Sunday, February 27, 2011

Economic Impact of Arab Revolt on South Asia

Much is being written about the potential for the spread of political upheaval that started in Tunisia and recently led to the end of the 30 years rule of the Egyptian dictator Hosni Mubarak. Most of the commentary and punditry has so far been focused on potential political instability forced by possibly massive street protests.

Political fall-out from the events in Tunisia and Egypt has already engulfed the Middle Eastern nations of Bahrain, Libya and Yemen. However, little attention has so far been paid to the more immediate impact of spreading trouble in the oil-rich Middle East on developing nations in South Asia and elsewhere.

Crude oil prices have been rising for some time but the fears of the spread of the political unrest have accelerated the rate of increase. The price of crude has already crossed the crucial $100 a barrel mark with the Libyan crisis in full bloom. South Asian economies are keeping a close eye on the situation in Africa and Middle East but still remain unaffected in receiving their oil supplies through this region. Any further spread of the unrest into GCC countries, particularly Saudi Arabia, could have a huge impact on the health of South Asian economies.

According to the World Bank's Immigration and Remittances Factbook 2011, the top remittance sending countries in 2009 were the United States, Saudi Arabia, Switzerland, Russia and Germany. Worldwide, the top recipient countries in 2010 were India, China, Mexico, Philippines and France, according to Dawn News. In South Asia, the top five remittance receiving nations in 2010 were: India ($55.0 billion), Bangladesh ($11.1 billion), Pakistan ($9.4 billion), Sri Lanka ($3.6 billion), and Nepal ($3.5 billion).

Pakistan's exports to the Middle East add up to several billion dollars a year. The United Arab Emirates alone imported $1.7 billion worth of Pakistani products last year, according to Arabian Business.

Relatively stable energy prices and rising exports and surging remittances have helped South Asian nations in 2009-2010. But this could all unravel with rising oil import bill combined with the fall of inflows from worker remittances and decline in exports to the Middle East region. India and Pakistan are already running significant current account deficits, and experiencing high rates of inflation exacerbated by rising food and energy prices since late 2010. The economic hardship, particularly high food prices and unemployment, could become a catalyst for serious political turmoil in South Asia in 2011 and beyond.

Related Links:

Haq's Musings

Pakistan's Economy 2008-2010

Pakistan's Rising Exports and Remittances

Indian Economy: Hard or Soft Landing in 2011?

China's Trade and Investment in South Asia

India's Twin Deficits

Inflation Hits India

Goldman Sachs India Warning on Twin Deficits

India's Nov 2010 Imports, Exports

15 comments:

Anonymous said...

riaz jee pakistan just hiked petrol prices by a whopping 10%.

What fun!

hamid said...

Just came from Karachi:
Power outage 3 times a day everyday
12-1 pm, 4-5 pm, and 9-10 pm!

Water supply every other day!

Inflation 25%! Petrol forget it!!

I have no idea how people are surviving.

gunam said...

Why there is suddenly revolt in gcc. ?
What are the intentions and outcome?
What actually happened in egypt?

These question will show indicators.

Nobody knows suddenly why there is a revolt and it has happened in few months.

Oil price has gone - swf and western oil company has become rich
Dollar is looked upon as stable due to uncertainity in the world economic due to price raise.

in egypt, hosni has been changed with another crony of him with same reputation.

Arms and oil companies wants unrest and they are running a drama of change of actors but the play will continue in the same manner.

New player who emerges will either perish or fall in line with these two companies across the globe

Riaz Haq said...

KSE-100 is so far flat this year but BSE is in sharp decline as foreign buyers are fleeing.

Whatever happened to the Indian equity market? asks the BBC:

Back in November, the Sensex squeezed past 21,000 for a day before starting a three month, 16% fall.

In the same time, the world's main indices, the FTSE Dow and Nikkei have all gained up to 7%, two of the remaining BRIC countries have fallen no more than 7%, and Russia's RTS Index has gained 26%.

Unsurprisingly foreign funds have been fleeing Indian equities in the last three months.

India is in a pickle and two reasons spring to mind - the stock market was heavily overvalued and the Central Bank has been raising interest rates.

At the end of the year the price of the average share on the Sensex was 23 times its earning power (ie its p/e ratio was 23 x). The Shanghai Index was 18 x, Brazil's Bovespa 14 x and Russia's just 9 x (the Dow's p/e was 13 x). That kind of valuation may be fine if future growth seems assured, but there are signs it may be falling off.
'Leg down'

GDP in real terms expanded at an annual rate of 8.2% in the last quarter - slowing from the 8.9% rate recorded in April to June. Now, this isn't a serious problem and no one is suggesting that the Indian growth story is in serious trouble, but it may be more than just a blip.

