Maritime tourism has become the ‘buzz word’ in the global economic industry. A review undertaken by the World Economic Forum concludes that maritime and coastal tourism would grow at a global rate of 3.5 percent annually by 2030. The travel and tourism industry at large have performed remarkably well over the years. It shared 10.4% of global GDP in the preceding year equivalent to a striking $8.8 trillion dollars. The industry also provides 319 million jobs; i.e. 1 out of every 10 jobs provided on an aggregate. For South Asia, projected to be one of the fastest growing region there are important takeaways from the success story of global travel and tourism industry. The region presently contributes$296 billion in tourism, with states such as Maldives, India and Sri Lanka taking the lead in successfully whirling the sector into a major contributor for the national economy. The World Bank estimates that tourism for Pakistan has a mere share of 2.93 percent to the gross domestic product (GDP), compared to other regional states that are performing extraordinarily well. The China-Pakistan Economic Corridor (CPEC)by tapping in the maritime potential of Pakistan and Gwadar port in particular, is foreseen by analysts to provide the necessary impetus for a prosperous sea-based tourism in Pakistan.
The joint venture of $52 billion (CPEC) between China and Pakistan, is a flagship project of Belt and Road Initiative (BRI). The latter aims to revive the ancient Silk Road via an ambitious network of rail, road and maritime networks involving more than 150 states across the continent. The grandeur nature of the project allows considerable opportunities for local and international investors to participate in developing the sea-based tourism industry. It is worth mentioning that China increased its revenues to almost ten times from RMB 147.8 billion (2002) to RMB 1463.6 billion (2017), as a result of coastal tourism. The two countries should collaborate on increasing tourism. China sharing from its successful experience can provide important insights in developing viable maritime tourism industry in Pakistan.
In order to fully grasp the industry there is a need to define the two interlinked, yet different forms of sea-based tourism under discussion. Coastal tourism refers to land-based tourist activities including swimming, surfing, sun bathing and other coastal recreation activities. Maritime tourism denotes those sea activities such as boating, yachting, cruising and nautical sports (Ecorys, 2013).Studies that have been undertaken on the financial aspects of sea-based tourism signify on the “multiplier-effect of tourism” .It is revealed that those destinations that are inclined at providing amenities to the lucrative segments of the market, particularly the high-end tourists draws in massive scale revenues that can add to the GDP of the country.
The coastline of Pakistan extends to 1050 km along the Arabian Sea, of which Sindh province shares 350 km and Balochistan segments 700 km. The coastal region of Balochistan in particular has a number of sand beaches with “shifting sand dunes”. Biological diversity, adds to the beauty and importance of the coastal belt, where migratory birds can be seen at Pasni, Jiwaniand Miani Hor. Astola Island, country’s first Marine Protected Area (MPA), is a known nesting ground for endangered green turtles which can perhaps be developed into a sustainable tourist attraction. The Balochistan government, in view of the above potential has announced to build tourist resorts to cater the needs of local and foreign tourists at an allocated cost of Rupees 150 million at KundMalir, Gadani, Ormara, Jiwani and Kalmat. Karachi, provincial capital of Sindh, is the coastal city that remains a popular destination among national tourists. The Clifton beach is a famous place to visit where camel and buggy rides are offered for families on picnic. Hawke’s Bay is another of the beach for leisure seekers who usually rent a hut to spend their weekends. The Indus Delta and the mangroves at the Sindh provincial coast also offers a potential tourism resource.
The government of Pakistan has sought the attention of tourists by relaxing its visa policy. It is now offering e-visas and visa on arrival to enthusiastic leisure seekers from across the world. International hotel chains have also shown interest in expanding their services in coastal areas, including Gwadar. Renowned magazine, Forbes dubbed Pakistan to be “one of the coolest places to visit” in 2019. The British Backpacker Society, ranked Pakistan as its “best adventure travel destination” and “one of the friendliest countries on earth that is beyond anyone’s wildest imagination.”Conde Nast Traveler has recently ranked Pakistan as the number one holiday destination in 2020.These developments will prove beneficial for maritime tourism. However, government requires sustained efforts to build sustainable and viable sea-based tourist industry.
Pakistan has all the vital constituents for a flourishing maritime tourism sector. A beautiful coastline along the Arabian Sea, enriched with God-gifted marvels including beaches, lagoons, cliffs and headlands; which are a dream come true for tourists. In the wake of CPEC, maritime tourism needs to be prioritized as an important sector that can generate viable revenues for the state. Collaborative efforts need to be made by federal and provincial governments to steer in the right direction. A Public-Private Partnership is also suggested for the various ventures to build the required infrastructure and meet the international standards for tourists. Such actions will promote CPEC as the ‘catalyst for regional growth’ and will provide an “appealing image” of the project to dissuade all the negative propaganda, to attract the attention of international tourists and investors.
