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Remodelling the Belt and Road: Pakistan picks up the torch

Dr. James M. Dorsey

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Pakistan, following in the footsteps of Malaysia and Myanmar, is the latest country to balk at the China and infrastructure focus of Beijing’s Belt and Road-related investments.

Preparing for his first visit to China as Pakistan’s prime minister, Imran Khan is insisting that the focus of the China Pakistan Economic Corridor (CPEC), a US$60 billion plus crown jewel of the Belt and Road, shift from infrastructure to agriculture, job creation and foreign investment.

“Earlier, the CPEC was only aimed at construction of motorways and highways, but now the prime  minister decided that it will be used to support the agriculture sector, create more jobs and attract other foreign countries like Saudi Arabia to invest in the country,” said information minister Fawad Chaudhry.

Mr. Khan’s determination to ensure that more benefits accrue to Pakistan from Chinese investment comes at a time that various Asian and African countries worry that Belt and Road-related investments in infrastructure risk trapping them in debt and forcing them to surrender control of critical national infrastructure, and in some cases media assets.

Preceding Mr. Khan’s move, protests against the forced resettlement of eight Nepali villages persuaded CWE Investment Corporation, a subsidiary of China Three Gorges, to consider pulling out of a 750MW hydropower project.

Malaysia has suspended or cancelled US$26 billion in Chinese-funded projects while Myanmar is negotiating a significant scaling back of a Chinese-funded port project on the Bay of Bengal from one that would cost US$ 7.3 billion to a more modest development that would cost US$1.3 billion in a bid to avoid shouldering an unsustainable debt.

Fears of a debt trap started late last year when unsustainable debt forced Sri Lanka to hand China an 80% stake in Hambantota port.

Mr. Khan’s move takes on added significance given that Pakistan appears to have decided to ask the International Monetary Fund (IMF) to help it avert a financial crisis with a loan of up to US$12 billion and discussions with Saudi Arabia that could produce up to US$10 billion in investments that would be separate but associated with CPEC.

Pakistani finance minister Asad Umar is expected later this week to initiate discussions with the IMF during the fund’s annual meeting in Bali. The decision was taken after Saudi Arabia refused to delay Pakistani payments for oil imports, opting instead to build a refinery and strategic oil reserve in the CPEC port of Gwadar.

Pakistani officials see investment by Saudi Arabia as one possible way of facilitating a Pakistani request to the IMF for help. They hope that even an informal association with CPEC of Saudi Arabia, one of the United States’ closest allies in the greater Middle East, may alleviate Washington’s concern that IMF money could be used to repay Chinese debt.

Yet, even that is unlikely to prevent the IMF, backed by the United States, from demanding that the veil of secrecy be lifted that shrouds the commercial and financial terms of many CPEC-related, Chinese-funded projects, as a pre-condition for assistance from the fund.

Apparently concerned about Pakistan’s intentions, China’s deputy chief of mission in Islamabad, Lijian Zhao, insisted in an interview as well as a series of tweets that China welcomed Saudi investment and “always supported& stood behind @ Pakistan, helping #develop it’s #infrastructure& raise #living standards while creating #job.”

Mr. Lijian’s comments followed a statement last month by Chinese foreign minister Wang Ji after talks with Mr. Khan in Islamabad that appeared to indicate that China, while acknowledging Pakistani demands, would not address them immediately. Mr. Wang suggested that CPEC would only “gradually shift to industrial cooperation.”

Indications suggest further that China may be looking to Pakistan’s military to shave off the rough ends of the government’s determination to effectively renegotiate CPEC.

Pakistan’s army chief General Qamar Javed Bajwa visited Beijing in August days after commerce minister Abdul Razak Dawood suggested that the government may suspend CPEC projects for a year.

Making his comments shortly after Mr. Wang’s departure from Islamabad, Mr. Dawood also asserted that the previous government had negotiated terms that were favourable to China rather than Pakistan.

China this week, in a move likely designed as much to strengthen Pakistani counter-terrorism capabilities as a gesture towards the country’s politically influential armed forces, made Pakistan the second country after Saudi Arabia to receive killer drones and the associated technology.

The US has refused to sell its more advanced killer drones to either Saudi Arabia or Pakistan.

The Khan government’s desire to refocus CPEC tackles key issues raised by critics of the project that potentially could impact China’s plan to pacify its troubled north-western province of Xinjiang through a combination of economic development and brutal repression and re-education of its Turkic Muslim population.