Maya Bhandari, senior economist at Lombard Street Research, says that, on a seasonally adjusted basis, growth was pretty much flat. She adds: "I would expect another leg down in the market in the coming few months."

Food inflation has been entrenched for some time, which means the Reserve Bank started putting up interest rates a year ago and has since hiked them seven times.

"In the last 25 months or so, we have had negative real interest rates and the central bank is going to have its work cut out to bring down inflation. And while it may be raising rates, the bank is holding more auctions and lowering the statutory liquidity levels for banks - all of which has inflationary consequences," says Ms Bhandari.

On top of domestic inflation pressures, the Middle East and North Africa crisis sent oil prices belting up above $100 a barrel, adding to the central bank's imperative to keep the upward pressure on rates.
Rate rises?

India is the world's the fourth largest oil importer and imports over 70% of its oil requirements. Oil prices, which will stay high for as long as the Arab crisis lasts, will damage India's economy more than most of its main rivals. At the moment, most economists are pencilling in another half to one percentage point rise in rates.

Oil is also going to hurt government finances. In his March budget, Finance Minister Pranab Mukherjee estimated that the deficit would fall from an estimated 5.1% of GDP in the year ending March 31, to 4.6% next fiscal year.

But if oil prices keep on going up, the government will have to decide whether to keep on paying out fuel subsidies or deregulate diesel prices.

Keeping the deficit under control would suggest the latter.

Five state elections in the next few months would suggest the former.

London-based India investment consultancy director Deepak Lalwani points out that foreign confidence in India has also not been helped by a slew of scandals, the biggest being allegations that the 2008 sale of second-generation, or 2G, cellular licenses resulted in losses of nearly $36bn in potential revenue for the government.

http://www.bbc.co.uk/news/business-12650610

Riaz Haq said...

Arab protesters demand democracy, but not secularism, says Michael Scheuer, former Bin Laden hunter at the CIA:

The Arab world’s unrest has brought forth gushing, rather adolescent analysis about what the region will look like a year or more hence. Americans have decided that these upheavals have everything to do with the advent of liberalism, secularism, and Westernization in the region and that Islamist militant groups like al-Qaeda have been sidelined by the historically inevitable triumph of democracy—a belief that sounds a bit like the old Marxist-Leninist claptrap about iron laws of history and communism’s inexorable triumph.

How has this judgment been reached? Primarily by disregarding facts, logic, and history, and instead relying on (a) the thin veneer of young, educated, pro-democracy, and English-speaking Muslims who can be found on Facebook and Twitter and (b) the employees of the BBC, CNN, and most other media networks, who have suspended genuine journalism in favor of cheerleading for secularism and democracy on the basis of a non-representative sample of English-speaking street demonstrators and users of social-networking sites. The West’s assessment of Arab unrest so far has been—to paraphrase Sam Spade’s comment about the Maltese Falcon—the stuff that dreams, not reality, are made of.

A year from now, we will find that most Arab Muslims have neither embraced nor installed what they have long regarded as an irreligious and even pagan ideology—secular democracy. They will have instead adhered even more closely to the faith that has graced, ordered, and regulated their lives for more than 1400 years, and which helped them endure the oppressive rule of Western-supported tyrants and kleptocrats.

This does not mean that fanatically religious regimes will dominate the region, but a seven-year Gallup survey of the Muslim world published in 2007 shows that a greater degree of Sharia law in governance is favored by young and old, moderates and militants, men and even women in most Muslim countries. While a façade of democracy may well appear in new regimes in places like Egypt and Tunisia, their governments will be heavily influenced by the military and by Islamist organizations like the Muslim Brotherhood and al-Qaeda. If for no other reason, the Islamist groups will have a powerful pull because they have strong organizational capabilities; wide allegiance among the highly educated in the military, hard sciences, engineering, religious faculties, and medicine; and a reservoir of patience for a two-steps-forward, one-step-back strategy that is beyond Western comprehension. We in the West too often forget, for example, that the Muslim Brotherhood and al-Qaeda draw from Muslim society’s best and brightest, not its dregs; that al-Qaeda has been waging its struggle for 25 years, the Muslim Brotherhood for nearly 85 years; and that Islam has been in the process of globalizing since the 7th century.

