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The state and prospects of economic cooperation with Central and South Asian countries

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The foreign policy of Uzbekistan, which is aimed at rapprochement and strengthening good-neighborly, friendly and mutually beneficial relations with neighboring states, has created a solid foundation for the development of trade, economic and investment cooperation between the countries of Central Asia (CA).

The CA countries cover a market area of 75.3 million people. In 2020, the total GDP of the CA countries amounted to $291.1 billion and foreign trade turnover was $142.5 billion. 

Macroeconomic indicators of CA countries

CountriesPopulation (mln.)Foreign trade turnover (US doll. bln.)GDP (US doll. bln.)GDP per capita (US doll)
 2021201920202019202020192020
Kazakhstan18,996,185,0181,7169,898129056
Uzbekistan34,541,836,357,957,717241686
Turkmenistan*6,113,913,946,848,077248074
Kyrgyzstan6,66,95,78,57,713231290
Tajikistan9,34,54,68,37,9873834
Total75,3168,2145,5303,2291,1  

Source: Statistical departments of the CA countries, * knoema.ru / atlas (2019)

In recent years, the economies of the CA countries have had high growth rates in the range of 5-7% and even in the crisis year of 2020, the growth rates were negative only in Kazakhstan and Kyrgyzstan. According to the forecasts of the World Bank, the CA countries in 2021 will be able to restore the positive dynamics of GDP growth and increase the growth rates in 2022.

Dynamics of GDP growth rates of CA countries (in %)

 20172018201920202021 (**forecast)2022 (**forecast)
Kazakhstan4,14,14,5-2,62,53,5
Uzbekistan4,55,45,61,64,34,5
Turkmenistan*6,56,26,31,8
Kyrgyzstan4,53,84,5-8,63,84,5
Tajikistan7,17,37,54,53,55,5

Source: Statistical departments of the CA countries; * knoema.ru / atlas; ** World Bank forecast

Favorable conditions for mutual trade have been created between the CA countries within the framework of the following trade agreements:

– all CA countries (except for Turkmenistan) are parties of «Agreement on a free trade zone of the CIS» from 2011, which the participating countries do not apply import customs duties to each other;

– Kazakhstan, Kyrgyzstan and Tajikistan are members of the WTO, Uzbekistan is actively negotiating on accession to the WTO, Turkmenistan in 2020 received observer status in the WTO;

– Kazakhstan and Kyrgyzstan as members of the EAEU are in a common customs space;

– the CA countries also have bilateral agreements to create favorable conditions for mutual trade.

Although CA countries are open to international and regional trade, labor and capital movements at various levels, they have great potential for building closer partnerships and integrated interactions with each other.

 In 2020, the total trade turnover (in goods, excluding trade in services) between the CA countries amounted to $12.2 billion, the total foreign trade turnover – $145.5 billion.

Thus, the share of intraregional trade in the total foreign trade turnover of the CA countries amounted to 8.4%.

Mutual trade (in goods) between CA countries in 2020 (US doll. mln.)

CA countriesKazakhstanKyrgyzstanTajikistanTurkmenistanUzbekistanTotalShare of trade turnover with CA countries in total trade turnover
(in %)
Kazakhstan796,2791,4128,02916,54632,15,5
Kyrgyzstan794,137,311,8341,31184,521,0
Tajikistan909,736,87,8333,81288,128,3
Turkmenistan*145,98,012,2440,3606,44,5
Uzbekistan2856,3878,6360,6342,44437,913,3
Total4706,01719,61201,5490,04031,912149,0 

Source: Statistic offices of Kazakhstan and Kyrgyzstan. Central banks of Tajikistan and Uzbekistan. Data on Turkmenistan for 2019 according to trademap.org

Note: Numbers in calculations of trade turnover volumes of Central Asian countries may differ depending on chosen calculation method by countries’ statistic offices

At the same time, it should be noted that the participation of CA countries in mutual intraregional trade is different.

Thus, the share of Kazakhstan and Turkmenistan in the volume of trade between the CA countries, their total trade turnover is the lowest and amounts to 5.5% and 4.5% respectively. The participation of Tajikistan and Kyrgyzstan in intraregional trade is the highest at 28.3% and 21.0% respectively. Uzbekistan occupies an intermediate position with an indicator of 13.3%.

Foreign trade of Kazakhstan and Turkmenistan is less focused on the regional market due to the predominance of hydrocarbons in their exports, which are mainly supplied to non-CIS countries (European countries, China, Russia) and most of the imports also go to these countries.

