Pakistan: Robust vendor industry must for efficient automobile industry

The sector experts are of the consensus that the policy governing automobile industry in Pakistan has remained ‘OEM centric’ from the day one. This includes, incentives for the new entrants, lopsided indigenization policy, nominal difference in the duty rates on CKD kits and basic raw material and above all failure of the government in containing influx of parts as ‘scrap’. As a result, the vendor-industry has been fighting for its existence.

The biggest proof is that the annual turnover of the replacement market (parts market) in Pakistan is estimated around PKR35 billion. Ironically out of this only 5% is being met by the local industry. Most of the parts are imported as ‘scrap’. High-end electronic components are being ‘smuggled’. As a result local vendor fail to achieve economy of scale.

If I peep into the history, disbanding the manufacturing of Bedford trucks and buses in Pakistan is the ‘assassination’ of the units which were manufacturing engine blocks, gear, rings and pistons. This genocide was done soon after nationalization of the unit manufacturing Bedford trucks and buses in Pakistan and commencement assembly of a Japanese brand at the facility. This also led to ‘financial demise’ of Pakistan Machine Tool Factory operating in Karachi-Sindh.

Analysts also refer to the ‘absurd’ policies of the Government of Pakistan. Lately the number of OEMs in Pakistan has exceeded 18, from around half a dozen. All the new entrants were allowed to import completely built units (CBUs) in significantly large quantities and given a long period to even commence local assembly. They were also allowed to import many parts on the premise that local vendors are incapable of producing parts as per their global standards.

A question arises, if the local vendors are incapable of producing parts of international standards, who is to be blame, OEM or vendor? Sector analysts say that the GoP facilitates the OEMs the maximum because they have brought foreign investment. However, even the tier-one parts manufacturers are not given that kind of VVIP status.

At this time headlines are appearing in local media that the OEM are facing problems in opening letters of credit, due to the limited availability of the foreign exchange with State Bank of Pakistan (SBP). However, there is little talk about problems being faced by the vendors, which mostly fall in the category of SMEs and micro-enterprises. There are approximately 2,000 vendor units, which employ nearly 100,000 people.

A points which needs to be deliberated is that OMEs have borrowed heavily from the financial institutions, whereas vendor units, particularly third-tier units having the largest population and employment have invested their own money. Any deviation/concession to the OEMs to import parts which can be produced locally renders these units economically unviable.

Although, some of the readers don’t appreciate reference or comparison with India, it must be remembered that for decades it kept of models which did not have high ecstatic value, only to support the vendor units.

Another problem faced by Pakistan is that at present no steel manufacturing plant is operating in the country. Most of the units are ‘re-melting’ units which mostly use scrap. The output is below ‘prime quality’, which also lowers the quality of the body of the CBUs.

It may not be out of context to say that the two leading tractor manufacturing units face intermittent closure, because of high inventory levels. The incumbent government has allowed import of second-hand tractors, which is highly detrimental for the local manufacturers. It is ironic because the indigenization level is more than 95%.

One also fails to understand that the GoP has fixed agri lending target of PKR 1.8 trillion. The country needs use of machinery in agriculture, and tractor is the basic machine used for ground leveling, particularly laser-guided tractors. Appropriate field leveling also helps in prudent use of water, which is in short supply in the country. 

 

 

 

Iraq: Basrah-Aqaba oil pipeline face bleak outlook

Iraqi aspirations to move ahead with a long-planned crude pipeline from Basrah to Aqaba in Jordan have been dealt a major blow after the head of a powerful Shia military group in Iraq said the project will never happen.

"Jordanians must know their battle is doomed for failure. The Basrah-Aqaba oil pipeline will never be," said Ali al-Asadi, head of Iraq's Harakat Hezbollah al-Nujaba (HaN). "Let them try and they shall witness what happens to them and whoever collaborates with them."

HaN is known for its extremely close ties with Iran. Al-Asadi issued the statement after Iraqi lawmaker Mustafa Jabbar Sanad revealed that Jordanian officials — including the speaker of parliament, the Jordanian king's advisor and the head of intelligence — had met with senior Iraqi Shia, Sunni and Kurdish officials and agreed on the pipeline's implementation.

