ICH’s role in curbing grey traffic

The illegal exchanges can be set up at low cost by grey traffickers amid the presence of cheap Chinese equipment is in the country. PHOTO: FILE

LAHORE: 

Ever received an international call with a local number? If yes, then that call came through illegal grey channels.

For those who are not familiar, grey traffic is the way to carry international voice traffic into Pakistan through the internet (VoIP) and then terminating those voice calls on exchanges within the country. These exchanges are capable of transferring VoIP calls to local networks.

The costs of carrying voice traffic to Pakistan, government taxes and various levies involved during the process is pocketed by grey traffic smugglers, which is estimated to be around the $350 to $400-million mark per year.

This industry is only growing with time and resulting into huge losses to the national exchequer, local telecom operators and the national economy.

The scourge of grey traffic

The phenomenon of grey traffic dates back to the nineties. However, it picked up only during 2006-07 when mobile penetration in the country grew at optimum rates.

Grey traffickers cause a loss to the national exchequer by setting up illegal exchanges as they do not pay LDI license fee worth $0.5 million and a renewal fee of 0.5% of the annual gross revenue. They do not collect any taxes for the government and pose a grave threat to national security as all calls are unmonitored.

The illegal exchanges can be set up at low cost by grey traffickers amid the presence of cheap Chinese equipment is in the country. Operators also set up multiple SIMS of local cellular service providers which route these calls through VOIP services.

What is the ICH?

Serious concerns over grey traffic first surfaced around 2008, when the then Pakistan Telecommunication (PTA) chairman and other officials of the telecom industry tabled the idea of bringing in International Clearing House (ICH), essentially a centralised place through which international calls would be brought into Pakistan.

The main goal of the ICH was to centralise traffic route through a single channel so that illegal traffic could be detected and curtailed. Along with improving the margin of incoming calls, the operators would provide equipment to relevant authorities to detect the location of the illegal exchanges set up by the grey traffickers.

The premise of the ICH was also to improve return for the government with enhanced collection of taxes and monitoring of sensitive information. The ICH would have also improved viability for LDI operators and protect loss of jobs due to failure of business. Inflow of foreign exchange would have increased as well. The ICH would also help the Universal Service Fund bridge the digital divide providing access to telecom facilities to all citizens of Pakistan.

The IT ministry, under the previous government, re-reviewed the ICH proposal and went ahead with its implementation. As expected, the initial rise in tariffs also gave rise to grey traffic as people resorted to using cheaper medium of communication — illegal exchanges.

There is a misconception that the Pakistan termination rates have increased after the establishment of the ICH. The settlement rate in pre ICH scenario was 6.25 cents, which has increased to 8.8.

While looking at the LDI business holistically, it must be reviewed that the termination rates of foreign operators in Middle East and Europe (for mobile termination) are in the range of 10-15 cents that is still higher than 8.8. These countries account for two-thirds of the traffic terminated in Pakistan.

Although the Pakistan market termination rates in the pre ICH period were low, foreign operators were still charging higher tariffs to their subscribers. Therefore, the entire margin was reaped by the foreign operators resulting in a loss to the national economy. The ICH merely balanced this phenomenon, helping local operations become more viable.

What lies ahead for the industry

The requirement for the ICH needs to be understood before being rejected and outrightly banned. The ICH may have a teething problem but given time, grey traffic would be reduced and, eventually, resolved.

The PTA has already blocked over 200,000 IPs that were routing grey traffic, thousands of SIMs have been blocked and multiple raids have been conducted to shut down illegal gateways. In addition to this, the PTA has created awareness among people to report any illegal call they receive in an attempt to track and shut down these illegal exchanges.

Although there are calls within the industry to also cancel the licence of Chinese companies who are selling the gateways in Pakistan, it seems unlikely.

On the other hand, the PTA needs to draft a policy where these companies would need to declare details of their transactions. Any sale to unlicenced operators would then be curbed.

This would be another step to curb the setting up of these illegal exchanges.

Some LDI operators who are involved in such activities are coming to light as Wisecomm, an LDI operator, was recently shut down by FIA and their bank accounts seized on account of grey trafficking. The post ICH world is much better for the government and all players involved should also try to understand its importance.

