Economy

Russia and its European Partners Dream of Building Businesses from Lisbon to Vladivostok

Published

2 weeks ago

March 11, 2023

With the current geopolitical developments and the new processes of re-configuration, seriously affecting the landscape of economic cooperation, the basic question many researchers and observers are monitoring is to understand why Russia after the Soviet collapse aspired to transform into an European country. Russia wanted to develop and extend Europe down to the Pacific. In linguistics, phrases appeared in the direction, such as “developing solid economic cooperation from Lisbon to Vladivostok” and transform the entire vast region into European.

On different occasions, Kremlin has held several exclusive interactive meetings with European corporate business people. Those meetings raised various issues of fundamental importance for broadening economic cooperation. Throughout the 2000 to 2010, and at one point, Russian and EU business-people called on the Russian and EU authorities to resolve the issue of Russia’s accession to the World Trade Organisation (WTO) and begin work on a new basic agreement. President of the European Commission, Jose Manuel Barroso, took part in the discussions.

Interesting and worthy to note that during his presidency, Dmitry Medvedev sent his greetings to the participants in the second European-Russian Forum held on December 8, 2008. The message read in part: “This big event has an important part to play in resolving issues concerning Russia and Europe. I am sure that this forum will help to bring Russia and Europe closer together and create opportunities for promising new business and humanitarian projects.”

Participants in the forum, which took place in Brussels, included associations of Russians living abroad, Russian public organisations, and also representatives of the European Parliament, the European Commission and the European Council. The forum’s theme was ‘The European Union and Russia: New Challenges’.

As far back on November 24, 2006, President Vladimir Putin and the European Union leadership held an extensive meeting with participation of the members of the Russia-EU Business Cooperation Council. Taking part in the meeting with Russian and EU business community leaders were Finnish Prime Minister Matti Vanhanen, President of the European Commission Jose Manuel Barroso, and Javier Solana, secretary general of the EU Council and EU high representative for the common foreign and security policy.

The meeting between Putin, the European Union leadership and the business leaders took place behind closed doors just before the start of the Russia-European Union summit. The Russia-EU Business Cooperation Council was created in October 2005 and brings together the Russian and EU business leaders most interested in developing economic relations between Russia and the EU.

The Business Cooperation Council acts as a coordinator for practical action to develop new forms and vectors for cooperation between Russian and European business-people. The Council sets the objective of ensuring that the business community plays an active part in work to draft a new basic agreement between Russia and the European Union to replace the current partnership and cooperation agreement that expired in 2007.

The Council is responsible for coordinating work by industry and business associations to implement the project for creating a common economic space between Russia and the EU and advancing major forward-looking projects that can have a considerable impact on the structure and level of economic relations between Russia and the European Union.

Projects of this kind include cooperation in the energy sector, joint operation of satellite communications and navigation systems and the formation of mechanisms for cooperating in sectors such as aviation, car making, metals production, energy and machine building.

The Business Cooperation Council is a ‘union of equals’ and has no strong link to any one organisation. The principles on which the Council is formed enable it to expand and involve interested parties in its work. At that time, the Council was co-chaired by Anatoly Chubais, chairman of the board of RAO Unified Energy Systems, for Russia, and by Jukka Harmala, head of Finnish company Stora Enso, for Finland.

Back in 2015, Vladimir Putin took part in the plenary session of the Delovaya Rossiya celebrating the 10th year Russian Entrepreneurs’ Day, praised European business presence in the Russian Federation.

Precisely that year on May 26, Putin said “Entrepreneurship has come to be considered one of the most important factors of Russia’s confident development. We clearly need to ensure the influx of the largest possible number of self-motivated business-minded people to production companies, people who are ready to take on responsibility for both the work of their companies and their employees. Society and the state are interested in the appearance of a large number of successful, promising foreign companies. Their creation will become a worthy response to the challenges that are currently facing the Russian economy.”

Nevertheless, it would be important to note that during these years both Medvedev and Putin spoke at the plenary session of the St Petersburg International Economic Forum. In these platform, Medvedev and Putin have paid special focus on European businesses compared to Asian counterparts. In fact, Africa was completely not known those earliest formative years of SPIEF.

Not long ago on June 17, 2016, Putin at the plenary session of the 20th St Petersburg International Economic Forum emphasized that the platform served as a venue for discussing strategic issues. In his views on Russia in the changing world, he explained the systemic problems that are besetting the global economy and practically all countries.

