Subsidies to Public Sector Units Hurt Education in Pakistan

[Riaz Haq]

"...under 1.5% of GDP [is] going to public schools that are on the front line of Pakistan's education emergency, or less than the subsidy for PIA, Pakistan Steel, and Pepco." Pakistan Education Task Force Report 2011

Pakistan has ordered 5 Boeing 777s and 75 train engines for its state-owned companies in a bid to catch up with rising passenger and cargo service demands, according to media reports.

Boeing, the American aerospace giant, has announced the $1.5 billion deal with Pakistan International Airline (PIA) which includes a firm order of five 777-300ER (extended range) jets as well as the purchase rights for an additional five, according to Fox News.

Separately, The News is reporting that Pakistan Railway is purchasing 75 Chinese-made train engines for $105 million.

Highways have now become the most important segment of transport sector in the country, according to the Economic Survey of Pakistan. At the time of Pakistan's independence in 1947, transportation by roads accounted for only 8% of all traffic. Today, it accounts for 92% of national passenger traffic and 96% of freight.

The last decade has seen major competition coming from first-class private bus services now operated on modern motorways in all parts of Pakistan. The best known of these is Daewoo bus service with its comfortable luxury coaches and stewardesses offering meal services. With the construction and expansion of national highways and motorways, the trucking industry has also grown by leaps and bounds in the last few decades.

In mid-90s, Pakistan Railway had 10.45% share of passenger traffic and 5.17% of freight traffic, which has declined to 9.95% and 4.72% respectively by the year 2006-07, according to Economic Survey of Pakistan.

Pakistan Railway has been weighed down by heavy expenses of payroll and rising corruption and incompetence. As a result, a large number of engines are no longer operational and there have been big cuts in service.

After gaining domestic and international traffic market share for several decades after independence, Pakistan International airline has been losing it in recent decades because of serious problems of corruption and mismanagement by the cronies of the ruling politicians. PIA is now losing hundreds of millions of dollars a year while being hit by lean and mean domestic private airlines and international competition from rising Gulf giants like Emirates, Etihad and Qatar Airways.

Today, PIA's employee to aircraft ratio of 450 is more than twice as much as some of its competitors. "Politically motivated inductions have been the major cause of the significant increase in human resource burden in this organization," the State Bank of Pakistan said recently.

Pakistani taxpayers are heavily subsidizing the national airline at the expense of much more crucial public sectors like education. Last year, a Pakistani government commission on education found that public funding for education has been cut from 2.5% of GDP in 2007 to just 1.5% - less than the annual subsidy given to the various PSUs including PIA, the national airline that continues to sustain huge losses.

The latest example of the use of public funds to buy support for the government is Rs 366 million given in "discretionary development funds" as reward to senators for passing the 20th Constitutional Amendment with more than two-third majority, according to Pakistani media reports.

The crux of the issue for the bloated public sector units like PIA, Pakistan Steel Mills and Pakistan Railways is the reprehensible system of political patronage which puts the wrong people in charge of them. The sooner PIA, PR and other PSUs become privatized, the easier it will be to revive them for better service and improved profitability. It will turn them into a source of much needed revenue for the public treasury, just as the denationalization of banks did in the last decade.

From an after-tax loss of Rs. 9.77 billion in 2001 (when MCB, Habib, UBL and Allied were government owned) the earnings of these privatized banks rose to a profit after-tax of Rs. 73.115 billion in 2007. Higher earnings meant increased tax contribution by these banks to the government from Rs 10.8 billion in 2001 to Rs. 33.8 billion in 2007, according to data provided by former State Bank governor Mr. Shahid Kardar.

Even if privatization of the heavily subsidized public sector units does not yield higher tax revenue from them, it will at least free up public funds for more pressing needs like education, health care, energy, water and public infrastructure development.