The writer is head of marketing at Wateen Telecom Limited

India set to ease visa restrictions for 180 countries except Pakistan

A Hindu refugee from Pakistan shows her now-expired Indian visa page on her passport. PHOTO: AFP

NEW DELHI: Tourists travelling to India from up to 180 countries will no longer have to queue up at their local consulates to obtain visas under reforms expected to be approved this week, local media reported Sunday.

Most foreigners currently have to wait several weeks before learning whether they will be allowed to enter the country after submitting their applications at visa processing centres, a major deterrent for potential visitors.

But India’s intelligence agencies have now given their backing to proposals that would allow tourists to apply online and then wait only three days before receiving the green light, theIndian Express reported.

They would then be able to pick up their visas on arrival at any airport.

India currently issues visas on arrival to visitors from about a dozen foreign nations, including Japan and Indonesia.

But visitors from countries which account for the bulk of its tourists – such as the United States, Britain and France – have to go through the time-consuming process of applying in person.

The reforms were first mooted last October but only for around 40 countries.

The citizens of a handful of countries, including Pakistan, will not be included in the changes, the daily said.

Despite its cultural attractions, beaches and mountains, India attracts relatively few foreign holidaymakers – 6.58 million in 2012, which was about a quarter of Thailand or Malaysia.

A final decision on the visa reforms is likely to be taken on Wednesday at a meeting to be attended by the country’s top intelligence officers.

Changing culture: Investment flows swiftly to modern multiplex cinemas

The cinema industry got a real lift after the removal of the ban on Indian films in 2007. PHOTO: FILE

LAHORE: 

If someone still believes that the cinema business is on the verge of collapse, then he should look at the level of investment being made by different entertainment companies, like Super Cinema, in establishing state-of-the-art multiplex cinemas. This could be enough to change perception.

At present, around 100 new multiplex cinema houses are either under construction or in the pipeline all over the country with investment estimated at Rs10 billion. Of these, 13 new screens (cinemas) will be installed by Super Cinema with an investment of over Rs1 billion.

Super Cinema Founder-entrepreneur Ramzan Sheikh, however, believes that the cinema business is still in its infancy despite lots of development aimed at replacing traditional cinemas with multiplex screens in recent years.

“We entered into this business not only to make profit, but also to provide people with quality entertainment and revive the overall film industry,” says Sheikh in an interview to The Express Tribune. “I believe the industry will soon become profitable and contribute handsomely to the country’s economy.”

Established in 2012, under the umbrella of Mainland Group Limited, Super Cinema is expanding its footprint rapidly. In about two years, the company is running eight cinemas.

The group, which is also operating the Royal Palm Golf and Country Club, is well aware of the changing trends and ways to capitalise on them and set up profitable ventures.

It simultaneously established an entertainment company named Summit Entertainment to handle the distribution of films, since the success of these cinemas depends on Hollywood and Bollywood content.

The group later entered into the production segment, though not fully, covering all sides of the industry in a bid to become self-reliant in domestic film content at least.

“The success and growth of the cinema business will depend on domestic films in the future; investment in all three segments will help us produce local quality films, a thing which gives a boost to the overall industry,” says Sheikh.

The cinema industry got a real lift after the removal of the ban on Indian films in 2007. Apart from this, the Punjab government, following the 18th Constitution Amendment, is encouraging private investment in the neglected industry and supporting efforts to remove hurdles in the way of growth, adds Sheikh.

Investment and financing

The group got into the business with an initial investment of Rs500 million. Construction of a multiplex cinema costs between Rs25-Rs50 million.

It has so far pumped Rs300 million into cinemas and invested the rest in the distribution and production areas. It employs over 200 people and the expansion drive will add 500 more employees.

The group is equally financing quality films on a contract basis to cater to the needs of the industry. The cost of producing quality films, according to Sheikh, ranges between Rs5 and Rs50 million.

Food courts

The upcoming 13 cinema projects worth over Rs1 billion in cities like Multan, Sialkot and Lahore will also include food courts.