Indicators of share distribution in total trade turnover of Central Asian countries by countries and regions in 2020

 Share (in %) of total trade of the country
CA countriesRussiaChinaEU
Tajikistan28,321,310,421,6
Kyrgyzstan21,027,613,823,8
Uzbekistan13,315,517,736,4
Kazakhstan5,521,418,136,8
Turkmenistan*4,55,165,710,0

Source: According to the data of statistic offices of CA countries,    

* Data on Turkmenistan for 2019 according to trademap.org

Despite the fact that the majority of the commodity exports of the CA countries are fossil natural resources, regional trade with each other to a much lesser extent than they sell them outside of the region.

In particular, in 2020, the share of gold in total exports of Tajikistan amounted to 58.1%, Kyrgyzstan – 50.2% and Uzbekistan – 38.3%, which is supplied to Switzerland or Great Britain. About 66% export of mineral products are supplied mainly to the countries of the European Union in the total export volume of Kazakhstan. The main share of Turkmenistan’s exports, almost 70-80% falls on China, where Turkmen natural gas is mainly exported.

In this regard, the share of mutual trade between CA countries will be much higher if their exports of raw materials (oil, gas and precious metals) to third countries are not taken into account.

At the same time, the CA countries have great prospects for increasing the volume of intraregional trade in finished products, which meets the interests of all countries in the region.

The creation by CA countries of regional value chains, including industrial and agricultural clusters, will contribute to an increase in the number of joint ventures for the production of finished products that can be exported to third countries.

Regional integration will help reduce the costs of producers and promote the production of products that are competitive on foreign markets. In addition, when the CA countries carrying out trade operations within the region, they have the shortest distances for the delivery of goods, which gives them advantages in saving on transport costs.

The interests of the CA countries also meet the joint creation of international transport corridors and international transport infrastructure in the region, which will help to reduce transport costs in the supply of export products from CA countries to world markets.

It should be noted that all the countries of the CA region are interested in increasing export volumes and diversifying their foreign trade, entering new foreign markets, as well as creating and using new transport routes.

Currently the main trade routes of the CA countries are laid in the northern direction, encouraging area of ​​economic cooperation is the southern direction, including South Asian countries, which geographically lies on Afghanistan, Bangladesh, Bhutan, Maldives, Nepal, Pakistan, India and Sri Lanka.

Economic cooperation potential between the Central and South Asian countries

Uzbekistan

The total volume of Uzbekistan’s foreign trade with the countries of South Asia in 2020 amounted to 1.38 billion dollars or 3.8% of the total foreign trade.

The commodity turnover of Uzbekistan with the countries of South Asia, the largest volume falls on Afghanistan – 56.2%, India – 32% and Pakistan – 8.9%. Trade with the Maldives and Nepal is insignificant, while there is practically no trade with Bhutan.

Foreign trade turnover (FTT) indicators of Uzbekistan with the countries of South Asia in 2020 (US doll. mln.)

Trade turnoverShare in total FTT (in %)ExportImport
Total, including:36 299,8100,015 127,721 171,5
Afghanistan776,92,2774,62,3
India442,61,219,6423,0
Pakistan123,30,398,524,8
Bangladesh37,90,122,315,6
Shri Lanka1,80,00,31,5
Overall1 382,83,8915,5467,3

Source: State statistics office of Uzbekistan

In the trade with Afghanistan, the main share (99.7%) is taken by the export of Uzbekistan, which makes Afghanistan a profitable trade and economic partner. The main share of Uzbekistan’s exports to Afghanistan is electricity (30% of exports), wheat flour and legumes (24.1%), as well as metallurgical products.

It is also planned to implement the investment project “Construction of a 500-kW power transmission line «Surkhan – Puli-Khumri» on the territory of Afghanistan. The length is 260 km and worth about $150 million, through loans from ADB and Uzbekistan will finance $45 million. This transmission line will allow connecting the power system of Afghanistan to the unified power system of Uzbekistan and Central Asia.

In November 2020, the President signed two important documents concerning Afghanistan – the Decree «On measures to further expand and strengthen economic cooperation with the Islamic Republic of Afghanistan» and the Decree «On measures to further develop the activities of special economic and small industrial zones in the Surkhandarya region and the city of Tashkent», which create new legal conditions for strengthening economic cooperation with Afghanistan.

The documents provide for the signing of an agreement on preferential trade between Uzbekistan and Afghanistan and bringing the annual volume of mutual trade to $2 billion by 2023.

For these purposes, a free trade zone «International Trade Center Termez» is being created on the territory of Termez with Afghanistan, with an appropriate logistics infrastructure and a special visa-free regime.

On February 2, 2021, a meeting of the trilateral working group was held in Tashkent with the participation of the government delegations of Uzbekistan, Pakistan and Afghanistan on the implementation of Mazar-i-Sharif – Kabul – Peshawar railway project. As a result of the meeting, a joint “Road Map” was signed for the construction of the Mazar-i-Sharif – Kabul – Peshawar railway.

