The oceans play an important role in transportation of cargo in the world over, being the cheapest mode of transportation as compared to rail, road and air. According to International Chamber of Shipping, 90% of world trade is carried by 50,000 merchant ships. It includes all types of cargo like machinery, vehicles, different types of liquids, construction material, food items, and livestock. These ships need ports to be docked for loading and discharging of cargo. Countries having all weather deep draught ports, equipped with state of the art cranes and associated equipment to handle cargo efficiently are mammoth source of advancement of economy.
Seaports are also instrumental for generating employment opportunities through effects associated with these like crew for operations and personnel to work in repair workshops for sea going ships and different types of harbor vessels such of tugs, pilot boats, dredging vessels, and different types of other equipment . Logistics activities such as storing, distribution, container stacking, food arrangements for employees. Personnel for inspection and custom requirements. Ports attract investors to establish industries in the vicinity to import raw material and export finished goods. It is observed that large cities are located closer to the bigger ports. Infect ports can be the real pillars of economic development of a country.
Major considerations for a port are; less adverse weather affects, bigger ships (deep draught and longer in length) can be docked, efficiently handling of loading and unloading of cargo. In addition back yard area to handle cargo should have sufficient space. Hinterland connections should facilitate smooth flow of cargo to and from the port. Pakistan has about 1120 Km coast with three commercial ports. Karachi port was developed in 1887 and is being operated by Karachi Port Trust (KPT). It has a total 33 berths. Out of these, three oil piers for handling liquid cargo like different types of oil, molasses etc. Ships up to 12.5 meters draught can be berthed. Out of remaining 30, three each on East and West wharves are for handling containers which have been leased to Pakistan International Container Terminal (PICT) and Karachi International Container Terminal (KICT) following Land Lord Port Policy.
These companies install their own cranes, other equipment and have their own employees for operations. The ownership remains with the Port Authorities. Container carriers up to 11.5 m draught can be docked. Remaining berths can handle bulk carriers and other type of ships having comparatively shallow draught up to 10 meters. The recently built extension of Karachi port has quay wall of 1500 meters which can dock mostly container ships up to 16 meter draught. These berths have been given on lease to South Asia Pakistan Terminal (SAPT) for operations. It is a modern facility equipped with state of the art cranes and other associated equipment. Karachi port has handled 55million tons of cargo in 2017-18, which was about 55% percent of the total cargo of Pakistan. However, this port is now in the center of the busy city Karachi, therefore cargo flow to and from the port has become very problematic. Alternate routes needs to be explored. It is suggested that a pipe line for liquid cargo from oil piers at Kemari to an appropriate location outside limits of Karachi may be constructed. From here oil tankers may load the liquid cargo for upcountry. For containerized and other cargo a separate road may be built from Karachi port to link high way. In the meantime only smaller 6 to 8 wheeler trucks may be allowed to take cargo to a separately built yard outside the limits of Karachi from where bigger trucks can take the cargo to and from up country.
The second port is Bin Qasim which is also located in Karachi. It has seven berths; ships up to 12 meters draught can be docked. It is being operated by Port Qasim Authority (PQA). It was initially built to provide iron ore to Karachi Steel Mills. Now it can handle all types of cargo including containers, oil and Liquefied Natural Gas (LNG). In the year 2017-18 it has handled 45 million tons of cargo which was 45 % of the total cargo. Bin Qasim port has sufficient spaces to build new berths when required. Its connection with hinterland is not posing problems because it is located well outside the main city. These two ports are meeting the requirements to handle all types of import and export of Pakistan which is presently around 100 million tons and have capacity to meet future requirements as well.
3.The third commercial port is Gwadar which is located on the Western edge of the coast in the province of Balochistan about 533 km from Karachi. It occupies a strategic location at the entrance of Persian Gulf overlooking the Arabian Sea. It is just outside the choke point, Straits of Hormuz, where 17 million barrels of oil passes every day. In 1997 the government appointed Task Force identified this fishing harbor to be developed as a commercial port. The project could not be started due to economic sanctions after nuclear detonation in May 1998. It started in 2002 and first phase was completed 2007. It has 1000 meter quay wall to dock 14.5 meter draught ships. It has 3 multipurpose berths one RO – RO facility and one service berth. First ship was docked carrying 70,000 metric tons of wheat in March 2008. Originally it was built to supplement other two ports.