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[Riaz Haq]

Upgrading ML-1 is an early harvest project of CPEC, for which the National Railway Administration of China and the Ministry of Railways Pakistan have jointly conducted a feasibility study.
CPEC’s official website quotes the project cost of $8.176 billion for rehabilitation and up-gradation of the Karachi-Lahore Peshawar (ML-1) Railway Track, with a length of 1,872kms. The first phase of $3.2 billion covers up-gradation of four segments.

The upgrade will bring the long-needed attention to railway transportation, which has deteriorated significantly over the past few decades. The Pakistan Railways carried over 70% of the national freight load in the 1970s, which now stands at a meagre 4%. Reportedly, the Pakistan Railways expects that this would grow to 20% after completion of this project with freight traffic increasing from five to 25 million tonnes per annum by 2025. The passenger traffic is also expected to increase by 45% (from 55 to 80 million passengers per annum).

https://tribune.com.pk/story/1651831/6-cpec-and-railways/

[Riaz Haq]

New bus service giving Daewoo a tough time

https://www.globalvillagespace.com/new-bus-service-giving-daewoo-a-...

More and more bus services in Pakistan are competing against Daewoo style of luxury services. With the decline of Railway services, bus travel has become the chief source of intercity travel in Pakistani. The transit market is becoming overly competitive in Pakistan with new companies offering more comfort and facilities opening at a fast pace all over the world. Al Halal Travels, a new Bus Terminal, in Faisalabad, built at an estimated cost of Rs.500 million, is an interesting new addition to this burgeoning expanding market in Pakistan.

This newly constructed terminal, with international standard facilities, is located at the main Sargodha Road, opposite Crescent Textile Mills, in an area that is often called, “Bolay di Chuggi” after a local saint. Three bus companies – Faisal Motors, Shuja Motors and Silk Line – are offering services from this terminal. Silk Line is affiliated with Al Halal Travels that owns and operates the terminal. Connecting Faislabad with Rawalpindi, Lahore and Multan this terminal is already offering luxury services to more than a thousand passengers daily.

Luxury services being offered are not only air-conditioned coaches and comfy realign chairs but a choice of snacks and movies and more importantly Wi-Fi. Providing internet in buses is the latest feature across Pakistan. Internet has now become a necessity in the world with over 140 million handsets across Pakistan among which nearly half are smartphones. Handheld devices are becoming one of the biggest sources of media and entertainment in the country. 65% of the Pakistani population is reportedly under the age of 30 so airplane style video services are now merely an entertainment fad for older generation.

Fast developing motorways are transforming lifestyle and travel dynamics across Pakistan – especially in Punjab. Buses from Faisalabad now reach Lahore in less than two hours and Rawalpindi in four. Multan, which at the moment is at a four hours bus distance, will be reachable in two and a half hours once the new motorway is complete and operational. Credit for the motorways will go to Pakistan Muslim League-Nawaz (PML-N) government who first conceived the idea, and kick started the work on Lahore – Islamabad motorway in 1993.

The real idea behind the motorways was to inspire the nation that Pakistan, too, can compete with the rest of world when it comes to infrastructure development. The government’s idea of introducing a service provider like Daewoo into Pakistani transport system in 1997 lead to a revolution of its own kind. Today increasing number of indigenous service providers like Al Halal Travels is competing to provide services often better than Daewoo at affordable prices.

[Riaz Haq]

Bankability of the Transport Sector by Karandaaz

https://karandaaz.com.pk/wp-content/uploads/2018/11/Bankability-of-...

Executive Summary:

1. The Transport, Logistics and Communications (TLC) sector is estimated to have contributed 13.3% of GDP in 2016-17. Of this, more than 62% was contributed by the road transport sector. In 2014-15 the sector employed 3.1 million people.

2. Most traffic intensive routes are a) Karachi to Peshawar via Hyderabad-Multan-Faisalabad-Rawalpindi; b) Sukkur to Quetta; c) Karachi to Quetta via the RCD Highway; and d) N-5 National Highway segment of Multan-Lahore-Gujranwala-Rawalpindi.