The construction of this railway will significantly reduce the time and cost of transporting goods between the countries of South Asia and Europe through Central Asia.

This railway will provide access to the Pakistani seaports of Karachi, Qasem and Gwadar and will connect the South Asian railway system with the Central Asian and Eurasian railway systems and significantly increase the transit potential of Central Asia.

India ranks second in terms of Uzbekistan’s trade with the South Asian countries. At the same time, Uzbekistan’s export volumes lag significantly behind imports, which are mainly represented by pharmaceutical products in demand in Uzbekistan.

Uzbekistan’s exports to India mainly consist of textile products (13.6% share), base metals (8.4%), food products (5.8%) and etc.

Imports of Uzbekistan from India are growing mainly due to the growth of purchases of “pharmaceutical products”, the share of imports is 47%.

At the same time, investment cooperation in the pharmaceutical sector is successfully developing with India, joint ventures have been created on the territory of the «Andijan-Pharm FEZ». Branches of the Indian universities «Amity» in Tashkent and «Sharda» in Andijan were opened to train IT specialists.

In recent years, trade and economic cooperation of Uzbekistan with Pakistan has begun to develop actively, the volume of exports of finished and agricultural products has increased.

In the structure of Uzbekistan’s exports to Pakistan: food products make up 81%; textile products – 10.5%; services – 3.5%.

In the structure of imports from Pakistan: pharmaceutical products account for 37%; food products (potatoes, citrus fruits, rice, etc.) – 36%, transport services – 10%; chemical products – 4.5%.

Furthermore, Uzbekistan is interested in expanding cooperation with Pakistan in the transport sector and joint implementation of the above project for the construction of the «Mazari – Sharif – Kabul – Peshawar» railway line.

Kazakhstan

Foreign trade of Kazakhstan with the countries of South Asia mainly falls on Afghanistan, India, Pakistan, less on Bangladesh and Sri Lanka. In 2020, the volume of foreign trade amounted to more than $2.3 billion or 2.3% of Kazakhstan’s total foreign trade turnover.

Foreign trade turnover (FTT) indicators of Kazakhstan with the South Asian countries in 2020 (US doll. mln.)

 Trade turnover (TT)Share in total FTT (in %)Export  Import  
Total85 031,1100,046 949,738 081,4
India1865,41,91572,8292,6
Afghanistan401,80,4399,02,8
Bangladesh36,30,01,734,6
Pakistan27,10,01,925,1
Shri Lanka8,30,03,25,1
Overall2338,92,31978,6360,2

Source: National Statistics Bureau of Kazakhstan

At the same time, the largest volume of trade between Kazakhstan and the countries of South Asia falls on India – 1.9 billion dollars. (80% of trade with the countries of South Asia) and Afghanistan – 401.8 million dollars (17%).

Kazakhstan mainly exports oil (about 50% of the export volume), chemical elements and their compounds (ferroalloys, titanium, phosphorus), as well as silver in the form of powder to India.

Kazakhstan’s imports from India are represented by medical equipment, medicines, textiles, tea products, etc.

Kazakhstan is also interested in the development of the North-South transport corridor and the use of the Iranian port of Chabahar to increase trade with India and other countries of South Asia.

Kazakhstan is a major supplier of food products to Afghanistan, like grain and flour products.

Kyrgyzstan

Among the Central Asian countries, Kyrgyzstan has the lowest indicators of foreign trade with South Asian countries – $61 million or 1.0% of its foreign trade turnover, which is mainly (84%) represented by imports from India.

Foreign trade turnover (FTT) indicators of Kyrgyzstan with the South Asian countries in 2020 (US doll. mln.)

 Trade turnoverShare in total FTT (in %)Export  Import  
Total5648,6100,01964,53684,1
India48,60,96,841,8
Pakistan7,40,11,95,5
Bangladesh1,90,00,01,9
Shri Lanka1,60,00,01,6
Afghanistan1,50,01,30,2
Overall61,01,010,051,0

Source: National Statistics Committee of Kyrgyzstan

At the same time, Kyrgyzstan together with Tajikistan, is interested in the implementation of a project for the delivery of electricity from Central Asia to South Asia through the CASA-1000 (Central Asia – South Asia) transmission line. The project plans to supply annually from April to October 2 billion kWh of electricity from Kyrgyzstan and 3 billion kWh from Tajikistan to Afghanistan and Pakistan.

In February 2021, Kyrgyzstan planned to begin construction of power lines on its territory within the framework of this project.

It should be noted that the total cost of the CASA-1000 project is about $1 billion.

Tajikistan

The foreign trade turnover volume of Tajikistan with the South Asian countries amounted to 185.2 million dollars or 4.0% of its total turnover in 2020.

Tajikistan’s main trading partners are Afghanistan, Pakistan and India in South Asia.

