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CONTENTS

08 The fate of the Indus 12 attack of the SUVs 18 Can Ms Marvel be the superhero Pakistan needs to finally go mainstream? Ariba Shahid

18 18 Pakistan’s gold is going nowhere for now 21 Emlaak: Pakistan’s first mutual fund marketplace

23 SBP orders TAG to make full refunds to depositors. What does this mean for the troubled fintech startup?

24 24 Fintech company OneLoad announces $11m raise from Bill & Melinda Gates Foundation, others

Profit

26 The cruel business of buying and selling lions

Publishing Editor: Babar Nizami - Editor: Khurram Husain - Joint Editor: Yousaf Nizami Assistant Editors: Abdullah Niazi I Sabina Qazi - Sub-Editors: Mariam Zermina | Basit Munawar Editor Multimedia: Umar Aziz - Video Editors: Talha Farooqi I Fawad Shakeel Reporters: Ariba Shahid I Taimoor Hassan l Shahab Omer l Ghulam Abbass l Ahmad Ahmadani Shehzad Paracha l Aziz Buneri | Maliha Abidi | Daniyal Ahmad | Ahtasam Ahmad | Asad Kamran Chief of Staff: Maliha Abidi - Regional Heads of Marketing: Mudassir Alam (Khi) | Zufiqar Butt (Lhe) | Malik Israr (Isb) Business, Economic & Financial news by 'Pakistan Today' Contact: profit@pakistantoday.com.pk

The fate of the Indus Climate change is the latest threat to the Indus, and without immediate attention, there will be hell to pay

By Abdullah Niazi

n May 2022, reports began to emerge that the cotton crop in Sindh was wilting. In Sanghar, one of the largest cotton producing districts in Sindh with cotton grown on 300,000 acres of agricultural land, less than 200,000 acres were being used to cultivate cotton. And on the 200,000 acres that were being used to grow cotton, crop performance was abysmal. Over the past 10 years, according to figures available with the Pakistan Cotton and Ginners Association, Pakistan’s cotton yields have fallen by 26% from 880 kg per hectare to 652 kg per hectare over the last decade. While the cotton crop in Sanghar suffered, other agricultural areas dependent on the down-river water from the Indus were affected as well. In Thatha, fishing villages were left without any source of livelihood as the nearly three kilometre stretch of river that crossed the region dried up completely and was replaced by huge deposits of sand. At the Kotri Barrage of the Indus in Sindh, water levels had fallen from 15,000 cusecs of water to barely over 2000 cusecs. Figures from May this year showed that a major dip in the Indus of 10,000 cusecs (an outflow of 105,000 cusecs on May 19 and 95,000 on May 20) occurred at Tarbela dam, raising fears that the dam may have hit dead levels. Its inflows plunged to 77,900 cusecs on Friday from 98,000 cusecs on May 14. These flows are to be used Taunsa upstream in Punjab and in Sindh. The dam’s level stood at 1,406 feet on May 20 against 1,414 feet on May 16. All of these are signs of the times. For decades, the Indus River has been suffering. Since the middle of the 19th century, it has undergone severe changes due to the development of the Indus Irrigation System, the building of dams and barrages. Since the 1947 partition, the Indus River Treaty of 1961 has also contributed to the unnatural ebbs and flows of the river. All of these have had adverse effects on the water levels of the river and its different tributaries, and in turn has had an effect on the country’s agriculture. Now, however, we are beginning to see the emerging effects of climate change as well. In addition to the many historic reasons for the state of the Indus River, climate change is causing direct consequences already, adding another layer of complexity to an already troublesome issue. As climate change continues to wreak havoc on both lives and livelihoods, its effects are only just making themselves known. Over the decades to come, unless dire actions are taken, things are only bound to get worse.

The Indus

bout 50 million years ago, in the Mesozoic era, the shallow sandy Tethys Sea upfolded and formed the Great Himalayan Ranges because of the collision of the Indian plate and the Siberian plate. The Indus basin comprised lofty Himalayan mountains in the north and flat plains of Punjab and Sindh in the east and south. These mountains with immense snow cover gave birth to the Indus River and its tributaries. The river originates from Lake Mansarovar in Tibet, China, which stretches over 3200 kilometres. It flows through the Hindukush, joined by tributaries from Gilgit, Swat and Kabul, before flowing into the Punjab near Kalabagh. This is where five different freshwater tributaries which give the Punjab its name — Jhelum, Chenab, Ravi, Beas, and Sutlej — join the Indus before flowing together in a single mighty river all the way down Sindh and into the Arabian sea. For centuries this has been the flow of the Indus. It has changed course, warped itself around cities, and spurned them when they have grown too large. It has, at the same time, been open to the manipulations of human civilization. Since the middle of the 19th century, the construction of dams, barrages, and canals to divert the maximum river water for irrigation resulted in drying up the natural pathways of the rivers, except during monsoon season. “The aquifer in the irrigated areas became high and created problems of waterlogging and salinity, but due to extensive groundwater extraction, the water table near urban centres is lowered now. Water quality was degraded due to addition of fertilisers, pesticides, chemicals, municipal sewage, and industrial effluents,” says an article titled “Vulnerability of Environmental Resources in Indus Basin after the Development of Irrigation System,” published by the World Bank in 2019. In the British era, the irrigation system was developed to increase crop production in order to develop the agriculture-based economy, which turned the basin into a densely populated area. Food demand and British economic interests in the agricultural products, specifically cotton, were a major driving force for the development of an extensive agriculture system in British India. By the development of irrigation systems and introduction of fertilisers and pesticides, agricultural production increased many folds. This extensive human intervention in the Indus basin resulted in the adverse effects on the ecosystem of the Indus plain from the Himalayas to the Indus delta. Between 1872 and 1929, the British rulers built weirs across all the eastern tributaries of the Indus to divert the river water into canals. Weirs were also constructed on the Kabul and

Swat rivers and on three sites on the Indus itself and its inundation channels. Most of the upper Indus plain, thus, received perennial water and the desert was brought under the plough. Because the irrigation system was such a huge success, areas that were formerly rainfed now became dependent on river-water. After partition, and the Indus River Treaty of 1961, Indus River System (IRS) was developed into a complex network of canals, and 74% of its water was utilised for irrigation. Since 1947, the Indus irrigation network has been continuously extended, and cropland area has increased from 8.5 to 18.2 MH in Pakistan and 2.02 to 8.5 MH in India, according to the earlier mentioned report. It has never remained a single entity. Like all great rivers, it has shifted course and brought both destruction and life with it. The river has been unpredictable in its moods, but the one thing it has always been has been reliable in is the amount of water it has been providing. A large reason for that reliability has been that, according to a book titled “Irrigation” edited by Sandra Ricart, Antonio Rico, and Jorge Olcina, the Indus gets “more than 50% water from the glaciers followed by well-defined monsoon system in the upper catchment during monsoon season.”

Enter climate change

his was a very brief history of what has happened to the Indus since the middle of the 19th century. The point is not to say that the Indus was destroyed by the Indus Irrigation System or that it was a mistake. On the contrary, the irrigation system and the changes the Indus has undergone is testament to its adaptability. The number of dams and barrages built on the Indus have generally been identified as a major reason for the end of communities in the deltaic region dependent on the Indus. One example is Keti Bunder, which lies to the east of Karachi. This was once a bustling port and trading centre with a population of 40,000, but is today a ghost town with most of its population moving to more economically viable areas. Shah Bunder tells a similar story, as do several other port towns which once dotted the coast. However, the Indus has never been a monolith. It has never remained a single entity. Like all great rivers, it has shifted course and brought both destruction and life with it. The river has been unpredictable in its moods, but the one thing it has always been has been reliable in is the amount of water it has been providing. According to a book titled “Irrigation” edited by Sandra Ricart, Antonio Rico, and Jorge Olcina, the Indus gets “more than 50pc water from the glaciers followed by a well-defined monsoon system in the upper catchment during monsoon season.” This explains why it is reliable.

AGRICULTURE AND CLIMATE CHANGE

Line-graph-shows-the-Indus-River-water-flow-rate-from-Kotri-barrage-during-the-period While it has faced both natural and human changes, the Indus has thrived off the basis of these glaciers. With climate change knocking on the door, that too might be a thing of the past. It is an issue facing many of the rivers that are fed from the Tibetan plateau. Mountains are the water towers of the world, especially in the case of Asia, whose rivers are all fed from the Tibetan plateau and adjacent mountain ranges. More than 1.4 billion people depend on water from the Indus, Ganges, Brahmaputra, Yangtze, and Yellow rivers which are fed by these water towers. Upstream snow and ice reserves of these basins, important in sustaining seasonal water availability, are likely to be affected substantially by climate change, but to what extent is yet unclear. What is clear is that the early effects are already visible. In an article published in the journal for Global and Planetary Change, a report on the state of the Tibetan Plateau published a few years ago reads that the region has faced “evident climate changes, which have changed atmospheric and hydrological cycles and thus reshaped the local environment.” The report claims that “the Tibetan Plateau (TP) exerts strong thermal forcing on the atmosphere over Asian monsoon region and supplies water resources to adjacent river basins, and the effect of climate change on this region will have an impact on the Plateau energy and

water cycle.”