Now it has taken shape as key component of the China Pakistan Economic Corridor (CPEC). It has been leased to China Overseas Port Holding Company (COPHC) for 40 years. It is designed to handle cargo of Chinese Western province, Xinjiang and at a later stage cargo of land lock countries, Afghanistan, Turkmenistan, Uzbekistan, and Tajikistan. Presently cargo of Afghanistan is being handled by Karachi and port Qasim. Gwadar port is ready for operation about 11 years before but it has not been operated to its optimum capacity yet. Mainly because the designed road and rail infrastructure up to Khunjerab pass has not been fully developed. However it meets the requirements to be operated as a Transshipment Port in addition to CPEC cargo.
The transshipment concept refers to the shipment of containers/ goods to an intermediate port before being taken to the final destination. It plays a critical role due to infrastructure limitations in smaller sea ports and shipping lines strategies to have minimum ports of calls of their bigger ships. Now days an average, a container is handled 3 to 4 times between the first port of loading and the final port of discharge. The concept of transshipment operation is increasing very fast. Gwadar port because of its strategic location closer to Persian Gulf, ability to handle deep draught ships, short access channel of only 4.7 km long, comparatively low cost labor, sufficient area to stack containers and other cargo, can be equipped to operate as a transshipment port. Bigger ships coming and going to Persian Gulf, and bound for Indian Ocean littorals can discharge their cargo at Gwadar and smaller ships can take these to the ports of destination.
It is pertinent to mention that Singapore area wise is a small country, but its Port of Singapore is the world’s biggest transshipment port as well as the busiest port after Shanghai. It handled 36.6 million containers in 2018. The government of Pakistan Ministry of Maritime Affairs may consider the possibility of operating Gwadar as a transshipment port. It will certainly act as source of enhancement of economy and to provide job opportunities especially to residents of Balochistan.
Rebalancing Act: China’s 2022 Outlook
Authors: Ibrahim Chowdhury, Ekaterine T. Vashakmadze and Li Yusha
After a strong rebound last year, the world economy is entering a challenging 2022. The advanced economies have recovered rapidly thanks to big stimulus packages and rapid progress with vaccination, but many developing countries continue to struggle.
The spread of new variants amid large inequalities in vaccination rates, elevated food and commodity prices, volatile asset markets, the prospect of policy tightening in the United States and other advanced economies, and continued geopolitical tensions provide a challenging backdrop for developing countries, as the World Bank’s Global Economic Prospects report published today highlights.
The global context will also weigh on China’s outlook in 2022, by dampening export performance, a key growth driver last year. Following a strong 8 percent cyclical rebound in 2021, the World Bank expects growth in China to slow to 5.1 percent in 2022, closer to its potential — the sustainable growth rate of output at full capacity.
Indeed, growth in the second half of 2021 was below this level, and so our forecast assumes a modest amount of policy loosening. Although we expect momentum to pick up, our outlook is subject to domestic in addition to global downside risks. Renewed domestic COVID-19 outbreaks, including the new Omicron variant and other highly transmittable variants, could require more broad-based and longer-lasting restrictions, leading to larger disruptions in economic activity. A severe and prolonged downturn in the real estate sector could have significant economy-wide reverberations.
In the face of these headwinds, China’s policymakers should nonetheless keep a steady hand. Our latest China Economic Update argues that the old playbook of boosting domestic demand through investment-led stimulus will merely exacerbate risks in the real estate sector and reap increasingly lower returns as China’s stock of public infrastructure approaches its saturation point.
Instead, to achieve sustained growth, China needs to stick to the challenging path of rebalancing its economy along three dimensions: first, the shift from external demand to domestic demand and from investment and industry-led growth to greater reliance on consumption and services; second, a greater role for markets and the private sector in driving innovation and the allocation of capital and talent; and third, the transition from a high to a low-carbon economy.
None of these rebalancing acts are easy. However, as the China Economic Update points out, structural reforms could help reduce the trade-offs involved in transitioning to a new path of high-quality growth.
First, fiscal reforms could aim to create a more progressive tax system while boosting social safety nets and spending on health and education. This would help lower precautionary household savings and thereby support the rebalancing toward domestic consumption, while also reducing income inequality among households.
Second, following tightening anti-monopoly provisions aimed at digital platforms, and a range of restrictions imposed on online consumer services, the authorities could consider shifting their attention to remaining barriers to market competition more broadly to spur innovation and productivity growth.
A further opening-up of the protected services sector, for example, could improve access to high-quality services and support the rebalancing toward high-value service jobs (a special focus of the World Bank report). Eliminating remaining restrictions on labor mobility by abolishing the hukou, China’s system of household registration, for all urban areas would equally support the growth of vibrant service economies in China’s largest cities.
