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Pakistan Maritime: Shipping Policy of 2020

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The ‘Blue Economy’ is a rising idea which energizes better stewardship of our sea or ‘blue’ assets. The blue economy goes beyond viewing the ocean economy solely as a mechanism for economic growth. In the ‘business-as-usual’ model, enormous scope industrial countries have seen the improvement of their sea economies through the exploitation of oceanic and marine assets – for instance through delivery, business fishing, and the oil, gas, minerals and mining ventures – regularly without a view with the impacts their exercises have on the future wellbeing or efficiency of those equivalent assets. In Pakistan, the Ministry of Maritime Affairs is leading the concept of Blue Economy. The Blue Economy division presents numerous venture openings in the Maritime Sector. Pakistan National Shipping Corporation (PNSC) is a National flag carrier. It appeared by a merger of National Shipping Corporation (NSC) and Pakistan Shipping Corporation in 1979. The mission of PNSC is to give dependable and proficient delivery administrations to abroad and Pakistan’s seaborne exchange, keeping up relationship of uprightness and trust with clients, accomplices, workers, shielding interests of partners and contributing towards advancement of national economy, society and the earth. One of the most important sector in Maritime Sector is Shipping industry.

In 2019, the administration unveiled the new shipping policy, supplanting the two decades old structure, and declared a scored for impetuses for the extension and advancement of maritime. The administration had declared another expense motivating force strategy for Pakistan-based shipping organizations to diminish reliance on foreign vessels. Expansion of more Pakistan-enlisted ships with contribution of private segment would help decrease cargo cost by around $5 billion paid to the foreign delivery organizations. This activity would produce greater business open doors for sailors in the nation. The Minister said hydrocarbon cargoes imported by government associations and state-controlled undertakings, including petroleum, high sulphur furnace oil, low sulphur furnace oil, high speed diesel, liquified petroleum gas, unrefined petroleum, and coal, would be imported on free-on-board premises through PNSC-claimed vessels. Ali Zaidi uncovered that new government-to-government Liquified Natural gas (LNG) import agreements would be haggled on free-on-board premises and shipments would be made through PNSC-possessed or PNSC-chartered vessels.

The Advisor of Minister of Maritime affairs Razzak Dawood declared Maritime as Strategic Industry, he also mentioned that the shipping industry remained neglected for many decades after nationalization which is absolutely correct but the government had to face the criticism by many experts of the related field. As they believe that the government never shared and asserted any substantial focuses for Maritime Industry, as referenced commonly previously, many experts believe that the government never shared any proper pathway or any substantial plan for the progress. Government do announce that ships will register with the announced incentives till 2030, but how many ships MoMA is expecting to register? There are no tangible numbers for Maritime time Industry. The biggest drawback or criticism government faced was on Shipping policy 2019 that they did not mention shares of National Shipping from CPEC, which was quite shocking. Also, there was not a single word about reviewing Shipping Act 2001 or updating it which is the backbone of Maritime Policy Making. The Global leading Maritime Professional Mudassar A. Iqbal openly criticized the policy in a way that MoMA is failed to prepare an effective ‘Maritime Policy’.

Pakistan’s geographic location is important to discuss here, with its 1000 km long coast, situated at the focal point of Indian Ocean, Pakistan is a significant littoral state. In any case, Pakistan has dismissed its duties towards this part for as long as decades. This obliviousness and disregard have conjugated this expected goldmine to only an unused spot. Its neighbors like India, Bangladesh and China have used their marine assets ideally and are proceeding to do as such. As per 2019, Pakistan’s sea income projection remains at 183 million dollars which is far not as much as that of Bangladesh and India who remain at 5.6 and 6 Billion $ individually.

Imran Khan government is working progressively towards Maritime Affairs, On August 07, 2020 Federal Minister for Maritime Affairs Ali Zaidi announced new Shipping policy, under which the vessel enlisted in Pakistan will be excluded from custom obligation, annual expense and deals charge till 2030. According to new policy Pakistani flag carrier vessel will likewise have first berthing directly at the port. In new Shipping Policy many new incentives have been provided to private shipping companies because of new incentives government believe that three to four shipping companies will soon purchase vessels in the nation, including that the new shipping strategy will likewise facilitate fishermen. Ali Zaidi stated. “Another relief for all the private sector is the reduction in the Gross Tonnage Tax (GRT), given that shipping companies agree to accept freight charges in Pak Rupees and not in the greenback. This incentive has been approved in the finance bill of 2020-21.”

