Rolf Michael Hay Pereira Holmboe is the Ambassador of Denmark to Pakistan whom BR Research recently met. The conversation revolved around renewable energy, energy efficiency, and diplomatic relationship and investment ties between Pakistan and Denmark. Following are the edited excerpts:
BR Research: Walk us through your seven months in Pakistan so far?
Rolf Holmboe: It has been a tremendous experience since I came here in September 2017. I have been traveling a lot during this time with 7 times to Lahore, 6 times to Karachi and once to Faisalabad. In the coming months, we plan to travel to Multan and Sialkot where we have some of our partner companies.
The first thing that you notice when you come to Pakistan is that there is a great difference in the situation in Pakistan, and the perception of it outside. Till there is a perception that Pakistan is an unsafe country with some level of political turmoil, attracting businesses and investment in the country will be a challenge. It is one of our tasks to rectify this picture.
However, the way we have perceived the situation here is that there has been tremendous appreciation in the last three to four years that is leading to reengagement of businesses and investment. Some of the examples of the improvement are good economic growth, one of the fastest growing middle class and fasted growing retail sector that offer new opportunities.
Apart from the power supply challenges, companies in Pakistan have had difficulty in accessing global markets and that is where partnerships between Danish and Pakistani companies in Pakistan and outside Pakistan can really help. We have some good examples of that; Ciklum Pakistan is one and a half years old software and an IT company operating out of Islamabad with 150 employees. It was started by a Danish Pakistani who had the knowledge of both markets.
BRR: How exactly do you facilitate these Danish companies in Pakistan? What entails your role as an embassy?
RH: We work at macro level and then we drill down to various sectors and industries, and within those industries we engage with certain companies. We started with the trade department in 2014 to initiate and catalyze trade between the two countries; so we have been encouraging companies to come to Pakistan and Pakistani companies to go to Denmark. Now we are entering the phase where we want to accelerate growth and go for a more comprehensive trade partnership
We as an Embassy have a limited scope and have four key areas that we focus on: Energy & Infrastructure including Water, Food & Agri, Healthcare, and Technology. Within each of these, we have certain industries that we focus on. The way in which we help Danish companies is by essentially opening up doors for them in Pakistan; accelerating their growth either by helping them by overcoming impediments, or access to clients, projects and businesses.
Novo Nordisk is a good example of that. It is the world’s largest manufacturer of insulin. Novo Nordisk started with 20 people a few years ago in Pakistan; today they have over 300 people. And of course, they tap into the middle class – a major driver in Pakistan. But with middle class consumption, you also have bad food consumption that leads to increased levels of diabetes; you have one of the highest rates of diabetes in Pakistan. So, we have entered into a strategic partnership with Novo Nordisk from the time they entered and wanted to expand by helping them engage with relevant authorities. For instance, the Government of Punjab has signed a MoU with the Danish company to prevent diabetes by starting pilot projects for the training of doctors and nurses in select sites and create awareness. Within energy and infrastructure, we have examples of wind energy, which is a major niche of Denmark.
BRR: The two major constraints for Pakistan have been energy and security; both have improved considerably over the past few years. However, still most of our sources are conventional: oil and gas. Where in you view could we plug renewables?
RH: That renewables are only good for small or remote areas is an old thinking. We had this thinking 30 years ago. The federal government in Pakistan has set a cap of five percent of wind energy and five percent of solar in the energy mix because of their irregular evacuation to the grid and the distance of the corridors to the major grid. All these constraints do not exist anymore if you take the modern way of running wind turbines or solar plants. Today, you can have renewable solutions in major centres. What you basically do is you make solar-wind hybrid renewable systems with storage.
BRR: So can you give us a workable plan to bring efficient, ecological and indigenous renewable energy into Pakistan?