Foreign trade turnover (FTT) indicators of Tajikistan with the South Asian countries in 2020 (US doll. mln.)

 Trade turnoverShare in total FTT (in %)Export  Import  
Total4 523,7100,01 174,43 349,3
Afghanistan98,12,297,90,2
Pakistan56,31,210,445,9
India24,30,50,124,2
Bangladesh6,30,14,22,1
Overall185,04,0112,672,4

Source: National bank of Tajikistan

Due to its geographical position, Tajikistan is interested in the development of alternative transport routes, including through the countries of South Asia, in particular, Afghanistan and Pakistan.

The shortest seaport for Tajikistan is the Pakistani port of Karachi (2.7 thousand km), while the distance to the Iranian seaport of Bandar Abbas is 3.4 thousand km.

Another important project for Tajikistan in South Asia is the CASA-1000 transmission line project to export electricity from Tajikistan and Kyrgyzstan to Afghanistan and Pakistan. Within the framework of the CASA-1000 project, Tajikistan plans to export 75 billion kWh of electricity within 15 years.

In 2021, Tajikistan plans to complete the laying of power lines on its territory within the framework of this project. Currently, Tajikistan annually exports to Afghanistan up to 1.5 billion kWh. electricity.

Turkmenistan

Turkmenistan is also actively developing trade and economic ties with the countries of South Asia. In 2019, the trade turnover amounted to $462.3 million or 3.4% of its total turnover. The main trading partners of Turkmenistan are Afghanistan, India and Pakistan among the countries of South Asia.

Foreign trade turnover (FTT) indicators of Turkmenistan with the South Asian countries in 2020 (US doll. mln.)

 Trade turnoverShare in total FTT (in %)Export  Import  
Total13849,8100,010826,13023,7
Afghanistan410,93,0410,00,9
India42,00,33,738,3
Pakistan9,40,16,72,7
Overall462,33,4420,441,9

Source: trademap.org

The main share (70%) of Turkmenistan’s exports to Afghanistan consists of mineral products (oil products and natural gas). In October 2020, the following agreements were signed between Turkmenistan and Afghanistan:

– Memorandum of Understanding between Turkmengaz and Afgan Gaz Enterprise on the creation and development of a natural gas market in Afghanistan;

– Agreement on the purchase of electricity by Afghanistan within the framework of the Turkmenistan-Afghanistan-Pakistan power transmission line (PTL) project.

An important project of Turkmenistan with the participation of South Asian countries is Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline with a capacity of 33 billion cubic meters of gas per year.

The consortium for the construction of TAPI includes the state concern Turkmengaz (owns a controlling stake), as well as Afghan, Pakistani and Indian gas companies.

Turkmenistan planned to complete the construction of the TAPI gas pipeline on its territory in 2020 and in 2021 to begin laying the pipeline in Afghanistan.

Prospects for economic cooperation with Central and South Asian countries.

The main trading partners of the CA countries among the South Asian countries are Afghanistan, India and Pakistan. At the same time, the most active trade and economic cooperation of the CA countries is with Afghanistan, due to the geographical proximity, as well as the great dependence of the Afghan domestic market on imports of food and industrial products.

The Central Asian countries are actively cooperating with India and Pakistan also within the framework of the SCO. In addition, India is negotiating a Free Trade Agreement with the EAEU, which includes Kazakhstan and Kyrgyzstan and with Uzbekistan to conclude a Preferential Trade Agreement.

At the same time, the increase in trade with Pakistan and India largely depends on the creation of reliable routes for the delivery of goods. The project for the construction of the Mazar-i-Sharif – Kabul – Peshawar railway occupies a special place and will significantly reduce transportation costs for delivery cargo between the countries of the region.

Thus, the main promising areas of cooperation between the countries of Central and South Asia are new transport corridors that provide access to the Central Asian countries to the southern seaports, cooperation in the energy sector (export of electricity), encouragement of mutual investments, as well as the expansion and diversification of foreign trade.

It should be noted that Afghanistan, which is a bridge between the two regions, will contribute to the further development of economic cooperation between the countries of Central and South Asia.

In this regard, the implementation of transport and energy projects on the territory of Afghanistan will create conditions to expand opportunities for building up trade, economic and investment ties, strengthening transport and communication interaction between the countries of Central and South Asia.

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Russia, China and EU are pushing towards de-dollarization: Will India follow?

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Authors: Divyanshu Jindal and Mahek Bhanu Marwaha*

The USD (United States Dollar) has been the world’s dominant currency since the conclusion of the second world war. Dollar has also been the most sought reserve currency for decades, which means it is held by central banks across the globe in significant quantities. Dollar is also primarily used in cross-border transactions by nations and businesses. Without a doubt, US dollar’s dominance is a major reason for the US’ influence over public and private entities operating around the world. This unique position not only makes US the leader in the financial and monetary system, but also provides incomparable leverage when it comes to coercive ability to shape decisions taken by governments, businesses, and institutions.

