Wheat fields in Haripur Hazara. Pakistan can be an agricultural powerhouse with just a little strategic thinking on the part of its government. (Photo credit: Daniyal Gilani, Flickr)

For 5,000 years, the economic well being of the people of what is now Pakistan has been secured through agriculture. Even as Pakistan has rapidly modernized over the last 6 decades since independence, a very large component of the economy is still agriculture based. And in these days of population pressure globally, shortfalls of cultivable land, food security issues and rising food prices, this can be a tremendous asset for the country. Our strength in agriculture and farming is borne out by the numbers. We are the world’s 4th largest producer of milk, we export more than $24B worth of textiles annually based on the strength of our cotton production, we have one of the largest populations of farm animals – over 50M – in the country, and our wheat production stands at number 6 in the world. There are many other areas where Pakistan has unassailable competitive advantages, for example, in the fact that the variety of citrus produced in Pakistan is far more diverse than in any other country of the world, or that the mangoes grown in Pakistan are – without doubt – the richest and best on the globe.

Yet, so much more can be done. I have always been of the strong belief that Pakistan actually has no economic problems beyond mismanagement and poor planning. There are no inherent, structural reasons why Pakistan cannot rapidly develop to the levels of a first-world economy, and take its population of 180M along with it. There are very simple and – in the grand scheme of things – tiny steps that we can take to completely alter our economic picture. Let’s take a part of our agricultural sector; wheat production, as an example. We produce 24M tonnes of wheat per year, which is quite a bit. Yet, our per acre yield, at between 23-25 Maunds per acre, is the lowest in the world amongst major agri economies. If we increased yield to Australian or European levels (as high as 70 Maunds per acre), we would have an excess of between 30-40M tonnes of exportable wheat per year, from the existing land under cultivation. This would mean a minimum of an extra $10B of exports annually, given current international wheat prices. The reality is that these prices have been increasing over the past few years and with the world population expected to hit close to 10B in 2050, they won’t be going in the other direction any time soon.

Our own domestic consumption is in the neighbourhood of 20M tonnes per year. So the difference between 24M tonnes, and 70M tonnes is massive from an economic perspective. It is the difference between merely fulfilling our own needs and reaping a windfall by exporting a precious commodity, and one of strategic importance for almost the entire agri-poor middle east; a region which is not only close to us geographically, but with which we also share strong cultural and diplomatic ties. To put things in perspective, just this one change alone – with all other things staying the same – would mean an immediate increase of 5.2% in our per-capita income. Not only this, the fact that this would be $10B in foreign exchange, the need for IMF programmes would simply not exist. Which further means that the conditionalities and high-interest rate debt servicing also goes away. So the net-positive effects of just this one small thing would be tremendous and would result in immeasurable benefits by freeing up what is spent in debt servicing today, so that it can be redirected to high-yield infrastructure and human resource development investments.

The reason I used the example of wheat was just to illustrate how simple it is for Pakistan to make a quantum leap forward, developmentally and economically. With nothing other than basic technology – which we are in possession of – the adoption of best practices, but most importantly, the political will, we could revolutionize our agricultural sector, and hence our economy. If a new government were elected to power tomorrow and all it did was focus on a three point agenda of 1) Bringing wheat yields to Australian levels 2) Implementing drip irrigation – which saves up to 60% of the water used in flood irrigation and 3) Investing in export-quality food processing industries, this alone would make Pakistan the world’s fastest growing economy. It would free us of all water woes, as 70+% of our water usage is for agriculture, and 60% of that is wasted due to our use of ancient flood techniques. Drip irrigation is far more efficient, and could reduce our national water consumption by up to a staggering 50%! If we could export the excellent halal meat, mangoes, citrus, flowers and other agricultural products we produce, not as bargain basement prices, but in processed, high-quality forms (by transforming our milk into branded cheese products, for example), it would bring revenue streams we have never had and connect them to the poorest Pakistanis, while earning mountains of foreign exchange for the country.

This is a small example of how incredibly small, inexpensive programs can have a massive impact on the national economy, our growth rates and the future of Pakistan. We hope those in power, and those with influence, will finally pay heed and stop artificially quelling Pakistan’s natural growth rate; a number which will approach or exceed 10% with even the smallest of strategic investments in promising sectors like agriculture.

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Despite challenges, Pakistan's resilient economy continues to strengthen and grow

There’s been a flurry of economy related news about Pakistan recently, and we’ve tried to hit the highlights at least. Another positive development is the substantial growth in Pakistan’s foreign reserve position which has now reached an all time historic high of $18.25B. This increase is due to many factors, the two most important being the increase in foreign exchange remittances being sent to the country by Pakistani workers abroad, and the improvement in the import/export gap. That this high has been achieved at a time when global oil prices are relatively steep, is even more expensive. One would imagine that as oil prices ease – which seems to be an almost universal expectation – the rate of growth of the national foreign exchange reserve would accelerate further.

The implications of this rise are interesting. In the near-medium term, one would imagine this addresses any fears of weakness in the Pakistani Rs. So for near/medium term investments of foreign moneys into Pakistan, value loss due to a depreciation in the Pak Rs. presents a much reduced risk. With that being considered, the KSE is still posting tremendous returns and numerous banks in the country are offering 11-14.5% returns on deposits, CDs and TFCs. 10-11% is fairly typical on CD-like instruments with a 90-180 day maturity. Research has shown that, in Pakistan, the foreign exchange reserve position actually has a positive correlation with the stock market levels. So a rise in the reserve levels almost certainly implies a rise in the KSE index. Thus, with the foreign exchange rising continuously, remittances increasing and hence the Pak Rs. stabilizing, an 11% return on a 90 day note presents a great opportunity for short term, almost no risk exposure to the Pakistani market, with tremendous return potential. There is nothing to suggest that a large number of folks have picked up on this opportunity, but we’ll see if this becomes a popular option in the weeks ahead. 

We continue to believe that the projections for Pakistan’s economy and investment potential in the country over a 5-year time horizon remain stellar. During this time, regional stability is expected to heighten with the announced withdrawal of NATO forces from Afghanistan. The financial burden of the WoT is expected to thus diminish within Pakistan and a return to the country’s “natural” GDP growth rate of 6-8% can be counted upon. With the backdrop of rising exports, an officially declared if rather conservative goal of bridging the power gap over a 5-7 year timeframe, and rising remittances, the prospects for Pakistan’s economy are sound.

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The kind of vicious campaign that has been conducted against Pakistan and Pakistanis in the international media over the last many years is really unprecedented. It appears that one can’t pick up a newspaper or newsmagazine that doesn’t go to great lengths to paint a malicious and incredibly warped picture of Pakistan. It was several years ago that Newsweek famously declared Pakistan, “The most dangerous nation”. Several pundits have been predicting our demise for decades. Those deadlines keep passing, probably much to their chagrin.

Reality, however, is markedly different to what we’ve all been reading in the press. Let’s just look at last year alone. A year, mind you, that should never have arrived! We should have been wiped off the face of the earth much earlier, according to our detractors.

