Pakistan’s Textile Industry Is Dangerously Fragile

from BloombergBusinessweek..

April 26, 2012, By Farhan Sharif

Fabric drying in Faisalabad: Not enough power to go around

Fabric drying in Faisalabad: Not enough power to go around

Chaudhary Maqsood Elahi, a Pakistani exporter of knitted garments, spent two years trying to save his factory in the textile hub of Faisalabad. He sold his house, cut down on staff, and switched to air shipments to meet orders on time. It didn’t work. About six months ago, Elahi, whose Dilkhush Hosiery Mills produced T-shirts for European mega-retailers Carrefour and Metro, shut down his 15-year-old factory after booking losses for two straight years. He fired 550 workers, tore down his plant, and divided the land into plots that he put up for sale to help repay loans. “I kept running the factory despite losses in the hope of finding a way out, but the financial burden kept growing,” says Elahi.

Pakistan has one of the largest textile industries in the world, shipping 1.3 trillion rupees ($13.8 billion) worth of textiles in the year ended June 30, mostly to the U.S. and Europe. Textiles account for 63 percent of Pakistan’s exports, and mills employ 20 percent of the nation’s workforce. Faisalabad, which generates the most tax revenue after Karachi, accounts for half of all textiles shipped from Pakistan.

The Pakistani textile industry has had a golden opportunity to capture markets lost by Chinese producers because of rising wage pressure in China and the appreciation of the yuan. But according to the Pakistan central bank’s latest annual economic report, the local industry hasn’t been able to seize the advantage. Instead, Bangladesh and Cambodia have increased sales of apparel as Pakistani manufacturers struggle with energy shortages, the report says. Power blackouts last as long as 20 hours at a stretch in Faisalabad, while shortages of natural gas, which powers the looms, can go on for six days at a time. Demand for gas exceeds supply by as much as 15 percent in the city. Half of the city’s 250,000 power looms have gone out of business in the past 12 months, 10 percent of the spinning mills and fabric printing units have shut down, and half of the remaining plants are struggling to survive, says Muzammil Sultan, president of the Faisalabad Chamber of Commerce and Industry. At least 200,000 workers have lost their jobs since last year. “We’re shipping only half the quantity we used to from this city,” Sultan says.

Faisalabad, a city of 5 million people surrounded by Pakistan’s biggest cotton belt, was once known for attracting workers from across the Punjab province to run its weaving mills, spinning units, and garment factories. Now, as the textile business faces its biggest crisis ever, workers have begun leaving the city for the first time. “I’ve already moved my family back to Peshawar, and if I can’t make this new tire repair business work, I will also move and try to find some other work,” says Sher Shah Khattak, who came to Faisalabad 35 years ago to work in the textile trade and lost his job as a loom operator last year.

In March, thousands of textile workers poured out onto the streets of the city, burned tires, and shouted slogans against the government. “The change in the city is visible with just 10 percent of [large and medium] factories closed, and we see rioting by workers because of the growing frustration,” says Sheikh Abdul Qayyum, managing partner of Em Que Fabrics in Faisalabad. “We can’t imagine what would happen if half of all mills stop working.”

Omer Nazar Shah, who heads the Industrial Police Liaison Committee, a nonprofit group working with law enforcement authorities in Faisalabad, calls the layoffs “a very big threat” to security. “Since October, 2,500 people are losing jobs every week from various industries in Faisalabad. They’re either leaving the city or turning to crime,” he says.

Prime Minister Yousuf Raza Gilani pledged in February to install new electricity and gas plants in Faisalabad to help end the energy crisis. So far little has been done, probably because this is the last year of Gilani’s term. Elahi isn’t among those waiting for this to happen. “No matter what happens now,” he says, “I lost everything that I built.”

The bottom line: Pakistan’s $13.8 billion textile industry is struggling to survive a critical shortage of energy to run its plants.

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The Secret Strength of Pakistan’s Economy

from BloombergBusinessweek..

