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Climate change: time is running out

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ISLAMABAD:

The recent flash floods, with global warming and the resultant climate change holding primary responsibility, affected 33 million Pakistanis and is estimated to run losses of over $30 billion.

Unfortunately, by using the alibi that we emit less than 1% of greenhouse gases (GHG) we are attempting to externalise the issue, claiming that other countries are the only ones responsible for the damages. Even 1% is not really a number we should boast; it is, instead, only a measure of our rudimentary industrial development vis-a-vis those others. Also, these other countries are already on the path of correction, while we appear to have learnt nothing from their experimentation and mistakes.

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This article is an attempt at understanding the entire issue in a holistic manner and its potential of affecting our lives.

Back to basics

To proceed further, it is essential to describe some of the terms used above, such as greenhouse gases. Growing plants in controlled environments is an established practice. Such houses are known as greenhouses, where the plants and air are warmed by sun rays and most of that heat remains trapped inside the house keeping it warm to the required degree necessary for the growth of the plants. The same principle operates in the case of the earth’s atmosphere; the sun heats it during the day and the heat is radiated back into the atmosphere as the earth cools at night. The said heat is absorbed by greenhouse gases in the atmosphere, which help keep the earth’s surface warm, making it liveable.

What serves as the most vital variable in this arrangement is the individual concentrations of the said greenhouse gases and their corresponding capacity to retain and radiate heat. The human-induced change in the concentrations, however, has increased the said capacity, thereby having increased the atmosphere’s average temperature or causing global warming.

Carbon-dioxide, methane and nitrous-oxide respectively account for over 79%, 16% and 6% of global human-caused emissions. However, their potential to damage varies. While 40% of carbon-dioxide still remains in the atmosphere after 100 years, methane persists only for a little over 10 year – however, the global warming impact caused by methane is 25 times vis-a-vis that of carbon-dioxide over 100 years. In fact, the same for nitrous-oxide goes up to 300 times. Additionally, these gases cause warming and warmer air holds more water vapours; thereby increasing their capacity to absorb and retain heat, thus adding to the warmth already being caused by GHG emissions.

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As a result of the above phenomena, between preindustrial times and now, the earth’s average temperature has increased by 1 degree Celsius. The resultant global warming is causing heat waves, floods, rise in sea levels due to melting glaciers and an increase in ocean temperatures etc. If left unchecked, the above temperature may touch 2.4 degrees Celsius by 2100.

Global response

Population size, economic and industrial activity, and its associated energy mix, determine all human-caused GHG emissions. Historically, and simultaneously with the industrial revolution, we also observe a strong public mobilisation for environmental conservation all over the West.

By the late 60’s and mid-1970’s, full-blown green movements and political parties had emerged. The German Green Party even remained a coalition partner from 1998 until 2005. It was because of this awareness that, since the 1972 UN Conference on Human Environment in Stockholm, environmental protection has assumed centre stage. The conference was followed by the Earth summit in June 1992, held in Brazil, during which the UN established an international environmental treaty. The resultant Kyoto Protocol implemented in 2005 defined binding emission targets for 37 industrialised countries.

The protocol was then superseded by the Paris Agreement in 2015 with the primary goal of limiting global warming preferably to 1.5 degrees Celsius, compared to pre-industrial levels.

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Pakistan’s response

As per the Global Climate Risk Index of Germanwatch, Pakistan is among the top 10 countries most prone to the ravages of global warming and the associated extreme weather events. Still, we observe minimal sensitisation at any forum in this regard.

To develop the required infrastructure adapted to such events, we require $7-$14 billion per annum. We all know our own budgetary constraints; whereas, accessing the several external climate funding options requires well rounded professional capacity which we are acutely short of.

By 2030, Pakistan aims to shift to 60% clean renewable energy, including enhancing hydel capacity by over 50%, using 30% electric vehicles and placing a complete ban on imported coal, all the while focusing on gasification and liquefaction of indigenous coal.

The biggest question is not the shortage of funds, rather it is, where is that professional capacity to plan and implement the above fundamental shift? The institutions serving in other countries and acting as engines of such shifts are missing entirely. Nothing describes our dismal preparedness for transition to clean energy better than the Global Energy Transition Index of the World Economic Forum that places Pakistan at 104 out of 115 countries, with a score of 49.