According to him, the world’s leading economies are looking for sources of growth, and they are looking to capitalise on the enormous existing and growing potential of digital and industrial technologies, robotics, energy, biotechnology, medicine and other fields. Discoveries in these areas can lead to true technological revolutions, to an explosive growth of labour productivity. This is already happening and will happen inevitably; there is impending restructuring of entire industries, the devaluation of many facilities and assets. This will alter the demand for skills and competencies, and competition will escalate in both traditional and emerging markets.

Putin underlined the fact that it was necessary to proceed from a network of bilateral and multilateral trade agreements that envisage a varying pace, extent and level of interaction and the extent of market openness, depending on specific national economies’ readiness for teamwork, with understandings on joint research, educational and high-tech projects. All these agreements should be future-oriented and provide the basis for harmonious joint development resting on equal and effective cooperation.

“As early as June we, along with our Chinese colleagues, are planning to start official talks on the formation of comprehensive trade and economic partnership in Eurasia with the participation of the European Union states and China. I expect that this will become one of the first steps toward the formation of a major Eurasian partnership. We will certainly resume the discussion of this major project at the Eastern Economic Forum in Vladivostok in early September. Colleagues, I would like to take this opportunity to invite all of you to take part in it,” he said at the forum.

The “greater Eurasia” project – is, of course, open for Europe, and that such cooperation be mutually beneficial. Despite all of the well-known problems in the relations, the European Union remains Russia’s key trade and economic partner, Putin said and added: “It (EU) is our next-door neighbour and we are not indifferent to what is happening in the lives of our neighbours, European countries and the European economy.”

The challenge of the technological revolution and structural changes are no less urgent for the EU than for Russia. I also understand our European partners when they talk about the complicated decisions for Europe that were made at the talks on the formation of the Trans-Atlantic partnership. Obviously, Europe has a vast potential and a stake on just one regional association clearly narrows its opportunities. Under the circumstances, it is difficult for Europe to maintain balance and preserve space for a gainful manoeuvre.

As the recent meetings with representatives of the German and French business circles have showed, European business is willing and ready to cooperate with this country. Politicians should meet businesses halfway by displaying wisdom, and a far-sighted and flexible approach. It is necessary to return trust to Russian-European relations and restore the level of cooperation.

He, however, acknowledged there were some pitfalls. Russia did not initiate the current breakdown, disruption, problems and sanctions. “All our actions have been exclusively reciprocal. But we don’t hold a grudge, as they say, and are ready to meet our European partners halfway. In this context, let me repeat that we are interested in Europeans joining the project for a major Eurasian partnership. This can, by no means, be a one-way street,” Putin added in his speech.

In closing, the plenary session moderator, CNN host Fareed Zakaria, offered Putin for his last remarks. Putin said: “We agree on some points and disagree on others but there are still more things that unite us – this is absolutely clear. After all, Europe is Europe. The foundations of its economy don’t give us reason to believe that Europe will come to an end at any point, no matter what internal processes are playing out. It is our leading trade and economic partner. We have here the leader of a European country – Italy, and the leader of Kazakhstan – our closest partner and ally with which we are building an integration association. Today, we have gathered everyone together.”

Quite recently, Putin rained praises on French businesses in the Russian Federation. It was precisely on 29 April 2021, Putin held videoconference with leaders of several French companies – members of the Franco-Russian Chamber of Commerce and Industry (CCI France-Russia) to discuss some aspects of Russian-French trade, economic and investment cooperation, including the implementation of large joint projects as well as the prospects for collaborative work.

From the historical records, France has been and remains a key economic partner for Russia, holding the 6th place among EU members in the amount of accumulated investment in the Russian economy and 5th place in the volume of trade. Despite a certain decline in mutual trade in 2020 (it went down by 14 percent compared to 2019) the ultimate figure, quite acceptable, at $13 billion. French investment in Russia was hovering around $17 billion, while Russian investment in France was meagre at $3 billion.

Over 500 companies with French capital were operating in various sectors of the Russian economy. French business features especially prominently in the Russian fuel and energy complex, automobile manufacturing and, of course, the food industry. “It could have been more if the French regulatory and state authorities treated Russian businesses as Russia is treating French businesses. We appreciate that in a difficult economic environment, French companies operating in Russia have not reduced their activity,” Putin pointed out in the speech, addressing them.

“We are interested in involving foreign companies that would like to invest in Russia and in projects we consider high priority. In order to do this, we will continue to use preferential investment regimes and execute special investment contracts, as you know. A lot of French companies successfully use these tools on the Russian market. For example, more than one third of 45 special investment contracts have been signed with European, including French, partners,” he explained during the meeting.

