An effort to highlight the strengths of Pakistn. Should it come out of the current political and military crisis, Pakistan possesses the potential to become a strong nation.

Session 2

Sushant Rao - Director, Head of Asia, World Economic Forum, Switzerland

Presentation Title: “South Asian Economies and the Path of Growth, the Challenges and opportunities”

1.    WEF - More than just the Davos gathering - an initiative to bring together business leaders from all walks of life

2.    Also runs a WELCOME forum - a virtual gathering of more than 10,000 world leaders for collaborative dialogue and debate

3.    Global Competitive Report - Pakistan outlook

a.     Combination of hard data through IMF and WB and Leadership Opinion Surveys

b.    Competitiveness is defined as ‘productivity’

c.     Stages of development defined - progressive process

i.    Factor-driven

ii.    Efficiency-driven

iii.    Innovation-driven

d.    Report results: World overall

i.    US came out on top due to its large market - UK went down in the list this year

ii.    BRIC economies are doing better - China has broken into the top 30

e.     Report results: Pakistan

i.    Overall ranking of 101 out of 134

ii.    Important areas:

1.   Education

2.   Security environment

3.   Business friendly policies

4.    Financial Development Report - 2008 - also available on WEF website

a.    Pakistan performed remarkably well compared to other developing financial markets

b.   No 5 in overall Banking Efficiency Index

5.   World Trade Report

a.   Done in partnership with WTO

b.  Pakistan in top 25 in FDI and foreign labor - however, still work that needs to be in the perception among the international traders about the business environment and trade environment in Pakistan

6.   Last words

a.   Trade in Inter-South Asia is only @ 4% compared with ASEAN @ 45% - so this can be improved further

Zafar Siddiqui, President CNBC Pakistan, Chairman CNBC Arabiya, Africa

Presentation Article: Media in the Emerging Markets

1.    Referred to climate change - “another flood here, time to build an arc”

a.     Discussed some facts from a recently published article

2.    Emerging Markets

a.     Powerhouses that have adopted open market policies

b.    Market Trends in Emerging Markets

i.    Liberalization - decline in support for public media - private media ownership

ii.    Increasing trend of sponsor-centric content development as opposed to content being developed in the interest of the public

iii.   The New Media Vs The Traditional Media

1.    USNews has abandoned print in favor of web publishing

2.    Blogging increasing faster than ever

3.    Many firsts of the New Media in the recent US elections

iv.    The Digital Divide

1.    This could lead to the exclusion of millions in the world, especially Africa

3.    Media in Emerging Markets

a.    With the economic downturn in the West, the international media giants will look toward the emerging markets

b.    Free and independent media are necessary for effective functioning of democratic situations

c.     Informed decision a must for the democratic process to continue which can be facilitated through a responsible and free press and media

Rishi S. Jaitly - Senior Policy Analyst, Google Inc.

Presentation Article: The Internet in 2008: Democratizing Democracy and Globalizing Globalization

1.    Google’s Mission:  A Knowledge Society

2.    The Old World - 20^th century consumed content - saw content presented by the few

3.    The New World - participation by many, empowering people to speak to the world at large

4.    AdWords - a tool to raise awareness but also raise funds

5.    Learning from the recent US elections

a.     Expand electorates through web tools and social media

b.    Build a brand - through text by creating a context - the ‘change’ brand of Obama

c.     Live debates - a way to hold your elected officials in check and ask them tough questions breaking through the established media

d.    Pushing democracy to its limit - democracy on steroids

e.     Sign up to sitemap.com to get included to Google and other search engines

6.    Globalizing globalization

a.     Internet by definition is ‘global’ and by getting your products or services online, you are participating in a global market

Session 1

Points from Syed Farrukh Abbas, CEO, Pakistan Operations - Abraaj Capital

Presentation Title: “Entrepreneurship: Leveraging Business Opportunities in the Region

