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Requiem for Pandemic Recovery

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Pandemic recovery across the world now morphed into a symphonic requiem on human toil. There may be new rules and new elections, but old economic equations, masked citizens, gagged opinions and restless citizenry. Humankind squeezed, while world facing music, some hundred plus leaders, like tenors and sopranos from far and faraway lands representing their own ideas now hitting high notes for a somber requiem for pandemic recovery.

Deeper sounds vibrating the rotundas of power, high notes echoing all the ways to the boulevards of struggles, seeping through alleys and dark lanes, while the hiss of the silent marches advance across the randomly lit corners of the world, where economies already disgraced for stealing grassroots prosperity and political wisdom already exposed for destroying social fabric.

The symphonic requiem is still striving to reach a decent crescendo before the curtain falls. The economic world must forgive the pandemic recovery as a tough teacher but kneel it must to ground and promise to create new narratives of wisdom, integrity, and diversity to ensure grassroots prosperity and respect to stitch an already torn social fabric.

The triangulation of health, wealth and grassroots prosperity are already strangling the future of the world.

There are logical solutions but the tentacles of power will never allow the unlearning of fakery. The proven processes with options but in strangulation by deep silence will never allow any more breathing.  The world populace in deep haze of fog where invisible whispers and visible charlatans dance, where the billions, displaced, replaced and misplaced workers in confusion of darkness, question their own trajectory, try to decipher the speaking in tongues oratory, now only find consolation in sad notes, remember the lost ones and seek light.   

The new elections across the globe provide promises as a safety value to release on the economic pressure; the reality tries to hide old broken economic equations while desperate search for new narratives rises. Behold the future in both hands and smash it on its past, in the debris the undiscovered truth will eventually show us the way.  

Political performances to earn any standing ovations clearly need bold narratives and vitality; encores only reserved when political crescendos collide with sharp notes of glory. Mumbling talks and crypto wizardry already brought western economies to their knees. Pragmatism and immediately implementable programs will save the day.

Unless governments and related ministries of economic development and export promotion open bold new agendas to tackle the future of work, economy and exports as brand new frontiers modeled for new millennia, new patterns of stability may emerge. Leadership must challenge gatekeepers on why such transitions are still underradar, lacking bold national debates and narratives.

Today, ‘worklessness’ is created by the future as technology is out to save humankind from boring, mundane and daily grinds. Work after all is our body moving boxes, now replaced by robots. Thinking is managing our mind to figure out what to put inside the box and why. This is entrepreneurialism, a solution for the future and calls for business mindsets.

Now suddenly the small medium business economy has become a top of the agenda topic in over 100 nations.  Realization of small business being too small but far bigger in economic impact than any other force within the nation all has created new influences on policies. Still, fearful of national mobilization of top 25% of high potential high caliber small medium enterprises on upskilling and exportability platforms, national leadership in desperate need of meritocratic bureaucracies.

Singapore always respected as the world’s top performing nation, but of course for having the world’s top institution and extremely skilled frontline government agencies.  What levels of sacrifices needed to fix the internal government and bureaucracy problems will be the coming agenda for next elections. Across the world, a new horizon of opportunity emerges but visible to entrepreneurial mindsets and global age perceptive political leaderships.

Observe the sudden escape from the foolish paradise we created; where megacities kept on expanding limitlessly, but their downtown kept on shrinking endlessly, demands for office spaces always skyrocketing; working conditions always sardined, traffic flows always jammed and renting of the smallest spaces always-needed the largest gold bars. Cities with the most expensive downtown penthouses always surrounded by the largest tent-cities and gentrification charging unaffordable daily costs for local workers, line-ups in downtown, the crammed cubicle slavery, institutionalized enforcement as long-term economic prisoners all over the developed economies in the sleek ghettos of concrete jungles.

Now is the time for national mobilization of entrepreneurialism on digital platforms of upskilling for exportability, for some nations. Study more on Google. Needed are the urgent high-level discussions on how to table immediately workable ideas in local regions. The rest is easy

Footnote:
Maestro Giuseppe Verdi performed Requiem on May 22, 1874.
Recently conducted by Riccardo Muti

Naseem Javed is a corporate philosopher, Chairman of Expothon Worldwide; a Canadian Think tank focused on National Mobilization of Entrepreneurialism Protocols on Platform Economy and exportability solutions now gaining global attention. His latest book; Alpha Dreamers; the five billions connected who will change the world.

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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Economy

Global Revolution in the Crypto World: Road to Legalization

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The raging popularity of virtual currencies is hardly unheard of in today’s day and age. If not by the damning crackdown in China, price swings in cryptocurrencies – especially bitcoin – are definitely deemed perpetual and inherent: unlikely to go away. And while the volatility does bring along a unique thrill to retail investors, the experienced pundits of the financial world are expectedly skeptical. Regardless of the apparent discomfort and resistance to tap into the pool of virtual currencies, policymakers across the world are aware that the future is digital. Therefore, while digital fiat seems to be the direction of most developed economies to counter the decentralized giants, the economic gurus are preparing to harness the mania on another front as well – before the craze overtakes the globe.