But, against all odds, in 2010:

1) The Karachi stock exchange outperformed the much ballyhooed “BRIC” nations significantly. We returned almost 28% to investors over the year, whereas neither the BRIC bourses, nor the NASDAQ or Dow came anywhere remotely close.

2) In the midst of much political upheaval, we continued to produce brilliant students who have been educated in Pakistan from kindergarten to college. After Ali Moeen’s record-setting 23 A’Levels passed with flying colours, in 2010 we had another young boy break all previous O’Level records with 23 As! If you know anything at all about O’Levels, this feat will leave you shocked beyond belief. How, in the name of Isaac Asimov, can a human mind contain all the information and understanding necessary to excel in 23 subjects?! But apparently, a Pakistani lad has shown us that in our country, this too is possible.

3) Business continues to grow in Pakistan with the recently launched Pakistan 25 fast growing companies index providing an initial indication of the excellence, variety and diversity entrepreneurs in Pakistan represent. One of our local software companies produced a global #1 hit with their Blackberry software product. Meanwhile, we’ve had a whole slew of award winning performances from other local software outfits, and growth has returned to the software industry. Better figures perhaps need to be collected, but based on my own understanding, I would project that we grew the industry by at least 20% last year (2010). And all this is with a full fledged war across our border, 4 million Afghan refugees burdening our economy and a global recession, not to mention numerous other woes. If this isn’t perseverance, tell me what is!

4) IMF this, and IMF that. But here’s the truth. It isn’t the IMF or the US that are supporting the Pakistani economy. It is the hard work of our own people, here and abroad. Pakistani expatriates, a community now numbering 7 million worldwide, continue to send substantial remittances back to their motherland. 2010 left all previous years in the dust, with $10+ Billion in remittances from Pakistanis living overseas. Further, our exports are on track to exceed $20 Billion for the very first time. When you consider the global context in which this 15-18% growth is occurring, it is nothing short of astounding.

5) Our diplomacy left much to be desired as far as dealings with our western allies go. But, the visit of the Chinese premier was a clear win for the country. With almost $40 Billion in investments and projects announced, the Chinese commitment to Pakistan dwarfs the KL Bill’s $1.5B per annum, or any other bilateral relationship, for that matter.

6) And our military continued work on building a deterrent. Make no mistake, Pakistan, as the world’s sixth largest nation, must have the capability to deter any and all foes. If we’re going to learn from the brilliant success of the Chinese, we should stay true to Mao’s philosophy on national defence, “All political power stems from the barrel of a gun”. IL-76 refuellers, Chinese ZD AWACS, Swedish Erieye AWACS, Block 52s, substantial numbers of JF-17s and more were inducted in our arsenal. Early in 2011, reports came out suggesting that Pakistan had the fastest growing nuclear programme in the world, with the country having built more weapons than its larger neighbour. Enough said on this topic.

The flip side of the campaign against Pakistan has been the romance with India. My personal perspective is that the West, attempting to recover from a fairly deadly economic mess, is trying its best to goad India into spending much of its treasure on western goods. This is not really as much a romance as it is a paid floor show. The money flows, so the music and dance go on. This economically motivated grandstanding (e.g. Obama’s Security Council overtures) is widely misreported as an earth shattering, fundamental change that has taken place immediately to our east. It appears the western press has, on this subject, decided to take a page out of the Bollywood Manual of Gross Overacting.

The contrast between Pakistan and India, in simple terms, is as follows. For much of our history, since 1947 till today, Pakistan has enjoyed significantly higher per capita income and a higher standard of living. It is only now that India has caught up. At the moment, there is roughly a $50 difference in India and Pakistan’s per -capita income. So one wonders where the sharp economic contrasts subjectively presented by all and sundry actually emanate from. Further, in a very fundamental way, Pakistan will always have the luxury of more land resources per capita, a lower population density and more natural resources per capita. We must reduce our population growth rate, but know that Pakistan’s peak population projection still leaves it better off than India is today, in terms of density.

Top all this off with the fact that it is not at all clear whether India’s growth will continue at the present pace, and nor is it clear that Pakistan will not return to the 8 or so percent GDP growth rate it achieved under Musharraf. Come mid 2011, the withdrawal in Afghanistan starts and over the next 2 years, Pakistan’s woes on account of the ill conceived, ill planned and pathetically executed campaign in Afghanistan will end. Then we can revisit each of the items on the list above and see whether we grow our remittances at a mere 18%, or much higher. Whether the KSE returns “only” 28%, or if it goes back to matching its performance as the World’s #1 bourse. Whether our software industry grows at a “mere” 20%, or whether we go to the 50% YoY growth we achieved just 5 years ago. Let us see… Let us see.

Not everyone is wearing blinders, by the way. The Austin, Texas based Stratfor organization is a highly respected strategic and foreign affairs forecasting organization. Headed by Mr. George Friedman, a celebrated futurist, author and security expert, Stratfor’s reports analysing the global security situation are purchased by the world’s largest companies. Following up on his predictions in his excellent book, “The Next 100 years”, Mr. Friedman has published a sequel, “The Next Decade”. In this book he analyzes the economic and security scenarios that will likely come about. What then, does Mr. Friedman think about India? The following:

“Pakistan is not going to simply collapse, and therefore will remain the persistent problem that India’s strategic policy will continue to pivot on. India lags behind China in its economic development, which is why it is not yet facing China’s difficulties. the next decade will see India surging ahead economically, but economic power by itself does not translate into national security. nor does it translate into the kind of power that can dominate the Indian Ocean. American interests are not served by making India feel overly secure. Therefore, US-Indian relations will deteriorate over the next ten years, even as the US leaves Afghanistan and even as US-Indian trade continues.”

Page 192, “The Next Decade”, George Friedman, Founder of Stratfor.

This is the kind of strategic perspective many in Pakistan miss as they are taken for a ride by the psychological onslaught – nothing short of psy-ops – being unleashed through much of the international press.

So, my friends, I have a different perspective on the future. I think that those who, out of fear, are being misled by stories of doom and gloom and are not investing in Pakistan (financially and otherwise), will regret having missed the opportunity. Now is the time to make a sensible bet on Pakistan. In the long term, it will turn out to be the best bet.

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The Karachi Stock Exchange was a star performer this year, showing near 20% gains, twice the Nasdaq and Dow!

Back in December 2009, I had come up with a list of predictions for 2010. I may have gotten a little lucky this year, because many of these predictions were spot-on to an uncanny degree. Here’s how I fared:

Political predictions

I don’t see Asif Zardari making it through 2010. I think he will be deposed as President.

Couldn’t have been more wrong on this. And for the second time in a row. El Presidente has shown himself to be a better survivor than I am a Futurist!

Though many political pundits talk about it, I don’t believe there will be mid-term elections this year. Whatever changes occur will be with individual and will not displace the entire post-2008 election scenario.

And thus it happened. No mid term elections, even though last year many pundits were proclaiming that this was a near guaranteed event.

