“ SHIPPING POTENTIAL DUE TO GROWTH IN REGIONAL BLOCK OF SOUTH ASIA?”

1. “ SHIPPING POTENTIAL DUE TO GROWTH IN REGIONAL BLOCK OF SOUTH ASIA?” By Ravi K Mehrotra Chairman Foresight Group, London At 7th IAPH Asia Oceania Regional Meeting & Forum Karachi Sheraton Hotel, Pakistan On 15th February 2006

2. When I visited China in late 1980’s

3. When I visited China in 2005

4. When I visited India in late 1980’s

5. When I visited India in the present day

6. Pakistan in the late 1980’s

7. Pakistan today

8. Pakistan & India in 1980 Ahead of China esp. in free enterprise and per capita earnings China in 1980 Still struggling with Communist Egalitarian past and lack of enterprise How did China imbibe Entrepreneurship into their Management? How will India & Pakistan’s Industrial Growth look in 2010? WHAT DO THE PREVIOUS SIX IMAGES TELL US? Pakistan & India in 2005 • Full of vigour but political system still trapped in clanship management of the Nation instead of taking charge of enterprise China in 2005 • Government took charge of enterprise in late 1980’s, transforming China into a modern industrial nation which increased per capita income by a factor of 5

9. WHAT CAN WE LEARN FROM CHINA’S PHENOMENAL GROWTH OVER LAST 25 YEARS? • Population is not a liability for a nation but an opportunity • Why an opportunity? If inflation can be kept very low then this population can produce goods for daily use at a very competitive cost • The advantage of producing daily consumable goods at very low prices is you can easily export without being branded as dumping goods • In fact these low cost consumable goods are welcomed by developed Nations with open arms • Why are these low cost goods welcomed? Because they keep the developed world’s inflation down. Producing these goods perennial problem for developed world to control inflation • It is because of China the developed world has lived for the last 10 years with very low inflation (below 2.5%) • Their capital and labour has been used to produce goods of high value addition. This is the reason of healthy growth of world’s economy in last 10 years and low interest rates

10. ARE PAKISTON & INDIA THE NEXT BIG STORY? Are Pakistan & India ready for a repeat of the China Effect on Global Shipping? Pakistan & India’s Intellectual Industry Growing, Why? Pakistan & India presently lacks development of infrastructure and full utilisation of labour force. More than 25% population unemployed or partly-employed Because of our ancient philosophy and emphasis on self-analysis we have become very argumentative. Each of us wants to keep our point of view ahead of others. This makes it difficult to bring out cohesive policies for growth of the Nation. Due to this, we take too long to finalise a project (hence slow growth). Due to this argumentative nature our political systems have developed over the last 58 years laws-within-laws which have become impediment to free our labour force for productive growth Are we ready to unshackle this? This is the main reason of keeping 32% of Pakistan and 23% of India’s population below the poverty line

11. = = Source : World Bank and IFC: India – Investment Climate and Manufacturing Industry, November 2004 WORLD MARKET SHARES FOR MANUFACTURED EXPORTS

12. [2003 bn US Dollars] 45000 40000 35000 30000 - Similar per capita GDP as India 25000 20000 Japan 15000 Russia Brazil 10000 Germany 5000 0 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 GDP GROWTH 2000 to 2050 Source: Goldmann Sachs: The Path to 2050

13. WEAKNESSES OF PAKISTAN & INDIAN ECONOMY • Still dependent on agriculture – 25% of GDP and 40% of labour employment • Labour Laws archaic – contributes to keeping people below poverty line • Political system controlled by clan mentality • Day-to-day economic activity shackled in bureaucracy • Legal system slow & time consuming • Acute shortage of infrastructure development in the country