The initial plan for CPEC appeared to position Pakistan as a raw materials supplier for China, an export market for Chinese products and labour, and an experimental ground for the export of the surveillance state China is rolling out in Xinjiang.

The plan envisioned Chinese state-owned companies leasing thousands of hectares of agricultural land to set up “demonstration projects” in areas ranging from seed varieties to irrigation technology. Chinese agricultural companies would be offered “free capital and loans” from various Chinese ministries as well as the China Development Bank.

The plan envisaged the Xinjiang Production and Construction Corps introducing mechanization as well as new technologies in Pakistani livestock breeding, development of hybrid varieties, and precision irrigation. Pakistan effectively would become a raw materials supplier rather than an added-value producer, a prerequisite for a sustainable textiles industry.

The plan saw the Pakistani textile sector as a supplier of materials such as yarn and coarse cloth to textile manufacturers in Xinjiang. “China can make the most of the Pakistani market in cheap raw materials to develop the textiles & garments industry and help soak up surplus labour forces in (Xinjiang’s) Kashgar,” the plan said. Chinese companies would be offered preferential treatment with regard to “land, tax, logistics and services” as well as “enterprise income tax, tariff reduction and exemption and sales tax rate” incentives.

For Mr. Khan to ensure that Pakistani agriculture benefits, the very concept of Chinese investment in Pakistani agriculture would have to renegotiated.

Similarly, Mr. Khan has yet to express an opinion on the plan’s incorporation of a full system of monitoring and surveillance that would be built in Pakistani cities to ensure law and order. The system would involve deployment of explosive detectors and scanners to “cover major roads, case-prone areas and crowded places…in urban areas to conduct real-time monitoring and 24-hour video recording.”

The surveillance aspect of the plan that identifies Pakistani politics, such as competing parties, religion, tribes, terrorists, and Western intervention” as well as security as the greatest risk to CPEC could, if unaddressed, transform Pakistani society in ways that go far beyond economic and infrastructure development.

Dr. James M. Dorsey is a senior fellow at the S. Rajaratnam School of International Studies, co-director of the University of Würzburg’s Institute for Fan Culture, and the author of The Turbulent World of Middle East Soccer blog, a book with the same title, Comparative Political Transitions between Southeast Asia and the Middle East and North Africa, co-authored with Dr. Teresita Cruz-Del Rosario and three forthcoming books, Shifting Sands, Essays on Sports and Politics in the Middle East and North Africaas well as Creating Frankenstein: The Saudi Export of Ultra-conservatism and China and the Middle East: Venturing into the Maelstrom.

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Economy

Amirabad Port: The game changer in Indian foreign trade

Vahid Pourtajrishi

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Authors: Vahid Pourtajrishi & Mahdi Torabi

Seaports have played undeniable role in international and even local trade environment. To demonstrate this claim, we can refer the remained paintings from stone age which show how sea ports help man to feed from sea.

But along the many centuries this significance got more blurred. Specially after the industrial revolution, nobody can reject this significance in international trade. To understand the depth of this issue, just take a look at the condition of commerce and military power of Great Britain after 19th century.

Iran is one of the great geopolitical focal points of the world which connects Europe to Asia and Central Asian states to South of the old continent. In fact, Iran is the most important way for Russia and the Central Asian states to achieve the warm waters of the Persian Gulf and as the result, the main way for entering the free waters. This linkage is created blessing existence of various sea ports in south and north of Iran.

After fostering the idea of International North – South Corridor (INSC), development of the Iranian sea ports got more important. Also, Iran is working hardly on development of Chabahar Port in its South Eastern part of this country that is specially designated to carry the Indian cargos to the North.

 Amirabad Port, the game changer for India

After serious focus on INSC by its participants since at least 10 years back, Iran also established Amirabad Port located in Mazandaran Province enhanced with up to date facilities, cranes and even Ro-Ro mode of rail. The train stops exactly at the seashore and this ability reduces the cost of multi modal transportation highly. This port could accept the various type of cargos from container to bulk. The ability of oil and agricultural products transportation is another option of this port which could be very attractive for those Chinese companies who take their cargos from Kazakhstan to West of this country.

As we know, China has focused heavily on BRI route as one of the determinant elements in Beijing national policy and foreign trade. This corridor starts from West of China and ends to Europe passing Kazakhstan in East of Caspian Sea and Azerbaijan, Georgia, Turkey (BTK Corridor) in West of this sea. So, we can assume that Caspian Sea is fully surrounded by the Chinese goods while India as the main competitor of China is fully absent in this region.

