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Pakistan’s Geoeconomic Necessities

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Pakistan has finally got the opportunity to look towards its economic development after facing internal and external security turmoil during last few decades. It is willing to prioritize economic security and leverage it to protect the national interests. The shift from geo-political confrontation to geo-economic cooperation was proposed by National Security Adviser, Moeen Yousuf. Foreign Minister Shah Mehmood Qureshi has also reiterated Pakistan’s commitment to ‘geo-economic shift’ during his physical and virtual contacts with several countries including Germany, and Egypt. The country has started diversifying its economic and diplomatic engagement with states. Domestically, the situation is rather vague when it comes to economic attributes necessary for pulling geo-economic strategy. Pakistan is facing recurrent need of foreign loans, trade deficit, narrow export base, and low international market share. This puts question whether the strategy would ever be materialized or not. To prevent the latter scenario, government should work on the means for successful achievement of geo-economic goals.

First of all, Pakistan needs to enhance its engagement in the regional economic setups to diversify its trade partners, prevent or lower obstacles in the form of trade barriers, prevent export diversions and secure FTAs with different countries. It will also enhance Pakistan’s inclusion in global supply chains  (which currently stands at meagre 0.08%) and ensuring domestic competitiveness in production and supply. Pakistan wants to be the Full Dialogue Partner in ASEAN plus six; however, its membership is denied by three members (Vietnam, the Philippines and Singapore). Pakistan is reaching out to these states bilaterally, but the process will be smooth if it engages with them at multiple levels and fora. The most recent neglect in this domain has been in the form of non-membership of RCEP, which includes East Asian economic giants (South Korea, Japan, China, Australia, etc.). Most of East Asian states do not have extensive trade relations with the inner Asia. Pakistan can offer them to extend their trade in these regions through CPEC. This is especially true for South Korea and Japan, since CPEC will reduce time of access and curtail their insecurity due to Hormuz dilemma as almost 80% of their trade depends on this strait. Also, there is an incentive for these states to invest in Pakistan in SEZs, infrastructure, hydropower projects, theme parks development, and coastal development. Pakistan has 300,000 English speaking IT specialized young people, and overall 2/3rd of population is youth. This human capital can also be a big potential for these states. Most of advanced East Asian states (like Singapore, Philippines, and Thailand etc.) also face the threat of terrorism. Pakistan can help them through its own successful experience of counter-terrorism. Moreover, Pakistan can pursue both public-partnership and privatization with these states for efficient industrialization and refunctioning of disabled industries.

Secondly, Pakistan should also embark on joining US and its allies’ led ‘B3W Initiative,’ which is a 40 trillion dollars infrastructure project for facilitating the developing countries in building back better. The initiative is argued to be ‘anti-China,’ but is not necessary to be projected this way since one of G-7 members, i.e. Italy, is also a BRI partner. More than 100 countries have already signed agreements with China under BRI. B3W is more like giving an opportunity for the states to develop themselves and to balance their policies between both strategic and economic competitors. Pakistan, with its aspirations of pursuing independent policy-making and remaining neutral in US-China competition, can get benefit politically and economically from joining B3W, as well. It has already signed a multilateral deal with USA, Afghanistan and Uzbekistan, which focuses on regional stability, peace and connectivity. This is a good incentive for Pakistan to further this deal for entry into B3W project.

Thirdly, as Pakistan is already working on enhancing its tourism due to the richness of natural aesthetic places with all their diversity, there is a need to develop better transport facilities, modern infrastructure that would boost the potential. Pakistan should work on maritime tourism as well, which can be a huge industry, but given the poor management of the beaches and limited development, it does not come under global attractive tourist destinations despite having the potential. The lack of attention is not limited to tourism domain. Pakistan has marine area of 240,000 square kilometers which makes up to 36.4% of the country’s territory. If the maritime area of Pakistan were a land piece, then it would be a little greater than Punjab province. This tells that Pakistan has blessed blue economic zone. The all year functional seaport of Karachi and Port Qasim and world’s deepest port Gwadar with its strategic location add more to its significance. Despite all this, unfortunately, Pakistan suffers from what we call sea blindness (people are not aware of maritime potential). At one time, Pakistan ranked first in ship-breaking industry but now it’s fourth with India being at the top and Bangladesh at second place. It should tap its resources and capitalize on them, be it maritime coast, maritime tourism or even fisheries. There is a need to educate people that sea is not a dumping source but a potential which is to be utilized. It should also enhance public-private partnerships (at both national and international levels) so that the ports and its resources can be developed. Pakistani elite go to Thailand, Mauritius etc. to visit their beaches which are not unique, but just well-developed. Pakistan needs technological advancement as there is no advanced technology for handling massive cargo and even for cleaning up the shores. The technologies for fishing are also not advanced and environment-friendly due to which it was banned many times by international community.