He further mentioned continuous efforts to attract foreign companies to localise their production to state purchases and to implementing the National Development Projects, as well as existing opportunities for French businesses in special economic zones. Today, there are 38 such zones created throughout the Russian Federation.

Russia pays particular attention to attracting high-quality foreign specialists. Their employment is being fast-tracked, and their families can now obtain indefinite residence permits, with plans to launch a special programme of ‘golden visas’ whereby to issue a residence permit in exchange for investment in the real economy, a practice is used in many other countries.

Taking his turn, Co-Chair of the CCI France-Russian Economic Council, Gennady Timchenko, noted that the pandemic has changed the world, people and business, and that French companies in Russia are responsible employers and socially responsible members of Russian society.

Despite the crisis and the geopolitical situation, a number of French companies have launched production in 2020–2021. Despite the current geopolitical conditions and information field, there are important signals for French business and the Russian side to strengthen economic cooperation, attract investment, and create partnerships on a new mutually beneficial basis.

Co-Chair of the CCI France-Russian Economic Council, Patrick Pouyanne, noted that the meeting has become an excellent tradition, the presence of 17 CEOs and deputy CEOs of French companies showed the importance of these joint meetings, and further reflect the deep interest of French business in Russia.

In addition to above, Foreign Minister Sergey Lavrov has several times held meetings with European Union members. With the same perception, despite the challenges today, that diplomacy has to continue playing an important role in settling differences, and that businesses could convincingly create bridges to strengthen investment and economic cooperation between Russia and the European Union.

Lavrov has oftentimes reiterated Russia’s recognition of the enormous significance and invaluable contributions of European businesses. The stark reality is that Russians simply adore European brands at the expense of their local brands. That makes European businesses, their products and services solid in the Russian Federation. The European enterprises has prominently made their presence always at the St Petersburg International Economic Forum. As an association, it adheres to the principle of mutual cooperation. It marked 25 years in 2020 in Russia.

Over the years, the Association of European Business has held corporate meetings with participation of top Russian politicians and business stalwarts. In St. Petersburg, Foreign Minister Sergey Lavrov has always been the guest speaker during special panel sessions, with participation of the Association of European Business, highlighting with an appreciation their various efforts in promoting economic, investment and trade ties, laying the solid foundation for building good relations between Europe and Russia.

The last time Lavrov addressed the gathering, he stressed the fact there were alarming geopolitical trends that have also affected Russia-EU relations. “We regret that trade and economic cooperation is becoming increasingly politicized. Trade and economy have been viewed as a safety net in relations among nations. Nowadays though, things seem to have shifted into a somewhat different phase,” Lavrov told the business gathering.

“Politicized energy cooperation is yet another blow at the foundations of what we call European security. Energy is the area of cooperation dating back over 50 years. Protectionism and other barriers and restrictions will only aggravate the economic situation, which is already complicated. By the way, we noted that the Confederation of European Business published recommendations aimed at protecting European businesses amidst sanctions-related restrictions,” he added.

Nevertheless, Lavrov suggested the discussions become a global economic driver, firmly believe that it is in common interests to prevent the appearance of undesirable dividing lines in the new economic spheres created by the new technological paradigm. It is strong conviction that this calls for combining efforts rather than trying to play zero sum games again, as was the case in the past. Russia is ready for cooperation on the broadest possible basis.

Obviously, the future Russia and European business relations can still be consolidated despite the current political differences, Lavrov said with high optimism. Russia is ready to build its relations with the European Union along some principles. The European Union remains as its important trade partner. As before, there is optimism that both are open to cooperation, European partners are keen on building businesses in the economic space from Lisbon to Vladivostok, this vast country and in the Eurasian region.

The interest in strengthening and diversifying trade and economic ties have been growing since Soviet collapse. According to statistics, trade with the European Union reached almost $300 billion in 2019. The Association of European Business, which unites European companies, believes that both business circles and business diplomacy can and should make a useful contribution to restoring mutual trust and confidence in the business sphere. Under its aegis, European businesses show readiness to expand cooperation and to implement mutually beneficial joint projects across Russia.

Here is a bit of interesting point about Russia’s demography. Records show that European Russia accounts for about 75% of Russia’s total population. But the documents further indicate that 1.8 million Russians live in the European Union (majority in Britain, Germany and France). But then, the rhetorical questions are: Can Russia lead the emerging global economic order? Is Moscow a financial hub and host to international organizations’ offices as in New York and Washington, and in Europe? Is this the end of Russia’s European dream?

