ISLAMABAD

StAff RePoRt

the government of Pakistan, inorder to meet the energy shortfallin the country and fulfil futureenergy requirements formulateda new Petroleum Policy, 2012,

wherein more liberal fiscal incentiveswere offered. Besides this, the govern-ment also introduced Tight Gas Policy,Low BTU Gas Policy, Marginal/StrandedGas Pricing Guidelines and Shale GasFramework for three pilot projects.

In order to alleviate the shortage ofhydrocarbons and to meet the future re-quirements of the country, Advisor to theprime minister on Petroleum & NaturalResources Dr Asim hussain said the Min-istry of Petroleum & Natural Resourcesshould play a dynamic and proactive roleto meet new challenges. Following his di-rectives, the Directorate General of Petro-leum Concessions, after a lapse of almostthree and half years, offered 58 blocks for

grant of exploration licences. The bids forthese blocks were opened on 10th March(yesterday), in the presence of representa-tives of the provinces, exploration andproduction (e&P) companies and officialsof DGPC/Ministry of Petroleum & Natu-ral Resources. Dr Asim also said the ex-ecution of new exploration licences and‘petroleum concession agreements’ forman integral part of the government’s driveto attract investment in the oil & gas sec-tor, therefore, maximum number of explo-ration licenses ought to be executed withmultinational, public sector and locale&P companies to achieve the country’senergy goals in the shortest span of time.

Following advertisements publishedin leading newspapers calling for bids, thegovernment received 66 applications for50, out of the 58, blocks offered for bid-ding through open and transparent com-petitive bids. As a result of bidding, e&Pcompanies have committed to invest aminimum financial expenditure of morethan $ 372 million (Rs 37 billion).

PPl clinches 11 explorationblocks, committing over $64m KArAchI: Alligned with its aggressive exploration programme to optimise

production and reserves replenishment of hydrocarbons, the Pakistan

Petroleum Limited (PPL) won provisional grant of 11 strategically-fit

exploration blocks offered in the latest bidding round held on March 10 at

the Directorate General of Petroleum Concessions, Ministry of Petroleum and

Natural Resources (MP&NR). The blocks won by PPL are located in Sindh,

Punjab and Balochistan. The company has committed a total of 6,445 work

units, which translate into a minimum financial obligation of $64.45 million,

though actual investment would be significantly higher on discharging the

work commitment. To engage a multinational E&P company in the bidding

round, the PPL submitted two joint bids with OMV (Pakistan) Exploration

GmbH. The Austrian E&P company will operate one of the two blocks,

becoming the first multinational E&P in recent years to venture into the

country as operator- a move likely to draw more multinationals to the local

E&P sector. PPL was instrumental in bringing OMV to Pakistan during the

1989 bid round and has since partnered with the company in successful

ventures, including Sawan, Miano, Latif and Tajjal fields. StAff RePoRt

01

BUSINESS

BMonday, 11 March, 2013

ISLAMABAD

NNI

the All Pakistan CNG Associa-tion (APCNGA) on Sundaysought 7-day gas supply tocompressed natural gas (CNG)filling stations across the coun-

try as the change in weather has signifi-cantly subsided demand for gas.

In a statement issued on Sunday,APCNGA Chairman Ghiyas AbdullahParacha said the government must re-visit the load shedding schedule forCNG sector and resume round-the-clockgas supply until next winter.

“Government must end discrimina-tion and provide relief to the masses be-fore the dissolution of assembliesbecause we have braved unprecedentedgas load shedding which took a heavytoll on routine life, the country’s econ-omy and foreign exchange reserves,”said Paracha.

Paracha further said reduced demandfor gas has improved supply levels,adding that this fact can be verified from

records of gas distribution companies.The government is left with no excuse tocontinue its policy of unjust distributionof resources, he said.

expressing disappointment over thepetroleum ministry’s continued silenceon proposals by APCNGA to end the gascrisis, he said the government must takesteps to rescue the CNG sector and en-sure smooth functioning, especially inPunjab, which has been hit the hardest.Paracha said Punjab is being penalised

by policymakers and remained ex-posed to high levels of load sheddingcompared to other provinces, solely forpolitical reasons. he said foreign ex-change reserves have touched alarminglevels. In such a scenario, he said, theCNG sector can play a decisive rolein cutting the import bill, providingsome much-needed fiscal space.