RH: First, instead of putting a cap on renewables, maximise it; do as much as you can for renewables and the cost would go down. If you look at the global pricing, wind energy is at 2.5 cents per kWh, which is a third of oil and gas in Pakistan. Obviously, it will be expensive than that in Pakistan because of other reasons like non-existent industry here right now. Second, mix solar with wind. Plus, you need a long-term framework and legislation in place to achieve such goals. When we say 100 percent renewable energy in Denmark by 2050, it’s not just a number taken out of the blue; the reason for that is a long-term goal has been given, and at the back there is legislation and policy framework that gives long-term stability to companies to innovate and develop solutions that do not exist today. In Denmark, there has been an evolution from centralised power to decentralised power over the 34 years; and the next 20-30 years, our plan is to see integrated intelligent energy systems. Wind energy is an essential part of that; it accounts for 50 percent of Denmark’s electricity right now and will continue to be the baseload. But when you talk about baseload, it is not just wind but other renewables where we are linked the rest of the Europe like our neighbour Norway that has hydro power. The scenario going forward to 2050 is that our baseload will also utilize biogas, biomass, solar and hydrogen.
Denmark needs hydropower from Norway, whereas in Pakistan, you have an abundance of hydropower resources, which seasonally matches really well with wind power. Pakistan also has better solar power resources than Denmark. Pakistan has a much more power access to indigenous renewable resources so; the country needs a very stable and strategic policy framework for investments to come in, because the potential is immense. Another thing that Pakistan needs is a strong transmission grid; the World Bank is looking into stronger investments into the transmission networks that will help the price in future.
BRR: What kind of Danish investments could come to Pakistan?
RH: For investment to come in wind energy small projects worth 50MW won’t work; they need to be larger projects like 250MW minimum auctioned at competitive terms to attract foreign investors. For giants like Tesla to come in, you need policy framework that ensures that a certain type of energy is here to stay. Plus, the investors today look for guaranteed tariffs once they win the bid in the auction process.
One project that is at very initial stages right now is where we are working with a small Danish company that does low-cost wifi masts that have been rolled out in certain East African and West African countries and as part of ‘Digitize India’. They’ve won major tenders in the state of Jharkhand and Odisha. They won 15,000 locations with multiple masts in each of these locations. They are now in the process of raising capital from Denmark, the US and other places to go ahead with this. Now they want to enter aggressively in Pakistan where they want to combine this setup of low-cost mast with rural electrification, e.g. partnering with solar power companies or energy efficiency companies. You can set up these low cost wifi masts, which provide an umbrella of wifi signals that you can utilize in a radius of around 200-1000 metres and bundle them with services like a solar panel or a weather mast, for example.
BRR: Water is a big issue in Pakistan and drinking water quality is deteriorating staggeringly. Since water and infrastructure are also a key focus for you, what is being done on this front?
RH: Waste water treatment is one area we are looking into. I can give you an example where we are supporting a waste water treatment plant. In that project, we are giving multilayered type of financing. The Danish government will give some concessional grants, which will be around 20 percent. Then you have a soft loan with no interest from the Danish government, and that would be complemented with a loan on very concessional terms.
Another area where Danish companies can help is water efficiency and water consumption. Water is very cheap in Pakistan and until you put a price on it, people won’t value it. Intelligent water meters are an essential part in developing and becoming water efficient. The same goes for electricity and gas meters.
BRR: What kind of solutions can you provide in food and agriculture?
RH: First of all, we are planning an incoming follow-up delegation this November since the potential here is immense and a lot of Pakistani companies are looking to become more productive and competitive. Of the practical examples, we are working with a Danish company that makes tasteless enzymes in powder form that can be utilized to fortify different processed foods like eggs, bread, etc. This methodology is relatively cost effective and easy to transport and gives major nutritional benefits. So for example, in a packet of biscuits, you could get omega-3 contents.
BRR: What is the trade balance between the two countries? Where do you see it going in the coming years?
RH: It’s around 60 percent exports from Pakistan to Denmark, and 40 percent the other way. The size of it is around half a billion dollars. We have the ambition of reaching a billion-dollar mark by 2024. When we started trade department back in 2014, the trade balance was around $250-300; so essentially we have achieved a growth of around 50 percent in four years. We see a lot of Danish investor interest in Pakistan in the coming years, and our investment institutions are actually interested in coming to Pakistan.
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