However, this dynamic is undergoing gradual and visible changes with the emergence of China, slowdown in the US economy, European Union’s independent policy assertion, Russia-US detachment, and increasing voices from across the world to create a polycentric world and financial system in which hegemonic capacities can be muted. The world is witnessing de-dollarisation attempts and ambitions, as well as the rise of digital or cryptocurrencies at an increasing pace today.

With Russia, China and EU leading the way in the process of de-dollarisation, it needs to be argued whether India, currently among the most dollarized countries (in invoicing), will take cue from the global trends and push towards de-dollarisation as well.

Why de-dollarisation?

The dominant role of dollar in the global economy provides US disproportionate amount of influence over other economies. As international trade needs a payment and financial system to take place, any nation in position to dictate the terms and policies over these systems can create disturbances in trade between other players in the system. This is how imposition of sanctions work in theory.  

The US has for long used imposition of sanctions as a tool to achieve foreign policy and goals, which entails restricting access to US-led services in payment and financial transaction processing domains.

In recent years, several nations have started opposing the unilateral decisions taken by the US, a trend which accelerated under the former president Donald Trump’s tenure. He withdrew US from the JCPOA deal between Iran and US, aimed at Iran’s compliance with nuclear discipline and non-proliferation. Albeit US withdrawal, other signatories like EU, Russia, and China expressed discontent towards the unilateral stance by the US and stayed committed towards the deal and have desired for continued engagements with Iran in trade and aid.

Similarly, the sanctions imposed on Russia in the aftermath of the Crimean conflict in 2014 did not find the reverberations among allies to the extent that US had wanted. While EU members had switched to INSTEX (Instrument in Support of Trade Exchanges) which acts as a special-purpose vehicle to facilitate non-USD trade with Iran to avoid US sanctions, EU nations like Germany continue to have deep trade ties with Russia, and  EU remains the largest investor as well the biggest trade partner for Russia, with trade taking place in euros, instead of dollars.

Further, despite the close US-EU relations, EU has started its own de-dollarization push. This became more explicit when earlier this year, EU announced plans to prioritize the euro as an international and reserved currency, in direct competition with dollar.

Trajectories of Russia, China, and EU’s de-dollarisation push

Russia has emerged as the nation with the most vigorous policies oriented towards de-dollarization. In 2019, the then Russian Prime Minister Dmitry Medvedev had invited Russia’s partners to cooperate towards a mechanism for switching to use of national currencies when it comes to transactions between the countries of the Shanghai Cooperation Organization (SCO). It must be noted that in Eurasian Economic Union (EAEU), which functions as a Russian-led trade bloc, more than 70 percent of the settlements are happening in national currencies. Further, in recent years, Russia has also switched to settlements in national currencies with India (for arms contracts) and the two traditionally strong defence partners are aiming at exploring technology as means for payment in national currencies.

Russia’s push to detach itself from the US currency can also be seen in the transforming nature of Russia’s foreign exchange reserves where Russia for the first time had more gold reserves than dollars according to the 2018 data (22 percent dollars, 23 percent gold, 33 percent Euros, 12 percent Yuan). As per the statement by Russian Finance Minister in 2021, Russia aims to hold 40 percent euro, 30 percent yuan, 20 percent gold and 5 percent each of Japanese yen and British pound. In comparison, China holds a significant amount of dollar denominated assets as forex reserves (50 to 60 percent) and has the US as its top export market with which trade takes place mostly in US dollars. Moreover, Russia has also led the push by creating its own financial messaging system- SPFS (The System for Transfer of Financial Messages) and a new national electronic payment system – Mir, which has witnessed an exponential rise in its use.

While China-Russia trade significantly depends on euros instead of  their own national currencies (even though use of national currencies is slowly rising), instead of pushing the Chinese national currency Renminbi (RMB), Beijing is aiming towards establishing itself as the first nation to issue a sovereign digital currency, which would help China to engage in cross border payments without depending on the US financial systems. Thus, for China, digital currency seems to be the route towards countering the dollar dominance as well as to increase its own clout by leading the way for an alternate global financial system operating in digital currencies. It needs to be noted here that EU has succeeded in internationalizing the euro and this can be seen in the fact that EU-Russia trade as well as Russia-China trade occurs predominately in euros now.

Will India follow suit?