April 5, 2012,  By Naween A. Mangi

8.6 percent: Pakistan's tax collections as a share of GDP. Among the lowest in the world

8.6 percent: Pakistan’s tax collections as a share of GDP. Among the lowest in the world

Screen Shot 2012-11-30 at 6.01.26 PM

It’s early morning in Karachi, Pakistan’s biggest city, and Muhammad Nasir is outside his makeshift shelter of palm leaves, rags, and bamboo, washing up after breakfast. He uses water stolen from a nearby supply pipe that belongs to the local water utility. The 17-year-old bids farewell to his mother, an unlicensed midwife, and walks to his tire-repair shop, an open-air stand in a residential area with a table of tools and a wooden bench. He checks to make sure the electricity he’s drawing illegally from the overhead power line is on so he can run his tire pump. Then he sends 10-year-old Abid, one of his two employees, along with 12-year-old Irfan, to get tea from a nearby shop.

Nasir’s business, his home, his power and water supply, and even the cup of tea Abid brings him don’t exist in Pakistan’s official figures. They’re part of another economy that doesn’t pay taxes or heed regulations. It probably employs more than three quarters of the nation’s 54 million workers and is worth as much as 50 percent of Pakistan’s 18 trillion rupee ($200 billion) official gross domestic product. And while the documented economy had its smallest expansion in a decade at 2.4 percent in the year ended June 2011, soaring demand for cars, cement for houses, and other goods shows the underground market is thriving.

“Everything from auto parts to sports goods, knitwear, clinics, and beauty salons fall into the informal economy,” says Sayem Ali, country economist at Standard Chartered Bank in Pakistan. “All these make a significant contribution to employment and income, and that’s one reason why the economy is still growing. But since Pakistan has one of the worst tax structures in the world, these fall under the radar.”

Pakistan’s tax-to-GDP ratio—that’s taxes as a share of gross domestic product—was 8.6 percent in June, one of the world’s lowest, according to Macroeconomic Insights in Islamabad. Only 25 percent of the economy is taxed if the undocumented sector is taken into account, says Chief Executive Officer Sakib Sherani. Developing economies usually have a tax-to-GDP ratio of from 13 percent to 18 percent, according to Invest Capital Markets, a brokerage in Karachi. Former Finance Minister Shaukat Tarin said in 2010 that Pakistan loses 800 billion rupees a year in tax evasion: The government collected 1.7 trillion rupees in tax last fiscal year. That’s not enough to close the budget gap, which is 6.3 percent of GDP.

Nasir says he pays 200 rupees a month to employees of the utility company to look the other way, and 400 rupees to the police to allow him to run his unregistered shop. Then there are the occasional political contributions to local parties—protection money, in other words, to keep the parties’ criminal components at bay. “I don’t think paying taxes to the government will do any good to me,” says Nasir. “We are already paying taxes.”

He spends the morning repairing tires and fixing motorbikes, taking payments in cash and never issuing a receipt. At lunchtime he sends for salad and yogurt or lentil curry from one of the nearby pushcart vendors, none of whom is licensed. His mother and sister, a maid, supplement the family income with jobs in the informal sector. After work, a religious teacher comes to give them lessons on the Koran at home, charging a monthly fee in cash that isn’t reported to the government. Once a month, Nasir pays 300 rupees rent to a man who illegally settled on the land where Nasir’s family dwelling was built.

Only 1.5 million people, less than 1 percent of the population, file tax returns, according to the finance ministry. That compares with 3 percent in India. “A low tax-to-GDP ratio means we get into a vicious cycle of high budget deficits financed by printing money or borrowing, which adds to the debt burden and creates inflationary pressures,” says Asad Sayeed, director of the Collective for Social Science Research in Karachi. Pakistan has the fastest inflation in Asia after Vietnam, and its budget gap may expand to 7 percent of GDP in the year ending in June, according to the IMF.

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Pakistan, Land of Entrepreneurs

from BloombergBusinessweek..

