Window of opportunity: Government needs to stick to its tough stance

This is not the time to take back harsh decisions. It is also not the time to capitulate to industrial lobbies. PHOTO: FILE

KARACHI: The PML-N-led government has been in power long enough now for some of the initial euphoria to have died down, but business confidence is still strong and corporate circles are still optimistic that change will come. At the same time, exporters, industrialists and technocrats believe that tried and tested methods will not bear results and the government will have to think out of the box.

The World Bank has also recently issued a report which was prepared by the Pakistan Country Team that has come up with some suggestions which it believes can help the government achieve its goals. The report starts off by talking briefly about the aims of the current government.

The Pakistan Muslim League Nawaz manifesto “Strong Economy, Strong Pakistan” establishes a pretty steep benchmark right off the starting blocks with a target of 6% GDP growth and to get there it is looking to increase investment. It is focusing specifically on energy, agriculture and transport. Energy is perhaps the key issue facing Pakistan today and the Nawaz government wants to tackle this by reducing losses, corporatisation and privatisation of energy companies, rationalizing power tariffs and reducing subsidies.

The government also aims to increase revenues, which is not limited to just tax revenues and this is easier said than done. To do this the government wants to try and improve documentations, reduce subsidies and losses in state-owned enterprises and to reduce government borrowing.

And last, but not least, the government wants to improve Pakistan’s human capital by improving education, health services and social services.

All of these are admirable goals but they will not be easy to achieve. The World Bank policy note being referred to attempts to present a guideline for the government that can help it in achieving these admirable, yet ambitious targets. While the country has made progress democratically, with the first successful transition from one democratic government to the next, economic growth has been dismal.

While it is true that Pakistan has had to deal with a lot of other factors like natural disasters, the war against terror and a deteriorating law and order situation, it is also true that this just reinforces the need for strong leadership with a clear vision, well laid out plans and sustained implementation. Each and every government that has come to power has indicated that it knows about the problems and wants to fix them but the above three ingredients have been lacking. Any two of them, but missing the third, will be a recipe for failure.

One of the key ingredients missing in all governments so far, according to the report, has been strong political will and the ability to take tough decisions. The current time period for the Nawaz government is critical. It is always easier to make the tough calls early on. The first few months of any political transition always provide a unique window of opportunity. Making a bold start and then following through with solid and steady implementation will be essential.

This is not the time to take back harsh decisions like increasing documentation of the retail sector, or increasing power rates or asking the industry to stop using gas for captive power. It is also not the time to capitulate to industrial lobbies.

If the government can sustain its first six months in power without giving in to the demands of these pressure groups, the way forward will be easier.

Then they will come down to the actual implementation, and focusing on key areas that need to be targeted if they truly want to turn their manifesto “Strong Economy, Strong Pakistan” into a reality. We will talk more about that in subsequent articles.

Appreciate Pakistani rupee: avoid huge external debt

If Pakistan could manage to earn current account surplus over a number of years, the supply of foreign exchange would automatically increase in the free and interbank markets. ILLUSTRATION: JAMAL KHURSHID

ISLAMABAD: Unless the Pakistan government settles an issue of continuous depreciation of Pakistani rupee, it will be left on the edge of an unprecedented external debt default. On average 66% of the total increase in external debt is caused by unfavourable movement of exchange rate since 2007-08.

Pakistan badly needs fresh foreign money for boosting foreign exchange reserves and to ease down pressure on Pak rupee. To avoid a full-blown crisis and a collapse of the currency, the assistance of a $6.6 billion loan from the IMF may be a ray of hope but at the cost of crowding out of the private sector, because in order to fulfill the conditions set by the IMF, the government hiked the interest rates.

The flexible exchange rate that prevails in Pakistan increases uncertainty for traders both internally and externally and also has a hash effect on a volume of foreign debt which might eventually lead to the depression and unwanted inflation.

In Pakistan external loans are contracted in various currencies but disbursements are effectively converted into Pak Rupee. As Pak Rupee is not an internationally traded currency, the other currencies are bought and sold via selling and buying of US Dollar. Hence, currency exposure of foreign debt originates from two sources: US Dollar/other foreign currencies and Pak Rupee/US Dollar. This two-pronged exchange rate has been a major source of increase in the stock of EDL over a period of time.

Pakistan’s external debt and liabilities (EDL) include all foreign currency debt contracted by the public and private sector, as well as foreign exchange liabilities of the State Bank.

According to the data compiled by State Bank of Pakistan: External Debt in Pakistan decreased to 59.561 USD billion in the second quarter of 2013 from 60.9 USD billion in the first quarter of 2013. From 2002 until 2013, Pakistan External Debt averaged 47.037 USD billion reaching an all-time high of 66.451 USD Million in December of 2011 and a record low of 33.172 USD billion in September of 2004.

