South Asia Investor Review

As South Asians, Americans and the rest of the world suffer the impact of doubling of the food and fuel prices in about a year, there is a strong desire around the world to understand and address the underlying causes driving this phenomenon. While conspiracy theories abound, the more serious reasons being explored include imbalances between supply and demand and market speculation by large financial players. Meanwhile, the people continue to suffer in countries such as Pakistan and India where the poor spend as much as 66% of their income on food and fuel. Increasing demand from the fast growing economies of the BRIC countries is usually acknowledged as a factor. Simultaneously, supply jitters have been caused by "peak" oil theories bandied about Saudi Arabia and crop failures in traditional breadbaskets of the world. In addition, the US and Japan have become the largest hoarders of oil. The Strategic US Petroleum Reserve (SPR) is an emergency petroleum store maintained by t...

As Pakistan increasingly finds itself the object of the world media attention, its coverage is frequently based on widespread negative perceptions by the correspondents who parachute in to cover specific events there for brief periods of time. Often, there is little or no context to the "breaking news" of the hour and little understanding of the country, its history and its people. The reporters often go there to find and confirm what they already believe rather than to uncover and learn the big picture of what is really happening there. Their cameras often focus only on a tiny slice of Pakistan that suits the report they want to file. For example, pictures of bearded men carrying weapons or chanting anti-West slogans or women in burkas demanding Shariah laws are often used to symbolize Pakistan. Pakistan does have its share of protesters and extremists, but it has a lot more than that, as some visitors discover. Here are a few such visitors and their impressions that I hav...

Pakistan's KSE-100 index has gained more than a thousand points in two days bringing it back above 12000 points but still well below the 15739.25 reached on April 21. The latest rally was triggered by several joint measures by the Securities and Exchange Commission of Pakistan and the Karachi Stock Exchange. The measures included a 1-month ban on short selling, a special 30 billion rupee ($446 million) fund set up to stabilize volatility, and revision of the short circuits to 10% on the upside and 1% on the downside. The new measures could reduce the downside while "creating incentives for the KSE-100 to increase," said Khalid Iqbal Siddiqui, head of research at Invest & Finance Securities, speaking to the Wall Street Journal. Some 78 companies of the 650 listed on the KSE gained close to the new limit of 10% on Tuesday. Among those that jumped 10% were Oil & Gas Development, National Bank of Pakistan and Lucky Cement. While there is short-term euphoria in respons...

Bunge, the third biggest US agribusiness company after Archer-Daniel-Midland and Cargill, is buying Chicago-based Corn Products International Inc. for $4.2 billion in stock to add corn-based sweeteners as demand increases for soft drinks and processed foods in China, India and Pakistan, according to US media reports. This acquisition enlarges Bunge's international footprint in emerging economies to drive its growth. Corn Products is the fourth-largest maker of high-fructose corn syrup in the U.S. and will give Bunge new customers in Pakistan, South Korea and Thailand, Credit Suisse analyst Robert Moskow said in a note on this deal. Corn sweeteners are used in soft drinks and processed foods instead of traditional cane or beet sugar because of their lower cost and higher concentration. A single 12-ounce can of soda has as much as 13 teaspoons of sugar in the form of high fructose corn syrup, according to San Francisco Chronicle. China, India and Pakistan have all seen double digit a...

Anil Ambani, the Indian billionaire, is putting up between $500 million and $600 million to back famous Hollywood director Steven Spielberg and his team at DreamWorks as they leave Viacom Inc.'s Paramount Pictures later this year, according to the Wall Street Journal. While Anil Ambani, married to a former Bollywood actress Tina Munim, has clearly shown great interest in the Indian film world for a while, his global ambition to build a major international media and entertainment empire is just beginning to emerge. Ambani's company, Reliance Big Entertainment, said last month that it would finance movies by production houses connected to George Clooney, Jim Carrey, Tom Hanks, Brad Pitt and others. It also said it plans to spend more than $1 billion in the next 18 months to expand its entertainment empire. Reliance is not the only Indian company pursuing deals in Hollywood. Similar deals are being made by UTV Motion Pictures, which co-financed current U.S. box-office hit "Th...