The first – and most popular – cryptocurrency is undoubtedly bitcoin. In the aftermath of China’s crackdown on mining activities, bitcoin lost more than half of its valuation. However, acceptance around the world in the past few weeks has helped the currency to buoy past the slump. Bitcoin currently stands at a market cap of $863.8 billion: flirting with the $46,000 mark. Naturally, the rest of the crypto world flows in tandem as fanatics have placed bets for the currency to breach the $50,000 psychological mark again in the following months. However, the rally is largely attributed to the blooming acceptance by governments around the world; something the officials were wary of to avoid risks and uncertainty. However, I still don’t understand the change of perception given the market is more volatile than ever.

Last week’s headlines were all about El Salvador and its adoption of bitcoin as a legal tender. The fiasco that followed was hardly a surprise. Though the incident bolstered the crypto critics, the event projected nothing that was a mystery before the launch. A glitch in the virtual wallet, called “Chivo Wallet,” was one of the countless impediments that had already been warranted as risky by economists around the globe. While the problem was resolved in a matter of hours, the price of bitcoin nosedived by 19% from the 4-month high of $53,000. President Nayib Bukele boasted about “buying at a dip” yet overlooked a crucial aspect from a broader perspective. He failed to realize that a minor glitch in his small nation was significant enough to send the currency spiraling; that in mere hours, billions of dollars were wiped from the global market. All because the app couldn’t appear on the designated platforms for a few hours.

What happened in El Salvador is a vital example to analyze. The resulting confusion is exactly why a passage of regulation is being placed. If the domestic and international markets are to rely upon cryptocurrencies in the near future, then the need for a detailed framework becomes even more amplified.

Recently, Ukraine became the fifth country in weeks to legalize bitcoin. However, while the Ukrainian parliament adopted a bill to legalize the cryptocurrency, regulations are put into place to handle its precarious and volatile nature. Unlike the loose move by El Salvador, Ukraine did not facilitate a rollout of bitcoin as a form of payment. Moreover, the parliament has refrained from placing bitcoin on an equal footing with Hryvnia – Ukraine’s national currency. Primarily because adding another currency prone to unprecedented and wild swings in value could prove complex in policymaking matters including drafting fiscal budgets and taxation planning. And while Kyiv is pushing to lean further into bitcoin to gain more access to global investment, the authorities are prudent. Therefore, unlike the brazen entry by El Salvador, the Ukrainian authorities are underscoring a strategy to learn about the crypto world before bitcoin is etched into Ukrainian law forever.

Meanwhile, the United States is proving rather stringent against the rise of bitcoin – and the crypto world – as nightmares of another financial crisis are caging a progressive adoption. The lawmakers are already vigilant to put braces on the market before it blooms beyond control. The Infrastructure Bill recently passed by the senate provides a hint of direction being adopted by the US legislators. The tax provision, estimated to collect $28 billion over a decade, has been placed as a regulation of the crypto market that stands at a valuation of $2 trillion. The Treasury directives are driven to mobilize the Internal Revenue Service (IRS) to tax crypto brokers while monitoring mandated reporting requirements. The goal is obvious: gradually tighten the screws before regulating the uncharted territory as any other capital market. However, the bill is purposefully vague regarding market actors deemed as brokers under the new law. Naturally, the frenzy follows as miners are left scrambling to define the meaning of a broker in an extremely complex and unorthodox market mechanism. It is clear that prominent lawmakers, like Senator Elizabeth Warren, are the main driving forces to put a leash on the emerging market.

Furthermore, the US Security and Exchange Commission (SEC) has been vocal about Treasury’s long-awaited intervention in the crypto market. Allegedly the virtual currencies have come across as a key tool for tax evasion in the United States. Therefore, much of the lobbying to amend the tax provision in the infrastructure bill is to limit the strictness of application rather than simplifying the vague terminologies. Moreover, the Treasury Department has also been active in discussing the financial stability of Stablecoin – crypto assets pegged to the US dollar and other fiat currencies. While extreme volatility is not a risk in this scenario, the Federal agencies – particularly the Financial Stability Oversight Council (FSOC) – have been keen to set tougher regulations over the market with more than $120 billion in circulation. The move has been swift since the tax provision made its way into the Senate debate. The main intent to regulate stablecoin – particularly Tether – is to harness the market, primarily because the sector acts as an unregulated money market mutual fund holding massive amounts of corporate debt. A plunge in price is enough of a spark to send ripples through the fixed income markets: posing a financial threat to the entire market. Thus, the FSOC is touted to be mobilized soon to probe and regulate the market as it continues to grow.