Exchange rate is a determinant factor of international transactions. A comprehensive research on the subject matter showed that highly indebted nations like Pakistan find it difficult to progress despite their incessant efforts as a result of fluctuations on the exchange rates. The depreciation of nation’s exchange rate is a result of its deficits; however this will increase the debt service payment in domestic currency.

In current scenario, total foreign debt of the country stood at dollar 59.5 billion and depreciation of one rupee per dollar would increase the debt by Rs59.5 billion. Since the Pak rupee had depreciated between six rupees and seven rupees over the last few weeks, national debt would have increased by around Rs357 billion and spiked inflation.

As far as composition of External Debt and Liabilities is concerned, EDL has been dominated by public and Publicly Guaranteed Debt having share of 73 percent owing to current account deficit which is financed through loans from multilateral and bilateral donors. Debt obligations of private sector are fairly limited and have been a minor proportion of EDL (5 percent). Borrowing from IMF contributed 9 percent in EDL stock as compared with 11 percent at the end of 2011-12 owing to hefty repayments during the first nine months of current fiscal year.

The servicing on EDL was recorded at US$ 5.3 billion during first nine months of current fiscal year. Out of total debt servicing, an amount of US$ 3.9 billion was repaid, out of which around US$ 2 billion was against IMF loans. Loan repayments to the IMF has strained the rupee and drained forex reserves.

According to the IMF, Pakistan’s current level of foreign reserves is critically low at 5.4 billion US dollars, whereas the IMF’s adequacy metric suggests a level of 14 billion US dollars for countries with a floating exchange rate and 23 billion US dollars for countries with a fixed exchange rate. The low level of reserves leaves the economy susceptible to a number of triggers that could result in a BoP crisis, similar to in 2008.

Given the heavy amount of external debt payable, the current continuous currency depreciation will put heavy burden on the country’s economy. Therefore, Pakistan should adopt policy of stabilising the exchange rate, in order to protect the country against the increase in debt.

If Pakistan could manage to earn current account surplus over a number of years, the supply of foreign exchange would automatically increase in the free and interbank markets.

The writer is a researcher at the Economic Growth Unit of Sustainable Development Policy Institute

Sweet-and-sour: Measures to avoid the sugar crisis

Pakistan has low sugarcane yield and sugar recovery percentage as compared to major sugarcane producing countries. PHOTO: FILE

FAISALABAD: 

The sugar industry is still in a financial turmoil. No one in the government seems to be cognizant of the fact that this major sector is a valuable contributor to the economy. The government applies only cosmetic measures without looking into the core issues.

Main determinants contributing for the lesser production of sugarcane viz. maximum area under wheat crop restricting the sugarcane acreage, shortage of canal water, load-shedding of electricity, realisation of lower prices in the preceding season and high rate of inputs also discouraged the farmers to grow more sugarcane crop. Due to all these reasons the country is still facing a sugar crisis.

Sugarcane industry is the country’s second largest agro-based industry after textiles.  It is cultivated on about one million hectares area. Pakistan ranks 5th in cane acreage and production, and grabs 15th place worldwide in terms of sugar production. Its share in value-addition of agriculture and GDP is 3.6 percent and 0.8 percent, respectively. In addition to sugar, sugarcane produces numerous valuable byproducts like alcohol used by pharmaceutical industry, ethanol used as a fuel, biogases used for paper and fuel, chipboard manufacturing and as a rich source of organic matter for crop production.

Pakistan has low sugarcane yield and sugar recovery percentage as compared to major sugarcane producing countries. Sugar consumption has been on the rise, which is an upshot of population explosion. According to a rough estimate, the country will need approximately 5.5 million tons of sugar to meet the local demand by the year 2020. The per capita sugar consumption is around 25 kg per year which is highest in developing countries. The demand for sugar will increase in the coming years at the rate of about 2.3% because of growth in the population which is about 2.3%.

Low production, hoarding and politics together have contributed to the alarming situation of sugar crisis in Pakistan. To meet the domestic demand, Pakistan needs to import sugar. Both the state-owned Trading Corporation of Pakistan (TCP) and the private traders import sugar. Poor timing of imports, the late releases of stock by the TCP and certain millers during the previous year had a negative market impact and contributed to the upward price spiral.

There are two lobbies in sugar industry, one of the cane growers and the other of mill owners. They always keep on blaming each other for the sugar woes. Industry procurement practices such as delaying the crushing season, buying cane at less than the support price, short weight, false deductions and delayed payments reduce returns to farmers. Growers blame the industry for creating the crisis artificially by not lifting the available crop with the twin motives of keeping cane prices below the procurement rate and reaping high profits by price increase. Sugar millers complain that farmers grow unapproved variety with low sucrose content, thus resulting in lower sugar production and recovery rate varieties.

