PakAlumni Worldwide: The Global Social Network

The Global Social Network

As Pakistan struggles to bring a sense of stability and security amidst daily carnage, it is important to recognize that there is more to Pakistan than meets the eyes of a casual consumer of the images and reports by the world's media. For example, Pakistan is a developing country with functional bureaucracy, well-organized police force, democratic institutions and a powerful army. And Pakistan has more advanced infrastructure than its neighbors, including India. Among the modern infrastructure pieces in place in Pakistan are its motorway system, extensive road network, mobile telecommunications systems, airports, high-speed Internet system, extensive railroad network, gas pipeline etc. A British writer William Dalrymple who visited and compared India and Pakistan on their 60th anniversary described Pakistan as follows:

"On the ground, of course, the reality is different and first-time visitors to Pakistan are almost always surprised by the country's visible prosperity. There is far less poverty on show in Pakistan than in India, fewer beggars, and much less desperation. In many ways the infrastructure of Pakistan is much more advanced: there are better roads and airports, and more reliable electricity. Middle-class Pakistani houses are often bigger and better appointed than their equivalents in India. Moreover, the Pakistani economy is undergoing a construction and consumer boom similar to India's, with growth rates of 7%, and what is currently the fastest-rising stock market in Asia. You can see the effects everywhere: in new shopping centers and restaurant complexes, in the hoardings for the latest laptops and iPods, in the cranes and building sites, in the endless stores selling mobile phones: in 2003 the country had fewer than three million cellphone users; today there are almost 50 million."

More recently, Alistair Scrutton filed a Reuters report about Pakistan's infrastructure, particularly its 367 Km long M2 motorway that connects Lahore with Islamabad:

"Indeed, for sheer spotlessness, efficiency and emptiness there is nothing like the M2 in the rest of South Asia.

It puts paid to what's on offer in Pakistan's traditional foe and emerging economic giant India, where village culture stubbornly refuses to cede to even the most modern motorways, making them battlegrounds of rickshaws, lorries and cows.

There are many things in Pakistan that don't get into the news. Daily life, for one. Pakistani hospitality to strangers, foreigners like myself included, is another. The M2 is another sign that all is not what it appears in Pakistan, that much lies hidden behind the bad news.

On a recent M2 trip, my driver whizzed along but kept his speedometer firmly placed on the speed limit. Here in this South Asian Alice's Wonderland, the special highway police are considered incorruptible. The motorway is so empty one wonders if it really cuts through one of the region's most populated regions.

"130, OK, but 131 is a fine," said the driver, Noshad Khan. "The police have cameras," he added, almost proudly. His hand waved around in the car, clenched in the form of a gun.

On one of my first trips to Pakistan. I arrived at the border having just negotiated a one-lane country road in India with cows, rickshaws and donkey-driven carts.

I toted my luggage over to the Pakistan side, and within a short time my Pakistani taxi purred along the tarmac. The driver proudly showed off his English and played U.S. rock on FM radio. The announcer even had an American accent. Pakistan, for a moment, receded, and my M2 trip began."

Here are another western tourist's impressions of M2 from

A strange relief to get to drive 3 lane asphalt in such serene quietness! It was unreal, we had to pinch our arm if this was really happening. Is this Pakistan? We decided to spend the night at the 3rd big service area with restaurant, gas station, police and clean toilets. It was strange to see there was no trace of locals selling stuff on the curbs – something which is really normal in Pakistan. Probably these place are off limits to the small business men.

Going to India – something we have long looked out for. We’ve heard a lot about India from other travellers – good and bad experiences. One thing’s for sure – India must have a LOT of people, each and every traveller from India has mentioned this explicitly. With Pakistan and Nepal (1998) as context we’re curious and somewhat anxious how we will experience India. We’re not crowd maniacs and both appreciate a ‘bit of air’ between people. Anyhow India happened quicker than we expected – we left Islamabad on the 25th, the next day we already sat in the garden of Ms Bandari’s Guesthouse. The superb M2 motorway with overnight parking and the road to the Indian border was uneventful. We drove the canal bank road through Lahore a long drive on a straight road. But look carefully to find this road separated by a canal – it’s sign posted rather miniscule by “Wagah border”.

