A rapid fire round with Asad Umar
Earlier this month, BR Research had a quick tÍte-ŗ-tÍte with Asad Umar, the former Engro boss turned politician and current MNA with the Pakistan Tehreek-e-Insaf. What followed was a quick discussion on a host of topics ranging from CPEC, the impact of political climate on CPEC as well as ongoing and planned changes in Khyber Pakhtunkhwaís economy. Below is the edited transcript of that discussion.
BR Research: PTI has been very active in the parliamentary processes. Can you please talk about that, especially the role of an effective opposition in the process?
Asad Umar: The assembly process has two primary legs where the opposition can contribute. One is oversight which involves raising issues, raising flags, and asking questions. The second relates to legalisation.
Under legislation there are again two aspects: One is the legislation that you bring to the table and the other is helping to improve the quality of legalisation that is coming from the government. And we try to do both.
If you ask in committees you will hear that PTI participates seriously, perhaps more than anybody else. Half of the legalisation that Iíve been involved in, I literally sit separately and work directly with the ministries. So itís not just opposition, it is also constructive partnership in the legislative part because that is not partisan.
BRR: What are your thoughts on the CPEC? There seems to be euphoria because of CPEC. How do you see that?
AM: That euphoria you are talking about, it does not exist on the ground. I am a data person and the data doesnít show any euphoria.†
BRR: FDI data, in terms of dollars, is surely not reflecting euphoria. But donít you think we are seeing green shoots in the shape of transactions like Shanghai Electric, PSX, Roshan Packages etcetera. Chinese private investors are flocking to Pakistan to hunt for opportunities even in sectors as small as coconut farming.
AM: As I said, I am a numbers person. I donít go by sentiment, I go by numbers. And the numbers say that Pakistan currently sees one of the lowest investmentĖto-GDP ratios in history. To gauge the significance of any of these transactions, Pakistanís investment-to-GDP in the recent era had peaked in 2007 at about 21.5 percent of GDP. Last year it was about 8 percentage points lower than that, at around 13.5 percent of GDP.
What does 8 percentage points result in a dollar figure? 25 billion dollars! The total FDI that we have received so far this year including everything happening under CPEC, the so called euphoria, is $1.2 billion, out of which about $450 million dollars is just one transaction (reference to Engro Foods).
Therefore, there is nothing. There is not even a ripple on the still waters right now as far as investment excitement is concerned.†In fact, FDI from China in the year to date is half of that last year.
BRR: Dollar numbers are post-mortem; the sentiments are futuristic, and right now we are talking about euphoria which is a sentiment. Consider also that between FY11 and FY15, 30 new Chinese companies were incorporated in Pakistan. But between July 2015 and December 2016, 45 new Chinese companies were incorporated in the country. Are these not signs of CPEC green shoots at firm level?
AM: Let me explain. There is $18 billion ballpark of CPEC energy related projects under execution right now. Most of them are more than halfway through implementation phase. So Ďall of thisí, is reflected in the numbers I just shared with you.
If you take out the Engro Food transaction and you take out the Chinese FDI, the remaining FDI is the lowest the country has seen in memory! But even inclusive of the Engro Foods transaction and Chinese investment, we are still at record lows.
So when I see some green shoots I will say something is happening. Right now I donít see any green shoots; coconut farming is not going to impact these numbers. When the numbers are still anaemic even after $18 billion CPEC that are under way, we need mega projects.†Right now, there is no euphoria, except in a very small elite Pakistani circle.
BRR: Letís leave euphoria at that then. What about the CPEC projects. Are you satisfied with the progress?
AM: The CPEC projects are on track, more or less on time, few months here and there. They will happen. And they will happen reasonably on time and within the budget. Phase 1 of CPEC is now in advanced stages of execution and the early stages of completion. I keep on using the first phase of CPEC but this first phase is actually not CPEC at all.
BRR: How do you classify it then?
AM: Letís face it. The first phase is basically a financing package for energy and infrastructure projects. There is no economic corridor in this CPEC. In that greater vision of what can be CPEC; these will form parts of that. But as of right now, we have not started working on what truly would be an economic corridor.
BRR: Have you discussed or raised this with the government?
AM: I keep asking Ahsan Iqbal (Planning Minister) in the CPEC Parliamentary Oversight Committee that you are showing such beautiful black roads in Baluchistan but can you tell me which Pakistani products will flow on this roads to which Chinese market? What is our competitive advantage in those products? Where in Pakistan will it be produced? Who will it produce? And the answer to all of the above is we donít know. And itís acknowledged by Ahsan. He says we donít know right now.
They are now talking about setting up an industrial zones committee. But the mindset of industrial zones will not give the answers to the questions that I am asking. So what is at risk here is that you will end up doing what you have done with the motorway, which has a negative economic rate of return.
If we are able to actually translate CPEC into its vision of economic and regional integration, it will really be a genuine game changer. But if we donít do that, then its utility will be limited. It will still be a good thing and will add to our energy and road infrastructure. But it wonít be an economic corridor; nor a game changer.†
BRR: Letís ask you to wear your business manager hat Ė the former Engro boss one Ė and then ask you how you would do things differently, if you were in charge of CPEC. What business plans you have in mind to ensure that Pakistani products flow on the corridor and to which markets?