3. Passengers and freight are the primary segments of road transport sector. The fastest growing freight segment is the delivery vans at 7.5% annually, while for the passenger segment it is motor cabs and taxis at 5.9% annually.

4. Road transport grew at an average rate of 6.2% annually between 1991 and 2016, faster than the average GDP growth rate 4.4% during this period. China-Pakistan Economic Corridor (CPEC) is expected to accelerate transport sect or growth with construction of roads and other transport infrastructure.

5. Freight transport sector is highly lucrative with profit margins ranging from 21% for large trucks to 43% for rickshaws. Passenger transport sector is even more lucrative with 30% profit margin for wagons to 50% for luxury buses.

[Riaz Haq]

Passenger train service halted in #Pakistan till March 31. Pakistan #Railways operates 142 trains daily on its 1,885-km-long tracks to ferry some 700 million passengers every year. #Coronavirus fears had already reduced ridership. #COVID19 #lockdown https://tribune.com.pk/story/2183068/1-pakistan-railways-suspend-pa...

The Pakistan Railways on Tuesday announced that all passenger train services would be suspended till March 31 to curb the spread of coronavirus infections.

Taking effect from midnight, all passenger trains will remain suspended owing to the growing number of COVID-19 cases in the country, while cargo trains will continue to function according to their schedule.

Passengers who have already booked seats will be accommodated in trains of their choice when the services resume, according to a statement issued by the Pakistan Railways.
In case tickets are unavailable, they will receive a full refund.

The move to suspend the services came after Prime Minister Imran Khan’s approval.

Earlier in the day, Railways Minister Sheikh Rashid told the media that the suspension of all passenger train services was on the cards but the final decision would be made by the prime minister.

He added that he had recommended to the prime minister to give a relief package to the railways and continue paying salaries of its employees while the services remained suspended.

On Saturday, the minister had announced the suspension of 42 trains by April 1 to restrict the spread of COVID-19 in the country.

The minister said trains would be suspended in phases, adding that the notification of the suspension would remain in effect till the first half of the holy month of Ramazan.

The trains suspended in the first and second phases included Khushhal Express, Akber Express, Sindh Express, Ravi Express, Shah Latif Express and Rohri Express. Jinnah Express, Bolan Express, Moinjo Daro Express, Thal Express, Marvi Express, Samman Shakir Express, Faisalabad Express, Musa Pak Express and Chenab Express.

The Pakistan Railways operates 142 trains on its 1,885-km-long tracks to ferry some 700 million passengers every year, which means that some 200,000 people travel by trains every day. However, because of the coronavirus spread, the number had declined.
“Due to the current situation the number has declined to 165,000 passengers per day,” the minister said.

[Riaz Haq]

#Pakistan government has wasted Rs58 billion in subsidies to #Karachi-based Pakistan #steelmill (PSM) since 2008 when ex Chief Justice Iftikhar Chaudhry blocked its #privatization by #Musharraf. The Express Tribune

The federal government has so far disbursed Rs58 billion to the Pakistan Steel Mills (PSM) through five bailout packages since 2008-09 to ensure survival of the country’s largest industrial unit, said a report compiled by the Ministry of Industries and Production.

The report was submitted to the Supreme Court on Saturday – days after the Economic Coordination Committee (ECC) of the Cabinet – the country’s top forum for economic decision making – decided to terminate all employees of the PSM which is not functioning since 2015.

A three-judge apex court bench, headed by Chief Justice of Pakistan Gulzar Ahmed is also going to take up on June 9 a slew of petitions filed against the ECC decision.

The ministry compiled the report to respond to a query of CJ Gulzar who while heading a three-judge bench on March 12 wondered why the PSM had employed thousands of people and how it was giving salaries to them when the mills was not operating for years.

The bench had also asked the federal government to attend to all PSM affairs immediately.

According to the report, the PSM owes Rs22 billion to the Sui Southern Gas Company –a state owned gas supply company – as principal amount. The National Bank of Pakistan (NBP) – a state owned bank – also extended a loan of Rs36.42 billion to the PSM and the loan is yet to be paid.