Rulers must realise that Pak-istan is set to witness widespreadpolitical chaos if it fails to createaround one million jobs per annumwithout which economic instabilitywill persist, Paracha opined. The han-dling of the energy crisis since sev-eral years is adding greatly tounemployment which poses a mas-sive security threat to the country,Paracha said.

he demanded that an inde-pendent commission be formedto probe into the causes, conse-quences and the macroeconomicimplications of the energy crisisand suffocation of the CNGsector. “Owners of the CNGfilling stations will not ac-cept deliberately engi-neered gas shortagesanymore,” saidParacha.

APCNGA demands 7-day gassupply across Pakistan

ALSO DEMANDS FORMATION OF INDEPENDENT COMMISSIONTO PROBE INTO CAUSES, CONSEQUENCES OF ENERGY CRISIS

$372 MILLIONCOMMITTED BY E&P COMPANIES

$7.878b loansobtained From imF in threeyears, na toldISLAMABAD: Pakistan has obtained $

7.878 billion loan from the

International Monetary Fund (IMF)

from 2008 to 2010-11, according to

documents placed before the National

Assembly (NA). The documents

revealed that the country obtained a

$3.9 billion Stand-by Agreement (SBA)

in 2008-09 while the SBA obtained in

2009-10 was $3.526 billion. In

addition, $ 0.452 billion had been

obtained as Emergency and Natural

Disaster Assistance (ENDA) in 2010-

11. The interest rates on these loans

range between 1.07 percent and 3.07

percent per annum. The IMF had

disbursed the amount in 6 tranches,

each of which is payable in eight equal

installments. APP

Pakistanattracted $11.464b Fdi inlast Five yearsISLAMABAD: Pakistan received

$11.464 billion in Foreign Direct

Investment (FDI) in last five years,

according to official documents. The

documents reveal that the country

attracted $2.6208 billion FDI in 2007-

08 (March-June) and $3.7199 in the

financial year 2008-09. In 2009-10,

the country attracted $2.1508 billion

as FDI whereas the figure stood at

$1.6348 billion in 2010-11 and

$0.8126 billion in 2011-12 In 2012-13

(January-July) FDI stood at $0.5251

billion. Meanwhile, National Database

and Registration Authority (NADRA)

earned a sum of Rs 7.5 billion from

overseas Pakistanis as fee for issuance

of computerised National Identity Card

for Overseas Pakistanis (NICOP) during

the last four years. According to

breakup, NADRA earned Rs 1.3 billion

as NICOP fee during July 2012 to

March 2013, Rs 2.1 billion in 2011-12,

Rs 1.7 billion in 2010-11, Rs 1.5 billion

in 2009-10 and Rs 1.2 billion in 2008-

09 from expatriate Pakistanis. APP

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BUSINESSMonday, 11 March, 2013

02

B

Yukon HuAng & CLAre LYnCH

BloomBeRg

XI Jinping and Li Keqiang are tak-ing over China’s leadership at atime when growth has slackenedand labor issues have becomemore complex.

Reports that businesses such as FoxconnTechnology Group are raising wages andstruggling to recruit workers in China haveintensified debate over just how many surplusworkers the country still has. Meanwhile, aboom in college-educated Chinese has raisedconcerns of an impending threat to U.S. com-petitiveness. These seemingly disparate con-cerns about China’s labor force are actuallylinked by common underlying factors, withcritical implications for China’s ability to re-main the growth engine of the world.

China’s large pool of surplus labor has fu-eled its rapid industrial growth. Now this “de-mographic dividend” may be almostexhausted, and its economy reaching a Lewisturning point: a shift named after the Nobelprize-winning Arthur Lewis, who was the firstto describe how poor economies can developby transferring surplus labor from agricultureto the more productive industrial sector untilthe point when surplus labor disappears,wages begin to rise and growth slows.