What does this mean?

ccording to a 2020 study on the threat of climate change to the Indus Water Treaty, climate researcher Rameez Mohib Bhat explains that climate and water have a close relationship, and depend on each other. Any change in climate affects water resources and alters water levels. On the one hand, climate change causes a rise in temperatures which means greater evaporation off the river’s surface, leading to more humidity and stronger and more destructive monsoons. On the other hand, the melting of the glaciers that feed rivers like the Indus also has an adverse effect. “Scientists have predicted a decrease in precipitation over the lower Indus Basin leading to drought-like conditions and an overall warming effect. Although the forecasts of climate change for the region may not be completely reliable, it is largely predicted that trends will continue towards this pattern,” says Bhat. ”Extreme flooding in the basin also leads to chaos on farms and in communities along riverbanks. Flooding transforms the soil and makes surrounding areas more vulnerable to erosion and degradation, resulting in the pollution of waterways and a reduction in agricultural productivity.”

The results of studies have not been encouraging. An analysis of the melting rate of glaciers entering the Indus Basin is limited due to the inaccessibility of the Himalayan Mountains and high altitudes. However, forecasts obtained using the hydrological modelling approach in combination with the calculation of the mass balance of the glaciers show that the most probable glacial scenario as a result of a “decrease in mean upstream water supply from the upper Indus”. Himalayan glaciers, an important source of rivers in South Asia, have lost more mass since 2000 than in the entire twentieth century, according to a report from the International Food Policy Research Institute (IFPRI). Meanwhile, a Dutch study predicts that a reduction in glaciers would reduce the Indus flow by 8% by the year 2050. The reduction would be extremely detrimental as the Indus River is the main source of water for all downstream areas. All of this will have a major impact on agriculture. According to Bhat, Pakistan’s position is precarious because it relies entirely on the Indus River system and has no other alternative if the Indus were to run short. Agriculture accounts for 23% of Pakistan’s national income and about 68% of the rural population depends on it as a source of livelihood. “Water stress will increase, as the population and demand for water grow but supply

is no longer increasing,” says Bhat. “Reduced water availability for irrigation due to reduction or reallocation of the flow of water may happen for the following reasons. A reduction in groundwater resources, a decline of reservoir storage due to sedimentation, a rise in environmental flow and growing urbanisation which increases domestic and industrial demand for water. Furthermore, it is estimated that the number of people living in the Indus Basin is likely to rise to 400 million by 2050 as compared to 300 million people today,” it reads.

The effects - the example of cotton

ere is the situation in short. Over the centuries, the Indus changed course many times, like mentioned above, but always remained consistent in the amount of water it supplied. However, over the course of nearly two centuries, unplanned irrigation, badly placed dams and barrages have all caused the river to become erratic. With the threat of climate change looming over the Indus, the river may be in for some trying times in the days to come, and the consequences will be widespread. Due to a lack of data, it is difficult to determine how much of the Indus’ current plight is due to climate change, but if immediate steps are not taken, it will not be a pretty picture. The Indus is the spine of the nation’s agriculture, and it being affected by climate change will have a massive impact on the sector. Outside of the Indus, agricultural outputs have already been under pressure because of rising temperatures. Global warming and a lack of advancement in seed science has meant that our crops are not resistant to the rising temperatures and are withering under the pressure. Time series data from 1982 to 2012 for the Punjab province observed that the minimum temperature during February and November considerably impacted the wheat production in rain-fed areas, and had risen over the years by as much as 1 degree. The study found that if the temperature increases by even 3 degrees in 2050, per capita wheat availability may decline to 84 kg per annum from a level of 198 kg per annum in 2012. Similarly, the study also found that water availability and temperature will be key variables for wheat production in the future. This is one small example of how climate change and rising temperatures have had an adverse effect on agriculture in Pakistan. And these are not connected to the Indus River. As discussed earlier, the Indus is facing an existential threat because of the situation of glaciers in Tibet that are its major source. If those glaciers continue to melt at the rate that

they are going, the immediate result will be an increase in water supply followed by a steady decrease as the glaciers melt and disappear. Eventually, a few years of massive flooding will be followed by drought. At the beginning of this story, we discussed how the cotton crop in Sanghar had been affected by a lack of water supply. The cotton crop is not new to these kinds of environmental pressures. The cotton belt of Pakistan, spreading around 1,200 km along the Indus river, faced extreme damages in 2010 flooding. Studies report that nearly 20% of the crop land was completely washed away with the flood water. Loss of production caused the textile industries to rely on the foreign import of cotton to keep their production process smooth. A total of 2 million bales of cotton were destroyed, which affected the competitiveness of textile exports of Pakistan on the global level. This was at a time when the cotton crop was in harm’s way because of flooding. A similar situation could now, as a result of climactic pressures on the Indus, be happening because of a lack of water. According to the 2012 National Study on Agricultural Investment in Pakistan, “water shortages in Pakistan due to possible drying up of the Indus river would create pressure on food crop production. This will likely divert already scarce water resources to food crop production and would further stress the cotton supply. It is important to note that these reductions in cotton production not only have serious implications for the textile industry but also for the livelihood of millions of people. According to a rough estimate, the textile sector is linked to the livelihoods of approximately 10 million people.” “Sindh, being at the tail end of the Indus River, is directly impacted by a 60% shortage of water in the Indus, putting at risk the provincial population, agriculture and livestock,” said Sherry Rehman, minister for climate change. “Kotri barrage downstream should have an adequate 15,000 cusecs of water, but instead less than 2,000 cusecs are being released. It is a grave calamity to see that

there is no river flow after Kotri. Due to this severe shortage, farmers are dangerously at a risk of losing their cotton, rice and other crops in Sindh,” she added. “Policymakers need a better understanding of why the flow of the River Indus to the sea is important. It is not a waste. If freshwater does not flow towards the delta, there is a huge loss of biodiversity, culture, and heritage. Rehabilitation of the Indus ecosystem and flow would be a solution where interprovincial efforts would be seriously required,” she explained. “We need to give this mighty river its flow back, and clean it off toxins. Like all great rivers, we will give its own species rights and declare it a living entity with its own environmental rights, which is being done for big water bodies and rivers in the world. If the Indus is at risk, Pakistan is at risk. The Climate Ministry will work on a Recharge Indus policy and report back with an action plan for the provinces.”

Conclusion

n May this year, the ‘Global Food Policy Report 2022’ warned that summer heatwaves are projected to increase at a rate of 0.71 day per decade in Pakistan, while in India it is estimated to triple or quadruple by 2100. The report’s conclusions were that Pakistan’s water supply woes were going to worsen because of climate change. Climate change presents immediate and long-term challenges for South Asia such as glacier melt, sea-level rise, groundwater depletion, extreme weather events, and frequency of natural hazards that are likely to worsen in the coming decades. This is a problem faced in unison by the Global South, particularly South Asia. In Pakistan, where the entire agricultural set-up is based on one river, it is a terrifying realisation that climate change permanently altering the river could have long-lasting effects on our food security and largely agrarian economy. What is needed is immediate action. Whether that will happen or complacency will continue is anybody’s guess. n

AGRICULTURE AND CLIMATE CHANGE

COVER STORY

By Daniyal Ahmad

ften derided as the sick man of Pakistan’s industrial base, the automobile sector seems to be experiencing a renaissance period. This is attributable to the crossover SUV (CUV) bonanza that’s currently in full swing. The sector is so dynamic that within three years of its inception it is now the stage for the automotive industry’s grand chess game. In this game, you have the progenitor still consolidating its gains, the Sino-Franco-Malay-Korean up starts, and a resurgent Big 3. The CUV segment is the poster child for the success of the Automotive Development Policy (ADP) 2016-21. It was a market that did not exist prior to the KIA Sportage and has now grown from 5% to 20% over the past three years. It was actually not a market that existed at all. It was carved out at the expense of the Big 3 of Toyota Indus Motor Company (IMC), Honda Atlas Cars Pakistan and Pak-Suzuki Motor Company (PSMC). Writers note: SUV is used interchangeably with CUVs in Pakistan and in many other countries where CUVs are described as small to medium size SUVs. We will use a liberal interpretation of the term for the sake of math, and club all of them together. At least, until we get completely-knocked-down (CKD) Prados for proper market differentiation. Not only has the CUV/SUV segment achieved significant success, but it is also poised for further growth. Its market share is expected to increase from 20% to 37% by 2030 according to Shabbir Uddin, Director Sales and Marketing at Master Changan Motors. This will come at the expense of the sedan and hatchbacks segments. Disregarding the industry’s protectionism, capital allocation of this sort would probably make Adam Smith proud. All of this, at some level if not all, is attributable to the KIA Sportage. However, before the Sportage could consolidate its gains, it had competitors, and it’s half-sibling (we’ll get to this) at the gates armed with its blueprints for CUV success. The Sportage may have found itself to become the first incumbent in the segment. However, all the entrants born from the ADP that sought to challenge the Sportage have now become incumbents as the Big 3 are now mounting their own entry to the CUV market with their CKD lineups. To explain how everything got to this point. Let’s first begin with where it started and that is the KIA Sportage.

