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Pakistan’s removal from FATF is no panacea for country’s economic challenges

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On October 21, 2022, Pakistan was removed from the grey list of the global financial watchdog Financial Action Task Force (FATF) after a period of 4 years.

In a statement, FATF said:

“Pakistan is no longer subject to FATF’s increased monitoring process; to continue to work with APG (Asia/Pacific Group on Money Laundering) to further improve its AML/CFT (anti-money laundering & counter-terrorist financing) system,”

Pakistan PM Shehbaz Sharif, who took over in April 2022, after the overthrow of the Imran Khan led Pakistan Tehreek-E-Insaaf (PTI) government hailed the efforts of Pakistan’s civil and military leadership and specifically credit Pakistan Army Chief, General Qamar Javed Bajwa and Pakistan Foreign Minister Bilawal Bhutto for playing an important role in ensuring that Pakistan was removed from the grey list of FATF . Said Shehbaz Sharif in a tweet:

‘I would particularly commend the role & efforts of Foreign Minister Bilawal Bhutto, Army Chief General Qamar Javed Bajwa and their teams & all political parties for putting up a united front to get Pakistan out of the grey list’.

Members of the Pakistan Tehreek-E-Insaaf party (PTI) also lauded the previous government for the role it had played in ensuring that Pakistan is out of the FATF grey list.

Pakistan moving out of the FATF Grey list is important for a number of reasons. Firstly,  this decision comes weeks after the Biden administration approved a USD 450 million F-16 fighter jet fleet sustainment programme to Pakistan for dealing with counterterrorism threats. This decision was announced On September 8,  2022 and was Washington’s first major security assistance to Islamabad in four years (in 2018, Biden’s predecessor Donald Trump had suspended USD 2 Billion aid to Pakistan for failing to take action against terror groups.

 This decision was attributed to a number of factors, by analysts. First, US needed to work with Pakistan for counter terrorism operations (Washington wants to use US airspace to keep the Taliban in check). Second, the US wanted to prevent Pakistan from developing closer security ties with China. Third, US ties with Pakistan have improved ever since the government led by Shehbaz Sharif has taken over, though remarks by the US President with regard to Pakistan being the most dangerous country, ‘possessing nuclear weapons without any cohesion’ were not taken to kindly by Pakistan.

Most importantly, Pakistan’s economy is facing significant challenges, and its removal from the grey list of FATF, will remove some hurdles to seeking financial assistance from Asian Development Bank ADB, World Bank. In the aftermath of the floods, Pakistan had been appealing for the removal from the grey-list. The removal from the FATF also shows that while ties between the west and Pakistan may have deteriorated in recent years, with Islamabad moving closer to China, both sides realize that they need to keep a manageable relationship (while Pakistan had support from China and other countries, the removal from the grey list would have not been possible without support from the west – especially US)

In conclusion, removal from FATF is no panacea for Pakistan’s economic challenges but it is definitely a face saver for the country, and could help in terms of getting financial assistance from international organisations.

Tridivesh Singh Maini is a New Delhi based Policy Analyst associated with The Jindal School of International Affairs, OP Jindal Global University, Sonipat, India

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Women Participation in Workforce Of Pakistan: Is It A Gender Inequality?

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There is a gender wage gap that disproportionately affects low-income women across a wide range of countries, industries, and occupations. Pakistan is the focal point of this injustice. The Global Gender Gap Report, 2022, was recently published by THE World Economic Forum. (UNEP, 2022) In the report, the size of the gender gap is measured in relation to things like educational attainment, economic engagement, physical and mental health, and political empowerment. The news is as bad as to be expected. The second-to-last spot goes to Pakistan. Pakistan is ranked 145th out of 146 nations in the index, slightly outperforming Afghanistan (Zakaria, 2022). The gender wage gap exists in numerous countries, industries, and professions, disproportionately affecting low-income workers. According to the WEF, Pakistan will need 136.5 years to close its gender gap. Think about that.