"The road to Amritsar was like wading upstream in extreme suicidal traffic – the independence day ceremony must be something special. It must be totally worth risking your life for this. Naturally we had our usual ‘end of the day – near dark – took the wrong turn in mega dense traffic’ exercise. Just to make our arrival in Amritsar a little bit more special. We arrived in the dark - asking directions many times. This way we came a few 100 meters closer to Ms Bandari’s guesthouse each time we asked. We nearly seen the golden temple by truck. Ain’t that a relaxed truck ride in the dark! Cool!
And yes, even with GPS coordinates of the place it’s still a nice puzzle to solve after a border crossing day like this."

According to BMI research, Pakistan has experienced a high level of activity in its infrastructure sector in 2008. This has mostly been focused on the power sector and the road network. In addition, construction of housing has been a top priority. However, the global downturn is hitting Pakistan hard, and the BMI's 2009 Annual Infrastructure Report for Pakistan is forecasting the construction industry to contract by 6.31% y-o-y in 2009. The power sector has been the major focus in Pakistan's infrastructure sector in 2008. Years of underinvestment in electricity generating and distributing infrastructure came to a head in 2008, when there was not enough supply to meet demand, further exacerbated by lack of rainfall almost knocking out Pakistan's large hydropower sector. It is currently estimated that there is a 3,300MW shortfall in capacity at peak hours; as a result, load shedding has been a common practice. In an attempt to combat the shortages, a US$30bn investment plan has been announced, which has seen the development of a number of projects. Construction started in 2008 on the 969MW Neelum-Jhelum power plant, which is being built by a consortium comprising Chinese Gezhouba Group Company and China Machinery Export Corporation. Construction of the Diamer Basha Dam, which will have a capacity of 4,500MW once completed, is expected to start in 2009. Within the transport sector, the roads have benefited from the majority of attention in 2008. This has been the result of the National Highways Authority's plans to invest US$5.36bn into the sector. The plans benefited from a US$900mn multi-tranche loan from the Asian Development Bank. The main project being pursued is the National Trade Corridor, envisaged as a main thoroughfare connecting the north of the country to the ports in the south; it is estimated to cost US$6.58bn. Construction of housing has been a major feature in 2008. Residential construction is being carried out under the prime minister's 'mega housing scheme' which involves the construction of one million low cost houses per year. Pakistan's economy has been hit hard by the global economic downturn and BMI's is forecasting real GDP growth of 2.5% y-o-y in 2009, down from 6.8% in 2007. In November 2008, the country received a US$7.6bn 23-month standby loan from the International Monetary Fund to "support the country's economic stabilization program". The move might help boost investor confidence in the short term; however, it may put off investors looking at long-term infrastructure investments.

Pakistan Energy Infrastructure (Source: PPECA)

The 2008 World Bank assessment says that Pakistan is one of the most water stressed countries in the world, and water resources are depleting rapidly. With its water infrastructure in poor condition, the report argues that Pakistan has to invest around Rs60 billion (US$1 billion) per year in reservoirs and related infrastructure over the next five years. In the energy sector, the country will face severe power shortages of around 6,000 megawatts by 2010. Similarly, inefficiencies in the transport sector cost the economy between 4-5 percent of GDP each year.

To overcome these constraints, the Government of Pakistan is tripling its annual infrastructure investment from an average of Rs150 billion (US$2.5 billion) to Rs440 billion (US$7.3 billion). However, the bank report points out that mega projects in the past have experienced frequent delays and cost overruns, illustrating a lack of capacity in the industry to plan, program, and execute large projects.

Many infrastructure projects in Pakistan, including power plants and motorways, are being built and financed on build-operate-transfer or BOT basis. Built on the BOT basis, the M2 motorway has already paid for itself and now generates revenue for Pakistan government.

Here's a video clip of British Writer William Dalrymple comparing India and Pakistan:

Here is a slide show of some of the infrastructure development projects underway in Pakistan:

Here is a video with pictures of Pakistan's extensive roads network:

Related Links:

Foreign Visitors to Pakistan Pleasantly Surprised

Digital Maps of Pakistan
Pakistan's daily carnage

Pakistan's Road Network
Life Goes On in Pakistan

Water Scarcity in Pakistan

Food, Clothing and Shelter in India, Pakistan

Urbanization in Pakistan Highest in South Asia

A Review of Global Road Accident Fatalities

Pakistan Leads South Asia in Clean Energy

Karachi Fashion Week

Is Pakistan Too Big to Fail?