We will be introducing the latest edition of the HR-V. We expect customers to be attracted by its design and fuel average Amir Nazir, General Manager of Sales and Marketing at Honda Cars Pakistan Limited

Suffering from Success

J Khalid’s album titled Suffering from Success may not have drawn inspiration from the KIA Sportage but it is the most apt description of the situation. The KIA Sportage is the undisputed leader in the CUV market. It’s also probably in the same league as the Suzuki Mehran and Toyota Corolla in terms of cars that hit the ground running. Possibly even in terms of cult status. Its success is immeasurable. Quite literally, as Lucky Motors does not publish sales figures. Lucky Motors is not a part of the Pakistan Automotive Manufacturers Association’s (PAMA) and is thus not bound to release sales figures. When asked about this, Lucky Motors told Profit that it is their company policy to not disclose sales figures. It is because of this that we have to employ creativity to ascertain the success of the KIA Sportage.

The Sportage celebrated its 25,000 sales anniversary in March 2021, 20 months after being released in August 2020. Now 25,000 sales over the course of 20 months may or not sound like an impressive figure, depending upon who you ask. Looking at figures provided by PAMA for context, the Toyota Corolla, arguably Pakistan’s most famous car, recorded 33,413 sales over the same time period. The Toyota Fortuner in comparison, Pakistan’s most expensive completely knocked down (ckd) car, recorded 3,538 sales. Recording seven times the sales of the Fortuner and nearly as many as the Corolla is, perhaps, exactly where the Sportage wanted to be when Lucky Motors first conceived the thought of it. Doing so with a new vehicle, launched by a new company, in a non-existent category, and then achieving those figures is probably over and above what Lucky Motors expected. It has continued to make strides (possibly). Looking at Lucky Motors’ financial statements, their turnover from their automotive

It’s not like we do not understand this. The Sportage created space for not only itself but also chartered a path for others to follow. We are mindful of the fact that you need to bring change at an appropriate time. The new Sportage is more expensive in every market it has been launched. If the price exceeds a certain point then volumes come down Muhammad Faisal, President Automotive Division at KIA Motors

division grew 25% from PKR 77 Billion to PKR 96 Billion between 31st March 2021 to 31st March 2022. Profit is led to believe that most of this increase is from the Sportage. Simply looking at Google Trends one can see which of Lucky Motors’ cars from its KIA portfolio garnered the most interest. However, it would be premature to make any assumption based on just Google Trends alone. “The Sportage was our most popular car. We were averaging sales of 250-300 Sportages a month before the import issue arose.” said a member of the sales team at a local KIA dealership in Lahore. “If we sold 10 cars a day then seven of them would be Sportages,” he said when asked about the popularity across their vehicle portfolio. However, Profit is still not going to risk upsetting the competitors. Estimating a range of 40-70% of total sales, Profit did the maths as to how many KIA Sportages, Lucky Motors may have sold to get the turnover figures that they did. Let’s just say we arrived at a lot of Sportages sold across all our possible estimates. Competitors are free to arrive at their own conclusions from these figures. These figures are keeping in mind that Lucky Motors’ Q1 2022 figures include the Peugeot 2008. The 40% to 70% range is given to adjust for this. However, this is where the problem starts and our ode to DJ Khaled begins. The Sportage has changed the Pakistani car buyers preferences for better or worse, depending upon who you ask. However, in doing so it now risks its own demise as it may have subsidised the success of all the new entrants. Pakistani customers are now not only open to the idea of trying new companies, but

are also acutely aware that they too are deserving of purchasing the latest models of any car like their international consumer counterparts. The importance of having the latest model available may not seem important at first glance, particularly given how Pakistani customers have become accustomed to purchasing globally outdated vehicles courtesy of the Big 3. Releasing the globally prevalent model was one of the main reasons for the Sportage’s success. To put the importance of this in context, Lucky Motors has already been punished by the market for releasing an outdated model of their KIA Sorento. Customers would have been shocked in 2016 if you told them they would become automotive connoisseurs within a decade. “It’s not like we do not understand this. The Sportage created space for not only itself but also chartered a path for others to follow. We are mindful of the fact that you need to bring change at an appropriate time. The new Sportage is more expensive in every market it has been launched. If the price exceeds a certain point then volumes come down. From Pakistan’s perspective, you need to justify your volumes to be viable,” said Muhammad Faisal, President Automotive Division at KIA Motors, when asked about the entire matter. So what could be the price of the new KIA Sportage in Pakistan? Well, Profit decided to do some creative mathematics and figure out what it could be. Firstly, Profit looked at the LX and X-Line AWD variants of the Sportage across a range of possible estimates for what the Rupee will settle on against the US Dollar. A 15% profit margin was then utilised to find that the new Sportage CBU could retail for anywhere

between PKR 15 million to PKR 23 million. The importance of looking at the CBU price of the Sportage is because Lucky Motors sells the CBU and CKD variant of the Stonic, at least, in its Lahore KIA dealership. The price difference between the CKD and CBU variants is 10% for the EX and 15% for the EX+. Utilising the 10-15% difference between the CKD and CBU units, Profit estimates that if the new KIA Sportage achieved the levels of localisation of the KIA Stonic then its price could range from PKR 14 million to PKR 21.5 million. This range includes the application of the 10-15% discounts. Even with all the current price increases, these prices are steep. Lucky Motors seems very self-aware of the conundrum they are in. However, so are the new entrants. They saw Lucky Motors dislodge the Big 3 due to their lethargy. They now smell more blood, coming from the current incumbent this time, and are going for the jugular.

The Floodgates are Open

harbozay ko dekh kar kharboza rung pakarta hai aur Pakistani auto manufacturers doosray ki gaari ko dekh kar apni gaari launch kartay hain. The number of CUVs on offer across the new entrants is astounding. It would be remiss to highlight that one may forget how many CUVs are available in the market. So let’s do a count. To strike when the iron is hot would be an understatement. Just looking at the aforementioned sheer variety, within a range of PKR 4.5 million, customers can choose between 18 different CUVs apart from the Sportage and the Corolla Cross (we’ll get to the latter in particular, later on). The new entrants have not only provided customers with choice but are also a breath of fresh air in terms of features. The CUV category already has the title of being the parent category of Pakistan’s first automotive export, and also potentially the first CKD hybrid vehicle.

COVER STORY

The CUV market is actually so enticing that Lucky Motors’ new Peugeot brand only has CUVs right now. This is probably the Sportage’s Brutus moment with the Peugeot 2008. However, it’s also the finest example of pragmatism. Pragmatism is probably the best word to describe the entrants. “Customers prefer vehicles with greater height because of the safety and status it provides,” said Amir Nazir, General Manager of Sales and Marketing at HACPL, when asked about why CUVs appeal to customers. Profit identified the allure of being a Chaudhry Sb on a budget as one of the reasons for the Sportage’s success. Newer entrants were likely cognisant of this when they all doubled down on the CUV market. “The global giants are large ships and MG is a speed boat. Our turning radius is much better so we can respond to the needs of customers more quickly,” said Syed Asif Ahmed, General Manager of Sales and Marketing at MG Motors, when asked about the CUV segment. Though these are his words, we can assume that all automotive top brass across the new entrants are similarly buoyant. However, their buoyancy may be all there is to it. The competitors, though numerous, have not significantly dented the Sportage’s success. Profit would like to have substantiated this claim with data, but we assume the new players believed not releasing sales data was part of Lucky Motors’ recipe for success because none of them have posted it. The Hyundai Tucson is the only outlier with publically available sales figures. Brownie points for their confidence. The Tucson was poised to be the main rival to the Sportage largely on account of the Sportage and the Tucson sharing the same frame because Hyundai and KIA are sister companies globally. However, the similarities between the two end about there. The Tucson has only recorded 8,643 sales since its launch in August 2020. The other main competitor, and arguably the loudest, the MG HS, made initial strides but has since been encumbered in a tax and legal quagmire. It would be incorrect to paint the entire industry with the strokes of MG and Hyundai. The new entrants will likely mount a challenge like no other in the CUV market. All whilst claiming to be the best two syllable company from their country of origin. All of this was the assumption till the Pakistani Auto Show 2022 took place. This is because it’s no longer the new entrants compet-

The global giants are large ships and MG is a speed boat. Our turning radius is much better so we can respond to the needs of customers more quickly Syed Asif Ahmed, General Manager of Sales and Marketing at MG Motors

ing with one another in a market they largely created and occupy. This is because the Big 3 are back, well maybe.