According to the ILO’s Global Wage Report 2018–19, (ILO, 2018-19) Pakistan has the greatest overall hourly average (mean) gender pay disparity at 34 percent, more than double the global average. Nearly 90% of the lowest one percent of wage earners in Pakistan are female. The number of statistics that might be used to demonstrate how marginalized women are in Pakistan is infinite, and many more could be provided. me female. Pakistan is the focal point of this injustice. Pakistan ranked 112 in 2006, 110 in 2005, and 112 in 2004 in terms of economic participation and opportunity, educational attainment, health and survival, and political empowerment. Only 46.5 percent of Pakistani women are literate, despite the country’s efforts to close the educational attainment gap, which has decreased by 81.1 percent overall. Only 61.6 percent, 34.2 percent, and 8.3 percent of girls in the country enroll in elementary school, and high school, respectively. (ILO, 2018-19)

Even though Pakistan is ranked better than other nations in terms of political empowerment, this gap has only been bridged to a certain extent—just 15.4%. Given that a woman has held the position of head of state for only 4.7 years, Pakistan is among the top 33 countries in the world on this criterion (out of the last 50). However, there are still insufficient numbers of female MPs (20.2%) or ministers (10.7%). Only 22.6% of workers are women, and even fewer of them hold managerial positions (4.9pc). This translates into very large income differences between men and women in Pakistan: on average, a woman earns 16.3% of a man’s income, suggesting that just 26.7 and 5.2 percent of these gaps have been filled thus far, respectively.

One must wonder why we have such a low number of women workers. There are some reasons we must consider. (Zakaria, 2022)

According to Human Rights Watch, (Britannica, 2022) about 1,000 women are slain in Pakistan every year in the name of honor due to ‘inappropriate’ romantic relationships, disregard for physically or digitally gendered places, brazenness in language and dress, or alleged immorality. 90% of Pakistani women lack a postsecondary education, and 50% of women have never attended school (Zakaria, 2022). The gender pay gap in Pakistan is negatively impacted by this education gap because women with post-secondary education earn three times as much as women with only primary education.

Currently, women make up less than 18% of STEM professionals in Pakistan. Two factors that may be used to explain this discrepancy are women’s lower literacy rates and social pressure to enter more traditionally female-dominated sectors. Women in Pakistan have a lower rate of literacy than men (71% versus 47%), which exacerbates the gender wage gap. The difficulty for employers in finding educated, qualified women to fill open positions is only made worse by the prevalence of workplace harassment, which also deters women from pursuing careers in STEM disciplines. keeping in mind the cultural backdrop where men are perceived as the breadwinners, providing housing, security, and money for household expenses, whilst women are seen as homemakers, taking care of the house and the children. (Philipp, 2022)

A huge percentage of women in metropolitan areas are unproductive due to tight work cultures and a lack of accessible, high-quality childcare, which wastes their quality of education by keeping them out of the labor market. (Ahmed, 2021)To overcome the present situation, we need to make policies that are more inclusive so that women can handle both their household responsibilities and their career. This means that they should not only be promised equal pay, but also support as mothers, access to daycare, and flexible work schedules. The governments and private organizations’ claims that they do not discriminate against women or that they are expanding the number of female employees are insufficient. To reduce obstacles to women’s contributions, action must be taken. A paradigm shift is required in the manner that women are included in the workforce through flexible work schedules, work-from-home possibilities, and better, more affordable childcare facilities.

It is time for the government to participate in policy creation and to collaborate with the private sector to develop accessible childcare facilities to reduce barriers to the entrance for women and to increase their retention in the workforce. All levels of the Pakistani state must be inclusive of women. State institutions should systematically accommodate women and put them on an equal footing with males. And the workshops and debates in the five-star hotels need to address this inclusivity question. Equal numbers of men and women should be present in public places and government buildings. And men should be shown performing household tasks that are normally reserved for women inside their houses. This would be a step toward bringing up male children in a world devoid of gender-based violence. It’s time to put an end to the sexist devaluation of women in so-called comedic performances, jokes, TV series, and literature.