Bangladesh’s Graduation: A Ray of Hope for India’s Garment Industry?
Authors: Ms. Prerana Manral and Mr. Shreyansh Singh*
A report was released by the World Trade Organization (WTO) on May 8th highlighting the implications of graduation of Least Developed Countries (LDCs) on their trade participation. By virtue of their status as LDCs, these countries enjoy access to international support measures such as development financing, preferential market access, technical assistance etc. WTO also obliges LDCs with certain carve outs such as Special and Differential Treatment (S&DT) to increase their participation in global trade. The LDCs are graduated to developing country status if they meet the threshold levels for at least two of the three indicators i.e. Gross National Income (GNI), Human Assets Index (HAI) and Economic Vulnerability Index (EVI) for two consecutive triennial reviews. Interestingly, in 2018 Bangladesh became the first country to meet the thresholds for all the three indicators and if it meets these thresholds again for the second triennial review in 2021, it will be eligible for graduation in 2024.
In such a scenario, Bangladesh will lose some of the benefits provided to LDCs by developing and developed countries like the preferential market access which presently accords Bangladesh a competitive edge over Indian products. One of the key labor-intensive sectors which contributes significantly to the exports of both Bangladesh and India is garments industry. In 2009, both the countries almost had an equivalent share in the world market, however in 2018 India was left far behind Bangladesh. India’s total garment exports stood at 21 billion USD whereas Bangladesh’s exports were at 40 billion USD in 2018.
Bangladesh’s garment sector, due to its LDC status, currently enjoys a duty-free access to markets of Europe and other developed countries. Specifically in EU markets, goods from Bangladesh are covered under “Everything But Arms” (EBA) preferential arrangement which provides zero percent duty on all the products except arms and ammunition. On the other hand, India loses out due to 9% average tariff on garments under the Standard GSP scheme of EU. Further, under the SAFTA and APTA Agreements, India also provides similar duty-free market access to LDCs which along with the removal of quantitative restrictions has exponentially increased Bangladesh’s garments exports to India leading to a tough time for the domestic industry even in the internal market.
The major markets for India and Bangladesh garment exports are the EU, Australia, Canada and Japan. Trade estimates of garment products clearly show that India’s export in terms of value is significantly less than that of Bangladesh. Since 2010, India’s total share of exports grew by 9.4% whereas Bangladesh’s exports skyrocketed by 141% in these markets. The major reasons behind Bangladesh’s exemplary export performance are tariff exemptions and lower wage labor market which provides impetus to narrowly beat its competitors in the international market. The analysis done in the report reveals that 70% of Bangladesh’s overall export is covered under LDC-specific preferences.
At this juncture a possible graduation of Bangladesh will lead to termination of such preferential access granted exclusively to LDCs which may provide an opportunity for Indian exporters to grab a larger share. However, to maximize the gains arising from this development India needs to prepare a robust action-plan. Firstly, low cost inputs such as cheap power, land and raw materials will have far-reaching effects in enhancing the export competitiveness. Secondly, India should focus on mass scale production of garments in order to achieve economies of scale to bring down its cost of production. Presently, the production is limited majorly to small-scale enterprises which lack capital intensive technology. This in turn negatively affects the quality and time of production which are crucial factors in tapping the domestic and international markets. The improvement in these parameters would help Indian exporters to move up the value chain in terms of creating brand value for its superior quality products. Another overdue policy action could be cutting the import duties on high-quality machinery required for better production. In addition to this, a fiscal stimulus is required to boost the ecosystem in wake of Covid-19 pandemic.
Lastly, to offset the preferential access enjoyed by its competitors such as Vietnam, Bangladesh etc. India should identify its partners and strategically negotiate FTAs for lower tariffs and Non-Tariff Measures (NTMs) to obtain better market access for Indian exports. Needless to mention, India will only be able to reap the benefits arising from Bangladesh’s graduation (due in 2024) if it sows the right seeds today. Effectuating such policies especially at a time when corporate taxes are slashed to match that of India’s competitors along will definitely send a positive signal for investment in the sector from the top global garment companies.
*Authors are Research Fellows at Centre for WTO Studies, Indian Institute for Foreign Trade. Views expressed are personal.