US-India Venture Capital Association (US-IVCA) hosted a panel discussion and dinner in partnership with Asia Society, Harvard Business School Association, Princeton Club, and the Indus Entrepreneurs in Silicon Valley on June 12, 2008. The venue was Quadrus Conference Center on Sandhill Road in Menlo Park, the home of the VC community in the United States. The event featured Dr. Tarun Khanna of Harvard Business School as the keynote speaker. The event theme was inspired by Dr. Khanna's recent book "Billions of Entrepreneurs" that covers the rise of entrepreneurship in China and India and how the US venture capital community is participating in this phenomenon. Appropriately, the panel included David Chao of Doll Capital Management, Mark Sherman of Battery Ventures, and was moderated by Sumir Chadha of Sequoia Capital India. Each of these panelists has significant experience of VC investing in the world's two most populous nations in Asia. To give a flavor of his book, ...

As the US venture capital investment activity in India and China races ahead, the VC investments in Pakistan are just beginning to show signs of life with two young Pakistani companies receiving funding in late 2006 and middle of 2007. Venture capital investment in China was up to $719m across 39 deals during the first quarter of 2008 from $492m in the first quarter of 2007, with media and advertising companies accounting for the bulk of deal activity and investment, according to the China Quarterly Venture Capital Report released by Dow Jones VentureSource. China has seen some very high-profile IPOs and exits recently that have firmly established China's value to the US VCs as a desirable destination. IT and IT enabled services sectors have emerged on top for VC investments in India in the first three months in 2008, attracting over two-third of the total deals worth 144 million dollar. Venture capitalists invested $928 million in 80 India-based companies last year, a significant ...

On June 14, the SAP campus in Palo Alto was the venue for OPEN Forum 2008, probably the world's largest gathering of Pakistani entrepreneurs outside of Pakistan with over 500 attendees. Organization of Pakistani Entrepreneurs (OPEN) describes itself as "a voluntary, not-for profit organization dedicated to the promotion of entrepreneurship and leadership in the Pakistani-American business community". Only a stone-throw away from Sandhill Road, the home of the big Silicon Valley venture capitalists, and located next to the legendary Xerox PARC, OPEN Forum this year naturally brought together a large number of VCs, high-tech executives, technologists, political leaders, diplomats, recruiters and the media. The conference was opened by Dilawar Syed, the current president of OPEN, who welcomed the attendees and explained what OPEN Silicon Valley is about. It was immediately followed by Adam Lashinsky of Fortune Magazine in conversation with Mike Moritz, Manging Director of ...

Pakistani economy adrift with nobody in full charge: Burki * Economist says policy makers have no serious priorities, common man sees no sign of relief * Says period of high growth in Pakistan is over * Says government should not be held responsible for current wheat shortage Warns government against subsidizing energy WASHINGTON: No one is in full charge of Pakistan’s economy, while the political elite is preoccupied with the judges’ issue and power-sharing arrangements, according to Pakistani economist and financial planner Shahid Javed Burki. Burki, a former World Bank vice president and finance minister in the Moeen Qureshi caretaker government, told a meeting at the Woodrow Wilson Centre, at which he is a senior scholar, that there is a “disconnect” between the poor, whose prime concern is their next meal, and the elite. The establishment and the citizen are not on the same page, which is making the common man increasingly angry as he sees no sign of any serious attention being pa...

MWH, a global provider of environmental engineering, strategic consulting and construction services, today announced that it was selected by the Pakistan Water and Power Development Authority (WAPDA) to provide engineering and construction management services for the Neelum-Jhelum Hydroelectric Project. The project is expected to add 963MW power generating capacity at a cost US $2.2 billion, according to Business Wire. MWH is a US firm based in Broomfield, Colorado. This hydroelectric project, first formally announced by former Minister Omar Ayub on June 10, 2007, is finally starting in earnest under the PPP government of Prime Minister Yousaf Raza Gilani. Prior to this project, Prime Minister Gilani signed a deal with a Chinese company, Dong Fong, for setting up 525 MW thermal power plant with an investment of $450 million at Chichoki Mallian (Sheikhupura). Both of these projects are expected help partially close the 3000 MW gap that exists today between supply and demand in Pakistan....

The bears reigned supreme as Karachi Stock Exchange (KSE)100-Index plunged by 226.33 points to close at 12,908.23, a loss of 1.75% on Monday. Other Asian countries also saw their stocks slump, India's Sensex lost 3.3%, Japan's main Nikkei 225 index slid 2.1% and Taiwan's Taiex shed 1.8%. While the Asian and international stocks have been in decline since the beginning of the year, the latest round of losses was triggered by an $11 a barrel spike in oil prices with renewed inflation fears. On Monday, oil prices slid slightly, though this did little to ease concerns in Asia. The US markets, however, have opened higher on Monday morning. Central banks across the globe have warned that interest rates may have to rise as they look to keep inflation under control, despite the fact that economic growth is slowing in key areas such as the US and EU. Pakistan's State Bank has recently raised interest rates from 10% to 12.5% and cut 2007-8 growth from 7.2% to 5.8%. This forecast ...