Karachi Fashion Week Goes Bolder

More Pictures From Karachi Fashion Week 2009

Pakistan's Foreign Visitors Pleasantly Surprised
Start-ups Drive a Boom in Pakistan

Pakistan Conducting Research in Antarctica
Pakistan's Multi-billion Dollar IT Industry

Pakistan's Telecom Boom
Pakistan's Infrastructure Assessment by World Bank
ITU Internet Data

Eleven Days in Karachi

Pakistani Entrepreneurs in Silicon Valley

Musharraf's Economic Legacy

Infrastructure and Real Estate Development in Pakistan

Pakistan's International Rankings

Assessing Pakistan Army Capabilities

Pakistan is not Falling

Jinnah's Pakistan Booms Amidst Doom and Gloom

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Comment by Riaz Haq on January 27, 2012 at 5:48pm

Here's a 2011 Dawn Op Ed on cement industry by Pakistan Cement Industry Association leader Tariq Saigol:

While the private sector performed magnificently whenever provided with an enabling environment, the response of the present government remains mired in confusion and inertia. Installed capacity was a paltry nine million tons in 1990, much of it being grossly inefficient as it was based on the outmoded wet process technology. As demand rose, the industry responded by launching a massive expansion programme. Over time, the installed capacity rose to nearly 44 million tons, a magnificent feat by any standards and a credit to the entrepreneurial spirit of the private sector.

However a number of adverse developments from 2007 onwards have brought the GDP growth to some two per cent. It is being reported by the media that the revised allocation after the latest cut, is a measly Rs180 billion. High inflation combined with slump in real estate and increase in the cost of production due to weakness of the dollar, resulting in a spike in coal prices, electricity and freight rates and accounting for 70 per cent of the cost, has adversely affected consumption while production cost soars, retarding construction activity in the private sector.

The current economic environment including low public spending has had disastrous consequences for the cement sector.

Local sales during the first half of the current fiscal year have witnessed an eight per cent year on year drop to around 10.1 million tons. Simultaneously, exports fell from 5.6 million tons to 4.6 million tons. The bad news does not end here. On top of low volumes, the average cement FOB prices fell to $48 per ton during the corresponding period— a level low enough to hardly break even.

Consequently cement sales through the sea route alone declined by about one third. Cement sales to India were also hard hit on account of non renewal of BIS certification (a quality control licence). Burdened with high energy and freight costs as well, the manufactures are desperate for some government support.

But no support is forthcoming. One would expect the government’s economic planners to appreciate the tremendous odds against which the industry is battling. If care of the cement industry is in short supply, then some thought may be given to the enormous exposure of the banks which have provided financing to the tune of $1.5 billion to the sector during 2003-2008.

Comment by Riaz Haq on May 7, 2012 at 6:20pm

NHA to implement 82 highway schemes at Rs 569bn, reports Daily Times: National Highway Authority (NHA) is implementing 82 highway schemes at the cost of Rs 569 billion, while 14 new projects are in pipeline costing Rs 95 billion.

The participants of 11th Senior National Management Course visited NHA head office here on Wednesday where

NHA’s member (planning) Sabir Hasan while briefing about the functioning of the NHA to visiting faculty members of the 11th Senior National Management Course said 98 Toll Plazas have been approved on NHA, out of which 84 were operational.

NHA is striving hard for availability of National Trade Corridor (NTC), in the country. Practical advancement is being made for achieving North South economic corridor, providing linkages with Gwadar and up gradation of Karakoram Highway in particulars.

Under NTC programme highways, Motorways, Expressways are being constructed from ports to borders with the view to provide linkages for the Transit Trade. NTC will reduce 50 percent travelling time, decrease 10 percent transportation cost and reduce 70 percent road fatalities.

Rs 300 billion will be spent during the next 5 to 7 years for this gigantic programme. Toll Collection System is being established on modern lines, he added.

He said pragmatic steps have been taken to save asset of highways from bad effects of overloading. To this effect weigh stations have been set up at specific locations to check the overloaded vehicles. In order to ensure construction of durable roads state of the art and advanced technologies are being employed. NHA is attaching great importance to make journey safe and sound on its network, he added.\05\08\story_8-5-2012_pg5_5

Comment by Riaz Haq on October 8, 2012 at 9:15am

Here's a BR report on WB and ADB financing infrastructure projects in Pakistan:

ISLAMABAD: Pakistan has signed eight new projects worth $2.24 billion with the World Bank while six projects of $69 million have been signed with Multi Donor Trust Fund (MDTF) during the last fiscal year.