During the past several years, Putin’s meetings with EU members included those, such Germany, Italy, France, Spain et cetera. In addition to Putin’s meetings, Foreign Minister Sergey Lavrov and, the Economic and Development Minister held series of meetings, both the Federation Council and the State Duma discussed consistently issues relation to their point cooperation. Today, with the global changes and the war on Ukraine that necessitated the imposition of stringent sanctions, Russia has gunned down its the post-Soviet dream of becoming purely European. What remains in this emerging new world, despite the sharp differences among them Russia might only and eventually become Greater Eurasian.

Related Topics:Economics European Union Russia

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Kester Kenn Klomegah

MD Africa Editor Kester Kenn Klomegah is an independent researcher and writer on African affairs in the EurAsian region and former Soviet republics. He wrote previously for African Press Agency, African Executive and Inter Press Service. Earlier, he had worked for The Moscow Times, a reputable English newspaper. Klomegah taught part-time at the Moscow Institute of Modern Journalism. He studied international journalism and mass communication, and later spent a year at the Moscow State Institute of International Relations. He co-authored a book “AIDS/HIV and Men: Taking Risk or Taking Responsibility” published by the London-based Panos Institute. In 2004 and again in 2009, he won the Golden Word Prize for a series of analytical articles on Russia's economic cooperation with African countries.

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Economy

Impact of technological advancements on International Trade and Finance

Published

7 hours ago

March 23, 2023

Muhammad Anser

Technological advancements have had a significant impact on international trade and finance in recent years. These advancements have facilitated cross-border transactions, reduced transaction costs, and improved the speed and efficiency of financial transactions.

One major impact of technology on international trade is the emergence of e-commerce, which has revolutionized the way businesses conduct their operations. E-commerce has made it easier for companies to reach customers in foreign markets, allowing them to expand their customer base and increase sales. Additionally, advances in logistics and transportation technology have made it easier and faster to ship goods across borders, reducing shipping times and costs.

In terms of finance, technology has enabled the development of innovative financial instruments and platforms that facilitate cross-border transactions. For example, blockchain technology has the potential to transform international finance by enabling faster and more secure transactions, reducing the need for intermediaries, and lowering transaction costs. Additionally, fintech companies have emerged, providing new financial services and products to consumers and businesses around the world.

However, technological advancements have also raised concerns about the impact on jobs and income inequality. Automation and artificial intelligence (AI) have the potential to replace human labor in certain industries, leading to job losses and potential social unrest. Furthermore, the benefits of technological advancements may not be evenly distributed, leading to greater income inequality between countries and individuals.

Technological advancements and international trade:

The development of technology has had a significant impact on international trade in recent decades. Advances in communication technologies, such as the internet and mobile phones, have made it easier for businesses to connect with each other across borders. This has led to an increase in trade by reducing the costs and time associated with communication and travel.

Similarly, advances in transportation technologies, such as cargo ships and airplanes, have made it easier to move goods around the world. This has allowed businesses to source inputs and sell products in global markets, increasing their opportunities for growth and profitability. Additionally, advances in logistics and supply chain management technologies have enabled businesses to streamline their operations, reduce costs, and improve efficiency, further driving international trade.

However, technology has also had some negative impacts on international trade. For example, automation and robotics have led to the displacement of workers in certain industries, particularly in manufacturing. This has resulted in job losses and reduced demand for certain types of goods.

Furthermore, technology has also facilitated the growth of online marketplaces and digital platforms, which have disrupted traditional business models and created new challenges for regulators and policymakers. These platforms often operate across multiple jurisdictions, making it difficult to enforce rules and regulations.

Overall, the impact of technology on international trade has been largely positive, enabling businesses to expand their reach and tap into new markets. However, it has also presented new challenges and risks, requiring policymakers and businesses to adapt to a rapidly changing environment.

Technology has played a crucial role in promoting international trade by facilitating communication, reducing transaction costs, and increasing the speed of transactions. With the advent of the internet, businesses can now connect with potential customers and suppliers from all over the world, regardless of their physical location. E-commerce platforms and online marketplaces have made it easier for small and medium-sized enterprises to reach a global audience and tap into new markets. Additionally, technology has made it easier to track shipments and manage supply chains, improving efficiency and reducing costs. The use of electronic payment systems and digital currencies has also made it easier to conduct cross-border transactions, reducing the need for intermediaries and further lowering costs. Overall, technology has made it easier for businesses to engage in international trade, and its role is only expected to grow in the future.

