“The decision of his removal has been reversed in the light of Supreme Court orders to suspend all the orders of appointment and transfers by caretaker setup [sic],” read a company statement issued here.

In an unprecedented move, the interim government had replaced the heads of at least eight organisations, including OGDC, Sui Northern Gas Pipelines and Sui Southern Gas Company. The move was seen by many as a politically-motivated decision.

The Supreme Court overturned the postings and transfers on Wednesday, saying they fell outside the mandate of the interim government.

Siddiqui’s sacking had sparked a tit-for-tat battle of words with Petroleum Minister Sohail Wajahat, who had claimed the OGDC CEO had misused company funds.

Wajahat accused Siddiqui of causing financial losses by hiring a bulletproof car, regularising contract employees and subverting an internal investigation.

In response, Siddiqui said the use of the bulletproof car in Karachi was authorised by the company board as he was receiving threats. Contract employees were regularised to do away with contractors who were earning commissions but not paying workers on time, he said.

Siddiqui was appointed less than 11 months ago by the Pakistan Peoples Party (PPP) government. He is a petroleum industry veteran, having worked at Premier Kufpec, ENI and other companies. He had also formed his own company, Alpha Petroleum, a few years ago.

When contacted, Siddiqui affirmed that he resumed office in the latter half of the day. He said the chairman of the OGDC Board of Directors had asked him to come and resume work following the orders of the Supreme Court.

“The rules and procedures for removing the head of a state-run organisation are very clear – an individual or a ministry cannot interfere in a company’s organisational matters on their whims,” Siddiqui said. “As a matter of fact, the Securities and Exchange Commission has clear guidelines in this regard. Even the Supreme Court says you cannot remove the managing director without proper reason,” he added. “If some allegations have been levelled against the MD, the board of directors needs to give him a proper chance to clear his or her position,” Siddiqui added.

The management of OGDC has been changed multiple times over the past four years. While the company has posted a steady rise in profits due to better oil and gas prices, there hasn’t been any substantial expansion in hydrocarbon reserves.

As the Pakistan Muslim League-Nawaz prepares to form the next government, anxiety has increased among executives of state-run oil and gas firms. People close to the party say it has decided to overhaul the boards of directors of public sector companies, and give them the task of appointing their own CEOs.

“The trend where the prime minister selects the top boss at such companies must end once and for all,” a former industry executive said.

Siddiqui said the incoming govt will have to follow laid down regulations if it wishes to bring changes in state-run organisations.

The company says that development projects accelerated under Masood Siddiqui, including Kunnar Pasakhi Deep-Tando Allah Yar, Uch Development Project and Dakhni Development Projects.

“During this period, oil and gas fields dormant for the last decade were activated, such as Noor Bagla and Sinjhoro Fields were put on production.”

Company officials have raised concerns about the important Kunnar Pasakhi Deep-Tando Allah Yar field project, recently awarded to a Chinese firm for $197 million.

Published in The Express Tribune, May 24^th, 2013.

Like Business on Facebook to stay informed and join in the conversation.

The group is part of Midwest Fertilizer Corporation, which seeks to build a $1.75-billion fertiliser plant in Indiana and was banking on financial incentives from the State.

But Indiana Governor Mike Pence said last week that the package had been put on hold because of reports that militants continue to use CAN as improvised explosive devices (IEDs) against US troops in Afghanistan.

“The decision came as a surprise for us. We have taken all the steps to address their concerns and are continuously engaged with them,” said Habib, a well-known Pakistani investor. “We will appeal against the decision with state authorities and try to convince them.”

But, he said, the investment in which Fatima Group has a $225 million equity stake was not entirely dependent on the incentive package. “We feel it’s a good investment opportunity. It is a profitable venture. And more than everything else it’s positive for Pakistan’s image.”

The statement of the governor of Indiana coincided with major symposium organised by the Government of Pakistan in Islamabad on Monday to pacify concerns about use of CAN in IEDs.

Chief of Army Staff General Ashfaq Parvez Kayani himself defended CAN production in Pakistan, saying that it was not the sole reason IEDs were being used in Afghanistan.

He also highlighted the efforts of the Fatima Group to bring down the nitrogen content in CAN, whereas other countries in the region were producing fertiliser with much higher content.