The Empire Strikes Back

“I

t does not make much sense for any player to bring a newer generation model in this economic situation,” said Faisal when asked about the state of competition. The Big 3, however, probably did not get the memo. The Pakistan Auto Show 2022 marked nearly three years since the Big 3 were left reeling by the rise of the Sportage. Another two years since they were subsequently made to feel like boomers by the new entrants. The event showed that the Big 3 had not been licking their wounds idly. Imitation may be the best form of flattery and that could not be truer than with IMC, HACPL, and PSMC all using the event to highlight their own CUV offerings. “All cars have a replacement cycle of three to four years and the current cycle for CUVs is coming to an end,” said Nazir. Early adopters of the Sportage will now be in their third year of owning the vehicle so the timing is ideal for the Big 3. “We will be introducing the latest edition of the HR-V. We expect customers to be attracted by its design and fuel average,” explained Nazir when asked about what will entice customers to the HR-V. The Cross and the HR-V were launched globally in 2020 and 2021 respectively. Releasing the latest globally prevailing model in Pakistan relatively so soon breaks with the Big 3’s norm. It not only highlights how far Pakistan’s

automotive landscape has come but is also rather ominous for a certain KIA Sportage. However, the return of the Big 3 for now at least is more like the Storm Troopers and less like Darth Vader. This is because, for starters, we do not have any release date as of yet. IMC and HACPL have given tentative dates for 2023 but it would not be impossible for them to just extend the timeline to 2024. They could easily do this and cite the current economic situation and their preoccupation with a certain import conundrum that’s led them to take very unexpected decisions. We don’t think anyone expected the IMC refund at all. It’s also interesting that PSMC revealed their XL7 as a sample vehicle and as an MPV. The general belief seems to be that it’s a Trojan Horse because PSMC may have thought no one would Google it and see that Suzuki advertises the XL7 as a CUV/SUV in other markets such as Indonesia and Thailand. The decision to market it as a sample vehicle may very well be on account of the economic situation as PSMC, like IMC, is currently subject to a production crisis. Maybe not the best move to expand your production portfolio when you can’t produce existing orders? PSMC may be thinking along those lines and may have kept the XL7 as a sample vehicle so that they can introduce it on their own timeline, whilst also being able to reject all questions about it from the media. IMC and HACPL may not have thought that through. Furthermore, apart from release dates, there is no expected price for any of the models either. IMC has hinted at a price of PKR 10 million with Nazir confirming that the HR-V will be priced competitively. The HR-V and Corolla Cross are both cheaper than the new KIA Sportage, however, PKR 10 million may be a stretch today. Assuming a one- to two-year horizon, the PKR 10 million figure may be a reality given that IMC and HACPL are likely to be ahead of Lucky Motors in localisation solely due to the

TEXTILES

number of years they have been in business. However, given the Big 3’s track record with localisation, we cannot be too optimistic. IMC and HACPL would benefit from the reduced import duties on the import of parts for hybrid vehicles outlined in the Auto Industry Development and Export Policy (AIDEP) 2021-26. However, the cost savings are debatable given that hybrids are generally more expensive in terms of their upfront costs. Honestly, a Daronomics-backed Rupee might be the only way IMC, HACPL, and KIA are

able to launch affordable CUVs. However, this may not be the hill to die on for the three as the Civic warps perception of what is considered affordable. This is also just another moment to appreciate how right the new entrants got their prices in terms of the larger players. PSMC’s XL7 will not be subject to this problem. It competes directly with the B-Segment Sedans and might just undercut everyone. Irrespective of the problems with the Big 3, their decision now puts all existing CUV

players under a crunch. Hyundai, for example, faces a very comparable problem to the KIA Sportage due to it too having an outdated design. The only difference in the situation is that the Tucson has a fraction of the Sportage sales numbers. Do you cut your losses and come back to fight another day with a newer model or do you persist? That is a question Hyundai-NIshat will ask themselves. Thankfully, they now have the productive capacity to undertake any overhaul as Profit was able to confirm from a source at the company who preferred to not be named. MG and HAVAL are still in the midst of setting up their local assembly plants and, therefore, will likely face capacity constraints comparable to what Hyundai-Nishat faced last year. By the process of elimination this just leaves DSKF, Changan, Peugeot, and Proton in the ideal position to benefit from any disruption at the top. Will they benefit from more customers wanting CUVs courtesy the Sportage, more features courtesy the Big 3, at low prices, and all whilst MG and HAVAL face production issues? Maybe. It’s a lot of assumptions. The Sportage may dwarf the cumulative CUV sales of everyone listed in this based on information available. Or rather, the lack thereof. Assuming the Sportage to have come to the end of its journey may be a bit premature. It may just have inadvertently benefited from the global and domestic supply shocks that hinder production of these latest iterations of CUVs. An older model might just be beneficial in this situation. “Not a lot of time has passed since the Sportage was launched. It still has the potential to continue further and we think its current price point still provides value for money from a customer point of view,” said Faisal. The coming year will test the resolve of the KIA Sportage to retain its position at the very top of the CUV market. It is faced with the dilemma of whether or not to introduce the latest model of their best selling car. If they do not then they risk becoming the Big 3 and if they do then they risk low sales volume. Whilst Lucky Motors ponders over the matter, it is likely new entrants will be out for a pound of flesh. The original Big 3 will finally be getting their opportunity for revenge against everyone. Now whether their return is more akin to Godfather 2 or Godfather 3, we will find out once they release their CUVs. The certainty that we do have is that the wild west of the CUV market may be coming towards its final destination. It is just ironic that the Big 3 may utilise the same tactics to return that were used to dislodge them. n

COVER STORY

OPINION

Ariba Shahid Can Ms Marvel be the superhero Pakistan needs to finally go mainstream?

The show has managed to present Pakistan to be exotic but at the same time, just like any other country. It was simple and effortless, very unlike the Reluctant Fundamentalist by Mohsin Hamid which felt forced. Ms Marvel has captured local nuances and cultural reverence through its simple and subtle execution. It was done in a way that could make Pakistanis around the world be able to relate to it whilst also sparking intrigue from non-desis. lot has been said about cultural representation in the meFor instance, a scene in which the protagonist is holding a carddia. I’m assuming this is the last place you would expect board box that has Mitchell’s milk toffee branded on it. discourse on this topic because it is a business magazine, https://twitter.com/rogueonomist/status/1548388187151552513? after all. So let us give Ms Marvel credit for opening up s=20&t=oOrPFpjjuMGk-bM0GkvNYQ this discussion. The scene has the potential to get people around the world In the past few weeks, Pakistanis have expressed much exciteinterested in Pakistani snacks if taken up correctly by Mitchell’s and ment over seeing their culture represented worldwide through this other manufacturers. This would make Mitchel’s wanted worldwide. hit series. In fact, it even went on to show a carton of Milk Toffee by You don’t need mind-bending or other superhero powers to be influMitchell’s. Excitement aside, this is a huge business and a branding ential and drive demand but simply to be aware of business opportuopportunity, but we will get to this later. nities that are present. And before you think it’s not that simple, let’s https://twitter.com/SovietOnionn/status/1548040853830057985? flashback to Gigi Hadid posting a picture of her spice cabinet chocs=20&t=oOrPFpjjuMGk-bM0GkvNYQ a-bloc with Shan Masalas. While Shan masala is popular in the PakiBefore we talk about Ms Marvel and Pakistan, let us take a look stani and Indian diaspora, that picture alone, despite not being a paid at Korean Pop (K-Pop). It has become a global sensation, entering the or structured product placement, managed to introduce the brand to mainstream arena. You don’t need to understand Korean to be obsessed non-desis. We’ve covered Shan’s international expansion extensively with it, as is evident by its large fan base. A spillover of this is a demand in the past and how Shan can still do more to expand its footprint. In for Korean products across the world. K-pop has managed to make Kothe past, the government has spent large amounts of money bringing rean food, snacks, fashion, and skincare products popular globally. I’m in international influencers and bloggers to talk about Pakistan as a sure you must have noticed Korean cuisine suddenly becoming popular tourist destination. The forced and not-so-subtle nature of it made the at eateries across the country too. Turkish culture has also made its way exercise futile in hindsight. The obsession with a positive image and into Pakistan and other countries around the world. Yes, I’m looking presenting Pakistan in a specific way did not materialise in results at you, Ertugral. The show has triggered interest locally for all kinds of one would have hoped. Turkish products. It has also managed to push more people to travel Getting the right perception, and creating hype for Pakistani to Turkey, boosting tourism. Needless to say, this is the influence that products requires Pakistan to create its own opportunities. It is a television, social media and fandoms have. business opportunity to become mainstream in the media, and curatNow let us return to our newest favourite, Ms Marvel. In the past, ing demand for local products is important if Pakistan wants to be Pakistan has made its way to international tv shows and movies. But part of a global narrative and win the economic battle. the representation isn’t what one would have hoped for. Or at least that Gaining cultural relevance and interest from around the world seems to have been the general opinion. Ms Marvel, on the other hand, is an economic proposition that will eventually bring returns. is a breath of fresh air. There are so many products unique to Pakistan such as our funky lawn kurtis, bangles, khusas, herbal skincare, and snacks such as churan chatnis, chilli mili, top pops, cocomo, limca. If Pakistan manages to tap into it correctly we could have a K-pop like situation. However, to do this, brand managers need The writer is a business to think out of the box and beyond the scope of billboards and Facebook ads. While bloggers can help, the need to journalist at Profit. She look beyond Instagram transitions is key. For this to happen, Pakistan needs to create great content that can comcan be reached at ariba. pete internationally. You cannot rely on Hollywood to represent you. The absence of Pakistani content on Netflix shahid@pakistantoday. is sorely conspicuous. At the end of the day, only you can save yourself. Remember Squid Games and how everyone com.pk or at twitter. was obsessed with Sugar cookies? The very fact that Korean media produces quality content that is watched for its com/AribaShahid own production quality is proof of just that. This leaves us with the conclusion that to go big, Pakistan cannot wait for Hollywood or Bollywood to represent it. And as much as we would love to see it happen, we cannot wait for Kamala to save the day. It is time brand managers become their own superheroes and the media proves to be an ancillary for others by creating quality content. There is a limit to the number of armed forces movies one can watch. No wonder Pakistan’s presence on Netflix is limited, but that is a conversation for another day.