As India has focused on Chabahar Port construction project, the rail linkage between Chabahar and Amirabad could directly connect Indian goods to the South of Caspian Sea and this issue could to realize the old dream of Indian merchants to access central Asia and Russia market easily with the lowest cost. So, the Indian merchants could start a real challenge with their Chinese competitor in the region by meaningful reduction of transportation costs while the current access route which is mainly from East of Russia is very costly coz of the very ling distance between East and West of Russia and as the result, the total price is such high which could not be competitable  with the Chinese goods price!

But unfortunately, the weak foreign policy of Narendra Modi’s government and his extremely conservative approaches regarding Iran following US sanctions has stopped the work in Chabahar Port. While the Iranian government still welcomes India to invest and construct the second phase of this port, but after withdrawal of India from this project, Iran has fulfilled the required fund to construct this unfinished project from its own national budget.

in the other hand, the controversial 25 years strategic deal between Tehran and Beijing has increased the danger of entering China to Chabahar Port project higher than past. If this issue happens, nobody recognizes it as the Indian government fault but this is the Indian nation who will lose the golden opportunity of leasing Chabahar Port forever.

At the same time, we have to point to this fact that Chabahar is the last chance for India to invest in a modernized Iranian port in order to access the vast market of Central Asia and Russia. It seems while the pressure of US sanctions against Iran is increasing, China is the only country who benefits this condition and is strengthening its political and commercial ties with Tehran everyday and in near future, there will be no chance for India remained to invest in Iran as the artery and gate of entrance to Central Asia and Russia.

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Pandemic Recovery: Upskilling Government Saves Nations

Naseem Javed

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Urgently needed are “scientific-based-econo-political-thinking” with proven pragmatic capabilities to execute, because embossed degrees, old-fashioned election expertise with “political-science” studies now appear Machiavellian rhetoric. What works on the election podium is often useless will applied towards pandemic recovery. Nation-by-nation, during pandemic recovery, uplifting midsize business economy is now a number one challenge. Nation-by-nation the absence of hardcore expertise in Public Sector is adding to global crisis. In certain regions, the commonalities of calamities may create a domino fall. For the first time during the last century, the ‘commonalities of calamities’ now shared by the populace of the world. Now, this creates a rare opportunity to demonstrate national and continent wide tactical deployments towards recovery, collaborate by saving the prolonged agonies of humankind. Billion displaced, billion to starve and hundreds of millions in serious quandary. This is far more intricate what any Tik-Tok upgrades and Teleprompter shows can handle.

Understanding ground realities: Those who recently attended many dozens of national or global zoom events on government programs and ideas on economic survival often witnessed serious lack of contents, expertise or experiences, most importantly inability of most presenters to debate or question existing broken down systems. Observe the 75th United Nation meetings, outside very few countries, most nations are only reading the laundry list of the problems without any specific solutions.  It is also true, all are waiting for vaccines and this moves the date of ‘global normalcy’ to 2025. As economies start to crumble, seen as almost a national emergency by dozens of the 200 nations, the lack of special skills-sets and high-speed performance labeled a new crisis.  A quick test of any top frontline leadership on any 10-government agencies, in any nation mandated to foster economic growth will provide the real picture to this challenge. Upskilling is about expected performance levels and for smart nations to adapt, survive and save nations now mandated nation-by-nation by pandemic recovery. There is no escape. Ask Augustus Caesar.

Understanding Simultaneous Synchronization: The art and science of upskilling frontline government teams to tackle pandemic recovery and economic survivals are normal progressions, but only once deployed with an agenda. Furthermore, to resuscitate fatally wounded economies special global age skills mobilized, like creating digital platform economies where entrepreneurialism dances, creating upskilling and innovative excellence mobilization in simultaneous synchronizations, where exports fly, creating a vibrant globally attractive economy where investments rain. Such upskilling of Public Sectors deployments are often not new funding dependent but rather execution hungry and mobilization starved.  Study Expothon Strategy on Google for models.

The Facts: The world can easily absorb unlimited exportable ideas in unlimited vertical markets. Fact: The well-designed innovative ideas are worthy of such quadrupled volumes. Fact: The entrepreneurial and dormant talents of a nation are capable of such tasks. Fact: The new global age skills, knowledge and execution are now the missing links. Fact: fear of change is a false state of mind now corrected with upskilling mobilization.

The Warnings: The Shape of Pandemic Recovery is W: Depending on country, recovery spanning a year, a decade or even longer. Speed will save economies and avoid restless citizenry magnetized by populism. Study the specificity of your own regions and nations, identify voids on small medium business economy sectors and open debates. Follow the trail of silence and it may lead you to hidden conclaves and robed bureaucracies all afraid to change. Upskilling is a bright light in those dark tunnels.  Discover the art of transformation and power on enlightenment. Start with high-level zoomerang events and encourage dialogue.  