1. Mr Farrukh Abbas disagreed with me professionally.  He claimed this region to be the most promising in the world in the next 20 years.
2. Showed a chart that shows the global distribution of GDP from 0 AD to 2008 AD.  The chart was developed by Sir Paul Judge - a board member of Abraaj Capital.
3. Fast growing GDP in the MENASA region compared to other regions.
   1. “what can we buy cheap when people are running” - an investor’s view from Middile Eastern region
4. Abraaj is looking into ‘food and agriculture’ investment in Pakistan in the next few months
5. Mr Farrukh shared the overview of Abraaj Capital
   1. 50% of average gross IIR in the last five years
   2. 150+ employees
   3. Has worked with regional companies, companies with competitive advantage, platform consolidation and public-private partnership
6. He concluded by reiterating that MENASA is the region to invest in and that true entrepreneurship means not being the boss and answering to customers and growing employees.

Mr Hilmy Cader, Global CEO MTI Consulting, Bahrain

Presentation Title: Strategies and Managing in Turbulent Times

1. The crisis has hit the world. Pakistan also has an economic crisis on top of the world economic crisis.  His presentation will touch upon the following three subjects:
2. Bull Market Syndromes
   1. This is what companies do when the going is good - expanding recklessly, investing in areas and making acquisitions
   2. Companies build models which are on very high fixed cost base - an airline has Seat Capacity Breakeven of 87%
   3. Companies disguise unprofitable brands and variants - Unilever had 1600 brands but 90% came from only 400 - e.g. 36 variants of Crest in the US
   4. Also, unprofitable staff - they don’t do a Personal P&L, i.e. who is contributing what
   5. Company structures are considered very fixed  - e.g. Agri business in Philippines created an additional layer for sales staff just to promote two good sales persons
   6. Himalayan Layers - tall vertical structure with multiple layers
   7. Activity-based job filling - You appoint people based on activity instead of a strategic value addition by each position
   8. ‘White Collar Crime’ - management wastes a lot of time and it goes unaccounted for
   9. Case Study done in Paksitan -
3. Strategic Response Alternatives
   1. Two options to respond to a crisis
      1. ‘Chop and Cripple Mode’ - Cost-cut mindset with focus on cost upside
      2. Trim & Fit Drivers - Go to back to fundamentals with prudent thinking and focus on revenue upside
4. Trim and Fit Drivers
   1. Knowledge sharing by MTI based on their work with some regional companies
      1. Change starts at the top - CEO and Chairman must be there at the Trim and Fit meetings
      2. Accept reality and communicate the truth with staff with tact
      3. The change process should be an inclusive process
      4. Laser Beam Bottom-line Focus - look at the currency - that is the language of crisis
      5. Good time to Consolidate and Acquire - small companies are suffering and if you have cash, go shopping - also a good time to build a brand
      6. Take the Fat off the Process and NOT the People
5. Last word - “Tighten your belt or lose the pants”

‘Pakistan, Forex & Musharaf’ by Kalwar on Teeth Maestro

@ A.H.Kalwar

First, I must acknowledge Kalwar’s attempt at analyzing the problems of our current economic situation, though not completely correct in the manner he has connected all of the dots. First, the exchange rate policy that Pakistan has adopted, since our last IMF program which was initiated in the 90s, is that of floating exchange rate (though it’s not been practiced that way most of the time). In a ‘fixed exchange rate’ policy, the central bank of the country sets the official rate and all banks must stick to it. This was the policy that Pakistan had adopted in the 80s and in the early 90s until IMF came and suggested otherwise. If you remember, we don’t have exchange rate notifications released by the State Bank as they are done by OGRA for oil prices every fortnightly (now that is highly regulated). If Musharaf government ran the affairs this way, you would be right in claiming that he pursued a ‘fixed exchange rate’ policy, but it actually didn’t. Now, why I say that Pakistan’s foreign exchange rate policy isn’t exactly ‘floating rate’ is because our State Bank (on the advice of the government) pumps in dollars in the open market to keep it around a certain level. This may be termed as ‘attempting’ to regulate the exchange rate around a certain place but it can never guarantee it. If the flight of foreign capital speeds up, this method will hardly have any bearing on the rate.