As new Arab regimes develop, Westerners also are likely to find that their own deep sense of superiority over devout Muslims—which is especially strong among the secular left, Christian evangelicals, and neoconservatives—is unwarranted. The nearly universal assumption in the West is that Islamic governance could not possibly satisfy the aspirations of Muslims for greater freedom and increased economic opportunity—this even though Iran has a more representative political system than that of any state in the region presided over by a Western-backed dictator. No regime run by the Muslim Brotherhood would look like Canada, but it would be significantly less oppressive than those run by the al-Sauds and Mubarak. This is not to say it would be similar to or more friendly toward the West—neither will be the case—but in terms of respecting and addressing basic human concerns they will be less monstrous.

Riaz Haq said...

Here's State Bank of Pakistan (SBP) assessment of the effect of Arab revolt and Japan quake-tsunami on Pakistan's economy:

KARACHI: The State Bank of Pakistan (SBP) said on Saturday that the global trade shock due to the conflict in Arab world and earthquake and tsunami in Japan remained beneficial for the country’s economy.

In its Monetary Policy Statement for the next two months, SBP said that the scenario helped the country to fetch better export price in international markets.

SBP said that there remains growing uncertainty in the global economic environment. The popular uprising in the Middle East and North Africa (MENA) region and unprecedented damage to the Japanese economy because of an historic earthquake and tsunami have shaken the global economy, which has yet to fully recover from the repercussions of the financial and economic crisis of advanced economies, it said.

One consequence of these developments has been high international commodity prices, especially of oil, it added.

“So far, the terms of trade shock have been favorable for Pakistan’s economy. More than 90 percent of the incremental increase in export earnings during July ñ February, FY11 over the corresponding period of last year has been due to high international prices of Pakistan’s exports.”

SBP said that the contribution of high import prices, particularly of oil, to the import bill has been relatively low, but is substantial and rising.

SBP further said that the turmoil in the Arab region may also influence the flow of remittances to Pakistan. “However, assuming that the inflow of remittances continue its current trend for the remaining months of FY11, there are no immediate risks to the external current account balance,” SBP added.

The financial account inflows such as foreign direct investment and portfolio investments have remained fairly modest during July ñ February FY11, almost half the level of inflows seen in the corresponding period of the last year, which was also small compared to historical levels.

SBP said that the overall balance of payment position appears to be strong at the moment with a gradual build-up of foreign exchange reserves and a stable foreign exchange market. “However, given the uncertainty with respect to foreign inflows, the developments in the external sector will need to be monitored closely in the coming months.”

Riaz Haq said...

Talking about democracy, here are some excerpts from a Vanity Fair article by Nobel Laureate Economist Joe Stiglitz about growing concentration of wealth and power in America. It's titled "Of the 1%, For the 1%, By the 1%":

Americans have been watching protests against oppressive regimes that concentrate massive wealth in the hands of an elite few. Yet in our own democracy, 1 percent of the people take nearly a quarter of the nation’s income—an inequality even the wealthy will come to regret.

It’s no use pretending that what has obviously happened has not in fact happened. The upper 1 percent of Americans are now taking in nearly a quarter of the nation’s income every year. In terms of wealth rather than income, the top 1 percent control 40 percent. Their lot in life has improved considerably. Twenty-five years ago, the corresponding figures were 12 percent and 33 percent. One response might be to celebrate the ingenuity and drive that brought good fortune to these people, and to contend that a rising tide lifts all boats. That response would be misguided. While the top 1 percent have seen their incomes rise 18 percent over the past decade, those in the middle have actually seen their incomes fall. For men with only high-school degrees, the decline has been precipitous—12 percent in the last quarter-century alone. All the growth in recent decades—and more—has gone to those at the top. In terms of income equality, America lags behind any country in the old, ossified Europe that President George W. Bush used to deride. Among our closest counterparts are Russia with its oligarchs and Iran. While many of the old centers of inequality in Latin America, such as Brazil, have been striving in recent years, rather successfully, to improve the plight of the poor and reduce gaps in income, America has allowed inequality to grow.

Economists long ago tried to justify the vast inequalities that seemed so troubling in the mid-19th century—inequal ities that are but a pale shadow of what we are seeing in America today. The justification they came up with was called “marginal-productivity theory.” In a nutshell, this theory associated higher incomes with higher productivity and a greater contribution to society. It is a theory that has always been cherished by the rich. Evidence for its validity, however, remains thin. The corporate executives who helped bring on the recession of the past three years—whose contribution to our society, and to their own companies, has been massively negative—went on to receive large bonuses. In some cases, companies were so embarrassed about calling such rewards “performance bonuses” that they felt compelled to change the name to “retention bonuses” (even if the only thing being retained was bad performance). Those who have contributed great positive innovations to our society, from the pioneers of genetic understanding to the pioneers of the Information Age, have received a pittance compared with those responsible for the financial innovations that brought our global economy to the brink of ruin.

http://www.vanityfair.com/society/features/2011/05/top-one-percent-201105

Riaz Haq said...

