Pakistan is energy abundant. It just runs a distribution problem.

The energy in Islamabad on the eve of peace talks

The episode opens with Muzamil acknowledging a rescheduled recording — his original guest could not make it, and his wife was speaking at the Harvard Pakistan conference, leaving him solo parenting. Farooq Tirmizi, managing editor of Profit magazine, agreed to come on instead, fresh off a flight back to The US on the eve of regional peace talks being hosted in Islamabad.

Muzamil is clear about why he wanted Farooq on. Profit, he says, is one of the few publications he has ever paid for. “I have not seen someone consistently churn out quality content and actually fight the system,” he tells the audience, framing Farooq as the rare nuanced read in a clickbait economy. The brief for the episode is just as clear: Muzamil has been away from the discourse, the regional situation is volatile, and he wants to war-game Pakistan’s bull case, bear case, and base case with someone who reads the data rather than the omens. “Economist najoomi nahin hote,” he says — economists are not fortune tellers; they look at data and identify directions.

Farooq’s opening read of the mood in Pakistan is wry. He recalls a tweet asking what one has to do to ward off the evil eye from Pakistan, because “we’re not used to our government behaving in a responsible manner, let alone behaving in a responsible manner at a time when a lot of other people are behaving irrationally and irresponsibly.” He calls it a healthy mix of skepticism and surprised pride.

Why the biggest business families have stopped deploying capital

The conversation quickly moves to a structural problem Farooq has been picking up in off-the-record meetings with Pakistan’s largest CEOs. He names one on-record source — Mohammad Ali Tabba — and otherwise speaks in aggregate. The pattern is the same across the room. The largest Pakistani companies have grown to a size where the next move requires government cooperation they cannot rely on. International expansion is impossible without the state. Domestic expansion past a certain point runs into regulated industry. So the capital sits.

“They are definitely a lot of companies sitting on a lot of cash thinking, where do I deploy this?” Farooq says. The result, he points out, even shows up in his own work: when nobody is doing interesting and risky things with capital, “there aren’t a whole lot of stories to tell.”

He adds a second, less obvious structural reason: generational cycles. The second generation of Pakistan’s biggest business families is winding down. The third is either taking over or has just taken over. “That tends to be the most risk averse generation,” he tells Muzamil. None of this means nothing will happen — it just means the transition will be quieter than the headline narrative suggests.

Heavy industry, assembly, and the Air Link story

Muzamil pushes the obvious question: Pakistan has a vast consumer class, imports almost everything, and yet has never built a real heavy industry base. Why?

Farooq’s answer is patient. Heavy industry is the most capital intensive activity an economy can take on, and it depends on a higher savings rate than Pakistan has historically generated. The easier path is the one the country is already on — sugar mills at one end of the spectrum, mobile phone assembly at the other.

He uses Air Link as the example. “Yaar mobile ki dukan se shuru hua tha,” he says — it started as a mobile phone shop in 2011. The company moved from a single store to multiple stores, then into mobile phone assembly, and is now moving into Acer laptops and television screens. The parallel he reaches for is unexpected: Sony also started as a shop in Tokyo. Muzamil adds Ronin to the list — a headphones brand he interviewed earlier, which built its own factory after several years of just buying and reselling.

The pattern, both men agree, is that industrialisation in Pakistan is happening bottom-up. The story is rarely the established industrialist building a plant; it is the trader extending the production cycle from six weeks to ten, capturing a little more margin, and earning his way into the next rung.

”Pakistan is about to become an energy abundant country”

Then Farooq drops the line that Muzamil immediately knows will provoke half the audience. “We’re about to become an energy abundant country.”

Muzamil predicts the reaction on behalf of his viewers — load shedding is still constant, gas cuts off at eight in the evening. He asks Farooq to explain.

Farooq’s framing is the most important argument in the episode. The country’s load shedding problem from 2008 to 2011 was a supply problem — there simply was not enough electricity. That is no longer true. “The issue is just that the government has set up too many power plants for which it has to make too many payments, and sometimes they just turn it off literally because they just don’t want to make the payment.” Add solar’s astonishing speed of adoption — Pakistan was the third largest deployer of solar last year — and the country’s energy challenge has flipped from supply to distribution.

A distribution problem is harder politically, but more solvable structurally. The cleanest fix is to route excess capacity to large industrial consumers. Marginal generation cost on coal — about 85% of variable cost — is under ten rupees per unit, with abundant fuel for the next decade and beyond. Capacity payments, the noisiest line item in the cost stack, taper from 2028 and largely roll off by 2033. That is not a permanent ceiling. It is a two-to-five-year transition.

The implication is large. “It has gotten to the point where a very heavy energy intensive industry is now possible in Pakistan in a way that it wasn’t even five years ago,” Farooq says. Aluminium — possibly the most energy intensive industry in the world — is on the table for the first time.