Sheikh believes that the modern cinema is incomplete without food courts and play areas for children. The group is also investing in quality food courts along with digital/3D screens and is trying to establish it as an allied business.

“Traditionally, on spending of every Rs100 in a cinema, Rs20 is on food, while in multiplex cinema the ratio is 70-30, and if screens and food courts are excellent then the ratio becomes 50-50,” he says.

“We are injected capital in quality food courts to adopt this as an allied industry and achieve maximum ratio.”

Exchange goods, not contempt

$500m was the amount the World Bank had offered to Pakistan for establishing the Zero Point Border Market. ILLUSTRATION: TALHA AHMED KHAN

ISLAMABAD: Until the 1965 India-Pakistan war, Indian citizens in Amritsar were getting their electricity bills from the other side of the border, from the Lahore Electric Supply Corporation. War not only broke down this infrastructure, it also led to an iron curtain on the Wagah border.

Now this border is internationally known for the “carefully choreographed contempt” staged by the border patrolling forces every evening.

I propose that both countries should capitalise on their recently-activated trade contacts and announce a halt to this practice. Instead, this should be replaced by a ‘Peace Market’ at Wagah attracting retail customers and businessmen from both sides without crossing international borders. Thus, it will replace soldiers’ contempt with quarrels between sellers and buyers.

This is not fancy. Last year, the World Bank had offered to develop the Zero Point Border Market (ZPBM) at Wagah by declaring it a no man’s land. Later, the bank’s offer was withdrawn but the Asian Development Bank and UKAID showed interest.

According to the proposal, the ZPBM will be equipped with all facilities where business leaders from both India and Pakistan would be able to assemble without any visa requirements and discuss their business ventures, make business deals and go back to their respective countries.

The bank was willing to put money where its mouth is and had originally offered $500 million to Pakistan for the project.

Not possible? Already, a reasonable infrastructure in a boundary wall has been built on both sides, however, it is currently used for immigration and customs purposes only. It now needs to be expanded to build a marketplace.

In 1947, the two countries were heavily inter-dependent on bilateral trade as about two-third of Pakistan’s exports went to India and about one-third of Indian exports arrived in Pakistan. In 2013, these numbers were 0.27% of Indian trade basket and around 3% of Pakistan’s trade basket. The most important predictor of peace will be an increase in these numbers.

Formal bilateral trade between India and Pakistan is $2.4 billion. Most studies indicate the real potential lies anywhere between $8 and $10 billion. In trade, there are no losers. A key pre-requisite is more freedom for people-to-people contact, not just by relaxing rules, but also by actually making it happen.

Until that happens, a Peace Market can compensate for the reciprocated bureaucratic slackness.

As the goods under the proposed Peace Market will be restricted to retail operations and the exchange will only happen in the no man’s land, a zero customs duty zone can be effectively developed without any chances of goods being smuggled out either way.

The recent trip of Commerce Minister Khurram Dastgir Khan to India during the South Asia Business Conclave in January greatly helped in normalising trade relations. As Indian Commerce Minister Anand Sharma will visit Pakistan in February, this will further strengthen bilateral contacts.

In fact, his planned trip to Lahore is scheduled for February 14, an ideal day for fuelling romance – love for commerce. This day may be planned as the day to announce the establishment of the Peace Market at Wagah-Attari border.

The author is the executive director of PRIME, a free market economy think tank in Islamabad

Fun food: Business of frozen yogurt going cold?

The fro-yo business has slowed down amid a presence of several outlets within very little time. PHOTOS: AYESHA MIR/EXPRESS

KARACHI: 

Higher prices, the law of supply says, tend to increase the quantity supplied of a good or service, assuming nothing else changes.

Perhaps, this basic economics concept best defines local investors’ approach towards the frozen yogurt business that has slowed down in the country after a brief flirtation with success.

Frozen yogurt or fro-yo was originally introduced as a low-fat alternate to ice cream and sold as a health food in the western world. With more people switching to fro-yo, this niche product started competing with the conventional frozen dessert like ice cream.