Sugar mills used to purchase cane on credit but farmers are not willing to sell their produce on credit. Instead they are interested to sell on cash because mill owners have not yet cleared dues amounting to millions of rupees to farmers for the previous crop. But the millers are refusing to purchase sugarcane on cash. Due to this problem farmers are making shakar and gur from sugarcane instead of selling to millers.

Mill owners purchase sugarcane through middlemen, who are actually agents or employees of the mill owners. The middlemen purchase sugarcane from small growers before the maturity of crop at lesser rates than the support price. The middlemen manipulate the farmers and cause the prices of sugarcane to rise creating an artificial shortage of the crop across the country.

Last year, the country harvested a bumper sugarcane crop but the sugar mill owners had exploited the situation in connivance with the middlemen and deliberately delayed payments to the growers of their produce. The future of the country’s sugarcane crop seems bleak as continuous delays in payments to growers as well as in the crushing season, the sugarcane growers will be forced to switch over to other crops. Due to unavailability of sugarcane to mills at minimum support price announced by the provincial governments and the involvement of middleman during crushing season 2012-13, the retail sugar prices are expected to rise.

The government supports cane production by setting an indicative price, which is announced either before or after planting. The federal government generally does not procure cane, but authorises provincial governments to fix respective cane prices in consultation with representatives of both the sugar industry and farmer organisations.

The government is striving to achieve self-sufficiency and sustainability in sugar production by ensuring the availability of inputs and establishing a sugarcane support price which is acceptable to all stakeholders. However, self-sufficiency has not yet been achieved due to fluctuating transactional mode of payments between growers and mill owners.

To avert the looming sugar crisis, the government should announce support price before sowing of sugarcane crop to persuade farmers to put large area under sugarcane.

The writers are faculty members at the Institute of Business Management Sciences, University of Agriculture, Faisalabad

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Homeland recap: season three, episode three – Tower of David

Brody in a hoodie … very Eminem. Photograph: Kent Smith/Showtime

SPOILER ALERT: This blog is for people watching the third series ofHomeland at UK broadcast pace. Don't read on if you haven't seen episode two – and if you've seen later episodes, please do not leave spoilers.

Catch up with Rebecca Nicholson's previous episode blogposts

"You are a naughty boy. A naughty, naughty boy"

Perhaps Homeland has been on the same stuff as Brody. That's the only reason that the reintroduction of a key character, along with some gang activity and people-smuggling, could make for such a boring hour of television. On top of the crawling pace, it felt like a different show entirely, again, as if the Dana's Creek (thanks to blog regular Ben McCrory) interlude last week had been a test run to see if they really needed to bother making Homeland like Homeland any more. I really wanted this season to get back to basics. The first episode suggested it might. After this week, I'm starting to lose hope.

Brody is in Venezuela, having been shot on the Colombian border. Dellum, a man who sounds like Kevin Spacey and reminds me of a Buffy villain, gets the bullets out of his belly and gives him a nice dose of heroin. I have no idea why he spends the episode imparting dubious world-weary wisdom; it's a horrible, hammy role.

There's a $10m reward on Brody's head, and it doesn't matter if he turns up dead or alive. It's not clear why (or really, if) El Nino is protecting him. El Nino knows Carrie Mathison. So does Brody. That's as much as we get. There's obviously something more to it: El Nino kills a man for stealing his possessions, and kills policemen, an imam and his wife for shopping Brody to the police after he escapes. He doesn't want the bounty, so what does he want? And who does he work for?

Meanwhile, Homeland has abandoned any sense that it respects the intelligence of its audience by hammering home the fact that there are PARALLELS between CARRIE and BRODY. She's medicated and imprisoned. He's medicated and imprisoned. They don't know who to trust. They're the same, do you see?

In hospital, Carrie is attempting to be more cooperative. Her consultation with Doctor Recap, who reminds us what Saul told the committee, is touch-and-go, but there's a sense that she's trying to get out of there. A lawyer pays her a visit – not Saul, as she expected – but she's cogent enough to suspect he's recruiting her as an asset. The only interesting aspect of Carrie's storyline right now is whether she's actually paranoid, or whether the CIA really is out to get her, or whether it's a mix of both.

As the show fades out on Carrie and Brody – the same, do you see? – they don't even bother to chuck in a cliffhanger. Come on, Homeland. You're making me miss Dana. You can do better than this.

Notes and observations

• Brody's hoodie and walk were very Eminem.

• Carrie asked her nurse for the name of her visitor, to no avail. If I were a crack CIA agent, my next question would be, "Did he have an increasingly wild beard, or did he look like Rupert Friend?" rather than abandoning the line of enquiry.

• "Where do you think you're going?" "Out." This is a replica of the conversation I had with my mother every single night in 1998.

• It was nice of Esme to learn English so quickly, rather than Brody bothering to learn any Spanish.