Gen. Kiyani is scheduled to retire close to the end of the year, but I believe he will receive a rare 1 year extension of service. However it happens, I don’t believe we will see him retiring this year.

This happened too. Though the extension he received was even more generous than I had thought. Gen. sahib will be at the helm of affairs for another 3 years.

The surge in Afghanistan will not work. If not by the end of 2010 then in 2011 the US will have to sit and talk to elements of the Taliban. The commitment of these forces will prove politically costly for President Obama.

Has this not happened to the letter? Now we have news of a Taliban office opening in Turkey which Mr. Karzai has already supported and in fact requested the Turkish Government for. And Pakistan has come out in support of this initiative as well. We all know that the discussions with the Taliban have been initiated by NATO and not from a position of strength.

Security and the situation in northwest Pakistan

As I had mentioned last year, the Army certainly had an operation up their sleeve. What happened in Swat and South Waziristan was the result of meticulous planning that had occured for months prior to the execution of either campaign. I believe these campaigns will begin to bear fruit in 2010 in the form of a reduction in security incidents in Pakistan. While there will be a definite tapering off in 2010, the nihilists will continue to make their presence felt now and then. Unfortunately this is a process which will take a little bit of time to completely unfold. But 2010 will inshaAllah be more secure than 2009 and quite measurably so.

There was a 35%  reduction in the number of terrorist attacks in Pakistan in 2010, as compared to 2009. The number of people who perished in these attacks was roughly the same, but that was due mainly to the terrorists no longer having the reach they once did. The number of attacks in major cities was also markedly reduced. As I said, the process of securing Pakistan in light of what is going on in Afghanistan will take some time, but certainly, 2010 was an improvement.

The military will continue significant presence in Swat, Waziristan and will expand into other tribal agencies, expanding the writ of the government in an area that was always free of federal or provincial law enforcement since 1947. The action being conducted in these areas is certainly against the foreign nihilists who have taken refuge there and those who would seek to support them, but it also marks an expansion of writ into areas where it never existed previously (by design and by a 1947 era agreement which has clearly outlived its relevance).

The gorgeous Pakistan-China Joint Fighter (JF-17) wowed crowds at Farnborough and Zhuhai

In fact, the only agency where the Army has not entered in force is North Waziristan. And there’s a lot behind that, so I’ll avoid the urge to take that segue. The homes of Taliban terrorists have been converted to Girls’ Schools in the FATA area and the writ of the Government has been extended to areas that no central government has ever controlled in hundreds of years.

Pakistan will continue to implement its strategic weapons programs and reap the fruits of investment in tactical weapons development. In addition to the first JF-17 squadron being weaponized and fully operationalized, we will see the arrival of F-16 Block 52 (Yes, there will be no last minute ‘hitches’), additional Saab Eireye AWACS aircraft, significant progress on the FC-20 fighter program, new air-to-air weapons such as the AMRAAM, and air to ground munitions and the Sniper targeting pod. In addition, the missile program will continue at full speed and more details will emerge regarding the 7,000km range Taimur ICBM. Pakistan will, however, not make any official announcements concerning this system. The much delayed Pakistan Navy next generation submarine deal will be finalized – there is a German vs. French situation going on at the moment but this will succesfully be navigated and a firm deal will take shape in 2010.

It is absolutely irrefutable that Pakistan has made tremendous strides forward in national defence. The only item from the list above that did not materialize was the Sub deal with Germany and/or France. In stead, we know hear that the PN is evaluating Chinese submarines. There are even rumours that the Chinese – in addition to providing a diesel fleet – may also lease a nuclear submarine to Pakistan (an SSGN). Too little is known about this thus far to elucidate much further, but things are definitely in the works.

As for the Taimur ICBM, piece parts have begun to fall into place. The most recent Hatf-V tests in December were rumoured to have included a MIRV (Multiple Re-entry Vehicles) warhead, which goes hand in hand with effective ICBM technology.

In addition to the list above, the Pakistan Air force also took delivery of Iluyshin air-to-air refuellers, Chinese AWACS, in addition to the Swedish Erieye aircraft and the SD-10 Beyond Visual Range Air to Air missile made significant progress in its SD-10B incarnation. The JF-17s will be armed with SD-10As for now as the standard BVR weapon, soon to be upgraded to the B model.

The F-16 Bl 52s were delivered on time, the JF-17 squadron is impressing people within the country as well as without. They participated in a static display at one of the world’s most famous airshows at Farnborough, in the UK, and then wowed crowds at China’s largest air event in Zhuhai.

Technology Predictions

There will be a near-breakout level of success with a Pakistani based mobile software company. At least one company will claim 250K users for its mobile products by the end of 2010. It is very likely that two will.

Pepper.pk announced that they have over 1 million users using their software products, but what’s more, Pepper’s Photo Editor software for the Blackberry made it to World #1 on AppWorld. So not only was there a breakout success, Pakistanis were literally on top of the world as far as this area of technology is concerned. I’ve never been happier at being right about something! More great things will come from Pepper and many other Pakistani technology startups in 2011 inshaAllah.

Netsol will see its fortunes improve in 2010 from a share price perspective. Hovering now at around $1, they can expect to be at least 25% better off by the end of the year.

Netsol fared even better! They are ending the year almost 50% up, at 1.50. They traded as high as $2 in 2010!

2010 is going to be a really bad year for Palm in terms of adoption of the Pre. I had predicted in 2008 that the Hail Mary piece of technology demo’d at CES fail for Palm. It has almost happened, but not quite completely yet. Palm will be relegated to a fourth tier player at best and 2010 will mark a signifciant reduction in its brand equity and influence.

I covered this one earlier this year… Palm got sold to HP and for not all that much. It’s Intellectual Property portfolio (patents) was probably worth 60-70% of the price paid by HP. So the operational parts of the business and the products themselves got valued at almost nothing. The good news is that HP will continue Palm products and may even be coming out with a Tablet leveraging the WebOS platform. Let’s see how it fares. Either way, let’s be clear that the Palm logos you see now don’t represent the good old Palm we knew and loved. That Palm is gone forever.

The Apple Tablet will be released and it will be a major hit. Even though I don’t like Apple, I will buy it  It will be iPhone OS based and will not have the full functionality of a Mac. eReader apps for it will be absolutely killer and very successful.

“Apple Tablet”… what a blast from the past! We all know now that the “Tablet” I spoke of in December 2009 ended up being the massively successful iPad. Yes, I bought it, and the product didn’t just achieve success, it launched a new market for similar devices. eReader apps were in fact a killer app, with Zinio launching digital magazine subscriptions straight to the iPad, and Apple itself showcasing iBooks as a major attraction. And aren’t you impressed that I even got the OS right? The iPad is indeed iOS based and not derived from OS X.

Windows Mobile 7 will come out in 2010 but will not be ‘all that’. It will take several updates and major enhancements to improve it. It will not reverse the market share trend away from Microsoft based phones that has taken hold over the last few years. Android will be the biggest gainer on the Smartphone side and will continue to whittle away at the Windows lead. Microsoft will undergo some pain in this area in 2010.

