Pressure on Huawei Will Spell Doom for American Business
The key event in a sanctions-filled May was the actions of the U.S. authorities against the Chinese company Huawei. On May 15, the United States Department of Commerce added Huawei to its “Entity List.” Now, U.S. companies are significantly limited in their export and import operations with Huawei. This is a serious blow to the Chinese telecommunications giant, as the company uses the US components, technologies and software. By May 20, the Department of Commerce had issued a Temporary General License granting certain exemptions to the new rules. The license safeguards U.S. businesses against a sudden collapse in existing trade relations with the company. But this is of little consolation to Huawei. The license is subject to review every 90 days and can be revoked at any time. Huawei thus remains in a state of limbo, and its contract partners now have to prepare for the worst.
The actions of the United States Department of Commerce are part of a bigger plan. The decision on Huawei came on the same day that Donald Trump signed the Executive Order on Securing the Information and Communications Technology and Services Supply Chain. The President of the United States declared a state of emergency in connection with the risk of the country’s enemies carrying out malicious cyber-enabled actions. While China was not explicitly mentioned in the Executive Order, it was clear that the law was directed against the country. This way, the Order can just as easily be used against Russia.
Interestingly, the key official reason for the restrictions imposed on Huawei is that the company deliberately violated the U.S. sanctions against Iran. That is, formally speaking, the United States has introduced secondary sanctions against Huawei. The United States Department of the Treasury is also investigating the company, and there is no doubt that the two regulatory bodies will end up levying huge fines on Huawei.
It should be noted here that Chinese companies have been carefully observing the U.S. sanctions for a long time now. According to the Russian International Affairs Council, the United States Department of the Treasury has carried out just four investigations in relation to Chinese companies over the past ten years, while EU companies have been the target of secondary sanctions more than 40 times during that same period. Chinese banks have never been hit. However, there have been problems with trade. The biggest case was completed in 2017 against the Chinese company ZTE, which is also a telecommunications giant that was targeted violating the sanctions against Iran. The company paid a fine of $892 million, with a further $1 billion being added in 2018 for breach of obligations.
The Huawei case has serious political repercussions. In China, the secondary sanctions are seen as an attempt to contain China’s technological development. The events of May will become a powerful motivating factor for China to step up the development of its own technological base. Without such a base, the global ambitions of giants such as Huawei will continue to be crippled by restriction after restriction. The problem is seriously politicized in the United States as well. Suspicions of all kinds of “intervention,” the trade war with China and the general tightening of the course create a fertile environment for harsh decisions.
Tactically, China is losing. Huawei will suffer losses. However, the Chinese side is unlikely to enter into open conflict. Instead, it will regroup and stubbornly do everything to reduce its dependence on the United States. Huawei will probably try to resolve the issue with the U.S. authorities itself. The price will be very high, but, at the end of the day, Huawei is a business and not a state. The company is interested in things returning to normal as quickly as possible. Like many of the victims of secondary sanctions, it will likely bow to the demands of the Americans.
Strategically, U.S. business will lose out, as will the very model of globalization itself. The Chinese side will take stock of the situation and steer the inevitable and irreversible course towards technological independence — with all the consequences that will entail for the U.S. businesses on the Chinese market and in Chinese projects.
From our partner RIAC
Looking at Indonesia’s Nickel Downstream Efforts from The Perspective of Resource Curse
Republic of Indonesia under the government of President Joko Widodo is intensively pursuing downstream industries, mainly in the natural resource products sector. One of which is Nickel. Indonesia’s abundant natural resource wealth is certainly a field for increasing the economic level of state revenue. Moreover, if the Government is able to ‘prosperate’ the community through the results obtained from the wealth of the country’s natural resources.
In this opinion article, the author tries to look at the perspective of the natural resource curse which is prone to be experienced by countries/regions that are rich in natural resources but the level of community welfare is far from expectations, then the author tries to provide an opinion regarding the linkage of resource curse in the midst of government efforts. increasing the downstreaming of Indonesia’s natural resource industry.
Downstreaming Nickel: A Way Out of the Term Natural Resource Curse?
President Joko Widodo and his staff’s steps to increase state revenues through the downstreaming of natural resource industry, one of which is Nickel. It should be appreciated because it is this step a way for the government to provide a way out of from natural resource curse.