Here are some excerpts from a recent speech by veteran journalist Bill Moyers given in memory of historian Howard Zinn:

In polite circles, among our political and financial classes, this is known as "the free market at work." No, it's "wage repression," and it's been happening in our country since around 1980. I must invoke some statistics here, knowing that statistics can glaze the eyes; but if indeed it's the mark of a truly educated person to be deeply moved by statistics, as I once read, surely this truly educated audience will be moved by the recent analysis of tax data by the economists Thomas Piketty and Emmanuel Saez. They found that from 1950 through 1980, the share of all income in America going to everyone but the rich increased from 64 percent to 65 percent. Because the nation's economy was growing handsomely, the average income for 9 out of 10 Americans was growing, too - from $17,719 to $30,941. That's a 75 percent increase in income in constant 2008 dollars.

But then it stopped. Since 1980 the economy has also continued to grow handsomely, but only a fraction at the top have benefited. The line flattens for the bottom 90% of Americans. Average income went from that $30,941 in 1980 to $31,244 in 2008. Think about that: the average income of Americans increased just $303 dollars in 28 years.

That's wage repression.

Another story in the Times caught my eye a few weeks after the one about Connie Brasel and Natalie Ford. The headline read: "Industries Find Surging Profits in Deeper Cuts." Nelson Schwartz reported that despite falling motorcycle sales, Harley-Davidson profits are soaring - with a second quarter profit of $71 million, more than triple what it earned the previous year. Yet Harley-Davidson has announced plans to cut fourteen hundred to sixteen hundred more jobs by the end of next year; this on top of the 2000 jobs cut last year.

The story note: "This seeming contradiction - falling sales and rising profits - is one reason the mood on Wall Street is so much more buoyant than in households, where pessimism runs deep and unemployment shows few signs of easing." There you see the two Americas. A buoyant Wall Street; a doleful Main Street. The Connie Brasels and Natalie Fords - left to sink or swim on their own. There were no bailouts for them.

Meanwhile, Matt Krantz reports in USA TODAY that "Cash is gushing into company's coffers as they report what's shaping up to be a third-consecutive quarter of sharp earning increases. But instead of spending on the typical things, such as expanding and hiring people, companies are mostly pocketing the money or stuffing it under their mattresses." And what are their plans for this money? Again, the Washington Post:

... Sitting on these unprecedented levels of cash, U.S. companies are buying back their own stock in droves. So far this year, firms have announced they will purchase $273 billion of their own shares, more than five times as much compared with this time last year... But the rise in buybacks signals that many companies are still hesitant to spend their cash on the job-generating activities that could produce economic growth.

That's how financial capitalism works today: Conserving cash rather than bolstering hiring and production; investing in their own shares to prop up their share prices and make their stock more attractive to Wall Street. To hell with everyone else.

Riaz Haq said...

Here's a Op Ed by Miranda Husain published in Newsweek Pakistan about Saudis and Bahrainis seeking Pak help in quelling Shia protests:

Less than three weeks after Gulf Cooperation Council (GCC) forces, led by Saudi Arabia, entered Bahrain to aid the anti-democracy crackdown there, dignitaries from both oil-rich kingdoms did their separate rounds in Pakistan. The royal houses of Saudi Arabia and Bahrain are nervous, and they need Pakistan’s mercenaries, and—if necessary—military muscle to shore them up.

This is a remarkable turn of events for Asif Ali Zardari, who had been trying since he was elected president in 2008 to secure Saudi oil on sweetheart terms. He had been unsuccessful in his efforts because the Sunni Saudis view his leadership with some degree of skepticism. It also doesn’t help that Zardari, a Shia, is big on improving relations with Shia Tehran. Riyadh now appears inclined to export oil on terms that better suit cash-strapped Islamabad. Manama, too, wants to play ball. It wants increased defense cooperation and has pledged to prioritize Pakistan’s hopes for a free-trade agreement with the GCC in return. But Zardari and his Army chief, Gen. Ashfaq Kayani, should fight the urge to get mired in the Middle East.

