Running Scared

Re: # 10

Hi Romair:

Cell Phones ...... ``was at 3.3. million by the end of 2003. At 7.5 million in 2004. And has now crossed 10 million. This market is growing at 110% annually. ......``

This number is suspect ..... With 137 million poppulation, including children, and old folks. At 110% growth will double every year.... i.e. 20, 40, 80, 160 million cell phones, which means in little over three years there will be cell phones than Pakistanis.


...... ``It recently signed an $11 billion deal with the Malaysian company that built the Petronas Towers. Yes, billion with a B. ...``

About three years ago, India`s GDP crossed $500 Billion mark, the market capitalization of Microsoft in that year. Say India`s GDP is now $600 Billion, and Pakitan`s GDP is about 15% of India`s is at $90 Billion. This single real estate deal at $11 Billion is about 12% of Pakistan`s economy. For such a deal to be credible cannot be no more than 10% of the company`s current revenue. Is there any company in Pakistan big enough to have $110 Billion annual revenues?

You might investigate a little more.

Anil Kapuria

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for those of us who don`t want to get our statistics from romair mian, our exuberant cheer leader (kind of like shaikh chilli ) and prolix mr knowitall, here is a much better source :

Business Recorder

Pakistani economy is now booming. Due to which after fifteen years, finally, the number of poor has started decreasing, instead of increasing. In 1990 or so, Pakistan was at its lowest poverty levels of around 18%. The lost economic decade of the 90s, put Pakistan`s poverty levels at 33%. They went from some of the lowest in South Asia to some of the highest. It took about four years to turn that around. And now they are decreasing again.......

Removing poverty, more than anything else, is the best indication of success of a govt. in Pakistan....

The auto, land, stock market, large scale manufacturing, financial and telecom are some of the sectors that have gone through the roof. Pakisatan`s auto industry is growing by 32% annually. Pakistan produced 35,000 (?) cars a year, just a few years ago. It produced 60,000 in 2002. And now produces 150,000. In four to five years, the target is 500,000. However, the demand still cannot be met. Same is the case with motorcycles.

Pakistan had 150,000 cell phones five years ago. It was at 3.3. million by the end of 2003. At 7.5 million in 2004. And has now crossed 10 million. This market is growing at 110% annually. There are more cell phones now in Pakistan, than fixed land lines. And Pakistan`s largest telecom company has been valued internationally at $10 billion. Considering the fact that it was a massively overstaffed govt. company, it will only get better with a higher market cap, now that it is privatized.

Pakistan real estate business has boomed to the point where anyone who had a small plot is very rich now. Bahria Town, is one of the largest private real-estate companies in Asia. It recently signed an $11 billion deal with the Malaysian company that built the Petronas Towers. Yes, billion with a B.

The banks are showing profits like never before. They are at their highest growth rates and assets under management in the history of Pakistan...........Even a huge white elephant like PIA is making a profit.

So one should accept a good thing when one sees it. The issue with Pakistanis is that they are too blinded by non-economic factors, to want economic progress for Pakistan. The problem with the growth is that:

- it now needs to spread to the lower-classes of Pakistan. That is where this article is accurate. All the money is still concentrated at the top, from where only us Chowkies, with houses in Lahore and Karachi and Islamabad are benefitting.

- The second issue is to privatize the big companies. This is happening. PIA should be privatized. As more and more companies are privatized, they will have to become more efficient

- Open trade with India. This is happening also

- Get the Army out of business. They are a huge hindrance and barrier for entrepreneurs. The Army is still the largest corporate entity in Pakistan. This part is not happening.........

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Omar Quraishi is right. This fauji govt. has sold itself like there is no tomorrow.

It`s not letting the market economy work but continues to abuse the average buyer through ridiculous tarrifs.

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This is from my own experience :

Published in The Review, Dawn, July 7, 2005

The pains of booking a car

By Omar R. Quraishi

The problems faced by genuine car buyers have been covered quite extensively in the print media for quite some time now. Much centres around the fact that for most car models, a buyer has to wait several months before he or she gets delivery. And this happens after one has paid the full amount to the authorized car dealers.

