taking about old but settled conflicts. No one can deny the fact that Afghans always have a hostile attitude towards Pakistan; they have not accepted the border.

In one of hisstatements Karzai has openly termed the formation of Durand Line a 'result of British imperialism' in the region. He even went to the extent of saying that Afghanistan has never accepted this border since 1893, nor will they ever accept it in future.

"When Pakistan came into being in 1947, they received it this way, so we are not blaming them but Durand Line is a blow which no Afghan can ever forget. We do not accept this border but will not fight over this issue," said Karzai.

He maintained that terrorism and extremism is a menace which has not only affected people of both Pakistan and Afghanistan but added that "we (Afghans) think they have found safe havens and are getting aid from Pakistan."

Despite having remained President of Afghanistan and witnessed cross border terrorism, he has deliberately avoiding taking about militants living in Afghanistan and their involvement in cross border terrorism against Pakistan as well as Iran.

Trade going on under the disguise of ‘transit trade’ has been causing colossal damage to Pakistan’s economy. May be the time has come to let Afghanistan decide itself, if it wants to use Pakistan or Iran as transit route.

As stated above if Afghanistan wants it can route all its international trade through Iran and let Pakistan build fence and gates at the common border. This border, spread over hundred to kilometers is highly porous and terrorist can very conveniently pass it.

The movement of Afghan and Pakistanis should also not be allowed without passport/visa and the old system must be discontinued immediately. If the ground realities are changing the ‘rule of the game’ must also change. Let Afghan chose between Pakistan and India but once the decision is made the new rules will have to be followed stringently.

Need to revisit Pakistan’s foreign policy

To begin with it may not be wrong to say that since independence Pakistan’s foreign policy has been dictated by the United States. During Ayub Khan Era Pakistan got the maximum aid, grants, and loans, which some analysts also called cold war era. During this period, an airbase in Pakistan was used by the United States for spying against the then USSR.

When USSR attached Afghanistan, Pakistan was dragged into the proxy war in the name of Jihad during Ziaul Haq Era. Then in Musharraf Era Pakistan was once again assigned a role to eliminate Taliban, the Jihadi group created and funded by the United States to avert USSR attack. Pakistan is still fighting the US proxy war in Afghanistan. The fallout of Pakistan’s involvement in Afghanistan is cross-border attacked that also includes an attack by the United States on Sala check post. 

Pakistan has fought three wars with India, which have dented two-nation theory and resulted in the creation of Bangladesh. Pakistan spends billions of dollars every year in a bid to maintain minimum deterrence level and to counter Indian war mania. Both the countries have attained the status of nuclear powers but Kashmir remains the biggest thorn, which has kept both the countries in the constant state of war since independence. Over the decades both the countries have failed in developing even working relationship with each other. It may not be wrong to say that all the efforts to normalize the relationship between the two countries have been sabotaged by hawks present on both sides of the border. Despite enjoying common border, rail and road links, official trade between the two countries is a fraction of total trade conducted through a third country or smuggling.

 Worst have been the relationships with Afghanistan, which still refuses to accept the demarked borders. It was the only country that opposed Pakistan’s entry in the United Nations. The country during the monarch era enjoyed the most cordial relationship with India and USSR. Most of the modern day Afghans consider Pakistan their worst enemy as it has been accused of killing hundreds of Afghans in a war against Taliban and cross-border terrorism is most common. Lately, in a bid to contain Afghan infiltration, when Pakistan decided to construct fence and gates, Afghanistan once again started talking about disputed border.

For decades, Pakistan has been providing transit facility to Afghanistan, which is not considered a favor but its inherent right. To undermine Pakistan’s importance India is contracting a port in Iran, Chabahar, and road and rail links up to Central Asian countries passing through Afghanistan. It is necessary to point out that India was involved in the construction of this Iranian port at a time the country faced worst economic sanctions. It may be said that the United States kept its eyes and ears closed as it also wanted an alternate route.

During Shah’s era Pakistan enjoyed an extremely cordial relationship with Iran but after the Islamic revolution, Pakistan’s foreign policy went into the shadow of the United States and Saudi Arabia. Despite recent withdrawal of sanctions imposed on Iran, Pakistan and has not come out of this dictate. Pakistan has not been able to establish banking links with Iran, a must for boosting trade between the two countries. Not a drop of crude oil is being imported from Iran, contrary to the fact that India remained one of the major buyers of Iranian oil even when sanctions were there.

China is often termed a time-tested friend but the response from Pakistan is often disappointing. Many anti-China groups have emerged in Pakistan, mostly based in Baluchistan. They are also trying to spread disinformation about China Pakistan Economic Corridor (CPEC). It is also on record that many Chinese engineers and workers have been attacked and killed. One has all the reasons to doubt Indian support to the militant groups because Gwadar port will reduce the importance of Chabahar.

To conclude, it may be said that ever since PML-N government headed by Mian Nawaz Sharif has come into power, the cabinet is without a full-time Foreign Minister. Mian Sahib’s tilt towards Saudi Arabia is a major hurdle in improving the relationship with Iran, as he himself overseas Foreign Ministry. Ironically, Saudi Arab and the United States relationship have deteriorated after withdrawal of sanctions imposed on Iran.

It is feared that tweaked foreign policy is pushing Pakistan towards isolation. It may be true that Pakistan enjoys geopolitically important position but it has not been able to take advantage of its location. Pakistan needs a vibrant foreign policy and a young and more articulated full-time Foreign Minister. The current advisors are part of past legacies and also see the world with tinted glasses.