In Pakistan, the days of doing business by candlelight are far from over.
Power cuts in many areas of the country last as long as 16 hours every day, and consumers will be paying about 45 per cent more for electricity by the end of this month compared with last year as government subsidies are withdrawn. Ending the power subsidy might help the country get US$6 billion (Dh22.03bn) of loans from the IMF, but it will deeply hurt the people of Pakistan.
The country's demand for electricity doubles about every 10 years, which implies that ensuring enough supply is essential for the economy to stay afloat, at least in theory. With a population of more than 170 million, this South Asian nuclear-armed nation is the world's sixth-largest consumer market by population and a place of interest for many international investors.
With its government offering incentives such as 100 per cent ownership of businesses by foreigners, tax holidays, low-cost land, specialised industrial zones and repatriation of funds, one would think there would be investor interest. But watching the potential gold mine that is Pakistan from a distance makes more sense than committing funds to its industrial or agricultural sectors: factories need power to function, and foreign investors are reluctant to compete with the rising population of this country for a resource as precious as electricity.
Pakistan's economy has threatened to go under a number of times in the past decade or so - not entirely on account of power shortage - but if an economic collapse were to occur, power shortages would be a major contributor.
The country's shortfall between power generation and demand is widening with every passing year. It is a peculiar truth for a country with major coal reserves.
The estimated coal deposits at Thar in the southern province of Sindh are massive: as much as 175 billion tonnes. However, since the discovery almost 18 years ago, Pakistan has managed to fully explore only six blocks, spanning 488 out of a total 9,100 square kilometres of the Thar reserve. The drill-proven reserves, according to Pakistani government data, are 3.7 billion tonnes.
The data show that Pakistan has so far managed to explore with the help of international partners only enough to generate 63,390 megawatts of electricity for the next 30 years.
With two more blocks under exploration, experts say proven reserves are enough for Pakistan's power generation needs for the next 100 years.
The highly bureaucratic structure of governance and practically empty coffers of the state, all wrapped up in red tape, are the reasons that exploration in Thar has moved at a snail's pace. The reluctance of foreign investors to come to the government's rescue in the current dire security situation is also understandable.
"It's true we can safely generate 40,000 megawatts for over 100 years with proven coal reserves. But for that to happen, a lot in Pakistan needs to change, including political interference," says Rashid Mehr, the country head in Pakistan for Moody International, one of the largest global project risk advisory companies in the oil and gas and natural resources exploration sector.
Textile and agriculture, Pakistan's main sources of foreign exchange, are hamstrung due to power shortages, and industry generally is slowly being wiped by power cuts.
"For an economy to operate at 100 per cent, you require 120 per cent of required power. You need 100 per cent to support the economy and an additional 20 per cent to fuel the growth," Mr Mehr says.
According to government data, the demand for power has risen 29 per cent from 18,883mw in 2007 to 24,474mw this year, and it is expected to rise almost 50 per cent to 36,217mw by 2015. The peak demand projection would require Pakistan to generate 113,659mw to satisfy both commercial and domestic requirements by 2030.
The installed capacity, on the other hand, has risen from almost 9,000mw in 1991 - just a year before Pakistan discovered the Thar coal reserves - to 19,552mw at the end of 2004, according to data on Pakistan's Board of Investment website. Progress since then has been painfully slow.
Pakistan's federal secretary of water and power, Shahid Rafi, in a presentation last year to the Friends of Democratic Pakistan (FoDP) at a conference in Abu Dhabi, said Pakistan's power generation capacity stood at 20,231mw, which implied that the country had added only about 700mw of capacity since the end of 2004.
Already, there is a supply shortfall of about 4,500mw, various government figures show.
But Mr Mehr argues that the situation is even worse than the government data indicates. His work with some of the international companies involved in natural resources exploration in Pakistan paints an even graver picture.
"I have my reservations about the shortages and demand projection figures. They [the government] are targeting to produce about 30,000mw by 2015, which is practically impossible," he says. "I don't suppose foreign investors are going to come to Pakistan in the given circumstances and help government achieve this target. Also, the major hydro projects are not going to come on stream before 2016."