Fatima Group’s fertiliser divisions – Fatima Fertilizer and Pakarab Fertilizer – together produce 600,000 tons of CAN annually, enough to make over 20 million IEDs, according to estimates.

Ammonium nitrate was used in the bomb that blew up a government building in 1995 in Oklahoma City which resulted in 168 fatalities and then in the Bali bombings in 2002.

Chemical composition of CAN is 26% nitrogen, 13% nitrate, 13% ammonical, 10% calcium among other ingredients. CAN is often used as a substitute for ammonium nitrate, a fertiliser, according to Pakarab Fertilizer’s website.

Company officials insist that many other chemicals can as easily be exploited to make IEDs. Under US directives, Fatima Group changed the packaging of its fertiliser bags so it can easily be identified at the border.

“Obviously there are some groups behind all the pressure directed towards Fatima,” said another company official. “They want a share of the market.”

Pakistan accounts for just 0.1% of the world’s total production of ammonium nitrate. A lot of other countries in the region produce high intensity ammonium nitrate like Iran and Uzbekistan.

The company has also changed the colour of CAN grain on US insistence.

National Fertilizer Development Centre (NFDC) Research Officer Ahmad Ali Khan said stopping CAN production can be disastrous for the agriculture sector especially in areas facing water scarcity.

“The easiest way to understand its significance is that where a bag of urea yields an efficiency of 20% to 25%, CAN yields over 50%,” he said. “In any case, CAN makes up miniscule part of the total fertiliser output of the country.”

Pakistan’s annual demand for urea stands at seven million tons while it is producing around 5.5 million. Stopping CAN production will mean spending $2.5 billion on import of fertilisers.

According to reports, just 200 to 300 tons of the 600,000 tons of CAN produced in Pakistan could have actually been used in developing IEDs.

Published in The Express Tribune, May 22^nd, 2013.

Like Business on Facebook to stay informed and join in the conversation.

This story of a young boy who managed to cross multiple security checks at Islamabad International Airport and hoodwink Pakistan International Airlines (PIA) crew to find a seat on a flight to Balochistan’s capital has raised serious concerns about the safety of airports.

On the evening of May 9, PIA crew found Hassan sitting alone in the aircraft, which had just landed in Quetta.

“He didn’t have a ticket, boarding pass or parents accompanying and he kept coming up with different stories. He is a very shrewd boy,” said a Civil Aviation Authority (CAA) official who is linked with the case. “The way he managed to get on the aircraft leaves a big question mark about the performance of the Airport Security Force (ASF).”

According to the CCTV footage from Islamabad airport, Hassan walked to the ASF counters alone. One after another, he casually passed through all the security checks, the official said.

“When he reached the Boeing 737’s gate, the PIA crew asked him about his ticket. He said it was with his parents who were sitting somewhere inside. Our staff checked the name on the list and it was there. Apparently another boy named Ali Hassan was also on the flight,” said a PIA official.

At the Quetta airport, he was handed over to CAA officials and sent back to Islamabad on a PIA flight the next day. He was handed over to SHO Airport Police Station Malik Rafaqat but the boy has been missing since then.

“I can’t say anything on the matter right now. Just give me a day and I will come up with details,” said Rafaqat, insisting he was in Lahore on an official engagement. He didn’t say where the boy was.

A reliable source in CAA said Hassan was shifted to SOS Children’s Village, a social welfare organization that takes care of orphaned and abandoned children. But there the trail grows cold.

“We don’t have any boy by that name,” said SOS Rawalpindi’s Director Fatima. “As a matter of fact police has not shifted anyone to our facility in the past two months.”

PIA’s Quetta station officer and managers of Quetta and Islamabad airports refused to comment on the story. Islamabad’s ASF officials were also unable for comments.

A PIA spokesperson said that the fault lies with ASF, which didn’t stop the boy at the entry gate. “We accept that there might have been some oversight on our part. But it was clearly the responsibility of security officials to stop him from approaching the plane.”

Officials say the boy could have been used to see if someone can bypass the security checks.  “Anyone could be behind this. They could be smugglers or terrorists. We don’t know yet,” said another airport official.

