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Gwadar: An Influence multiplier option for China

Nasurullah Brohi

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The Gwadar Port project has an exceptionally important function not only for Pakistan but also for the rest of the region. Notably, the Chinese government has paid the bulk of the funds for the project execution. The state owned Frontier Works Organization (FWO) of Pakistan got financial support of $360 million from China for the expansion and up gradation of the Karakoram Highway in order to smooth and speedy transportation of the imported and exported goods through the Gwadar Port.

In the longer-run, the Gwadar port will exceptionally serve the Chinese interest in the region. To meet the energy needs essentially required for the functioning of industries, China’s oil and energy supplies travel from the gulf region those pass through a long route across the Strait of Malacca near the areas falling under the US influence. The current route of Chinese goods transportation takes more than 45 days to reach destined markets of Europe via the Middle East. Apart from this, the oil supplies reaching Chinese Eastern parts coast high along with additional time required to transport these supplies to other Western parts of China. Whereas, the oil supplies from Gulf countries would be transported through Gwadar and the Karakoram Highway with highly cheaper cost, safe transportation and in a very short time to the western parts of China. Likewise, the Chinese trade goods will also find an easier, shorter and secure route to Middle East bringing profitability greater than ever before. Once the project is functional, China will make huge revenues because with the completion of CPEC, the Chinese shipments will become able to reach the same destination just within 10 days period. The Gwadar Port will eventually create a nexus between China, Pakistan and the Central Asian countries with prospective revenues more than billions of dollars every year for all the countries.

The changing landscape of the region with prospectively abundant by putting the finances of various mega multinational companies such as Shell is working for setting up mega oil refinery. Moreover, the Arab Countries, stuffed with high revenues from the oil resources also rendering their plans for the port city. The business groups from the Gulf countries particularly the business enterprises from the UAE are particularly interested in investing $90 billion for constructing high standard recreational hotels and industrial units.

The real-time efforts by the China and Pakistan collaboration for the actual usefulness of the Port are mainly due to the duty free trade and the development of the Gwadar as a Free Trade Zone. These policies outstandingly appeal the investor around the globe particularly the neighboring Gulf countries moreover, also encourages the confidence of many multinational companies with their immense financial strength in this port that is already on the focus of the whole world. The greater economic opportunities are particularly related with the factors that most of the Central Asian states such as Tajikistan, Uzbekistan and Turkmenistan along with Afghanistan all are landlocked countries and they all will depend mainly over the Gwadar port for their trade and exports.

The Gwadar port has capability to handle ships of 50,000-deadweight tonnage (DWT) which enables the importers to ship maximum cargo on a single ship. The liquid bulk and the containers as the main contributors for the Gwadar Port that prospectively throughput 321 to 345 million tons. The flow of financial resources mainly contributing to the Chinese economy through the fully functional Gwadar and the CPEC estimated at $40 billion per annum by the year 2020 however, this in turn would also add a total of $8 billion revenue per annum in Pakistan’s economic resources. In addition, the narrow estimates of revenues through the exports from Gwadar Industrial Park would reach at $1.5 billion per annum. Given the need of high interface of Chinese and Pakistani business and investment, collaboration will immensely spur the economic activity by generating around 2 million additional employment opportunities for the people of both countries. The recent MoU signed between North South Transport Network (NSTN) Private Limited Pakistan and Gwadar International Terminal Limited (GITL) intend to setup three warehouses and storage of goods and containers with an initial level anticipation of each monthly volume capacity of 200-250 containers or 5,000-6,000 tons of cargo-total of 5% of China’s international cargo volume. The three transport and logistics subsectors could earn up to $6 billion per annum and attract creating 9,000 new enterprises and 400,000 additional jobs in the Port city.