Citing periodic labor shortages and un-skilled wages that have risen since 2003,prominent Chinese economists suggest thattime has come. The International MonetaryFund disagrees and puts the turning pointmuch later — between 2020 and 2025,based on a model analyzing labor produc-tivity. A third view is that China’s surpluslabor is still plentiful, given that about 40percent of the labor force is still underuti-lized in the rural sector, mostly in agricul-ture, which accounts for only 10 percent ofgross domestic product. mobility restriCtioNs: In China,many market imperfections impede the mo-bility and use of labor. Thus, actual avail-ability may fall far short of what ispotentially available. The hukou residencysystem that restricts migrant workers fromaccessing services where they are em-ployed is the most glaring example of thiskind of imperfection. Less obvious is theextent to which China’s rural- support poli-cies, including subsidy programs, may beencouraging workers to stay in agriculturelonger than they should.

Surplus workers may not be in agricul-ture as in the original Lewis model but insmaller towns, underemployed at depressedwages. The result is that China has thehighest rural- urban income disparity in theworld. Why don’t these workers move tomore productive jobs in more dynamic set-tings? In formal terms, it is because their“reservation wage” has increased — that is,the minimum wage they demand to moveis much greater than their current wage, be-cause for a generation that didn’t experi-ence the hardships of the Mao Zedong era,the monetary and emotional costs of relo-

cation have risen. Many workers won’tmove to major cities that lack affordablehousing. They may also have rights to landthat can’t be sold for full market value —thus, staying in familiar surroundings isnow a more attractive proposition.

If recent decades saw a huge migrationthat “brought workers to where the jobsare” along the coast, the future may meanthe reverse, involving “bringing the jobs towhere the workers are” with profound im-plications for China’s economic geography.

In lesser known provinces such ashenan, with a country- sized population of100 million, large numbers of young work-ers seek factory positions but are unwillingto relocate to seemingly foreign places incoastal China. As China becomes moreconsumption-oriented with rising incomesand urbanization, the center of economic

gravity will naturally move inland wheretwo- thirds of the population resides. ColleGe Graduates: Just as youngworkers are demanding more satisfyingjobs, they also increasingly feel entitled toa college education. Government policy hasexpanded access to higher education. From2000 to 2010, the percentage of college-agecohorts enrolled in universities more thantripled in China, a rate of increase far abovethat of India, Malaysia and Indonesia. Chinawants to produce 200 million college grad-uates by 2030; they will make up more than20 percent of the projected labor force, morethan double the current ratio. The push toexpand higher education means the numberof college-educated has leapfrogged — andexcessively so — ahead of those holdingonly vocational or junior college degrees.

These college-educated workers are un-

willing to settle for factory work and com-pete for office-based positions. Collegegraduates are four times as likely to be un-employed as urban residents of the same agewith only basic education, even as factoriesgo begging for semi-skilled workers. Giventhe underdeveloped service sector and still-large roles of manufacturing and construc-tion, China has created a serious mismatchbetween skills of the labor force and avail-able jobs. As the economy moves up thevalue chain, substituting more capital-inten-sive manufacturing for unskilled labor-inten-sive assembly, a shortage of semi-skilledworkers is appearing. But the excessivegrowth of college graduates has outpaced thestructural transition and prematurely shiftedthe labor supply from semi-skilled manufac-turing workers to more knowledge- inten-sive service professionals. More emphasis

on vocational training and industry-specificengineering skills will help China fill its im-mediate need for manufacturing workers.

economists will continue to debatewhether China is running out of surplus labor.But pinpointing the timing of the Lewis turn-ing point is less relevant than understandinghow policy distortions, shifting labor migra-tion patterns and higher education enrollmentsare creating labor shortages and skill-mixproblems. As China enters a more complicatedand less predictable phase of its economic de-velopment, its policy makers need to focus onhow to encourage use of labor in the rightplaces and with the right skills.

(Yukon Huang and Clare Lynch are,respectively, a senior associate and ajunior fellow at the Carnegie Endowment.The opinions expressed are their own.)

Where have china’s workers gone?