This means that if, say, a car model costing Rs1 million has a nine-month waiting period, then the buyer of the vehicle is foregoing interest income (if it can be invested in securities) worth around Rs70,000 or more.

If, however, one does not wish to wait out the delivery period, then one can always go to any car showroom and pay an additional amount for immediate delivery. This additional amount is known as the premium or in car dealers’ lingo the ‘own’ (mostly pronounced as ‘on’), that a buyer has to pay.

However, if one has recently thought of purchasing a new car, there are various options. With financing from banks readily available just about every Tom, Dick and Harry can probably get their hands on a brand new car. Or so one surmised. What happens after that is quite an interesting story and might be instructive for others who are thinking of booking a new automobile.

It’s not just the waiting period inconvenience, or the troubling fact that one has to pay in full in advance and not expect to get a car for six or more months, or that premiums on some models are as high as Rs 100,000. The problem is that if you don’t want to take a loan from a bank to purchase a car and manage to save enough (or borrow from relatives and friends) to purchase it outright then the system is stacked against you.

For example, one happened to approach an authorized dealer of a well-known brand to book a CNG-fitted compact model. The first response was that the month’s quota was over (the request was first made in mid-June) and that nothing could be done at least till the next month. The prospective buyer then tried his luck at another authorized dealer and was told the same thing: that the monthly quota for those wishing to book a car on an individual basis was finished.

The quota had been imposed by the manufacturer, and the reason, according to the dealer, was to stop demand from spiralling out of control. However, anyone with even a basic knowledge of economics would know that imposition of quotas, when demand exceeds supply, often leads to a blackmarket -–– which is precisely what the car purchase market in this country has become.

This situation gives rise to more questions, especially regarding this particular situation where a genuine buyer with enough money to book a vehicle outright seemingly has no choice but to turn to the open market and pay a premium ––- even if he (the prospective buyer) was willing to wait out the delivery period. However, if the buyer wanted financing or if the booking was made through a company the dealer was more than willing to accommodate the request.

Asked why this was so, the first response was that those who booked cars without any bank financing were often investors who were buying cars to sell them later in the open market on a premium. However, upon some further goading, and albeit a bit reluctantly, the dealership employee admitted that his organization had some kind of arrangement with the banks and hence the preference for buyers who wanted financing.

As far as the advice that a booking made through a company had a far greater chance of being accepted, the reply was that the quota for corporate bookings was 95 per cent and five per cent for individual buyers. So not only is this system forcing genuine buyers to turn to the open market, where they must pay premiums, it is also pushing them, even if they don’t want to, into indebtedness.

In fact, even to book a car, one had to have connections or some influence especially since the quota set by the dealers for individual buyers is a ridiculously low five per cent. And this was the only choice left, since paying a premium was out of the question and since one was prepared to wait out the delivery period.

In such a situation, what is an individual buyer of a car supposed to do? Especially someone who does not have any recourse to any influence or, for the sake of principle, does not want to involve anyone. So much has been written about this apparent cabal of car manufacturers, authorized dealers and showroom owners whose operation is completely against the interests of ordinary consumers.

For example, why cannot the government force the car manufacturers to accept a token payment and the rest to be paid later upon delivery, as is the practice in most civilized countries? Also, the ministry for industries and production needs to sort out this quota business since a five per cent quota for individual buyers means that they will suffer the longest delays.

But instead of doing any of this, all that the government has done is to commend the car manufacturers for increasing (so they claim) their production and to lower import duties on mid-sized and large cars.

The latter, much touted in the federal budget for 2005-6, only helps the manufacturers since most have now started importing such vehicles. If the government really cared for the individual car buyer, it should have lowered import duties on small and compact model cars. But then, does anyone in this country care for the ordinary consumer?