Fourth, Pakistan should expand the export base and opt for modern techniques for efficient production and long-term preservation. The country is already a major exporter of textiles, fruits, cereals, vegetables, pharmaceutical instruments, and sport items. Recently, it has started the export of meat to states like China, Malaysia etc. Domestically, Pakistan should introduce price tags for utility items that are same across the country, so that food items’ exploitation through hoarding practices can be prevented. Pakistan must increase its competitiveness in these exports by introducing modern technological methods. This is necessary as competitors of Pakistan in these exports are being facilitated by regional mechanisms. Also, being one of the four largest milk producers in the world, Pakistan should introduce cold supply chains for efficient domestic use and even bringing it at international standard for exports. Subsidies and government intervention (packaging laws etc.) are required to reap economic benefits in terms of employment, food security and revenue. States like Turkey, India, Bangladesh, Malaysia etc. have already developed dairy industry. It also needs to shift its exports’ orientation towards IT sector that is more economically productive for state economies in this information age.

Fifth, Pakistan must work on its positive image through soft power tools, like public diplomacy that do not only target international audience, but also national one. There is a need of unanimous understanding between government and public about certain policies, so that there is no room for misunderstanding, repulsion and policy failures. Internationally, too, Pakistan has to work on its ‘image,’ because in this age of media, people believe what they see, without considering who’s behind the scene or what other aspects of reality could be. The initial climate snub, recent re-listing Pakistan on UK’s Red-list, and non-removal of Pakistan from FATF’s list—all point to the need of ‘soft and liberal image’. International audience must be convinced about Pakistan’s tolerance towards diversity in all aspects, i.e. cultural, religious, political, economic and social. This is necessary for them to know the other side of the coin, and for Pakistan to have international confidence in business, tourism and diplomacy. The first step towards this is what PM Imran Khan said, ‘self-belief’. During National Amateur Short Film Festival (NASFF), ISPR Chief Gen. Iftikhar Babar said that the youth should take “the responsibility of showing the real Pakistan,” which is ‘extremely beautiful and magnificent’ through their film-makings.

As for Jaishankar Doctrine—ignore, isolate and intimidate Pakistan, which seems to be working, yet it needs to be ignored. Pakistan should keep, on its part, diplomatic and peaceful methods of engagement open for India. It should engage and have as many partners as possible in East Asia, South Asia, Middle East, North and Central Africa, Europe and Americas, because the aim is now to ensure Pakistan’s ‘economic security’ with the goals of ‘peace and progress’ as stressed by FM Shah Mehmood Qureshi. In a single sentence summary, there is a need of substantive reforms, not just conveyed policies, because they are the means to remove the obstacles, which Pakistan currently faces in the materialization of its geo-economic strategy.

I am Rubab Nawaz, currently an undergraduate International Relations student at National Defense University Islamabad, Pakistan. I have taken several online subject and linguistic courses from international universities as well such as University of Virginia, University of London, Universiteit Leiden, Peking University etc. I have two year unpublished writing experience as well. Currently, I am part of organizing committee at ourmun.