The fro-yo business has slowed down amid a presence of several outlets within very little time. PHOTOS: AYESHA MIR/EXPRESS

Still a fresh concept in Pakistan, fro-yo received an overwhelming response. As a result, several new players entered the market – thinking there was a growing demand for the product. By 2013, America’s Tutti Frutti, Berrylicious and The Country’s Best Yogurt (TCBC); UK’s Snog; Canada’s Yogen Früz and South Korea’s Red Mango each had their franchises running in the country.

Despite this influx of international chains, fro-yo business failed to create a mass appeal. According to market sources, nearly a dozen outlets from various brands have already wrapped up their operations in Karachi, Lahore and Islamabad – some within six months of their launch.

There was a hype that the market was ready for fro-yo business but the reality was different, according to sources. “It’s a niche product that appeals to health-conscious consumers. The concept doesn’t really work in Pakistan,” said the industry source.

The investors’ optimism about the Pakistani market – the sixth largest consumer base in the world – was partly driven by an overall demand for food business. According to a conservative study by online food portal EatOye, Pakistanis spend close to a billion dollar on food every year — such is the potential for food business.

However, the investors misread the market in the case of fro-yo, experts say, as supply clearly exceeded demand.

“The rapid expansion of fro-yo chains is the primary reason why this business is struggling generally,” said an industry expert doing business with fro-yo chains as well as other food restaurants mostly in the upscale areas of Karachi, Lahore and Islamabad.

“There were only one to two players in the market in 2012 but within the next year or so as many as half a dozen new chains entered the country,” the expert said. “The demand is growing slowly. The problem was that people misread the market, which may just be good for three to four players at the moment.”

“It’s true that there are many players in the market but there are a host of other reasons why the concept has not taken off as per expectations,” said Shamsi Khan Shamsi, a representative of Yogen Früz franchises that entered Pakistani market in November, 2012.

The Canadian fro-yo chain expanded aggressively by opening franchises in Karachi, Lahore and Islamabad. However, all of its Karachi franchises – three in total – were closed down recently. It also closed one of its franchises in Islamabad.

Explaining, Shamsi said some franchisees didn’t have a background in this business. “One has to be patient as every new business takes a while to click.”

At the time of the launch, the company conducted branding and marketing at a national level but a lot more was needed to be done by franchisees, Shamsi said.

“Maybe, they thought the business would click on the brand’s strength alone,” he said. For example, he said their Zamzama franchise closed down despite being at a prime location.

Shamsi’s observation was seconded by an industry expert who has more than 10 years of experience in the food and restaurant business — both in Pakistan and abroad. “Many people jumped in this business because of its high profitability margin but they failed to conduct proper marketing and branding,” the expert said.

However, Yogen Früz is not the only brand reflecting the trend. Tutti Frutti also closed about half a dozen outlets, while Berrylicious also closed at least one.

“One common mistake was not to choose a suitable location,” said Umar Hussain, who sold a Tutti Frutti franchise at Zamzama. Food business is a different ball game, he said, some businesses run well in malls, while others do well on roadside locationS – Tutti Frutti’s Clifton outlet closed but the one in Dolmen City Mall is still running.

Though the general trend does not seem to favour the fro-yo business, there are signs that the concept will click.

“It’s too early to say how the market is doing but the response so far is very positive despite the fact that our product is expensive,” said Taimur Butt of Red Mango, which entered the market only three months ago.

“We are attracting high traffic on both outlets at Zamzama and Nueplex,” he said. “Our expectations are that it will do much better going forward and we are planning to launch one in Islamabad and a few more in Karach

Crucial talks: PM to begin Ankara sojourn on Feb 12 ahead of trilateral summit

Prime minister Nawaz Sharif. PHOTO: AFP

ISLAMABAD: 

Prime Minister Nawaz Sharif will fly out to Turkey on February 12 ahead of the crucial trilateral summit that will be attended by the leaders of Pakistan, Afghanistan and host Turkey.

The summit – the eighth of its kind since 2007 – is being held against the backdrop of the planned withdrawal of the bulk of US troops from Afghanistan this year, President Hamid Karzai’s reluctance to sign a security pact with Washington and the presidential elections in the war-torn country.