Technological advancements and international finance:

Technology has had a significant impact on international finance by transforming the way financial transactions are conducted and information is disseminated. The emergence of new technologies such as blockchain, artificial intelligence, and big data analytics has enabled financial institutions to operate more efficiently, reduce costs, and enhance their ability to manage risks. Here are some of the ways technology has impacted international finance:

Improved efficiency: Technology has made financial transactions faster, cheaper, and more secure. The use of online banking, mobile payments, and electronic transfers has made it possible to transfer money across borders in real-time, reducing the time and cost associated with traditional methods.
Increased transparency: Technology has made it easier for investors to access information about financial markets and companies. With the advent of big data analytics, investors can now analyze large volumes of financial data and identify trends and patterns that were previously difficult to detect.
Enhanced risk management: The use of technology has enabled financial institutions to better manage risk by improving their ability to assess creditworthiness, monitor transactions, and detect fraudulent activities.
Facilitated cross-border transactions: Technology has made it easier for businesses to conduct cross-border transactions by providing secure and efficient payment systems. For example, the use of blockchain technology has enabled businesses to conduct transactions without the need for intermediaries, reducing costs and increasing speed.
Improved financial inclusion: Technology has played a significant role in promoting financial inclusion by making it possible for people who were previously excluded from the formal financial system to access banking services. For example, mobile banking has enabled people in remote areas to access banking services and conduct financial transactions.

Challenges of regulating and supervising the use of technology in international finance:

Regulating and supervising the use of technology in international finance presents several challenges. Firstly, technology moves at a rapid pace, making it difficult for regulatory bodies to keep up with new developments and their potential impact on the financial sector. This can lead to regulatory frameworks becoming outdated or insufficient, creating loopholes that can be exploited by financial institutions and cybercriminals alike.

Secondly, the global nature of international finance means that regulatory bodies must coordinate their efforts across borders and jurisdictions. This can be difficult due to differences in legal systems, cultural norms, and technological infrastructure. Some countries may have more advanced regulatory frameworks and capabilities than others, making it challenging to establish a level playing field for all market participants.

Thirdly, financial institutions and other market participants may resist regulation and attempt to circumvent it through the use of offshore entities or other tactics. This can create a regulatory “race to the bottom” as countries compete to attract business by offering lax regulatory environments.

Case studies:

Case study 1: Impact of technology on the global supply chain

The impact of technology on the global supply chain has been profound and far-reaching, transforming the way businesses operate and the way goods are produced, distributed, and consumed.

One major impact of technology on the global supply chain is the increased efficiency and speed of communication and data sharing. Technologies such as the Internet, cloud computing, and real-time tracking systems have made it possible for businesses to communicate and collaborate more effectively with their suppliers, manufacturers, and customers, enabling them to respond quickly to changing market conditions and customer demands.

Another important impact of technology on the global supply chain is the rise of automation and robotics in manufacturing and distribution. Advanced robotics and artificial intelligence (AI) technologies are increasingly being used to streamline and optimize manufacturing processes, reduce labor costs, and improve the quality and consistency of finished products. This has also led to the creation of “smart” factories, which are highly automated and connected to the Internet of Things (IoT) to optimize production and supply chain processes.

Technology has also enabled the development of new supply chain models, such as “just-in-time” and “lean” manufacturing, which are designed to minimize waste, reduce costs, and improve efficiency. These models rely on real-time data and advanced analytics to optimize inventory levels, improve logistics planning, and reduce the time and cost of delivery.

Finally, technology has enabled businesses to track and monitor every aspect of the supply chain, from raw materials to finished products, enabling them to identify and address issues such as delays, quality problems, and bottlenecks in real-time. This has helped businesses to improve the transparency and traceability of their supply chains, which is becoming increasingly important to consumers and regulators concerned about issues such as sustainability, ethical sourcing, and product safety.

Case study 2: The impact of fintech on international finance

Fintech has revolutionized the world of international finance, offering innovative solutions to longstanding problems in the industry. One of the most significant impacts of fintech on international finance is its ability to facilitate cross-border transactions. With the use of block chain technology and digital currencies, fintech has made it possible for individuals and businesses to conduct international transactions quickly, securely, and at a lower cost than traditional methods. Fintech has also led to the development of new financial products and services, such as peer-to-peer lending and mobile payment solutions, which have increased access to financial services for people around the world. However, fintech also presents new challenges in terms of regulation and cyber security, and it remains to be seen how these issues will be addressed as the industry continues to grow and evolve.