Under the new marine arrangement, the state bank has permitted the Long Term Finance Facility (LTFF) for the boats and vessels, which was prior accessible to exporters. “This will assist speculators with purchasing every single drifting vessel including towing boats, dredgers, load vessels and even the fishing boats to acquire the drawn out obtaining at three percent from the banks.” The MoMA has higher expectation that new policy will help Pakistan to upgrade Marine industry.

To overcome Marine Hurdles here are the few recommendations. Awareness between decision makers and among local people. The nonattendance of institutional changes at administrative and provisional level shall be overcome. Technology and equipment’s should be modernized for investigation in marine life. Marine related exploration and preparing is required to be re-evaluated. Exporters lean more towards nearby market as opposed to one abroad on account of the red tape. This will be overwhelmed by reinforcing arrangements regarding sea. Lack of normalized rehearses, as per an investigation distributed by the German Institute for Standardization, 84% of the worldwide organizations’ severe normalized method, in any case, lamentably Pakistan is not one of them. Pakistan wins $1bn from IT part while India produces $12bn yearly. If we need oceanic segment to arrive at its latent capacity, we must follow these normalized pathways. The infringement of ocean rules and Illegal, Unreported and Unregulated (IUU) fishing will be taken under scrutiny and deep sea policies shall be commenced. The question remain will this Shipping policy 2020 prove to be effective?

I am Daniyal Talat. I have done my Masters in Defense & Strategic Studies from Quaid-i-Azam University Islamabad. I am working as a Program Coordinator in the School of Inclusion.

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Indian Farmers Protest Against the Parliament’s Encroaching Bills

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The new agricultural reforms in India aim to permit farmers to offer their produce to private purchasers beyond a state-run discount or wholesale markets, where farmers are guaranteed a minimum cost for their yields.

However, the farmers state that the laws would undermine their livelihoods and will solely be profitable to large companies, leaving producers helpless under the heel of a free market. Such patters can be gauged from the Modi government’s corporation-oriented policies. For instance, the current corporate tax rate – 30 percent – has been considerably reduced: 22 percent for existing companies and 15 percent for those established after 1st October, 2019. 

Farmers regard these bills with suspicion, for they feel threatened by the corporatization of their agricultural domain and the dismissal of the MSP regime. Introduced in 1966-67, the MSP regime promises the sale of specific crops at a fixed price thus assuring the farmers of a regular income in spite of escalating input costs and unstable prices.

Primary leaders of farmers’ associations have called for protests, even willing to observe fasts during the protest in order to challenge the new farmer laws. With almost 250 million protesters, to protest is being called the largest protest in human history

This is the second time in the previous two weeks that the farmers have called for country-wide protests, requesting all the people to organize sit-ins outside the district organizations across the state. The protests are being led by a large number of farmers sitting outside the capital, New Delhi, obstructing main highways heading towards the city.

Chief Minister of Delhi, Arvind Kejriwal, and his party ‘Aam Aadmi Party’ have supported the sit-ins by fasting with them. Kejriwal encouraged his party workers and members to join the campaign and asked Modi’s Bharatiya Janta Party to set aside arrogance and fulfill the demands of the farmers.

The agriculture sector contributes almost fifteen percent to India’s $2.9 trillion economy and enrolls the greater part of the nation’s 1.4 billion individuals. In recent years, this sector has been facing setbacks and driving a huge number of indebted farmers to take their lives.

Modi said the enactment was required to support the agricultural sector, and that the new laws would profit the farmers and “free” them from the oppression of middlemen. Farmers, generally from Haryana and Punjab and considered the “grain bowl” of India, have denounced the laws as “hostile to farmers”.