The ‘resource curse’ in the theory introduced by Richard Auty (1993) was followed by further research from Jeffrey Sachs and Andrew Warner (1995) find that there is a strong connection between countries with an abundance of natural resources and poor economic growth. This becomes interesting, not about the wealth of natural resources of a country. But about how the state can properly and appropriately manage the results of the abundance of nature with the economic standard of living of its people. In the perspective of resource curse, especially in terms of yield management, there are differences in each resource-rich country. Countries with abundant resource wealth sometimes succeed in development, but on the other hand they don’t. How could this happen?
One of the things countries that are rich in natural resources has a low level of economy and people’s welfare, can be due to the management of natural resources governance by weak institutions. Weak in the sense that there is no transparency, accountability and oversight by the surrounding community.
Indonesia, through government policies to downstream the nickel commodity industry, is expected to strengthen national economic competitiveness amid global uncertainty and can become a global key player in the nickel commodity extractive industry. The government’s step in advancing industrialization and downstreaming the natural resource industry with nickel as a commodity that has the largest reserve value in Indonesia. According to the author opinion, it is a way to avoid resource curse in the future. Construction of a nickel smelter by President Jokowi’s administration, in Morowali Regency, Central Sulawesi which adopts a green smelter in mid-2023, is a concrete step by the government in accommodating nickel natural resource products for later downstreaming.
As a society, the authors in this opinion hope that the implications of downstream nickel industry governance for the welfare of the Indonesian people in general, and the Morowali community in particular can be well maintained through the construction of a nickel green smelter. Control, supervision and community participation accompanied by transparent institutions are certainly needed in the development process, so that the process of accountability and transparency of future results can avoid the curse of natural resources and be able to increase the country’s economic level.
Impact of Multinational companies on Pakistan
Multinational companies (MNCs) have had a significant impact on Pakistan’s economy since the country’s liberalization and opening up to foreign investment in the 1990s. Overall, the impact of MNCs on Pakistan can be seen as mixed, with both positive and negative effects on the economy and society.
Multinational companies (MNCs) are firms that operate in multiple countries, including Pakistan, and are usually headquartered in developed countries. They have the capability to invest large amounts of capital, technology, and expertise, which can significantly impact the host country’s economy. MNCs, bring foreign direct investment (FDI) to Pakistan, which is essential for economic growth.
The presence of MNCs in Pakistan has had a positive impact on the economy in various ways. They have contributed to the development of infrastructure, which has helped to improve the country’s business environment. MNCs have also helped to increase exports, which has led to an increase in foreign exchange reserves. Additionally, they have introduced modern technologies and practices, which have enhanced productivity and efficiency in the local industries.
One of the significant impacts of MNCs on the Pakistani economy is their contribution to employment generation. MNCs have created jobs for the local population, which has helped to reduce unemployment and poverty. According to the State Bank of Pakistan, the number of people employed in the manufacturing sector, where most MNCs operate, has increased by 2.8% in the fiscal year 2020-21. This growth can be attributed to the expansion of MNCs in the country.
The presence of MNCs in Pakistan has also led to the transfer of skills and knowledge to the local workforce. MNCs employ highly skilled professionals who share their knowledge and expertise with local employees. This transfer of skills and knowledge helps to enhance the human capital of the country, which is essential for economic growth.
Furthermore, MNCs have a significant impact on the tax revenue of Pakistan. MNCs pay corporate taxes, which contribute to the government’s revenue. According to the Federal Board of Revenue, the contribution of MNCs to the country’s tax revenue has increased by 19.9% in the fiscal year 2020-21. This increased tax revenue can be attributed to the expansion of MNCs in the country.
MNCs have negative impacts on the environment and may exploit natural resources. The entry of MNCs into the Pakistani market has increased competition for local firms, making it difficult for them to compete with well-established global brands
MNCs have been accused of exploiting labor and natural resources in Pakistan. There have been reports of low wages, poor working conditions, and environmental damage associated with MNC operations in the country.
The current situation of multinational companies (MNCs) in Pakistan is mixed. On one hand, Pakistan has been successful in attracting foreign investment in recent years, with MNCs investing in various sectors of the economy such as telecommunications, energy, and infrastructure. On the other hand, Pakistan still faces a number of challenges that can impact the operations and growth of MNCs.