The report said the PSM stopped commercial function in 2015 without formulating any human resource plan of its 14,753 employees. The number of PSM employees declined to 8,884 in 2019 wherein 2,233 are officers and 6,651 are workers.

The government of Pakistan pays Rs355 million for monthly net salaries of the PSM employees and it doesn’t include the component of leave encashment, provident fund and gratuity.

So far the government has released Rs34.01 billion as net salaries to the PSM employees. The government has also made a payment of Rs1. 266 billion to deceased employees on compassionate grounds to mitigate suffering of families.

It said the government constituted Expert Group in 2018 with an object to invite professional recommendations for the revival of PSM.

The group primarily recommended that the government should establish a Public Private Partnership (PPP) to raising the necessary capital investment and obtaining technical expertise for revival of PSM.

It recommended that government should appoint a technical advisory consortium (TAC) to design an appropriate public-private partnership structure after ensuring a transparent international competitive bidding process to select a preferred bidder and propose and implement liability settlement plan.

The report revealed that a financial adviser has been appointed and working in collaboration with the Privatization Commission. The PSM board of directors on April 16 approved a Human Resource Retrenchment Plan that was presented before the ECC of the Cabinet.

The ECC directed the PSM to resubmit the proposal after reformulating it with consultation of the PSM management so that its scope could be extended to the maximum number of the PSM employees along with disbursement and payment plan.

Later, the PSM with the approval of its board of directors shared revised Human Resource Rationalization Plan to retrench 100 per cent workforce. The ECC on June 3 approved this plan with direction that payment to the PSM employees shall be contingent upon the decision of the apex court.

“The payment calculated by the PSM shall be final once and for all and shall not accrue any further liability against the government of Pakistan and the PSM in this regard,” said the report.

[Riaz Haq]

ML-1 Project: How can an outdated railway line change the destiny of Pakistan? - BBC URDU

https://youtu.be/D7pTwYlzkrI

یک وقت آئے گا جب پاکستان میں ٹرینیں بنا توقف 160 کلو میٹر فی گھنٹہ پر دوڑیں گی اور لاہور سے اسلام آباد آپ صرف ڈھائی گھنٹے میں پہنچ پائیں گے۔ کراچی سے حیدرآباد تو صرف ایک گھنٹہ لگے گا۔ یہاں تک کہ مال بردار ٹرین بھی 120 کلو میٹر فی گھنٹہ پر چلے گی۔ ایسا اس وقت ہو گا اگر آٹھ برس کی مدت میں کراچی سے پشاور تک جانے والی مین لائن ون چین کی مدد سے بحال ہو پائے گی۔ اس سے نہ صرف ریلوے کو نئی زندگی ملے گی، پاکستان کی معیشت بھی اس سے مستفید ہو گی۔ ایم ایل ون کیا ہے، کس حال میں ہے اور کیسے بحال ہو گی، دیکھیے ہمارے ساتھی عمر دراز اور فرقان الٰہی کی اس رپورٹ میں

[Riaz Haq]

#Pakistan, #China agree to execute ML-1 #Railway Up-gradation Project under #CPEC on a priority basis. The agreement was reached at a virtual held meeting between the CPEC Authority and the National Development and Reforms Commission (NDRC) of China. #Transport- Business Recorder

https://www.brecorder.com/news/40161566

ISLAMABAD: Pakistan and China agreed to execute the much-awaited mega ML-1 Pakistan Railway Up-gradation Project under the China-Pakistan Economic Corridor (CPEC) on a priority basis.

The agreement was reached at a virtual held meeting between the CPEC Authority and the National Development and Reforms Commission (NDRC) of China to follow up on the decisions taken during the recent visit of the prime minister to China.

Special Assistant to Prime Minister (SAPM) on CPEC Affairs Khalid Mansoor and Director-General NDRC co-chaired the meeting.

The ambassador of Pakistan in China also participated.

The meeting decided that Pakistan Railways would immediately contact the National Railway Administration (NEA) to work out further details of the project.