The farmers have demanded revocation of the new laws and assurance of the Minimum Support Price for their yields.“It’s been months now since the farmers began protesting. We have sent a few written messages to the Prime Minister, Agricultural Minister is demonstrating our hatred to the hostile laws but the BJP government is careless on this issue,” said the farmers’ leader.

One elderly woman, aged 75, said that “unless and until Narendra Modi withdraws these laws, we will not go back. This government should know about the strength and determination of the Punjabi people.”

The Indian Supreme Court has received many petitions regarding a ban on the protest, but the top court has declined such calls and ordered the government and unions to form a committee in which the experts would mediate between the concerned parties.

On the birth anniversary of Sikh leader, Guru Nanak, Canadian Prime Minister Justin Trudeau said in a Zoom meeting that Canada would always defend the right of peaceful protest.

Federal Minister Fawad Chaudhry termed Indian behavior with farmers as “shameful”. He stated that the Indian government’s policies were the biggest threat to regional peace. United Nations Secretary-General António Guterres called on the Indian government to allow protests, asserting the right to raise a voice and show opposition to the government.

The vociferous calls have certainly proven to be a feather in the farmers’ cap, as India’s Supreme Court has recently ordered for the suspension of these farming bills.

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U.S. Trade Deficits Increase from Covid

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America’s trade deficit (excess of imports minus exports) reached its minimum in February 2020, and since then has increased 84% from February’s -3708, up to November’s -6812. America has one of the world’s highest rates of coronavirus-19, or Covid-19, infection, and therefore is less productive and more needy than most countries are, during the coronavirus crisis, and is consequently importing more and producing less. The reverse has generally been the case for the countries that have had good policy-responses to the virus — those countries’ economies have either been virtually unharmed by, or else have actually boomed from, this pandemic.

China’s mere month-long trade deficit from coronavirus was an enormous -62.05 in February, but by March China popped back up to+19.93 and has remained above +36 since that time, and it reached its high of +75.43 in November. China has one of the world’s lowest rates of coronavirus-19 infection, and is therefore exporting more as it fulfills the needs of countries (such as America) that are producing less because of the coronavirus crisis. 

A major study by Jungle Scout, “Global Imports Report 2020”, says that:

Those countries that were able to recover from the impact of early 2020 economic events are the countries faring better later in 2020. For example, China had the most drastic year-over-year reduction in U.S. imports among the top 20 countries in February and March, second only to Hong Kong. But in April, China bounced back significantly, achieving approximately 40% year-over-year growth in U.S. imports. The countries that were able to recover early are the countries faring better later in 2020.

On December 17th, Matthew C. Klein at Barrons headlined “China’s Pandemic Recovery Accelerates While the U.S. Economy Rolls Over” and he reported that, “Soaring consumer spending, rapid manufacturing growth, and robust exports are pushing up the speed of China’s recovery from the pandemic even as the third wave of the viral outbreak and the withdrawal of federal government income support are causing the U.S. economy to turn over.”

One of the very few countries that were hit about as little as China by this pandemic is Vietnam, whose northern border is China. Vietnam has perhaps the world’s most vigorous and well-planned policies to restrain this virus. The country’s only two months of trade deficit were during April, at -12.20, and popped back up to +12.33 in May, then peaked at +49.86 in August, and declined sharply down to +6.00 in November, and then down to -10.00 in December. Although Vietnam’s worst month of the infection was August, after which the numbers of new daily cases returned quickly to the extraordinarily low numbers of the preceding months, Vietnam was hit hard by retaliation (such as complaints and investigations) from the U.S. regime in October, which caused an especially hard drop from 29.39 in October down to November’s +6.00, and then December’s -10.00. China wasn’t hit so hard by the U.S., mainly because Trump had already turned the screws against them earlier, and China had thus already reoriented its exports toward other countries. Yet, still, China has, steadily, each year, during the past five years, produced almost exactly 40% of all imports by the U.S. The impact of America’s policies against China has been much bigger in boosting America’s imports from China’s competitors than it has been in reducing America’s imports from China. America has been increasing its imports mainly from Vietnam, Germany, and Taiwan. So, those have been the chief beneficiaries of Trump’s anti-Chinese policies.

