Thursday, March 22, 2012

Pakistan on Goldman's BRIC+ N11 Growth Map

In his recently published book "The Growth Map", Goldman Sachs' Jim O'Neill of BRIC fame has reiterated Pakistan's long term growth prospects as part of the Next 11 (N-11) group of nations which includes Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, Turkey, South Korea, and Vietnam.

Goldman Sachs has recently launched an N-11 equity fund (GSYAX) to enable investors to take advantage of growth in the Next-11 group of nations.

Answering a reporter's question about the growth prospects of GCC (oil-rich nations of Gulf Cooperation Council) at a recent investment conference in Dubai, he said: "Some GCC countries are well placed to be hubs for the BRIC and N-11-influenced world. I often think of Dubai as a kind of N-11 center, even the capital of the N-11 world, given its business adjacency to Egypt, Pakistan, Iran, Turkey, and, of course, India and Russia."

While the primary criterion used by Goldman Sachs for membership of a developing nation in BRIC and N-11 is the size of its population, the firm also considers what it calls Growth Environment Score (GES) of each nation. The 13 variables which make up growth environment score are inflation, fiscal deficit, external debt, investment rate, openness of the economy, penetration of phones, penetration of personal computers, penetration of internet, average years of secondary education, life expectancy, political stability, rule of law and corruption.

Goldman Sachs has given Pakistan a low GES score which puts the country among the bottom third of Next-11 nations. However, this score is rising, and Goldman forecasts that Pakistan will be among the top 20 world economies by 2025.

It seems to me that Goldman Sachs' assessment of Pakistan's growth prospects are too heavily influenced by the current crises the country faces. It is too conservative and does not fully reflect its future potential based on the nation's economic history over the last 64 years. For example, Goldman assumes a future growth rate that is less than the average of over 5% a year which Pakistan has seen over the last 64 years.

My view is that Goldman Sachs' forecast should fully reflect the fact that Pakistan's per capita GDP increased by 60% to $3,000 in the last decade. Even if it is assumed that there is no demographic dividend and the country's gdp growth rate will not accelerate, its per-capita income should still rise to nearly $20,000 by 2050, well above the Goldman Sachs' forecast of $15,066.00.

It is unrealistic to assume that Pakistan's economy will not benefit from its very young population. With half of its population below 20 years and 60 per cent below 30 years, Pakistan is well-positioned to reap huge demographic dividend, with its workforce growing at a faster rate than total population. This trend is estimated to accelerate over several decades. The average Pakistanis are now taking education more seriously than ever. Youth literacy is about 70% and growing, and young people are spending more time in schools and colleges to graduate at higher rates than their Indian counterparts in 15+ age group, according to a report on educational achievement by Harvard University researchers Robert Barro and Jong-Wha Lee. Vocational training is also getting increased focus since 2006 under National Vocational Training Commission (NAVTEC) with help from Germany, Japan, South Korea and the Netherlands.

The fact is that equity markets in Pakistan have already produced much higher returns than BRICs' markets have over the last decade.

Pakistan's main stock market ended 2010 with a 28 percent annual gain, driven by foreign buying mainly in the energy sector, despite concerns about the country's macroeconomic indicators after summer floods, according to Reuters. Although it was less than half of the 63% gain recorded in 2009, it is still an impressive rise in KSE-100 index when compared with the performance of Mumbai(+17%) and Shanghai(-14.3%) key indexes. Among other BRICs, Brazil is up just 1% for the year, and the dollar-traded Russian RTS index rose 22% in the year, reaching a 16-month closing high of 1,769.57 on Tuesday, while the ruble-based MICEX is also up 22%.

Pakistan's key share index KSE-100 dropped about 5% in 2011, significantly less than most the emerging markets around the world. Mumbai's Sensex, by contrast, lost about 25% of its value, putting it among the worst performing markets in the world.

Given the historical economic data I have shared in this post, I remain optimistic that Pakistan can and will easily beat Jim O'Neill's current forecast in the coming decades.

Related Links:

Haq's Musings

Pakistan's 64 Years of Independence

Goldman Sachs & Franlin-Templeton Bullish on Pakistan

Emerging Market Expert Investing in Pakistan

Pakistan's Demographic Dividend

Genomics & Biotech Advances in Pakistan

The Growth Map by Jim O'Neill

Pakistan Rolls Out 50Mbps Broadband Service

More Pakistan Students Studying Abroad

Inquiry Based Learning in Pakistan

Mobile Internet in South Asia

Online Courses at Top International Universities


Anonymous said...

I am not very optimistic about PAkistan,Nigeria and other countries in the long term as countries with large populations >50 million which do not industrialize invariably do not do that well.

What is more pakistan scores very poorly on quality of governance and technical competence of bureaucracy which is much less merit based.

It also has virtual medevil serf-master social structure in the rural areas which further drags down the growth potential.

Just goes to show how decisions taken in the nation's efficiency greatly hamper long term outlook.

Riaz Haq said...

Here's an excerpt on Pakistan from a recent Worth magazine piece posted on Goldman Sachs website:

PROMPTS MEMORIES OF OSAMA BIN LADEN and worries about current instability more readily than it does investment opportunity. “But a large portion of Pakistan is relatively stable, and it’s a country that’s growing rapidly almost in spite of itself,” says Paul Herber, portfolio manager of the Forward Frontier Strategy Fund.
Pakistan’s local oil and gas companies are a promising investment play. Unlike other N11 nations, where these resource companies are government-owned and give investors little access, “a lot of Pakistan’s oil and gas companies are public,” Herber says. The country is by no means a big global oil producer, but with 170 million people—more than Russia— growth in domestic demand is likely to boost the domestic industry, Herber says.

Riaz Haq said...

Here's a Korea Times report on investment opportunities in Pakistan:

Located in the heart of Asia, Pakistan is the gateway to the financially liquid Gulf States and the economically advanced Far Eastern tigers. This strategic advantage alone makes Pakistan a marketplace teeming with possibilities, but there are many more reasons.

A large part of the workforce is proficient in English, hardworking and intelligent. Pakistan possesses a large pool of trained and experienced engineers, bankers, lawyers and other professionals with many having substantial international experience and who are available on cost effective terms.

Current investment policies have been tailor-made to suit investor needs. Pakistan’s policy trends have been consistent, with liberalization, de-regulation, privatization and facilitation being its foremost cornerstones.

The capital markets are being modernized, and reforms have resulted in the development of an improved infrastructure in the stock exchanges of the country. The Securities and Exchange Commission of Pakistan has improved the regulatory environment of the stock exchanges, corporate bond market and the leasing sector. Whilst the federal Board of Revenue has facilitated structural reform in tax and tariffs, the State Bank of Pakistan has invigorated the banking sector into seeking high returns on investment.

Pakistan’s coal resource potential is estimated to be around 186 billion tons. Of these resources about 175 billion tons are located in Sindh Province at Thar, one of the single largest coal deposits in the world.

Thar coal resources have an estimated potential of generating 100,000 megawatts of electricity over a period of more than 100 years. Thus, this resource provides a wonderful opportunity for large scale mining and power generation over long period of time. Besides, Thar coal fields are located 296 km from Karachi port in the south eastern arid zone region of Pakistan which is one of the most peaceful and harmonious area of the country.
There are many potential investment options in Thar, including coal mining where investors interested only in mining may apply for a mine lease; an integrated coal and power generation project for which investors may also opt for investing in an integrated coal mining and power generation project; mine mouth power project, where the Thar coalfields present the best opportunity for mine mouth power projects in view of the great demand for energy in the country.

Anonymous said...

Why is Goldman Sach's opinion about Pak is anything more important than their term BRIC.

Riaz Haq said...

Anon: "Why is Goldman Sach's opinion about Pak is anything more important than their term BRIC."

It's important for investors who see focus on BRIC too limited and would like to diversify their portfolio to take advantage of growth opportunities elsewhere. That's why GS has set up an N-11 fund with symbol GSYAX.

little_saturn said...


Interesting article but the total asset of the fund is around 19.80 mn usd for investment in the eleven countries could be very small to the total portfolio of goldman

Riaz Haq said...

LS: "total asset of the fund is around 19.80 mn usd for investment in the eleven countries.."

It's not unusual for a new fund. Besides, there are other funds like Castlestone which also focus on N11 nations.

little_saturn said...

bric 2 bn usd
china 2 bn
asia 16 bn

This gives the details of trading by FII in india which will be few billion usd.

Riaz Haq said...

LS: "This gives the details of trading by FII in india which will be few billion usd."

It just shows how Goldman Sachs' forecasts become self-fulfilling prophesies....expect the same for N-11, a Jim O'Neill construct that came several years after he coined BRIC.

Iqbal Singh said...

Globally, approximately 1.5 trillion dollars annually are invested according to Goldman Sachs.

To put things in proper perspective, Pakistan's FDI for the DECADE ending 2010 was 23 billion!

Riaz Haq said...

Iqbal Singh: "To put things in proper perspective, Pakistan's FDI for the DECADE ending 2010 was 23 billion!"

Yes, let's put in perspective. The $21 billion FDI in 2001-2009 came in spite of a major insurgency raging in Pakistan. About $15 billion of it came in just three year-2005/6/7- before the TTP started a major campaign of suicide bombings.

Can you imagine how quickly it can change once the insurgency gets under control?

Talking about foreign direct investment (FDI) in his 2007 book, former US Federal Reserve Chief Alan Greenspan said: “But clearly the Licence Raj (in India) has discouraged foreign direct investment. India received $7 billion in FDI in 2005, a sum dwarfed by China’s $72 billion. India’s cumulative stock of FDI at 6 per cent of GDP at the end of 2005 compares with 9 per cent for Pakistan, 14 per cent for China, and 61 per cent for Vietnam. The reason FDI has lagged badly in India is perhaps no better illustrated than by India’s unwillingness to fully embrace market forces. That is all too evident in India’s often statist response to economic problems. Faced with rising food inflation in early 2007, the response was not to allow rising prices to prompt an increase in supply, but to ban wheat exports for the rest of the year and suspend futures trading to ‘curb speculation’ — the very market forces that the Indian economy needs to break the stranglehold of bureaucracy.” (p. 322 of "The Age of Turbulence" by Alan Greenspan.)

Already, the death toll from terrorism in Pakistan is declining for three years in a row, and the economy is expected to post a recovery to 4% in 2011-12.

Ashmit (India) said...

"Can you imagine how quickly it can change once the insurgency gets under control?"

Vague...arbitrary...It's the same as saying - can you imagine how many girls i would be dating if i was George Clooney? But guess what - i'm NOT clooney and he's gay.

As for the various excerpts that you have highlighted as evidence of foreign investors' interest - you, appear to have, cherry picked information to present a marginalized view as the majority opinion. Because, despite your lengthy arguments and citations, facts on ground zero, tell a different story.

Despite the “potential”, that you have so stubbornly tried to highlight – according to the latest figures by SBP, between July 2011 and Feb 2012, foreign inflows into pak have dipped by over 70%. FDI is down by over 46% and portfolio investments have dipped by 141%.

And if you would like to argue against the relatively small time period that such data covers – how about tracking the performance of the pak rupee as a barometer of foreign interest. There has been little respite for the pak rupee as it continues its free fall.

Clearly, despite advocates such as yourself, it appears that many of whom you quote are, merely, paying lip service.

Riaz Haq said...

