ISLAMABAD // In October, two commodity shortages hit Pakistanis with a vengeance: sugar and hashish.
Both shortages were artificial, manipulated by networks of manufacturers and wholesalers who hoarded thousands of tonnes of stock to send prices and profits soaring.
By November, prices of both commodities had doubled: sugar hit 125 rupees (Dh5.37) a kilo at those shops that were still catering to Pakistanis' sweet tooth.
But that figure paled in comparison to the 50,000 rupees (Dh2,147) a kilo that so-called "A-grade" export-quality hashish reached in the wholesale drugs market of Bara, a smugglers market near Peshawar, according to Fata Research Centre, an Islamabad-based think tank.
After a political furore, authorities dragged the price of sugar back down to 72 rupees per kilo, 10 rupees more than before the onset of shortages.
The price of hashish has stayed put, however.
"The big shots wanted us to reduce our sugar consumption, so we have," said Tasawar Shah, a house painter and resident of Nurpur Shahan.
"Now it looks like we'll have to give up 'medicine' as well," he quipped to a group of friends gathered in his uncle's sitting room.
Medicine is one of several nicknames Pakistanis have given to charas, or hashish.
"It's embarrassing. It has always been custom to offer medicine to our guests. Now it has become so expensive that we have to excuse ourselves by saying we have given it up," Mr Shah said.
Mangal Bagh Afridi, the commander of the Lashkar-i-Islami, a Pakistani Taliban faction based in the Khyber tribal agency, is a major reason the hashish trade has become a sellers' market.
Khyber agency, home to the Khyber Pass linking the subcontinent with Afghanistan, is the headquarters of a massive drugs trade that sprung up in the 1980s.
Back then, proceeds from huge shipments of heroin and hashish filled the pockets of kingpins such as the late Ayub Khan Afridi, who was a member of the federal parliament in the late 1980s.
Ayub Khan operated with impunity because a significant portion of the proceeds went towards buying weapons for the mujaheddin, fighting Soviet forces in Afghanistan.
Pakistan's Inter Services Intelligence and the US Central Intelligence Agency were complicit in the illicit trade, according to media reports.
That lesson has been well learnt by Mangal Bagh Afridi, a former lorry driver's assistant, who emerged from nowhere in 2006 at the head of a militant faction that seized control of Khyber agency, and by 2009 threatened to take Peshawar.
He was beaten back by a military counter-offensive this year and has retreated to the remote Tirah Valley, where the cultivation of bhang, a subcontinent variety of cannabis, is widespread.
While there are no official statistics on cannabis cultivation, production or consumption in Pakistan, hashish is believed to be the most widely consumed intoxicant in the country.
From the Tirah Valley, Mangal Bagh holds sway over the hashish trade, according to analysts specialising in the murky affairs of Pakistan's seven militant-infested tribal regions, known officially as the Fata.
"Mangal Bagh has transformed hashish into a regular commodity business," said Mansur Khan Mahsud, the director of the Fata Research Centre, an Islamabad-based think-tank.
His research has shown that the militant commander controls the Bara smugglers' market, extorting 3,000 to 5,000 rupees per month from traders, practically all of whom are doubly susceptible because they are migrant Afridi tribesmen from Tirah.
Cynically, the Lashkar-i-Islami describes the payments as zakat, an Islamic tax on disposable wealth.
Mangal Bagh has leveraged that control to massively increase the profitability of the hashish trade, Mr Mahsud said.
Notable among the "reforms" he has introduced to the trade are restricting supplies of A-grade hashish, to establish it as a premium product and the inferior B-grade as standard.
The tola, a unit of weight equivalent to slightly more than 11 grams (usually used to weigh gold), has been reduced to eight or nine grams.
He has also periodically stopped supplies to Bara, creating artificial shortages.
Mangal Bagh ordered a moratorium on hashish sales in October to force up prices and enable him to build up a drug inventory estimated to be worth between 50 million and 150 million rupees, the analysts said.
His intervention has pushed the price from 80 rupees per 11-gram tola of A-grade hashish in 2007, to 650 rupees per nine-gram tola of B-grade hashish at present.
The Anti-Narcotics Force, a military-led law enforcement agency, first noticed Mangal Bagh's impact on the hashish trade in June 2007.
It found that the national price of hashish leapt by an average of 52.8 per cent since June 2006.
"In effect, he has pushed up the price of hashish 10-fold in the last three to four years," Mr Mahsud said.
Mangal Bagh's use of stockpiling as a price-control tool mimics the Afghan Taliban, which stockpiled opium after bumper opium crops in 2008 and 2009 to protect prices, according to the United Nations.