Sanad is a member of the pro-Iran Shia Co-ordination Framework group and was behind a lawsuit against the federal government in Baghdad over monthly payments to the Kurdistan Regional Government (KRG).

Iraq's speaker of parliament Mohammed al-Halbousi said on January 14, 2023 that the Basrah-Aqaba pipeline will see the light, following a meeting with his Jordanian counterpart Ahmad Al-Safadi during an official four-day visit to Iraq.

Al-Halbousi said the project will be executed as soon as the new government in Baghdad overcomes certain obstacles, not least the high cost of the pipeline.

Baghdad's most recent estimate is that the project will not exceed US$8.5 billion, down from its previous estimate of below US$9 billion.

Costs and financing have been major barriers for the project for several years, with both Iraq and Jordan looking for ways to cut expenses.

The proposed pipeline consists of two sections. A 2 million barrels/day capacity line extending from Basrah to Haditha near the Syrian border would transport crude to Iraqi refineries and power stations. A second one million barrels/day pipeline would extend from Haditha to Aqaba in northern Jordan.

 

Saudi Arabia: Economy grows by 8.7% in 2022

Saudi Arabian economy grew by 8.7% in 2022 as compared to the previous year, according to flash estimates posted by the General Authority for Statistics (GASTAT) on its official website on Tuesday.

According to the report, available at its website, the real GDP during the fourth quarter of 2022 grew by 5.4% as compared to Q4 of 2021, while the real GDP during 2022 grew by 8.7% as compared to 2021.

The report indicated that the real GDP of oil activities grew by 6.1% during the fourth quarter of the year 2022, as compared to the same quarter of the previous year, 2021. The real GDP of oil activities during 2022 grew by 15.4% compared to the previous year, 2021.

The real GDP of non-oil activities grew by 6.2% as compared to the same quarter of the previous year. The real GDP of non-oil activities during 2022 increased by 5.4% as compared to last year.

The report showed that the seasonally adjusted real GDP increased by 1.5% during the fourth quarter of 2022 compared to the third quarter of 2022.

GASTAT is the only official statistical reference for statistical data and information in Saudi Arabia. It carries out all the statistical work in addition to the technical oversight of the statistical sector.

It also designs and implements field surveys, conducts statistical studies and research, analyzes data and information, and documents and archives all works of information and statistical data covering all aspects of life in Saudi Arabia from its multiple sources. 

Central banks bought the most gold in 2022

Central banks around the world added a whopping 1,136 tons of gold worth some US$70 billion to their stockpiles in 2022, by far the most of any year since 1967, the World Gold Council (WGC) said on Tuesday.

The data underlines a shift in attitudes to gold since the 1990s and 2000s, when central banks, particularly those in Western Europe that own a lot of bullion, sold hundreds of tons a year.

Since the financial crisis of 2008-09, European banks stopped selling and a growing number of emerging economies such as Russia, Turkey and India have bought.

Buying dipped during the coronavirus pandemic but accelerated in the second half of 2022, with central banks purchasing 862 tons between July and December 2022, according to the WGC.

Banks including those of Turkey, China, Egypt and Qatar said they bought gold last year. But around two-thirds of the gold bought by central banks last year was not reported publicly, the WGC said.

Banks that have not regularly published information about changes in their gold stockpiles include those of China and Russia.

"Central bank buying in 2023 is unlikely to match 2022 levels," the WGC said.

"Lower total reserves may constrain the capacity to add to existing allocations. But lagged reporting by some central banks means that we need to apply a high degree of uncertainty to our expectations, predominantly to the upside."

The central bank purchases took total gold global gold demand last year to 4,741 tons, up 18% from 2021 and the highest for any year since 2011.

 

 

Blinken reaffirms need for two-state solution

US Secretary of State Antony Blinken urged Israelis and Palestinians to ease tensions on Monday during a visit to Jerusalem, reaffirming a long-stalled peace vision of two states side by side as the only path forward.

Arriving amid the bloodiest violence in years, Blinken focused censure on a Palestinian gun spree outside a synagogue that put Israel on high alert but also cautioned against any celebration or avenging of such bloodshed.

Seven people were shot dead in Friday's attack by an East Jerusalem man who was himself killed by police. Lionized by many fellow Palestinians, he had no known links to militant groups.