November 29, 2012,  By Naween A. Mangi

Arif Habib takes a turn at bat near his 2,100-acre Karachi development

Arif Habib takes a turn at bat near his 2,100-acre Karachi development

On a warm Sunday morning in November, Arif Habib leaves his posh home near the seafront in southern Karachi and drives across town in a silver Toyota Prado SUV. About half an hour later, he arrives to check up on his latest project: a 2,100-acre residential development at the northern tip of this city of 20 million. He hops out, shakes hands with young company call-center workers who are dressed for a cricket match, and joins them at the edge of the playing field for a traditional Pakistani breakfast of curried chickpeas and semolina pudding. After a quick tour of the construction site, he straps on his leg pads, grabs his bat, and heads onto the field. “The principles of cricket are very effective in business,” says Habib, 59. “The goal is to stay at the wicket, hit the right balls, leave the balls that don’t quite work, and keep an eye on the scoreboard. I feel that my childhood association with cricket has contributed to my success.”

Habib, who started as a stockbroker more than four decades ago, has expanded his Arif Habib Group into a 13-company business that has invested $2 billion in financial services, cement, fertilizer, and steel factories since 2004. His group and a clutch of others have become conglomerates of a kind that went out of fashion in the West but seem suited to the often chaotic conditions in Pakistan. Engro, a maker of fertilizer, has moved into packaged foods and coal mining. Billionaire Mian Muhammad Mansha, one of Pakistan’s richest men, is importing 2,500 milk cows from Australia to start a dairy business after running MCB Bank, Nishat Mills, and D.G. Khan Cement.

These companies have prospered in a country that, since joining the U.S. in the war on terror after Sept. 11, has lost more than 40,000 people to retaliatory bombings by the Taliban. Political violence in Karachi has killed 2,000 Pakistanis this year, and an energy crisis—power outages last as long as 18 hours a day—has led to social unrest. Foreign direct investment declined 24 percent to $244 million in the four months ended Oct. 31, according to the central bank.

At the same time, some 70 million Pakistanis—40 percent of the population—have become middle-class, says Sakib Sherani, chief executive of Macro Economic Insights, a research firm in Islamabad. A boom in agriculture and residential property, as well as jobs in hot sectors such as telecom and media, have helped Pakistanis prosper. “Just go to the malls and see the number of customers who are actually buying in upscale stores and that shows you how robust the demand is,” says Azfer Naseem, head of research for Elixir Securities in Karachi. “Despite the energy crisis, we have growth of 3 percent.”

Sherani of Macro Economic Insights estimates the middle class doubled in size between 2002 and 2012. “Those who understand the difference between the perception of Pakistan and the reality have made a killing,” Habib says. “Foreigners don’t come here, so the field is wide open.” The KSE100, the benchmark index of the Karachi Exchange, has risen elevenfold since mid-2001. Shares in the index are up 43 percent this year alone. Over the past decade, stocks have been buoyed by corporate earnings, which were bolstered in turn by rising consumer spending.

Habib’s parents emigrated to newly created Pakistan in 1948 from Bantva, in the Indian state of Gujarat, leaving behind a tea-growing venture and several properties. When the family arrived, all they had was the gold jewelry tied to his mother’s waist. The youngest of nine siblings, Habib was born in Karachi. “Growing up, I remember my father, who had gone back to India, used to send us 200 rupees ($3.60 at today’s rates) a month. Those were very tough times for us,” he says. In 1970, Habib’s elder brother bought a trading license at the stock exchange and hired Habib, who at age 17 had just finished 10th grade, at 60 rupees a month.

Habib spent his day in the trading hall where shares changed hands through the open-outcry system. When companies issued statements that were read out on the floor, he would analyze them for others. “This way, investors started coming to me with queries, and this gave me the impetus to increase my knowledge,” he says. Habib was voted president of the exchange in 1992. He computerized trading and formalized a system for buying stocks on margin.

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Serbia’s richest man faces police questions over business deals

from Reuters..

November 29, 2012,  By Aleksandar Vasovic

(Reuters) – Serbia’s richest man, Miroslav Miskovic, will appear for police questioning over his business activities, his Delta Holding said on Thursday, weeks after the deputy prime minister vowed to investigate corruption allegations against Delta affiliates.

Last month, Aleksandar Vucic, Serbia’s deputy prime minister and defence minister, accused Miskovic of plotting to remove him from office and topple the ruling nationalist Serbian Progressive Party because of its efforts to fight corruption.