Documents obtained by this correspondent showed that the Project of Tertiary Education worth $300 million, Social Safety Net TA Additional Financing of $150 million, Tarbela (Fourth Extension) worth $840 million, Punjab Irrigated Agriculture Productivity Project $250 million, Natural Gas Efficiency Project $200 million, Punjab Education Sector program worth $350 million, Sindh Skill Development of $21 million and Highway Rehabilitation Additional Financing project worth $130 million were signed between Pakistan and the World Bank during 2011-12.

The projects of Khyber-Pakhtunkhwa Emergency Road Recovery Project worth $8 million, Khyber-Pakhtunkhwa Fata Economic Revitalisation Project $20 million, KP Fata Governance Support Project of $6 million, Fata Rural Livelihood and Community Infrastructure worth $12 million, Fata Urban Centre Project of $7 million and the project of Revitalizing Health Services in Khyber-Pakhtunkhwa worth $16 million are the projects signed by Pakistan with MDTF.

Documents also showed that the Asian Development Bank’s (ADB) active portfolio in Pakistan comprised $3.3 billion in loans for 23 ongoing projects: $143 million in grants and $9.37 million in technical assistance as of June 30 this year. In terms of lending modality, the Multi tranche financing Facility accounted for 49 percent of the portfolio and project leans at 41 percent while disbursement achieved during FY 2011-2012 amounted to $429.4 million.

One of the key pillars of reform in the power sector of Pakistan is to enhance power generation, replacement of inefficient plants and improve the transmission and distribution system. In this regard, ADB has committed a financing facility of $2.9 billion over medium-term.

Documents also showed that the ADB organised 55 capacity-building initiatives for 2011-12 for Pakistan in areas of irrigation, energy, transport, environmental safeguards, gender statistics, poverty reduction, regulatory practices, financial inclusion approaches, sustainable and millennium development goals, taxation, public sector management, planning, budgeting and evaluation, foreign direct investment, procurement, project processing and regional integration.

Comment by Riaz Haq on September 17, 2014 at 10:00pm

From Hindu: Comparison of Azad Kashmir and Indian Occupied Kashmir:

As a resident of Baramulla, I should have been able to make it to Muzaffarabad, the capital on the other side, within five hours by road, had the governments of India and Pakistan allowed our three-member delegation to travel on the much-vaunted cross LoC bus.

However, the walls between the two sides built over 60 years forced me to travel via Delhi-Lahore-Islamabad — the journey thus took me almost three days.

Nevertheless, this longer route was interesting in itself. The 180-km Islamabad-Muzaffarabad road reminded me of the winding Srinagar-Jammu highway, while the mountainscape and the gushing waters of the Jhelum resembled Patnitop and the waters of the Chenab.
Muzaffarabad, with a population of just over 6,00,000, looks cleaner than Srinagar (PoK has 10 districts with an estimated population over three million in 2009). Even during my previous visit in 2004, I found that the stories of “under development in PoK,” fed to us on this side, are off the mark. This time, I noticed road connectivity and power supply to houses even on the upper reaches of a hill. In contrast, many villages in Jammu and Kashmir even today are without basic facilities. Neither does Muzaffarabad seem to be lagging behind in education and health compared to the Indian side of Jammu and Kashmir though progress is more in tune with Pakistani literacy rates. In the past few years the development in these two sectors has been rapid. The literacy rate in PoK has touched 65 per cent which is higher than for any other area in Pakistan. In conversations, both the young and old in Muzaffarabad say that Pakistan has “never discriminated” against the region.

Comment by Riaz Haq on November 7, 2014 at 5:15pm

Indian airline SpiceJet hits buffalo during take-off

Correspondents say animals straying into Indian airports over the years have led to serious safety concerns. In June 2008, close to 100 flights were disrupted on a single day after a family of monitor lizards crawled out onto the Delhi airport runway, forcing its closure for an hour.

On other occasions, reports said jackals, antelopes, peacocks, porcupines, snakes, monkeys, foxes and dogs have strayed onto runways.