Pakistan already has a presence in Bahrain: a battalion of the Azad Kashmir Regiment was deployed there over a year ago to train local troops, and retired officers from our Navy and Army are part of their security forces. Media estimates put the number of Pakistanis serving in Bahrain’s security establishment at about 10,000. Their removal has been a key demand of protesters in the kingdom. Last month in Islamabad, Prime Minister Yousaf Raza Gilani reportedly assured Bahrain’s foreign minister, Sheikh Khaled bin Ahmed al-Khalifa, that Pakistan would offer more retired manpower to help quell the uprising against Bahrain’s Sunni rulers by its Shia majority. Gilani’s spokesman was unable to confirm the pledge.

Islamabad’s support to the tottering regime in Manama is not ideal. “It’s like our version of Blackwater,” says Talat Masood, a former Pakistan Army general, referring to Bahrain’s recruitment drive in Pakistan. “We’re doing [in Bahrain] exactly what we have been opposing here,” he says. Pakistan, he maintains, has no business in trying to suppress a democratic, people’s movement in another country. Short-term economic gains cannot be the only prism through which Pakistan views its national interests, he says.

Pakistan has a long history of military involvement and training in the Arab world. Its pilots flew warplanes in the 1967 Arab-Israeli conflict, and volunteered for the 1973 Yom Kippur War. Involvement in Bahrain’s current strife would not be the first time that Pakistan has used its military might to thwart an Arab uprising against an Arab regime. In 1970, future military dictator Gen. Zia-ul-Haq, then head of the Pakistani military training mission in Jordan, led his soldiers to intervene on the side of Amman to quash a Palestinian challenge to its rule.
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“The U.S. has counted on Pakistan to help control the Arab world and safeguard Arab rulers from their own populations,” says Chomsky. “Pakistan was one of the ‘cops on the beat’ that the Nixon administration had in mind when outlining their doctrine for controlling the Arab world,” he says. Pakistan has such “severe internal problems” that it may not be able to play this role even if asked to. But the real reason that Pakistan should avoid this role is so that it can stand on the right side of history, alongside those who are fighting for democracy.

Riaz Haq said...

Pakistan's prime minister set up an energy council to tackle the current energy crisis, according to Radio Pakistan:

.. He said a team effort was required for a mutually rewarding and strategic partnership between the government and the energy sector as he firmly believed that the industry was capable of turning the tide and delivering results.
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The Prime Minister said “Fuelling the Future” therefore requires finding new oil and gas reserves through aggressive exploration activities, optimizing production from existing fields by applying cutting-edge technology, enabling gas imports from across the borders via regional pipelines and LNG shipments.

He said the Government was encouraging foreign investments in energy infrastructure development and in a broader context, development of alternate sources of energy and energy conservation, for a sustainable energy supply.
He said Pakistan was an energy-deficit country, meeting nearly 90% of its oil requirement through imports.
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He said the government was struggling to keep up with an increasing energy import bill which has adversely affected country’s trade deficit and pointed that it was difficult for the government to pass on the full impact of the rising international oil prices to the people.
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He said development of local energy sources, including hydel projects and the Thar coal-fields, also remains a high priority for this government.
He said the government has already added 1700 MW in the national electricity grid during last three years and many more power projects were at various stages of development.
“We have even resolved the basic problem which had held us back in utilizing the vast coal reserves in Sindh for producing energy,” he said.
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He said the share of natural gas as one of the primary energy source has increased from 40 percent in 1999 to 60 percent in 2010 and currently the entire domestic natural gas production was being consumed while providing for approximately 50 percent of total energy requirements.
The Prime Minister said holding of the international event being clearly indicated the priority accorded to highlighting the country’s energy issues by the Petroleum Institute being the representative body of the most important public and private sector companies in the oil & gas sectors of the country.
He said Pakistan today faced a number of challenges including security issues arising from its fight against terrorism and a growing trade deficit as a result of rising energy prices globally.
The Prime Minister said though the challenges have caused financial constraints in the country, the government was however determined to face these in the same way as was being done in the political arena.
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He said the Energy Conference that will have working sessions on oil & gas exploration & production, LNG imports, development of Thar coal-fields, power sector progress, oil infrastructure development and safety recommendations for the energy sector.
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The event also saw the formal launch of the 2011 Pakistan Energy Outlook Document.
The conference while noting the almost 80 per cent growth in Pakistan’s energy requirement in the past 15 years from 34 million tons oil equivalent (TOE) in 1994-95 to 61 million TOE in 2009-10 would deliberate on ways to find a way out to find cost effective solutions.
The country’s energy supply currently comes primarily from indigenous natural gas which is 45% of the energy mix and oil imports at 35% of the energy mix, with the balance from hydel at 12%, coal at 6% and nuclear at 2% of the mix respectively.
Chief Executive Officer of Petroleum Institute of Pakistan (PIP) Saleem Piracha presented an overview of the Pakistan Energy Vision 2011-2026, while Chairman PIP Zaiviji Ismail, Country chairman of Shell Pakistan spoke about the energy need, demand and the measures being taken to meet the shortfall.