Indian economy’s dynamic with dollar is different than other major economies in the world today. Unlike China or Russia (or EU and Japan), which hold dollars in significant amounts, India’s reserve is not resulted by an export surplus. While others accumulate dollars from their earnings of trade surplus, India maintains a large forex reserve even though India imports less than it exports. In India’s case, the dollar reserves come through infusion of Foreign Direct Investment (FDI) and Foreign Portfolio Investment (FPI), which reflects the confidence of foreign investors in India’s growth prospects. However, accumulation of dollar reserves through this route (which helps in offsetting the current deficit faced in trade), India remains vulnerable to policy changes by other nations’ monetary policies which are beyond India’s own control. For instance, it has been often highlighted that a tightening of the US monetary policy leads to capital outflows (capital flight) from India, thus impacting India adversely.

New Dehi has resisted a de-dollarization push for long. Back in 2009, when Russia and China had started the push via BRIC mechanism (Brazil, Russia, India, China grouping), it was argued that New Delhi would not like to upset Washington, especially after the historic US-India civil nuclear agreement was signed just a year before in 2008 -for full civil nuclear cooperation between the two nations.

Further, currency convertibility is an important part of global commerce as it opens trade with other countries and allows a government to pay for goods and services in a currency that may not be the buyer’s own. Non-convertible currency creates difficulties for participating in international market as the transactions take longer routes for processing (which in case of dollar transactions, is controlled by US systems).

 Just like Chinese renminbi, Indian rupee is also not yet fully convertible at the exchange markets. While this means that India can control its burden of foreign debt, and inflow of capital for investment purposes in its economy, it also means an uneasy access to capital, less liquidity in financial market, and less business opportunities.

It can be argued that just like the case of China and Russia, India can also look towards having a digital currency in the near future, and some signs for this are already visible. India can also look towards having an increased share of euros and gold in its foreign exchange reserves, a method currently being used by both China and Russia.  

Conclusion

An increasing number of voices are today pointing towards the arrival of the Asian age (or century). With China now being the leading economic power in the world, US economy on a slowdown, and emergence of an increasing polycentric structure in world economy, the dominance of dollar is bound to witness a shake-up. In order for global systems to remain in sync with the transforming economic order, structural changes like control over leading economic organisations (like IMF and World Bank) will become increasingly desirable.

With an increasing number of nations now looking towards digital currencies and considering a change in the mix of their foreign exchange reserves, a general trend is now visible even if it would not mean an end to dollar’s dominance in the immediate future. As the oil and gas trade in international markets also start shifting from dollar, geopolitical balance of power is expected to witness a shift after decades of US dominance.

Major geopolitical players like China, Russia and EU have already started their journey to counter the dominance of dollar, and the strings of US influence on political decisions that come with it. According to Chinese media, Afghanistan’s reconstruction after US-withdrawal can also accelerate the global de-dollarization push as nations like Saudi Arabia might look for establishing funds for assisting Afghanistan in non-dollar currencies. So, conflict areas highlight another avenue where de-dollarization push will find a testing arena in coming times.

India has several options for initiating its de-dollarization process. Starting from Russia-India transactions, trade with Iran, EAEU, BRICS and SCO members in national or digital currencies can also become a reality in near future. Considering India’s present dollar dependence, whether US sees India’s move towards de-dollarisation as a direct challenge to US-India relations, or accepts it as a shift in the global realities, has to be seen.  

*Mahek Bhanu Marwaha is a master’s student in Diplomacy, Law and Business program at the OP Jindal Global University, India. Her research interests revolve around Indian and Chinese foreign policies and trade relations.

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Today’s World Demands Sustainability

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In the Brundtland Report, the United Nations defined sustainable development as development that satisfies current demands without jeopardising future generations’ ability to meet their own. It is based on the assumption that resources are finite and should be used sparingly and wisely to guarantee that there is enough for future generations without lowering current living standards. A socially responsible society must prioritise environmental conservation and dynamic equilibrium in human and natural systems.

Pillars of Sustainability

Environmental, social, and economic pillars make up the concept of sustainability, which is sometimes known as profits, planet, and people informally. These are especially important in terms of corporate sustainability and company activities.

The most frequently discussed aspect is environmental protection. As part of a supply chain, it is concerned with reducing carbon footprints, water usage, non-decomposable packaging, and wasteful operations. These procedures can be both cost-effective and beneficial to the bottom line, as well as crucial for environmental sustainability.

Social development entails treating people fairly and ensuring that employees, stakeholders, and the society in which a business operates are treated responsibly, ethically, and sustainably. More responsive benefits, such as greater maternity and paternity benefits, flexible scheduling, and learning and development opportunities, could help achieve this. Businesses should, for example, utilise sustainable labour, which entails adequately compensated, mature employees who can work in a safe atmosphere.

Economic development is probably the most straightforward type of long-term sustainability. A firm must be successful and generate enough money to be economically sustainable in the long run. The difficulty with this type of sustainability is finding a balance. Rather than producing money at any cost, businesses should try to make money in a way that is consistent with other aspects of sustainability.