This is not the first time that poor security checks at airports have come under the spotlight. In 2011, a stowaway fell to death in Lahore from an aircraft. The investigations into that case were never completed. More recently, Shahrukh Jatoi, the main accused in the Shahzeb murder case, also breezed through airport security when leaving Karachi for Dubai. He was on the Exit Control List at the time.

The recent incident has again forced the Ministry of Defence to constitute a high level committee led by Additional Secretary Muhammad Iftikhar Mir for the investigation. The enquiry is supposed to be completed in two weeks.

Published in The Express Tribune, May 21^st, 2013.

The price of a carbon credit, which represents the right to emit one ton of carbon dioxide (CO2), has come down to around $2 from an average of $10 last year, they said.

“We have missed out on a great opportunity by delaying all the wind-energy projects,” said Hammad Bashir, Director of Nouveau Energy Management Services, a consultancy firm. “Now we won’t get the right price. This is all because of procrastination on the part of government officials.”

Devised under a global treaty to reduce greenhouse gas emissions, trade in carbon credits is meant to be the cost-effective way for companies in developed world to reduce their carbon footprint.

Under the Kyoto Protocol, leading economies had binding targets to bring down emissions by December 2012, known as the first commitment period of the treaty. Each of the industrial nations was supposed to meet the target.

Instead of spending huge amounts in their own countries to update industrial processes, the companies there buy carbon credits from developing countries to compensate for the emissions.

Industry officials say the second commitment period that will run until 2020 has not been legally enforced yet. “The projects which come up now won’t be getting the right price,” said Bashir.

Pakistan has around 12 projects in fertiliser, cement, power generation and other industries that have qualified for selling carbon credits. It is hard to say how much the industry is actually earning by selling carbon credits since the information is not disclosed.

There hasn’t been any study to establish how much greenhouse gases are emitted in Pakistan, according to Bashir. “But we believe that the size of CO2 emissions, which could be brought down and converted into carbon credits, stands at around 43 million tons.”

As an example of the potential, industry officials often point to Pakarab Fertilizer’s N2O Abatement Project. It was implemented at a cost of $15 million and offered estimated annual revenue of around $13 million against reduction of 1.3 million tons of CO2 equivalent emissions.

Omar Malik, a director at Carbon Services, another consultancy firm, said slowdown in European economies and oversupply contributed to slashing carbon credit’s price.

“We won’t see any rush for investing in environment-friendly projects until the price starts to climb again,” he said. “That in no way means that work has completely stopped. There are many projects in the pipeline.”

As per the Clean Development Mechanism (CDM) secretariat in Pakistan, 67 projects have been approved for undertaking work to reduce greenhouse gas emissions.

CDM’s former head Javed Ali Khan said a fall in price of carbon credits should not be any reason to discourage investment. “So what if the price has crashed? You are not bound to sell your carbon credits right away. Just save them when price rises again.”

Referring to disagreement between developed countries over implementing the next phase of the protocol, he said market remains under pressure whenever there is uncertainty.

“Pakistan stands to gain a lot out of this initiative. Until now only private sector has come forward to earn carbon credits while there are so many public sector projects which could do the same.”

Industry people say the government must renew emphasis on CDM considering the massive power shortfall. Inefficient power plants and waste of methane in factories because of worn-out equipment contribute to the energy crisis.

Published in The Express Tribune, May 21^st, 2013.

Like Business on Facebook to stay informed and join in the conversation.

“We expect to see some of the business shifting to us,” said Shaikh Shafiq Rafiq, Chairman South Zone of Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA). “The same thing happened to us when there was a factory fire in Karachi. The buyers are wary of public backlash.”

Over 1,100 people, many of them women, were killed on April 24 when a Dhaka building housing garment factories collapsed. The disaster sparked angry reaction from international human rights organisations and labour groups to poor working conditions there.

In the last few days, Bangladeshi government has allowed workers to organise labour unions and announced plans to increase wages, which at around $38 a month are the lowest in the world.

Some of the leading retailers like H&M, Inditex and Tesco have also become part of a collaboration that plans to fund projects aimed at improving working conditions in factories across Bangladesh.

“They have two advantages over us – one is lower wages and other is duty-free access for their products to European countries,” said Rafiq. “We are catching up on both fronts.”