Ashmit: "Despite the “potential”, that you have so stubbornly tried to highlight – according to the latest figures by SBP"

Forget potential for a moment and just look at the cumulative FDI inflow data from 2000-2010 for both India and Pakistan:

India $200 billion---about 11% of GDP

Pakistan $23 billion--about 11.5% of GDP.

Riaz Haq said...

Top adviser says 70% of Indians are poor, according to IANS:

Debunking the government's claim that the number of poor in India has come down, a top adviser has claimed that around 70 percent of the country's 1.2 billion population is poor, and stressed the need for a multi-dimensional assessment of poverty.

"The government claim that poverty has come down is not valid... there is a need for a multi-dimensional assessment of poverty as around 70 percent of the population is poor," National Advisory Council member N.C. Saxena told IANS in an interview.

According to Saxena, the various poverty estimates the government relies on to assess the impact of developmental schemes are faulty as they fail to factor in the lack of nutritional diet, sanitation, drinking water, healthcare and educational facilities available to the people.

The former bureaucrat, who now is part of the NAC that reports to Congress president Sonia Gandhi, claimed that not only the National Sample Survey Organisation data is faulty, the ongoing Socio-Economic and Caste Census, which is expected to throw up the latest poverty estimates, is highly flawed.

"The NSSO data is unreliable and the SECC is highly flawed," said Saxena.

The National Advisory Council (NAC) was set up as an interface with civil society. The NAC provides policy and legislative inputs to the government with special focus on social policy and the rights of disadvantaged groups.

After the government faced flak over its latest poverty estimates, according to which anyone earning over Rs.28 per day in urban areas and Rs.26 per day in rural areas is not poor, Prime Minister Manmohan Singh said a multi-layered approach is required to assess poverty as the widely accepted Tendulkar committee report "is not all inclusive".

The government now plans to set up another expert panel to devise a new methodology to assess poverty levels in the country, said the prime minister.

The government recently revised its poverty estimates from earlier Rs.32 per day in urban areas and Rs.26 per day in rural areas based on 2011 prices, to the current estimate which is based on 2009 prices.

Using the Tendulkar panel report, the Planning Commission pegged poverty at 37.5 percent of the population.

Saxena said in reality out of about 200 centrally sponsored schemes, only 5 or 6 are linked to the poverty estimates, pegged at 37.5 percent by the Planning Commission.

Having a realistic assessment of poverty in not only crucial for the government to ensure that around Rs.80,000 crore that it spends on various welfare schemes annually reaches only the genuinely poor, it is also important for the United Progressive Alliance which hopes to roll out the ambitious National Food Security Bill, which aims to provide subsidised rations to around 65 percent of the 1.2 billion population some time next year.

Riaz Haq said...

Here are excerpts of former PM Shaukat Aziz's recent interview with Fortune magazine:

Q. It's been more than six years since Goldman Sachs (GS) recognized Pakistan among the Next Eleven newly industrialized countries -- inflation is up, investment is at a 40-year low, and infrastructure is deteriorating, particularly in the power sector. By just about any measure things are not particularly good, so what is the source of your optimism about the Pakistani economy?

A. The problems of the world economy have obviously leaked to Pakistan. Yes, investment is down, trade also, but in Pakistan's case a lot of this is due to the security situation, the war on terror. We have to pay a huge price in terms of damaging our investor confidence -- both domestic and foreign.

On the other hand, we should bear in mind that more than two-thirds of the population lives in rural areas and agriculture has done well, especially in cotton -- prices and exports are up and the farmer is relatively more comfortable.

The country's human capital is a strong suit, the Pakistani people are very talented, their skills levels are impressive and they are hard-working. There's a huge number of Pakistanis working overseas and we can export a few more million and there won't be an iota of difference because there is a whole pipeline of trained – and untrained - people coming.

Q. You mentioned the need for good management. How would you assess the current management of the economy? I ask that in light of the lapsing of the stabilization plan with the IMF.

A. Being out of the IMF -- obviously this reflects the desire of the government to have more flexibility to pursue its reforms. The IMF program does bring with it certain macroeconomic discipline and that's beneficial, but I also believe in economic sovereignty. You need good governance and good management, but abdicating the economy to the IMF is not the way to succeed. What we need is growth and job creation, like every other country in the world.

Q. The disagreement with the IMF is at least in part related to tax collection, which has been notoriously weak in Pakistan. There is a lot of concern whether Pakistan can muster the political will to make tough reforms, partly because of self-serving elites among the political class that have brought the country to the point of being nearly a failed state.

A. No, I think that's not true. The country is large -- roughly 180 million people -- and it's functioning. It has many challenges -- governance issues, transparency and management issues -- on top of the security issues that have cost us dearly. But the country is functioning. Obviously it could function better, but it's not come to a grinding halt. Life is going on.

Riaz Haq said...

Here are some excerpts of The Australian story on the eve of BRICS summit:

INDIA is routinely touted as a big emerging market and a rising global player. Tomorrow New Delhi will host the fourth BRICS summit of the non-Western powerhouses Brazil, Russia, India, China, and South Africa.
Most major global corporations have a presence there, with substantial expansion plans. Many Indian corporations are expanding their footprints abroad, including in Australia, through investment, mergers and acquisitions. India's growing economic weight has translated into increased political clout.
And yet India has the world's biggest pool of poor, sick, starving and illiterate. It ranks 134 on ease of doing business indicators, 119 on human development, 122 on gender equality, and 87 on corruption. On average, more than 16,500 farmers have committed suicide every year for 13 years running. The annual road death toll is around 150,000, thrice as many as the US or, on a per vehicle basis, almost 20 times the US. Most of those killed in India's traffic accidents are pedestrians, cyclists, motorcyclists and pillion riders - those from the poorer end of society.

Even this single statistic is a proxy for several ailments, including inadequate infrastructure that adds to road risks and public corruption that ensures weak compliance with driving skills and safety regulations.

A report published in January by the Hong Kong-based Political and Risk Consultancy rated India's bureaucrats the most inefficient in Asia with a score of 9.21 out of 10, below China (7.11), The Philippines (7.57), Indonesia (8.37) and Vietnam (8.54). Singapore was judged the best (2.25) followed by Hong Kong (3.53). The report was based on a survey of business executives. Respondents also highlighted onerous and complex tax, environmental and other regulations and a time-consuming, costly and unpredictable court system.

Also in January, the Program for International Student Assessment published its findings of comparative national academic performance of 15-year-old school students in maths, science and English. In the 73 countries tested, India came second last, ahead only of Kyrgyzstan. An eighth-grade Indian student fared the same as a South Korean grade three or a Shanghai grade two student.

Yet another study, also published in January, based on a survey of height and weight of more than 100,000 children in six states, found that 42 per cent of India's children were moderately-severely underweight, and 59 per cent suffered from moderate-severe stunting. Prime Minister Manmohan Singh described the results as a "national shame".

The following month a government committee concluded that Indian railways have been responsible for thousands of deaths. Some 15,000 people are killed every year trying to cross unfenced railway tracks, half of them in Mumbai alone.

The report called for urgent investment, but when the Railway Minister announced a fare increase to raise the revenue base to invest back in railways for modernisation and upgrade of services and safety, he was forced to resign by his own party, which is in the coalition government.

We read last year how India has more mobile phones than toilets. Some years ago, I had organised an international workshop in a resort along a beautiful stretch of India's eastern coast.

A European participant decided to go for a pre-breakfast run along the beach. I well remember his look of utter disgust and horror as he told us how he had to thread his way through the folks of the village squatting along the beach, defecating. According to a UNICEF survey last year, 58 per cent of the world's population practising open defecation lives in India....

Riaz Haq said...

Here's a Wall Street Journal report on Gilani-Singh meeting in Seoul:

Mr. Singh met Pakistan Prime Minister Yousuf Raza Gilani briefly on the sidelines of a nuclear summit in Seoul on Tuesday. He told reporters Wednesday that he’d thanked Mr. Gilani for recent trade concessions and offered to make an official visit to Pakistan.

“I had a good meeting with him. I thanked him for the trade concessions that they have announced. He said when are you coming there (Pakistan). So, I said let us do something solid so that we can celebrate,” the Press Trust of India quoted him as saying. Mr Singh also said he told M. Gilani that he would “look into” the Pakistani leader’s request for India to supply power.

The chumminess of this encounter is likely to annoy India’s Pakistan hawks, who see no reason to make gestures toward Pakistan. Islamabad has failed to push ahead with the trials of the seven men it has charged with attacks on Mumbai in 2008 which killed more than 160 people and should be shunned until it does so, they argue.

Mr. Singh has taken a different approach.He invited Mr. Gilani to watch a World Cup cricket match between India and Pakistan a year ago, an act which sparked hopes of cricket diplomacy.

Although no breakthroughs have happened on the big issues that bedevil relations, like over the disputed Himalayan region of Kashmir or what India says is Pakistan’s continued support of militant groups, India and Pakistan have edged forward in recent months on other, smaller issues, like trade.

Last month, Pakistan agreed to normalize trade with India by the end of the year, a move which is part of a strategy to build confidence without yet touching issue like Kashmir.

This is a strategy dear to Mr. Singh’s heart. He’s said in the past that building economic ties with Pakistan is crucial to achieve peace but also to give India access to trade through Central Asia and beyond.

But the focus on trade has angered some in India, who see it as obfuscating the goal of getting Pakistan to crack down on militant groups. In Pakistan, too, there has been some opposition to normalizing trade with India. Mr. Gilani told Mr. Singh getting domestic support for the move was not “entirely easy,” PTI reported.

Gul Kapoor said...

Seems you are fascinated by the idea of open defecation in many of your blogs.

Pakistan isn't that far off, (women surprisingly are not counted - UNICEF). Here is an article from The Dawn.
ISLAMABAD: As many as 97, 900 people died annually due to poor water and sanitation in Pakistan, said a report released here on Friday by an international charity.

The report by WaterAid titled: “Off-track, off-target: Why investment in water, sanitation and hygiene is not reaching those who need it most”, was released by the WaterAid`s Country Representative in Pakistan Siddiq Khan on World Toilet Day being observed on November 19 globally.

It said that 48 million Pakistanis defecated in the open and basic toilet was a distant dream for them.

Pakistan had committed under Millennium Development Goal to supply safe water to 93 per cent and adequate sanitation facilities to 64 per cent of the population by year 2015.

Yet, according to the report, only 45 per cent people used improved sanitation facilities in Pakistan. At current rates of progress the water target would be missed by 7 years (2022) and the sanitation target by 13 years (2028).

The report quoting figures from the World Health Organisation (WHO) and Unicef estimated that in Pakistan 54,000 children under the age of five died from diarrhea caused by contaminated water and sanitation every year.

The report said that unless urgent action was taken, the Pakistan Government would fail to meet the MDGs, including the pledge they made to halve the proportion of people without sanitation by 2015. This had massive consequences for child mortality in the country.

WaterAid’s Country Representative in Pakistan, Siddiq Khan said the government also must increase the level of spending on water and sanitation, and donor governments increase the share of aid they spend on water and sanitation, so that the situation could be turned around

Riaz Haq said...

Kapoor: "Pakistan isn't that far off"

Yes, but here's the bottom line.

India will not reach its Millennium Development Goal on sanitation before 2047, while Bangladesh, Pakistan and Nepal will not achieve the target before 2028, according to a United Nations report released on the eve of World Toilet Day 2011.

