Measuring effects: Sit-ins paralyse Islamabad, slow down progress

ISLAMABAD: 

There is not a shred of doubt that the recent developments in Islamabad have affected the country’s economic progress, causing direct and indirect, measurable and immeasurable losses.

The sit-ins, organised by Imran Khan’s PTI and Tahirul Qadri-led PAT, have forced the cancellation of a visit by Sri Lankan president before casting doubt on the planned arrival of the Chinese head of state.

The nature of the Chinese president’s visit is as high-profile as it gets and the slightest of reshuffling in plans would strengthen hands of those international forces that do not want to see close ties between Pakistan and China. Furthermore, Chinese president is set to visit India, which could be interpreted as further isolation for Pakistan.

During the visit, the Chinese head of state was expected to sign several defence and economic pacts.

Pakistan has been negotiating a deal to acquire four submarines besides purchasing two squadrons of JF-17 Thunder multi-role aircraft, which is the joint production of Pakistan and China. Additionally, agreements were expected to be signed for 14 power sector projects that would have the potential to generate 10,400 megawatts of electricity with active Chinese assistance.

At a time of a severe power crisis, the deals are priceless.

“The international image of Pakistan has considerably been shattered,” the federal government responded in the Supreme Court of Pakistan. The fallout has also shattered confidence of investors, it added.

The government has so far estimated overall losses to the economy at Rs547 billion. Out of the total, Rs228 billion have been estimated on account of 4.3% depreciation in the value of Pakistani rupee against the US dollar. Another Rs319 billion was estimated due to decline witnessed in the stock market. However, the Karachi Stock Exchange has now entered the recovery mode on the back of reports suggesting that the contesting parties have agreed to resolve the issue through dialogue.

The government has also claimed that political uncertainty has also adversely affected financial markets and foreign currency reserves have declined to $13.52 billion from the $13.926 billion in the week that ended on August 15.

It comes as no surprise that protesters have rendered the government machinery dysfunctional. The Pak-Secretariat – the seat of civilian bureaucracy – remained almost closed for about two weeks. Important matters remain unattended and barring emergency nature no other files are being entertained.

Since August 16, less than half of the Federal Board of Revenue’s workforce has been able to attend office that is also located at the Constitution Avenue. However, it would not affect revenue collection as the work in field formations is going on smoothly.

The additional cost of security has been estimated at Rs357.6 million. An amount of Rs226.8 million has already been released, while ministry of interior has requested Rs130.6 million additional funds as of August 29.

The damage to public property has been estimated at Rs5 million by the Capital Development Authority. The equipment of state-owned Pakistan Television was also damaged while protestors burnt a police vehicle besides damaging 17 others. So far, 717 persons have been injured including 202 police personnel and three protesters also lost their lives, according to official estimates.

The Trader Association of Islamabad has claimed Rs10 billion losses – a figure that seems highly exaggerated. However, the government machinery has come to a standstill.

Schools have remained shut with children losing valuable learning time. Police forces from Punjab and AJK have been temporarily using the schools’ premises.

The fear is that the government will try to hide behind the political turmoil to hide its inefficiency on the economic front. The government has set ambitious economic targets for the current financial year and many of these cannot be achieved.

However, protestors seem to have given an excuse to the government.

International financial institutions that were somehow ready to deal with the government have, for the time being, taken a back seat and are waiting for a resolution of the dispute. 

Investors play safe, want quick settlement

KARACHI: 

When the PML-N took the reins of the country in June last year, few businesspersons would have thought that the government, which is perceived to be pro-business, will face such a strong protest movement within 15 months.

The situation took a sharp turn in mid-August when long marches and sit-ins by two political forces forced investors to play safe while considering their short and long-term investment plans.

According to some investor accounts, persistent protests in Islamabad have not only hurt the economy, but more importantly, have dented the confidence of local and international investors in the country’s economic progress.

“The on-going protests and sit-ins have put a question mark over political stability, which no business, whether small or big, can afford,” said Asad S Jafar, President of Overseas Investors Chamber of Commerce and Industry (OICCI), an association of over 195 multinational firms operating in Pakistan.

OICCI, whose members come from 35 different countries, conducts surveys regularly to determine the mood of investors.

It released on Friday a quick survey on the on-going agitation against alleged election rigging. About a third of the respondents expect a fresh review of their investment plans for the next three years, indicating that the investors are perturbed about the prospects of future capital injections.

Earlier in an interview with The Express Tribune in May this year, Jafar had, however, said despite unfavourable conditions OICCI members were planning to invest around $3 billion over the next five years. In the survey, over 50% of respondents said recent events had caused the postponement or cancellation of scheduled business meetings in Pakistan with overseas shareholders and regional management.

Apart from long-term repercussions, there was some immediate ripple effect on business operations and product distribution. About 40% of respondents expect a decline in sales and profitability with a possible drop in tax payments.

Similarly, a majority of them (62%) foresee serious damage to the 2014-15 fiscal targets of the government.