COMMENT

Pakistan’s gold is going nowhere for now The SBP has rejected unsubstantiated claims that they were about to pledge their gold reserves, but is that even an option? By Ariba Shahid

here was, a few weeks ago, a rumour making the rounds that Pakistan had pledged its gold reserves. For those that do not know what that means, it is when a government is in such a deep crisis that it promises its gold reserves as collateral in exchange for foreign currency when a country’s coffers are entirely depleted. The sense of alarm that has persisted in Pakistan over the course of the country has caused such rumours to often take flight and become a part of the public consciousness. On this occasion, the Whatsapp forwards were defeated by a swift rebuttal from Dr Inayat Hussain, Deputy Governor of the State Bank of Pakistan (SBP). In a podcast hosted by SBP Chief Spokesperson Abid Qamar, the Deputy Governor informed that Pakistan currently holds $3.82 billion worth of gold, but that these reserves were not in danger because current cash reserves were not low enough for the state to consider pledging its gold. “Currently, we are not in a debilitating crisis, so we do not need to pledge these gold reserves. We must not panic. I advise the Pakistanis to reject the fake news reports drawing a doomsday scenario for Pakistan,” said Hussain. The podcast was joined by Acting Governor Murtuza Syed and Deputy Governor Sima Kamil.

MACROECONOMY

Hussain explained that the gold reserves are safe considering the current FX reserves. Pakistan’s current reserves stand at $9.3 billion. Hussain says they are sufficient enough to carry Pakistan through the next few months despite not being ideal. The FX reserves are fully usable for all purposes. It is important to note that these reserves are in addition to the gold held and encumbered assets. “We would like to increase it to equalise three months of Pakistan’s import bill, the reserves are not too low and should not be a cause of concern for the nation,” says Hussain. Pakistan holds most if not all of its gold reserves in Pakistan. In the past the reserves were held in New York, however have been mostly brought back.

Gold reserve trends

lobal central bank gold reserves grew by a net 84t in Q1, 29% lower than in Q1 last year. Central banks have been net buyers of gold in every quarter since Q1 2014, except for Q3 2020 at the peak of the COVID pandemic. Considering how Pakistan is a price taker for gold, its gold reserves have remained stagnant over the span of a decade. The reserves have gone down by 0.31 tonnes in a decade. Pakistan ranks number 43 in the world in terms of gold reserves held as per the World Gold Council’s rankings released in February 2022. The United States, Germany, Italy,

France, and Russia are the top 5. Numerous countries around the world are choosing to hold gold in their own country and have been repatriating their gold reserves to eliminate counterparty risks. Eastern European countries such as Serbia, Slovakia, Hungary, Poland, etc have repatriated gold from the Bank of England. This trend strongly suggests that these countries would rather hold gold than to trust other institutions like the Bank of England to hold it for them. This is also not the first time that gold has been used as a chip by governments in severe crises. In 1991, the Reserve Bank of India pledged 46.91 tonnes of gold with the Bank of England and the Bank of Japan to raise $400 million during an economic crisis. The situation improved in India soon after that, and the government was quick to repurchase it months later. In India as well, the situation was close to the one in Pakistan. India struggled to finance its essential imports, especially of oil and fertilisers, and to repay official debt. The attempt then was to raise money at a time when even the State Bank of India, the country’s largest bank, was finding it difficult to raise overnight or short-term funds from the international market given India’s economic indicators. For months, the government had kept the show going by using the bank to borrow overnight – raise money for one day and repay the following day. With even that means of borrowing drying up, the only option was to borrow from other

central banks. During talks with central banks and investment banks abroad, some of them pointed to the fact that India had enough gold which could be utilised. Knowing that a proposal to go in for an outright sale of gold would have run into resistance, the SBI was told to submit a proposal to the RBI to lease gold confiscated from smugglers on the government account. Within two months, the proposal was approved by the central bank and by the government in March 1991. Even in a severe crisis, India used smuggled gold that was captured to bail themselves out of this situation. Within two months, the proposal was approved by the central bank and by the government in March 1991. Even then, the government was anxious to repurchase the gold. Of course, much of that is because gold is still considered a pivotal commodity in the international economy.

Why is gold a safe haven?

old and its classification as a safe haven often come under criticism by some individuals that claim gold only has an intrinsic value apart from tradition. We often say that children are fascinated by shiny things but it seems like this fascination never truly dies; well at least in the form of the human love for gold. There’s a certain allure to gold considering all other metals in the periodic table are silvery colored, save for copper, the distinctness, gloss, and beauty of golf could be considered to be the success of the currency. The dichotomy of gold being jewellery, currency and a form of investment often adds to the mystery of the appeal of gold. This makes gold a unique commodity considering how it is quantifiable and tangible, but also because it can embody a feeling and human experience to it despite being a metal. This also builds up on the notion, “if you don’t hold it, you don’t own it.” This aspect drives individuals to buy physical gold and store it at home thereby taking away all counterparty risks and having direct access to their holdings in case of a crisis. If we look at the possibilities for a safe haven asset available on earth, gold fits the bill. It isn’t abundant in supply, and it can be used for savings as it maintains its form. It can take nearly 5 to 10 years to extract gold from a mine. Think of any alternative and you’ll find some flaw which deems it unsuitable for this purpose. Now you must be thinking why we don’t consider diamonds equally important in terms of usage like money. Well, the reason is simple, they cannot be divisible or combinable, nor is it homogenous. Gold, however, is durable, it never rots or rusts, you can combine and divide it, and every ounce of gold is the same

as others. Silver has similar characteristics but since it’s less rare, it is less valuable per ounce.

How did gold become money?

irst used as coins under the reign of Croesus, gold had been used as the currency of choice throughout history and dates back earlier than 643 B.C. Back then the value of the coil relied on the value of the metal within. Countries that had gold deposits were considered wealthy. This also worked as a driving force for Spain, Portugal, and England to explore the “New World”. Building on to this exchange through gold, the US Treasury Secretary Salmon Chase printed the first US paper currency in 1861. The Gold Standard was established and set the value of gold at $20.67 per ounce. This also set gold as the only metal that can be used for redeeming paper currency. In order to standardise transactions, other countries also adopted the gold standard. This meant that the government would redeem any amount of paper money for its value in gold along with increasing the trust in global transactions. Paper money now had the guaranteed value tied to something real, however this also meant that the value of money and gold took dips every time a considerably big gold deposit was found. However, countries took a pause from the gold standard during World War I. European countries chose to print “enough” money for their military, however were plagued with inflation as a result. This emphasised the need to try currency to guarantee gold. As a result, countries returned to a modified gold standard. Considering how the global gold supply grows slowly, the gold standard in theoretical terms holds the power to keep inflation and government spending in check. The U.S effectively abandoned the gold standard in 1933 and completely cut off the link between the dollar and gold in 1971. No country currently backs its currency with gold. The US now has a fiat money system, which means that the value of the dollar is not determined or linked by a specific asset. President Franklin D. Roosevelt severed the ties between the dollar and gold in order to combat the Great Depression in the work of mounting unemployment and spiralling deflation. The government was at its whims to stimulate the economy. Abolishing the gold standard meant that the government could pump money into the economy and lower interest rate to give the economy stimulus. The US, however, maintained some ties with gold as it would let foreign governments exchange dollars for gold until 1971 when President Richard Nixon set out to tackle the dollar-flush.