Post-Pandemic Economies and Environment
The cleaner air in cities, the burgeoning biodiversity and dramatic shift to less pollution-intensive lifestyle across the globe indicate the scope of the environmental improvement that can be achieved in just days. This is what we need to adhere to navigate the current pandemics:COVID-19 and environmental degradation. The environmental issues as we know do not seem to wait for a more convenient time, we therefore must deal it and Covid-19 pandemic concurrently. It is a very fatal disease and has incited urgent response all over the world. The governments, businesses and industries have been forced to deal with the pandemic in an unprecedented way.
According to the experts, this pandemic has provided us with the opportunities to deal with other crises also. We can take a transnational leap towards a sustainable society that produce minimum wastes and emissions. How we deal with current pandemic will also set our environmental trajectory for the centuries to come. The changes in our behaviour that we are experiencing nowadays and some of which may instilus permanently have a far-reaching impact on the environment. Our consumption and travel patron are more responsible: driving less car, attending online meetings rather than taking flights. Equally, it indicates that considerable dent on emissions and wastes products can be made without disturbing too much economic growth.
However, according to International Renewable News Agency (IRENA), for the long-run substantial reduction in the emissions of the toxins, huge and lasting changes are needed in the way how energy is produced and consumed. Though China and India two major growing economies, observed 25% and 30% reduction respectively during the months of lockdown. However, a shift towards low-emission society cannot be accomplished only via individual choices instead it involves reimagining the ways our urbane centres are built and organised, how roads are laid out so that moving without cars become easier, how provisions for walking, cycling and public transport is mad. There is a need for complete overhauling theway we grow, manufacture, trade, consumes and the way we travel.
Cities of Western Europe have been leading this transition by introducing innovative infrastructure projects: Milan has allocated 35 Km street for pedestrians and cyclists; Brussels has created 40km of a new path for cyclists and France has subsided cycling. Also, the Mayor of London started taking measures to build a car and buses free streets and bridges. Similarly, many cities are working on the circular economy where wastes are minimized through reuse and recycling. Following the footsteps of these cities, Pakistan also needs to devise pro-environmental urbane policies and mobility models.
Many studies such asYaron Ogen, 220 and Dario Caro, 220 indicate a strong link between COVID-19 death rate and an increase in emissions. Especially in North Italy and Spain, the high death rate from COVID-19 is seen to be associated with high air pollution in cities. Curtailing the pollution, therefore, would reduce general health burden and prevent any future pandemic may not prove to be so lethal. It has been learnt from the pandemic that early actions to contain the virus were more effective than trying to deter when the virus has spread. The same is also true for the environmental issues as Prof. Stern of Brentford claimed in 2006 that “countries needed to spend 1% of their GDP to stop greenhouse gases rising to dangerous levels. Failure to do this would lead to damage costing much more, the report warned – at least 5% and perhaps more than 20% of global GDP”.
Eventually, it is time for governments to forge with the private sectors to produce a sustainable economy. After this pandemic is over, the businesses, the industry, and individuals would plead to governments for state support. The governments should have an agenda of a sustainable economy while pouring money into the economy as aid packages. Governments should use this opportunity and must take a long view to utilize the stimulus packages. To an extent, the impact of COVID-19 on the environment is the functions of a kind of fiscal stimulus will be adopted in post-pandemic. Ideally, we should avoid a post-2008-09 financial crisis when fiscal measures of China government boosted the emissions by 6% (World Bank,2020). Rather, a more successful model of South Korea should be borrowed where stimulus package of 2008 included investment in natural conversation, energy efficiency, renewable energies, and sustainable transportations.
The COVID-19 virus is a global issue that requires a global response asall states are sharing data, experiences, equipment, and resources to deal with this pandemic. This same spirit of international collaboration is needed to produce the viable solution of the environmental issues. An inclusive global programme collaborated by rich and poor nations that ensures sustainable production can ensure low-emissions economies across the globe. The post-pandemic economies should be navigated in a way that protects people and planet and avoids any ecological destruction that leads to viral diseases. This pandemic can be taken as a mandate to build a new world from its broken parts.
Long lockdowns and the status of Indian MSMEs
Recently, when the Government of India decided to classify institutions as Micro, Small, and Medium Enterprises (MSMEs) they were trying to set up an incentive structure to usher a new era of growth. The incentives announced are in the form of attractive cheap loans, fewer compliance standards, tax benefits, and host of other freebies. The intended scheme wanted to keep growing — from Micro to Small and Small to Medium, and the support system and put the nation on a path of self-sufficiency .