The crypto world has been cited by global lenders such as IMF as a haven for money laundering and tax frauds. Such tags could lead to negative credit ratings and ineligibility to gain investment and aid packages, especially when debt-ridden countries like El Salvador dabble along without any fixed legal framework. However, with broader regulation, like the steps taken by the US and Ukraine, the risk could be minimized. Another area is to initiate with experienced investors before gradually easing market restrictions for retail investors. A prime example is Germany which recently allowed institutional investors to invest as much as 20% of their holdings in bitcoin and other crypto-assets. While the portion still congregates to billions of dollars, such deft institutional investors are trained enough to manage and monitor trillions of dollars in a vast array of capital markets. Moreover, such large-scale institutional investment firms already have strict regulatory requirements and thus, by default, are bound to consciously maintain conservative holdings.

In my opinion, the crypto market is the financial future of the technological utopia we aspire to build. The smart choice, therefore, is to learn the system down to its spine. Correct the loopholes and irregularities while monitoring experienced professionals participating in an open market. Sketch and amend the legalities and a financial framework along the way. And gradually let the market settle as second nature.

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Economy

CPEC: Challenges & Future Prospects

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Global economy paradigm is shifting from the West to the East while China is torch bearer in this context with it’s master stroke OBOR project. The beauty of this unique project is that it provides a new trade corridor and a new route to at least 60 countries. If we make an educated guess, then about 80% of the world population would get benefit from this project. This project can be divided into “Silk Road economic belt” and Maritime silk road”. For disbursement of funds, five financial institutions are opened so that the complete burden should not fall on China. Now it has been a proven fact that the US, few Western countries and India are lobbying and conspiring against the OBOR project.  

The most important project of this initiative is CPEC as it gives China access to the most important geo-strategic location of Gwadar that had always been dream of Russia and NATO for their strategic, military and economic interests in the region. The only project which gives landlocked countries access to the sea. CPEC certainly can be game changer due to its potential of creating mass industrial productivity, exports, and job creation not only for Pakistan but for entire South Asian region.  

Due to various factors, there are always chances that mistrust may prevail among Pakistan and China, which can have a direct impact on Pakistan’s economy. The economy plays a fundamental role in the development and strengthening of any country, but unfortunately, Pakistan was unable to stabilize this sector for decades. As soon as the situation becomes better, another incident of unrest happens. Attacks like the Dasu hydropower plant in Khyber Pakhtunkhwa or like Serena Hotel Quetta are preplanned efforts of our enemies like India to destabilize the project. Although, it has been accepted by Chinese think tanks on various occasions that the security situation has improved in Pakistan during the recent few years. 

Luckily, due to the US withdrawal from Afghanistan, Indian investment is also dying. There is no doubt that the economic stability that Pakistan will achieve after the completion of CPEC cannot be digested by an eternal enemy like India. India is intensifying its covert operations against CPEC, as its discomfort is growing day by day with the cozying Pak-China relations. Modi’s government believes that once operational, CPEC will reduce its sphere of influence in Central Asia, IIOJ&K, and Afghanistan.  The terrorist network formulated in Afghanistan to create unrest in Pakistan under the garb of diplomatic activities has also been jeopardized. As CPEC passes through Gilgit-Baltistan which India claims as a disputed territory but their claim was rejected out rightly by Pakistan and China. Now India may try to reinstate its sleeper cells inside Pakistan to disrupt CPEC.

CPEC in particular offers a win-win situation for participating nations and it has a strong component of social development, poverty alleviation, and demographic uplift, unlike similar programs offered by other international donors. CPEC would not impact its balance of payments of Pakistan at any stage. The payment schedule is very relaxed. It’s about geo-economics and the establishment of a non-exploitable economic system. Another point is that CPEC is a transparent project with all its details present on its websites. The projects of CPEC are not only confined to specific areas but its network is present in the whole of Pakistan. 

Although, it’s correct that Pakistan has a risky security environment, but Pakistan has taken various positive steps in this regard like raising two “Security Divisions” in Pakistan Army, incorporating special paramilitary forces, increasing intelligence apparatus, and improving local police networks.  

There are eight main core areas linked with CPEC which are ‘integrated transportation system’, ‘information network infrastructure’, cooperation in ‘energy related’ fields, ‘trade and industrial parks’, ‘agricultural development and poverty alleviation, ‘tourism’, ‘social development and non-government exchanges’ and lastly ‘financial cooperation’. CPEC is now attracting other countries around the world who are also expressing their desire to join it. 

In present circumstances, the CPEC projects must be completed as soon as possible so that Pakistan’s geographical location can be truly exploited. Our narrative building part is weaker in International media as India and other lobbies are floating a huge bulk of anti-CPEC stories with fake facts and figures, we have to give proper rebuttal and our side of the story must be backed with verified facts and figures. Another point to be focused on is that a prosperous Balochistan would strengthen CPEC’s foundation. This is a real game-changer and we have to engage maximum countries of the world in this project to get moral, social, and financial support. 

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