One of the major challenges faced by MNCs in Pakistan is the weak and uncertain regulatory environment. The country’s legal and regulatory framework is often viewed as complex and difficult to navigate, which can make it difficult for MNCs to operate and make long-term investments. In addition, corruption and lack of transparency in the regulatory environment can increase the cost of doing business and reduce investor confidence.
Another challenge is the inadequate infrastructure in Pakistan, which can make it difficult for MNCs to operate efficiently.
Furthermore, Pakistan has faced security challenges that can impact the operations and growth of MNCs. Terrorism, political instability, and sectarian violence can increase the risk of doing business in the country and deter foreign investment.
Despite these challenges, there are opportunities for MNCs in Pakistan, particularly in sectors such as agriculture, healthcare, and tourism. The country has a large and growing population, a strategic location, and abundant natural resources, which can make it an attractive destination for foreign investment.
The impact of multinational companies (MNCs) on the thinking of people in Pakistan can be both positive and negative, depending on various factors such as the nature of the company’s operations, its business practices, and the local cultural and social context.
On the positive side, MNCs can bring new ideas and practices to Pakistan and can help to expose people to different ways of thinking and doing business. They can also bring job opportunities and skills development to local communities, which can have a positive impact on the local economy and people’s quality of life.
Moreover, MNCs can help to promote cultural exchange and understanding between Pakistan and other countries. For instance, MNCs may bring in employees from different parts of the world, exposing local employees to different cultures and perspectives. This can lead to increased tolerance and diversity in society.
On the negative side, MNCs may lead to negative consequences for local communities and the environment. MNCs may contribute to the marginalization of local businesses and industries, leading to the loss of local cultural and economic practices. This can have a negative impact on people’s sense of identity and belonging.
The impact of MNCs on the thinking of people in Pakistan is complex and multifaceted. While they can bring new ideas and opportunities, they can also have negative consequences for local culture and values. It is important for MNCs to be aware of these potential impacts and to operate in a socially responsible and culturally sensitive manner, in order to promote positive outcomes for both the company and the local community.
In conclusion, the current situation of MNCs in Pakistan is mixed. While there are challenges such as a weak regulatory environment, inadequate infrastructure, and security concerns, there are also opportunities for foreign investment in various sectors of the economy. It is important for Pakistan to continue to address these challenges and create a more investor-friendly environment to attract further foreign investment and promote economic growth.
How Saudiconomy, is an economic-transformational miracle?
What is happening in the Global economy? The outlook seems entirely iffy, in the state of flux and bewildered with negative outlooks. The answer is, “Disturbance”. If we analyze the global-environment with respect to economy, we find it clouded with discussions pertaining to hawkish vs. dovish trends of central-banks, rising inflation, hyper-inflation, tanking GDP growth, Russian-Ukraine conflict, energy-crises, broken supply-chains, unemployment, recession-fears, supply-shocks, lower demands, inverted yield-curves, liquidity crises, banking debacles and many other ensuing economic-ramifications etc. all have become talk of corridors and towns.
In my opinion, the global economy seems in shambles, extrapolated perceptions assumed by analysts out of Jackson Hole meetings and other developed-countries’ central-banks are creating disturbances in financial-markets. Simply, the world is devoid of any solid vision, which could steer it towards betterment and prosperity. Major financial newspapers are dreading with inflation impacts. Ask any banker across the globe about his or her medium-term economic-outlook & you’ll get an ugly picture painted.
Welcome to Saudi Arabia, the year 2022 the country surpassed a mark of a trillion-dollar economy according to both IMF and Oxford Economics coupled with GDP which grew at 8.7% in 2022. The annual CPI in Saudi Arabia increased by 2.5% and inflation averaged at 2.47% in 2022 which is “absolutely nothing” against double-digits’ inflation worldwide.
So paradoxically asking, what is happening in Saudi Economy? The answer is, “Growth”. If we analyze Saudi economic ecosystem, we find it filled with positive economic-vibes where the discussion is all about hike in industrial-production, foreign-investment-inflows especially huge industrial-investments, mining-investments which aim to unleash the potential of natural-resources, infrastructure-investments, giga-projects, achievement of economic & financial targets on time, flourishing private-sector, multiplying Non-Oil GDP etc.