Case study 3: The impact of block chain technology on international trade and finance

Block chain technology has the potential to significantly impact international trade and finance. By enabling secure, transparent and tamper-proof transactions, block chain can improve trust and efficiency in global trade. Smart contracts on a block chain network can automate many aspects of trade finance, such as verifying documents and tracking shipments, reducing processing time and costs. Additionally, block chain can enable new forms of financing, such as peer-to-peer lending and crowd funding, which can benefit smaller businesses that may struggle to obtain traditional financing. The use of block chain can also reduce the risk of fraud and errors in international trade, which can result in substantial savings for businesses. As block chain technology continues to mature and gain widespread adoption, it has the potential to revolutionize the way international trade and finance are conducted, providing greater security, transparency, and efficiency.

Future prospects and challenges:

The future of technology in international trade and finance appears bright, with numerous opportunities to improve efficiency, reduce costs, and increase transparency. Emerging technologies such as block chain, artificial intelligence, and the Internet of Things are already being used to enhance supply chain management, streamline payment systems, and improve risk management.

However, with these opportunities come challenges and risks. One challenge is the need to ensure interoperability between different technologies and systems used in different countries, which requires international standards and cooperation. Another challenge is the potential for disruption to existing industries and business models, which could lead to job losses and economic inequality.

In addition, technological advancements also bring risks such as cyber security threats, fraud, and the potential for manipulation and abuse of data. There is a need to develop robust regulatory frameworks that balance innovation with protection of consumers and investors.

Furthermore, there are concerns over the digital divide between developed and developing countries, with the latter potentially being left behind in the race to adopt new technologies. Therefore, it is crucial to promote technology transfer and capacity-building initiatives to bridge this gap.

Conclusion:

Technological advancements have had a significant impact on international trade and finance, facilitating faster and more efficient cross-border transactions, enabling the emergence of new business models and trade patterns, and expanding access to global markets. However, these advancements have also brought challenges and risks that policymakers must address to ensure a fair, transparent, and stable international trade and finance system.

One of the main challenges posed by technological advancements is the potential for increased inequality and exclusion, as some countries and firms may be better equipped to take advantage of these advancements than others. This could lead to a concentration of power and wealth, creating a more uneven playing field in international trade and finance.

Another challenge is the risk of cyber threats and security breaches, which could undermine the integrity and stability of the international financial system. This risk is particularly acute given the growing reliance on digital technologies and platforms for conducting financial transactions.

In addition, there is the need to address issues related to data privacy, intellectual property rights, and regulatory harmonization, which could affect the competitiveness of firms in different countries and regions.

To address these challenges and risks, policymakers must take a proactive approach that balances the benefits of technological advancements with the need to mitigate their potential negative effects. This could involve developing international standards and regulations to ensure the fair and secure use of digital technologies in international trade and finance, investing in digital infrastructure and skills development in less advanced countries, and promoting greater collaboration and information-sharing among stakeholders in the global financial system.

Overall, technological advancements have the potential to drive greater prosperity and inclusion in international trade and finance, but policymakers must remain vigilant to ensure that these advancements are harnessed for the benefit of all.

Economy

Price hike in Pakistan: the worst of all worries

Published

1 day ago

March 22, 2023

Nadir Ali

The most serious issue Pakistan’s economy is currently dealing with is price increases or inflation. Life has become miserable for the average person as a result of the ongoing increase in the cost of necessities like food, fuel, and medicine. The general public’s standard of living is not the only thing this phenomenon is affecting; it is also fueling social unrest across the nation.

There are numerous factors contributing to the price increase. The rise in the price of oil on the global market comes first. Pakistan relies heavily on imported oil, and when the price of crude oil increases globally, it has a negative impact on the regional economy. The issue has also been exacerbated by Pakistan’s struggling economy, high-interest rates, and currency devaluation.

However, several causes can be identified for Pakistan’s dollar exchange rate’s ongoing rise. One of the main causes is the nation’s substantial import bill, which raises the demand for dollars. Energy and other necessities must be imported into Pakistan, and the pressure on its foreign exchange reserves is increased by the high demand for dollars to pay for these imports. Further weakening Pakistan’s currency is the fact that its exports have not been able to keep up with its imports, resulting in a trade deficit. Due to investors’ reluctance to invest in a nation with an unstable economy, political unrest, and economic ambiguity have also boosted the dollar rate.