ML-1 project: design fault, inadequate consultancy cause delay

The meetings also discussed the schedule for holding of meetings of Joint Working Groups (JWG) for various sectors. It was decided that meetings of the Joint Working Groups for Industrial Cooperation, Information Technology, Science and Technology and Agriculture would be held in the near future.

The NDRC director-general said that the relevant Chinese institutions were already taking the necessary actions to implement the understandings reached during the visit.

The SAPM CPEC Affairs stated that the prime minister’s meeting with the Chinese leadership had been extremely fruitful and the relevant institutions of the two countries were fully geared to take the necessary steps to translate the understandings reached at the highest level into actual actions on the ground at the earliest.

The NDRC director general stated that the relevant Chinese institutions were already taking the necessary actions to implement the understandings reached during the visit. He said that the Chinese side attaches the utmost importance to the ML-1 project and several internal meetings between the National Railway Administration and other relevant institutions have been held to work out the modalities and prepare for execution of the first phase of the project.

The meeting also discussed projects in the power sector including the 300MW Power Project in Gwadar and the 1,320 MW Thar Coal Block-1 Power project. It was noted that all actions relating to these projects had been completed on Pakistan side. It was decided that the Chinese side would expedite the next steps relating to these projects.

The meeting expressed satisfaction at the pace of implementation of various projects in Gwadar such as the East Bay Expressway, New Gwadar International Airport, Pak-China Friendship Hospital, etc.

The SAPM on CPEC Affairs expressed his gratitude to the NDRC for their support and facilitation in forwarding the agenda of the CPEC.

[Riaz Haq]

Bilal I Gilani
@bilalgilani
In one decade PIA has lost 25% of its fleet

2 / 3 rd of available seat and passengers who got on to a PIA

Yet we continue to put tax money to save this

https://twitter.com/bilalgilani/status/1535718850351837187?s=20&...

[Riaz Haq]

China, Pakistan Agree to Launch $10 Billion Railroad Project
Two countries plan to upgrade line from Karachi to Peshawar
Pakistan officials have said they expect funding from China
By Faseeh Mangi


https://www.bloomberg.com/news/articles/2022-11-02/china-pakistan-a...

Chinese President Xi Jinping and Pakistani Prime Minister Shehbaz Sharif agreed in a meeting in Beijing to launch a high-speed rail project that could cost $9.85 billion, a move that comes as the world’s No. 2 economy moves to slow some of its lending due to growth concerns.

The two nations agreed to get started on the Main Line-1, according to a statement from Sharif’s office, which described it as “a project of strategic importance.”

That project involves upgrading a 1,163-mile, colonial-era track from Karachi to Peshawar to carry high-speed trains. Earlier this week, Pakistan formally approved the project, which has been in discussion for years, without saying where the funding would come from or providing technical details.

Officials in Pakistan have previously said they expected to get loans from China for the upgrade.

The US has in the past criticized China for using what it calls “debt diplomacy” to make developing nations more dependent on Beijing. Still, earlier this year China delayed a bailout for Pakistan as its debt soared, and it has been scaling back lending in Africa as its economy slows.

About 30% of Pakistan’s foreign debt is owed to China, including state-owned commercial banks, the International Monetary Fund said in a report in September.

In June, Moody’s Investors Service downgraded its outlook on Pakistan to negative from stable, citing financial concerns.

See: Xi Kicks Off Third Term With Flurry of Diplomatic Activity

In their talks, Xi and Sharif agreed to finalize details on an inner-city rail line in Karachi. The Chinese leader also said his nation would provide 500 million yuan ($68.7 million) to Pakistan to help it rebuild after flooding over the summer that displaced more than half a million people.

Also Wednesday, the two countries’ central banks signed a memorandum of cooperation on a yuan clearing in Pakistan, the People’s Bank of China said in a statement. It didn’t give more details.

Sharif is wrapping up a two-day visit to Beijing. China is hosting a flurry of foreign leaders this week, as Xi kicks off a norm-busting third term during which he’s vowed to increase his nation’s global influence.