• More on bad bankers – El Nino explains that David funded the construction of the tower, then left when the economy collapsed, which is why it's now full of squatters.

• When Dellum said, "the world outside can be judgemental and cruel", I thought, being misunderstood is the least of Brody's troubles, what with being the world's most wanted terrorist and all.

Quote of the week

• "It's like the hole in Iraq" – Brody explains the very explicit parallel that has already been made in moving images

GTA Online: more glitches fixed and exploits closed

GTA Online: the well-known used car exploit is now gone

Good news for some, bad for others: Rockstar has issued a new downloadable patch for GTA Online, which fixes some issues but also solves a glitch that was allowing canny gamers to make millions by reselling the same car over and over again. The multiplayer persistent world adventure, which is free to owners of Grand Theft Auto V, has been beset by technical difficulties since its launch on 2 October, but the development team is slowly getting through its long 'to do' list of repair tasks.

Importantly, the publisher claims that problems with disappearing cars and customisations have now been fixed. Players were often finding their hard-earned (or carefully stolen) vehicles going missing, or would spend thousands on new upgrades, only to have those new pieces of kit mysteriously disappear. Now whole fleets can be safely stored in garages around the city.

And yes, the well-known used car exploit is now gone. Several YouTube videos appeared last week showing how to drive a car into a custom shop, sell it, and then tweak the menus to make it appear again – and naturally they were getting thousands of views. That rich-quick scheme is now at an end.

There are two other interesting additions. The character customisation system has been altered, "to make better-looking default characters with the 'random' option". Clearly there are too many ugly randoms strolling the streets of Los Santos. Furthermore, Rockstar has capped the cost of death in "Freemode"– ie the part of the game where you can just drive around the city streets meeting – and usually shooting – other players. Previously, an unsuccessful shootout could result in thousands of pounds of medical fees, but now the most you'll lose is $500.

This death tax reduction could take things in one of two ways: either the streets become more violent as players take greater risks in order to experience the thrill of totally random virtual urban violence, or they become more peaceful, as players learn to interact without immediately reaching for a submachine gun in the fear that they're about to get wasted. So far, my experiences suggest the former.

OS X Mavericks: is Apple's latest operating system really that lethal?

Aple's OS X Mavericks is named after a break at Monterey Bay, California. Photograph: Frans Lanting/Getty Images/Mint Images

Apple is about to announce the release date for Mavericks, the latest version of the software that runs on all its desktop computers and laptops.

Since 2001, every edition of OS X has been named after big cats, starting with the code-names Cheetah and Puma, and followed by Panther, Tiger, Leopard, Snow Leopard, Lion and finally Mountain Lion in 2012. Eventually Craig Federighi, Apple's senior vice-president of software engineering, joked about naming its next operating software release “Sea Lion”, and the era of the big cats was over.

Apple toyed with 10.9 Cabernet and 10.10 Syrah, but apparently couldn't stomach a wine-related meme and announced in June that the next releases will be named after Californian locations.

No doubt Apple's marketing department (and the California tourist board) are brewing Bay Bridge, Lake Taho, Sacramento, Humboldt, Yosemite and others. But where and what exactly is Mavericks?

It's easy to imagine what went through the mind of the marketing team; the endless summers of the California surf aesthetic, and those timeless, artful shots of breaking waves and barrels. But the romance stops there.

Mavericks is regarded as one of North America's most dangerous surf breaks. In 1994, it became one of the few locations to kill a professional surfer when Hawaiian big wave rider Mark Foo wiped out. In 2011, Mavericks claimed another life when Sion Milosky drowned.

Just the month before, Milosky had won the North Shore underground surfer of the year, leading Surfing Magazine to write “we’ll be watching Si to see where this momentum takes him”. He used some of his $25,000 prize money to pay for the trip to Mavericks.

Even among surfing's select group of big-wave riders – maybe 100 in the world – only a handful will take on the winter swells at Mavericks, where waves can reach 80 feet. Those that do need specialist equipment – helmets, sometimes lifejackets, jetski tow-ins and emergency backup. None of which makes for a comfortable marketing metaphor with a mainstream piece of computer software.

As for how the surf break got its name, it owes more to dogs than cats.

For years, most thought Mavericks too dangerous to be surfed and just one man, Jeff Clark, rode it alone, for 15 years. The name though, predates him.

In 1961, three surfers arrived in Half Moon Bay to try it out, accompanied by a German shepherd called Maverick. While the men had a mediocre day, steering clear of the big waves which would make the spot famous, Maverick had a great time, swimming out to join in until he had to be tied up on shore for his own safety. Since he was the only one of the four who seemed to have had fun, they decided to name the place after him, and so "Maverick’s" was born.

If the California thing doesn’t work for Apple, it can always switch tack and say that animals were the plan all along – the names have just switched from cats to dogs. Could Mac OS X Lassie be next?