The reluctance of foreign investors to enter the energy sector, or for that matter any sector of the economy, is evident from the fact that Pakistan has not closed even a single privatisation deal in the past 18 months. Up for grabs are about 30 small hydro power projects and one large project that could require billions of dollars of investments. Not one of these projects has persuaded investors to put down any money. Failing to generate interest from a wider market, Pakistan has lately been wooing friendly nations to come to its rescue. The FoDP is one forum in which Pakistan has been voicing appeals for aid and investments in its economy, which has taken a battering because of the country's front-line position in the war on terrorism.
Mr Rafi's presentation to representatives of the FoDP indicated that the country would require an investment of about $7.2bn in Thar mine-mouth power plant projects to generate 1,000mw by 2015 from four available mining blocks. So far, the provincial government has managed to sign only one agreement with a local firm to set up a small power plant in the Thar area. The 16,000mw additional capacity that Pakistan intends to generate through hydro projects would need $26bn of investments, while $30bn of investments is needed to rehabilitate and reinforce the power transmission and distribution systems.
The other options for Pakistan are to invest in nuclear power production or to start importing power from neighbouring countries. The country is studying the feasibility of importing 1,000mw of power each from Tajikistan and Iran.
Mr Mehr says the Pakistani government owes about $1bn to independent power producers who mainly use oil to generate electricity. The producers have reduced power generation as they want their long-standing receivables cleared.
"One reason for withdrawing government subsidies for power is that the government wants to pay the power producers and ask them to increase power generation," Mr Mehr says.
The fact remains that Pakistan cannot afford to continue producing power by burning oil.
"International oil prices are high and it's expensive for a country like Pakistan. They will have to invest in cheaper power production if the economy is to survive and grow," he says.
Currently, 80 per cent of Pakistan's electricity is generated from oil and natural gas, while hydro projects account for 11 per cent. Only 7 per cent of power is obtained from coal, while 1 per cent is contributed by the country's one small nuclear power plant.
@Email:skhan@thenational.ae
Milestones on the road to union
1970
October 26: Bahrain withdraws from a proposal to create a federation of nine with the seven Trucial States and Qatar.
December: Ahmed Al Suwaidi visits New York to discuss potential UN membership.
1971
March 1: Alex Douglas Hume, Conservative foreign secretary confirms that Britain will leave the Gulf and “strongly supports” the creation of a Union of Arab Emirates.
July 12: Historic meeting at which Sheikh Zayed and Sheikh Rashid make a binding agreement to create what will become the UAE.
July 18: It is announced that the UAE will be formed from six emirates, with a proposed constitution signed. RAK is not yet part of the agreement.
August 6: The fifth anniversary of Sheikh Zayed becoming Ruler of Abu Dhabi, with official celebrations deferred until later in the year.
August 15: Bahrain becomes independent.
September 3: Qatar becomes independent.
November 23-25: Meeting with Sheikh Zayed and Sheikh Rashid and senior British officials to fix December 2 as date of creation of the UAE.
November 29: At 5.30pm Iranian forces seize the Greater and Lesser Tunbs by force.
November 30: Despite a power sharing agreement, Tehran takes full control of Abu Musa.
November 31: UK officials visit all six participating Emirates to formally end the Trucial States treaties
December 2: 11am, Dubai. New Supreme Council formally elects Sheikh Zayed as President. Treaty of Friendship signed with the UK. 11.30am. Flag raising ceremony at Union House and Al Manhal Palace in Abu Dhabi witnessed by Sheikh Khalifa, then Crown Prince of Abu Dhabi.
December 6: Arab League formally admits the UAE. The first British Ambassador presents his credentials to Sheikh Zayed.
December 9: UAE joins the United Nations.
Race card
1.45pm: Maiden Dh75,000 1,200m.
2.15pm: Maiden Dh75,000 1,200m.
2.45pm: Handicap Dh95,000 1,200m.