VIA BLooMBerg

The death of Presidenthugo Chavez marks thebeginning of a perilous

and hopeful moment forVenezuela and the West-ern hemisphere. There is no denying the

impact of the charismatic ex-paratrooper, a plotter and survivor of

coups who demolished Venezuela’s po-litical power structure, won three elections

with wide support and usedthe wealth from the

world’s largest oil re-serves to advance,across the Andes andbeyond, his home-brewed ideology of “Bo-livarian socialism.”

how long that inco-herent ideology will sur-

vive its creator is an openquestion. The chal-

lenge now fac-i n g

Venezuelaand its

neighbors is to ensure a peaceful transition to a newelected government. Under Venezuela’s constitution, anelection must be held within 30 days. Given the super-charged atmosphere surrounding Chavez’s death — justhours earlier, Vice President Nicolas Maduro blamedChavez’s enemies for his cancer, and claimed that oppo-sition groups were sabotaging the nation’s power grid —the potential for unrest during the campaign looms large.

In last October’s election, Chavez used the tools ofincumbency, including not just government largesse butalso dominance of the news media and other soft author-itarian strategies, to disadvantage his challenger hen-rique Capriles Radonski. That pattern will repeat itself,with the added uncertainty and tension that may comefrom rivalries between Maduro, National AssemblyPresident Diosdado Cabelloand others within the post-Chavez camp. Good NeiGhbors: It will fall to Venezuela’s dem-ocratic neighbors, led by Brazil and Colombia, to exertinfluence for a clean and lawful campaign. Any publicpressure by the U.S. will be as ineffective as it is unwel-come — in the short run, Chavez’s followers are likelyto resort even more readily to anti-American invectiveto whip up popular support, as Maduro did the dayChavez died by expelling two U.S. diplomats for al-legedly seeking to destabilize the country.

The disappearance of the larger-than-life Chavez doescreate more of an opening for the Organization of Amer-ican States to call, if needed, for intervention under theInter- American Democratic Charter. It also provides anopportunity to defeat a cynical “reform” aimed at weak-ening one of the hemisphere’s human-rights monitors.Chavez, along with his ally President Rafael Correa ofecuador, had led an attack on the OAS’s Inter-AmericanCommission on human Rights, which had called attentionto Venezuela’s authoritarian drift. In a measure to be takenup this month in Washington, they propose to cut funds tothe judicial watchdog and particularly to its special rap-porteur for freedom of expression, who defends liberty ofthe press and journalists. Some deft and forceful diplo-macy could blunt that effort, which would weaken pro-tection for opposition groups at a particularly bad time.

Seismic political upheaval in Venezuela, however,is neither imminent nor desirable. Not only are 20 out of23 governorships in the hands of Chavez supporters(many of them former military officers), but over thecourse of his dozen years in power he built up a 125,000-strong militia, of whom 30,000 could be consideredarmed combatants. having them pour out into the streetsis in nobody’s best interests. Instead, if moderate changeis to come, it will be driven largely by economic neces-sity. Chavez’s policies, especially his most recent pre-

election spending splurge, have led to growing debt,among the highest borrowing costs of emerging marketcountries, one of the world’s highest inflation rates, andwidespread shortages of milk, meat, toilet paper andother basic goods. A recent devaluation will help gov-ernment finances but make imported goods even moreexpensive and seems like a short- term fix. ’homeGrowN Charm’: Such economic tribula-tions didn’t seem to dim the adulation of Chavez’s sup-porters, who backed him repeatedly. his likelysuccessors, however, may not have his “immediatefriendliness and…homegrown charm” — qualities thatGabriel Garcia Marquez singled out in calling Chavez“a natural storyteller.” And they probably won’t have asmuch money to mix with the magical realism. Starvedof investment and milked to fund Chavez’s special proj-ects, Venezuela’s state-run oil company produces one-quarter less oil than it did when he first took office.

In the days and months ahead, Chavez’s championsand critics will debate the extent to which his policies re-duced poverty and inequality, and how accountable heshould be held for the near-quadrupling of murders from1998 to 2011, when more than 19,000 Venezuelans werekilled (about the same as the total for the U.S. and theeuropean Union combined). They may plumb the mys-teries of Chavismo, including the wisdom of forging tieswith Iran and Syria and giving away billions of dollarsin oil each year to Cuba. But the luxury of mulling his-tory’s verdict will be denied to whoever takes Chavez’splace, because the economic mess he left behind will de-mand all of his successor’s attention.

Chavez’s Legacy of Ruin

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