AM: We need a strategic game plan. We need the private sector to lead the developmental plan. The government should only play the role of facilitator and provide the platform. But we need business minds. We need Mian Mansha; Razzak Daud, Ali Muhammad and the likes.
BRR: But we are asking Asad Umar right now; and he is no stranger to business strategy, is he?
AM: Off the top of my head I cannot give you a strategic game plan. What I am saying is we need to let the private sector put together the strategic game plan, because in the end, the economic agents are going to be the private sector guys.
Before the 2013 election campaign, our party identified there growth drivers. The first is the consumer of Pakistan. So anything that promotes the consumer industry, the regulatory framework that facilitates the growth of those industries needs to be put in place. The second is the resource industry of Pakistan including oil, gas, minerals etc. And the third is regional trade/integration.
These are the three big growth opportunities, where the CPEC fits into one of these and therefore we wholeheartedly support it. But as I said, we need to figure out which products; why those products; where is our competitive advantage in those products; where they should be produced and who is going to produce them. And the private sector needs to put that game plan together.
BRR: How do you think KP can be a part of that game-changer? What policies or what zones or game plan you might have?
AM: KP is gearing up to capitalise the second of those growth drivers: resources. KP OGCL was given that mandate and it is run by professionals. Their whole role was to act as a catalyst for exploration in the province. If you look at the number of rigs employed, they have improved dramatically in the KP. Oil production numbers have gone up also, but more importantly it is the rig count that shows there has been improvement. Of course, a factor in that is the security situation improving because of Zarb-e-Azb. So it is not just what KP OGCL has done but that has also happened in conjunction.†
Second, we are in discussion with the World Bank to put together a game plan for Peshawar city in terms of how we position it as a regional hub in the context of the next 5-10 years when the situation in Afghanistan settles. To that end, the Afghan ambassador recently met Imran Khan for trying to play a role of politically enabling conditions which can be conducive to a lasting peace.†
BRR: Donít you think we need to correct the whole equation of East-West corridor, specially the Indian border, to make that plan successful?
AM: I agree. And not opening the Indian border for trade is not an excuse. The fact of the matter is that the federal government and its agencies are ninety percent of the solution.†
BRR: Developing Peshawar as a regional hub is a great idea. But donít you think KP and other provinces need to work on provincial GDP and other disaggregated data. We recently met Asif Bajwa, the PBS boss, and he said that provinces already have the relevant data and that producing provincial GDP is the job of provincial statistics department.
AM: The question is why do we want to replicate it? The PBS is simply not making the data available. How can they have national accounts without provincial data being made available to them? So by definition, all of this data is available. So for whatever political reasons they refuse to make that data transparent.
The provincial account is something that needs to be put together; but here we have been asking for despatch data on electricity, a data that already exists. Yet the federal government refuses to share it. Can someone tell me why is this not on Nepraís website?†Why do they hide this information; itís beyond my understanding.
BRR: If Nawaz Sharif suffers some setback in Panama case, do you think there will be any impact on CPEC?
AM: Nothing. It has nothing to with Nawaz Sharif.
BRR: Not even due to political uncertainty? Will that not affect Chinese?
AM: Maybe for 1-2 months at the most. The Chinese donít have a relationship with any political party. Pakistan has had a good relationship with China for decades regardless of the political set up in Pakistan.
BRR: How do you see the political situation if PM Nawaz gets a clean chit in Panama case?
AM: Since there are so many different scenarios, it is difficult to predict how it will play out. But one of the reasons of PML-Nís strength in Punjab is that there is an aura of invincibility which has been created. So if Mian sahab (PM Nawaz) suffers a setback at the hands of the judiciary, that invincibility will be punctured. What and how much are the consequences is a separate debate.†Obviously it will benefit us without a doubt. But how much benefit and what form it will take remains to be seen.
However, even if Nawaz is there, PTI still has a lot of chance of winning because if you look at the last 12-15 months by-election results in Punjab, the headline is that PML-N has won almost all of them. The real story is how close those elections were.†
BRR: What now after FATA inclusion in KP?
AM: Inclusion of FATA is a great decision. This will become a part of the next NFC Award. But regardless of the fact that FATA-KP merger was taking place or not, the question I have been repeatedly asking that if you see the present value of the benefits of the debt rescheduling of Pakistan, and the additional aid which came into Pakistan it totals about $70 billion.
Go to FATA and tell me if out of that $70 billion, you even see a billion dollars anywhere? The rest of Pakistan has actually benefited out of their destruction. We owe something back for heavenís sake. This country needs a domestic Marshall Plan equivalent to make sure that the military progress of Zarb-e-Azb can be consolidated in FATA. The political leg is a fantastic decision but the economic end of that also needs to be put in place.
BRR: Do you think there will be a new NFC this year or do you think they will throw the can down the line?
AM: It may be very difficult to reach a decision in an election year.
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