The WaterAid report titled "Off-track, off-target: Why investment in water, sanitation and hygiene is not reaching those who need it most" says that 818 million Indians and 98 million Pakistanis lack access to toilets. It also reports that 148 million Indians and 18 million Pakistanis do not have adequate access to safe drinking water.

vishesh said...

Here is an answer to your various rants about how the kse performs better than any other stock exchange including the Sensex.

1) the kse doesn't have a lot of FII inflows into it and hence is insulated from the world economic conditions.

2) majority of the traders and the money that goes into it is local and since the people do not want to invest in anything as investing in other things will be very risky, they put their money into the stock markets.

Hence,the rise of kse only shows the sign of no confidence of your countrymen on investing in other sectors in the country as it is absolutely unstable on the verge of drowning.

here is an article on the state of investments in your country.

Oh and by the way, India managed to eradicate polio, leaving your country among 3 with polio

Riaz Haq said...

vishesh: "the kse doesn't have a lot of FII inflows into it"

FII, also called hot money, has been in and out over the years. Yet, the bottom line is that KSE has outperformed its BRIC counterparts by a significant margin over the last the last ten years. Depending on FII is dangerous because it is so volatile. It leaves as fast as it comes in, causing a lot of damage....and causing the kind of crises we saw in Asia in 1997.

FDI is more important for development bevcause it represents a longer-term commitment. So let's look at the cumulative FDI inflow data from 2000-2010 for both India and Pakistan:

India $200 billion---about 11% of GDP

Pakistan $23 billion--about 11.5% of GDP.

vishesh:"India managed to eradicate polio, leaving your country among 3 with polio"

Yes, it's a problem that Pakistan must deal with in spite of the fact most of it is in insurgency-hit FATA region.

But why single out polio? Why not look at the overall disease burdens as reported by WHO?

In the range of DALYs/1000 capita from 13 (lowest) to 289 (highest), WHO's latest data indicates that India is at 65 while Pakistan is slightly better at 58. In terms of total number of deaths per year from disease, India stands at 2.7 million deaths while Pakistani death toll is 318, 400 people. Among other South Asian nations, Afghanistan's DALYs/1000 is 255, Bangladesh 64 and Sri Lanka 61. By contrast, the DALYs/1000 figures are 14 for Singapore and 32 for China.

Recent research shows that there are potentially far reaching negative consequences for nations carrying high levels of disease burdens causing lower average intelligence among their current and future generations.

Anonymous said...

By the way, while you are busy juggling stats on defecation – here’s some food for thought. A recent report, titled – “Wealth Report 2012 by Knight Frank & Citi Private Bank”, says that India will be the largest economy by 2050. It says that the centre of power, in the future, will lie somewhere between India and China. The report goes on to add that Indian cities – Delhi and Mumbai, will be amongst the top 20 by 2050.

In the context of Pakistan – apparently, it just isn’t relevant enough to find a place in this report. Between 2010 and 2050, the report highlights the fastest growing nations. India is placed second, Bangladesh at fourth and Sri Lanka at ninth. No mention of Pakistan. South Asia, apparently, is expected to grow – just not Pak.


Riaz Haq said...

anon: "A recent report, titled – “Wealth Report 2012 by Knight Frank & Citi Private Bank”, says that India will be the largest economy by 2050...No mention of Pakistan. South Asia, apparently, is expected to grow – just not Pak."

These kinds of reports are dime a dozen; they ignore past history of several decades. Instead, the analysts who prepare these reports simply extrapolate the current data out several decades.

Anonymous said...

These kinds of reports are dime a dozen; they ignore past history of several decades. Instead, the analysts who prepare these reports simply extrapolate the current data out several decades.

yup just like N-11 what an absurd concept Nigeria,Pakistan,Mexico...hmm

there is also a CIVET :Chile Indonesia vietnam egypt thailand and many other such acronyms.

But none as compelling or successfull as the BRIC major emerging economies with nominal GDP>1 trillion.No other developing country is even $500 billion and by next year all the BRIC countries will have GDP>2 trillion(nominal USD)

Riaz Haq said...

anon: "yup just like N-11 what an absurd concept Nigeria,Pakistan,Mexico...hmm"

No more absurd than BRIC... described by an investment analyst as Bloody Ridiculous Investment Concept.

anon: "No other developing country is even $500 billion and by next year all the BRIC countries will have GDP>2 trillion(nominal USD)"

Oh really? Please check your facts.

Mexico $1.567 trillion

Indonesia $1.03 trillion

South Korea $1.46 trillion

Turkey $960 billion

Pakistan's PPP GDP $550 billion

Riaz Haq said...

Here's an Op Ed in The Nation written by economist and author Dr. Kamal Monnoo:

While there is no denying the fact that Pakistan’s economic health, its global ratings and image per se are all taking a serious dent and, of course the recent (released in February 2012) IMF report on the state of the Pak economy notwithstanding, the reality also is that it has a very resilient and robust side that continues to surprise. A picture that depicts the glass to be at least half full, points to the sectors that are consistently growing and adding value and, more importantly, exposes the huge underlying economic potential which despite poor governance keeps taking the national economic activity to the next level. Amidst great adversities and serious financial challenges, there does exist a silver lining on how the economy has performed over the last 12 months and some of the positives going forward.

On the back of a slowly but surely evolving middle class, there exists a visible consumption boom in the economy where companies are going through a period when domestic sales have never been higher. An exceptionally high percentage of young employable youth is unearthing new dynamics, as these fresh minds strive to create their own opportunities, thereby unleashing a wave of innovative entrepreneurial benefits. For example, the quality and speed at which the Pak urban consumer and service sectors (fashion wear, eateries, home decor, healthcare centres, private education, beauty salons, leisure and entertainment etc) are growing has but a few parallels in the world.

The inflow of foreign exchange remittances by Non-Resident Pakistanis (NRP) has never been stronger and provided its current rate of growth does not stall, the government envisages that the final figure is well on course to touch the $18 billion per annum level. Add to this, the fact that our exports registered $25 billion in 2011 and the possibility that if we can somehow supplement these inflows from NRP remittances and national exports, by re-attracting the presently dried up Direct Foreign Investment, there actually exists a strong case for successfully balancing our current account status - Pakistan as we know (even with the oil prices are high) is an economy that traditionally imports between $35 and $38 billion per annum.

The reserves in the meanwhile have held their ground at around the $17 billion mark and when doing a regional comparative analysis on parity with the US dollar one finds that the Pak rupee has also fared better than most of its neighbours. In fact, against the European currencies, like the Euro and the Sterling, the Pak rupee has gained in value when comparing its parity during the pre- and post-European crisis periods.

Further, according to the latest data released by the FBR, the revenue collection this year is on target and is likely to cross the Rs2,000 billion mark for the first time in history. ...
Large Scale Manufacturing (LSM) has begun to turn the corner by registering a 1.50 percent growth from negative 0.80 percent in 2011, more than 1.50 million motorcycles were sold last year and Automobile Sector’s sales are about 30 percent above from the fiscal year 2004-05 (regarded by auto pundits to be their best year). Companies and banks in general have announced healthier profits with especially the consumer goods companies leading the pack by churning out some unprecedented results. This coupled with the new policy announcement on investment in the shares markets has given a boost to the stock markets with the KSE (Karachi Stock Exchange) Index climbing to near 14,000 points. If the returns can continue to be interesting, such an opportunity is bound to even lure back foreign investment into the Pakistani markets.

Ashmit (India) said...

Just thought you should know. The board of Goldman Sachs is busy "romancing" India.

It appears that Jim O'Neill's "disappointment" with India hasn't kept Goldman from trying to "charm" India.

Is a similar meeting in pak on the cards?! Just thought i'd ask...



Riaz Haq said...

Karachi stock index KSE-100 outperforms Mumbai's Sensex in Q1/2012.

During the three-month period, the benchmark KSE-100 index posted a gain of 2,414 points, up 21 percent (20% in terms of US), according to Business Recorder.

During the same period, Mumbai's Sensex rose 12.6%, according to Marketwatch.

Pradip Malhotra said...

"Karachi stock index KSE-100 outperforms Mumbai's Sensex in Q1/2012."

Your cross comparisons with the Sensex is a nonsensical issue. Almost all institutional investors invest in a region or certain type of a market. No one in their right mind will invest in the KSE or the Sensex alone.

Riaz Haq said...

Is India another illusion? asks Pierro Scaruffi of IEET:

Last year I predicted that the Chinese bubble will burst soon, and that it’s unlikely that China will become the biggest economy in the world any time soon, contrary to what most analysts predict (See The great illusion?). Now it looks like India might also disappoint, although for completely different reasons.

The closer we look, the more Indian ills look like a scary combination of European ills and American ills. Start with the budget deficit: India’s economy needs to grow frantically just to pay its debt, which is about 8.5% of GDP. Defense spending increased 10% last year and this year should grow even faster. At the same time, growth is projected to slow down to 6-7%. That sounds a lot like the problem the USA is facing with colossal defense spending that is not justified by the facts on the ground (who’s planning to invade the USA? who’s planning to invade India?)

On top of defense spending, the Indian government also spends billions to provide subsidies to the oil industry and to farmers. Just like the USA. Finally, the Indian parliament resembles the fractured and paralyzed parliaments of Italy and Belgium, in which the governing party is tamed by the tiny allies that it needs in order to claim a majority. Just like Europe, the balance sheet and ridiculous bureaucracy are scaring away foreign investors.

India is famous for a dumb and gargantuan bureaucracy, which was never truly reformed when it moved from pseudo-communism to free-market capitalism, and that bureaucracy recently has been at work to make it difficult for anybody to do business in India. (And even for tourists to visit it: India is the only country in the world that forbids tourists from reentering India for two months).

The social and political problems of India have long been ignored by the world as remote and passing nuisances.

The truth is that many more people are killed by terrorists of various factions in India than in the other emerging powers.

The truth is that India still has a caste-based system that has created incredible social injustice.

The truth is that India, unlike China, Brazil and Russia and virtually any other emerging country, is a federation of linguistically and ethnically different states, a fact that could potentially derail the union.

The truth is that it is the largest Muslim country in the world (or second largest after neighboring Pakistan), a fact that constitutes a perennial threat to its identity.

The truth is that, unlike China, Russia and Brazil, who are unlikely to go to war with any of their neighbors, India is in a constant state of alert along the border with Pakistan, a nuclear enemy.

The truth is that corruption in India is more widespread than even in Russia (see for example for example).

The truth is that this year 27 million babies will be born in India (versus 10 million in China and 4 million in the USA): India needs to create an improbable number of jobs to improve the conditions of its population, or even to keep it where it is and avoid social unrest.
The closer one looks, the less reassuring India looks as a place to invest money.

This would matter little if growth were still exponential and business opportunities were popping up everywhere. However, just like China, India is vulnerable to oil prices and to prices of commodities in general. Those prices are unlikely to come down any time soon, now that the US economy is picking up steam.

Last but not least, India may have run out of Western customers willing to offsource jobs to cheaper English-speaking countries (i.e., to India) and may have to rely on its own domestic market. That market is, in theory, huge. Alas, the World Bank estimates that 300 million of them live under the poverty line, and the others have an average salary which is below $1,000 a month

Riaz Haq said...