The UN reported that the Taliban has used the shortages of heroin to increase demand and the prices of hashish.
thussain@thenational.ae
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
AUSTRALIA SQUAD v SOUTH AFRICA
Aaron Finch (capt), Shaun Marsh, Travis Head, Chris Lynn, Glenn Maxwell, D'Arcy Short, Marcus Stoinis, Alex Carey, Ashton Agar, Mitchell Starc, Josh Hazlewood, Pat Cummins, Nathan Coulter-Nile, Adam Zampa
How Tesla’s price correction has hit fund managers
Investing in disruptive technology can be a bumpy ride, as investors in Tesla were reminded on Friday, when its stock dropped 7.5 per cent in early trading to $575.
It recovered slightly but still ended the week 15 per cent lower and is down a third from its all-time high of $883 on January 26. The electric car maker’s market cap fell from $834 billion to about $567bn in that time, a drop of an astonishing $267bn, and a blow for those who bought Tesla stock late.
The collapse also hit fund managers that have gone big on Tesla, notably the UK-based Scottish Mortgage Investment Trust and Cathie Wood’s ARK Innovation ETF.
Tesla is the top holding in both funds, making up a hefty 10 per cent of total assets under management. Both funds have fallen by a quarter in the past month.
Matt Weller, global head of market research at GAIN Capital, recently warned that Tesla founder Elon Musk had “flown a bit too close to the sun”, after getting carried away by investing $1.5bn of the company’s money in Bitcoin.
He also predicted Tesla’s sales could struggle as traditional auto manufacturers ramp up electric car production, destroying its first mover advantage.
AJ Bell’s Russ Mould warns that many investors buy tech stocks when earnings forecasts are rising, almost regardless of valuation. “When it works, it really works. But when it goes wrong, elevated valuations leave little or no downside protection.”
A Tesla correction was probably baked in after last year’s astonishing share price surge, and many investors will see this as an opportunity to load up at a reduced price.
Dramatic swings are to be expected when investing in disruptive technology, as Ms Wood at ARK makes clear.
Every week, she sends subscribers a commentary listing “stocks in our strategies that have appreciated or dropped more than 15 per cent in a day” during the week.
Her latest commentary, issued on Friday, showed seven stocks displaying extreme volatility, led by ExOne, a leader in binder jetting 3D printing technology. It jumped 24 per cent, boosted by news that fellow 3D printing specialist Stratasys had beaten fourth-quarter revenues and earnings expectations, seen as good news for the sector.
By contrast, computational drug and material discovery company Schrödinger fell 27 per cent after quarterly and full-year results showed its core software sales and drug development pipeline slowing.
Despite that setback, Ms Wood remains positive, arguing that its “medicinal chemistry platform offers a powerful and unique view into chemical space”.
In her weekly video view, she remains bullish, stating that: “We are on the right side of change, and disruptive innovation is going to deliver exponential growth trajectories for many of our companies, in fact, most of them.”
Ms Wood remains committed to Tesla as she expects global electric car sales to compound at an average annual rate of 82 per cent for the next five years.
She said these are so “enormous that some people find them unbelievable”, and argues that this scepticism, especially among institutional investors, “festers” and creates a great opportunity for ARK.
Only you can decide whether you are a believer or a festering sceptic. If it’s the former, then buckle up.
The low down
Producers: Uniglobe Entertainment & Vision Films
Director: Namrata Singh Gujral
Cast: Rajkummar Rao, Nargis Fakhri, Bo Derek, Candy Clark
Rating: 2/5
COMPANY PROFILE
Name: Kumulus Water
Started: 2021
Founders: Iheb Triki and Mohamed Ali Abid
Based: Tunisia
Sector: Water technology
Number of staff: 22
Investment raised: $4 million
Company profile
Date started: January, 2014
Founders: Mike Dawson, Varuna Singh, and Benita Rowe
Based: Dubai
Sector: Education technology
Size: Five employees
Investment: $100,000 from the ExpoLive Innovation Grant programme in 2018 and an initial $30,000 pre-seed investment from the Turn8 Accelerator in 2014. Most of the projects are government funded.
Partners/incubators: Turn8 Accelerator; In5 Innovation Centre; Expo Live Innovation Impact Grant Programme; Dubai Future Accelerators; FHI 360; VSO and Consult and Coach for a Cause (C3)
Specs
Engine: Electric motor generating 54.2kWh (Cooper SE and Aceman SE), 64.6kW (Countryman All4 SE)
Power: 218hp (Cooper and Aceman), 313hp (Countryman)
Torque: 330Nm (Cooper and Aceman), 494Nm (Countryman)
On sale: Now
Price: From Dh158,000 (Cooper), Dh168,000 (Aceman), Dh190,000 (Countryman)
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.”
6 UNDERGROUND
Director: Michael Bay
Stars: Ryan Reynolds, Adria Arjona, Dave Franco
2.5 / 5 stars
Auron Mein Kahan Dum Tha
Starring: Ajay Devgn, Tabu, Shantanu Maheshwari, Jimmy Shergill, Saiee Manjrekar
Director: Neeraj Pandey
Rating: 2.5/5
Specs
Engine: Duel electric motors
Power: 659hp
Torque: 1075Nm
On sale: Available for pre-order now
Price: On request