A day earlier, Israel carried out an unusually deep raid on the Jenin refugee camp in the occupied West Bank, killing 10 residents, most of them gunmen. At least 35 Palestinians, including fighters and civilians, have died in violence surging since beginning 2023, medical officials say.

"It is the responsibility of everyone to take steps to calm tensions rather than inflame them," Blinken told reporters after landing in Tel Aviv.

He said, “Friday's rampage was more than an attack on individuals. It was also an attack on the universal act of practicing one's faith. We condemn it in the strongest terms”.

"And we condemn all those who celebrate these and any other acts of terrorism that take innocent lives, no matter who the victim is or what they believe. Calls for vengeance against more innocent victims are not the answer."

Israeli Prime Minister Benjamin Netanyahu, whom Blinken met later on Monday, has called for more citizens to carry guns as a precaution against such street attacks. But he has also warned Israelis not to resort to vigilante violence.

Blinken is due to see Palestinian President Mahmoud Abbas on Tuesday.

Palestinian officials said Israeli settlers had set fire on Monday to two cars near the northern West Bank city of Nablus and thrown stones at a house near Ramallah, following a similar attack on Sunday.

Elsewhere in the West Bank, Palestinian officials said Israeli troops killed a 26-year-old man at a checkpoint. The army said troops opened fire on the man's car after he rammed into one of them and tried to flee an inspection.

The last round of US-sponsored talks on founding a Palestinian state alongside Israel stalled in 2014.

Netanyahu's new hardline government includes partners who oppose Palestinian statehood, and control over the Palestinian territories is divided between Abbas, who favours diplomacy, and rival Hamas Islamists, who are sworn to Israel's destruction.

After meeting Netanyahu in Jerusalem, Blinken restated Washington's belief that a two-state solution was the only way to resolve the Israeli-Palestinian conflict.

“As I said to the prime minister, anything that would move us away from that vision is, in our judgment, detrimental to Israel's long-term security and long-term identity as a Jewish and democratic state,” Blinken said.

Recent data indicates that public support for a two-state solution has reached a historic low.

According to a survey published last week by the Palestinian Center for Policy and Research, 33% of Palestinians and 34% of Israeli Jews say they support it, a significant drop from data collected in 2020.

Two-thirds of Palestinians and 53% of Israeli Jews said they opposed the two-state solution.

Blinken also addressed local political tensions, noting that the vibrancy of Israel's civil society has been on full display of late, a reference to large demonstrations against proposed changes in the judiciary that protesters see as undermining judicial independence.

Standing alongside Netanyahu, Blinken said a strength of the US and Israeli democracies was a recognition that building consensus for new proposals is the most effective way to ensure they're embraced and that they endure.

Customer Experience: Number one brand differentiator

KPMG Saudi Arabia has published the results of its 2022 global annual Customer Experience Excellence (CEE) survey. This 13th global edition, and the second to run in Saudi Arabia, is based on inputs from 1,550 consumers in Saudi Arabia measured against inputs from 89,000 consumers across 25 countries worldwide.

The Saudi version of the survey included 96 brands across nine different sectors and provided the respondents with the ability to evaluate those brands based on their personal customer experiences with them.

The survey was based on the CEE methodology, developed by KPMG’s global CEE Centre of Excellence, and is made up of six pillars; Empathy, Personalization, Expectations, Resolution, Integrity and Time & Effort.

Those pillars represent the core of this research as they make up the fundamental components of an ideal customer experience.

In terms of overall CEE performance, the non-grocery retail sector emerged as a leader among other sectors in Saudi Arabia with a score of 8.08 in 2022 and beat its last year’s performance; Followed closely by the grocery retail sector with a score of 8.05. Such results indicate notable progress in those two sectors and point to the essential role they play in consumers’ lives.

Moving down the chart, the financial services sector marked a noticeable decrease to a score of 7.94 from last year’s 8.07, indicating growing customer expectations that brands in the financial sector need to consider.

Travel and hotels, restaurants and fast food, and entertainment and leisure followed with close scores of 7.92, 7.91 and 7.90, respectively.

Finally, telecoms, utilities and logistics sectors trailed the ranking with scores of 7.82, 7.70 and 7.66, respectively.

In the area of Net Promotor Score (NPS) index, non-grocery retail, grocery retail, and the financial services scored the highest among the other sectors. In contrast, logistics and entertainment & leisure obtained the lowest NPS scores.