Here's an excerpt from a Dawn Op Ed by economist Sakib Sherani:

The estimates of the size of Pakistan’s middle class are truly astounding. Amongst the first to take a stab at this nearly a decade ago, as part of a request from a large fast-moving consumer goods (FMCG) client, I estimated the cohort to be at around 35 to 40 million, using a global definition of ‘middle class’ taking into account just one parameter — income. Later, eminent economic historian and commentator Shahid Javed Burki published his estimate in the context of the expansion of the middle class in the Musharraf years, and also arrived at a figure of around 40 million.

More recently, while preparing my presentation on ‘The Pakistan Opportunity’ for the Marketing Association of Pakistan’s flagship event MARCON 2012, I updated the figures arrived at earlier, making one crucial adjustment: for the estimated size of Pakistan’s undocumented (or, ‘black’) economy. The adjusted figure for the middle class is a staggering 70 million people, or 40 per cent of the population.
To put this number in perspective, Pakistan’s middle class is larger in size than the individual population of UK, France and Italy — and is a shade smaller than the total population of Germany. In absolute terms, it is the fourth largest middle class cohort in Asia, behind China, India and Indonesia. Affluent, educated, urbanised, and increasingly ‘globalised’, Pakistan’s middle class is not only growing, but is already a voracious consumer. The ADB report estimated total consumption spending by this group at $75bn.

This can be gauged by the furious pace of sales nationwide of cars, motorcycles, cellphones and durable goods over the past few years. Over 1.5 million motorcycles and nearly half a million cars have been sold in the country since 2008 (based on registration data), while the number of cellular subscribers has crossed over 100 million. True, despite such ‘glamorous’ numbers, Pakistan is a two-speed economy where the vulnerability of too many people has increased. Successive shocks to the economy — a severe energy crisis, unprecedented floods for two consecutive years, a fight against militancy which has gone on for several years — have all taken their toll on jobs and incomes.

However, despite these challenges, what amazes observers and commentators alike is the sheer resilience of the Pakistani nation.

Over the past few years, this resilience has come to a large extent from the performance of the rural economy, which has drawn strength from bumper crops and booming prices. The government’s intervention in the market for wheat has poured an additional several hundred billion rupees into the rural economy, propelling demand for cars, motorcycles, tractors, durable goods as well as fast-moving consumer goods (FMCG). In fact, the FMCG sector has witnessed an unprecedented boom in sales since 2008, which has defied expectations — and gravity.

Additional support for consumption has come from remittances from the Pakistani diaspora, and, in part, from the fiscal behaviour of the government which has injected several hundred billion rupees into the economy via borrowing from the central bank. From the foregoing, it is clear that the Pakistani consumerism story is not cyclical, but has structural underpinnings. Rapid urbanisation, a young, mobile and spirited population entering the work force, global connectivity via the Internet, social media and cable TV are all driving aspirations — and conspicuous consumption...

Riaz Haq said...

Here's NY Times piece by Jim Yardley on growing clout of Indian business lobby in New Delhi's policies:

The foray into Pakistan is further proof of the increasingly important role of India’s private sector in foreign policy. India’s leaders, eager for a bigger footprint in global affairs, now aspire to a permanent seat on an expanded United Nations Security Council. But the Indian Foreign Service, though consisting of top-notch officers, is too understaffed to provide a comprehensive global presence.

To compensate, the government often relies on the private sector to serve as an intermediary abroad. India’s two leading business groups — C.I.I. (the Confederation of Indian Industry) and Ficci (the Federation of Indian Chambers of Commerce and Industry) — now have offices around the world and sponsor informal diplomatic dialogues between India and countries like Japan, China, Singapore and the United States.

Riaz Haq said...

Here's an Express Tribune story on Tradekey, a B2B company based in Karachi:

You would never think that a company that was giving – the world’s largest business-to-business portal – a run for its money around the world was based out of Karachi and yet there it is. Tucked away in an office suite on Sharae Faisal, the global headquarters of look rather unremarkable, until you start asking the executives what they have achieved and what they plan on doing next.

“We want to be one of the world’s biggest companies,” says Junaid Mansoor, the founder and CEO of Tradekey, in a rather matter-of-fact tone of voice. “We want to be in businesses that affect the largest number of people.”, the world’s third largest B2B portal, is certainly an impressive beginning by the 32-year-old Mansoor, though by no means his first venture into the world of web-based start-ups. The serial entrepreneur created his first company when he was just 15 years old: a web-based e-mail service that promised to share its revenues with its users. (The site – – went bust when the dotcom bubble burst in 2001). has about 5.8 million members, of whom only about 5,000 have paid subscriptions, the source of the bulk of the company’s revenues, though the company also offers advertising services. While it does not release financial information about itself, based on the company’s fee for its two levels of premium services, Tradekey’s revenues are estimated to exceed $3 million a year.

Crucially from the company’s perspective, however, it has been growing at a rate of more than 86% a year (Tradekey did not offer a precise number). According to Mansoor, an analysis conducted by a third-party expert valued the company at around $700 million......

Anonymous said...

Dr. Haq,

Please blog about the results of
our 2011 population census as revealed on 29th March by "The News" Daily in Pakistan.

It says our current population is 197 million.

What does this do for per capita
calculations? Per capita income,
per capita water?

It also says our population grew by 47% since 1998.

This implies a CAGR of 2.8-3.0%.

Does this mean our goverment has
been fudging the previous estimates of 1.6% pop growth?

The difference is too great. How
can this be?

Please research and comment.

Riaz Haq said...

HopeWins: "What does this do for per capita calculations?"

We'll know officially in June this year. I expect total nominal GDP to grow about 16% YoY (4% real growth & 12% inflation) to exceed US$ 250 billion in fiscal 2011-12....or US $1330 per capita for 192 million people (excluding Azad Kashmir).

As far as Goldman Sachs is concerned, the primary criterion for being a growth market is the size of the population. Higher population just increases Pakistan's relative importance among BRIC+N11 nations for investors.

Pete Chandra said...

" I expect total nominal GDP to grow about 16% YoY (4% real growth & 12% inflation) to exceed US$ 250 billion in fiscal 2011-12....or US $1330 per capita for 192 million people " - Riazeconomics

Are you suggesting then higher the inflation in non-dollar terms translates to a higher per capita in dollar terms!

What about currency devaluation. High rupee inflation actually lowers the per capita in dollar terms.

Please check these sources:
IMF, Economist, CIA Factbook and the World Bank

Riaz Haq said...

Chandra: "What about currency devaluation. High rupee inflation actually lowers the per capita in dollar terms."

Pak rupee is down about 4% relative to US $ in FY 2011-12, a lot less than the 12% rupee inflation rate.

The Indian rupee is down about 12% relative to US $ in FY 2011-2012 so far.

Pete Chandra said...

"Pak rupee is down about 4% relative to US $ in FY 2011-12, a lot less than the 12% rupee inflation rate.

The Indian rupee is down about 12% relative to US $ in FY 2011-2012 so far. " - Riazeconomics

Data from a single year doesn't give you the full details here.
In 1992 one US dollar bought 24.98 PKR and 25.92 INR
Pakistan per capita GDP real terms 380 and so was

Today $1 = PKR 90 = INR 50
GDP per capita (2011) PPP per IMF and the Economist
PK 2700 IN 3700

Riaz Haq said...

Chandra: "Data from a single year doesn't give you the full details here."

I'm talking about official data from Economic Survey of Pakistan for FY 2010-2011 (and projected data for FY 2011-2012)....IMF, WB and other IFIs also use this data.

According to Economic Survey of Pakistan, Pak GDP in 2010-11 was $1254 nominal or US $3100 PPP.

Even if Pak's nominal gdp grows by 12% this year (4% real growth+12% inflation-4% PKR depreciation), it will still be $246 billion or, for 192 million people, it'll be $1283 per capita nominal or $3207 PPP.

Riaz Haq said...

Here's a Reuters' report on Pak shares and currency markets:

(Reuters) - Pakistan stocks rose almost 1.8 percent to a new four-year high on Wednesday, led by blue chips on hopes of progress on capital gains tax (CGT) reforms, dealers said.

The Karachi Stock Exchange (KSE) benchmark 100-share index ended up 1.79 percent, or 244.83 points, at 13,945.30 points, its highest close since May 2008.

Volume rose to 409.3 million shares, compared with 318.14 million shares traded on Tuesday.

"Investors remained interested in blue-chip stocks as volumes climbed to 9 billion rupees ($99 million)," said Samar Iqbal, a dealer at Topline Securities Ltd.

Among heavyweight companies, the National Bank of Pakistan ended 5 percent higher at 49.40 rupees, Pakistan Telecommunication Co Ltd closed up nearly 1 percent at 12.61 rupees and Oil and Gas Development Co Ltd rose 2.5 percent to 168.15 rupees.

In the currency market, the rupee ended firmer at 90.30/35 to the dollar, compared with Tuesday's close of 90.49/54 to the dollar amid a lack of import payments.

The rupee has also been supported recently by remittances from overseas Pakistanis, rising by nearly a quarter to $8.59 billion in the first eight months of the 2011/12 fiscal year, compared with $6.96 billion in the 2010/11 period.

In February, remittances totaled $1.16 billion.

In the money market, overnight rates fell to 9.10 percent, compared with the previous day's close of 9.75 percent amid increased liquidity in the interbank market.

Riaz Haq said...

Here's a Businessweek story on Pakistan's informal economy:

It’s early morning in Karachi, Pakistan’s biggest city, and Muhammad Nasir is outside his makeshift shelter of palm leaves, rags, and bamboo, washing up after breakfast. He uses water stolen from a nearby supply pipe that belongs to the local water utility. The 17-year-old bids farewell to his mother, an unlicensed midwife, and walks to his tire-repair shop, an open-air stand in a residential area with a table of tools and a wooden bench. He checks to make sure the electricity he’s drawing illegally from the overhead power line is on so he can run his tire pump. Then he sends 10-year-old Abid, one of his two employees, along with 12-year-old Irfan, to get tea from a nearby shop.

Nasir’s business, his home, his power and water supply, and even the cup of tea Abid brings him don’t exist in Pakistan’s official figures. They’re part of another economy that doesn’t pay taxes or heed regulations. It probably employs more than three quarters of the nation’s 54 million workers and is worth as much as 50 percent of Pakistan’s 18 trillion rupee ($200 billion) official gross domestic product. And while the documented economy had its smallest expansion in a decade at 2.4 percent in the year ended June 2011, soaring demand for cars, cement for houses, and other goods shows the underground market is thriving.
the nation’s purchasing power is more than estimated, says Nadeem Naqvi, managing director of the Karachi Stock Exchange. Rising crop prices have pumped an extra 1 trillion rupees into the rural economy in the past four years, most of it undocumented, Naqvi says. He estimates agriculture may account for as much as 35 percent of GDP, instead of the 21 percent reported.

Evidence of consumer demand is everywhere as new shopping malls and restaurants in Karachi are filled to capacity. Car sales rose 14 percent in February from a year earlier, as more people could afford a Toyota Corolla or Suzuki Mehran (a small hatchback), according to the Pakistan Automotive Manufacturers Association. More than half a million motorbikes hit the road in the eight months ended February, a 5 percent increase, perhaps a sign that Nasir’s tire business has a bright future. ..

Riaz Haq said...

Here's an excerpt from Express Tribune on FBR's efforts to collect taxes:

In an effort to document black economy in phases, the government has decided to gradually enforce the condition of declaring national tax numbers or identity card numbers at the time of bulk purchases.