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Economy

Finding Fulcrum to Move the World Economics

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Domenico Fetti / Wikimedia Commons

Where hidden is the fulcrum to bring about new global-age thinking and escape current mysterious economic models that primarily support super elitism, super-richness, super tax-free heavens and super crypto nirvanas; global populace only drifts today as disconnected wanderers at the bottom carrying flags of ‘hate-media’ only creating tribal herds slowly pushed towards populism. Suppose, if we accept the current indices already labeled as success as the best of show of hands, the game is already lost where winners already left the table. Finding a new fulcrum to move the world economies on a better trajectory where human productivity measured for grassroots prosperity is a critically important but a deeply silent global challenge. Here are some bold suggestions

ONE- Global Measurement: World connectivity is invisible, grossly misunderstood, miscalculated and underestimated of its hidden powers; spreading silently like an invisible net, a “new math” becomes the possible fulcrum for the new business world economy; behold the ocean of emerging global talents from new economies, mobilizing new levels of productivity, performance and forcing global shifts of economic powers. Observe the future of borderless skills, boundary less commerce and trans-global public opinion, triangulation of such will simply crush old thinking.

Archimedes yelled, “…give me a lever long enough and a fulcrum on which to place it, and I shall move the world…”

After all, half of the world during the last decade, missed the entrepreneurial mindset, understoodonly as underdog players of the economy, the founders, job-creators and risk-taker entrepreneurs of small medium businesses of the world, pushed aside while kneeling to big business staged as institutionalized ritual. Although big businesses are always very big, nevertheless, small businesses and now globally accepted, as many times larger. Study deeply, why suddenly now the small medium business economy, during the last budgetary cycles across the world, has now become the lone solution to save dwindling economies. Big business as usual will take care of itself, but national economies already on brink left alone now need small business bases and hard-core raw entrepreneurialism as post-pandemic recovery agendas.

TWO – Ground Realities:  National leadership is now economic leadership, understanding, creating and managing, super-hyper-digital-platform-economies a new political art and mobilization of small midsize business a new science: The prerequisites to understand the “new math” is the study of “population-rich-nations and knowledge rich nations” on Google and figure out how and why can a national economy apply such new math. 

Today a USD $1000 investment in technology buys digital solutions, which were million dollars, a decade ago.Today,a $1000 investment buys on global-age upskilling on export expansion that were million dollars a decade ago.  Today, a $1000 investment on virtual-events buys what took a year and cost a million dollars a decade ago. Today, any micro-small-medium-enterprise capable of remote working models can save 80% of office and bureaucratic costs and suddenly operate like a mini-multi-national with little or no additional costs.

Apply this math to population rich nations and their current creation of some 500 million new entrepreneurial businesses across Asia will bring chills across the world to the thousands of government departments, chambers of commerce and trade associations as they compare their own progress. Now relate this to the economic positioning of ‘knowledge rich nations’ and explore how they not only crushed their own SME bases, destroyed the middle class but also their expensive business education system only produced armies of resumes promoting job-seekers but not the mighty job-creators. Study why entrepreneurialism is neither academic-born nor academic centric, it is after all most successful legendary founders that created earth shattering organizations were only dropouts.  Now shaking all these ingredients well in the economic test tube wait and let all this ferment to see what really happens.

Now picking up any nation, selecting any region and any high potential vertical market; searching any meaningful economic development agenda and status of special skills required to serve such challenges, paint new challenges. Interconnect the dots on skills, limits on national/global exposure and required expertise on vertical sectors, digitization and global-age market reach. Measuring the time and cost to bring them at par, measuring the opportunity loss over decades for any neglect. Combining all to squeeze out a positive transformative dialogue and assemble all vested parties under one umbrella.

Not to be confused with academic courses on fixing Paper-Mache economies and broken paper work trails, chambers primarily focused on conflict resolutions, compliance regulations, and trade groups on policy matters.  Mobilization of small medium business economy is a tactical battlefield of advancements of an enterprise, as meritocracy is the nightmarish challenges for over 100 plus nations where majority high potential sectors are at standstill on such affairs. Surprisingly, such advancements are mostly not new funding hungry but mobilization starved. Economic leadership teams of today, unless skilled on intertwining super-hyper-digital-platform-economic agendas with local midsize businesses and creating innovative excellence to stand up to global competitiveness becomes only a burden to growth.

The magnifying glass of mind will find the fulcrum: High potential vertical sectors and special regions are primarily wide-open lands full of resources and full of talented peoples; mobilization of such combinations offering extraordinary power play, now catapulted due to technologies. However, to enter such arenas calls for regimented exploring of the limits of digitization, as Digital-Divides are Mental Divides, only deeper understanding and skills on how to boost entrepreneurialism and attract hidden talents of local citizenry will add power. Of course, knowing in advance, what has already failed so many times before will only avoid using a rubber hose as a lever, again.  