The line that defines the next thirty years

In the middle of the energy conversation, Farooq delivers the line that lands hardest. “The core theme of the Pakistani economy over the last ten fifteen years and certainly over the next thirty years is that the people of Pakistan are done waiting for the government to do anything. We’ve just started doing things.”

Muzamil takes the framing and runs with it. “Twenty years later that is gonna be the story,” he says. The private sector will simply have grown too large for the government to slow it down. The episode then circles back to solar policy — Muzamil’s pet concern — and the question of whether Pakistan will deregulate the electricity market enough to let provincial and neighbourhood-scale operators emerge. Farooq is realistic. The federal government recognises the need, but has not picked a direction. Energy is a natural monopoly market, and Pakistan’s federal-provincial overlap makes the regulation hodgepodge.

Mining, copper, and the long road to scale

The discussion pivots to mining as the natural complement to assembly. Mohammad Ali Tabba’s group, Farooq notes, is going heavily into copper — “a vital element of electronics,” and increasingly the metal that determines who wins the electrification race. Muzamil pulls in his own family example: his maternal uncle has been exporting chrome from Balochistan since the nineties, and only in the last two years has the operation moved into onshore refining at facilities in Risalpur and the south, lifting per-truck value before the ore even leaves Pakistan.

Farooq adds the global context. The scale required to be globally competitive in heavy industry has shifted by an order of magnitude over the last few decades — a 100,000 ton copper smelter that would have been competitive in the 1970s is irrelevant against a five-million-ton modern plant. Pakistan is therefore entering at a disadvantage. But the country is approaching it the right way: bottom-up assembly on one side, mining on the other, eventually converging to the full supply chain. “It’s gonna take some time,” he says, but the tipping points are non-linear — value capture accelerates sharply once a producer crosses certain thresholds.

Digitisation, traceability, and the death of the cash economy

Muzamil brings in a thesis from a previous guest — Faisal Aftab — that Pakistan’s structural inefficiencies are essentially a function of its off-the-books cash economy, and that mass digitisation of finance will collapse the corruption stack underneath. Farooq agrees, and adds the data points.

Last year, Pakistan crossed an inflection. More transactions were conducted through bank mobile apps and web apps than through cash withdrawals from all ATMs and branches combined. Tax filing has gone from a handful of people Farooq knew personally in 2013 to a near-default behaviour today. Account creation has crossed 100 million — heavily double-counted, but moving in the right direction. “We are really at that cusp of taking off where I think people are going to be using a lot more digital money,” he says, and the most likely winners on the deposit side are, somewhat counterintuitively, the legacy banks.

The Iran war, the price of oil, and Pakistan’s quiet luck

Later in the discussion, the conversation shifts to the regional conflict. Muzamil wants the war-game: what happens if the conflict ends, and what happens if it escalates?

Farooq’s read is unexpectedly upbeat in the near term. He quotes Otto von Bismarck — “God makes special providence for drunks, fools, and The United States of America” — and argues that Trump, by accident rather than design, has done something strategically clever. The Strait of Hormuz is staying open, but the cost of keeping it open is shifting from the United States to China. China is the largest importer of the oil that flows through it. The US is now a net surplus producer with statutory authority to shut exports if it ever chooses to. The result: the Americans are unusually insulated from a global oil shock, and the Chinese are unusually exposed. China, accordingly, is the one telling Iran to stand down.

On Pakistan specifically, Farooq’s read is granular. There has been no material disruption to Pakistan’s oil flows — ships are still hitting Karachi Port on three-day sailing times. The country has lost roughly 15% of its gas supply, which is “noticeable but not catastrophic.” Fertiliser plants have been partially shut down, LPG is harder to get, and gas load shedding is up. But the conflict has also pulled Pakistan out of some unfavourable Qatari contracts. Twelve months out, he expects high prices but economic activity back where it was.

Saudi troops, Iranian gas, and aggressive neutrality

Muzamil reads recent moves through a wider lens — Saudi-Pakistan defence deals, a reported $12 billion arms deal with China, a Central Asia trade corridor opened through Gwadar, fuel selling at 280 rupees in Balochistan. “Suddenly there is a lot of activity on the regional connectivity,” he says, asking whether Pakistan is finally building a regional economic role rather than just a security one.

Farooq is precise. Pakistani foreign policy gets one thing right: aggressive neutrality between Iran and Saudi Arabia. Every move toward one is balanced by a move toward the other. The Gwadar-to-Central Asia route is, in his view, “not an economically viable route” — a diplomatic gesture, not an economic strategy. He is skeptical of the corridor thesis altogether.

What he is not skeptical of is the Iran-Pakistan gas pipeline. If The US partially desanctions Iranian energy, the South Pars field — the same field Qatar buys from — becomes accessible by pipeline rather than as expensive LNG. “That really is a major game changer for us,” he says. The Saudis fund Pakistani defence in lieu of Washington. The Iranians may eventually fund Pakistani energy in lieu of Qatar. “Instead of getting aid from Washington, Pakistan’s getting aid from Riyadh.”