In this regard, the Federal Board of Revenue (FBR) has amended existing rules and added a chapter to Sales Tax Rules of 2006. According to a statutory regulatory order issued here on Friday, the condition will gradually be enforced from March to July this year.

In the first phase beginning March 1, all manufacturers, importers and exporters have been asked to make minimum 60% of their sales to identifiable persons having either sales tax registration number, national tax number (NTN) or computerised national identity card (CNIC).

While there are no official estimates of the size of the black economy, independent experts and former tax officials put the figure in the range of 50 to 60% of the total size of formal economy. For the current fiscal year, the projected size of national economy is Rs21.04 trillion, according to the finance ministry.

The government had earlier tried to enforce the NTN/CNIC condition from July 2011 but fierce opposition from businesses forced it to defer the plan to January 2012. Now, it has decided to fully implement the much talked about condition by July this year.

An official of the FBR said the purpose of gradual implementation was to facilitate the industry and now this condition would also be applied to the sugar industry, which had earlier been granted exemption.

However, retail supplies will remain exempted. According to the notification, manufacturers-cum-retailers and importers-cum-retailers making retail sales to unregistered persons will not be required to provide CNIC number or NTN to the extent of retail sales, which will be separately shown in sales tax return.

The notification further states that provisions of the newly added chapter will be applied to registered manufacturers, importers and exporters while making taxable, dutiable or exempted supplies to unregistered persons.

The FBR has asked all registered manufacturers, importers and exporters to issue an invoice containing NTN or CNIC number of the buyers. The sellers will be bound to declare 60% sales to identifiable persons in March. In April, the ratio will increase to 70%, in May 80%, June 90% and in July all sales will be made to identifiable persons only.

Currently, only 146,000 traders have sales tax registration numbers while less than 100,000 regularly file returns.


The notification states that if any registered person gives an NTN or CNIC number, which is not verified from the FBR’s database or database of the National Database and Registration Authority (NADRA), such person will have to pay a penalty of Rs5,000 or 3 per cent of the amount of tax involved, whichever is higher. The amount would be considered as arrears against the supplier.

Furthermore, all payments of the amount for transactions will be made by the buyers through bank instruments.

Riaz Haq said...

Here's a WSJ Op Ed by Mike Boskin on India-Pakistan trade:

With their sizable nuclear arsenals and tensions over territory, water and terrorism, India and Pakistan pose staggering risks to South Asia. But they also offer outsize economic potential for their citizens, the region and the world. Leaders in both nations seeking peace, stability and a prosperous future should seize on free trade as the best way to further these goals. The time has come for an India-Pakistan free trade agreement.

Free trade would substantially increase trade and investment flows, incomes and employment, and it would give the citizens of both countries a far greater stake in the other's success. Economists of varying backgrounds agree that free trade is a positive-sum economic activity for all involved. In the seven years following Nafta, trade among the United States, Canada and Mexico tripled and real wages rose in each country.

The International Monetary Fund reports that direct trade between Pakistan and India was a pitifully small $2.7 billion in 2010, just two-thirds of India's trade with far smaller Sri Lanka. Remarkably, Pakistan's exports to Bangladesh are larger than those to India, though Bangladesh's economy is only 6% the size of India's. South Asia doesn't have enough trade.

The tool economists use to analyze bilateral trade, called the "gravity model," suggests trade should be proportional to the states' GDP and inversely proportional to the distance between them (a proxy for transportation costs). India's GDP of over $4 trillion is roughly nine times that of Pakistan's.

Estimates based on gravity models by Amitra Batra of Nehru University and Mohsin Khan of the Peterson Institute suggest that Pakistan-India trade could be at least 20 times larger with a bilateral free trade agreement than it is today. That's a staggering expansion of over $50 billion that would raise real wages in both countries.
The obstacles to such an agreement range from cross-border security concerns to old-fashioned protectionism. The perceived economic vulnerability to free trade of some domestic firms, sectors and regions can be addressed with transition relief such as worker retraining and tariff phase-in periods.

Realistically, it will take several years to negotiate and implement a free trade agreement between India and Pakistan. Even with strong political leadership, negotiating Nafta took four years.

Still, Pakistan President Asif Ali Zardari and Indian Prime Minister Manmohan Singh spoke of the importance of trade in their brief meeting earlier this month in New Delhi. Both men appear to understand that trade liberalization is economically necessary and will diffuse tensions between these two nuclear nations. The next step is to initiate high-level discussions of a free trade agreement.

Riaz Haq said...

Here are excerpts of a WSJ Op Ed by Pak finance minister Dr. Shaikh:

For more than a decade, Pakistan has partnered with the United States to combat the extremism and militancy that threatens the stability of our region and the world. This fight has taken an enormous human toll on our people, with over 37,000 civilians killed and more than 5,000 police and soldiers lost. In addition to the enormous human tragedy, this struggle has directly and negatively impacted our economy and the development of our nation.

We have witnessed the loss of more than $100 billion of foreign investment, a tightening of our financial markets, and a freeze on the progress of many social programs. But that trend has now dramatically reversed, and there is an emerging story of a new Pakistan strategically located at the crossroads of the world's most dynamic economies, ready to take its place as a critical emerging market.

We have a consumer base of more than 170 million, a young and educated work force, and a culture of entrepreneurship. The opportunity for our economy to grow is immense. People in the West may not be aware, but the positive change that is sweeping Pakistan as we speak has profound economic and political consequences for the future.
...over the last four years, the Pakistani government has taken difficult but important steps to get our economy back on track. This year real growth in gross domestic product is likely to reach 4%, nearly double last year's rate. During the first nine months of fiscal year 2012, tax collections have surged by 24%, remittances from Pakistanis abroad by 21% (to $9.7 billion), and our exports by 5.5% over last year's base of $25 billion.

Inflation and consumer prices were down in March, easing pressure on small and medium-size companies. The Karachi Stock Exchange KSE100 Index now stands at 14,000, having been at 6,000 in 2008. Pakistan's foreign exchange reserves increased to $18 billion in 2011, the largest in history, and our financial obligations are declining. In 2015, Pakistan's annual repayment to the International Monetary Fund will be a quarter of its 2012 obligation.

Six months ago, Pakistan granted Most Favored Nation trading status to India, a paradigm-shifting policy change driven by the business sectors on both sides of the border. With its complete implementation and the concomitant reduction of India's nontariff barriers, this decision has the power to reconfigure the region's economic landscape and dramatically increase its stability. Today, bilateral trade between India and Pakistan stands at $2.7 billion per year. Business chambers in both countries predict that figure could quadruple to $10 billion by 2015.
Investing in any emerging market has its challenges, but Pakistan is poised for growth. For the first time in our history, a democratically elected government will complete a full five-year term next year. Our judiciary is independent and upholding the rule of law. Our military is working with our civilian government to protect our borders and keep militancy and extremism in check. Our civil society is expanding, and our media are robust and uncensored.

Business contracts have been consistently honored and the return on investment for many investors has been enormous. And though the last decade has taken a toll on our economy and our infrastructure, our resilience is evident and turning the tide. We are building infrastructure and expanding our energy capacity, we are modernizing our agriculture sector, we are a leader in telephone access, our textile sector is one of the largest in the region, and our information-technology companies are some of the best in the world.

Riaz Haq said...

Here's a Daily Times story on Pakistan's capital markets:

The capital markets in Pakistan offer transparency, best price and efficient execution coupled with attraction for foreigners as equity market trades at discount as compared to regional valuations.

Based on price earning (PE), price by volume (PBV) and payout, the Pakistani capital markets trades at lower levels as compared to regional markets. Such attractiveness must catch the eyes of foreign fund managers to explore the opportunities offered by the Pakistani capital markets.

Securities and Exchange Commission of Pakistan’s (SECP) Shahid Naseem and Imran Inayat Butt said this while making a presentation at an institute, organised by the US Securities and Exchange Commission (SEC) in Washington, DC.

The SECP strives to maintain fair, orderly and efficient markets, they said. It protects the rights of investors, facilitates capital formation and develops an efficient and dynamic regulatory framework in line with the principles of the International Organisation of Securities Commissions (IOSCO).

The participants were told that the SECP has a vast mandate, which includes corporate sector regulation, regulating securities markets, commodities market, insurance, pension, private equity, venture capital, NBFC, debt securities trustees and rating agencies. It is also responsible for the registration and licensing, supervision, enforcement, adjudication, appellate bench, investors’ education and awareness, development of legal framework, implementation of corporate governance and AML (anti-money laundering) and administration of professionals.

It was highlighted that after the 2008 stock market crash (when the index fell from 15,500 to 4,500 points), due to successful reform process led by the SECP the index has successfully recovered by almost 200 percent. With the recent developments on the regulatory and operational front and future roadmap, the Pakistani capital market will be comparable with developed international jurisdictions that meet the IOSCO benchmarks.

The International Institute for Securities Enforcement and Market Oversight for the past 18 years has been one of the US SEC’s flagship programmes to promote the quality of securities enforcement programmes around the globe, and strengthening and deepening international cooperation among securities regulators.

This time over 180 regulators from about 73 countries and jurisdictions from around the world are having intensive training and discussions on the most significant issues of securities enforcement. The ongoing seminar is providing an opportunity to participants to brainstorm on and learn from the challenges faced by the capital markets around the globe. It was a rare opportunity for the Pakistani regulator to address such an institute, showcase Pakistan capital market and interact with fellow regulators.\04\27\story_27-4-2012_pg5_5

Riaz Haq said...

Here's a Bloomberg report on preliminary estimates of Pak GDP growth in current FY 2011-12:

Pakistan’s economy will probably expand 3.2 percent in the fiscal year through June 2012, lower than a previous forecast of 4 percent, the nation’s statistics office said in a preliminary estimate.

Gross domestic product increased 3 percent in the 2010-2011 financial year, more than an earlier report of 2.4 percent, following a change in the base year for calculating the pace of expansion, the Pakistan Bureau of Statistics also said in a statement released yesterday.

Pakistan’s $200 billion economy has been hampered by blackouts from its worst energy crisis, an insurgency on the Afghan border, elevated inflation and diminished aid flows. The nation’s Supreme Court yesterday convicted Prime Minister Yousuf Raza Gilani of contempt of court, adding to political tensions ahead of general elections due by February.

“Growth will remain subdued this fiscal year,” said Khalid Iqbal Siddiqui, the head of research at Karachi-based United Bank Ltd. “Manufacturing industries are suffering from power and gas shortages, while there are signs that the urban economy dominated by the service sector is performing poorly as well.”

Riaz Haq said...

Here are some excepts of a BBC Op Ed on Indian economy titled "Five things wrong with India's economy":

After several official predictions that India would grow by 7-8% in 2011-12, the finance minister finally admitted in his Budget 2012 speech that the growth would be 6.9%.

The actual figure may be lower at 6.5%, thanks to the statistical error in sugar production, which dragged down January's industrial production growth figure from 6.8% to 1.1%.

Although ratings agency Standard and Poor's estimate for 2012-13 is 5% or above, Indian economists feel they won't be surprised if the economy grows by just 4%.

"If things remain the way they are, in terms of policy decisions, investments and sentiments, I would go to the extent that the figure may be 3%," says a senior economist with a leading business association.
Wholesale price inflation, which is under 7%, could increase to 9-10% over the next few months.

Food inflation is still high at double-digit levels, and any hike in fuel (petrol and diesel) prices in the near future will spur inflation.