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Explainer: African Leaders Should Accelerate Industrialization Without Short-Haircut Processes

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At the end of their four-day deliberations, African leaders and participants have issued a joint statement relating to the future of economic diversification and industrialization in Africa. The summit provided the opportunity to take stock of the progress made during the year on the drive towards industrialization, it also provided a policy dialogue platform to firmly recommit to accelerating structural transformation. 

Convening in Niamey, Niger, the Extraordinary Summit on Economic Diversification and Industrialization, the ministers and participants collectively, in a the report, suggested that the key policies and regional integration issues should be drastically addressed to support industrialization in Africa, reminding further that Africa is widely seen as a future investment and development frontier given its extraordinary economic potential in Africa.

It was, however, acknowledged that it was held at the backdrop of a completely uncertain global landscape owing to the prolonged effects of the coronavirus pandemic, the pressing challenges posed by climate change and the Russia-Ukraine conflict that have disrupted the global supply chains with huge consequences globally and more fundamentally on African economies.

According to the summit reports these circumstances have revealed the extreme fragility of African economies against external shocks and reinforced the need for structural changes necessary for the acceleration of productive transformation through a determined shift towards sustainable and resilient industrialization in the years and decades ahead, the statement says.

The summit highlighted the role governments and other non-government actors play in addressing the constraints to industrial development, strategies for countries to re-invigorate the role of development finance institutions to promote industrial financing while drawing lessons from existing challenges, strategies for the countries to deal with global issues such as climate change in their efforts to industrialize, and reflected on the experience on industrial policy, design, implementation and monitoring its new industrial strategies. 

Ms. Aissata Tall Sall, Minister of Foreign Affairs and Senegalese Abroad and the current Chairperson the Executive Council, underscored the critical role of the private sector in supporting innovation in high-potential areas such as agriculture, agro-industry, health, education, infrastructure, and especially energy, which remains a crucial issue in advancing industrialization. 

She observed that “this decision has a high strategic significance because the aim of the industrialization and productive transformation process in our countries is to improve their capacity to take advantage of the many human and natural resources that the continent has to offer. Indeed, the industrialization of Africa can unlock the continent’s potential for inclusive growth by expanding access to the economic opportunities thus created to all segments of the population, especially women and youth. In addition to these challenges, all of which are important, there is the issue of mobilizing domestic resources to finance our economies, as well as the fight against illicit financial flows that encourage tax evasion and corruption.”

Massoudou Hassoumi, Niger’s Minister of Foreign Affairs and Cooperation emphasized on the urgency for inclusive industrialization that harness the demographic divide of the youth, which he noted would also sustainably address issues of irregular migration, manipulation and recruitment into outlawed groups.

He added that “industrialization and economic diversification are therefore a lasting economic legacy that we must leave to the younger generation, because it is a solution to the challenges of the moment, especially those related to insecurity. In this regard, it is important to reiterate the African position for a fair and equitable transition to defend the right of our countries to exploit their available resources such as gas, alongside their efforts to develop the energy mix.” 

To accelerate the progress made in operationalizing the African Continental Free Trade Area, Moussa Faki Mahamat, Chairperson of the African Union Commission restated the need to conclusively address the structural challenges that hinder the optimal functioning of the common market. 

“The major challenge here is to be able to strengthen trade between African countries that are more open to the outside world through agreements that have already been signed and that manage the bulk of their trade. It is therefore a matter of developing the capacity to successfully transform our productive structures with a view to increasing the complementarity of intra-African trade. It would also be necessary to ensure convergence by reducing the major gaps between Member States and between the Regional Economic Communities in terms of development and level of integration. The AU Commission’s State of Integration in Africa 2022 report has highlighted the reality of such gaps,” according to Moussa Faki Mahamat.