Nasurullah Brohi works as a Senior Research Associate at the Strategic Vision Institute, Islamabad and can be reached at nasurullahsvi(at)outlook.com

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Economy

Côte d’Ivoire: Robust growth under the looming threat of climate change impacts

MD Staff

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According to the Economic Update for Côte d’Ivoire, published today, the short- and medium-term outlook for the Ivorian economy remains positive. The economy is expected to maintain a steady trajectory, with GDP growth of 7 to 7.5% in the coming years. Titled “So Tomorrow Never Dies: Côte d’Ivoire and Climate Change,” the report highlights the urgent need to implement measures to ensure that climate change impacts do not imperil this economic progress and plunge millions of Ivorians into poverty.

“The solid performance of the Ivorian economy, which registered growth of almost 8% in 2017, is essentially due to the agricultural sector, which experienced positive climate conditions. The economy also benefited from a period of calm after the political and social instability of the first half of 2017 and from more favorable conditions on international markets,” said Jacques Morisset, Program Leader for Côte d’Ivoire and Lead Author of the report. “The Government also successfully managed its accounts, with a lower-than-expected deficit of 4.2% of GDP, while continuing its ambitious investment policy, partly financed by a judicious debt policy on financial markets.

However, the report notes that private sector activity slowed in 2017 compared with 2016 and especially 2015, which may curb the pace of growth of the Ivorian economy in the coming years. Against the backdrop of fiscal adjustment projected for 2018 and 2019, it is critical that the private sector remain dynamic and become the main driver of growth. This is particularly important in light of the uncertainty associated with the upcoming elections in 2020, which could prompt investors to adopt a wait-and-see approach.

As economic growth in Côte d’Ivoire relies in part on use of its natural resource base, the authors of the report devote a chapter to the impact of climate change on the economy. They raise an alarming point: the stock of natural resources is believed to have diminished by 26% between 1990 and 2014. Several visible phenomena attest to this degradation, such as deforestation, the depletion of water reserves, and coastal erosion. According to the Intergovernmental Panel on Climate Change (IPCC), climate change could reduce GDP across Africa by 2% to 4% by 2040 and by 10% to 25% by 2100. For Côte d’Ivoire, this would correspond to a loss of some CFAF 380 billion to 770 billion in 2040.

This report sounds an alarm in order to spark a rapid and collective wake-up call,” said Pierre Laporte, World Bank Country Director for Côte d’Ivoire. “Combating climate change will require prompt decisions and must become a priority for the country to maintain accelerated and sustainable growth over time.”

The report pays special attention to coastal erosion and to the cocoa sector, which represents one third of the country’s exports and directly affects over 5 million people. With 566 km of coast, Côte d’Ivoire now boasts a coastal population of almost 7.5 million people, who produce close to 80% of the national GDP. Two thirds of this coast is affected by coastal erosion, with severe consequences for the communities and the country’s economy.

The Ivorian Government, which is already aware of this challenge and has prepared a strategy to confront it, must expedite its implementation. This would have the two-fold effect of developing a “green” economy and creating new jobs.

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A future of work based on sustainable production and employment

Simel Esim

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On the first Saturday of July each year, the international community celebrates the International Day of Cooperatives. This year’s theme, Sustainable consumption and production of goods and services is timely, as the ILO works towards a future of work that is based on sustainable production and employment models.

As head of the ILO’s Cooperative Unit, I have witnessed firsthand the positive impact of cooperatives’ commitment to sustainable consumption and production.

In Northern Sri Lanka, for instance, after years of civil war, I saw how cooperatives helped build the resilience of local communities.

A rapid assessment at the start of the ILO’s Local Empowerment through Economic Development project (LEED) indicated that cooperatives were the only “stable” structures present in Northern Sri Lanka before, during, and after the conflict. Since 2010, the project has been supporting agriculture and fishery cooperatives by securing fair trade certification for their products and helping them establish market links.

I’ve also listened to inspiring stories from other parts of the world of how cooperatives have joined forces to contribute to sustainable consumption, production and decent work – often through cooperative-to-cooperative trade.

Some of these stories were shared at a recent meeting in Geneva of cooperative and ethical trade movements.