Shouldn’t gold be worthless now?

he abolishment of the gold standard did not take any importance away from gold. In fact, it managed to highlight gold as an investment class. In terms of investment, gold is a way to diversify portfolios. The price of gold often increases in wake of events that cause the value of paper investments such as stocks and bonds to decline. Despite short term volatility, gold manages value over the long term. Now you’re thinking why not just buy US Dollars considering how they are the world’s most important reserve currency? The greenback is considered a safer bet, however it is subject to volatility as seen between 1998 and 2008 when the dollar slid and gold tripled in value. This reaffirms gold’s position as a safer asset, particularly in consideration of the US budget and trade deficit along with large increases in the money supply. Gold also finds its value as a hedge against inflation. In layman terms one may be enticed to buy gold when they feel their currency is losing value. If we look at historical trends, gold prices rally and stock markets crash during times of rapid inflation. This can be attributed to the fact that fiat money loses value or purchasing power during times of inflation. This makes gold prices soar because gold is priced in those currency units and rises along with every other commodity. What’s funny is that despite being a hedge against inflation, gold also serves as a means to save during times of deflation. While such a phenomenon has rarely been witnessed, gold in such times sees a rally in prices as people choose to hoard cash. They believe that the safest way to do that is to buy gold. Considering the fact that gold holds its value in both inflationary and deflationary pressures, it does not come as a surprise that the safe haven asset also retains its value during heightened geopolitical tensions and crises. This is why the sparkly metal is also known as the crisis commodity.

Paradox of value

uxuries like gold and diamonds are priced far more than necessities of life due to their limiting supply. Priced higher than water, one would think of exchanging something against gold, but never against water considering the latter’s abundance. This highlights how gold makes a strong argument towards it being a safe haven. However, this notion leaves us at the question we began with, does gold only shine due to its intrinsic value? The answer is simple: gold is merely buying money with money and hoping for it to not only maintain its value but rise over the years. n

MACROECONOMY

Emlaak: Pakistan’s first mutual fund marketplace A mutual fund marketplace to drive up investor interest through housing all options under one roof

By Ariba Shahid

inance Minister Miftah Ismail formally inaugurated Emlaak Financials, a digital aggregator platform for mutual funds at the Central Depository Company (CDC) House in Karachi on Friday. The platform is a first of its kind for the Pakistani market. The pilot for Emlaak had been launched in 2021 to help with Sahulat account opening which can be done through the platform. Following that, the CDC collaborated with the Mutual Fund Industry on ways to enhance the product and expand its offerings. The full-fledged account opening feature has now been launched through the online investment portal which is the first of its kind in Pakistan allowing multiple funds from different AMCs to be offered to investors through a single platform. What this means is an investor can open an easy Sahulat account or a regular Sarmayakari account.

What are mutual funds and why would anyone invest?

hrough the mutual fund aggregator, investors can open their mutual fund accounts digitally from anywhere. They do not have to go to a brickand-mortar office of an asset management company and can browse the number of options. To define it very plainly, a mutual fund is a way of investing money alongside other investors in order to benefit from the inherent advantages of working as part of a group such as reducing the risks of the investment by a significant percentage. Essentially, you do not invest in an asset management company, you simply give them your money and pool that money with other like-minded individual and organizational investors, and then use that pool of money to invest for you. It also gives the opportunity to single, small to medium-sized investors to put their

money in high stake businesses in the form of a pool and participate in that part of the economy. Mutual funds do not just cater to individual investors, however. They also provide advice to large capital investors on where to park their money, provide management of excess assets for companies and also provide a place for companies to put their pension funds. In this way, these funds have a lot of money tied up in their investments both from large and small fish.

What difference does Emlaak make?

he concept of a digital aggregator for mutual funds has been fast gaining traction globally. Internationally, this role is played by various institutional distributors that provide digital / online multi-product investment solutions which has a pivotal role in the development of the mutual fund industry by creating the much required depth and

This (less investor participation) is a typical characteristic of a very young industry that has had less than two decades to reach at the current level of total assets of over PKR 1.25 trillion under management in over 300 mutual and pension funds operated by 18 asset management companies.” Khaldoon bin Latif, CEO Faysal Funds

MUTUAL FUNDS

This mini-app will open up the gateways of micro-investment avenues for EasyPaisa’s user base of 10 million plus users, thus promoting the savings and investment culture in Pakistan at the grass-root level and enabling the average Pakistani person to easily create a sahulat mutual fund account with just a click from his cell phone without having to submit any other KYC information Shariq Naseem, Head of Product Development and Marketing at CDC

maturity in those markets. “This aggregator gives a financial supermarket experience to the investors, allowing them to compare funds across the industry and make wise investment decisions using the comparative analytics and unique tools offered by the platform,” says Shariq Naseem, Head of Product Development and Marketing at CDC. In simpler terms easier to understand for the general public, one can compare Emlaak Financials to aggregator platforms of other industries, such as FoodPanda which is the aggregator of restaurants and food caterers. While officiating the event, Ismail said, “It is very important for our economy that we should introduce such novel concepts which will promote the investment culture in Pakistan and provide an easy and informative platform to the investors thus enabling them to make wise investment decisions while giving them the convenience to open their mutual fund accounts digitally from anywhere without having to visit the brick & mortar offices of Asset Management Companies.” Furthermore, the platform offers complete transaction facilitation for all types of transactions, including investments, redemptions, and conversions. Naseem adds that one can even undergo conversions across the industry. “This is the first of its kind in the local investment landscape!” The platform offers consolidated portfolio tracking in a comprehensive dashboard and other various features such as account statement generation and return calculators, etc. Khaldoon bin Latif, CEO of Faysal Funds, however says that this aggregator creates value for investors. “Emlaak will be able to add value for investors through standardised benchmarking and independent performance comparison of various mutual funds at a single system, which is the real function of an aggregator.” As per Latif, Emlaak has the potential to change the history of the mutual fund industry.

Microfinance has joined the chat

n order to increase product penetration, Emlaak has developed a mini-app for the EasyPaisa application. This is through a collaboration with Telenor Microfinance bank. Naseem says, “This mini-app will open up the gateways of micro-investment avenues for EasyPaisa’s user base of 10 million plus users, thus promoting the savings and investment culture in Pakistan at the grass-root level and enabling the average Pakistani person to easily create a sahulat mutual fund account with just a click from his cell phone without having to submit any other KYC information.” “Emlaak Financials has been envisioned to pave the way for the growth of the Mutual Fund Industry and promote the savings culture in Pakistan at the grass-root level.,” said Moin Fudda, Chairman of CDC’s Board of Directors. Mutual fund penetration, however, in Pakistan has been low. While the process of signing up and investing in mutual funds has been made easier through the application, creating public interest will remain a challenge.

What does this mean for mutual funds?

he mutual fund industry, like the stock exchange itself, has been struggling with the onboarding investors. Drawing in public interest remains a challenge. There are less than 350,000 investor accounts. Important to note that this number includes multiple accounts by a singal investor. “This (less investor participation) is a typical characteristic of a very young industry that has had less than two decades to reach at the current level of total assets of over PKR 1.25 trillion under management in over 300 mutual and pension funds operated by 18 asset management companies,” says Latif

Khaldoon points out that this low penetration of assets under managent as percentage of total bank deposits is less compared to regional and global industries that are much maturer and possess greater depth in terms of age, available product structures and investment avenues as well as systems and infrastructure. Latif explains the various reasons behind the low acceptance of mutual funds. He lists, “low per capita income and savings rate in our country, historically high rate of return on government saving schemes (NSS), low literacy hence awareness of investment avenues/ products, lack of commercial banks’ interest (except few) in distributing mutual funds due to thin revenue margins, absence of centralised customer profiling database to perform KYC and AML/CFT screening, too much volatility in both interest rates and equity market resulting in low investor confidence, etc,” Khaldoon adds that the explosion of social and digital media has also provided the platform to AMC’s to optimize their marketing budgets and deploy innovative low cost awareness and advertising campaigns to cater to meet the challenge of lack of awareness among masses. As for Emlaak, the concept of providing all options in one application to compare and be aware of all that is to offer is an attempt at making the market more transparent and investors more comfortable. “The stunted growth of mutual funds can be attributed to lack of awareness among the general public and potential investors as well as the general inhibitions regarding investments,” said Naseem However, he points out that there are all types of mutual funds available that cater to the investment needs and risk appetites of various investors. The options and clarity regarding them help fix the perception around mutual funds. However, like any financial product in Pakistan, without awareness and the right type of reach; expansive growth will remain a dream.

MUTUAL FUNDS

SBP orders TAG to make full refunds to depositors.

What does this mean for the troubled fintech startup?