The new world economic order: There is no such thing as big and small as it is only strong and weak, there is no such thing as rich and poor it is only smart and stupid. There is no such thing as past and future is only what is in front now and what is there to act but if and or when. How do you translate this in a post pandemic recovery mode? Observe how strong, smart moving now are advancing and leaving weak, stupid dreaming of if and when in the dust behind.

The conclusion: At the risk of never getting a Nobel Prize on Economics, here is this stark claim; any economy not driven solely based on measuring “real value creation” but primarily based on “real value manipulation” is nothing but a public fraud. This mathematically proven, possibly a new Fulcrum to move the world economy, in need of truth

The rest is easy  

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Evergrande Crisis and the Global Economy

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China’s crackdown on the tech giants was not much of a surprise. Sure, the communist regime allowed the colossus entities like Alibaba Group to innovate and prosper for years. Yet, the government control over the markets was never concealed. In fact, China’s active intervention in the forex market to deliberately devalue Yuan was frequently contested around the world. Ironically, now the world awaits government intervention as a global liquidity crisis seems impending. The Evergrande Group, China’s largest property developer, is on the brink of collapse. Mounding debt, unfinished properties, and subsequent public pressure eventually pushed the group to openly admit its financial turmoil last week. Subsequently, Evergrande’s shares plunged as much as 19% to more than 11-year lows. While many anticipate a thorough financial restructuring in the forthcoming months, the global debt markets face a broader financial contagion – as long as China deliberates on its plan of action.

The financial trouble of the conglomerate became apparent when President Xi Jinping stressed upon controlled corporate debt levels in his ongoing drive to reign China’s corporate behemoths. It is estimated that the Evergrande Group currently owes $305 billion in outstanding debt; payments on its offshore bonds due this week. With new channels of debt ceased throughout the Mainland, repayment seems doubtful despite reassurances from the company officials. The broader cause of worry, however, is the impact of a default; which seems highly likely under current circumstances.

The residential property market and the real estate market control roughly 20% and 30% of China’s nominal GDP respectively. A default could destabilize the already slowing Chinese economy. Yet that’s half the truth. In reality, the failure of a ‘too big to fail’ company could bleed into other sectors as well. And while China could let the company fail to set a precedent, the spillover could devastate the financial stability hard-earned after a strenuous battle against the pandemic. Recent data shows that with the outbreak of the delta variant, the demand pressure in China has significantly cooled down while the energy prices are through the roof. Coupled with the regulatory crackdown rapidly pervading uncertainty, a debt crisis could further push the economy into a recession: a detrimental end to China’s aspirations to attract global investors.

The real question, therefore, is not about China’s willingness to bail out the company. Too much is at stake. The primal question is regarding the modus operandi which could be adopted by China to upend instability.

Naturally, the influence of China’s woes parallels its effect on the global economy. A possible liquidity crisis and the opaque measures of the government combined are already affecting the global markets: particularly the United States. The Dow Jones Industrial Average (DJIA) posted a dismal end to Monday’s trading session: declining by more than 600 points. The 10-year Treasury yields slipped down 6.4 basis points to 1.297% as investors sought safety amid uncertainty. The concern is regarding China’s route to solve the issue and the timeline it would adopt. While the markets across Europe and Asia are optimistic about a partial settlement of debt payments, a take over from state-owned enterprises could further drive uncertainty; majorly regarding the pay schedule of western bondholders amid political hostility.

Economists believe that, while a financial crisis doesn’t seem like a plausible threat, a delayed response or a clumsy reaction could permeate volatility in the capital markets globally. Furthermore, a default or a takeover would almost certainly pull down China’s economy. While the US has already turned stringent over Chinese IPOs recently, a debt default could puncture the economic viability of a wide array of Chinese companies around the world. And thus, while the global banking system is not at an immediate threat of a Lehman catastrophe, Evergrande’s bankruptcy would, nonetheless, erode both the domestic and the global housing market. Moreover, it would further dent Chinese imports (and seriously damage regional exchequers), and would ultimately put a damper on global economic recovery from the pandemic.