14. 13,1% 86,9% 12,5% 87,5% 1950 1950 14,3% 85,7% 1955 14,2% 85,8% 1955 15,6% 84,4% 1960 16,0% 84,0% 1960 17,0% 83,0% 17,6% 82,4% 1965 1965 18,4% 81,6% 1970 17,4% 82,6% 1970 19,8% 80,2% 1975 17,4% 82,6% 1975 21,1% 78,9% 19,6% 80,4% 1980 1980 22,6% 77,4% 23,0% 77,0% 1985 1985 24,1% 75,9% 1990 27,4% 72,6% 1990 25,6% 74,4% 31,4% 68,6% 1995 1995 27,0% 73,0% 35,8% 64,2% 2000 2000 28,2% 71,8% 2010 45,1% 54,9% 2010 29,1% 70,9% 2015 49,5% 50,5% 2015 29,7% 70,3% 53,6% 46,4% 2020 2020 30,1% 69,9% 2025 57,2% 42,8% 2025 30,0% 70,0% Urban population 2030 60,5% 39,5% 29,5% 70,5% 2030 Rural population URBANISATION TRENDS World Population Prospects: The 2004 Revision United Nations Population Database Population Division

15. [mn US-Dollars] 2003 Exports: 55.9 bn USD Imports: 70.7 bn USD 2003 Exports: 437.9 bn USD Imports: 413.1 bn USD Exports Imports VALUE OF MERCHANDISE EXPORTS & IMPORTS

16. [bn of current US Dollars] 53.5 4.3 2.5 FDI INFLOWS PER YEAR

17. STRENGTHS OF PAKISTAN & INDIAN ECONOMY • Self-sustaining & not implanted by foreign investments to utilise cheap labour • Industrial Growth improved from 5% to 11.7% • Largest middle-class purchasing power • Largest number of Professionals • Largest percentage of computer literate people • Self-sufficient in food production in fact net exporter

18. 78% 22% Highly Educated Workforce 73% 27% Rule of Law 73% 27% Management Talent 70% 30% Transparency 66% 34% Cultural Barriers 57% 43% Regulatory Environment 50% 50% Availability of M&A Targets 46% 54% Consumer Sophistication 45% 55% Competitor Presence 42% 58% Tax Regime 41% 59% Quality of Life 41% 59% Political/Social Stability 40% 60% Economic Reform 39% 61% Financial/Economic Stability 36% 64% Infrastructure 35% 65% Production/Labor Costs 34% 66% Government Incentives Region 29% 71% Access to Export Markets 22% 78% Market Growth Potential China 6% 94% Market Size CHINA VS REGION – FDI ATTRACTIVENESS Source: FDI Confidence Index. A.T. Kearney. October 2004. Volume 7

19. [% of GDP] *) Transportation, Electricity, Telecom etc. INFRASTRUCTURE *) INVESTMENTS Source: China Statistical Yearbook, RBI, Morgan Stanley Research

20. SUMMARY ON PAKISTAN & INDIA • It will still take time to sort out distortions in society and its economy • Acute shortage of infrastructure development in the country • Above two weaknesses will limit economic growth • For next 5 years Pakistan & India will have a negative trade balance • Population growth means young labour force for next 20 years • Hydrocarbon exploration in river deltas due perennial rivers from Himalayas will contribute to both countries being self-sufficient in energy • Due globalisation of Pakistan & Indian economy Bombay and Karachi Stock Exchange will continue in positive direction

21. CONCLUSION Pakistan & India will sustain 8% Growth Rate during next 5 years Economy will grow to between 10 – 12% between 2010 – 2015 Will Pakistan & India’s Development have an effect on Global Shipping? Will International Ship Owners reap similar profits which they had from China over the last two years? I speak annually at Cambridge University and always end with a question to my audience, so my final question to you is: Are we ready for a repeat of the China Effect for Global Shipping?

22. “ SHIPPING POTENTIAL DUE TO GROWTH IN REGIONAL BLOCK OF SOUTH ASIA?” By Ravi K Mehrotra Chairman Foresight Group, London At 7th IAPH Asia Oceania Regional Meeting & Forum Karachi Sheraton Hotel, Pakistan On 15th February 2006