“As we know, these sectors have been highly commoditized over the last few years, and ‘opportunities to delight’ have become significantly rarer,” commented Adib Kilzie, Head of Customer Experience, Cloud and Enterprise Solutions at KPMG in Saudi Arabia.

“Today’s customers are better informed, better connected and more demanding than ever before. In some cases, customer experience has overtaken price and product as the number one brand differentiator. Although many organizations are investing record amounts in customer-related initiatives, not all are seeing the desired ROI in the absence of a clear CX strategy.”

Having the right customer insight through segmentation and persona development remains as a leading challenge among businesses; a challenge that is likely to hinder the business’ ability to personalize their services and orchestrate exceptional customer journeys.

“Although most businesses appreciate that need and its impact on their market share and profitability, they continue to face challenges in data collection and customer insight. The market has witnessed a rise in the use of Voice of Customer (VoC) solutions, surveys and questionnaires; however, many businesses have not been able to leverage the needed real-time data collection and decision capabilities,” Kilzie noted.

Companies are now acting purposefully, deciding what to take with them into the future and what to leave behind, he stated, adding that this points to a significant transition underpinned by new ways of working for most firms.

“The hierarchical silos of an industrial past are giving way to an agile culture for a digital future,” Kilzie concluded.

 

Drone attack on Iranian weapons factory termed phenomenal success

Despite Iranian claims, the drone attack on Iran at Isfahan was a tremendous success, according to a mix of Western intelligence sources and foreign sources, The Jerusalem Post initially reported on Sunday.

Several hours later, The Wall Street Journal came out with a similar report, stating that Israel and the Mossad were behind the attack, citing US officials.

There were four large explosions at the military industry factory, documented on social media, against a facility developing advanced weapons. The damage goes far beyond the minor roof damage that the Islamic Republic claimed earlier Sunday.

Iran's response matches responses to similar incidents. Iran’s foreign minister said the cowardly attack was aimed at creating insecurity in Iran. Their defense ministry said the explosion caused only minor damage and no casualties. The extent of the damage could not be independently confirmed.

Israel is playing mum, but most Western intelligence and Iranian sources have credited the Mossad with similarly successful attacks against Iran’s Natanz nuclear facility in July 2020, a different Natanz nuclear facility in April 2021, another nuclear facility at Karaj in June 2021 and with destroying around 120 or more Iranian drones in February 2022.

Few organizations globally, besides the Mossad, are believed to possess the advanced and surgical strike capabilities displayed in the operation.

Multiple large drones with significant amounts of explosives were involved and hit their targets with pinpoint accuracy.

In each of the prior incidents, Tehran tried initially to pretend that the attacks failed and only acknowledged the extent of the damage when satellite photos or other evidence broke into the public sphere, outflanking their denials.

It is still unclear whether the advanced weapons damaged related only to conventional warfare, or might have nuclear relevance, such as for use in ballistic missiles or explosives which can be used for both conventional and nuclear weapons.

Isfahan has been used on and off for various nuclear issues as well as non-nuclear military issues.

Iran even at one point told the IAEA that some of the nuclear activities being carried out at the Karaj nuclear facility until June 2021 had been moved to Isfahan.

The WSJ noted that there was an Iranian aerospace facility nearby, which could also be utilizing dual-use items for space launches and nuclear weapons, used for escaping and reentering Earth’s atmosphere.

Speculation centered on whether the attack was meant to set back Iran’s advanced drone program or a new program, such as the development of hypersonic missiles, with Russian help.

Hypersonic missiles fly so fast and have such advanced maneuverability that many experts believe they could penetrate all of Israel’s air defenses.

Another theme raised during the day was that the US and the CIA may have been involved this time.

Experts noted that the US and Israel just spent an entire week conducting military exercises around attacking targets, such as Iran, so carrying out such an attack immediately after these exercises could be meant to send a message as to their seriousness.

They estimated that the visit of CIA Director William Burns to Israel just before the attack was evidence of a need for a special face-to-face meeting between the CIA and Mossad chiefs preparing the attack.

The US has adopted a more aggressive tone with Iran since it provided drones to Russia in the war with Ukraine and has demonstrated even more impatience recently with Tehran’s failure to return to the 2015 nuclear deal.