Yes, Phone7 did launch this year and thus far has sold about 1.5 million devices. In comparison, 300,000 Android devices are being sold every day. Phone7 may still impress, but certainly it hasn’t been a 2010 winner. Android, as I had predicted, went from 5% to 25% market share within a year! It is the biggest tech success story of 2010 in many ways.

ARM based devices and cheaper laptops will start to chip away at Netbook growth. There will at most 20% growth in the Atom based Netbook segment. A market which went from 0 units in 2007 to close to 40M units in 2009.

Netbooks slowed down immensely in 2010. In 2009, about 36.3 million units shipped and according to estimates in 2010 the number will be 40 million. As I had said, growth would be under 20%, and so it was. In 2011, this growth will decline even further.

Nokia is not being succesful in its move from basic and feature phones to truly smart phones. Their UI development and OS skills are not in the top 3 at all. I think this will be Nokia’s downfall… as smartphones become less expensive in markets outside the US, fewer people will choose Nokia as it will no longer provide the best experience primarily due to software reasons. From the low end, Samsung and LG feature phones will continue to become better thus providing competition to the traditional Nokia feature phone niche. All in all, 2010 will see other mobile companies grow at the expense of Nokia.

Wouldn’t change a thing even if I wrote the above earlier this morning instead of last year. As you can see from this IDC report, Nokia indeed lost market share. Samsung launched Bada, focused on foreign markets and the lower end of the smartphone cost spectrum. LG continues to grow. And from the top end you have the iPhone, Android and Windows Phone7 appearing as significant challengers to Nokia.

I was wrong on this one last year, and this is almost too easy for 2010, but then again – you never know! The Software Park Tower in Lahore will be completed and will become fully operational in 2010. It is going to be too expensive sq ft cost wise for most companies so move-ins will be slower than expected.

The building’s done, but rates are super expensive and I think move-ins will be few and far between until something is done to incent companies to move in.

Financial and Economic Predictions

The S&P will show a better than 7% gain in 2010. The Dow and NASDAQ will also come close to 10% gains.

The Dow was under 10,500 at the end of 2009, and is just under 11,600 now. That’s a better than 10% gain, as predicted. The NASDAQ went from just around 2,300 to over 2,650 at the end of 2010, that too is better than 10%. The S&P went from about 1125 to 1260 which handily beats the conservative 7% projection I made.

The recession in the US will be over officially – it technically is already – but you’ll hear common people saying it. There will be a net reduction in the unemployment rate in 2010.

Unemployment went down a mere .2% from Jan to December 2010, as shown here. There’s still a long way to go. The recession is technically over and the markets performed well, but until unemployment is reduced significantly, common people will continue to feel the pinch. I was only half right on this one.

The KSE, having recovered more rapidly than expected in 2009, will show more modest gains of in the 10-15% neighbourhood in 2010.

Well the KSE was the star of the year, showing better than a 20% gain and hitting a multi-year high. It did twice as well as the US markets. There’s something to be said for the fortitude of the Pakistani markets!

The Pakistani Rs. will continue to trade between 82 and 86 to the USD through the year.

Well, here’s the list of daily closes and we stayed under 87, so there you have it!

In summary, of 18 predictions, I was completely wrong on one (Asif Zardari) and half wrong on the US recession (ordinary people have yet to feel the effects of the technical data). Probably my most successful year of predictions thus far! And hopefully I haven’t jinxed myself by saying that.

So, stay tuned for the 2011 predictions. Watch this space!

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I was browsing The Economist at a book store the other day and habitually jumped to the last few pages that showcase economic data and indicators from a number of different countries. Pakistan is one of the countries they cover, along with other asian economies such as China and India. The April 2010 data actually seems fairly positive.

As the chart above shows, Pakistan’s long term bond yields are at about parity with India’s. Long term bond yields indicate how much the state has to “offer” to raise domestic debt. In Pakistan’s case, this is now pretty much in line with regional metrics and that’s an indication of stability.

Similarly, if you look at the budget balance as a % of GDP, we’re actually doing better than our neighbours in this area. This is where strict control on spending has helped. Even though these cost-control moves have had their critics, this metric shows the pay-off.

In other news, the KSE has been doing fairly well also. We recently covered its performance and the fact that it just achieved a 19-month high.

All in all, there is light at the end of the tunnel. One can see it now. A few more months of progress and we should be in the clear.

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Lahore's Pace Circle and Hyatt Regency Hotel... construction is proceeding rapidly

This post is the second in a series titled, “Pakistan Emerging”. The first post can be read here.

A few weeks ago we looked at Pakistan’s evolving situation as it relates to regional security and in context of its alliances with emerging powers. In other words, how the regional and external situation is propelling Pakistan in a very positive direction. In this second piece of the “Pakistan Emerging” series, I want to focus instead on things happening within Pakistan; projects, infrastructure, initiatives etc. that I believe are mere peeks into both the quality and quanta of development and change taking place in the country.

In a previous article, I addressed many aspects which I would have covered here had I not already written about them. For example, increasing rates of literacy, arresting population growth, macro economic situation etc. So before you go any further, if you are truly interested and haven’t read that earlier piece, you might want to take a look now.

Lahore's beautiful Allama Iqbal International Airport is being expanded

My work requires me to travel quite a lot, so I am frequently away from Pakistan. But every time I take that flight back, and land at Lahore’s Allama Iqbal International Airport, I start to notice things that have changed since the last time I stood in the same spot. And that’s understandable, because one of the largest infrastructure projects currently in progress in Pakistan, Lahore’s 80km+ 6 lane circular highway, “The Ring Road”, is unfolding right outside the Airport. Once you start driving away from the airport, you notice billboards for “Broadway” and “Lake City”, just two of a large number of ultra-modern residential and commercial developments being undertaken in Lahore. And it’s not just a few homes or a few buildings, these projects are massive. Lake City alone will be home to 100,000 people and if you look at some of the images I’m including in this article, you’ll get a sense for how these massive and extremely well-thought out communities are changing the shape of Pakistan’s cities.

Lahore's Ring Road is a remarkable and massive project

And it’s not just Lahore where this is happening. You only have to see the UAE real estate giant Emaar’s projects outside Islamabad, or the German Meinhardt Group’s developments in Karachi to get a sense for the scale and concurrent change taking place across the length and breadth of the country.

Lahore: The cultural hub of Pakistan… and a fast-emerging world metropolis!

Lahore's Defence Raaya layout

Glimpses of the emerging Lahore of tomorrow can be seen today when you drive through one of the many new urban areas under development. Lake City is one of these, an immaculately planned 2,104 acre new development on the outskirts of Lahore. The first houses in Lake City have already been completed,  but eventually there will be almost 4,000 residences, hundreds of shops, malls and dozens of office buildings. Lake City has a giant lake at its center, with ‘arms’ extending throughout the development, as well as an artificial beach. A PGA 18 hole golf course is included in the development also, with a 5-star hotel and adjoining club for residents.