Riaz Haq said...

Here's a VOA report on Bahraini govt recruiting Pakistan Army and Police veterans to put down the Shia rebellion:

Former CIA officer Bruce Riedel, who has extensive experience in South Asia, says Bahrain has been recruiting Pakistani veterans for decades. But he says the eruption of the pro-democracy demonstrations in the Gulf state in March has sparked a sharp increase in the recruiting.

"This winter, when the very serious demonstrations began and it looked like the regime might even be toppled at a certain point, their hiring of mercenaries went up substantially," said Riedel. "And they began sending out basically want ads in major Pakistani newspapers advertising well-paying jobs in the Bahraini police and the Bahraini National Guard for any experienced soldier or policeman in Pakistan."

The ads placed in Pakistani newspapers call for ex-riot police and riot control instructors, military police, non-commissioned officers, and other military and security specialists - as well as cooks and mess hall waiters - for the Bahrain National Guard. The ads were placed by the Fauji Foundation, an organization set up to help veterans and their families. Calls to the foundation seeking comment were not returned.

A senior Pakistani source says President Zardari and King Hamad discussed the issue of recruitment during the Pakistani leader’s visit to Bahrain Wednesday. But asked to comment on the matter, a Pakistani embassy spokesman said the recruitment of veterans is done through private channels and has nothing to do with the Pakistani government.

Riedel says hundreds, if not thousands, of unemployed Pakistani military and police veterans were hired. Most have come from the province of Baluchistan in southwest Pakistan.
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Bruce Riedel, now a senior fellow at the Brookings Institution’s Saban Center for Middle East Policy, says the Bahraini policy has aggravated the Shia-Sunni sectarian divide.

"The fact that the [ruling] Khalifa family is importing Sunni Pakistani mercenaries to repress the Shia majority only underscores the perception of the Shia majority that the regime is not interested in genuine reforms, not interested in building a constitutional monarchy, but interested in repressing the majority simply because they are Shias," he said.

Repeated calls and e-mails to the Bahrain Embassy in Washington seeking comment got no response.

Riedel adds that for Bahrain's rulers, there is a side agenda to the recruitment.

"Many of these Sunni Pakistani troops, if they’ve served well and served long enough, will also be offered Bahraini citizenship at the end of their career - an offer that is intended to try to increase the demographic size of the Sunni minority on the island. And that only intensifies Shia frustration with the way things are governed in Bahrain," he said.

The issue also has diplomatic repercussions. Iran, a Shi’ite nation, has voiced concern about the Bahraini government’s response to the demonstrations. In March, a 1,600-man Gulf Cooperation Council force, led by another Sunni monarchy, Saudi Arabia, went into Bahrain. In April, Iran summoned the Pakistani ambassador to hear official concern about Bahrain's recruitment of Pakistani mercenaries to help put down the protests. According to Iranian press reports, Iranian officials warned of “serious ramifications” for Pakistani-Iranian relations if the recruitment continued.

Riaz Haq said...

China has become Pakistan's largest trading partner, replacing the US which slipped to third place, according to Dawn News:

China has emerged as Pakistan’s largest trading partner replacing the US and is being closely followed by the UAE. The US has slipped to third position on the list of the top ten trading partners.

Germany and the UK occupy eighth and 10th slots respectively and Japan is no more on the ten top list. The latest rankings based on the FY11 statistics indicate that Pakistan is doing much more trade within Asia and its reliance on American and European markets is on the decline.
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Emergence of the new rich in China and expansion in middle-income consumers in the Middle Eastearn countries opened up new opportunities for Pakistan to boost trade with all these nations. Moreover, the trade gravity played its part in redirecting our external trade towards South and East Asia including Malaysia and Indonesia.

Small wonder then, that in the last fiscal year seven out of the top ten largest trading partners of Pakistan were all Asians—China, the UAE, Saudi Arabia, Kuwait, Malaysia, Afghanistan and India. And all of them except Saudi Arabia and India showed an improvement in their respective rankings, in a small span of three years.