Another of the very few countries that have been hit by this coronavirus even less hard than China has been is Taiwan, which is almost unique in its enjoying a positive balance of trade throughout the year, and so Taiwan has produced record-breaking trade surpluses ever since May. This is largely because Taiwan is selling more to all of the desperate countries, such as the United States (which regime is especially happy to increase its purchases from Taiwan so as to decrease its purchases from China and from Vietnam). Taiwan is perhaps the world’s top gainer as a consequence of this pandemic.

Unlike China, Vietnam, and Taiwan, Germany has been somewhat poor in its coronavirus policies, and has 24,493 cases per million inhabitants, versus 16 in Vietnam, 36 in Taiwan, and 61 in China. America, by comparison, has 73,795. So, whereas America is over 3 times worse than Germany, it’s 4,612 times worse than Vietnam, 2,950 times worse than Taiwan, and 1,210 times worse than China. Germany is benefitting not because its coronavirus policies have been good but because the American regime wants to crush China and for some products this means buying from Germany instead.

The people who were saying that the aggressive types of measures that countries such as China, Vietnam, and Taiwan, were imposing against this virus would hurt instead of help those nations’ economies were not only wrong but they had their understanding exactly upside-down. They were exactly and precisely and extremely wrong. And if the United States (and perhaps some of its allies) had not been retaliating against the countries (other than Taiwan) that are the most successful against this virus, then the countries that have been doing an outstanding job of protecting their populations from this virus would be economically benefitting even more than they have been economically benefitting from their success against this virus. The result for the well-performing countries is not only lower rates of disease and lower rates of deaths, but higher rates of economic production and GDP. 

Coronavirus has thus been redirecting global leadership away from the United States. One might anticipate that America will respond by relying increasingly upon its military in order to impose its will — no longer as any sort of role-model to inspire its ‘allies’. For example, on Christmas Day, December 25th of 2020, at the very same time that the nation’s austerity hawks were blocking passage of a covid-19 relief bill in the U.S. Congress, and millions of Americans were terrified at the resulting prospects of soon becoming made homeless, CNN headlined “US Army prototype cannon blasts target from 43 miles away”, and presented video of a successful test of a tank’s cannon firing a small guided missile against a military vehicle that was located 43 miles away, which video CNN accompanied with martial music in celebration of the huge explosion and fireball-annihilation of that targeted vehicle. America would then be selling its threats more, and its benefits less, and CNN was already a liberal cheerleader for this change to a more ‘assertive’ style of propaganda. But if this is liberal propaganda, then what is conservative propaganda; or: How will CNN now distinguish itself from, say, Fox?

Trump’s replacement, Biden, has appointed, to his Administration’s international affairs posts, individuals who are just as intensely neoconservative (or “hawkish” or “war-loving”) as Trump did; and, therefore, the incentive for America’s trading-partners to become less economically dependent upon America is likely to decrease little, if at all, and America’s balance-of-trade numbers will probably improve little, if at all, during his Presidency. America seems set on being an aggressive declining power, economically, no matter how much it will be spending militarily in order to prop-up its power. America’s billionaires have been thriving while America has been spending around half of the entire world’s military expenditures, and, so, this type of U.S. Government is unlikely to change in the near future.

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‘Make That Trade!’ Biden Plans Unprecedented Stimulus for US Economy

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The revolving doors to the White House, the Senate, and the House are set to welcome president Joe Biden and his administration. Now that the Democrats control the executive and the legislative branches of government, they have carte blanche to push through unprecedented economic stimuli to benefit all Americans. Taking center stage is a massive $1.9 trillion stimulus on top of the $900 billion stimulus recently passed by Congress under President Trump. Combined with the $2.9 trillion stimulus in 2020, the US economy is now flush with cash.

All that money has plenty of different directions to go, including Wall Street and Main Street. Americans across the board are anticipating $1400 stimulus checks to go with the $600 released in December 2020. Dubbed the ‘American Rescue Plan,’ the stimulus money is intended to get the economy moving again, by empowering consumers who have faced sweeping job losses, cutbacks, and personal difficulties.