The construction so far, in Lahore DHA's Defence Raya

And Lake City by no means is the only such development. Lahore’s area has more than doubled in the last 10-15 years. The giant new Defence Housing Authority (DHA) developments, for example, are of similar quality. Defence Raaya, a small part of the overall DHA initiative, is a 400 acre development also built around a new Golf Course. The quality of the build-out starts from the infrastructure; underground wiring, excellent roads, grid layout, green belts and extends to the homes themselves. Amongst DHA’s other projects is the Broadway and Hydra Group’s Times Square. These projects each involve dozens of skyscrapers and other buildings which will forever transform Lahore’s skyline in just a few short years.

The progress so far at Lahore's Lake City... many homes are now ready for move-ins!

Lahore has long been the proud home of several leading hotels, including the evergreen Pearl Continental, the Hilton/Avari, Holiday Inn and others. But the number of 4+ star rooms available in the provincial capital will soon more than double. Two new Hyatt projects are being built, while a new Hotel Intercontinental is likely to be launched in partnership with Lahore’s breathtaking Royal Palm Golf and Country Club (RPGCC). Pearl Continental’s new Hotel One is also a new entrant into the market, followed by the Pearl Continental’s (Mall Road) own expansion.

Lahore's Royal Palm Club is the finest Club in South Asia

Lahore is an ancient city and belongs to an era when transport was on foot, by horse – or if you were a royal – by elephant! And expanding the road network in a large, living city like Lahore is not without its challenges. However, during the last few years there has been a massive effort to make signal free corridors and new highways. Lahore’s multi-billion dollar Ring Road project alone will add over 80KM of

A massive archway at the entrance of the grand Mall of Lahore

circular highway around the city, connecting all parts of it via a 6-lane freeway. Other projects intended to expand Lahore’s roads and highways include the conversion of Multan Road into a wide highway (in progress) and the expansion of Ferozepur road into a Lahore-Kasur highway. Of course, the M2, linking Lahore to Islamabad remains one of Pakistan’s major highways and access to it has now been significantly eased with the construction of the Thokar Niaz Beg flyover and various underpasses on the Canal Road. The Canal, in itself, has been enhanced with two new underpasses and a major overpass recently completed at Mughalpura and Harbanspura.In terms of commercial development, Lahore has seen numerous upgrades, for example, the Punjab IT Board’s Software Park Tower, a state-of-the-art skyscraper that will act as a high-tech incubator and office space for tech companies. Under construction for the past few years, the Lahore Convention Center is also about to be inaugurated by the Prime Minister within the next few weeks. This large facility will include a skyscraper and numerous other structures, but at the heart of it will be a giant convention center which will host international conferences, trade shows and other activities.

A shopping mall in Lahore

Shopping in Lahore has also undergone a transformation. Where previously the corner store was standard fare, mega stores like Makro, Hyperstar (Carrefour) and Metro provide a new option. These giant megastores are creating jobs for thousands and allowing Lahore’s denizens to shop smart and save… not to mention the shopping experience has been significantly improved. In addition to these megastores, fashionable malls such as the recently opened “Mall of Lahore” and the upcoming Mall 99 and Pace Circle near Allama Iqbal International, are becoming incredibly popular.

Industrial development at the outskirts of the city cannot be overlooked if one talks about the evolution of the city. The new Sundar Industrial estate was one of the key accomplishments of the past government and new industries continue to come online there. This project alone will add tens of thousands of jobs for the denizens of greater Lahore.

Lahore's jewel, the lovely tree lined canal that runs through the city, is being made even more beautiful

Lahore is being reshaped not just by beautiful new buildings and luxurious new hotels and malls. There is a “greener” change afoot… The Punjab government is developing the area around the new Ring Road as a green belt and has also already started the implementation of the Canal revival project. As part of this effort, the PHA (Punjab Horticultural Authority) is leveling both banks of the Canal that runs through the city, and planting flowers, shrubs and other plants. Completely lined, as it is, on both sides with Weeping Willows, Eucalyptus and numerous other trees, the Canal is only getting greener and more beautiful. Numerous other parks are also being upgraded and restored. Just in the Lahore Cantt area alone, over the last few years, parks have been completely transformed. The beautiful new Park next to “Girja Chowk”, or Cathedral Square is just one example. Another one is the exemplary park right next to the Cavalry Grounds Polo field.

Lahore's Software Park Tower - the inset shows current progress

So how are these changes impacting Lahore? Well, the’re undoubtedly improving the quality of life of Lahore’s citizens by easing transportation, adding numerous sources of entertainment while making the city greener and more friendly. They are also creating thousands of jobs in manufacturing, retail and services, while making Lahore a far more tourist-friendly metropolis. The Lahore of tomorrow retains the  history, wonder and charm it has always had, while adding to these timeless qualities, innovation, convenience, modernity and most of all, a dynamic, unrelenting positive energy that has an exclusively Lahori flavour!

In future episodes of the Pakistan Emerging series, I’ll take a look at the Islamabad and Karachi of tomorrow.

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South Asia's most modern city, Islamabad, Pakistan.

It’s been a while since I wrote about how I see Pakistan’s macro situation developing. Even though the noise in the media about Pakistan has died down considerably over the past year or so, you still come across oddities now and then that make you wonder how mainstream publications can put across nonsense that couldn’t be further removed from ground realities. Well, I suppose they count on the fact that their readers won’t take the flight over to confirm things for themselves, and selling the image of conspiracies unfolding in a mysterious and ornery land is so much easier than dealing with reality!

But ignoring the actors playing to the audience, what really is the nature of the Pakistan that is emerging early in the 21st Century? What trends and developments are shaping our future and what do we have to look forward to? These are obviously vast topics, but I’ll try to give you a glimpse of how I see things and will try to convey as much cold, hard fact as I possibly can so as to point out the underlying reasons that cause me to believe what I believe.

To start off with, in this segment I will survey part of our national and immediately relevant regional situation in broad contours. In a subsequent part, I will talk about some of the projects unfolding now in Pakistan which have the potential to change things in a phenomenal way.

The Afghan Situation: If at first you fail, enable the Pakistanis and let them handle it

After almost a decade of highly destablising US presence in Afghanistan, the Afghan situation is rapidly heading to a favourable conclusion for us. From what appears fairly obvious now, the Americans will be starting a withdrawl as soon as 2011, NATO will be spending $500M to bribe the very forces they have fought for 9 years and Pakistan’s role will be pivotal in ensuring a safe exit for ISAF/NATO from Afghanistan. Our justification for why we have an interest in Afghanistan and why we seek to defend it has been made plain and public by none other than our Foreign Minister and our Chief of Army Staff.

Gone are the days of dancing around the issue and deft diplomatic maneuvering. It is all out in the open now and unfolding before our eyes. It is almost impossible to imagine how Pakistan will not wield greater influence in Afghanistan than any other single country after the saga of this drawdown/withdrawl concludes.