Understanding Upskilling of Public Sector: Across any single nation, Public Sector upskilling models work in simultaneous synchronization and can manage from 1000 to 100,000 participants.  How local grassroots manufacturing uplifts small medium enterprises for sharper productivity and exportability?  How foreign investments turn around economic performances. How ‘soft-power-asset-management’ the art of imagining things over ‘hard-asset-centricity’ where staying deeply stuck to old routines on old factory floors rewarded. This is when forbidden are the bicycle makers to dream of ‘drones’ or flying cars. Some 500 millions small and large plants and businesses around the world are badly stuck in old groves of decades old mentality, unable to transform, optimize to grow to new heights with new global age thinking and execution. Imagine all that wasted potential, talent and machinery, infrastructure under the dead weight of old concepts still logged into hard-assets based mentality. Pandemic recovery shows no mercy, therefore, understanding of the core proposition of any entrepreneurial venture is “extreme-value-creation” as a prime objective. Running wild on “extreme value manipulations” only creates hologramic economies and ponzy schemes. Quick study of any major financial publication will eliminate the need of any further proof.  

The world just changed, the pandemic recovery will change the world repeatedly and do it very quickly. Upskilling at all levels of frontline economic development teams anywhere around a world critically missing link. What is needed are bold and open discussions with diversity and tolerance and national goals to turn around the economy; explore national mobilization of entrepreneurialism as new thinking, explore master upskilling agenda as savior towards stability and superior performances to stand up to new challenges.

If you like, share this with right parties and join our thought leadership. The rest is easy. 

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Long trends and disruption: the anatomy of the “post world” of the COVID-19 crisis

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What will be the economic architecture of the world after the COVID-19 crisis? This question involves understanding the major trends at work for twenty years now.

The world that will emerge from this crisis will be marked by these major trends, which, for some, will be reinforced by this crisis. However, this crisis has created too specific disruptions, in particular in the field of transport and energy. It has also provoked an awareness of the centrality of sovereignty, and in particular of economic sovereignty. Finally, the economic and monetary policies that have been put in place to combat the economic effects of the epidemic and of containment will have long-term consequences on international financial balances.

An acceleration of the change of the world?

Since 2000, we have witnessed the rise of an “Asian bloc” to the detriment of what we might call the “Western bloc”, that is to say the United States, the European Union and the United States. Japan. This Asian bloc is heterogeneous, as is the Western bloc. In each of these bloc politics is the main factor of homogeneity. But, these blocs also correspond to an economic reality: that of the countries of old industrialization against the countries, which it is better to call new industrialization than emerging ones.

In 2000, the China-India-Russia combined represented only 15% of world GDP, while the United States, the European Union and Japan combined weighed more than 47%, or three times as much. In 2020, the two blocks are tied at around 31.5%. If we take into account the immediate effects of the COVID-19 crisis, this movement is even expected to grow. The IMF has made forecasts which indicate that China and emerging countries should recover much faster from the shock of this crisis than the so-called “advanced” countries, ie countries of former industrialization. The world should see the shift to Asia amplify in the coming years.

The death of oil has been greatly exaggerated… (bcc, Mark Twain)

The COVID-19 pandemic has had a profound influence on the energy market and on oil production. The persistence of the pandemic means that air transport, among other things, will not return to its 2019 level before, no doubt, 2024. This implies a weak demand for kerosene as estimated by the International Energy Agency Forecasts of global oil demand and post-crisis economic growth are determined by different assumptions. In the optimistic scenario, there is a rapid economic recovery in a more or less flattened “V” shape in the first half of 2021, but the demand for oil does not fully return to the pre-pandemic trend. In the more pessimistic scenario, oil demand will not reach 2019 levels until 2023, and its growth will remain well below the pre-pandemic trend. The current evolution of the pandemic suggests that we are closer to this pessimistic scenario. These two scenarios also assume that zero-emission vehicles will represent 60% of new vehicle sales by 2040, because investments are high in these technologies. Therefore, they both forecast a slowdown in demand for oil to peak in the mid-2030s at around 105-108 Mb / d. What will be the consequence?