Third, the wider use of carbon pricing, for example, through an expansion of the scope and tightening of the emissions trading system rules, as well power sector reforms to encourage the penetration and nationwide trade and dispatch of renewables, would not only generate environmental benefits but also contribute to China’s economic transformation to a more sustainable and innovation-based growth model.
In addition, a more robust corporate and bank resolution framework would contribute to mitigating moral hazards, thereby reducing the trade-offs between monetary policy easing and financial risk management. Addressing distortions in the access to credit — reflected in persistent spreads between private and State borrowers — could support the shift to more innovation-driven, private sector-led growth.
Productivity growth in China during the past four decades of reform and opening-up has been private-sector led. The scope for future productivity gains through the diffusion of modern technologies and practices among smaller private companies remains large. Realizing these gains will require a level playing field with State-owned enterprises.
While the latter have played an instrumental role during the pandemic to stabilize employment, deliver key services and, in some cases, close local government budget gaps, their ability to drive the next phase of growth is questionable given lower profits and productivity growth rates in the past.
In 2022, the authorities will face a significantly more challenging policy environment. They will need to remain vigilant and ready to recalibrate financial and monetary policies to ensure the difficulties in the real estate sector don’t spill over into broader economic distress. Recent policy loosening suggests the policymakers are well aware of these risks.
However, in aiming to keep growth on a steady path close to potential, they will need to be similarly alert to the risk of accumulating ever greater levels of corporate and local government debt. The transition to high-quality growth will require economic rebalancing toward consumption, services, and green investments. If the past is any guide to the future, the reliance on markets and private sector initiative is China’s best bet to achieve the required structural change swiftly and at minimum cost.
First published on China Daily, via World Bank
The US Economic Uncertainty: Bitcoin Faces a Test of Resilience?
Is inflation harmful? Is inflation here to stay? And are people really at a loss? These and countless other questions along the same lines dominated the first half of 2021. Many looked for alternative investments in the national bourse, while others adopted unorthodox streams. Yes, I’m talking about bitcoin. The crypto giant hit records after records since the pandemic made us question the fundamentals of our conventional economic policies. And while inflation was never far behind in registering its own mark in history, the volatility in the crypto stream was hard to deny: swiping billions of dollars in mere days in April 2021. The surge came again, however. And it will keep on coming; I have no doubt. But whether it is the end of the pandemic or the early hues of a new shade, the tumultuous relationship between traditional economic metrics and the championed cryptocurrency is about to get more interesting.
The job market is at the most confusing crossroads in recent times. The hiring rate in the US has slowed down in the past two months, with employers adding only 199,000 jobs in December. The numbers reveal that this is the second month of depressing job additions compared to an average of more than 500,000 jobs added each month throughout 2021. More concerning is that economists had predicted an estimated 400,000 jobs additions last month. Nonetheless, according to the US Bureau of Labour Statistics, the unemployment rate has ticked down to 3.9% – the first time since the pre-pandemic level of 3.5% reported in February 2020. Analytically speaking, US employment has returned to pre-pandemic levels, yet businesses are still looking for more employees. The leverage, therefore, lies with the labor: reportedly (on average) every two employees have three positions available.
The ‘Great Resignation,’ a coinage for the new phenomenon, underscores this unique leverage of job selection. Sectors with low-wage positions like retail and hospitality face a labor shortage as people are better-positioned to bargain for higher wages. Thus, while wages are rising, quitting rates are record high simultaneously. According to recent job reports, an estimated 4.5 million workers quit their jobs in November alone. Given that this data got collected before the surge of the Omicron variant, the picture is about to worsen.
While wages are rising, employment is no longer in the dumps. People are quitting but not to invest stimulus cheques. Instead, they are resigning to negotiate better-paying jobs: forcing the businesses to hike prices and fueling inflation. Thus, despite high earnings, the budget for consumption [represented by the Consumer Price Index (CPI)] is rising at a rate of 6.8% (reported in November 2021). Naturally, bitcoin investment is not likely to bloom at levels rivaling the last two years. However, a downfall is imminent if inflation persists.
The US Federal Reserve sweats caution about searing gains in prices and soaring wage figures. And it appears that the fed is weighing its options to wind up its asset purchase program and hike interest rates. In March 2020, the fed started buying $40 billion worth of Mortgage-backed securities and $80 billion worth of government bonds (T-bills). However, a 19% increase in average house prices and a four-decade-high level of inflation is more than they bargained. Thus, the fed officials have been rooting for an expedited normalization of the monetary policy: further bolstered by the job reports indicating falling unemployment and rising wages. In recent months, the fed purview has dramatically shifted from its dovish sentiments: expecting no rate hike till 2023 to taper talks alongside three rate hikes in 2022.