Change of classification criteria
In fact, the businesses are classified as Micro, Small, or Medium depending on the kind of investments they were making in plant and machinery and if we made investments of up to 5 Crore, then we are as a Small enterprise. But what happens when business is booming and there’s an incentive for us to invest and expand. Well, without government intervention, we’d have lapped up this opportunity no questions asked. But now, we have to consider the downside. Because, as our transition from being Small to Medium, we’ll forego a few benefits. Benefits that might not want to cede. Here likes the dilemma because when we try and deceive the government into thinking we are a Small enterprise when in fact we are not and we will have to do is to keep making the investments we need, but figure out ways to hide the investments on our accounting books. That means the government will now have to spend additional resources in physically verifying your claims. In effect, the incentives that were designed to help MSMEs grow and become self-sufficient have now turned “perverse”. A move that was meant to promote investment and foster growth is now yielding terrible unintended consequences stifling all progress.
Scheme of the Government
So they began working on a proposal to change the classification criteria. They figured that total revenues would be a good metric since claims regarding revenue can easily be verified with the GST Sales data filed at the Goods and Service Tax portal. More importantly, entrepreneurs won’t have to worry about making new investments since the benefits are no longer tied to this metric. But the industry body representing MSEMs is not happy with this development. They lobbied and urged the government to keep the classification criteria intact but when the government finally charged ahead and introduced turnover as an additional criterion. They even expanded the investment limit to ensure MSMEs don’t graduate out of benefits too soon. However, MSMEs in the service sector (IT and stuff) will also be classified along the same lines as their manufacturing counterparts. So no step-motherly treatment for the people in the service industry either. Besides the classification, the government also wants to get the big guns interested in the space. They want Venture Capitalists to walk in and buy ownership in promising upstarts. The plan is simple. Put together a mother fund with 10,000 crores from the government. And then disburse the funds from the mother entity to smaller daughter funds in a piecemeal fashion and try and get other investors on-board these smaller funds. If all goes well, the 10,000 crores from the government should attract an additional 40,000 crores from outside investors (PE/VCs) and this should give MSMEs some much-needed funding support. They are calling it the Fund of Funds.
However, in the present status of pandemic banks don’t want to offer another lifeline by extending new loans considering their own precarious situation. And they most certainly cannot contain the problem; since we are likely to see a spike in defaults owing to the fact that most MSMEs have shut shop completely since the lockdown. And if MSMEs can’t restart operations and fail en masse, we will have a systemic problem on our hands. So a government intervention was inevitable. And the finance minister finally announced 3 lakh crore worth of collateral—free loans for businesses, including MSMEs in a bid to plug the funding gap. If we are in a business with a loan burden on your hands, banks will now extend new loans of up to 20% of the total loan outstanding so that we can restart operations. Now, we’ll have 4 years to repay this loan. Repayment obligations won’t kick in until the end of the first year. The government will stand as our guarantor in case we default and they will compensate the banks in full interest and principal. So technically, banks should be more willing to lend to these institutions now.
Growing importance of agriculture
Around 51 lakh people migrated to agriculture last year and this should be seen positively. In fact, we should actively pursue this endeavour and focus on making farming economically viable. Indian Agriculture, on an aggregate level, has been unprofitable for a good while now. Monsoons are erratic. Irrigation infrastructure still needs work. Warehousing and storage problems still persist. The middlemen skim most of the profit and many farmers work with land parcels so tiny that they can almost never leverage benefits of scale. Meaning we have a small proportion of landowners who run an extremely profitable enterprise while a good chunk of the agrarian population still live below the poverty line. The point is — there’s been very little incentive for people to continue and work the farmland. And as a consequence, many people migrated from rural hinterlands to urban centres en masse.
But now in the pandemic and long lockdown the migration patterns have reversed. There’s now more incentive for India’s labour population to return to agriculture. It’s become prosperous again. First, it is likely that employment did not actually increase in agriculture, but the sector merely absorbed the excess labour as it had no other place to go to. Farmers did not actually call out for more labour. But, family labour landed up in farms when they had no other place to go to. The real estate and construction sector, which is usually a provider of employment to low-skilled farm labourers who try to move out of the labour surplus farmlands, shed 4.6 million jobs between January-April 2018 and January-April 2019. This failure of the construction industry to absorb farm surplus labour is, possibly, the biggest reason why there is an increase in employment under agriculture. A family farm always has scope to absorb some unpaid labour although such additions may not increase any production or profit. There is always an extra patch of the farms to tend to or the need to take the cattle to graze a little farther. Farm work can be spread thinly over available labour and keep everyone “employed” when there is no alternate work available to them.And right now, with the lockdown in place, we are seeing it happen again. People are moving back to agriculture en masse because they have nowhere else to go. The only difference—it’s happening at a scale that almost seems unreal. This migration also has some very real policy implications.
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