According to the proposed schedule for the visit – a copy of which is available with The Express Tribune – Prime Minister Nawaz will reach Ankara on the afternoon of February 12. Turkey’s President Abduallah Gul will host a dinner at the Presidential Palace for the participants of the moot the same day. On February 13, Premier Nawaz will have separate bilateral meetings with Turkey’s Prime Minister Recep Tayyip Erdogan and President Abdullah Gul in the morning. This will be followed by his joint meeting with Presidents Gul and Karzai, and Premier Erdogan in the afternoon.

Two sessions of the trilateral summit – one of which will be restricted while the other will be a plenary session – will take place in the afternoon the same day. The three countries’ heads of government will hold a joint press conference and announce a joint statement once these sessions conclude.

When contacted, the Foreign Office spokesperson said it is premature to comment on the possible outcome of the summit. In response to a question as to whether any bilateral meeting between Premier Nawaz and President Karzai would take place on the sidelines of the summit, the spokesperson said certain details were still being worked out.

It is likely that Pakistan and Turkey will also sign a preferential trade agreement (PTA) on the occasion.

Clean Pakistan: Encouraging recycling, a household at a time

Encouraging recycling, a household at a time. PHOTO: FILE

LAHORE: 

“Clean Pakistan aims to target 500 urban union councils, it will create more than 15,000 jobs [social motivators and sanitary workers] whose salaries will add Rs2 billion to the economy.

In addition, an estimated Rs3 billion will be generated from recycling and waste collection activities,” Waste Busters CEO Asif Farooki told The Express Tribune.

Clean Pakistan campaign workers will collect domestic waste from houses, sort them and recycle waste to be used to manufacture fertiliser and other products.

Implementation plan

Under the project, each city will be divided into zones [union councils]. Each zone will have 10 social motivators to mobilise the community and 20 sanitation workers, preferably from the city district government and town municipal authority. They will work from 10am to 4pm daily.

Social motivators will campaign door to door telling people about the programme, its benefits and service charges. GIS mapping will ascertain the target area, number of streets, houses, commercial areas and waste transfer points.

Each social motivator will be assigned two sanitation workers for 250 houses. They will collect domestic waste in hand carts where a Suzuki pick-up will collect the garbage and take it to a transfer point or waste enclosure in every union council.

The sanitation workers will segregate recyclable materials like bottles, plastic, cans, lined paper packs and papers. They will be weighed every Friday and Waste Busters will purchase them on market rates [not less than Rs5,000/metric tonne] and send it for recycling at a recycling plant on Ferozepur Road.

Organic waste and non-recyclable waste will be taken to a dump site.

An “ecopreneur” will collect the service charges.

Inorganic waste will be sorted and sold. Used plastic shopping bags will be recycled into plastic wood and used to manufacture chairs, huts, dustbins for parks, Farooki said.

“That leaves us with mostly shopper bags, rags and nappies which can be processed into refuse-derived fuel and sold to the cement industry,” he said. Approximately 60MT of recyclable waste will be collected from each union council and sold to vendors or recycling factories. This will generate an estimated Rs3 billion for the economy and provide income to a sizeable section of the lower income strata, he said.

Franchise plan

Waste Busters will train ecopreneurs in efficient waste management, waste collection and recycling.

Mutawakil Qazi, an ecopreneur from Gujranwala, said, “I have received a very positive response from my community…people are excited to know that concerted efforts are being made to clean up the area and are willing to pay for it.”

The Small and Medium Enterprise Development Authority has included the programme in its list of approved business plans are eligible for the Prime Minister’s Youth Loan Programme. “Ours is a viable business with a plan to return the loan as well, said Farooki.

Tania Qureshi of the Walled City of Lahore Authority said the Waste Busters has been managing solid waste from Delhi Gate to Chowk Kotwali in the Walled City. Their workers clean 57 streets from Delhi Gate to Chowk Kotwali every morning and collect garbage from houses and shops. “We are planning to handover other parts of the Walled City to them as well,” she said.

Waste Busters is presently running similar projects in Green Town, Walled City of Lahore, Defence and Gulshan-i-Ravi.

Published in The Express Tribune, February 2^nd, 2014.