Now that there is a near-term end in sight for the destabilizing presence of foreign forces in Afghanistan, Pakistan must use its influence to support and ensure the emergence of a more inclusive government in that country. The advent of such an inclusive government, in particular, will itself address many of the underlying factors that have allowed a band of rag tag fanatics to develop broad based support for their insurgency. Provide for a fair and level playing field in Kabul where all groups feel that they are part of the solution and not being unfairly excluded, and you will rob support from the fanatic fringe. Pakistan is being tasked by its allies to accomplish such an outcome and this bodes well for Afghanistan, Pakistan and the region.

Dealing with India: Undoing the overdo

Indian Occupied Kashmir's Chief Minister acknowledges Pakistan's role in peace in IoK

There is such a thing as being too nice. And I think Pakistan has been guilty of this error over the past 4-5 years with respect to relations with our eastern neighbour. In this period, Pakistan has used its resources and influence to help calm the situation down in Indian occupied Kashmir, has publicly condemned and offered help with multiple acts of terrorism within India, has tried suspects of the Mumbai incident, has downplayed and not vociferously raised in international fora the presence of terrorists and extremists within the Indian Army – such as Col. Purohit – who have blown up trains and killed dozens of Pakistani citizens on Indian soil, and has even attempted to address key issues such as India’s violation of the Indus Water Treaty in an understated and diplomatic way.

All of this was done, presumably, under the misdirected belief that being nice, or indulging in “CBMs” as they are referred to in diplomatic parlance, would bring a more amiable India to the negotiating table and the two of us would be able to sit together decently and work out our problems.

No such luck. What is that old expression about giving an inch and being taken for a mile? There is, like I said, such a thing as being too nice. I think the Pakistani establishment has received this message loud and clear and is now working to address the excess we have been guilty of. “Undo the overdo”, should be the mantra in effect on this front and it seems to be, if you listen to Gen. Kiyani’s recent speech about our posture viz India.

I think this evolving realism will do far better for us in addressing issues from a position of strength or equality than the “Aman ki Asha” sing-along affection marathon. In the context of this recent clarification of our India policy by Gen. Kiyani, we stand at a much better place than at any time during the past five years of confusion and diplomatic excess.

China: Partnering with a Dragon that is beginning to soar

Chinese tourist in Islamabd enjoying a view of the city

Chart the data and graph the trends. There is no second opinion about China’s emergence as an economic and military superpower. And armed with leverage of a dozen kinds, such as the $800B in US debt that it holds, the $2.2T in foreign reserves it commands, the world’s largest and most rapidly modernizing army, the world’s largest manufacturing base, the world’s largest population of middle class consumers and the list goes on. Having embraced the sense of arrival as a dominant player on the world scene, China has become far more aggressive in its position on a number of regional and international issues.

Take its stance on India, for instance. Suddenly, we see Chinese troops cross the line of control in Southern China and deposit “we were here” souvenirs for the Indians to clean up. We see Chinese diplomats raise the issue of disputed territory aka “Arunachal Pradesh”. We see the Chinese moving in international fora to block aid to India. We see a much stronger position on Tibet and a sanctioning of companies supplying Taiwan. And finally, in the Indian Ocean we see a Chinese Navy undergoing massive modernization and growth beginning to project its force in numerous ways.

It is important for Pakistan to support the Chinese to the hilt as they emerge as the premier super power. They have been a true friend and ally to us over five decades, through thick and thin. Pakistan not only has a lot to learn from China, but also finds itself in the unique position as the most allied ally of what will be the world’s greatest power in just a little more than a decade.

Energy: Capitalizing on location

Pakistan is THE conduit for energy in the region

Most of success is hard work, but some of it is also luck. Clearly, with our strategic geographical location, that second element is at work. We couldn’t possibly have been positioned in a more crucial place on the globe. For if India needs access to Central Asian oil, it must route those pipelines through us. If that Central Asian oil needs to find a close by warm water port, it must send its black gold to Gwadar. If Iran is to supply India with gas, then that gas must cross Pakistani territory. If the West/NATO is to supply Afghanistan overland and, then that too must happen through Pakistani territory.

While the Government of Pakistan has commited the folly of getting distracted with many other issues of almost no importance and could have used this energy to fast track these initatives, the emergence of Pakistan as a leading global energy conduit has happened anyway.

One recent example is India’s role as spoiler in the erstwhile IPI pipeline. For a couple of years, India delayed signatures on this Iran-Pakistan-India pipeline which would have provided India with much needed gas at an internationally competitive price. Finally, it became clear that these delays would be unending and Pakistan requested Iran to proceed without India. Not only did Iran oblige, it is now becoming increasingly probable that China will join this effort, changing the IPI to an IPC pipeline.

As a side note, much has been said about Iran-Pakistan relations. While these have been historically very friendly, lately many external players have invested their time and energy to attempt to derail these ties. What is particularly reassuring about massive project such as the IPC pipeline, or the Islamabad-Tehran-Istanbul rail initiative is the fact that Iran and Pakistan’s relations continue to remain in excellent standing.

Not only will the IPC pipeline address Pakistan’s energy needs, it will also create a regional framework of cooperation between China, Iran, Pakistan and perhaps Central Asian countries in future. This framework is one which India has self-selected itself out of on account of intransigence. If you aren’t part of something, you don’t maintain leverage.

Turkey: A trusted ally and an emerging European power

Amongst a long list of defence projects, Turkey is also offering Pakistan T-129 ATAK gunships

Pakistan and Turkey have an excellent relationship going back decades. In trying times, Pakistan has always supported Turkey (Kurdistan issue, disputes with Greece etc.) and Turkey has reciprocated by supporting Pakistan’s Kashmir stand and participating in dozens of joint ventures and development projects in Pakistan. With a GDP now approaching $1T and the largest Armed forces in Europe, Turkey will be a major regional and international player.

Thanks to a variety of factors, cooperation between Turkey, Iran and Pakistan has continued to increase. Just recently we covered President Abdullah Gul’s announcement about the initation of a $20B Islamabad-Tehran-Istanbul rail link.

It bodes well for Pakistan that along with our own development, two of our most allied allies, Turkey and China, are in very strong positions. From a foreign policy perspective, if both these countries have supported us unquestioningly even when they were relatively weaker, what do we have to look forward to when their position is so much stronger?

In a nutshell, I think the emerging regional situation is generally looking quite favourable for Pakistan. Having endured 10 years of the Great Game unfolding in our region with a mixture of grit, might and wit, we are now in a position to reap the rewards of fortitude. Much else is happening within Pakistan which I will cover in an upcoming post. We’ll continue the discussion in part II of this series.

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The Centaurus in Islamabad... work continues, but completion won't happen in 2009

Last year, I listed out a set of predictions and just recently I evaluated how they turned out. But on to more important business: what’s 2009 going to be like for Pakistan, for the IT industry and for the world at large? There are lots of very important trends unfolding before our eyes and they can cause some pretty dramatic changes to the status-quo. You may have read recently about the Russian Prof. Panarin’s prediction concerning the dissolution of the United States, or various other hypotheses about the economic disasters that are lying in wait for us as we enter 2009… and if you haven’t, I would encourage you to take a look. I won’t say whether I agree or disasgree, but will tell you that 2009 is a phenomenally imporant year for the whole world, and it is never a bad thing to understand the forces behind the change.