The stock markets have reacted to these stimuli as expected – bullishly. A snapshot of the US financial markets confirms the impact of the stimulus, and what’s to come. The 1-year change for the major US indices reflects strong gains for the NASDAQ composite index (38.44%), the S&P 500 Index (13.17%), and the Dow Jones Industrial Average (5%).

Markets across Europe, the Middle East, and Asia have performed poorly over the past 1 year, owing to the government enforced lockdowns vis-a-vis the pandemic. The best performing European market over the past 1 year was the DAX (+2.38%). This begs the question: How will all the stimulus money impact the stock markets, and demand for gold?

What Happens When Central Banks Start Flooding the Market with Trillions of Dollars?

Monetary stimulus is designed to assist struggling American households who through no fault of their own were furloughed, or now face tremendous economic uncertainty. SMEs across the board are cutting costs, and letting people go. In December 2020, hiring rates in the US dropped for the first time in 7 months. Industries affected most by the pandemic include service-related businesses, travel and tourism, restaurants and bars.

It’s not only low income families struggling against adversity; it’s middle income earners too. Several measures have been proposed, including raising unemployment benefits to $400 weekly, and increasing the minimum wage to at least $15 per hour. All of these bold initiatives have yet to be passed by Congress, and signed into law by the President.

The effects of these massive stimuli will reverberate across the economy. There are definite winners and losers from massive spending. The Deficit/GDP ratio is already 15%, and monetary supply growth has increased by 25%. Inflationary concerns are growing, but for now the stock markets are shrugging off the prospect of higher prices and welcoming the stimulus. Low-income earners will benefit most from the stimulus, but every action has a reaction in the financial markets.

Currently, the Federal Reserve Bank has indicated no change to interest rates. This is surprising, given that bond yields are increasing. Multiple economists are concerned that the infusion of trillions of dollars into the economy will ultimately lead to rising prices, and nullify the intent of the stimulus packages. Equity markets and housing markets have shown tremendous resilience, and growth in recent months. State governments will be getting their fair share of stimulus money, as ‘financial healing’ kicks off in earnest.

TheFed’s bond-buying program continues in earnest as quantitative easing goes into overdrive. Millions of Americans remain out of work, and the unemployment rate is at pre-pandemic numbers. If the proposed economic boom kicks in, inflation will likely result before the end of the year. Markets across the US rallied in 2020, and bullish sentiment continues into 2021.

Analysts point to high valuations in the stock markets that are not supported by the fundamentals. The CARES Act was like a steroid shot for the market. The Paycheck Protection Program (PPP) ensured that at least some of the $1200 + $600 checks found a way to stock markets. Brokerages across the board reported increased registrations and trading activity. Americans are certainly taking to stay-at-home work/life by actively engaging in the financial markets. This will likely continue with an additional $1400 stimulus check.

Which Stocks Will Benefit?

Source: StockCharts.com SPX 500 Large Cap Index

Major US banks are set to benefit over the short-term, thanks to their ability to borrow money at short-term interest rates, and lending that money out over the long-term at higher rates. The biggest US banks should all see an uptick in stock price performance. Bank of America (NYSE: BAC) has a market capitalization of $285.563 billion, and the performance outlook for the stock is bullish over the short-term, mid-term, and long-term.

Wells Fargo & Company (NYSE: WFC) has a market capitalization of $132.469 billion, with a medium-term and long-term bullish performance outlook. Much the same is true for Citigroup (NYSE: C) with a market cap of $133.77 billion, and a medium-term bullish outlook. Energy efficient stocks will also benefit from the Biden administration. Companies like Tesla stand in good stead with a green energy-focused Presidency, House, and Senate

Analysis of bank stocks provides interesting insights. For example, BAC has climbed from November lows of under $24 per share to $33 per share. The stock price is higher than its short term moving average (50-day MA), and the long-term moving average (200-day MA) of $29.04 and $25.26 respectively. Technical analysis of BAC, using the Ichimoku Cloud confirms bullish momentum moving forward.