A combination of low growth and high inflation, or near-stagflation, would be India's worst economic nightmare come true.
In 2011-12, the fiscal deficit zoomed from a projected 4.6% of GDP to 5.9%. Although Budget 2012 predicted it would come down to 5.1% in 2012-13, most economists remain sceptical.

Low growth rates, lower-than-estimated government revenues, and higher-than-expected expenditures, especially on welfare schemes for rural employment and the right to food, may force the deficit to go up in 2012-13, as happened in the previous financial year.

Although exports grew by 20% in 2011-12, imports rose at a faster pace, and the trade deficit went up to $185 billion, the highest ever in the country's history.

Since August 2011, foreign exchange reserves have dipped from $322bn to $293bn due to the higher trade deficit and other foreign exchange outflows.
Coalition compulsions, a united opposition and corruption allegations have forced the government to backtrack on key economic reforms, including foreign direct investment (FDI) in multi-brand organised retail.
In 2011-12, the domestic private sector was wary of huge investment commitments; many firms delayed or postponed plans to invest in expansion or building new factories.

An April 2012 overview of the Reserve Bank of India (RBI) stated that "consultations with industry and banks suggest that new project investment continue to be sluggish"

Riaz Haq said...

Here's a Business Line story on India's bills coming due:

A rapidly depreciating rupee, dipping foreign exchange reserves and strong financial links with the Euro Zone are pushing India against the wall. The over 20 per cent depreciation of the rupee against the dollar in the last one year has hugely increased the repayment burden of Indian companies.

According to the Bank for International Settlements' (BIS) preliminary data for December 2011, international claims on India, payable within the next one year, are $137 billion.. This is 60 per cent of the total claims of overseas banks on India in non-rupee currencies. This can eat up one half of the $293-billion foreign exchange reserves that India now has. European banks account for over 40 per cent of India's total foreign dues. At $132 billion, this is twice India's liabilities towards the US.

But leaving out the UK, India's Euro Zone exposure is about $60 billion. That is close to 3.4 per cent of India's GDP. Any full-blown crisis in Greece could spill over to the other European nations, posing a risk of capital flight from India.

The immediate impact of capital flight and the depreciating rupee would be more pressure on domestic liquidity, says Ms Sonal Varma, Executive Director and India Economist at Nomura. That also means a higher risk of interest rates moving upwards.

International claims, other than rupee-denominated ones, include trade credit and other borrowings. The data on international claims from the BIS, roughly tally with the RBI's data on non-rupee external debt.

Riaz Haq said...

Here's Bloomberg on worsening imbalances in India:

Indian Finance Minister Pranab Mukherjee missed his budget-deficit target by the most in three years and announced a 12 percent increase in debt sales, sending bond yields to a two-month high.

The shortfall in finances in the year ending March will be 5.9 percent of gross domestic product, 1.3 percentage points more than the goal, Mukherjee said in a March 16 speech in parliament. That was the biggest margin of failure since falling short of the aim by 3.5 percentage points in the 12 months through March 2009, the height of the global financial crisis.

Goldman Sachs Asset Management Ltd. and FIM Asset Management Ltd. said the budget didn’t do enough to restore the credibility of Mukherjee, who pledged to cut the deficit to 5.1 percent of GDP in the 12 months starting April. The yield on 10- year bonds had the biggest weekly increase since January to 8.43 percent last week, compared with 3.55 percent in China, where the 2012 deficit was 1.5 percent of GDP.
The finance ministry plans to sell a record 5.69 trillion rupees of debt the next fiscal year, compared with 5.1 trillion rupees in the 12 months ending March 31. Underwriters had to buy unsold bonds at nine auctions this fiscal year, central bank data show, signaling demand didn’t match supply of notes. The government will set the first-half borrowing target on March 23, Shaktikanta Das, additional secretary in the ministry, said on March 16.

Yields on 10-year (GIND10YR) sovereign debt jumped 14 basis points, 0.14 percentage point, last week after data on the website of the Controller General of Accounts showed India’s budget gap widened to 4.35 trillion rupees in the 10 months through January, exceeding the full-year target of 4.13 trillion rupees. A year earlier, the shortfall was 58.3 percent of the annual goal.
The shortfall will reach 5.8 percent of GDP in the year starting April, he predicts. The finance ministry has exceeded its budgeted spending target in eight of the last 10 years, according to government data.

The yield on the 8.79 percent note due November 2021 fell one basis point today after climbing seven basis points on March 16. The extra yield investors seek to hold the notes instead of U.S. Treasuries has rebounded 11 basis points from an eight- month low of 601 reached on March 14, data compiled by Bloomberg show.
Spectrum Sale

Rupee-denominated bonds handed investors a loss of 0.3 percent in March, compared with a 0.2 percent return on yuan notes, according to indexes compiled by HSBC Holdings Plc. India’s revenue collection was 69.5 percent of the full-year target in the 10 months through January, compared with 92.2 percent a year earlier, official data showed this month. The rupee advanced 0.2 percent today to 50.0885 per dollar after declining 0.7 percent last week, according to data compiled by Bloomberg.
Still, global investors have cut holdings of Indian debt by $634 million since Feb. 29, pulling money out of the local market for the first time in six months, exchange data show.

The cost of protecting the debt of State Bank of India, seen as a proxy for the sovereign, against non-payment climbed this month. Five-year credit-default swaps on the lender now cost 305 basis points, compared with 300 at the end of February, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in privately negotiated markets. The swaps pay face value in exchange for the underlying debt should a company fail to adhere to its agreements.

Riaz Haq said...

Here's Bloomberg on worsening imbalances in India:

Indian Finance Minister Pranab Mukherjee missed his budget-deficit target by the most in three years and announced a 12 percent increase in debt sales, sending bond yields to a two-month high.

The shortfall in finances in the year ending March will be 5.9 percent of gross domestic product, 1.3 percentage points more than the goal, Mukherjee said in a March 16 speech in parliament. That was the biggest margin of failure since falling short of the aim by 3.5 percentage points in the 12 months through March 2009, the height of the global financial crisis.

Goldman Sachs Asset Management Ltd. and FIM Asset Management Ltd. said the budget didn’t do enough to restore the credibility of Mukherjee, who pledged to cut the deficit to 5.1 percent of GDP in the 12 months starting April. The yield on 10- year bonds had the biggest weekly increase since January to 8.43 percent last week, compared with 3.55 percent in China, where the 2012 deficit was 1.5 percent of GDP.
The finance ministry plans to sell a record 5.69 trillion rupees of debt the next fiscal year, compared with 5.1 trillion rupees in the 12 months ending March 31. Underwriters had to buy unsold bonds at nine auctions this fiscal year, central bank data show, signaling demand didn’t match supply of notes. The government will set the first-half borrowing target on March 23, Shaktikanta Das, additional secretary in the ministry, said on March 16.

Yields on 10-year (GIND10YR) sovereign debt jumped 14 basis points, 0.14 percentage point, last week after data on the website of the Controller General of Accounts showed India’s budget gap widened to 4.35 trillion rupees in the 10 months through January, exceeding the full-year target of 4.13 trillion rupees. A year earlier, the shortfall was 58.3 percent of the annual goal.
The shortfall will reach 5.8 percent of GDP in the year starting April, he predicts. The finance ministry has exceeded its budgeted spending target in eight of the last 10 years, according to government data.

The yield on the 8.79 percent note due November 2021 fell one basis point today after climbing seven basis points on March 16. The extra yield investors seek to hold the notes instead of U.S. Treasuries has rebounded 11 basis points from an eight- month low of 601 reached on March 14, data compiled by Bloomberg show.
Spectrum Sale

Rupee-denominated bonds handed investors a loss of 0.3 percent in March, compared with a 0.2 percent return on yuan notes, according to indexes compiled by HSBC Holdings Plc. India’s revenue collection was 69.5 percent of the full-year target in the 10 months through January, compared with 92.2 percent a year earlier, official data showed this month. The rupee advanced 0.2 percent today to 50.0885 per dollar after declining 0.7 percent last week, according to data compiled by Bloomberg.
Still, global investors have cut holdings of Indian debt by $634 million since Feb. 29, pulling money out of the local market for the first time in six months, exchange data show.

The cost of protecting the debt of State Bank of India, seen as a proxy for the sovereign, against non-payment climbed this month. Five-year credit-default swaps on the lender now cost 305 basis points, compared with 300 at the end of February, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in privately negotiated markets. The swaps pay face value in exchange for the underlying debt should a company fail to adhere to its agreements.

Riaz Haq said...

Here's Business Standard story of India's unraveling economy:

"Dear God," wrote economist Rajeev Malik as he called on the Almighty to help a "rudderless" government in a biting critique that underscored a growing frustration at home and abroad with the stewardship of Asia's third-largest economy.

Writing in the Business Standard newspaper, the well-respected Malik echoed the exasperation of Indian and foreign business groups pressing for the government to swiftly implement major economic reforms and formulate a coherent strategy to deal with its mounting problems.

Another newspaper said India could be heading to a Greek-style crisis.
Prime Minister Manmohan Singh's Congress Party blames unreliable allies in his coalition government for blocking major reforms aimed at opening up the economy to much-needed foreign investment and tackling obstacles in the way of growth, from creaking infrastructure to endemic corruption.

"Policy paralysis" has become the favoured shorthand of politicians, journalists and other India watchers.

But events since the announcement of the 2012-13 budget in March suggest a deeper dysfunction: a leadership vacuum that has led to empty promises and muddled policy decisions, most notably on tax reform.

They also raise questions about the most important economic relationship in government -- the one between Singh, who engineered the opening up of India's economy in 1991, and his former boss, Finance Minister Pranab Mukherjee.

Foreign companies looking for action are frustrated by the government's determinedly rosy view of the future that appears to ignore a recent raft of negative economic data.

The finance ministry pitched for a credit rating upgrade in a meeting with Fitch Ratings on Thursday even though Standard & Poor's Ratings Services cut the country's credit outlook just last month.

Self-awareness could avert a "macro-economic train wreck," wrote Ron Somers, president of the US-India Business Council.

India's economic growth has slumped to a near three-year low and its current account deficit is the highest since 1980, a gap that is difficult to control when the rupee is at a record low.

The government has projected a budget deficit of 5.9% of GDP, which Moody's Investor Service says is credit negative. Inflation is the highest among the so-called BRICS group of major developing countries, and industrial production contracted unexpectedly in March.

"We have a full-blown crisis on our hands," said Rajiv Kumar, secretary-general of the Federation of Indian Chambers of Commerce and Industry.

"The Indian growth story is intact," Mukherjee insisted in a speech to parliament this week as Singh sat impassively at his side in the upper house of parliament.


The Hindustan Times warned on Friday of a Greek-style debt crisis unless the government took firm action to rein in its fiscal and current account deficits.

"But increasingly the sense is that the government simply lacks the political capacity to make tough decisions," it said.

The government was forced late last year to backtrack on plans to open up the $450 billion supermarket sector to foreign firms such as Wal-Mart Stores after a political backlash, including from within the coalition.

Just this month, it delayed plans to tax foreign investors after an exodus of funds, partly driven by concerns the tax could be applied retroactively, battered the rupee.

"It is not an exaggeration to state that the magnitude of the economic damage and mismanagement by the Congress party under Dr Singh's watch will be embarrassing for even a student of introductory economics," Malik wrote....

Riaz Haq said...