Comment by Riaz Haq on December 3, 2014 at 7:02pm

HAVELIAN - Prime Minister Nawaz Sharif on Saturday performed the ground breaking ceremony of 60 km long Hazara Expressway costing Rs 33 billion, besides announcing a university.

Addressing a large gathering here after performing the groundbreaking, he said that the expressway was part of his vision for a bright Pakistan. The prime minister amidst thunderous applause and slogans also announced reduction in the price of petrol by Rs 9.63 dropping it to Rs 84.53. He said that the price of high octane was also being slashed by Rs 10.61, kerosene oil by Rs 4.34, and high speed diesel by Rs 7.12. The decisions, he hoped, would also go well with the few participants of the sit-ins as they opposed anything positive. The price slash, he expected, would be translated into decline in the prices of other items.

He said that the politics of sit-ins had been rejected by the masses, who knew that the Pakistan Muslim League-N (PML-N) was working for a prosperous Pakistan. He assured that the Hazara region would be provided natural gas as soon as possible. He said that the motorway would be part of the road infrastructure that would link it with the rest of Paksitan. Hazara, he said, would be connected with Islamabad through tunnels, making it easily accessible.

He said that work on the Bhasha Dam, which would be the largest type of project of its kind in Pakistan, would commence soon. Some 1000 schools, he said, would be constructed in the entire area, while work on Lahore-Karachi Motorway would start soon. He also announced construction of a motorway from Peshawar to Landi Kotal that would eventually extend to Kabul.

He said that this was the real “naya-Pakistan” - new Pakistan - in the Khyber Pakhtunkhwa, and not merely a fake slogan. He said that the sit-ins were only leading to backwardness and unemployment. He said that spate of lies, allegations and dirty language had now become a full time job of those who used the sit-ins to vent their frustration. The young generation was being spoiled with the foul language being used at the sit-ins, he said.

“This important road link forms part of Pakistan China Economic Corridor agreement. The four-lane fenced expressway would cost Rs 33 billion. The Hazara Motorway would reduce the drive from Islamabad to Havelian to 30 minutes, and provide access to the Havelian Dry Port project.” The prime minister said that the area would serve as a hub of all economic activity, and the people would soon see the real change.

The project would create thousands of employment opportunities, and lead to socio-economic uplift of the whole region, he said. National Assembly Deputy Speaker Murtaza Javed Abbasi also spoke on the occasion. Earlier, the PML-N leadership of Haripur, Abbotabad, Kohistan and Battagram received the prime minister.

Comment by Riaz Haq on March 11, 2015 at 9:17am

Karachi: Prime Minister Nawaz Sharif on Wednesday laid the foundation stone for the Karachi-Lahore Motorway (M9) that would connect this southern port city with the northern parts of the country.
The first phase of the mega project is expected to be completed in two-and-a-half years and cost 36 billion rupees (Dh1.2 billion).
At the brief inaugural ceremony, Sharif said that it was his earnest desire to begin the work on the motorway project.
In the first phase, the Karachi-to-Hyderabad section would be completed within two-and-half years and then work would begin on the Hyderabad-to-Sukkur section of the grand road.

The length of the road will be more than 1,100 kilometres once complete.
The prime minister said that the government was trying to shore up the resources for the next phases of the eight-lane motorway so that faster communication means could help the country enter the next development phase.
He also mentioned the work on the other roads, which were being constructed in the Hazara division of the Khyber Pakhtunkhwa province.
Sharif said that work on Khunjerab-to-Gwadar road was being carried out and it would be part of the Pakistan-China corridor.
He vowed to set up a network of motorways all over the country so that all the provinces could be interconnected, with a faster means of travelling between them.
The construction of M9 has been awarded to the Frontier Works Organisation (FWO) for the next 25 years on built-operate-transfer basis.
According to the contract agreement, the existing four-lane Karachi-Hyderabad Super Highway would be converted into six-lane 9M meeting international standards.
The project is being on public-private partnership basis and this would be the second-largest project in the country to be built on such basis.
FWO would pay 143 billion rupees to the state-run National Highway Authority (NHA) and another share of 109 billion rupees as tax to the government of Pakistan.