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Another parameter reflecting the attitude of a country towards global warming is when did its GHG emissions peak and start coming down, or its future target for the same. While 19 had peaked by 1990; the number would reach to 57, covering 60% of the global emissions by 2030. As to Pakistan; its GHG emissions increased by 140% since 1990 until 2017 and are expected to increase by 300% in 2030 vis-a-vis their level in 2015.

In 2000, we signed the UN’s Millennium Development Goals targeting accomplishment of those goals by 2015; increasing forest cover was one of the main targets. Pakistan, however, observed an erosion of 1% in the same from 6% to 5% during the period. India and China, on the other hand, increased forest cover from 22.7% to 23.8% and from 18.8% to 22.3% respectively. No one would believe that we had started in 1947 with a cover of 33%.

What needs to be done?

Currently, Pakistan is dealing with an existential challenge that requires intensive relevant knowledge, experience and capacity to lead. This can only be met effectively if Pakistan hands the lead on this to professionals immediately because the margins on the response time to the threat already stands exhausted.

The writer is a petroleum engineer and an oil and gas management professional

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Published in The Express Tribune, November 7th, 2022.

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Privatisation fails to meet objectives

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ISLAMABAD:

The success of Pakistan’s privatisation programme has remained limited to only generating $11 billion in sale proceeds, as the country could not achieve the post-privatisation objectives of improving efficiency and competition, says a new independent study.

The findings come amid the International Monetary Fund’s (IMF) push for approval of the State-Owned Enterprises (SOEs) Bill to improve efficiency and management of public sector firms. The finance ministry has requested the holding of a joint session of parliament to approve the law, after the bill was rejected by the Senate.

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In a study titled “Public Sector Enterprises (PSEs) in Post-Privatisation: Evidence from Pakistan”, authors Naseem Faraz and Dr Ghulam Samad concluded that the key objectives of the privatisation programme had remained unfulfilled. The study has been published in the Journal of Applied Economics.

“Our main finding is that the performance of firms has improved in the post-privatisation period but (it is) statistically insignificant,” said the authors. Privatisation has been carried out with the motive of reducing the fiscal burden and increasing the efficiency of the inefficient PSEs. Since 1991, the sale of PSEs has raised revenues of Rs649 billion, or $11 billion.

The $11 billion has been worked out by applying the exchange rate of the year when a privatisation transaction took place.

Pakistan is one of the developing countries where privatisation of a large number of PSEs has taken place, but the post-privatisation effect is yet to be analysed. Second, rather than focusing on one or a few sectors, the study considers all the privatised PSEs.

The study showed that the performance of a few firms improved in the post-privatisation period but it largely remained negative.

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“In particular, the privatised PSEs in energy, cement and chemical sectors do not show positive gains in the post-privatisation period. However, the telecom and textile sectors have experienced a positive change in the performance of the privatised PSEs.” “Similarly, the results also showed that the efficiency of firms did not increase significantly.”

The authors said that according to their assessment through the Key Informant Interviews, the malfunctioning of regulatory environment led to the market failure that eventually resulted in market exploitation.

Regulations and regulators are captured by the market, bureaucrats, judiciary and politicians. An effective regulatory environment does not exist to force the privatised entities to have higher efficiency and develop a competitive environment.

Government intervention in the regulatory sphere is dominant. Every regulatory authority has a board member from the government. This practice is clearly not aligned with the privatisation regulations.

The government intervention (secretary sitting as a board member) creates conflict of interest by having ownership and management together.

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The privatised banking and energy companies have failed to bring in the benefits of sell-off, according to the study. The process of privatisation and rewards distribution favoured mainly the buyers, while the government faced risk and cost.

According to the authors, the privatised companies earned a higher average rate of return on assets compared to their fully government-owned counterparts, as measured by the total net profits-to-sales ratio.

The higher returns on assets suggest a favourable effect of privatisation. On the contrary, the profitability or productivity measure (net profits-to-sales ratio) was relatively higher for the privatised firms but it was statistically insignificant compared to the period when the firms were fully government owned.