Now let me comment on your claim that a high dollar rate boosts exports and reduces the demand for imports. Let me tackle the first part of this claim – ‘high dollar boosts our exports’. You are totally right at saying that a weak rupee would help our exporters gain a competitive price advantage in the international markets but please remember that it is only a short-term effect. As the Rupee loses its value, the domestic inflation gets a kick in the rear which forces the State Bank to readjust their discount rate – increasing the cost of production for the industries, which ultimately not only eliminates the short-term benefit earlier reaped by exporters but might even push their costs so high that they find themselves at a disadvantage against their international competitors. Now the second part of the claim – ‘reduces demand for imports.’ While the demand for some imports may reduce by weakening the rupee, this is the worst way to achieve that objective. You and I know that the government has a wonderful tool if it wants to reduce the demand for a certain category of items and this method can be used very effectively to meet that end. It is called ‘taxation.’ The oldest rule in the economics book is ‘if you want less of something – tax it, if you want more of something – subsidize it.’ When one begins to look at reduced demands as a positive side effect of a weaker rupee, one has failed to register the impact of the same on imports of essential items such as machinery for industry expansion, raw material etc. Their increased import bill would pump the cost of production even higher, making them ever less competitive in the domestic or international market.

Moving on to your claim on the cyber bubble and the neglected sectors by the Musharaf government. First of all, the cyber bubble was solely a phenomenon of the American stock market and didn’t have as far reaching effects on the global economy as to bring it to a halt or push it on the road to growth. It’s effects as perceived by you are arguably over exaggerated. Second, you may be right at saying that Musharaf government gave priority to other sectors and not to agriculture. Here, I agree with you. But I disagree with the claim that it also ignored the manufacturing sector. Maybe you haven’t read the economic numbers of 2004, 2005 and 2006 when LSM (Large Scale Manufacturing) grew by over 15% every year. Over 15% growth! In 2006, only China had a higher LSM growth rate than Pakistan – in the entire world. That doesn’t come about by ignoring a sector. In 2006, our textile exports alone were more than $10 billion (just for comparison sake, our total exports in the 90s never reached that number). So to say that the last government ignored the manufacturing sector would be totally absurd. Yes, the focus was certainly more on banking and services and it is open to argument whether they needed that much focus or not.

And yes, Musharaf would do anything to keep his seat but so would any other ruler in a country where democratic institutions aren’t very strong. If you doubt my claim, please consult history. When you are in power, the only reason you give it up is when you know you can’t keep it no more. Only a few leaders in history actually gave up power because they believed someone else could do it better. In Western democracies, power changes every 4 or 5 years because the rulers know if they attempted to stay beyond their given time, their democratic institutions would put them behind bars. So Musharaf isn’t the most evil ruler for having done that – they all are the same – and I don’t mean to stay that what he did was right. It was wrong and cost our country a hefty sum in many respects. But to cast him out as Satan’s most favorite son and blame him for all of the problems is not only childish but also misrepresentation. And if you still doubt my assertion, please wait to see what Mr Zardari does when he feels the pinch. This is why the only solution for us is in stronger institutions.

Having said that, we must acknowledge that during Musharaf’s tenure, the government seemed to have a vision and a set of policies. Their policies might not have been all correct but there were many positives in their initiatives.

The global economic crisis continues to reach deeper and deeper, leaving organizations everywhere wonder how bad it really is going to get.  In Pakistan, almost every business is playing the ‘wait and see’ game in the midst of rising terrorist activities across the country, increased engagement of the security forces with the militants and the scrambling government officials in search for a rescue assistance from friendly countries or the international lending agencies.  According to a friend who works at a multinational bank in Karachi, the country’s economy has only started to get bad and is a long way from anything positive.  it’s going to take a whole lot of concerted efforts to bring it back on the right track.  This is bad news for all of us.  The Rupee is falling and the prices are rising and as a result the average consumer has less and less to spend.  And as sales volumes decline, business face the ‘devil and the deep blue sea’ situation with reduced margins from increasing input costs.