Comment by Riaz Haq on May 27, 2015 at 8:48am

Planes Landing On Autobahn NATO Exercise "Highway 84" West Germany 1984

Yes, #India Mirage landing on Yamuna Expressway is a big thing but #Pakistan did it much before via @firstpost

Highway strips are strategic assets for a nation which double up as auxiliary bases in war times. Many European countries have used this tactic for decades, particularly Germany, Sweden, Finland and Poland. Countries like China, Taiwan, Singapore and Australia too have done so many times before.
But what should bring a reality check for the Indians is the fact that Pakistan has done it twice before – first in 2000 and then again in 2010.
The first time Pakistan achieved the feat was way back in the year 2000 when Pakistan Air Force (PAF) used the M2 motorway (Islamabad-Lahore) as a runway on two occasions. For those who have an appetite for technical details, Pakistan’s M-1 Motorway (Peshawar-Islamabad) and the M-2 Motorway (Islamabad-Lahore) each include two emergency runway sections of 2,700 m (9,000 ft) length each. The four emergency runway sections become operational by removing removable concrete medians using forklifts.
PAF used the M2 motorway as a runway for the first time in 2000 when it landed an F-7P fighter, a Super Mushak trainer and a C-130. PAF did it again in 2010 by using a runway section on the M2 motorway on 2 April 2010 to land, refuel and take-off two jet fighters, a Mirage III and an F-7P, during its Highmark 2010 exercise.
India has finally woken up to the need to have many road runways. The Agra-Lucknow expressway is the first Indian road runway.
There are many prerequisites for having road runways. For example, there should be a smooth road at least three kilometers long. Moreover, the road segment has to be straight, leveled, located on non-undulating ground without slope and must not have electricity poles, masts, or mobile phone towers.
For a country like India, whose worst security nightmare is having to fight a two-pronged war with Pakistan and China, road runways are crucial. This underlines the importance of expressways – the highest class of roads which are six-or-eight-lanes controlled-access highways.
As of now, India boasts of 23 expressways totaling a length of 1324 kms, but the truth is that all of these so-called “expressways” are misnomers.
If one goes by the strict definition of “expressways”, India has under 1000 kms of such network; and barely a couple of hundred kms network if one goes by the international parameters.
In other words, the more international-class expressways India has, the more Indian strategic interests are secure.
The moral of the story: expressways are not only lifelines for transportation but also key assets for national security.

Comment by Riaz Haq on June 22, 2015 at 3:27pm

India infrastructure and debt:

And once a gleaming new highway is completed, the track will be connected to Delhi and the tourist destination of Agra. But for now, there is little traffic on the highway leading to Buddh and even less on the pristine racetrack.

It has been three years since Formula One abandoned the Buddh International Circuit, adding it to the sporting world’s crowded list of white elephants. It does not stand in total isolation, however.

Block after block of concrete skeletons of towers that were meant to provide up to 200,000 apartments line the highway, casting shadows on dusty wasteland, dried riverbeds and mesquite weeds.

Welcome to what is likely India’s largest ghost city, which extends across five expansive parcels of land along the highway adjacent to the racetrack. What was meant to be the crowning achievement of Jaypee Group and Jay Prakash Gaur, its 85-year-old patriarch, has become a monument instead to unrealistic aspirations and poor execution on the one hand and a shortfall in growth, the high cost of capital and an uncertain political landscape on the other.

The scale of Jaypee’s ghost city rivals that of some of China’s famous unoccupied cities. Fortunately for Jaypee, it also owns a collection of power and cement plants across India as well as three listed companies. Unfortunately, it also has about $12bn of debt, creditors and analysts say.

India chart

Jaypee is not alone in its plight. The company is ranked number six of 10 indebted Indian conglomerates that collectively owe about $125bn to their bankers, and account for 13 per cent of all bank loans in India, according to data from Ashish Gupta, an analyst with Credit Suisse. Others on the list include Lanco, a construction and power company; GVK, an energy and transport group; and GMR, an infrastructure conglomerate.

They are among the companies that should be leading India’s efforts to bolster its inadequate infrastructure, but instead are hampered by high debt levels and weak balance sheets.

In many ways, the difficulties of these groups embody the problems facing modern India, where private sector investment has virtually ground to a halt. The cost of capital is high, and banks are reluctant to extend credit because they have too many bad loans.

“Infrastructure companies are struggling and only the government can kick-start infrastructure,” says the chief executive of a prominent Indian company. “I don't see any market trigger.”