What can be done to quantify it?

The performance of the three basic principles as a whole, in particular a balanced treatment of all three, is used to assess sustainability. Although the Triple Bottom Line’s three core concepts do not provide a measurement methodology in and of themselves, subsequent approaches of assessing sustainability have attempted to do so. Despite the fact that there is no official universal assessment of sustainability, several organisations are developing industry-specific methods and techniques to assess how social, environmental, and economic principles operate within a corporation.

What Impact Does Sustainability Have on Business?

Sustainability is becoming increasingly crucial for all businesses, regardless of industry. A sustainability strategy is considered necessary by 62 percent of executives today, and another 22 percent believe it will be in the future.

Simply expressed, sustainability is a business strategy for generating long-term value by considering how a company works in its environmental, social, and economic contexts. The concept behind sustainability is that establishing such measures promotes firm lifespan. Companies are realising the need to act on sustainability as expectations for corporate responsibility rise and transparency becomes more widespread.

Executives today face a complex and unprecedented confluence of social, environmental, market, and technology forces. This necessitates comprehensive, long-term management. Executives, on the other hand, are frequently hesitant to make sustainability a priority in their company’s business plan, mistakenly believing that the costs exceed the advantages. Academic research and corporate experience, on the other hand, suggest the exact reverse.

Traditional business strategies prioritise shareholder value creation at the expense of other stakeholders. Sustainable companies are changing the corporate ecosystem by creating models that benefit all stakeholders, including employees, shareholders, supplier chains, civil society, and the environment. The concept of “creating shared value” was pioneered by Michel Porter and Mark Kramer, who argued that firms might generate economic value by recognising and addressing social issues that connect with their business. Much of the strategic value of sustainability stems from the requirement to communicate with and learn from important stakeholders on a regular basis. A corporation with a sustainability agenda is better positioned to foresee and react to economic, social, environmental, and regulatory changes as they happen through regular discussion with stakeholders and continuous iteration.

Moreover, Businesses can benefit from the Triple Bottom Line approach to running a firm in a variety of ways. Meeting UN environmental sustainability requirements is not only ethical and necessary, but it is also cost-effective and enables for a better business model. Furthermore, sustainability allows a company to recruit employees, owners, and consumers who are invested in and share the same values as the company’s sustainability aims. As a result, the impact of sustainability on a company’s reputation and income can be favourable

Why is Sustainability Important for Students

Sustainability is a comprehensive field that provides students and graduates with knowledge of almost every element of human life, from business to technology to the environment and social sciences. The essential skills with which a graduate leaves college or university are in high demand, especially in a modern society seeking to substantially reduce carbon emissions while also discovering and developing future technologies. Politics, economics, philosophy, and other social sciences, as well as the hard sciences, are all used to support sustainability.

As firms seek to comply with new legislation, many corporate occupations at the graduate level and above prioritise sustainability skills and environmental awareness. As a result, sustainability graduates will work in a variety of sectors, including civic planning, environmental consulting (both built and natural environments), agribusiness, non-profit management, corporate strategy, health evaluation and planning, and even law and decision-making. Entry-level occupations are on the rise, and bachelor’s grads may expect more options and opportunities in the future years. Sustainability is one of the newest degree programmes, attempting to combine social science, civic engineering, and environmental science with future technology. When we hear the phrase “sustainability,” we usually think of renewable energy sources, carbon reduction, environmental protection, and a strategy to keep our planet’s delicate ecosystems in check. In a nutshell, sustainability aims to safeguard our natural environment, human and ecological health, while also encouraging innovation and ensuring that our way of life is not jeopardised

Even if you aren’t studying environmental science, sustainability is an important topic to learn about. Sustainability is important for business majors to understand since it helps with customer appeal and Corporate Social Responsibility. Students studying agriculture, nutrition, and public health should concentrate on sustainability to understand how to feed a growing population nutritious and high-quality food. Majors in education pass on their knowledge of sustainability to the next generation, preparing them to lead change. Every major has a link to the environment

The Long Run

As people continue to live more sustainable lives as a result of the climate problem, there is a current drive towards sustainability as a more desirable focus for businesses. Positive climate impact across the entire value chain, improved influence on the environment, people, and atmosphere, and useful contribution into society will most likely be expected of businesses in the future. Companies will be held responsible for all parts of the industry, and any environmental damage or harmful emissions from production operations should be controlled or eliminated. In what is known as a ‘circular economy,’ it is also predicted that resources will be reused to accommodate the global growth in population. This transformation would allow one person’s garbage to become another’s resource, resulting in significant waste reduction and a more efficient supply chain.

As we approach the start of a new year, we’re acutely aware of the growing urgency in the climate movement, as well as the need for action to catch up to ambition. Not only for researchers and policymakers, but for everyone—business executives, negotiators, and communicators—there is still much work to be done. We have a better chance of constructing a sustainable future if we can share what is working.