In the medium term, OPEC will have to manage the probable return of part of the 5.7 Mb / d of unused production in OPEC countries (Venezuela, Iran and Libya) and non-OPEC countries (Syria and Yemen). OPEC will also have to deal with the resumption of US hydrocarbon production (particularly shale oil), a recovery that may be slow due to falling investment, as demand and the price of oil rise. US production of hydrocarbons has fallen by more than 2 million barrels / days, due to the closure of existing wells, reduced storage capacity and reduced demand.

The impact of COVID-19 on oil demand will therefore be profound, particularly in the event of a deep and long recession associated with a protracted pandemic. Without aggressive intervention by OPEC, the average crude oil price could thus remain below $ 50 / barrel until mid-2022. During the second half of this decade, supply and demand are expected to move closely towards equilibrium as non-OPEC production, especially from Russia, begins to decline and US hydrocarbon production reaches a low. tray. The price of oil is expected to rise to around $ 80-90 / barrel (optimistic scenario) or $ 70-80 / barrel (pessimistic scenario), even without OPEC intervention.

As we can see, however, despite all voluntarist proclamations one can hear here and there, oil will remain a major source of energy for at least the next thirty years.

The return of economic sovereignty

A more direct change brought about by the COVID-19 pandemic is the realization of the importance of economic sovereignty. Of course, a number of countries, China, Russia, but also the United States and India, were acutely aware of the importance of this sovereignty. The European Union, for its part, had adopted a very negligent attitude on this subject. The strong disruption of international trade caused by the pandemic caused a real shock on this point. Of course, there is no question of returning to more or less self-sufficient economies. But, the economic, social, and even strategic damage caused by free trade policies are globally more taken into account today.

This will accelerate the return of nations and the crisis of multilateralism that we could already observe. The economy is once again becoming a breeding ground for strategy. Through the policy of economic sanctions, which the United States has used and abused since well before the election of Donald Trump, we are witnessing an acceleration of the fragmentation of the world economic space. American pressure on Huawei, or on the Chinese social network “Tik-Tok” is an example. De-globalization had passed from the stage of possibility to that of concrete fact; with the effects of the pandemic it will pass from that of fact to that of major fact.

This return to economic sovereignty induces the great revenge of politics over “technology”, the triumph of decisions over the automaticity of standards. However, ” technology” is embodied today mainly in economics and finance. The pandemic heralds the return of sovereignty, and being sovereign is above all having the ability to decide. The countries will then be referred to logic of bilateral relations, or even to regional logic. It will then be necessary to seek allies.

The questioning of the “global” character of the companies linked to the INTERNET, the desire of several countries to build their “digital sovereignty” is an example of the struggle that is looming for economic sovereignty. This resurgence of politics does not mean that, in our societies, certain spaces are not governed by the technical order, and that there are spaces dominated by technical legitimacy. But, these dimensions will now become second in relation to the political, which will recover its rights. The economic and the financial will once again become instruments at the service of politics. What the political will do with it remains to be determined.

A Debt apotheosis or an end of debt?

A final point remains the explosion of both public and private debts due to the pandemic. In most countries, the COVID-19 crisis has resulted in the collapse of various barriers to the expansion of public debt.

The latter has therefore increased to finance the fall in tax revenues during the confinement period but also the considerable additional public expenditure generated by the crisis. In addition, there are liquidity facilities, consisting of guaranteed loans, equity investments and the like. The result of all this is that the indebtedness of states (especially in the Western bloc) and that of companies will increase considerably by 2021. This debt will not be covered by an increase in taxes because it would imply a deep recession. Reducing public spending beyond 2022 will hardly be a possible solution, for the same reason.

These debts will therefore be absorbed by central banks, in one form or another. The same will be true of a large part of corporate debt. What will then be the consequences for the currencies (mainly the US Dollar and the Euro) of these policies? What will also be the medium-term consequences on the equity and bond markets?

One of the most striking consequences will be the influx of liquidity as a result of central bank action, while production will remain relatively depressed and the outlook for investment will be uncertain for several years. Currencies should therefore experience significant fluctuations. The current downward trend in the share in central bank reserves and the US dollar and the euro in favour of the group of “other currencies” (Sterling, Yen, Australian and Canadian dollars, Renminbi) should therefore accelerate.

Its to be noted that the Euro share went down significantly under the level of older currencies included in the Euro and that the group of “other currencies” significantly increased their share since 2010.

The economy of the “world after” the COVID-19 epidemic will therefore present both the characteristics, in a more accentuated form, of that of the world before but also a certain number of ruptures linked to this epidemic. This combination of strong trends and ruptures will result in a “de-globalized” world which will reorganize itself on the basis of bilateral alliances or regional groupings.

From our partner International Affairs

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