If Narendra Modi, the prime minister, is to achieve his goal of boosting economic growth, he needs to attract private sector capital to improve roads, rail, ports, power and other infrastructure. India’s infrastructure could require investment of up to $1.7tn by the end of the decade, the World Bank has estimated.

Though the government says it is building 13km of road per day, construction in India’s cities has not kept pace with the rapid growth in the urban population, and the state of public transport remains poor.

This has contributed to a host of problems in India’s cities, including traffic congestion, high numbers of road accidents and pollution, Barclays has noted.

Only two of the 53 cities with a population of 1m or more have meaningful public rail programmes. More than $120bn should be invested in metro rail by 2031, the bank estimates.

Despite Mr Modi’s pro-business rhetoric, the private investment required for such projects is still lagging due to unpredictable regulations, powerful government-linked entities that often do not honour contracts and other structural problems.

India chart

And then there is debt. Jaypee, for one, needs at least $1bn every year just to service its debts, bankers say. Like many other highly indebted companies in the country, it has technically defaulted on some of its debt, Mr Gupta of Credit Suisse notes.

In some cases, the Reserve Bank of India is letting banks roll over loans to indebted infrastructure companies but only if they have good assets. Until indebted groups can raise the cash to repay the banks — either by selling assets or completing projects so they generate cash flow — the new investment that India needs is still not going to materialise in anything like the magnitude the country requires.

“The problem is that the cash flows from infrastructure are a matter of 25 years while the banks don’t do long-term lending. The combination of the economic slowdown and cash flows that don’t match repayments is the problem,” says a senior official at the Reserve Bank of India.

‘We paid the price’

That is why, a year after Mr Modi took over, optimism about the government is waning. A glimpse at the circumstances of the Jaypee Group highlights how long it will take for corporate India to recover from years of slow growth and poor governance.

Jaypee needs hundreds of millions of dollars to complete construction of the mostly empty residential towers along the highway, but that money is not coming in.

“In the fullness of time, everything might work out,” says one of the most successful real estate investors in India. “But that only works if you can stay the course. Without debt, you can play for time. But we are talking about two decades in the future and, with those sorts of debt loads, how do you keep yourself alive until then?”

Mr Gaur holds the inconsistent and changing policies of past governments largely responsible for his circumstances today.

“The problem is the economic policy of the government. India grew at 9 per cent for 10 years,” he says from his office outside Delhi, the walls covered in calendars illustrated with paintings of Hindu gods. “Then suddenly from 2009 on, we paid the price. The use of cement came down and we did not get the price we expected.”

Mr Gaur’s problems began in 2003, when Jaypee, which is one of the largest cement producers in India, won the right to build the highway, officially known as the Yamuna Expressway. The group would build the 165km road and collect tolls for 36 years, then transfer it back to the state government of Uttar Pradesh.

India chart

The real benefits came from gaining the right to develop five parcels of land, a total of more than 6,000 acres. The land, for which he paid only the acquisition cost, is close to Delhi alongside the highway in Noida and Greater Noida.

Mr Gaur has become one of the largest landowners in the area. Official plans to extend the Delhi Metro to the area have boosted the prospects for the land increasing in value.

China and Japan

Regional rivalry has yet to pay off for India

India should be the biggest beneficiary of the competition between China and Japan to gain influence in the region. But obtaining credit from its cash-rich neighbours seems problematic.

Officials in Delhi view Chinese initiatives, including the “One Belt One Road” plan and theAsian Infrastructure Investment Bank, as a conspiracy to offload excess capacity in everything from cement to steel on them. They add that Narendra Modi’s “Made in India” campaign carries a tacit message: do not import from China.

Another source of capital, theNew Development Bank, the so-called Brics bank of the emerging economies of Brazil, Russia, India, China and South Africa, has named the IndianKV Kamath as its chief executive. But the bank has been slow to get off the ground, partly because governments in Brazil and Russia have other priorities.

Tokyo has made India the largest recipient of aid and subsidised lending. But the Japanese private sector is reluctant to invest in India because of the lack of commercial terms on offer, such as “cost plus” formulas for power plant projects.

That leaves the Indian government itself. Arun Jaitley, finance minister, acknowledged last week India had fallen short of its targets for modernising its infrastructure and that many projects had been hampered by disputes and red tape.