State Bank has ordered more corrective actions than just refunding money to wallet customers By Taimoor Hassan & Babar Nizami

he State Bank of Pakistan (SBP) has ordered Pakistan’s fintech TAG Innovation to initiate refunds to customers. Despite that it may seem that TAG Innovation might be going towards a complete cessation of operations, it might not be entirely accurate because the State Bank has ordered more corrective actions than just refunding money to wallet customers. On August 4, the central bank said in a press release that TAG Innovation had been

ordered to initiate refunds to customers, with a hard deadline to complete the refunds by August 19. However, the original letter sent to TAG Innovation requesting this action also asked TAG Innovation to completely disassociate from co-founders Talal Ahmed Gondal and Ahsan Kaleem Khan, multiple sources privy to the contents of the letter, told Profit. Even though the State Bank also said that it would review the fit-and-proper test of both the co-founders, sources claimed that to satisfy the SBP, divestment of the shareholding of the two co-founders would also be necessary. Both co-founders currently have no direct shareholding in TAG Innovation, which is owned 100% by TAG Fintech in the US. In TAG Fintech, Talal Gondal owns the

majority shareholding and recently stripped the other co-founder, Ahsan Khan, of shareholding on grounds of alleged misconduct. The move by the central bank, coming after months of a probe into the startup, appears to be a measured one to keep the startup afloat while taking punitive action against persons allegedly responsible for the misconduct that led to the SBP action of first suspending TAG’s pilot operations and then ordering refunds to customers. According to a source, the actions that led to TAG Innovation in Pakistan’s troubles were initiated when a doctored document was submitted to the central bank by TAG Fintech when it initiated a bid to acquire a majority stake in SAMBA Bank. According to the

source, since these actions were carried out by TAG Fintech, with which the rest of TAG Innovation’s management and wallet operations had no connection since TAG Fintech is only the holding company of TAG Innovation, and that TAG’s wallet operations in Pakistan had no irregularities, as an entity, TAG Innovation is not directly implicated of any wrongdoing. The source further says that the arrangement, therefore, most likely is going to be that TAG Innovation’s operations will continue with changes in shareholding in the holding company, changes in the management, and without any involvement of both the original co-founders. According to one of the sources, the scenario for TAG Innovation now will be something like “touching the bottom and then coming back up.” The central bank has further asked TAG Innovation to submit an audit report of refunds to customers in September but gave no timeline by which the co-founders are required to be removed from the company.

According to SBP’s letter, following the satisfactory completion by TAG Innovation of the removal of both co-founders and refunds to customers, the SBP will convey the future of TAG’s EMI license approval, which affirms the State Bank’s willingness to keep the startup alive, though prompting them to start all over again. It is pertinent to note that the State Bank has not asked for any action against the CTO of TAG Innovation, Alex Lukianchuk, who is the third co-founder and a shareholder in the holding company. Alex was not named in the document submission fiasco. The Germany-based CTO of TAG Innovation was made the CEO of TAG Fintech, the holding company in the US after Talal’s resignation in March. Both Talal and Alex are said to be close and one option left for Talal would be to transfer his shareholding to Alex, in an attempt to retain a say in the company’s decision-making. Profit reached out to Talal for comments on his

future course of action but no comments were received. Profit asked Alex about his association with Talal as well as his future plans but no response was received till the filing of this report. Founded in 2020, TAG was at the pilot stage of the Electronic Money Institution (EMI) licensing process when the State Bank suspended its operations because of a forged document submitted by TAG Fintech while aiming to buy Samba Bank Limited. TAG Innovation, the operating company has among its present management Talib Rizvi, a senior banker, who has now been given charge to run the affairs under the supervision of new CEO Muhammad Afzal. In its press release, the SBP says that the recent action requiring refunds to customers has been taken after the identification of violations of SBP’s regulatory requirements and other concerns during the pilot operations of TAG. The central bank did not specify what these violations were. n

Fintech company OneLoad announces $11m raise from Bill & Melinda Gates Foundation, others With an EMI license on the cards, OneLoad aims to become a bank without physical branches By Taimoor Hassan

akistan’s fintech company OneLoad has announced raising $11 million in new funds as it focuses on the next phase of growth. OneLoad’s round was led by Pakistan’s Sarmayacar and Abu Dhabhi-based Shorooq Partners, with participation from the Bill & Melinda Gates Foundation’s strategic investment fund. The fintech company also has International Finance Corporation (IFC) as its prior funder. OneLoad, owned by System’s Ltd subsidiary EP Systems, is digitising micro retailers for banking functions. The Lahore-based fintech company is also an aspirant for the Electronic Money Institute (EMI) license and received the in-principle approval from the State Bank in January 2020. Muhammad Yar Hiraj, the founder and CEO of OneLoad, tells Profit that they have fulfilled the central bank’s requirements and are expecting approval for the pilot operations in a few weeks.

Founded in mid-2014, OneLoad acquired retailers by enabling them to sell airtime of telecom operators digitally. With its retailer base now intact, it has moved on to enable them to accept payments and plans further to equip them for cash-in and cash-out services. OneLoad plans to use the EMI license to convert OneLoad accounts into bank accounts and issue debit cards. “OneLoad trained retailers to keep money with the company as a store of value. With EMI, that store of value is going to become a bank account on which OneLoad will be able to issue a debit card,” Hiraj told Profit. “Since it will become a bank account, retailers will be able to accept payments from other digital wallets as well as through QR codes.” Hiraj further says that the most important function that they plan to enable retailers for is that instead of doing it through physical ATMs, customers cash-in and cash-out services through OneLoad’s retailer network. Retailers are further being offered digital loans to address their working capital requirements. OneLoad does the lending through the NBFI license of partner companies and its EP

Systems, is also in the process of acquiring an NBFI license. Hiraj says that the entire suite of OneLoad offerings is essentially aimed at fulfilling financial needs of retailers, as well as enabling them to provide banking services without physical bank branches. OneLoad will use the fresh funds to expand its suite of products and services, targeted at the large unbanked population in Pakistan, estimated at 100 million adults. “We are a grassroots company for the grassroots,” Hiraj said in a press statement. “We are excited to bring new partners to the company like Sarmayacar and Shorooq Partners. Our vision is to fully digitise the financial needs of the unbanked and the financially excluded masses in Pakistan,” Hiraj says. “We cannot have financial inclusion without a solid infrastructure that integrates into people’s daily lives; if the products we build don’t seamlessly integrate with people every day, we will not achieve that,” said Tamer Azer, a partner at Shorooq Partners. “This is what we learned in Egypt and this is what we see as a tremendous opportunity in Pakistan as well.” n

The cruel business of buying and selling lions By Shahab Omar

n the 2nd of August this year, Lahore’s Safari Park Zoo announced that it was auctioning off 12 African Lions. The news garnered a lot of attention, particularly from animal rights groups that called out the auction and the trade of exotic animals that has run rampant in Pakistan over the years. The auction itself was completely legal, particularly since it was taking place among a select group of registered lion breeders in Punjab. But just because it was legal, does not make it right. You see, Pakistan has a lion problem. And the problem is that it is ridiculously easy for anyone to find and buy a lion cub on the market, raise it in their home, and then keep it as a pet in cruel conditions. The system by which these lions are bought and sold is painfully simple, and no laws exist to make owning these creatures that belong in the wild illegal. There are, of course, some official restrictions but they are easily circumvented. Essentially, lions are bred in an official capacity by breeders registered with the wildlife authorities and the FBR. These registered breeders raise and breed big cats like lions and tigers and then sell them ahead to anyone that wants to buy them. The law of the land requires that anyone buying these animals adheres to a specific set of SOPs, which includes having a certain amount of space to keep the animals in, and other such conditions. In practice, while the

wildlife department claims they have agents constantly checking in on lion owners, these creatures are often kept in callous conditions. Owners that have nothing about their care and are afraid of the beasts remove their nails and teeth, giving them food that is not meant for them resulting in an incredibly poor life for these animals.

How to buy a lion

t the heart of this is the fact that it is legal to buy and sell these animals. The process is pretty simple. Take the recent sale of the animals at Safari Park. The animals were being sold at auction to registered breeders because the park had a surplus of animals that they could neither keep nor needed. The breeders would then use the animals to breed more cubs, which they would then sell at their farm houses or through brokers to regular people that want to keep them as pets. Yes. It is that simple. You just need to walk into a breeder’s farmhouse, pay the money, and walk away with an endangered species of animal in the backseat of your car. These breeders run a largely unregulated business, but within the circle of breeders and zoos these animals have a closer eye on them. There are currently 10 breeders in Lahore that are registered, and they are selling lion cubs anywhere between Rs 400,00 to Rs 600,000. Qaim Ali, a lion breeder based in Lahore, told Profit that the breeding and business of lions is becoming easier in Pakistan and now the