Pakistan is set to enter the European Union’s GSP Plus programme that will provide garment exports duty-free access to the EU.

According to provisional State Bank of Pakistan (SBP) data, textile exports were slightly lower at $9.59 billion in July-March 2012-13 compared with $9.792 billion in the same period of previous year.

But readymade garments exports jumped to $1.2 billion from $1 billion during the same period. It is hard to say how much increase Pakistani exporters have seen since the Bangladesh crisis.

“I believe Bangladesh is losing its competitive edge. They have same problems as we do in terms of law and order. As a matter of fact they have seen more labour unrest,” said Rafiq.

Meeting safety standards

PRGMEA ex-chairman Shehzad Salim said many firms complying with safety standards of international retailers were running close to full capacity as flow of orders has increased.

“Good companies are not short of work,” he said. “But what is happening with Bangladesh will have spillover effects on the entire region. And we are prepared for that.”

Pakistan was also in the limelight last year when a fire in a garment factory killed over 250 employees, forcing the industry to impart emergency exit training to thousands of workers.

“Working conditions in our factories are far better than what you will find in a Bangladeshi concern. Conditions are inhumane there,” said Salim, pointing out that minimum wage in Pakistan comes to around $90.

Yet, labour organisations say not all the companies follow rules and regulations. There are thousands of small factories, which operate as outsourcing units.

Large firms dealing with international retailers, contract out work to smaller units where working conditions could be really bad, according to industry officials.

Reduced buying power of customers in Europe has led to cutthroat competition among garment makers to reduce cost. Exporters also complain that retail chains are squeezing their margins.

“There is no doubt that prices have been under pressure,” said Salim. “But companies which have adopted technology and improved operations will easily sail through.”

Taking up the challenge

Power of international brands can be immense. In the 1990s, Pakistan had to revamp its sport factories in Sialkot where hand-stitched footballs involving child labour triggered a global controversy.

Initially, the industry feared that business will go away to other countries, but through efforts of International Labour Organization, Sialkot Chamber of Commerce and Industry, foreign brands and governments most of the production facilities were updated.

“There was an option before the industry to either bow out or take the responsibility and do everything possible to bring a change,” said Aijaz Ahmed, who works for the Child and Social Development Organization. “Industry opted for change.”

Through effective controls child labour stopped, he said. “We ran rehabilitation programmes and won back confidence of international brands.”

Published in The Express Tribune, May 15^th, 2013.

Like Business on Facebook to stay informed and join in the conversation.

“I am dead sure that Nawaz Sharif will take particular interest in the aviation industry,” said Farooq Omar Bhoja, who worked closely with the former prime minister in the 90s. “And PIA has to be the priority. They need to plug fiscal leakages. “

PIA posted a loss of Rs32.4 billion in 2012, up 28% over the previous year, as the airline continued to struggle to contain rising costs while operating an aging fleet of aircraft. The airline’s problems have compounded since then. In the past week, it could use only 17 of its 39 aircraft because the rest were grounded for want of repairs and funds to buy spare parts.

The Civil Aviation Authority (CAA) is currently pursuing a liberal aviation policy, allocating more flights to foreign carriers. This has particularly upset PIA: many past and present executives blame the ‘open skies’ policy for the downfall of the airline.

“We need a level playing field. Gulf-based airlines are backed by their governments, they have resources on their side. How can we compete with them?” a senior PIA official asked.

The strong ties between the Sharif family and rulers in Arab states have also made stakeholders more sceptical. Over the past few months, some Arab carriers have started flights to Sialkot, Multan and Faisalabad. The number of flights operated by foreign airlines has also increased. Emirates alone flies 13 flights from Karachi every day.

“There was demand on these routes and our airlines were not able to fill the gap. PIA can moan all it wants, but the reality remains that the airline has more internal challenges instead of external ones,” a CAA director said.

Revamping the airline will be a challenge. Over the years, the government appointed successful corporate bosses like Tariq Kirmani and Zafar A Khan, but that did not help much. Even Aijaz Haroon, the airline’s powerful managing director and a close aide to President Asif Ali Zardari, had to succumb to relentless union protests although he came from within the organisation.