But he said the government was dedicating more funds to infrastructure, aided by extra levies on petrol after the fall in oil prices.

It is slowly making progress, building 13km of roads a day.

“We are creating a negotiating mechanism to resolve disputes and emboldening civil servants to take decisions without worrying that they will be questioned by investigating agencies [for corruption],” Mr Jaitley said. “And contractors who can’t perform should exit.”

“Without the land development, the road is not profitable,” says Udayan Sharma, head of investor relations for the group.

The group embarked on an ambitious plan to build apartments in high-rise blocks with names such as Kensington Park and Imperial Court, as well as town houses that would sell for up to $2m.

“At Jaypee we say: ‘No dream too big’,” it says in glossy marketing materials.

But things did not go exactly as planned. Formula One abandoned the track after holding races there for three years, until 2013, and the construction on most of the housing developments has been halted. “The racetrack is an anchor; it is not a money spinner,” Mr Gaur says.

Off at the races

Formula One’s withdrawal was related in part to the loss of an entertainment tax waiver that had been granted by the previous state government.

Mr Gaur says it also had to do with the desire of race organisers to schedule it in March, rather than October as his company had wanted.

At the same time, construction on the high-rise buildings was delayed after the National Green Tribunal raised concerns over its impact on a nearby bird sanctuary.

Not many apartments appear occupied; laundry flaps in the wind from only a few isolated balconies at the Pavilion Court. A hospital is functioning as are several schools. But the sites are a far cry from the integrated communities the brochures promise.

“I have heard some people say that the only place that they have seen scale like this is in China,” says Mr Sharma, with a mix of sorrow and pride.

Group executives say they have no bank debt on the real estate. Jaypee has collected deposits from buyers, but those deposits are paid on a rolling basis as construction proceeds; as the construction slows, so does the cash from buyers.

“This is the story of the vast majority of real estate in India,” says the property investor. “There is a cascading effect. When the money for one project stops, there is no money for the next project.”

The track which once hosted Formula One is for rent and occasionally hosts company races such as a recent event for Tata trucks, auto shows and new model launches.

At night, barbed wire and security guards discourage youths from breaking in to race their motorcycles.

While Mr Gaur says the departure of Formula One is temporary, the revenues coming in are a fraction of the money invested.

‘Land is always precious’

The group has sold some of its power and cement assets in its attempt to raise cash, which is one reason creditors have been patient with Jaypee.

“They have been among the most proactive of all the indebted groups,” says Sanjay Bhandarker, who heads Rothschild’s Indian operation.

India chart

Because Jaypee used high-quality equipment, the plants could readily attract buyers. Still, the value of the assets is far less (a total of $3.4bn raised through such sales) than the face amount of the debt, lenders say. “Will the banks force more asset sales to buy time?” asks the head of a bank with a small exposure to the group.

Mr Gaur remains optimistic.

“There is always a cycle. Land is always precious but sometimes it takes time,” he says with a nod at the gods on his wall. “When the government builds the new airport near Agra, the land will become platinum. How can we be in trouble with such gorgeous projects? Next year we will be all right.”

Comment by Riaz Haq on July 27, 2015 at 10:07am

Prime Minister Nawaz Sharif on Monday said the Peshawar, Karachi motorway under the China, Pakistan Economic Corridor (CPEC) project should be completed by 2017.

“Work on different sections of the Peshawar, Karachi motorway should be completed by 2017,” the premier said, while chairing a meeting to review the progress of projects under the China, Pakistan Economic Corridor (CPEC) project.

During the meeting, PM Nawaz directed authorities to expedite work on the projects under the CPEC to materialise the dream of a prosperous Pakistan.

“Energy projects under CPEC should be completed on fast-track,” the premier said.

Read: CPEC to be completed at all costs: Army chief

“Railway stations from Peshawar to Karachi should be upgraded and maximum facilities should be provided to the passengers,” he added.

PM Nawaz also upheld that the Gwadar International Airport should be completed in the shortest possible time.

Earlier this week, Army chief General Raheel Sharif visited Panjgur area of Balochistan and vowed to torpedo the campaign run by the country’s enemies against the CPEC and help get the project off the ground.

Read: Eastern CPEC route unfeasible: report

Emphasising the importance of the CPEC, the army chief said construction of these roads would link Gwadar port with the rest of the country at Chaman and the Indus Highway.


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