One of the Middle East's largest private equity firms has been quietly buying up farmland in Pakistan as part of plans by the United Arab Emirates to increase food security and to control inflation, according to a gulf website arabbuild.net. Please read prior blog posts on this subject . Dubai-based Abraaj Capital says it is working with the UAE government on the strategic agribusiness investments in Pakistan. The government in Abu Dhabi has been holding talks with Islamabad about a framework for investment in its agricultural sector as it seeks to secure cheaper long-term supplies of staples such as wheat and rice. The UAE investments appear to be part of a pattern of international investments in agriculture. Record prices of wheat and various grains have been attracting hundreds of billions of dollars from hedge funds and other speculators to the commodity futures markets (particularly wheat and rice futures) in recent months. A NY Times report now says that the investors are sta...

Repatriation of profits and dividends from Pakistan rose by 12.2 percent during the first ten months of the current fiscal year. Foreign direct investors sent $735m abroad from July 2007 to April 2008, up from $654.9 million repatriated in the corresponding period last year, according to the figures released by the State Bank of Pakistan. It is this policy of the Musharraf-Aziz era permitting repatriation of 100% of the profits that spurred a significant increase in foreign direct investment over the last several years. The investments in power, communication, oil and gas have led the pack in profits repatriated recently. Thermal power generation companies sent $151.27 million, the most by any sector of economy. This represents 27.9 percent increase over $118.32 million sent last year. It was followed by the telecommunications sector, which sent $92.06 million during July-April period. It is a drop of 14.3 percent from $107.42 million remitted last year. The oil and gas exploration com...

National Public Radio(NPR, an American radio network, is doing a series on a massive wave of urbanization underway in the world's emerging economies such as Brazil, China, India and Pakistan. It has chosen to start with Karachi, which it describes as Pakistan's "economic lifeline" and financial and industrial "powerhouse" that produces 25% of Pakistan's GDP, and calls it "one of the largest and most crowded cities of the world". It has a segment on Shehri, the activist group fighting big-money developers. It highlights several other facts about Karachi such as: 1. Karachi is built along a natural harbor facing the Arabian Sea, and this central location between the Middle East and India has made Karachi an important trading port for hundreds of years. 2. Karachi encompasses both its old seafront district and a sprawling web of commercial and residential development that covers almost 1,400 square miles. Its contemporary landscape spans skyscrap...

While India leads the world in total number of murders, South Africa is number one by per capita murder rate. The top five countries by total number of homicides are India, Russia, Colombia, South Africa and United States, according to Nationmaster.com. Based on murders per 1000 people, India ranks at 26 along with Yemen while Saudi Arabia and Qatar have the lowest murder rates ranking them at 61 and 62 respectively on a list of 62 countries. Though Pakistan is not included in this list, its per capita rate of 0.0602 per 1000 would put it at number 20 along with Poland and just slightly above the US which is at number 24. Pakistan's murder rate is also well below the weighted average of 0.1 per 1000 reported for the world by NationMaster.com. There were 32,719 incidents (Nationmaster puts it at 37,170) of murder recorded in India, whereas there were 28,904 in Russia, 26,539 in Colombia, 21,995 in South Africa, 16,692 in the US, 13,829 in Mexico and 9,631 in Pakistan, the report com...

Pakistan's central bank expects economic growth will come in between 5.5 percent and 6 percent in fiscal 2008, which ends June 30, down from 7 percent the previous year. This forecast comes on the heels of dire talk of economic "meltdown" by the new leadership that is facing serious political instability amid serious differences in the PPP-PML(N) coalition government. The ongoing unease with new leadership is continuing to accelerate loss of confidence in Pakistan's economy by businesses, investors and consumers. In a quarterly report released Saturday, the State Bank of Pakistan said the economy was showing "increasing signs of stress" as a result of both homegrown and international factors. A disappointing wheat harvest will likely impact the key agriculture sector, while chronic power shortages - both households and businesses face regular load shedding - have slowed industries including steel and textiles, it said. With the dramatic rise in international...