“The only way to turnaround PIA is to put in place professional management, which is fully backed by the government,” said a former managing director of the airline. “There has to be zero political interference in managerial affairs.”

“A lot of times the management is helpless in taking important decisions, as directions come from the Ministry of Defence. Nawaz Sharif seems to be a politician who can stand up to the bureaucratic pressure of the ministry,” he said.

Private airlines

At the moment, four airlines – Indus Air, Rayyan Air, Vision Air and Fly Pakistan Air are vying to start operations. Half a dozen private airlines launched since 1993 have either gone bankrupt or shut down. The open skies policy might have given passengers options to travel in more foreign airlines, but has not spurred any substantial growth on the domestic front.

“You need deep pockets to run an airline,” said Farooq Bhoja, who was among the prospective sky-preneurs. “People don’t realise that. This business needs a lot of money and offers slim margins. Why would a big business group invest in an airline when it can make better profits elsewhere?”

Yet, he insists that offering incentives or protection will not help domestic carriers.

Published in The Express Tribune, May 14^th, 2013.

Like Business on Facebook to stay informed and join in the conversation.

Teachers and government officers posted at polling stations were assigned the tasks of ushering voters, locating names in rosters and taking thumbprints. As the voting process culminated, officers were engaged in separating, sorting and counting ballots.

“How can we vote while we are assisting people here?” questioned Humaira, a staff member at an Islamabad polling station.

Though there is the facility of casting a postal ballot, many polling staff members were unaware of it and had therefore failed to submit the requisite application on April 25. The postal ballot allows prisoners, government officials, members of the armed forces, holders of public offices and their wives and children stationed at a place other than the constituency to dispatch their vote by mail.

But a professor at a Karachi polling station, who has worked at various polling stations in his career, said that officials are usually not able to avail the option of a postal ballot owing to lack of time.

“By the time duties are assigned to the polling staff, it is already too late to file the application to the Election Commission of Pakistan for the postal ballot,” he said. “Duties are assigned just two or three days before elections.”

Polling staff were thus unable to exercise their own right to franchise, with many saying that they hoped a better system could be evolved in time for the next elections.

Published in The Express Tribune, May 12^th, 2013.

People turned up in hundreds, some even queuing up at 7am – an hour before the gates opened.

“I am 50 years old and I have never cast a vote. But I wouldn’t have missed this opportunity for anything,” said M Azam, who was among hundreds lined up near Zamzama Park. “We are all tired. We all want change.”

From DHA Phase-II to Clifton Block 9, there were complaints about absent polling staff and missing ballot boxes. But nothing was enough to discourage thousands of enthusiasts.

“I am voting for the third time at voting and I have never seen this kind of turnout,” said Shahab, who waited six hours for polling to start at the Govt College of Commerce.

Midway during the balloting, the Jamaat-e-Islami announced boycotting the elections, something which did not sit well with its supporters. “You want me to go home without casting my vote after I have waited in the line for five hours? If not Jamaat, then I’ll vote for PTI,” said a man at Bay View Junior School.

As delays prolonged, some people returned but many remained undeterred.  “We have been here since 8am and voting started four hours later,” said Usman, one of hundreds who were standing at the Zaheen Academy at Gizri.

People expressed their displeasure with the Election Commission of Pakistan for mismanagement of the registered votes.

“There are 35 votes in my family. We have been residing in Karachi for years and have voted in the last elections,” said Qabil Shah, a resident of Railway Colony. “I had personally filed the ECP registration forms, yet our votes have been registered at our ancestral village in Haripur, Khyber Pakhtunkhwa.

Published in The Express Tribune, May 12^th, 2013.

It is difficult to estimate exactly how much money businesspersons have paid to fund the election campaigns of various candidates. Interviews with executives from the oil, textile, power, pharmaceutical and auto sectors suggest that contributions have, indeed, been made – albeit in personal capacities only.

“No one wants to risk their neck,” the CEO of a denim manufacturing company quite candidly observed. “Pakistan’s politicians are vindictive: they come after us if we are seen close to their opponents. The best way, therefore, is to hand out cash to every political party across the spectrum.”