“The privatised firms experience a mild increase in productivity compared to their pre-privatisation period. This difference in performance is not statistically significant.”

Privatisation also did not enhance the efficiency of the privatised firms in terms of increase in sales. It suggested that the efficiency improvement was merely coming through the reduction in cost of production.

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The study identified weak regulators as a reason for the failure to achieve the privatisation objectives.

“Unfortunately, the regulator Pakistan Telecommunication Authority (PTA) did not influence PTCL and other related entities to work in a regulated market environment.”

The role of the PTA is limited to overseeing the determination of market prices. PTCL’s privatisation was not a fair deal. It lost $800 million and also did not improve the market in terms of competition.

“The government sold 26% shares to Etisalat and also transferred the management, which is against the rule, which requires 51% shares,” emphasised the authors.

The government had agreed that Etisalat would pay $2.6 billion by making upfront payment of $1.4 billion and the remaining $1.2 billion in nine installments of $33 million each. For the deal, the government received only $1.8 billion and the remaining $800 million was never paid.

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“The monopoly of the telecom sector persisted despite the privatisation and drove away billions of dollars.”

The privatisation of KESC, now KE, also did not achieve the objectives. Though the main reason of the privatisation was to get rid of the loss-making enterprise, unfortunately the government is paying more after privatisation, according to the study.

Published in The Express Tribune, November 24th, 2022.

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Tractor maker faces legal action over fraud

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KARACHI:

The Federal Tax Ombudsman (FTO) has ordered legal action against a tractor manufacturing company as the Federal Board of Revenue (FBR) reported a fraud of more than Rs10 billion.

According to FBR sources, the tractor company has allegedly committed a fraud of over Rs10 billion under the previous government’s initiative to provide tractors at a lower cost to the farmers.

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As part of the subsidy scheme, the government gave billions of rupees to the deserving and underprivileged farmers for the purchase of tractors.

Sources said that the tractor manufacturer had claimed sales tax refunds on fake documents and flying invoices. The FBR then referred the case to the FTO.

They added that the FBR recommended the application of the Benami Transactions Act while taking legal action against the tractor manufacturer.

“The respondent company misused pay orders of the complainant by issuing bogus and fake sales tax invoices to other persons for obtaining fraudulent adjustment and refund,” a notification of the FTO office read.

The FBR has initiated legal proceedings against the owners and dealers of the tractor manufacturing company for the recovery of money obtained through fraudulent means.

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The Directorate General of Intelligence and Investigation, Inland Revenue has been tasked with investigating the fraud and tax evasion case.

Published in The Express Tribune, November 24th, 2022.

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G7 looking at Russian oil price cap of $65-70

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BRUSSELS:

The Group of Seven nations (G7) are looking at a price cap on Russian sea-borne oil in the range of $65-70 per barrel, a European Union (EU) diplomat said on Wednesday.

Views in the EU are split, with some pushing for a much lower price cap and other arguing for a higher one. The G7, including the United States, as well as the whole of the EU and Australia, are slated to implement the price cap on sea-borne exports of Russian oil on December 5.

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“The G7 apparently is looking at a $65-70 per barrel bandwidth,” the EU diplomat said.

“Poland, Lithuania and Estonia consider this too high because they want the price set at the cost of production, while Cyprus, Greece and Malta find it too low, because of the risk of more deflagging of their vessels, which might mean the G7 has found a good middle-ground,” the diplomat said.

Some 70%-85% of Russia’s crude exports are carried by tankers rather than pipelines.

The idea of the price cap is to prohibit shipping, insurance and re-insurance companies from handling cargos of Russian crude around the globe, unless it is sold for no more than the maximum price set by the G7 and its allies.

Because the world’s key shipping and insurance firms are based in G7 countries, the price cap would make it very difficult for Moscow to sell its oil – its biggest export item accounting for some 10% of world supply – for a higher price.

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At the same time, because production costs are estimated at around $20 per barrel, the cap would still make it profitable for Russia to sell its oil and in this way prevent a supply shortage on the global market.

Brent crude front-month future oil prices initially fell to $86.54 from $87.30 on the news.

Published in The Express Tribune, November 24th, 2022.

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