practice of keeping this wild animal in homes has gained momentum. “I have three African lions at my house, two females and one male. If I put the expenses in front, keeping them is definitely not a cheap hobby. A male lion needs to eat 10 kg of meat per day while a lioness eats five to seven kilograms of meat per day. In our country, people have started feeding milk and curd to cubs, which is not actually their food because it is a wild animal. Now, since inflation is high and their food is expensive, their prices in the local markets have also increased. They are sold in two ways in the local market. The buyer either buys it through a broker or directly from the farmhouse. We advise people that whenever a lion or its cub is purchased, it should be taken from the farm house. There are two reasons for this. First, buying directly from the farm house eliminates the broker’s profit. Secondly, a letter is also given to the buyer by the registered farmer under which he can keep this wild animal in his house, whereas brokers cannot give any such letter,” he said. It is these brokers that he mentions that make things particularly difficult and cruel. When official breeders sell lions, those lions are chipped and registered which means they can be tracked. That means the wildlife department can run welfare checks on them. If the lion is not being treated according to SOPs, it is confiscated and the breeder and buyer both are fined. Of course, compliance with this is low. This is because most people do not buy directly from breeders and instead buy from middle-men. Even buying from breeders

is a morally dicey situation, and animals get treated poorly in the process, but with the brokers in the picture all rules and pretences are thrown out the window. Qaim believed that people buy from brokers also because they cannot fulfil the SOPs of keeping this wild animal at home.“A tiger or lion cub is sold by a registered breeder only when the buyer has the space, cage and environment and can afford to feed the animal as per the guidelines laid down by the Wildlife Department whereas the broker does not consider any such SOPs. This is the reason why in many posh areas of Lahore, people have kept tigers and lions in the rooms of their houses or in small cages,” he said. “What people do not understand is that these animals cannot be tamed like a dog or a cat. That’s why some people get bored after keeping it for four to six months and then find another customer. However, this animal does not usually suffer from diseases like other pets. A lion cub that has fed its mother’s milk for three months, even if it gets sick, will fight the disease and get wellby its own immunity. In our country, people clip their nails and sometimes pull out their teeth, which may reduce their wild nature but doing so makes the animal more dangerous,” he concluded.

Why in the world are they so cheap?

n short, because there are a lot of them. The World Wildlife Fund estimates that there are about 5,000 big cats living in captivity around the US, although animal welfare experts say precise numbers are hard to find. That is compared to the roughly 3,900 wild tigers left in the world, experts estimate. Now, this is not just a trend in the US. While there are not 5000 big cats living in captivity in Pakistan, people have tended to want to keep these animals as pets. Because these animals are not protected by any laws, people get away with keeping them in putrid conditions and can get them for cheap. This is because of one main reason — there are too many lions in captivity and zoos and breeders like to keep their numbers high so their business can flourish. The earlier mentioned official, for example, admitted that when the number of these [lions] becomes large, space problems arise for them.The official also said that fourteen African Lions were sold two years ago but this time the intention was to auction them to increase their value. A highly credible official of the wildlife department informed Profit that the auction or sale could be held only if the animals are in surplus. “Now, if African lions are being auctioned, it is because they are in surplus. If we have a surplus, it means that breeding prob-

lems do not exist and anyway, breeding of lions has never been a problem with us whether we visit Lahore Zoo or Safari Park. Rather, we have always had a surplus of lions that have to be sold. We sold fourteen African lines two years ago and even then the reason for the sale was their surplus,” he said. However, the said official also informed that there are currently 29 African lions, three white lions, six tigers and two jaguars in Lahore Zoo Safari and the facility of captive breeding of jaguars is only in the safari park. When contacted, Director of Lahore Safari Zoo, Tanveer Janjua, informed Profit that the auction of 12 African lions on August 11 has been cancelled and now it has been decided that these animals may be shifted to another park. “The auction was decided because the official rates of African lions are very low. At present, the official rate of an African lion is 150,000 rupees, while its price in the market is much higher. We were expecting that auctioning them would increase their value and one of our lions would sell for over a million rupees. Secondly, we have written to the government to revise their official rates, which may be revised soon. And at the new rates, an African lion is likely to be priced close to a million rupees. Their value is not determined by the wildlife department but by the Punjab government,” he maintained. Janjua further informed that the main reason for deciding to auction them was the space issue but the new management decided to relocate them instead of selling them. “We have these lions in surplus. Secondly, in this auction, these lions were to be sold only to wildlife breeders registered with the wildlife department. Documents of wildlife breeders, their farm houses and other formalities are checked by our field staff in different districts and then a NOC is issued to them. Now only the breeder who has this NOC can participate in the auction or we only sell him. World Association of Zoos and Aquariums (WAZA) guidelines are followed regarding suitable places to house the lion but what happened was that the documentation of those who were to come to us was not complete and this was also one of the reasons for not selling them. We had once before decided to sell African lions and even then, the decision was cancelled because the breeder’s documentation was not complete,” he added. When Janjua was asked if it was legal for people who kept tigers in their homes, he replied that it is legal if one has proper documentation and is following SOPs and guidelines. “Our field staff is monitoring all such things. If any complaint is received from any place, action is taken against them. If someone has kept a tiger or its cub at home, we have taken the breeder from him. They

check the certificate given by the breeder. If the certificate is there and the SOPs are not being followed, the breeder is also fined and sometimes the animal is also confiscated,” he says. Of course, compliance is low. Lahore Zoo Deputy Director Kiran Salim informed Profit that the zoo also has African lions in the lions category but they have never been auctioned. “We have either sold African Lions in the past or shifted them to other parks only when they become surplus to us. If we talk about the procurement of lions, we got some African lions in donation from UAE in 2019 but we haven’t had to buy them for a long time. One of the main reasons for this is that we had lions in good numbers from the beginning and they are continuously breeding. About two years ago we sold some lions to Army Museum Gujranwala at official rates while four years ago we also sold African lions to Peshawar Zoo,” she said. When Kiran was asked whether the official rates are fixed keeping in view the international market rates, her reply was that fixing these rates and selling the animal is a complete process in which international rates cannot be followed. “For example, five years ago, the price of a giraffe in Africa was between $60 and $100. This rate was because of the online market but when it is procured, its value will cease to be. Documentation must be completed by the vendor through whom the animal is procured then when the animal is imported, its price will not be the same as it was in the international market due to the addition of many separate costs. Similarly, some animals are priced very high in the international market but when we compare them with our official rates, our rates are very low. Here is an example of official rates for African lions,” she added. However, Kiran also informed that parks such as zoos or safari parks are providing inventory of surplus animals to the Punjab wildlife department on a regular basis. “Not every category of animal is on the surplus list, but only some animals and birds are sold or shifted elsewhere and only those animals are put in this surplus list. Apart from these specified animals, if any animal is surplus or available, it is not sold,” she concluded.

What should be done instead

his business, in short, is cruel. It is unfortunate that the trade of these animals is legal, when all of the resources and money being put into this business should instead be used to fund conservations of these precious creatures in the wild in their natural habitat n

NEWS ANALYSIS

Nation’s uncles refuse to elaborate financial advice beyond ‘earn in dollars’

A crisis has emerged in the wake of the current inflationary trend when the nation’s uncles have refused to elaborate their spirited financial advice beyond ‘earn in dollars.’

accounting student. “I say this because he starts showing me the rise in dollar value whenever I ask him. I’m not contesting that! Just tell me what to do!”

“It has been a long slog and negotiations have broken down yet again,” said the nation’s nephews and nieces to The Dependent. “We don’t seem to be getting any closer to the specifics of the said earning.”

“He keeps calling me stupid when I ask how I should learn in dollars,” said Seher Zaidi, a Karachi-based textile designer. “That my rupee income is falling as we speak, while the dollar is appreciating. I know that, tell me how to earn in dollars, don’t repeat the problem to me!” By the time this report was filed, the nation’s uncles have already complained to the nation’s parents that their good advice isn’t being taken seriously.

“They seem to be interpreting our demand for specifics for somehow opposing the suggestion that we should be earning in dollars,” said Imran Abbas, a Lahore-based

SATIRE

Is Pakistan/Sri Lanka the next Sri Lanka/Pakistan, worried citizens of Pakistan/Sri Lanka ask

The increasingly worried citizens of Pakistan/Sri Lanka are concerned that their beloved countries might soon follow the path that neighbouring Sri Lanka/Pakistan have taken. “Everyday I wake up with the fear that Pakistan might default on its sovereign debts like Sri Lanka,” said Saleem Zaidi, a senior marketing executive at a multinational company in Karachi. “Will that be our fate?” “Everyday I wake up with the fear that Sri Lanka, because of our dire economic circumstances, is going to become some sort of a rentier sepoy state for international powers,” said Asanka Bandara, a senior marketing executive at a multinational company in Colombo. “Will that be our fate?” “Seriously, every time I fill up my tank, I think, what

if there just isn’t enough petrol soon, much like Sri Lanka,” said local Lahori businessman Sajid Butt. “I’m just dreading bailouts and slimy superpowers like the US and China offering us money like some sort of cruel village moneylenders as things between them start heating up,” said local businessman Hanke de Silva. “An unsustainable war economy instead of our once-thriving tourism and agricultural exports.” “Three-hour queues at petrol pumps…ugh…,” grimaced Rashid Khattak, a Peshawar-based journalist. “Only 60% literacy…..ugh,” said Chaminda Tessera, one of the 92.8% literate Sri Lankans, while reading a newspaper.

SATIRE