And that’s not a bad topic to start with, why is 2009 more important than most other years? Here’s (partially) why:

1) The US is in dire straits, economically and politically. It faces a resurgent Russia, a Rising China and it remains tied up in multiple, expensive conflicts. People in the US realize the shaky ground their country stands on today and want to change things for the better. They wanted ‘change’ bad enough to vote an inexperienced Senator in to the White House, because they associated him with the ability to affect the greatest change. If Obama fails, the World and the US, will both pay a heavy price. Whether or not he is on the path to success will be determined in 2009.

Gen. Kayani will keep the Army out of politics, while ensuring that the Army's stance is well understood by everyone.

2) Pakistan has gone from a progressive government headed by Gen. Musharraf to a relatively ineffective civilian government. So far, there has been considerable infighting and very little action. There are some fundamental issues that must be resolved in 2009, such as energy, water, trade imbalances and the security situation on the Afghan border. If the present government, which is almost a year old now, is not seen to radically alter its behaviour and implement improvements in these key areas, the traditional ‘safety valve’ in Pakistani politics will cause a change of government.

3) The world has been hit by a simultaneous, global recession. Depending on what happens in 2009, the effects of this recession can be tremendous and long-lasting. China needs a certain level of growth to ensure political stability. The US needs growth to prevent the country from being sold off in debt, and in order to maintain the traditional stability of its society. The US must keep its people employed and prevent large numbers from feeling the economic pinch. If this is not done, there is nothing stopping the increasingly frustrated unemployed millions from exhibiting agitational behaviour on display in other less stable parts of the world. India needs growth if it is to feed its hungry millions. If it fails to do so, you will have more of what is going on in the Indian state of Assam, where a Marxist rebellion has taken firm hold and has resulted in the loss of thousands of lives and a complete breakdown of the Indian state’s authority.

4) From an IT perspective, there are plenty of key things unfolding in 2009. What happens to Apple with Jobs inevitable departure? What happens to Microsoft is Windows 7 is not a great success? Do they get a third chance? What happens to the PC industry with people buying cheaper computers? Dell, in particular, is vulnerable.

So what’s going to happen? Well, your guess is as good as mine. I’ll put my guess down first and you can tell me what yours is later.

Political Predictions:

Obama is in - will he be able to deliver change?

1. Asif Zardari is heading down a dangerous path. He will be significantly weakened and potentially removed in 2009. The conflicts with Amin Fahim, Nawaz Sharif and now Yusuf Raza and Mumtaz Bhutto, are fundamentally unsustainable. Combined with the Benazir tragedy fading further and further into the past, time will rob him of his number 1 political ally: sympathy. Were he a sounder statesman, he would have used 2008 to build alliances; he has tried, but ineffectively. 2009 will not be good for him.
2. Despite rumours, there will be no martial law in 2009; the Army will certainly have their input, but they will abstain from direct political involvement.
3. In the US, Obama will be constained in his ability to implement his election promises. In Iraq, he will find that he will either have to come to grips with an out-right US ‘loss’ in the sense the that government there, in 2-5 years, will not be pro-US. Or he will have to do an about turn on his election promises and find some way of prolonging US involvement. This will be hard to do, because the US cannot afford it politically and financially. Any progress claimed by the pro-surge camp, will be seen to be visibly undone – but we’ll get to that in 2010 and 2011.
4. Also in the US, Obama will have a very hard time with Afghan policy. Troop levels are going up as we speak, but the US military will soon discover that even 70,000 soldiers in Afghanistan are probably 130,000 too few. Afghanistan will not be policeable directly by the US military and sometime in 2009 we will see the US buying off warlords selectively, claiming that everything is ok and trying to set a course for departure. Of course, underneath the surface, nothing would have changed and Afghanistan will revert to being Afghanistan.
5. 2009 will not be a good year for Pakistan-India relations. While there is an understanding that two nuclear armed neighbours have to live in peace, there is also a realization in Pakistan that India is an ungracious and scheming neighbour that sees itself as a global power – which it is not. Due to these grandiose visions it has of itself, India feels it can deal with Pakistan brusquely, and in this it is deeply mistaken. The region will continue to pay the price, through 2009, of these Indian misconceptions.
6. Terrorism in India will continue to hit hard through 2009. The insurgency in Assam will not be controlled and will continue to get more serious. It already poses a threat to the Indian federation, and this threat will get more severe in 2009.

Financial and Economic Predictions:

Mian Mansha's MCB bank is a roaring success. Corporate Farming is where he's heading next.

1. There is a belief that the economic problems in America can be solved – to some degree – by spending gobs and gobs of money. This money is essentially being borrowed from the future and raised through excessive taxation. While in the long term, society in the US will pay the price on both counts, in 2009 at least, Obama will have to take measures to inflate the stock exchange – even if artificially. This will be done through the passage of trillions of dollars of bailout packages. Therefore, in 2009 the major US stock indices will likely see a very modest increase.
2. Not to be confused with the increase in stock indices, the US economy on the whole will be in bad shape through 2009. Many major businesses will file bankruptcy, unemployment will continue to rise at least through the first quarter or two of 2009 and spectacular corporate failures will continue to make headlines for the foreseeable future.
3. In Pakistan, the KSE has taken a massive battering due to the incorrect policies of the SEC, KSE and the Ministry of Finance. Specificaly, the lower lock prevented investors from selling when they wanted to and that caused an avalanche when the lower lock was ultimately removed. But everyone realizes this. And 2009 will see Pakistani stocks head higher. I would guess by as much as 10%.
4. The trade gap in Pakistan will be reduced somewhat and the out-of-control imports that were a major issue through the second half of 2007 and most of 2008, will be arrested.
5. Food will be big on the international economic agenda and corporate farming in Pakistan will mark 2009 as the year of its birth. This is one of the biggest trends to watch in Pakistan and globally, for the foreseeable future.
6. Iran will begin to supply about 1 Gigawatt of electricity to Pakistan and an additional 600-900MW will come online within the country in 2009. While this will reduce the power deficiencies to a great degree, it won’t be until 2010 that load shedding is firmly in our past.
7. The US$ will trade between Rs. 75 and 85 through 2009. While the Rs. might weaken, we believe the US $ isn’t on very firm ground either. One risk to this prediction is a potential devaluation of the Pakitani Rs. to spur exports and narrow the trade gap. We don’t think that would be a very smart move…

IT Industry Predictions:

1. The Software Tower in Lahore will finally get wrapped up close to the end of 2009. Fingers crossed.
2. Netsol will remain in serious trouble through 2009 and will either face some sort of shareholder action or will become a dirt-cheap acquisition target.
3. The economic downturn in the West will make it harder for Pakistani companies to expand services and we will start to see some very interesting Web 2.0 and other consumer-focused products emerging from Lahore, Islamabad and Karachi in particular. Due to the massive adoption of mobile technology in Pakistan, many of these products will cater to mobile phones/users.
4. 2009 will be a good year for WiMAX in Pakistan. There are now two competing offerings and Wateen is working hard to resolve coverage issues. Pakistan will be a WiMAX success story.
5. Windows 7 will be released early – before the holiday season in the US – and it will do well. It will be the only new version of a Microsoft operating system that will have more modest hardware requirements as compared to the previous version, and this will be a key reason why it will succeed.
6. Android will threaten to become pretty big in 2009, but will not actually become a dominant platform for the next year or more.
7. Palm will come out with a ‘Hail Mary’ piece of technology during CES, and it will not work for them. Palm will be pretty close to an untimely death by the end of 2009.
8. PSEB will remain relatively ineffective through 2009; since Yusuf Husain’s departure, this has unfortunately been the case and will continue to be the case… The primary reason is that the Ministry of S&T is being fundamentally mishandled and with the government’s occupation with all sorts of ridiculous infighting, the PSEB is not getting the attention necessary to attract and retain a top-class Managing Director.

We’ll revisit the list on Jan 1st, 2010 and see how right or wrong I was. Here’s to hoping that when I’m wrong, it’s because reality turned out to be sweeter!!

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Our earlier piece on Pakistan having the world’s largest WiMAX network attracted quite a bit of attention. In addition to other places, it was cited by democracyarsenal.org, which is part of the US-based National Security Network… but that wasn’t particularly helpful as an introduction, was it? Sort of reminds me of the old where-is-your-house?-By-the-mosque-But-where-is-the-mosque?-By-my-house joke! So I’ll let the National Security Network website do the talking:

“NSN is dedicated to developing innovative national security solutions that are both pragmatic and principled. We believe in countering emerging threats by drawing on the best traditions of American foreign policy: a strong and flexible military combined with shrewd diplomacy, the effective use of alliances, and an unwavering commitment to America’s basic values.”

Anyhoo, Shadi Hamid wrote this piece as a follow-up to my earlier article, and raised an important question. Is development occurring in Pakistan inspite of its government? Are all these technological achievements mere accidents outside the positive feedback loops that can enrich and develop society as a whole?

So I took a crack at addressing Shadi’s question. Here’s the comment I responded with:

The youngest Microsoft Certified Professional in the world being a Pakistani can, perhaps, be an “accident”, as you put it. Having a fibre network spread across a country the size of Pakistan can not. Having the largest WiMAX network in the world can not. etc. etc.

I won’t get into a detailed analysis of all the 15 points mentioned in my original blog post, or even a re-cap of why Pakistan might be one of the world’s best locations for an IT company, but let me take a crack at one item from that list of 15.

Why is it that Pakistan has the world’s largest WiMAX network? Was this truly an accident or can this be seen in a larger political/developmental context? And, what does a WiMAX network really even mean for a country like Pakistan?

First off, both companies that have competing WiMAX installs in Pakistan (Wateen and Mobilink) are head quartered in the Middle East. Wateen, which is a UAE “Sheikh owned” company, has invested billions of dollars in Pakistan. This investment did not accidentally make its way into Pakistan. It is, in fact, the result of a deliberate political decision made in many cash-rich countries of the Middle East, post 9-11. The Arab Sheikhs no longer look upon the West as a very safe place to park their capital, and as such, they have diversified. Hundreds of billions of dollars of their money have been invested in developing Muslim countries like Pakistan and Egypt. I won’t bore you with details of the close-to-$75BN investment UAE real-estate developers have committed to Pakistan. For me to make my point, it is enough to say that the money that fueled the world’s largest WiMAX network came to Pakistan because 1) Pakistan deregulated the Telecom, IT and other sectors, which were attractive to foreign investors given Pakistan’s demographics 2) Post 9-11. trillions of dollars of Arab money seek a safer refuge than what the west offers 3) Pakistan in particular attracts a lot of Arab money because the returns and growth in sectors as diverse as telecom, pharma, real estate and household goods – have been spectacular and 4) Pakistan’s government has some of the most attractive terms for foreign investment of any country, globally. For instance, an 18 year 100% tax holiday on IT companies, 100% repatriation of profits, 100% foreign ownership etc. etc.

The WiMAX story is, then, as much about post 9-11 politics and official Pakistan Government policy as it is about technology.

Now on to another aspect – are these just numbers quoted in articles or are these developments impacting real people, on the ground in Pakistan? We’ve got this WiMAX network now, but what does it mean for Pakistanis? Well, a lot. A parallel can be drawn to the cellular revolution in Pakistan which has empowered thousands of businesses that would otherwise never have been possible. I won’t cite the usual, direct beneficiaries such as cell phone franchises, repair stores etc. Let me give you a couple of off-the-wall examples.

Several companies in Pakistan have developed GPS tracking technology for both security as well as asset/inventory control and fleet efficiency. None of these companies would be able to produce their innovative hardware in places such as Hall Road, Lahore, without access to cheap SMS (text messaging) capabilities delivered by networks such as Wateen’s Warid, Mobilink or Telenor. The economics of a proprietary system simply would not have worked. Without the kind of country wide, redundant coverage Pakistan offers, the system would be useless. Only because you have all the necessary ingredients can you build these companies and create hundreds or thousands of well-paying jobs.

But these are larger companies that provide services to other large companies, or individuals who can afford the extra expense. How have cell phone networks impacted the ordinary man, beyond the city-to-village connectivity, or the PCO small businesses? Here’s an interesting little case study to consider. There is a small startup in Lahore that is in the movie rental business, except they have a unique spin on the concept. They deliver movies to the customer’s home, typically within 30 minutes of receiving an order on the phone or via their website. The business works because their motorcycle-riding delivery folks carry a few dozen of the most popular titles with them at all times… and they have a cell phone. When a new order comes in, they are simply SMS’d a delivery address and the name of a title. When they make a delivery they SMS a code back that allows the “HQ” to determine which delivery person has what movie remaining in their mobile “canvas bag” inventory. Without cell phones, this business would not exist. If SMS/calling rates in Pakistan where what they are in the US, it probably wouldn’t be able to make money. It is only because Pakistan has excellent cell services at cheap rates, that this 10-20 person company exists and thrives.

As was the case with cell networks, WiMAX will breed its own eco-system of companies and create thousands of jobs. Whether it’s businesses focused on video surveillance, automated ticketing at traffic lights, video conferencing, or telemetry applications in rural areas (output of a tube well) etc. etc.

When you create new jobs, it undeniably has political implications. When you give college graduates with technical degrees an ability to productively apply their minds, in an economy that can capture the benefits of their labour, that too has political implications. When you allow political messages to spread via SMS to 90 million Pakistanis… hmm… now that’s pretty interesting.

Could any of this have happened without the government deregulating the Telecom industry? Not at all. Without the government liberalizing foreign direct investment? Probably not.

What do you think?

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