“Pakistan is a country that offers a lot of business opportunities and that’s why many of our long-term investors look at it positively. But yes, the protests are detrimental to the investment plans, especially for the short term,” Jafar added.

Bearing the brunt

Talking to The Express Tribune, Federation of Pakistan Chambers of Commerce and Industry (FPCCI) President Zakaria Usman said investor confidence had borne the brunt of the political standoff as it had been shaken to the core.

“The current crisis will continue to haunt the country at least for months, if not for years,” remarked Usman, who represents the apex trade and commerce body of the country.

Endorsing the OICCI survey, he said multinational companies must have been disturbed by the political impasse. “Nobody will invest when your country and the government are stuck in such a crisis.”

He was of the view that the politicians could not even estimate the loss businesses had suffered in the past few weeks, adding many of the business people were just looking at factors that were tangible and could be calculated like the loss of factory output, decline in exports and imports, etc.

“But what about the impact on future investment that may get late or probably will never come. The decline in confidence of investors, especially foreign investors, is intangible and irreversible,” he said.

Taking a cautious stance, Pakistan Business Council Chief Executive Kamran Y Mirza stressed that it was too early to say that investor’s trust in the economy had been badly hit and investments would drop in coming days.

PBC, a business policy advocacy body that represents 44 leading conglomerates of Pakistan, enjoys a considerable influence in the policymaking circles.

“It is good that the situation is still in control of the authorities. But we wish to see it (political crisis) settled as early as possible,” Mirza remarked.

Alarm bells go off as investors rethink

KARACHI: 

It was the single largest foreign direct investment in Pakistan. At $6 billion, the 250,000-barrel per day (bpd) Khalifa Point Refinery would have helped save millions of dollars the country spends to import petroleum products including diesel.

But it never moved out of the drawing board.

“They were serious about it,” said a senior industry official, referring to Abu Dhabi’s International Petroleum Investment Company (IPIC) – the main sponsors.

“UAE wanted a channel other than the Strait of Hormuz for the refined petroleum products to reach world markets.”

Contradictory to popular belief, the project that was approved by the Pakistani government in 2007 was not put on the backburner due to economic slowdown — it was in fact a casualty of political turmoil.

“Fast-changing political climate, which always creates fear of change in official policy, was damaging for such a large investment,” said the official who manages a crude oil refinery in Pakistan.

“IPIC kept on waiting for some sort of certainty in the policy and state of affairs.”

The recent showdown in Islamabad has simply reinforced investors’ fears about the economy.

“Everything has been put on hold,” said an executive of a company, which is vying for pre-privatisation consultancy for various state-owned organisations. “Privatisation Commission Chairman Mohammad Zubair wasn’t able to go to his office for two weeks, what do you expect would happen?”

In the past two weeks, the government was due to hire advisory consultants to prepare for privatisation of power distributions companies, which have been beset by losses due to rickety distribution systems and rampant theft.

Industry officials say that the delay in taking decisions, paper work and requisite approvals are not the biggest of problems.

“The whole drama in Islamabad has actually sent out a signal that the government is toothless,” said the executive of the consultancy. “What would they do when thousands of Wapda employees come out on the roads (against privatisation)?”

Handing distribution companies to private investors would be particularly challenging for politicians who come from areas with high level of theft. The long battle K-Electric fought on all the fronts to convince people to pay their bills is an example before everyone.

Political stability and steadfastness on part of the government would be imperative for many of the projects to materialise, officials say.

But what many people were not prepared was the reported postponement of Chinese President’s official visit in wake of the protests.

Local companies behind the coal-fired plants have made it clear that only China’s banks have the financial muscle and commitment to fund the much-needed projects.

“International financial institutions like the World Bank are not ready to fund coal power plants. We are talking about $600 million of debt for a 660MW project. Chinese state-owned banks are our only option,” said CEO of a power company.

The importance of the projects cannot be overstated. As the reliance of the country increases on furnace oil to generate electricity, the power tariff has increased. And so have costs – from households to factories.

“Having our power generation switch to coal is the only way we could counter the challenges.

Alibaba envisions raising up to $24.3 billion

NEW YORK: 

Chinese online marketplace Alibaba unveiled plans to raise up to $24.3 billion in what could be the biggest stock flotation in history. The Initial public offering (IPO) is part of the company’s effort to expand globally.

The company would offer 320 million shares in a range of $60 to $66 per share with an option available for 48 million additional shares. The plan would raise a minimum of $19.2 billion even if the option for additional shares is not exercised by the underwriters.

Based on the price range, Alibaba would have a market value between $148 billion and $162.7 billion, in line with that of US online giant Amazon ($160 billion) and more than twice the value of eBay ($66 billion).

Alibaba, set up by Jack Ma in 1999, operates China’s most popular e-shopping platform, Taobao, which has more than 90 percent of the online market,800 million product listings and over 500 million users. The China-based group’s consumer services are similar to US Internet titans eBay, PayPal and Amazon.com.