“Interestingly whereas recession in the US and troubled political relationship between Islamabad and Washington affected growth of bilateral trade, the surge in the US troops in Kabul aimed at winding up the military operation there increased our exports to Afghanistan,” according to a senior official of Trade Development Authority of Pakistan (TDAP). That explains, at least in part, why Afghanistan’s seventh slot among our largest trading partners in FY11.

Our exports to Kabul totaled $2.3 billion in FY11. This growth trend is continuing and in the first five months of this fiscal year, exports to Afghanistan have touched a billion dollars mark------------
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Business leaders say Pakistan’s top bilateral trade partners are changing not just because of economic miracle of China and overall better average economic growth in Asia than in America and in Europe. “Increase in imports from China, for example, is also related to the Chinese investment projects in Pakistan part of which are scaling down American influence,” said a former president of the Federation of Pakistan Chambers of Commerce and Industry.
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India and China are two of the six countries on the list of the top ten trading partners with whom Pakistan runs trade deficits.
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The other four are the UAE, Saudi Arabia, Kuwait and Malaysia. Whereas Pakistan imports large amounts of costly fuel oil from the first three countries, it runs trade deficit with Malaysia primarily due to huge import bills of palm oil.
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With four countries out of the ten largest trading partners, Pakistan boasts of a trade surplus. These are the US, Afghanistan, Germany and the UK. “Whereas it is easier to retain Afghanistan as a major export market and it is encouraging that Bangladesh has emerged as a billion-dollar market for our products, the US, Germany, the UK and other European countries are equally important for sustained growth in overall exports,” remarked chairman of Pakistan Bedwear Exporters Association Mr. Shabbir Ahmad. He and many other exporters believe that normalisation of political relationship with the US and continuing of efforts to win trade concessions in European Union are required for keeping exports on a high growth trajectory.

http://www.dawn.com/2012/01/16/top-ten-trading-partners.html

Riaz Haq said...

Here's an Asia Times piece on the importance of GCC Arabs to US power and US dollar:

There's no way to understand the larger-than-life United States-Iran psychodrama, the Western push for regime change in both Syria and Iran, and the trials and tribulations of the Arab Spring(s) - now mired in perpetual winter - without a close look at the fatal attraction between Washington and the GCC. [1]

GCC stands for Gulf Cooperation Council, the club of six wealthy Persian Gulf monarchies (Saudi Arabia, Qatar, Oman, Kuwait, Bahrain and the United Arab Emirates - UAE), founded in 1981 and which in no time configured as the prime strategic US backyard for the invasions of Afghanistan in 2001 and Iraq in 2003, for the long-drawn battle in the New Great Game in Eurasia, and also as the headquarters for "containing" Iran.

The US Fifth Fleet is stationed in Bahrain and Central Command's forward headquarters is based in Qatar; Centcom polices no less than 27 countries from the Horn of Africa to Central Asia - what the Pentagon until recently defined as "the arc of instability". In sum: the GCC is like a US aircraft carrier in the Gulf magnified to Star Trek proportions.

I prefer to refer to the GCC as the Gulf Counter-revolution Club - due to its sterling performance in suppressing democracy in the Arab world, even before Mohammed Bouazizi set himself on fire in Tunisia over a year ago.

Cueing to Orson Welles in Citizen Kane, the Rosebud inside the GCC is that the House of Saud sells its oil only in US dollars - thus the pre-eminence of the petrodollar - and in exchange benefits from massive, unconditional US military and political support. Moreover the Saudis prevent the Organization of Petroleum Exporting Countries (OPEC) - after all they're the world's largest oil producer - to price and sell oil in a basket of currencies. These rivers of petrodollars then flow into US equities and Treasury bonds.

For decades virtually the whole planet has been held hostage to this fatal attraction. Until now.

Gimme all your toys
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It's true that whoever dominates the GCC - with weapons and political support - projects power globally. The GCC has been absolutely key for US hegemony within what Immanuel Wallerstein defines as the world system.

Yet let's take a look at the numbers. Since last year Saudi Arabia is exporting more oil to China than to the US. This is part of an inexorable process of GCC energy and commodity exports moving to Asia.

By next year foreign assets held by the GCC could reach $3.8 trillion with oil at $70 a barrel. With all that non-stop "tension" in the Persian Gulf, there's no reason to believe oil will be below $100 in the foreseeable future. In this case GCC foreign assets could reach a staggering $5.7 trillion - that's 160% more than in pre-crisis 2008, and over $1 trillion more than China's foreign assets.