Bitcoin now faces a volatile passage in the forthcoming months. While the disappointing job data and Omicron concerns could nudge the ball in its favor, the chances are that a depressive phase is yet to ensue. According to crypto-analysts, the bitcoin is technically oversold i.e. mostly devoid of impulsive investors and dominated by long-term holders. Since November, the bitcoin has dropped from the record high of $69,000 by almost 40%: moving in the $40,000-$41,000 range. Analysts believe that since bitcoin acts as a proxy for liquidity, any liquidity shortage could push the market into a mass sellout. Mr. Alex Krüger, the founder of Aike Capital, a New York-based asset management firm, stated: “Crypto assets are at the furthest end of the risk curve.” He further added: “[Therefore] since they had benefited from the Fed’s “extraordinarily lax monetary policy,” it should suffice to say that they would [also] suffer as an “unexpectedly tighter” policy shifts money into safer asset classes.” In simpler terms, a loose monetary policy and a deluge of stimulus payments cushioned the meteoric rise in bitcoin valuation as a hedge against inflation. That mechanism would also plummet the market with a sudden hawkish shift.
The situation is dire for most industries. Job participation levels are still low as workers are on the sidelines either because of the Omicron concern or lack of child support. In case of a rate hike, businesses would be forced to push against the wages to accommodate affordability in consumer prices. For bitcoin, the investment would stay dormant. However, any inflationary surprises could bring about an early tightening of the policy: spelling doom for the crypto market. The market now expects the job data to worsen while inflation to rise at 7.1% through December in the US inflation data (to be reported on Wednesday). Any higher than the forecasted figure alongside uncertainty imbued by the new variant could spark a downward spiral in bitcoin – probably pushing the asset below the $25000 mark.
Platform Modernisation: What the US Treasury Sanctions Review Is All About
The US Treasury has released an overview of its sanctions policy. It outlines key principles for making the restrictive US measures more effective. The revision of the sanctions policy was announced at the beginning of Joe Biden’s presidential term. The new review can be considered one of the results of this work. At the same time, it is difficult to find signs of qualitative changes in the US administration’s approach to sanctions in the document. Rather, it is about upgrading an existing platform.
Sanctions are understood as economic and financial restrictions that make it possible to harm the enemies of the United States, prevent or hinder their actions, and send them a clear political signal. The text reproduces the usual “behavioural” understanding of sanctions. They are viewed as a means of influencing the behaviour of foreign players whose actions threaten the security or contradict the national interests of the United States. The review also defines the institutional structure of the sanctions policy. According to the document, it includes the Treasury, the State Department, and the National Security Council. The Treasury plays the role of the leading executor of the sanctions policy, and the State Department and the NSS determine the political direction of their application, despite the fact that the State Department itself is also responsible for the implementation of a number of sanctions programmes. This line also includes the Department of Justice, which uses coercive measures against violators of the US sanctions regime.
Interestingly, the Department of Commerce is not mentioned among the institutions. The review focuses only on a specific segment of the sanctions policy that is implemented by the Treasury. However, it is the Treasury that is currently at the forefront of the application of restrictive measures. A significant part of the executive orders of the President of the United States and sanctions laws imply blocking financial sanctions in the form of an asset freeze and a ban on transactions with individuals and organisations. Decrees and laws assign the application of such measures to the Treasury in cooperation with the Department of State and the Attorney General. Therefore, the institutional link mentioned in the review reflects the spirit and letter of a significant array of US regulations concerning sanctions. The Department of Commerce and its Bureau of Industry and Security are responsible for a different segment of the sanctions policy, which does not diminish its importance. Export controls can cause a lot of trouble for individual countries and companies.
Another notable part of the review concerns possible obstacles to the effective implementation of US sanctions. These include, among other things, the efforts of the opponents of the United States to change the global financial architecture, reducing the share of the dollar in the national settlements of both opponents and some allies of the United States.
Indeed, such major powers as Russia and China have seriously considered the risks of being involved in a global American-centric financial system.
The course towards the sovereignty of national financial systems and settlements with foreign countries is largely justified by the risk of sanctions.