Similarly, the debt incurred by Pakistan is a sizable additional factor in raising the dollar rate in that country. Pakistan has one of the highest debt-to-GDP ratios in the world and has borrowed a significant amount of money from international financial institutions to meet its financial needs. The pressure from this borrowing has reduced the nation’s foreign exchange reserves and devalued its currency. The country’s economy has been severely impacted by the COVID-19 pandemic, necessitating a significant fiscal stimulus on the part of the government. This has further aggravated the situation. In Pakistan, the dollar rate has been rising steadily as a result of all these factors working together.

Simultaneously, inflation and price increases affect Pakistan’s politics as well as its economy. The opposition parties are using the government’s inability to control the price increase as a major issue to attack it and win over the public. The opposition parties are protesting and demonstrating against the government, accusing it of being responsible for the price increase. They contend that the general populace is suffering because the government’s policies have failed to control inflation. The price increase controversy is being manipulated by the opposition to advance their own political goals and turn the public against the ruling party.

The government, on the other hand, is making an effort to address the issue by implementing a variety of measures, including raising subsidies for necessities and lowering import taxes. However, the opposition parties are utilizing this failure to their advantage because these measures have failed to contain inflation. Similarly, the price increase has important political repercussions. Public support for the opposition parties is growing, while support for the government is eroding. If the government is unable to control the price increase, it may trigger more political unrest, demonstrations, and even violence.

Therefore, a price increase has far-reaching effects. The groups with lower incomes are most negatively impacted because they cannot afford the necessities of life. They are compelled to reduce their food intake as well as their health and education spending. The middle class is also suffering. After all, they must second-guess any major purchases because their purchasing power has significantly dropped.

In addition to economic issues, the price increase is also creating social ones. As they struggle to meet their basic needs, people are growing agitated and desperate. Riots, demonstrations, and protests against the government are being sparked by this annoyance. As people struggle more to make ends meet, inflation also causes a rise in the crime rate.

The government must act swiftly and effectively to stop the price increase. Controlling the hoarding and smuggling of essential commodities is the first step. Second, to lessen their reliance on imports, they must make investments in regional industries. Additionally, the government should prioritize economic expansion because it can result in more job opportunities and, ultimately, greater purchasing power for the average citizen.

The government needs to pay attention to it right away and take action. The stability of the nation’s social and economic systems is in jeopardy, and if the issue is not quickly resolved, it might fuel more unrest and instability. This issue requires both political and economic solutions. The public must see that the government is acting practically to control inflation by effectively communicating its policies to them. Furthermore, the opposition parties should cooperate with the government to find a solution rather than use the price increase issue for political purposes.

To address the issue, the government must take a comprehensive approach that includes both immediate and long-term actions. The private sector and civil society can both be crucial players in finding solutions to the issue. The only way the nation can hope to overcome the problem of price increases and guarantee a higher standard of living for its citizens is through collective effort.

The opposition parties should work with the government to find a solution to this issue, as the government must act quickly and effectively to control inflation. The common people’s lives are being impacted by the price increase, and resolving it will require a collaborative effort from all parties involved. The federal government ought to prioritize long-term economic plans that can boost employment opportunities, reduce reliance on imports, and promote sustainable economic growth. To encourage trade and commerce, the government ought to work on enhancing the infrastructure, such as the roads and communication systems.

Additionally, the government needs to take strict action against anyone hoarding, smuggling, or profiting from the situation in order to make extra money. In order to boost production and lessen reliance on imports, the government should also support local industries by offering incentives and support.

Economy

Vietnam’s macroeconomic policy and post COVID recovery

Published

1 day ago

March 22, 2023

Prof. Pankaj Jha

As per the latest IMF reports real Gross Domestic Product(GDP) of Vietnam in 2023 is estimated at 6.2 percent. This clearly shows that Vietnam has been avoiding the usual recessionary trends across the Asian markets and is showing better than average growth .With inflation rate being less than 4 per cent, it clearly shows that Vietnam is likely to emerge as a promising economy in Asia. According to the regional economic outlook which has been released by the IMF , it clearly projects that there are high expectations of uncharacteristic slow down in China benefitting competitors such as Vietnam, Philippines and Indonesia .

Asian Development Bank(ADB) has forecasted that Vietnam’s GDP was expected to grow by 6.5% in 2022 and nearly 6.7% forecasted for the year 2023. If one looks into the comparative forecast for countries in Southeast Asia it is stated that Philippines will grow by 6.3 per cent ,Cambodia 6.2 per cent ,Indonesia 5 per cent, Thailand 4.2 per cent , Laos 3.5 per cent ,and so on. If one looks into the core fundamentals of Vietnam following the COVID-19 pandemic, it has been clearly stated that Vietnam’s annual economic growth rate hovered between 6.3 per cent to 6.5 per cent for the decade preceding the current one.