Pakistan’s actual economic future, in Farooq’s reading, is not the corridor story. It is attracting investment, growing the domestic economy, and exporting where it can — a less romantic story than the silk road revival Muzamil keeps hoping for.

”The world is now at war”

When Muzamil asks the doomsday question — what if the conflict escalates — Farooq turns flatly pessimistic about the wider picture. “We are at war. The world is now at war.” He frames the next few years as the slow build to a US-led-versus-China-led conflict that will be the war their generation refers to as “the war” for the rest of their lives. Pakistan is currently in both camps, which is rare and useful, but the moment direct conflict breaks out, the most unmitigatable hit will not be food or fuel. It will be Chinese capital and goods flows, which Pakistan depends on far more than it appreciates.

He invokes The Guns of August, recommending it explicitly. Forty percent of Germany and Britain’s trade was with each other on the eve of World War One. They went to war anyway, over what he calls “one of the stupidest wars that the world has ever seen.” Regional trade interdependence works, he says, “until it doesn’t. And then it collapses very dramatically.”

The one thing Pakistan has done remarkably well in the current conflict, Farooq notes, is physical security of supply. The Pakistani flag has functioned, in this regional conflict, the way the ambulance siren functioned in 1990s Karachi when MQM and police were exchanging fire — everyone stops to let it through. “I think that is a remarkable achievement,” he says. In a world where chaos increases, the ability to maintain calm in the middle of the storm is Pakistan’s economic edge.

Indonesia, the Strait of Malacca, and a story about blood

Muzamil escalates the war-game. He points to news of a new US defence partnership with Indonesia and reads it as Washington securing leverage over the Strait of Malacca, where 80% of Chinese trade flows. That, he reminds Farooq, was the entire original logic of CPEC — Pakistan as China’s alternative route if Malacca was ever choked.

Farooq tells him a story he had not heard. “A little known fact about the Indonesian War of Independence was that 600 Pakistani soldiers fought in it, and all 600 died in it.” Indonesia, he says, has not forgotten. “The Strait of Malacca will be closed for everybody. It will not be closed for Pakistan."

"China is weaker than it looks”

Then comes the line that gives the conversation its sharpest edge. “I think China is weaker than it looks,” Farooq says.

His evidence is behavioural. China has war-gamed a Taiwan blockade for years and at any moment has hundreds of ships in position. Two or three perfect openings have come and gone — the Trump assassination attempt, the closing months of a visibly disengaged Biden presidency, an America divided beyond function. “If not then, then when?” he asks. The fact that Beijing did not move at the moment of maximum American distraction tells him they do not believe they are as strong as Washington believes they are. The American consensus, he says, is that the world is firmly bipolar and that China has hit parity, perhaps overtaken. “I don’t think it’s true, and I don’t think the Chinese think of it as true.” Any war, he concludes, will happen because the world stumbles into it, not because anyone decides to.

Muzamil pushes back, courteously but firmly. The same pre-war confidence existed about Iran, he reminds Farooq. The Iran-US conflict and the recent India-Pakistan exchange both demonstrated how much the nature of war has changed in the twenty-first century. He cites a hedge fund manager’s World War Two analogy: American tanks were half as good as German tanks, but America could build five for every one Germany built. Raw industrial power decided the war. Today, he argues, the US industrial choke has been visible — capacity constraints, supply chains, rare earths — and the narrative has flipped from raw power to missile inventory.

Farooq concedes the unpredictability. The conflict, he says, may not be triggered by a decision at all. Iran, at one point, devolved missile command to individual units, meaning launches were happening without central orders. One stray hit on Ghawar — the Saudi field that produces roughly half the country’s oil — would end the regional question instantly. “Game over, man.” The Israelis, he adds, are acting more irrationally than he has ever seen them. He puts the probability of a major escalation at higher within the next two to five years than not happening for ten.

India-Pakistan round two

By the end of the conversation, Muzamil saves his last question for the closest threat. Does Farooq think India-Pakistan round two is coming?

“Until last year, I would have said no,” Farooq replies. “But now I am afraid that you are probably correct, that such a conflict is all but inevitable.” His reasoning is structural. India, to become a great power, needs to stop paying attention to Pakistan. The rational part of the Indian establishment knows that and says so out loud, while the system as a whole continues to obsess. Either Indian politics reshuffles dramatically — which he will not predict — or it lashes outward, and the most politically consensus-friendly target is the one with the most historical practice attached. He closes with a line he learned in high school. “Don’t believe your own bullshit. And I unfortunately think the Indians believe their own bullshit.”

Muzamil wraps the episode honestly. “Lots of optimism, lots of pessimism. I don’t know which way to go.” The tragedy of the moment, he tells the audience, is the gap between the opportunity in front of Pakistan and the irrationality of the seventy-year-olds running the rest of the world. He signs off the way he opened — asking the audience to share their own read in the comments, and noting, half ruefully, that doomsday bunkers are now a real business on YouTube.