This across-the-board appeasement policy leaves little room for businesses to condition their funding with specific demands. Hidden from public scrutiny, such collaborations might help a few, but the entire industry never gains much from them.

Gulzar Feroz, vice president of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), says that distrust between industry groups and political parties runs deep, and has its roots in bitter past experiences.

“This is a country where governments reverse sound economic policies and rollback development projects just to settle scores,” he said, with a certain degree of contempt.

He also chided businesspersons for being too scared. “Sooner or later, we have to come together and make our voice heard at the right forums and at the right time. The best way to do this is to use the FPCCI’s platform and make it stronger,” he offered.

His frustration is not misplaced: despite its status as an apex trade body representing over 100 powerful industry associations and chambers, the FPCCI’s role has been limited to hosting lunches for government officials.

Adil Khattak, chairman of the powerful Oil Companies Advisory Committee, which represents oil refineries and petroleum marketing companies, concurs with the fact that it is risky being seen too close to politicians. “But things have changed over the years, reducing the need to be close to them at all,” he said. “Every civilian government since the late 1980s has encouraged the private sector [independently].”

In the past, businesses needed politicians they could rely on because of ideological divides in politics. “When industries were being nationalised in the 1970s, we simply had to find sympathetic politicians. Things are different now,” he observed.

Still, Khattak is very aware of what politicians can do to industry. After the Pakistan Peoples Party (PPP) came to power in 2008, a drive led by senator Rukhsana Zuberi led to a change in the pricing regime for refineries and oil marketing companies. There was unprecedented criticism of the industry’s profit margins.

“All we want is the consistency of policies,” Khattak explained. “And from time to time we have come together to lobby for that. The creation of the Pakistan Business Council (PBC) is an example of our efforts.” Formed in 2005 by the 14 largest Pakistani enterprises, the PBC is an advocacy group which lobbies for broad economic changes, instead of industry-specific issues.

Haroon Qasim, a member of the Pakistan Pharmaceutical Manufacturers Association (PPMA), was of the view that it might take a few more years before industry learns to effectively lobby for its demands.

“Nevertheless, whenever we have tried, the results have been good,” he said, referring to the PPMA’s drive to push the Drug Regulatory Authority bill through parliament. “We lobbied hard for that. We met different politicians over lunch and meetings and told them our point of view. We finally succeeded.”

Many businessmen point out that Asad Umar’s joining of the Pakistan Tehreek-e-Insaaf (PTI) was a positive change. The former head of Engro Corporation is the most high profile corporate boss to throw his hat in the political ring.

“The fact that he is close to PTI chief Imran Khan says a lot about how businesses and politics should work. Our economy needs broad-based changes in agricultural and manufacturing sectors; Umar’s position at the political helm reflects that things might just be moving in that direction,” said an auto industry executive.

Published in The Express Tribune, May 8^th, 2013.

Like Business on Facebook to stay informed and join in the conversation.

Traders said they were importing Malaysian palm oil at an average price of $875 per ton against last year’s $1,250 as international demand for edible oil shrank due to economic slowdown in the developed world.

“I think the full-year bill will be slightly less than $2 billion,” said Rasheed Janmohammad, a member of Edible Oil Refiners Association. “While the price of palm oil has come down, we are also importing more of oilseed.”

Palm oil imports dropped $279 million to $1.53 billion in July-March 2012-13, compared with $1.81 billion recorded in the same period of previous year, according to the State Bank of Pakistan. The country’s full-year oil import bill was $2.395 billion in fiscal year 2011-12.

“But there hasn’t been any significant change in demand for edible oil,” said Khawaja Arif, Chairman of Pakistan Vanaspati Manufacturers Association. “The country’s demand will remain flat at three million tons of edible oil.”

Pakistan meets most of its edible oil demand through imports. Traders said imports would range around two million tons of palm oil in 2012-13.

In its last quarterly review of the economy, the SBP pointed to the improvement in current account on the back of multiple factors, which also included a drop in palm oil import.

Traders said they expected the international price of palm oil to remain under pressure but warned that there could be a spike ahead of Ramazan. The retail price of cooking oil has actually increased despite the decrease in international palm oil rates.

Published in The Express Tribune, May 5^th, 2013.

Like Business on Facebook to stay informed and join in the conversation.