One of the major aspects of this better than average economic growth was high foreign direct investment, increased domestic consumption, sizeable increase in the middle class, and Vietnam’s focus on promoting its manufacturing to be export oriented. In terms of other critical aspects Vietnam has been securing loans from many other international agencies over the past few years. With funding and grants from different international economic agencies ,Vietnam has been able to upgrade its road, rail transport and border connectivity infrastructure along with promoting social economic growth of nearly 243,000 people across the provinces.

One of the mainstays of Vietnam economy has been small and medium enterprises along with active participation of women.These enterprises have been getting bank credit and technical assistance through different initiatives such as public private partnerships, promotion of private sector development, and extensive reforms in state owned enterprises. Vietnam has been preparing well for facing the severity of climate change and also undertaking pilot projects for post disaster reconstruction and rehabilitation. It has institutional arrangements with World bank and Netherlands to develop resilience for the coastal areas particularly Mekong delta to undertake comprehensive efforts in mitigating the climate change effects.

Over a period of time Vietnam has been making serious efforts in emerging as a knowledge network society. This includes improving policy applications, enhancing capacities of stakeholders and providing information to the communities on a regular basis. Vietnam has also received more than USD $ 2 million grant for climate resilient inclusive infrastructure through high technology fund from ADB. In terms of meeting UN sustainable development goals, Vietnam has successfully provided electricity to its cent percent population.

It has been stated that Vietnam is one of the economies which is going to benefit from Regional Comprehensive Economic Partnership(RCEP) given the reduction in tariffs during the period 2020 to 2035 and because of these reductions the export of electrical equipment and machinery from Vietnam is going to grow to the level of 12.1% while the main stay of its exports primarily textiles and apparels are going to grow by nearly 10%. Given the fact that RCEP would facilitate Vietnam’s entry into high end markets such as Japan, Australia and New Zealand might translate into better trade revenues.

In fact better integration with regional economies would promote its sectors such as tourism, entertainment, education, agriculture, automobile telecommunication, and IT. Two different aspects have gained international attention because of Vietnam ranked 70^th out of 190 countries in terms of ease of doing business, and its major strength has been the young population as nearly 70 per cent of its population is aged between 15 to 64. This large working population reduces social security liabilities to the aging population. Major work which has been done by the current Vietnamese government is its national strategy for Environmental Protection 2030 with a comprehensive plan under Vision 2050.

It is expected that Vietnam’s construction sector is going to grow because of increase spending on infrastructure projects along with improvement in regional connectivity through rail, road, and air transport infrastructure. There are high expectations that Vietnam tourism sector will post impressive recovery, and last year the country witnessed an increase of tourist arrivals by more than 185 per cent in the first four months of 2022. The tourism sector is going to increase further given the fact that Vietnam has signed a comprehensive agreement in boosting sustainable tourism and post COVID recovery at the national level. During the period 2022 to 2025 it is expected that the cumulative average growth rate of tourism would be 13.5% average each year .

As per the global data set and the General Statistical Office of Vietnam, the industrial production is also going to increase substantially and export orders as well as internal domestic demand is going to bring about remarkable improvement in production as well as exports. Last year, the G7 countries have agreed to grant a loan of US $5.5 billion for helping Vietnam transition from coal to other sources for power generation. This was based on the promise that Vietnam should make plans for shifting to nearly 50 per cent of its power requirements from renewable energy by the year 2030. It is also expected that foreign direct investment in Vietnam is going to be steady with high tech industries, knowledge based service industries, and education gaining the maximum investments. The real estate and construction sector are other sectors which are going to gain international attention.

This year it is expected that public investment would be helpful in post pandemic recovery and under the Socio Economic Recovery and Development Programme nearly US $15.4 billion has been approved for accelerating the economic growth. Furthermore, commodity exports is likely to see a remarkable two digit jump and the FTAs that Vietnam has signed with various partners will help in building the capacities of Vietnamese manufacturing sector in product transformation, exploring diversified markets, better restructuring, and skill development at different levels. The transformation is also happening in terms of fiscal and monetary prudence as well as undertaking reforms within banking system and financial governance. The anti corruption drive that the Vietnam has undertaken in the last few years have built the investor confidence and it is expected that Vietnam will reap the dividends of better business environment, market connectivity, and relatively comparative advantage among other competitors in Southeast Asia. As expected the fundamentals are getting stronger, and therefore Vietnam can witness a stronger economic growth and better macroeconomic stability in the year 2023.