Taking global-view, H1+H2 of 2022 were clouded with immense geo-political tensions, with ultimate economic-ramifications. But KSA has remained insulated of all global economic-vagaries, which attests the resilience & robustness of Saudi economic framework which is strengthened by Saudi leadership. The fiscal-year 2022 attracted significant foreign capital-inflows, which proves that Saudi Arabia has successfully positioned itself as a desired-destination of global financial-capital amid the ongoing global-turbulence. Saudi Arabia has successfully averted economic-effects of current geo-political turmoil, in terms of utilities, food-security and inflation-containment etc.
The question arises, how did KSA achieve this economic excellence & resilience in really a short time-span? The answer is, a Vision is being implemented and realized by Saudi leadership with sheer commitment and enabled by Saudi youth. This trifecta is indeed a global successful case-study of how major economic-transformations can happen in a short-period of time.
Delving into more details, the fundamental reason is, in 2016 Saudi Arabia had devised a brilliant Vision 2030 under the leadership of H.R.H King Salman and this was a road-map drawn by H.R.H Crown Prince Mohammad Bin Salman, as a forward strategic-economic framework. Under this brilliant vision, uniquely-crafted “Vision Realization Programs” (VRP) were designed, each tasked with a particular niche to smoothen the regulatory-processes, incentivize deployment of local-resources and ultimately attract private-sector & foreign-investments. All these VRPs are showing satisfactory-progress and many of these VRPs have over-achieved brilliantly.
Another driver of this economic-success is a significant-emphasis on optimizing potential of “Non-Oil GDP”. It is the Non-Oil GDP, which ultimately provided an impetus and incentivized Saudi Private-sector to act proactively. The fuel for sky-rocketing “Non-Oil GDP” is actually the giant private-sector of KSA, whose potential is being unleashed by Saudi government via launching a partnership-program namely “Shareek” which aims to intensify the potential of SAR 5 trillion of domestic private sector investments by 2030. The aim is to maximize the private-sector contribution up to 65% in Saudi GDP by 2030.
One of the attributable reasons of this economic-miracle of Saudi Arabia has been a constant emphasis on Higher Education & Research. For instance, scholarship programs for Saudi students proved to be a stellar success. Today we see countless highly-qualified Saudis, possessing valuable global-experience are now steering many organizations in both the public and private sector of country. Their competence coupled with determination, passion & loyalty for their leadership and the country paved the way for Saudi Arabia to result such an economic-success. Nature Index which tracks scientific & intellectual contributions globally has ranked Saudi Arabia, 1st in Arab World & 30th globally in 2022, which manifests emergence of high quality scientific-output by Higher education ecosystem.
Saudi Arabia was one of the countries, which made headlines across global-media due to smart Covid-management, leaving behind many developed economies. For instance, King Abdullah Port has bragged the 1st-position leaving behind 370 global-ports in a globally-renowned index, Container Port Performance Index – 2021 by World Bank and S&P Market Intelligence, which analyzed performances of 370 ports in post-Covid broken supply-chain scenario. Similarly, Jeddah Islamic port and King Abdul Aziz port have bragged 8th and 14th position respectively.
Saudi Arabia’s Sovereign Wealth Fund, Public Investment Fund has emerged as one of the smartest-SWF leaving behind many decades-old SWFs with stellar investments. The PIF (AuM = 620 USD billion) with its in-built strong potential has taken lead in investing locally in Saudi Arabia. In any country, a monetary-system always carries immense importance in proper functioning of an economy & solidifies its robustness. This important task is being carried out diligently by Saudi Central Bank, SAMA, which is brilliantly regulating Saudi financial-sector.
Saudi Arabia is taking a lead in developing state-of-the-art infrastructure. Each of the giga-project is adding gross-value of billions of SAR directly to economy and is providing thousands of jobs. I call them; “Super-infrastructure” because they are being developed with a super-vision, led by super-teams, giving super-results and yield a super-future. Recently Knight Frank which is a top-notch and a century-old UK-based real-estate consultancy firm has evaluated the 15 giga-projects up to 1.1 trillion dollars.
Indeed, Saudi success story of economic-transformation and diversification embodies sheer brilliance, commitment and determination, which has manifested wonders in less than a decade as appreciated by the Managing Director of IMF in the recent WEF sessions, in these words, “They (Saudis) are using the increase in revenue very effectively to create the investment environment for future growth for diversifying the economy,”
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