“A long and exhaustive probe into Delta Holding business has been undertaken, during which the company has answered all inquiries,” the retail, agribusiness and real estate company said in a statement.

“Miroslav Miskovic will respond to the summons in line with his civic duty and appear for questioning,” it said, adding questioning would take place on Monday.

Earlier this month, Delta Holding, one of Serbia’s biggest companies, said in a statement: “We are stressing that so far Delta has never had any irregularities in its businesses, both in domestic and foreign markets.”

Since it came to power in July, the Nationalist-Socialist government has pledged to root-out organised crime and corruption, a key condition for Serbia’s bid to join the European Union.

In an address to parliament on Thursday, Vucic said the government was drawing up a law to establish the origins of the wealth of Serbia’s richest citizens, as part of its anti-corruption drive.

“The first drafts of the strategy are completed and the draft law of the origins of property should be debated by end January or in early February at the latest,” he said.

Serbian authorities were investigating 24 privatisation deals completed after former strongman Slobodan Milosevic was ousted in 2000, Vucic said.

In recent months, police have arrested more than a dozen prominent businessmen, including two ex-ministers from the former ruling Democratic Party, who have been charged with corruption, fraud and abuse of office.

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Flashback: When Baghdad Was a Party City

from The Atlantic Cities..

November 29, 2012,  By Henry Grabar

Flashback: When Baghdad Was a Party City

Baghdad, 1932.  G. Eric and Edith Matson Photo Collection, Library of Congress, via Creative Commons.

From the 8th to 13th centuries, Baghdad was the seat of the powerful Abbasid Caliphate, the scene of remarkable advances in science, medicine, engineering and mathematics, inventions and discoveries that would not reach Western Europe for centuries.

It was also, apparently, a town full of party-crashers.

“Did I say you could come?” a host asks angrily. “Did you say I couldn’t come?” retorts the party-crasher.

The sheer prevalence of party-crashing is only the first lesson of Emily Selove’s Selections from the Art of Party Crashing in Medieval Iraq [Ed. note: order though FMC’s bibliography], the first English translation of al-Khatib al-Baghdadi’s 11th century manual on being the best uninvited guest you can be. Selove, a graduate student at UCLA, has been translating Al-Baghdadi’s Book of Party Crashing since she was a senior at Cornell in 2006.

Al-Baghdadi is known as the era’s premier historian of Baghdad and a scholar of the hadith (the words of Mohammed), but he also took some time to gather all the remarks and anecdotes he could find on being a tufayli. His findings, along with Selove’s whimsical illustrations, will be released from Syracuse University Press this month.

“Perhaps there were more suitable topics with which I could have occupied my mind,” al-Baghdadi notes. But every scholar, he concluded, needs a diversion — and besides, the book was a favor for a friend.

In chapters with titles like, “Those Who Engage in Very Subtle Acts of Party-Crashing,” and “Those Who Cast Aspersions on Party-Crashing and Its Practitioners and Satirize and Denounce Them,” Al-Baghdadi weighs the widely variant opinions on the subject.

Most of them are funny, like this darkly amusing anecdote culled from Muhammad ibn ‘Ali al-Jallab:

A party-crasher went out on a trip with a group of people. They’d decided that each would contribute something to the fare. “I came with such and such,” they each said, one by one. But when they got to the party-crasher, he simply said, “I came,” and fell silent.
“What did you come with?” they asked him.
“God’s curse on my head!” he said.
They all laughed at that, and excused him from contributing to the fare. They took him along on their trip.

Ungenerous scholars weighed in against party-crashing, offering a different taste of 11th century Baghdadi humor:

The people who most deserve to be slapped are those who come to eat without being invited, and the people who most deserve to be slapped twice are those who, when the host of the party says, “Sit here,” reply, “No! I’m going to sit over there!” And the people who most deserve to be slapped three times are those who, when invited to eat, say to the owner of the house, “Call your wife in here to eat with us!”