We heard how Kenyan producer cooperatives’ coffee has found its way on the shelves of Coop Denmark and how biological pineapples from a Togolese youth cooperative are being sold in retail cooperatives across Italy. We heard how consumer cooperatives in East Asia have developed organic and ecolabel products, while educating their members about the working conditions of producers and workers, as well as on reducing food waste and plastic consumption. We also shared ILO experiences in supporting constituents in the field.

The emerging consensus from the meeting was that cooperative-to-cooperative trade can help lower the costs of trade, while ensuring fairer prices and better incomes for cooperative members and their communities. Opportunities exist not only in agricultural supply chains, but also in ready-made garments and other sectors.

Cooperatives at both ends of the supply chain have been joining forces to shorten value chains, improve product traceability and adopt environmentally-friendly practices. At the ILO we have been working with our constituents to improve the social and environmental footprint of cooperatives around the world.

As the ILO continues to promote a future of work that is based on sustainable production and employment models, a priority for us in the coming years is to facilitate the development of linkages between ILO constituents and cooperatives. The aim is to encourage joint action towards responsible production and consumption practices, the advancement of green and circular economies and the promotion of decent work across supply chains.

Source: ILO

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Economy

Mongolia’s Growth Prospects Remain Positive but More Efficient Public Investment Needed

MD Staff

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Mongolia’s economic performance has improved dramatically with GDP growth increasing from 1.2 percent in 2016 to 5.1 percent in 2017 and 6.1 percent in the first quarter of 2018. While short- and medium-term economic prospects remain positive, Mongolia faces core structural vulnerabilities that hinder its potential, according to Mongolia Economic Update, the latest World Bank report on Mongolia’s economy launched here today. The report also highlights the importance of improving efficiency of its public investment programs given extensive consequences from the overambitious and unrealistic investment programs implemented in the past.

“Last year was a good year for Mongolia with favorable commodities prices and the successful implementation of the government’s economic recovery program,” said Dr. Jean-Pascal N. Nganou, World Bank Senior Economist for Mongolia and Team Leader of the report. “This resulted in improved fiscal and external balances, triggering a slight decline of the country’s public debt.

The recovery is expected to accelerate with a GDP growth rate averaging more than 6 percent between 2019 and 2020, driven by large foreign direct investments in mining. Other than agriculture, which was severely affected by harsh weather conditions during the winter, most major sectors including manufacturing, trade, and transport are expected to expand significantly. On the back of increasing exports and higher commodity prices, economic growth will continue to have a strong positive impact on government revenue, contributing to the reduction of the fiscal deficit.

The unemployment rate dropped to 7.3 percent in the last quarter of 2017, compared to 8.6 percent a year earlier. Still, it increased to 9.7 percent in the first quarter of this year, reflecting Mongolia’s highly seasonal employment patterns due to difficult working conditions in the winter, especially in construction, agriculture, and mining.

The report highlights possible short- and medium-term risks including political risks, regional instability, climate shocks, and natural disasters. The most critical risk identified is a sudden relaxation of the government’s commitment to full implementation of its economic adjustment program supported by development partners.

In addition, the economy remains vulnerable to fluctuations in global commodity prices and a productivity gap. The best long-term protection against these two vulnerabilities is the diversification of the Mongolian economy.

To create a strong buffer against economic vulnerabilities, the government and donors should give a high priority to economic diversification that helps counter the ups and downs of the mining sector. Investing in human capital and strengthening the country’s institutions are the best way to support diversification, together with sound investments in crucial infrastructure,” said James Anderson, World Bank Country Manager for Mongolia.

The report takes a closer look at public investment programs implemented over the past five years, which surged until 2015, contributing to large increases in public finance deficits and the public debt. Mongolia needs to review and reshape its public investment policies and decision-making processes to improve efficiency of public spending, including clear project selection and prioritization criteria, as well as proper maintenance of existing assets.

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