Here's an interesting excerpt from NY Times review of Ed Luce's book “In Spite of the Gods: The Strange Rise of Modern India”:

Despite its robust democracy and honest elections, India faces the future saddled with one of the most corrupt government bureaucracies on earth. Mr. Luce encounters a woman in Sunder Nagri, a New Delhi slum, whose quest for a ration card entitling her to subsidized wheat and other staples involved bribing an official to get an application form. The form was in English, which she could not read, so she had to pay a second official to fill it out. When she turned up to claim her wheat, it was moldy and crawling with insects. The store owner had evidently sold his good government wheat on the black market.

In the northern state of Bihar, Mr. Luce writes, more than 80 percent of subsidized government food is stolen. Most ration cards are obtained through bribery, by Indians who are not poor. It’s the same story in nearly every area of an economy touched by the groping tentacles of a government that “is never absent from your life, except when you actually need it.”

As a former cabinet official tells Mr. Luce, corruption is not simply a nuisance or an added burden on the system. Rather, he says, “in many respects and in many parts of India it is the system.”

Mr. Luce, traveling the country’s rickety rail system, covers an enormous amount of ground. He inquires into the Kashmir dispute while dissecting India’s fraught relationship with Pakistan; marvels over New Delhi’s spanking-new subway system; describes the middle class rage for megaweddings; pays a visit to Bollywood and, in some of his most absorbing chapters, analyzes the changing caste system, the status of India’s Muslims and the alarming rise of Hindu nationalism.

All this and a visit to, a Mumbai company that markets brands through the Internet, cellphones and interactive television shows. Its founder, Alok Kejriwal, is still in his 30s, and to Mr. Luce represents the new India.

“I am greedy,” he tells the author. “I have no trouble admitting to that.”

At one point, Mr. Luce ponders India’s constant state of chaos and compares it to a swarm of bees. From inside the swarm, things look random, but from the outside, the bees hold formation and move forward coherently.

Sometime in the 2020s, at current growth rates, India will overtake Japan to become the world’s third-largest economy. Greatness lies within its grasp, Mr. Luce argues, if it can figure out a way to restructure its inefficient agriculture, put millions of desperately poor people in jobs that pay more than a pittance, wake up to a potential H.I.V.-AIDS crisis and root out government corruption.

Mr. Luce takes a cautiously optimistic view. “India is not on an autopilot to greatness,” he writes. “But it would take an incompetent pilot to crash the plane.”

Riaz Haq said...

Here's an ET story on Credit Suisse bullish view of Pakistani stocks:

In a detailed report issued to clients on Monday, analysts at Credit Suisse said that they believed that the new rules on capital gains tax and the exemption from documenting source of income for the next two years will improve liquidity and trading volumes in the market and allow stock prices to rise to their historical levels of valuations from their currently highly depressed levels.

“Liquidity in 2012 has been concentrated in stocks offering positive earnings surprises (e.g., United Bank, Lucky Cement, DG Khan Cement and Bank Alfalah), enabling them to be strong outperformers,” said Farrukh Khan, a research analyst based in Credit Suisse’ Asia Pacific headquarters in Singapore, in his report. “With further improvements in liquidity, we expect a broad-based price discovery to take hold in attractively valued oil and fertiliser stocks as well.”

Besides liquidity, however, Credit Suisse believes there are several other reasons why Pakistan is a highly attractive market.

It notes, for instance, that Pakistan’s sovereign risk is declining. Yields on Pakistan’s Eurobond have fallen 3% over the past 90 days, which Credit Suisse believes is justified. “A few months back, it seemed imminent that the current government’s altercation with the army would lead to early elections. The crisis has been averted, and for the first time in Pakistan’s history, a democratically elected government looks likely to complete its term in office” Khan stated.

In addition, Khan points out that Pakistani stocks are undervalued by their own historical valuation levels. The seven-year average for the 12-month forward price-to-earnings (PE) ratio (a key valuation metric) is 9.0, but the MSCI Pakistan index is currently trading at an average forward PE ratio of 6.3, which Khan argues is too low.

“Although Pakistan’s macros and politics remain challenging, there is an increasing realisation that this comes with the territory, and should not deter strong bottom-up investing. A large part of the weak politics and macros is built into historical valuations as well,” said Khan.

Credit Suisse also points out that corporate profitability in Pakistan is back to the 2007 pre-crisis levels. The average return on equity for the stocks in the MSCI Pakistan index is expected to hit 30% this year. Earnings yield averages 16% and dividend yields a healthy 7.3%.

The final advantage for international investors, Credit Suisse says, is that Pakistan is highly uncorrelated with the broader global equity markets, especially Europe. This lack of correlation holds both on the upside as well as the downside, meaning investors who are looking to diversify out of their exposure to the weakening European economy should be investing in Pakistan.

Riaz Haq said...

Here's a Businessweek story on risks to Pak economic growth:

akistan will seek to reduce inflation to less than 10 percent for the next fiscal year as it grapples with the fastest pace of price increases in Asia.

The inflation goal for the 12 months starting July 1, 2012 is 9.5 percent, the prime minister’s office said in a statement in Islamabad yesterday. Earlier this month, the government projected gross domestic product will rise 4.3 percent in the period, up from 3.7 percent in the current fiscal year.

Pakistan’s economy has been hurt by blackouts, a trade deficit, diminished aid flows and an insurgency on the Afghan border. The government plans to boost spending on roads, health care and education to support growth and is due to present its last federal budget next week before elections that must be held by February.

“The economy is facing huge challenges,” said Khalid Iqbal Siddiqui, head of research at Karachi-based United Bank Ltd. “Power blackouts, reduced aid inflows and the law and order situation are the key constraints that will keep growth depressed in the next fiscal year.”

Pakistan’s rupee has weakened about 6.5 percent against the dollar in the past 12 months. Domestic risks and the threat to global growth from Europe’s debt crisis have curbed demand for the currency.

Farm output will climb 4 percent next fiscal year, up from 3.1 percent in 2011-2012, according to yesterday’s statement. The industrial sector may expand 4.1 percent, from an estimated 3.6 percent this financial year, the projections showed.
Inflation Risk

The targets were set in a meeting of the National Economic Council, which is headed by Prime Minister Yousuf Raza Gilani.

Pakistan’s inflation accelerated to an eight-month high of 11.27 percent in April, limiting scope to cut interest rates to support the $200 billion economy. The pace of price increases is the fastest in a basket of 17 Asia-Pacific economies tracked by Bloomberg.

The central bank left borrowing costs unchanged at 12 percent last month for a third straight meeting, after cutting them by 2 percentage points in 2011.

The International Monetary Fund said in February that Pakistan should broaden the tax base, curb some subsidies and curtail central bank financing of the budget deficit. It described the economy as “highly vulnerable.”

The council proposed to spend 873 billion rupees ($9.5 billion) on development projects in the year starting July 1, up 19.5 percent from 730 billion rupees in the current fiscal period. The council originally proposed expenditure of 863 billion rupees yesterday, before increasing the planned outlay by 10 billion rupees in a revised statement later the same day.

The Asian Development Bank has said the power deficit in Pakistan and damage to the cotton crop from floods last year may restrict economic growth to 3.6 percent in the year ending June.

The government will unveil the federal budget in parliament in the first week of next month, according to local media reports.

Riaz Haq said...

Here's a Pak Observer report on outgoing Italian ambassador's belief that Pakistan will be Asia's third largest economy:

Vincenzo Prati the outgoing Ambassador of Italy has stated that he had no doubt in his mind that Pakistan would be the third greatest economy in the Asian Continent. He was speaking at a farewell reception held here in his honor by (CNG/LPG systems leaders) Landirenzo Pakistan.

Having said that the Envoy prompted to add that his wife was Japanese and he considered Japan as ‘some islands beyond’: “If we consider the (Asian) Continent itself, I think Pakistan deserves to be the third biggest economy. It is of interest to all partners of Pakistan to consolidate our cooperation with Pakistan and never tier ourselves to renew the efforts. Things are never easy so we need to be patient and resilient”. Vincenzo Prati, who has contributed tremendously towards ameliorating Pak-Italy relationship during his sojourn here, has unassumingly stated that he was only representing Italian citizens and the Government: “Our strength is not our own strength. Our strength is the strength of the people behind us and in this case we have very valuable companies working in Pakistan. Recalling his recent meeting with the Governor State Bank of Pakistan, Prati maintained: “He is a man of great vision and he knows that the future of Pakistan is the future of the economy; also of the relations of Pakistani economy with the partners ... multiplying contacts with all the neighbors and partners to improve its economy. We should think of Pakistan as a great economy of the future. It is already an important economy but I have no doubt in my mind that Pakistan will become even more important”.

Commenting on the crisis Italian company Landirenzo (and Japanese companies like Suzuki) had to face due to Government’s restriction on CNG, he maintained: “When the Japanese Ambassador, the Argentinean Ambassador and myself went to speak to the Pakistani authority we were not speaking on our own of course but on behalf of the important companies that are part of our countries. They are working in Pakistan and contributing to the welfare of Pakistan, not only of their own countries. I have to say that they stood by the Pakistani authorities; they of course share the common goal to improve relations because it is in the interest of both the countries”. Maintaining that there was always a margin of compromise whenever there were divergences he said: “We have good understanding that there is a margin of maneuver. We hope that Pakistani government and the companies will reach a compromise that this is in line with Pakistani expectations. Italian Ambassador concluded his address with a note of optimism: “I am sure that if Suzuki, Toyota, Landirenzo and other concerned companies continue to fight their good battle, Pakistani authorities would be on their side sooner or later”.

First Secretary Italian Embassy Dr. Federico Bianchi speaking on the occasion has said: “Today we get here to bid farewell to our Ambassador Vincenzo Prati who will be leaving soon this beautiful country that he had served for the last four years. We also took the occasion of our trip to the financial and the economic hub of the country to discuss the issue of Landirenzo and the other Italian and foreign companies that had invested in CNG in the past years”. He said that the Italian Embassy in the past months had been working with the Pakistani authorities to find measures to protect the investments that Landirenzo had made in Karachi and in Sindh. ....

Riaz Haq said...

Here's an Economist story "A Bric hits the wall":

INDIA’S economy has had some bad economic ideas inflicted on it over the past century, from imperial neglect to the cult of the village and big-ticket socialism. Maybe the concept of BRICs—a handful of emerging economies including India that were destined for fast growth—should be added to the list. It led to a bubble of complacency that is now being popped rather brutally. Growth in India was 5.3% in the three months to March—worse than the 6% expected, below the prior quarter and way below the close-to-double digit rates that were meant to be preordained and propel India to economic super-power status.

Other BRICs have slowed too, including China and Brazil. But India's GDP figures, the worst for at least nine years, will have a deep impact on the sub-continent. The country was meant to grow in its sleep—regardless of what happens in the rest of the world. A quick bounce back looks unlikely. The central bank has cut interest rates a little this year, but will struggle to loosen policy further given high inflation. The ruling coalition keeps on promising a bout of reforms to boost confidence, but it is so divided, its behaviour so erratic and its record of delivery so poor that few believe this will actually happen. Expectations for growth over the next couple of years will probably slip further, to 6%.

A 6%-growth-India raises three issues. For one, the old orthodoxy was that after liberalisation India had been on an accelerating path, driven by demographics and its high rate of savings and investment. A rival view is now likely to take hold. It notes that India has grown pretty consistently at 6% since the mid 1980s, with the exception of a faster period in 2004-2007. What looked like a step up in trajectory now looks like a one-off blip driven by a global boom, an uncharacteristic bout of tight fiscal policy and an unsustainable burst of corporate optimism. Political history may have to be rewritten too. The reformers of 1991, who include the present prime minister, have turned out to be not visionaries, but pragmatists without a deep commitment to liberalisation who have been unable to build a lasting consensus among voters and the political class in favour or reform.