But al-Baghdadi seems decidedly more sympathetic, urging generosity — and citing examples of the prophet Mohammed’s own practice of bringing uninvited guests. In the chapter entitled, “Those Who Praise, Make Excuses for, or Speak Well of Party-Crashing,” Baghdadi quotes a stanza that seems to sum up his overall opinion:

“A party-crasher’s dear to me,
as dear as my own friends,
he comes without an invite,
and a new friendship begins.
For all the people, near and far,
my table’s always set . . .
I may neglect to call them all,
but crashers don’t forget!

“Though it’s light and really quite an enjoyable read, there are serious messages too,” Selove told Discovery Magazine, “You do not turn people away if they are hungry.”

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Pension profiles: Botswana, Ghana, Kenya, Namibia, Nigeria, South Africa

[reposted from Diverging Markets]

from The Africa Report..

October 31, 2012

The six pension profiles compiled by The Africa Report take a peek into a sector that is in the process of formulating regulatory and management structures.

Tanzania’s National Social Security Fund is financing around 60% of the cost of the Kigamboni Bridge/Photo©All Rights Reserved

Tanzania’s National Social Security Fund is financing around 60% of the cost of the Kigamboni Bridge/Photo©All Rights Reserved


GHANA’S PENSION landscape has been dominated by the Social Security and National Insurance Trust (SSNIT), a statutory public trust launched in 1965 that administers the national pension scheme. In 2008, the National Pensions Act introduced two additional tiers – Tier 2 is a 5% mandatory defined contribution scheme and Tier 3 is a voluntary scheme set up by employers. Since the law was enacted in January 2010, Tier 2 contributions have been deposited in a temporary account at the Bank of Ghana until a new pension regulator is ready to begin distributing it to newly licensed corporate trustees. SSNIT remains the largest institutional investor on the Ghana Stock Exchange. By 2012, it invested in four private equity funds and nine investments classed as ‘economically targeted’.


THE BOTSWANA PUBLIC Officers Pension Fund was registered in 2001 when the government decided to move from a defined benefit scheme to a defined contribution fund. There are five main subcommittees under the Board of Trustees covering investment, benefits, auditing, marketing and communications, as well as human resources. By April this year, the fund had assets of 44.1bn pulas ($5.6bn), up on the previous year despite the market downturn. The fund had 95,187 active members in 2010.

South Africa

AFRICA’S LARGEST pension fund, the Government Employees Pension Fund (GEPF), has more than 1.2 million active members, some 318,000 pensioners and beneficiaries, and assets worth R700bn ($85.5bn). It is a defined benefit fund set up in 1996 by consolidating 10 funds for public servants with an asset base of R127bn. The government-owned Public Investment Corporation (PIC) manages the investments along with some 35 other public-sector pension, provident, social security, development and guardian funds. The GEPF aims to be a leader in socially responsible investment in Africa. The PIC invests GEPF assets in equities, fixed-income investments and retail, corporate and industrial properties across South Africa. It also has put funds in the Isibaya Fund, which invests in black economic empowerment.


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THE BIGGEST INVESTOR in the Nairobi Securities Exchange is reported to be the National Social Security Fund. It is a statutory public trust set up in 1965 and aims to provide social security to all workers in the formal and informal sectors. In March, acting managing trustee Tom Odongo said it planned to build up to 30,000 homes near Nairobi. It has already built 5,000 housing units as part of its KSh110bn ($1.3bn) property holdings, 30% of its portfolio. At the end of 2007, the cumulative registered membership of the pension fund was about 3 million.


THE MARKET VALUE OF the investments of the Government Institutions Pension Fund (GIPF) was more than N$50bn ($6.1bn) at the year ending in March. The fund was worth 61% of gross domestic product, 75% of the value of investments from the financial services sector and 86% of the pension industry. Most controversial of all have been the GIPF’s efforts to boost local businesses, and more than N$600m has been written off from Development Capital Portfolio investments leading to a series of scandals and police investigations since 2010. The general manager for finance and investments, Conville Britz, says the GIPF intends to put up to 10% of its assets into unlisted Namibian investments as part of a commitment to invest 15% of the portfolio in unlisted investments.