3.15pm: Handicap Dh120,000 1,400m.
3.45pm: Handicap Dh80,000 1,400m.
4.15pm: Handicap Dh90,000 1,800m.
4.45pm: Handicap Dh80,000 1,950m.
The National selections:
1.45pm: Galaxy Road – So Hi Speed
2.15pm: Majestic Thunder – Daltrey
2.45pm: Call To War – Taamol
3.15pm: Eqtiraan - Bochart
3.45pm: Kidd Malibu – Initial
4.15pm: Arroway – Arch Gold
4.35pm: Compliance - Muqaatil
Test
Director: S Sashikanth
Cast: Nayanthara, Siddharth, Meera Jasmine, R Madhavan
Star rating: 2/5
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
The specs
AT4 Ultimate, as tested
Engine: 6.2-litre V8
Power: 420hp
Torque: 623Nm
Transmission: 10-speed automatic
Price: From Dh330,800 (Elevation: Dh236,400; AT4: Dh286,800; Denali: Dh345,800)
On sale: Now
Volvo ES90 Specs
Engine: Electric single motor (96kW), twin motor (106kW) and twin motor performance (106kW)
Power: 333hp, 449hp, 680hp
Torque: 480Nm, 670Nm, 870Nm
On sale: Later in 2025 or early 2026, depending on region
Price: Exact regional pricing TBA
COMPANY%20PROFILE
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Sui Dhaaga: Made in India
Director: Sharat Katariya
Starring: Varun Dhawan, Anushka Sharma, Raghubir Yadav
3.5/5
The White Lotus: Season three
Creator: Mike White
Starring: Walton Goggins, Jason Isaacs, Natasha Rothwell
Rating: 4.5/5
How to watch Ireland v Pakistan in UAE
When: The one-off Test starts on Friday, May 11
What time: Each day’s play is scheduled to start at 2pm UAE time.
TV: The match will be broadcast on OSN Sports Cricket HD. Subscribers to the channel can also stream the action live on OSN Play.
The%20Roundup
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The%20specs
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Real estate tokenisation project
Dubai launched the pilot phase of its real estate tokenisation project last month.
The initiative focuses on converting real estate assets into digital tokens recorded on blockchain technology and helps in streamlining the process of buying, selling and investing, the Dubai Land Department said.
Dubai’s real estate tokenisation market is projected to reach Dh60 billion ($16.33 billion) by 2033, representing 7 per cent of the emirate’s total property transactions, according to the DLD.
Formula Middle East Calendar (Formula Regional and Formula 4)
Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi
Round 3: February 7-9, Dubai Autodrome – Dubai
Round 4: February 14-16, Yas Marina Circuit – Abu Dhabi
Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia
Our legal columnist
Name: Yousef Al Bahar
Advocate at Al Bahar & Associate Advocates and Legal Consultants, established in 1994
Education: Mr Al Bahar was born in 1979 and graduated in 2008 from the Judicial Institute. He took after his father, who was one of the first Emirati lawyers
In numbers: PKK’s money network in Europe
Germany: PKK collectors typically bring in $18 million in cash a year – amount has trebled since 2010
Revolutionary tax: Investigators say about $2 million a year raised from ‘tax collection’ around Marseille
Extortion: Gunman convicted in 2023 of demanding $10,000 from Kurdish businessman in Stockholm
Drug trade: PKK income claimed by Turkish anti-drugs force in 2024 to be as high as $500 million a year
Denmark: PKK one of two terrorist groups along with Iranian separatists ASMLA to raise “two-digit million amounts”
Contributions: Hundreds of euros expected from typical Kurdish families and thousands from business owners
TV channel: Kurdish Roj TV accounts frozen and went bankrupt after Denmark fined it more than $1 million over PKK links in 2013
West Asia Premiership
Dubai Hurricanes 58-10 Dubai Knights Eagles
Dubai Tigers 5-39 Bahrain
Jebel Ali Dragons 16-56 Abu Dhabi Harlequins
Killing of Qassem Suleimani
COMPANY%20PROFILE
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