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Economy Contradicts Democracy: Russian Markets Boom Amid Political Sabotage

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The political game plan laid by the Russian premier Vladimir Putin has proven effective for the past two decades. Apart from the systemic opposition, the core critics of the Kremlin are absent from the ballot. And while a competitive pretense is skilfully maintained, frontrunners like Alexei Navalny have either been incarcerated, exiled, or pushed against the metaphorical wall. All in all, United Russia is ahead in the parliamentary polls and almost certain to gain a veto-proof majority in State Duma – the Russian parliament. Surprisingly, however, the Russian economy seems unperturbed by the active political manipulation of the Kremlin. On the contrary, the Russian markets have already established their dominance in the developing world as Putin is all set to hold his reign indefinitely.

The Russian economy is forecasted to grow by 3.9% in 2021. The pandemic seems like a pained tale of history as the markets have strongly rebounded from the slump of 2020. The rising commodity prices – despite worrisome – have edged the productivity of the Russian raw material giants. The gains in ruble have gradually inched higher since January, while the current account surplus has grown by 3.9%. Clearly, the manufacturing mechanism of Moscow has turned more robust. Primarily because the industrial sector has felt little to no jitters of both domestic and international defiance. The aftermath of the arrest of Alexei Navalny wrapped up dramatically while the international community couldn’t muster any resistance beyond a handful of sanctions. The Putin regime managed to harness criticism and allegations while deftly sketching a blueprint to extend its dominance.

The ideal ‘No Uncertainty’ situation has worked wonders for the Russian Bourse and the bond market. The benchmark MOEX index (Moscow Exchange) has rallied by 23% in 2021 – the strongest performance in the emerging markets. Moreover, the fixed income premiums have dropped to record lows; Russian treasury bonds offering the best price-to-earning ratio in the emerging markets. The main reason behind such a bustling market response could be narrowed down to one factor: growing investor confidence.

According to Bloomberg’s data, the Russian Foreign Exchange reserves are at their record high of $621 billion. And while the government bonds’ returns hover at a mere 1.48%, the foreign ownership of treasury bonds has inflated above 20% for the second time this year. The investors are confident that a significant political shuffle is not on cards as Putin maintains a tight hold over Kremlin. Furthermore, investors do not perceive the United States as an active deterrent to Russia – at least in the near term. The notion was further exacerbated when the Biden administration unilaterally dropped sanctions from the Nord Stream 2 pipeline project. And while Europe and the US remain sympathetic with the Kremlin critics, large economies like Germany have clarified their economic position by striking lucrative deals amid political pressure. It is apparent that while Europe is conflicted after Brexit, even the US faces much more pressing issues in the guise of China and Afghanistan. Thus, no active international defiance has all but bolstered the Kremlin in its drive to gain foreign investments.

Another factor at work is the overly hawkish Russian Central Bank (RCB). To tame inflation – currency raging at an annual rate of 6.7% – the RCB hiked its policy rate to 6.75% from the all-time low of 4.25%. The RCB has raised its policy rate by a cumulative 250 basis points in four consecutive hikes since January which has all but attracted the investors to jump on the bandwagon. However, inflation is proving to be sturdy in the face of intermittent rate hikes. And while Russian productivity is enjoying a smooth run, failure of monetary policy tools could just as easily backfire.

While political dissent or international sanctions remain futile, inflation is the prime enemy which could detract the Russian economy. For years Russia has faced a sharp decline in living standards, and despite commendable fiscal management of the Kremlin, such a steep rise in prices is an omen of a financial crisis. Moreover, the unemployment rates have dropped to record low levels. However, the labor shortage is emerging as another facet that could plausibly ignite the wage-price spiral. Further exacerbating the threat of inflation are the $9.6 billion pre-election giveaways orchestrated by President Putin to garner more support for his United Russia party. Such a tremendous demand pressure could presumably neutralize the aggressive tightening of the monetary policy by the RCB. Thus, while President Putin sure is on a definitive path of immortality on the throne of the Kremlin, surging inflation could mark a return of uncertainty, chip away investors’ confidence: eventually putting a brake on the economic streak.

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