Russia, for example, is vigorously pursuing the development of a National Payment System, as well as a Financial Messaging System. There has been a cautious but consistent policy of reducing the share of the dollar in external settlements. China, which has much greater economic potential, is building systems of “internal and external circulation”. Even the European Union has embarked on an increase in the role of the euro, taking into account the risk of secondary sanctions from “third countries”, which are often understood between the lines as the United States.
Digital currencies and new payment technologies also pose a threat to the effectiveness of sanctions. Moreover, here the players can be both large powers and many other states and non-state structures. It is interesting that digital currencies at a certain stage may present a common challenge to the United States, Russia, China, the EU and a number of other countries. After all, they can be used not only to circumvent sanctions, but also, for example, to finance terrorism or in money laundering. However, the review does not mention such common interests.
The text does propose measures to modernise the sanctions policy. The first one is to build sanctions into the broader context of US foreign policy. Sanctions are not important in and of themselves, but as part of a broader palette of policy instruments. The second measure is to strengthen interdepartmental coordination in the application of sanctions in parallel with increased coordination of US sanctions with the actions of American allies. The third measure is a more accurate calibration of sanctions in order to avoid humanitarian damage, as well as damage to American business. The fourth measure is to improve the enforceability and clarity of the sanctions policy. Here we can talk about both the legal uncertainty of some decrees and laws, and about an adequate understanding of the sanctions programmes on the part of business. Finally, fifth is the improvement and development of the Treasury-based sanctions apparatus, including investments in technology, staff training and infrastructure.
All these measures can hardly be called new. Experts have long recommended the use of sanctions in combination with other instruments, as well as improved inter-agency coordination. The coordination of sanctions with allies has escalated due to a number of unilateral steps taken by the Trump Administration, including withdrawal from the Iranian nuclear deal or sanctions against Nord Stream 2. However, the very importance of such coordination has not been questioned in the past and has even been reflected in American legislation (Iran). The need for a clearer understanding of sanctions policy has also been long overdue. Its relevance is illustrated, among other things, by the large number of unintentional violations of the US sanctions regime by American and foreign businesses. The problem of overcompliance is also relevant, when companies refuse transactions even when they are allowed. The reason is the fear of possible coercive measures by the US authorities. Finally, improving the sanctioning apparatus is also a long-standing topic. In particular, expanding the resources of the Administration in the application of sanctions was recommended by the US Audit Office in a 2019 report.
The US Treasury review suggests that no signs of an easing are foreseen for the key targets of US sanctions. At the same time, American business and its many foreign counterparties can benefit from the modernisation of the US sanctions policy. Legal certainty can reduce excess compliance as well as help avoid associated losses.
From our partner RIAC
Naftali Bennett Highlights Tech and Trade, Bridge-Building and Climate Change
Prime Minister Naftali Bennett of Israel used his address to the Davos Agenda 2022 to highlight the role of digital...
The Meeting Point between Pandemic and Environmental
Humans in the Anthropocene Humans are born from history, on the other hand, history is born from human life. Currently,...
Lithuanians Pave Way for EU’s Legal Migration Initiatives with Sub-Saharan Africa
The European Union is facing a shortage of specialists. The reality of demographic characteristics and the labour market dictate that...
Nearly half of City GDP at Risk of Disruption from Nature Loss
Cities contribute 80% to global GDP – but they also account for 75% of global greenhouse gas emissions. Integrating nature-positive...
Sino-American confrontation and the Re-binarized world
Americans performed three very different policies on the People’s Republic: From a total negation (and the Mao-time mutual annihilation assurances),...
Labour market recovery still ‘slow and uncertain’
As the COVID-19 pandemic grinds on and global labour markets continue to struggle, the latest International Labour Organization (ILO) report,...
India’s open invitation to a nuclear Armageddon
Army chief General Manoj Mukund Naravane said that “India was not averse to the possible demilitarisation of the Siachen glacier...
New Social Compact3 days ago
Age No Bar: A Paradigm Shift in the Girl Child’s Marriageable Age in India
Defense4 days ago
Why shouldn’t Israel Undermine Iran’s Conventional Deterrence
Middle East4 days ago
Egypt vis-à-vis the UAE: Who is Driving Whom?
Crypto Insights4 days ago
The Bitcoin ETFs: An Instrument to be Reckoned With
Southeast Asia4 days ago
Cambodian Prime Minister’s Visit to Myanmar: Weakening Role of the ASEAN?
Eastern Europe3 days ago
Rebuilding of Karabakh: Results of 2021
Middle East3 days ago
China-US and the Iran nuclear deal
Russia4 days ago
Do as You’re Told, Russia Tells the Neighborhood