#5 Excellent response!!!.Competition has done wonders for the indian auto industry.What it has done mainly is to unleash the potential on indian auto makers, putting them on the global map of auto producing countries.The TATA Indica is an example.Sold in 20 countries , the current model pictures is actually on it`s way out( been in prod. 5 yrs), with a new model launch expected next year!!.Base price Rs.350,000.00, and that`s what the 800 costs in Pak!!.TATA motors alone sold 179,000 passenger cars fiscal 2004-2005!!.

TATA Indica at 2005 geneva Auto show


Revamped TATA Safari SUV..Rs.783,000.00


This is just one indian homegrown manufacturer.Competition is all good!!.When will pak`s learn??...........

The state of the auto industry in India was exactly the same twenty years ago. Now you can buy any kind of car you like, from a 800 cc Suzuki to a Merc Maybach. Naturally, there is tremendous competition amongst the manufacturers, and the consumer has a huge choice. Also, the ``deletion`` is very high. The Nissan X-trail, recently launched, has 80% local content.

Indian industry was dragged, kicking and screaming, into liberalisation because in 1991 India was practically bankrupt. I think Pakistan needs to be in a similar situation, i.e. almost over the edge, before logic prevails and the country opens up.

On another note,medicines in India cost 10% of what they cost in the Western world. It`s a great pity that the poor people of Pakistan cannot get cheap, quality medicines from India.

Shakir:

You should have provided more info and statistics. Cause this is really an important topic. The current auto mafia has bribed the Pakistan Army - as has the real estate mafia.

We need statistics thrown out. Though the army has the nation by the throats, one should still project the wrongs beign commited against the middle and lower classes!

Interesting article......

``If Azerbaijan Airlines can fly from Karachi to London return for Rs. 28,000 then why can`t PIA? Incompetence or inefficiency? If private carriers have been allowed to fly on international routes then this means lower fares for the consumer and that is the most important thing -- not the protection of an inefficient corporation.``

I don`t know about the other industries, but this I do know about. PIA is one of the most overstaffed airlines in the world. Had it been in the USA, it would have gone under many years ago. This is true for most govt. enterprises. I believe PTCL was the same.....

PIA is basically the employment beareau for the political parties, and the military. It gets filled with political party members as the ground staff, and retired military officers at other levels. And its pilot and other unions are so strong that they get international level perks and extremely high salaries (by Pakistani standards).

Go see the lifestyle of a PIA pilot or even a PIA steward. They live like the rich elite of Pakistan. I know stewards who drive Pajeros...........

This is why they are complaining about int`l routes being given to private airlines. Becuase now the private airlines will take their business, forcing PIA to downsize and lower the perks of its employees..........

P.S. the Musharraf govt. has straightened them out quite a bit, though........And it has privatized PTCL. PIA should be privatized also............

what are the urdu equivalents of - perestrioka and glasnost??

Shakir:
Your analysis on illegal government protection and cronyism in protection of big businesses is spot on. The automotive industry in Pakistan is probably one of the biggest scams being run in the country. Complete violation of the deletion clauses signed when these companies were being set up, connivation of the Excise Dept. and CBR in the selling of these cars, massive Customs violations in the import of CKD kits and auto parts are just some of the issues driving this gross violation of Pakistani consumers. These companies are making horrendous amounts of profits by selling cars at inflated prices to government departments(incl. the military) who don`t care about the price of the car or to corporations who generally just lease the car and write it off in their taxes. In the meanwhile the average person with a modest legal income, for whose benefit the industry was set up in the first place, can barely afford a poorly built Suzuki Mehran with AC, and then put petrol in the darned car (He/she is only allowed a 5% quota in booking a car for private use!). No where in the world are cars being built without any real government oversight on the safety of the vehicles (have you ever heard of crash testing of Pak built cars, child seats or mandatory airbags?) at such an exorbitant price. The Pakistani consumer is being reamed from both ends: the car manufacturer`s illegal price gouging for an inferior product, and the government`s taxes on petrol. This is a criminal sham being purported with full knowledge and connivance of the government.