At the same time, China will be increasingly doing more business with the GCC. The GCC is increasingly importing more from Asia - although the top source of imports is still the European Union. Meanwhile, US-GCC trade is dropping. By 2025, China will be importing three times more oil from the GCC than the US. No wonder the House of Saud - to put it mildly - is terribly excited about Beijing.

So for the moment we have the pre-eminence of NATOGCC military, and USGCC geopolitically. But sooner rather than later Beijing may approach the House of Saud and quietly whisper, "Why don't you sell me your oil in yuan?" Just like China buying Iranian oil and gas with yuan. Petroyuan, anyone? Now that's an entirely new Star Trek.


http://www.atimes.com/atimes/Middle_East/NA20Ak02.html

Riaz Haq said...

UAE to invest more in Pakistan, reports The News:

UAE Ambassador Eissa Abdullah Al-Basha Al-Noaimi said Monday Pak-UAE relations would be taken to the new heights as the leaders of the two brotherly counties are showing keen interest in this.

Federal Minister for Commerce Makhdoom Amin Fahim has said that the trade and business ties of both the countries are satisfactory but the scope of enhancing them does exist and the leadership of the two countries is sincerely trying to expand the same.

They were addressing the gathering of representatives, CEOs, directors of the UAE investment companies and joint venture investing corporations in Pakistan here Monday evening. The meeting provided the two countries officials’ rare opportunity to interact with each other.

Ambassador Eissa Al-Noaimi told the guests that current bilateral trade between the two countries is US $7.6 billion while 27 companies of Pakistan and UAE are working in joint venture. The volume of the business in joint venture is US $21 billion. The UAE firmly believes in the principles of importance of strengthening economic coordination with Pakistan as the later presents suitable environment ready for investment. The fruit of this interest was holding the conference on ‘promotion investment in Pakistan’ in March 2010. The ‘UAE Expo Magnificent 7’ held in Karachi and it was honoured and inaugurated by Prime Minister Syed Yusuf Raza Gilani while the UAE delegation was led by Sheikha Luba Bint Khalid Al-Qasmi, the UAE foreign trade minister.

Ambassador Al-Noaimi recounted that the UAE investment covers all sectors such as aviation, navigation, banks, real estate and energy. In aviation sector, it extends its facilities to different cities in Pakistan to serve the passengers and for cargo. This also applies to the navigation sector. The banking sector actively contributes in developing Pakistani society while the real estate and energy sectors have effective role also.

All those sectors serve the human and economic development in the brotherly country Pakistan. “We might not exaggerate if we describe this relationship as model one, thanks to its solid foundation and due to its divaricating so that to cover different fields and according to agreements and memorandums of understanding which are looked by joint commission headed by both foreign ministers of the two countries. We consider the meeting of the businessmen and officials of both countries would furnish common ground to discover more investment opportunities and to discuss investment related topics,” the ambassador said.

Ambassador Eissa Al-Noaimi said the distinguished relationship and the contacts among the officials of the two countries and the diplomatic delegations here and the UAE are fully ready to solve any issue which might be faced by the companies and investors and if such matters occurred then it would be a natural issue usually happens during investment in countries. “One of my goals that I would be contributing during next stage to establish joint committee especially for businessmen of both the countries. The history of relationship among the businessmen is spread over decades due to religious, geographical, cultural connections and mutual interests in this excellent relationship,” Ambassador Al-Bash Al-Noaimi added.

The ambassador said the UAE leadership including President Khalifa Zayed Al-Nahyan, Prime Minister Muhammad Rashid Al-Maktoum, and Foreign Minister Abdullah Al-Nahyan are taking personal interest in enhancing ties with Pakistan in all spheres. A documentary was also shown on the occasion that depicted the marvelous all-round development of the UAE. The U-fone chief executive Abdul Aziz Khan, honorary counsel of the UAE in Lahore Chaudhry Munir Ahmad were also present on the occasion.


http://www.thenews.com.pk/TodaysPrintDetail.aspx?ID=89158&Cat=2

Riaz Haq said...

KSA and UAE are the first two countries to welcome the military overthrow of Dr. Morsi, the first democratically elected and legitimate president of Egypt in its entire history. It shows you how scared the Arab royals are of what would happen to them if their people rose up against them and demanded democratic constitutional govt.

The big fear I have is that the Muslim Brotherhood would abandon the path of peaceful means and take up arms...just as some former Brotherhood members like Ayman Al-Zawahiri did when they joined Al Qaeda. This would lead to massive violence across the entire Arab world and the Arab royals in KSA, UAE and Jordan will not be spared. It could also badly hurt Pakistanis making a living in the oil-rich Arab kingdoms.