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Economy

The Economic Conundrum of Pakistan

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The State Bank of Pakistan (SBP) is due to convene on 20th September 2021. The Monetary policy Committee (MPC) will be announcing its policy rate after retaining it since March 2020. As the world deals with the uncertainty of the delta variant along with the dilemma between inflation and growth, it is a plenary to watch as Pakistani policymakers would join heads to decide the stance on the economic situation. However, the decision would be a tough one. Primarily because the mixed signals could either lead to burgeoning inflation and subsequent financial deterioration or they should guide the central bank to strangulate the growth prematurely. Either way, the policymakers would have to be cautious about the degree of inclination they lean to each side of the argument – economic contraction or growth with inflation.

A poll conducted by Topline Research shows that about 65% of the financial market participants expect status quo; the MPC to maintain the policy rate at 7% to further accommodate economic growth. Pakistan has barely mustered a 4% growth rate after the contraction of 0.4% last year. In this regard, Mr. Mustafa Mustansir, head of Research at Taurus Securities, stated: Visible signs of demand-side pressure are still quite weak. In another survey conducted by Policy Research Unit (PRU): a policy advisory board of the Federation of Pakistan Chamber of Commerce and Industry (FPCCI), 84% of the market participants believe there will be no change in the policy rate. The sentiment implies that the researchers and the business community don’t expect a rate hike in this week’s policy meeting.

However, the macroeconomic indicators paint a bleak picture for Pakistan’s economy: warranting a tougher policy response. The external trade figures released by the Pakistan Bureau of Statistics (PBS) project a debilitating situation for the national exchequer. According to the data, Pakistan’s trade deficit has increased to $7.5 billion in the first two months (July-August) of the fiscal year 2021-22. The deficit stands at $4.1 billion: 120% higher than the same period last year. Due to the accommodative policies implemented by the government of Pakistan, the trade deficit has already climbed 26% up to the annual target of $28.4 billion, set in the fiscal budget 2021-22. Despite excessive subsidies, the bi-monthly exports have only grown by 28% to stand at $4.6 billion. And while it is an increase of nearly a billion dollars compared to the same months in the preceding year, the imports have more than perforated the balance of payments.

During the July-August period, the imports have grown by a whopping 73% to stand at $12.1 billion: 22% of the annualized target. What’s more worrisome is the fact that despite a free-float currency mechanism, the exports have failed to turn competitive in the global market. According to the data released by PBS, Pakistan’s exports have dropped from their previous levels for three consecutive months. And despite a 39% net currency depreciation in the past three years, the exports continue to drift sluggish around the $2 billion/month mark. Yet, the imports are accelerating beyond expectation: clocking a 95% increase last month alone. Clearly, something is not working.

Moreover, while the forex reserves with the State Bank stand at a record high of around $20 billion, the rapid depreciation in the rupee is gradually damaging the financial viability of Pakistan. According to Mettis Global, a web-based financial data and analytics portal, the rupee recently slipped to its all-time low of 168.95 against the greenback. While the currency reserves are at their peak, the rupee continues its losing streak as the State bank has refrained from intervening in the forex market to artificially buoy the currency. Primarily because the IMF program stands contingent on letting the rupee float and find equilibrium. As a result, the rupee is touted to breach the 170 rupees against the US dollar mark by next month. The bankers around Pakistan have urged the State Bank for an intervention to put an end to “abnormal volatility in spite of increased reserves.” However, an intervention seems highly unlikely as the SBP Governor, Dr. Reza Baqir, already warned regarding currency devaluation in the last policy meeting: citing supply constraints, debt repayments, and increased imports as primary reasons for the temporal slump.

Nonetheless, almost 10% of the market participants, according to the survey, expect a rate hike of 50 basis points in the policy rate to hedge against inflation. Furthermore, analysts at Topline Securities expect a hike of 25 basis points to counter “vulnerabilities in the current account and control inflationary pressures.” Regardless of the prudent beliefs in the market, however, a few players actually believe that a rate cut of 50-100 basis points is plausible in the meeting. They argue that while the Consumer Price Index (CPI) – a national inflation measure – refuses to let down, the core inflation of Pakistan has dropped perpetually down to 6.3% in August. A stratum of the business community, therefore, also believes that the policy rate should be gradually brought down to 5% to match the regional dynamics.

I somehow find this notion ironic, as the government has already doled billions of dollars in subsidies, provided lucrative loans, and slashed taxes periodically. Yet, the exports have stayed relatively redundant. While it may not be the most effective time to hike the policy rate and tighten the monetary policy, in my opinion, a cut in the policy rate would be detrimental – catastrophic for the current account and incendiary for prevailing inflation.

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