Vietnam’s Communist Party chief Nguyen Phu Trong became the first foreign leader to meet Xi since the Chinese president removed rivals and installed loyalists at a leadership reshuffle last month.

Xi and his top officials are then expected to hold talks in the capital with German Chancellor Olaf Scholz and Tanzanian President Samia Suluhu Hassan. Later this month, he will likely travel to Indonesia and Thailand for major summits attended by global leaders including President Joe Biden and Russia’s Vladimir Putin.

[Riaz Haq]

Pakistan taps Chinese credit for railway upgrade despite debt crisis
Islamabad says $10bn revamp of colonial-era line is essential even as it faces risk of default and forex reserves plunge

https://www.ft.com/content/44c26d5c-97d2-4181-b5a4-9ef66ce776db

Ahsan Iqbal, Pakistan’s planning minister, said the ML1 upgrade was vital to keep trains running and an example of the transformative work that Chinese credit had made possible.

“If we do not undertake this project, in a couple of years Pakistan will lose its railway logistics,” Iqbal told the Financial Times.

“The whole railway system will break down, this main line will break down. It will be very risky to run commercial operations on this track. It is no longer a choice. It is an imperative.”


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Iqbal, who oversees Pakistan’s involvement in the Belt and Road Initiative, China’s international infrastructure scheme, said it would take six to nine years to complete the ML1 upgrade. The work will include replacing track, modernising signalling, converting level crossings into underpasses or flyovers and building fences to stop cattle crossing the line.

The planning minister said the project would proceed in phases “to make it more manageable”, with an initial cost of $3bn. The loan from China would be repayable over 20 to 25 years and would be “concessional”, he said, without providing further details.

Chinese lending to Pakistan goes back years, part of an effort to forge economic and military ties that will help to counter their mutual rival India. The ML1 upgrade is part of the China-Pakistan Economic Corridor, a BRI centrepiece with an estimated total cost of $60bn.

The CPEC also includes Chinese development of a deep-sea port at Gwadar in south-western Pakistan, among other projects. Beijing is separately supplying Pakistan’s military with eight submarines and advanced J-10 C fighter jets.

A western diplomat in Islamabad said that for such projects to have continued even as Beijing saw growing financial distress in BRI recipient countries pointed to the importance it put on ties with Pakistan.

“Even if the rest [of BRI] lags behind, China wants to stay the course with Pakistan,” the diplomat said, adding that the relationship had “important military aspects developed over the long term”.

The projects — and Chinese financing — have also stoked domestic tensions. Police in Gwadar last month imposed emergency measures and dismantled a protest camp that had obstructed operations at the port with demands, among others, for Chinese nationals to leave.


Projects such as ML1 have also fuelled analyst concerns over whether excessive Chinese lending is exacerbating strains on Pakistan’s precarious finances. Chinese state lenders are together among the largest creditors to Islamabad, accounting for about $30bn of its outstanding debt.

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Sakib Sherani of advisory firm Macro Economic Insights said it was unfair to single out China’s role in Pakistan’s debt woes, with the largest repayments in the current financial year actually due to multilateral lenders.

But Chinese loans tend to carry higher interest rates than multilateral or other bilateral creditors, according to the AidData research lab at William & Mary college in the US. Chinese annual interest is typically 3-4 per cent compared with 1-2 per cent from OECD lenders, AidData said.



Even as it taps Beijing for the ML1 project, Pakistan is looking elsewhere for funds to help stabilise its shrinking reserves. The finance ministry is in talks with the IMF to secure the next tranche of a $7bn assistance programme, and has said it will approach “friendly” countries such as Saudi Arabia for more loans.

Sharif’s government is betting it can steady the economy in time for parliamentary elections that must be held before the end of this year.

Iqbal said he was confident the country would pull through. “Pakistan is facing economic [and] fiscal difficulties, but it is not in the range that it is a default economy yet. We are managing very prudently.”