The Company, however, does not sell products directly, instead hosts online venues such as Taobao where buyers and sellers can do business. This strategy has given the company an enviable profit margin as an online middleman of sorts. The Group made a profit of nearly $2 billion on revenue of $2.5 billion in the quarter ending June 30.

Alibaba earlier this year announced plans for a US marketplace called 11 Main, currently in a test phase. US Internet giant Yahoo bought 40 percent of Alibaba in 2005 for $1 billion and now stands to reap a handsome profit from that.

Yahoo sold part of its stake in 2012, getting a gain of $7.6 billion. Under the IPO plan, Yahoo will reduce its stake from the current level of 22.4 percent to 16.3 percent.The largest current shareholder is Japanese telecom group SoftBank, and its stake will fall from 34.1 percent to 32.4 percent.

A US government panel warned earlier this year that Alibaba’s complex corporate structure posed risks to investors.

Mystery product: Apple recruits renowned Australian designer

NEW YORK: 

Apple has recruited renowned Australian designer Marc Newson, whose creations have been featured by museums such as New York’s famous MoMA.

“Marc is without question one of the most influential designers of this generation,” Jonathan Ive, Apple’s senior vice president of design, told Vanity Fair magazine’s website. “He is extraordinarily talented. We are particularly excited to formalise our collaboration as we enjoy working together so much and have found our partnership so effective.”

An Apple spokesperson confirmed the comments. Newson – deemed by Time magazine in 2005 to be among the planet’s 100 most influential people–is especially well known for his furniture, in particular chairs with rounded forms.

Some have sold for hundreds of thousands of dollars at auction or been incorporated into collections of institutions such as New York’s Museum of Modern Art or the Centre Pompidou in Paris.

Newson, based in London, has worked with Nike, Qantas Airways and Ford, among others.

His website, meanwhile, highlights a series of watches amid persistent rumours that Apple could be unveiling an “iWatch” at its mystery-shrouded product launch event Tuesday.

Falcao 'like a kid' over Manchester United move

The Colombia international sealed a big-money loan move to Old Trafford on transfer deadline day and says he cannot wait to get started with Louis van Gaal's men

Radamel Falcao insists he feels "like a kid" after his deadline day loan move to Manchester United.

The Colombia international joined fellow new signing Daley Blind at Old Trafford on Monday, with United being granted an extension to sign the star from Monaco in the early hours of the morning.

He tweeted last Saturday that he had realised a dream by signing for Real Madrid, only to later delete it, while there were also links with moves to Manchester City and Juventus.

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And Falcao says he is ready to fire United up the league after a difficult few days.

"For me it is amazing," he told the Observer when asked about his move to United. 

"I am very happy. I hope to give my team the best and help to bring a lot of goals and victories.

"I think I have lived this week very intensely. It hasn’t been the most comfortable week to work in, with all of the changes, but I have lived it like a kid. 

"I have had the same feeling as when I debuted for the national team. It was very exciting and special and I enjoyed being back."

Falcao came off the bench late on in his country's 1-0 defeat to Brazil on Friday in Miami, and he is understood to be applying for a fast-track visa to be able to face QPR on September 14.

"I now leave in a very good condition to join my club and I hope to be available next week,” he added. "I go to Manchester with lots of hopes to try to win a place in the team and then come back to play for Colombia. It’s better to not overthink and let things happen normally instead."

Remy warns Costa and Drogba: I didn’t join Chelsea to sit on the bench

The Frenchman is targeting a place in Jose Mourinho’s first team and also revealed he had no contact with new team-mate Diego Costa after scoring against Spain on Thursday

Loic Remy has warned new Chelsea team-mates Diego Costa and Didier Drogba that he intends to become the first choice striker at Stamford Bridge.

Remy, who moved to the west London club from QPR at the end of August, came off the bench in Thursday night's clash between France and Spain and bagged the winning goal in a 1-0 win for les Bleus.

The 27-year-old says he jumped at the chance to join Chelsea, but will not be happy just to sit on the bench and is determined to work hard and earn a spot in Jose Mourinho’s starting XI.

"They are one of the best clubs in the world," Remy is quoted as saying in the Mirror.

"I know I won’t start out as first-choice striker at Chelsea, but nothing is set in stone. I have my aims.

"I didn’t sign for them in order to sit on the bench. I will try to improve as much as I can alongside their great players, and the rest will happen naturally."

He added: "When the chance comes up to join a club like Chelsea you can’t say no.

"The deal was done late in the evening. I was ­prepared to stay at QPR, but I didn’t hesitate for a second when Chelsea came along."

Costa and Remy faced off at the Stade de France earlier this week, with the former Marseille forward making a decisive impact while his new team-mate was subbed off, though the Brazilian-born forward neglected to applaud the Frenchman’s exploits afterwards.

"I didn’t get any congratulations from Diego Costa after the Spain game," added Remy.

"Their players were angry, and went straight back to their dressing-room. I didn’t get a congratulatory text from Jose Mourinho either!"