Indeed, experts at Bank of America attested to the benefit of passing the stimulus, without which a recession would have occurred. In a similar way, WFC stock, and C stock are also up sharply since the November 2020 lows. Bollinger Bands indicate that the run on bank stocks is likely to continue as momentum is clearly on rising prices for bank stocks.

Source: StockCharts AAPL

Besides bank stocks, there are plenty of other stocks to watch, including (NASDAQ: BKNG), Renesola Ltd (NYSE: SOL), Snap Inc (NYSE: SNAP), and Apple Inc (NASDAQ: AAPL).Pictured above, AAPL is currently trading around $127.14 per share [January 18, 2021]. It is bullish, compared to the 50-day moving average of $124.24 and 200-day moving average of $103.77 per share.

Bollinger Bands for Apple indicate a slight tightening,and stabilisation of prices at a much higher level than the lows recorded in July and August 2020. As the world’s most valuable company, AAPL is on the rise once again.  Momentum indicators such as Ichimoku Cloud tend to suggest that AAPL is set for additional gains.

Which Sectors of The Stock Market Will Flop?

The shift away from crude oil and natural gas to green energy will cripple the oil industry and all the stocks that populate it. If these companies don’t start switching to alternative energy investments they will stagnate. WTI crude oil is currently trading around $52.09 per barrel, while Brent crude oil is trading around $54.76 per barrel [January 18, 2021].

The long-term charts of companies like Exxon Mobil Corp, Chevron Corporation, Royal Dutch Shell all point in the same direction – decline. In fact, these major multinational companies are at their worst levels in 10 years. US oil consumption is flattening out, while that of global oil consumption is increasing. Overall, nonrenewable energy sources such as oil and natural gas are long-term bearish, and best avoided. The global focus is on clean energy, not oil and natural gas.

Other long duration assets such as biotech stocks will likely slump over the short-term. Given that these stocks are discounted to the present, makes them unattractive to investors right now. However, any attempts to expand the Affordable Care Act will work to the advantage of biotech stocks, and pharmaceutical stocks, because people have greater access to healthcare.

The lukewarm reaction of stocks to the stimulus plan is predicated on the notion that additional stimulus will invariably result in additional taxes. If lawmakers in Congress require that taxes be raised in order to pay for the income redistribution, stocks will slump. The cruise ship industry, hotel industry, and entertainment industries still have a ways to go before a recovery is on the cards.

The strongest-performing sectors include many household names. The likes of shopify, Nvidia, cryoport, Pinduoduo, and Albemarle were considered winners in 2020. The biggest losers were airlines such as Boeing, and United, real estate and retail operations such as Simon, and oil and gas industries like British Petroleum.

Overall, the stocks which outperformed market expectations included freight and logistics, basic materials, Internet retail, software applications, and semiconductors. Heading into 2021, the S&P 500 index was up 16.3%, and growth continues. There are ‘moral hazard’ concerns with any big stimulus. Prior to the pandemic, approximately 20% of public companies were operational, but unable to repay their debts. After the pandemic hit, that number swelled to 32%.

How will the Stimulus Affect Demand for Gold?

Source: MarketWatch SPDR GLD

Traders and investors tend to buy gold when stock markets are performing poorly. The pandemic hit the brakes on the economy, and gold benefited. During uncertain times, gold becomes the go-to commodity, as it functions as a store of value. With trillions of dollars in stimulus money finding its way into the markets and households, there is no threat of a recession anytime soon. Gold prices such as GLD are off their highs, and trading at weaker levels.

When the Fed decides to raise interest rates once again, possibly to curb inflation, gold will again get hit. Since gold is not an interest-bearing commodity, it doesn’t benefit investors the same way that interest earning bonds do. As the 10-year yields on bonds continues to increase, capital will exit gold stocks, ETFs, and holdings and move to the bond markets, and interest-bearing accounts. That the gold price forecast is bearish is par for the course under current conditions.

It is against this backdrop of change and uncertainty that trillions of dollars in stimulus will weave its way into the fabric of the American economy through households and businesses. How that plays out in the stock markets remains to be seen, but for now all signs are positive.

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