Africa possesses 60% solar irradiation in the world, 70% of cobalt global production and significant reserves of other battery minerals, world class carbon sink assets in our forests and peatlands, huge green hydrogen potential, which Antonio Pedro, UNECA Acting Executive Secretary noted can position the continent to become a powerhouse and a globally competitive investment destination for multi-sectoral investments combining climate action, job creation and industrialization. 

“As we drive industrialization, we also need to realize that industrialization is not an event, but it is a process, and a long one at that. And, of course, we should be mindful that industrialization is not the business of Ministries of Industry alone. Instead, the implementation of true industrial policy requires a whole of government and beyond approach and action. It requires aligning industrial, trade and other sectoral policies and putting science technology and innovation at the centre to ensure that we remain globally competitive beyond our initial endowments and comparative advantages,” noted Antonio Pedro.

To rally the support of the private sector, Dr. Amany Asfour, started the commitment by the AfroChampions Initiative to mobilize the private sector to enhance the public-private partnership as the continent moves from commitment to action on industrialization and trade. Empowering the private sector through market-based solutions and resolving finance barriers remains critical.

Among the recommendations of the minsters of the appointment of the African Union Champion for Sustainable Industrialization and Productive Transformation to provide political leadership, awareness and ensure effective implementation of Africa’s industrial development. And further considering endemic factors that have stifled the Africa’s economic transformation, it is important to reassess the continent’s capabilities in the face of external shocks. 

In this regard, it is important for the African Union members to set up innovative and inclusive institutions capable of designing and implementing effective industrial policies and processes that will advance socio-economic transformation, as stipulated in global and continental frameworks such as the African Union Agenda 2063, the United Nations Sustainable Development Goals and the Third Industrial Development Decade for Africa.

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Bregret Reigns Britain: Blaming Brexit over Economic Exigency?

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Sometimes I blunder that the UK is still a part of the European Union (EU). Whether when discussing a unified policy stance on sanctions targeting Russia or a common polity on sustainable energy strategies for a resilient future of Europe. Brexit may be a figment of the recent past, but its tremors are certainly not bygone. And the European cohesion, which should’ve been envied at a time when Russia is wreaking havoc on its energy security, seems ephemeral as Britain’s vexed relationship with the EU refuses to recede. However, amid the boiling economic crisis in Britain and the rest of Europe, public sentiments betray an inherent admission: Britain’s exit from the Union might have been a mistake. But the connotation of this public rhetoric is just as awry as the Brexit chatter leading up to the 2016 referendum.

The opinion of Britons has been notoriously fickle throughout history. But the outcome of the Brexit referendum was razor-thin at inception. Now, a stagnant economy; a revolving-door political leadership; and decades-high inflation are turning the tide against the championed narrative of the Conservatives. According to a recent opinion poll by YouGov – a leading market research and data analytics firm headquartered in Britain – 56% of the Britons surveyed concurred that leaving the EU had been a mistake. Only 32% believed that Brexit was a good idea. However, while many Brexit critics would jump onto this opportunity to bash the Tories, this perception is misguided, a product of frustration of an irate populace looking to blame something for their woes. And Brexit has been a notable feature of the ruling government.

Britain installed its fourth prime minister since 2016 last month. But the damage was already done a few months back. Britons were already reeling from soaring energy prices and acute food shortages. The economic slowdown was heralding an unfamiliar era of high-interest rates and unemployment. Then entered Liz Truss, the former prime minister who eschewed economic orthodoxy with her trickle-down tax-cut plans. Her disastrous stint in office – that barely lasted 50 days – tipped the pound into a free fall, sparked a liquidity crisis for pension funds, and sent government borrowing costs spiraling to harrowing levels. While the incumbent Prime Minister Rishi Sunak has managed to calm the turbulent economy, the wreckage is still visible in the mortgage market.