THE GOVERNMENT set up the National Pensions Commission in 2004 to regulate, supervise and ensure the effective administration of pensions, including the Nigeria Social Insurance Trust Fund, and to issue guidelines on pension fund investments. This includes making sure that eligible employers comply with mandatory contributions to retirement savings accounts set up by the Pension Reform Act of 2004. There were 4.8 million members in pension schemes in June 2011, and the total value of pension assets was N2.3trn ($14bn).

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Qatari Poet Sentenced To Life In Prison

from The Wall Street Journal..

November 29, 2012,  By Alex Delmar-Morgan

DOHA, Qatar—A Qatari poet was sentenced to life in prison on charges of trying to incite the overthrow of the emirate’s ruling family, the poet’s lawyer said, the latest move against dissent amid a crackdown by wealthy Arab Gulf countries.

Qatar’s criminal court on Thursday handed down the sentence to Muhammad ibn al-Dheeb al-Ajami, who has been held in solitary confinement since his arrest in November 2011, said the lawyer, Najeeb al-Nuaimi. There was no official confirmation of the poet’s sentencing, and Qatar government officials couldn’t be reached to comment.

Mr. Ajami’s poetry was deemed to be insulting to Qatari Emir Sheik Hamad bin Khalifa al-Thani. Mr. Nuaimi said he plans to appeal the sentence. He said his client didn’t receive a fair trial, and denied his poetry was offensive to Qatar’s ruler.

Many Gulf Arab governments have sought to clamp down on political dissent in the wake of the Arab Spring protests that unseated leaders across the region. This week, the United Arab Emirates unveiled new laws to prosecute social-media users deemed critical of the government.

While Qatar escaped last year’s wave of pro-democracy protests across the region, since then it has played an outsize role in regional politics by bankrolling and arming uprisings in Libya and Syria.

But the wealthy desert emirate has shown little tolerance for homegrown dissent. Qatar’s legislative body, the Shura Council, approved a new draft media law in June that prohibits the publication of material deemed to be offensive to the ruling family or endangering state security. Violators could face fines of as much as $275,000 if they are found guilty.

Qatar has also refrained from speaking out against its fellow Sunni rulers in Bahrain, who suppressed Shiite-led pro-democracy demonstrations last year with military backing from Saudi Arabia.

Al-Jazeera, Qatar’s government-owned satellite broadcaster, has faced criticism for rarely reporting on Qatar’s domestic affairs while giving expansive coverage supportive of the uprisings in Egypt, Libya and Syria.

“This is most awkward for Qatar, which has been embarking on a very public foreign policy, trying to ride the wave of the Arab Spring for its own political capital but yet when problems develop in its own backyard, and you have a dissenting voice, you have the hypocrisy exposed,” said Christopher Davidson, an expert on Middle East politics at Durham University in the U.K.

“Qatar hosts al-Jazeera and the Doha Center for Media Freedom and is really trying to promote itself as a bastion of free expression,” said Joe Stork, deputy director of Human Rights Watch’s Middle East and North Africa division. The life sentence for Mr. Ajami is “completely inconsistent with that,” he said.

Mr. Nuaimi, the poet’s lawyer, said Mr. Ajami was sentenced after being charged with encouraging others to overthrow the regime, claiming the emir was misusing the constitution and being critical of the crown prince in a poem. A recording of Mr. Ajami reciting the poem among friends was posted on YouTube in August 2010 without his consent, Mr. Nuaimi said.

In the poem, Mr. Ajami used swear words that were viewed by the court as personally attacking the emir, his lawyer said. The poem also referred to a sheik playing PlayStation, interpreted as a derogatory reference to the Crown Prince Sheik Tamim bin Hamad al-Thani.

In a poem that wasn’t the subject of the trial, Mr. Ajami praised the pro-democracy uprising in Tunisia early last year, the first of the Arab Spring revolutions.

Qatar, which hosts a large U.S. military base, has sought to maintain strong relations with the West. It has brokered peace deals in recent years, including in Sudan and Lebanon, and this month sponsored talks in Doha between elements of the Syrian opposition. It has also agreed to let the Taliban open an office in the Qatari capital.

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