Earlier this year, mortgage rates in Britain typically remained below 2.5%. Since October, however, the average two-year fixed rate mortgage is hovering around 6.25% – slightly down from the peak of 6.65% on Oct. 20. The lowest two and three-year fixed rates are still above the 5% mark, according to Moneyfacts Group, a financial information company. Unlike the United States, British mortgages run for shorter terms. For instance, about 2 million mortgages in Britain would reach the end of their fixed terms by the end of next year, pushing many Britons to refinance at rates more than double their initial settlements. An estimated 1.6 million borrowers in Britain have variable mortgages, which track the central bank’s policy rate. Thus, as inflation keeps running ablaze, no respite seems on the cards. 

The annual rate of inflation in Britain has reached a multi-decade high of 11.1%. And at its last policy meeting, the Bank of England (BoE) – the central bank of Great Britain – hiked its interest rates by 75 basis points, taking the policy rate to 3% – the highest level since the financial crisis of 2008. Andrew Bailey – governor of the Bank of England – doubled down on his commitment to raising interest rates higher to deter double-digit inflation fuelled by pandemic-induced supply chain logjams and the mercurial energy prices triggered by the Russian retaliation against Western sanctions. While the logistics backlogs seem to be improving, the Russian dilemma shows no sign of resolution. And as the Western coalition prepares to implement a price cap on Russian energy supplies, economic difficulties would only worsen for the British citizenry.

According to the Office for Budget Responsibility (OBR), a fiscal watchdog group in Britain, inflation-adjusted disposable income is projected to slump by circa 7% over the next two years under the government’s new budget plan. Introduced as the “autumn statement,” the 55 billion pound ($65.4 billion) budget virtually reversed every plan by Ms. Truss. Mr. Jeremy Hunt – the new chancellor of the Exchequer – has frozen the annual taxable income threshold until April 2028 rather than having those bands adjust to the inflation rate. Consequently, the top tax rate of 45% would now be applicable on earnings starting from £125,140 instead of the current level of £150,000. The government has also raised the windfall tax rate on energy firms from 25% to 35% until March 2028. Hence, economists believe that aggressive rate hikes coupled with such steep tax increments could trigger a brutal recession – perhaps the most debilitating since the 1930s.

So blaming Brexit for the economic turmoil battering Britain is not an accurate depiction of the public sentiment regarding Brexit. And it is chiefly because the throes of the British economy are tricky to quantify under a defining rubric. 

True, the UK is struggling with labor shortages. But this issue is not entirely driven by Britain’s inability to replace workers from Europe, who left after Brexit. A substantial portion of workers are Britons, who left during the pandemic and never returned to the labor force. Many started their own businesses; some settled into the groove of remote work. 

Admittedly, Britain’s sluggish growth further worsened when investments diverted to other epicenters of commerce in Europe after Brexit. Britain is the only member of the Group of Seven (G-7) advanced economies with an economy smaller than its pre-pandemic level. Recently, India replaced Britain as the world’s fifth-largest economy; Paris supplanted London as Europe’s highest-valued stock market, according to data published by Bloomberg. But Britain’s productivity has been in decline since 2009; public funding has been in the dumps ever since austerity policies were implemented in the aftermath of the 2007 financial collapse. High-interest rates are visibly hurting the domestic outlook of the British economy. But it is mainly because people were so conditioned to the ultra-low interest rates over the past decade that their perspective is dovishly askew.

Nonetheless, the British government has the incentive to structure a trade mechanism with the EU. While the hardliner Conservative MPs who voted Sunak into the office would definitely resent (and veto) an intimate relationship – like that enjoyed by Switzerland and Norway – with the single market, a settlement of disputes revolving around the hybrid trade status of Northern Ireland is imperative to Britain’s economic revival. Yet, if the Labour Party manages to topple the Tories in the next general elections, a closer alignment with Brussels should be in the vanguard. Because while Britain’s economic debacle might not be entirely Brexit’s unraveling, the UK cannot resurface without improving relations with Europe in an openly hostile neighborhood with a bleak future.

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