Second, financial stability will become trickier. Nominal GDP growth (including inflation) has slipped to the low teens. This is still above the rate of interest India's government pays on its debt and thus in theory enough to avoid a debt spiral—despite high fiscal deficits running at almost a tenth of GDP. Government bond yields are artificially depressed because banks are forced to buy government paper and because the central bank has been buying bonds actively in the last six months. Although this can go on for a while, the stress is showing up in two different areas. One is the banking system where gross bad debts plus "restructured" loans have risen to over 8% of the total—a figure high even by western banks' standards. Bankers and the central bank argue that "restructured" loans are unlikely to result in large losses. But with lower growth more corporate borrowers will come under strain, as will the credibility of those reassurances.
Perhaps growth will bounce back. And if it doesn't, perhaps public frustration will be expressed at the ballot box, creating a new, less complacent political climate. The view that India's democracy is a self correcting mechanism that steers the country back onto the right course when things go wrong, was an integral part of the bulls' view of India. Hopefully it is one idea from the boom that proves to be correct.

Anonymous said...

Mr. Riaz Haq....ur my hero! :D :) Pakistan zindabad!

Riaz Haq said...

Here's a PakistanToday story on Pakistan's current GDP being closer to $300 Billion:

The actual Gross Domestic Product (GDP) of Pakistan is nearer to $300 billion and not $210 billion, as is shown officially. And, if the ailing economy of the troubled Pakistan is assumed to grow by 3 per cent per year by 2015 the size of the actual GDP would likely to set between $ 350 and $ 375 billion. This was stated by Managing Director KSE Nadeem Naqvi while briefing the visiting V. Shankar, Member of the Board, Standard Chartered Bank PLC and CEO Europe, Middle East, Africa and Americas here at Karachi Stock Exchange (KSE) on Wednesday.
“Using conservative estimates, 50 per cent of the economy is in the undocumented sector,” Naqvi said adding that further estimation showed that the per capita income of top 10 per cent of households in Pakistan was near $5,000 versus national per capita income of $1,190.
“This represents a significant potential market for investment and financial services,” the MD added. Also, Naqvi highlighted the areas where KSE and SCBPL could cooperate that, he said, include investor awareness generation, attracting Non-Resident Pakistanis (NRPs) to the capital market and helping private companies list on the Exchange. Earlier, Shankar, accompanied by Mohsin Nathani, Chief Executive of Standard Chartered Bank (Pakistan) Limited (SCBPL) and senior members of his management team, rang the “Opening Bell” of the KSE in the presence of Chairman KSE Muneer Kamal, MD Nadeem Naqvi, DMD KSE Haroon Askari and directors of the KSE Board.
On the occasion Shankar said there was tremendous opportunity for growth in intra-regional trade for the South Asian economies, particularly India and Pakistan. Illustrating India-China bilateral trade, he said when Sino-Indian trade opened up they had to overcome some apprehensions, however, today they were one of the largest trading partners with benefit to both countries. Welcoming the guests, chairman KSE Muneer Kamal said Pakistan’s economy was at an inflection point. Despite challenges posed by low tax-to-GDP ratio, power sector difficulties and current account pressure due to demand slowdown in key export markets, Pakistan at present was in a position to repay IMF loans.
The foreign exchange reserves, supported by strong remittances by overseas Pakistanis, were in a much healthier position than at the height of global financial crisis in late 2008. While debt servicing burden had risen, it should be viewed in the global context and Pakistan’s total debt-to-GDP ratio of 64 per cent was far lower than many Euro zone and G-8 economies.
A concerted effort to mobilise tax revenue and focus on emerging domestic energy resources such as coal would go a long way in fixing structural deficiencies causing large budget deficits. Kamal highlighted that economic growth can be further accelerated with growing intra-regional trade in the sub-continent. He pointed out that while intra-regional trade in East Asia was 23 per cent of GDP, it was only 1 per cent of the GDP in South Asia.

Hopewins said...

QUOTE: "FDI is more important for development bevcause it represents a longer-term commitment. So let's look at the cumulative FDI inflow data from 2000-2010 for both India and Pakistan:

India $200 billion---about 11% of GDP

Pakistan $23 billion--about 11.5% of GDP"


This sounds about right. World Bank shows net data at 25 Billion$ for us and 181 Billion$ for India from 2000-2010.

Here are the comparative World Bank data plotted for visual convenience--

(1) 2000-2010 Cumulative Foreign-country Remittances Received
(2) 2000-2010 Cumulative Foreign Aid Received
(3) 2000-2010 Cumulative FDI Received
(4) 2000-2010 Cumulative Portfolio Funding Received

Interestingly, as seen from the "relative importance" plots (each type as % of all foreign funding) below, we are almost on par with India in so much as about 50-55% of our cumulative foreign funding during 2000-2010 came from Remittances (like India's) and 25-30% from FDI (like India's). The difference between India and our Country is that their Portfolio and our Aid contribution-levels are comparable (18-20%), while our Portfolio and their aid contribution-levels are comparable (2-4%).


Riaz Haq said...

HWJ: "The projection for our country does not look very good."

It makes no sense as obvious from the fact that it's just a straight line extrapolated out from the current gdp growth performance.

It completely ignores Pakistan's historical CAGR of 5-6% per year since 1947.

Riaz Haq said...

HWJ: "The difference between India and our Country is that their Portfolio and our Aid contribution-levels are comparable (18-20%), while our Portfolio and their aid contribution-levels are comparable (2-4%)"

Portfolio investment is hot money. It can leave as quickly as it comes in as it did in the 1997 Asian financial crisis. Neither aid nor portfolio investments are reliable.

Hopewins said...

Riaz Haq Spoke Thus: "Portfolio investment is hot money. It can leave as quickly as it comes in as it did in the 1997 Asian financial crisis. Neither aid nor portfolio investments are reliable."


This is the most commonly-held misconception that the 1997 Asian financial crisis was caused by the withdrawal of portfolio investments.

Contrary to popular belief, portfolio investment in the affected countries was actually negligible.

Even if those countries had ZERO portfolio investment, they would still have had the crisis. The portfolio withdrawals that everyone talks about were a *reaction* to the crisis and not a *cause* of it. People tend to confuse cause and effect.

The crisis was caused by (note carefully) excessively high short-term debt that was expected to be rolled-over.

In fact, the Asian Financial Crisis was structurally almost identical to the financial crisis faced by India in 1991.

Here are the World Bank Data for the following parameter: "Short-term Debt to Reserves Ratio".

You will clearly see:
(1) The *1991* Indian Financial Crisis

(2) The *1997 Asian Financial Crisis

Seek and ye shall find. Ask and ye shall receive... the data.

Riaz Haq said...

Here's a DNA Op Ed o India story unraveling:

These days, I tell my kids to go, and not look back. My eldest is at university in the US and my son is preparing for admissions. Make your lives in America, I tell them. For the first time in a quarter century I’m pessimistic about India. In fact, 20 summers ago I visited the US and found its mood so negative and in such contrast to newly-liberalised India’s optimism that it seemed the two countries were on different trajectories; and I believed the choice to live in India was the right one.

In 2004 the US National Intelligence Council projected the 2020 world scenario in a report called “Mapping the Global Future”. It mostly dwelled on how the rise of China and India would affect the US and the rest of the planet. It was optimistic about India’s prospects in the long term — though by 2050 our per capita GDP was projected to be only 20% of the USA’s, even though our total GDP might be second in the world; and demography and political development gave India more hope than China — but it still listed three economic growth prospects for India: good, bad and ugly. Here, bad meant middling along, always verging on greatness but never quite there; and ugly meant slipping back into a 1970s-type morass.

Midway between the year of the report and the year of its projections, it is not a stretch to say that India would be lucky to achieve the bad scenario outlined by the USA’s NIC. The irony is that Prime Minister Manmohan Singh, who, under the direction of the late PV Narasimha Rao, liberalised the economy and gladdened the middle-class’s heart, is the same man responsible for the despondency that has now set in. For it is now a commonplace to hear that there no longer is an “India story”.
Frankly, nothing is going to move in this country (except for prices, upwards) for the next few years. Not many of us expect that 2014 will bring us a purposeful and politically sound government; in fact, most of us expect a short-lived regional coalition. If political strategists are looking towards 2016 as a time when a proper agenda can be implemented, then governance between now and then will continue to be characterised by limbo.

And if we have this kind of drift for the next four years, during which time the demands of ordinary citizens increase — political action on land, water, power, education, health, the economy, etc — then do you blame some of us for losing hope and telling our children to jump ship? By the time India becomes a big power, if ever, my children will be grandparents. They might as well go out and enjoy life right now.

Hopewins said...

Dr. Haq,

W.r.t. my earlier comment (published above) that the Asian Financial Crisis was caused by excessive short-term external (foreign) debt relative to Forex reserves:

1) After the 1997 shock, all the countries of the world swore than they would never make the same mistake of getting into excessive short-term external debt again.

2) You can see that almost EVERYONE has reduced their short-term external debt to Forex reserves ratio to about 25% or less in order eliminate the refusal-to-rollover risk:

3) However, there a very few countries still left who JUST DID NOT GET IT. Amongst them, unfortunately, is our good friend and benefactor and (amazingly enough) a darling of superficial fund-analysts: TURKEY. Here is the proof that Turkey just did not understand the significance of the 1984 Latin American Financial Crisis, the 1991 Indian Financial Crisis, the 1997 Asian Financial Crisis or even their own 1994 Financial Crisis:

No, Turkey has clearly and definitely learnt absolutely nothing:

4) Regardless of the glamorous publicity they may be getting at the moment, Turkey is inherently unstable— at the slightly shock they will go into another financial crisis. Of course, having learnt nothing so far, they will continue to learn nothing. As usual, they will probably “blame the Jews” and just go on making the same mistakes again and again.

Conclusion: Turkey is probably fine as a developmental Partner for now, but GOP shouldn’t count on them being high-flyers for long.

Something to ponder upon.

Thank you.

Riaz Haq said...

US AID promoting private equity investment in Pakistan's SME sector, reports Express Trib:

..$80 million, earmarked by the Obama administration under the Kerry-Lugar-Brahman Act for the Pakistan Private Investment Initiative

Crowding-out of the private sector from credit channels due to reckless government borrowing has provided a unique public relations opportunity to the US. The US has said it will offer loans ranging from $500,000 to $5 million to small and medium sized business in Pakistan, to help the latter expand and create jobs.

In total, $80 million, earmarked by the Obama administration under the Kerry-Lugar-Brahman Act for the Pakistan Private Investment Initiative, will go towards providing cheaper financing and equity to small and medium enterprises (SMEs) in Pakistan.

“The United States Agency for International Development (USAID) will provide up to $24 million for an equity fund, and fund managers will be required to match the requested funding to take the size of each equity fund to at least $45 million,” said Theodore Heisler, the project manager and senior economic growth advisor to USAID.

Heisler said that co-investment was essential in bringing the size of each fund to a level where it can cover operating expenses. The US intends to create at least three funds, but is, as yet, noncommittal to the total number. US authorities are on the lookout for good fund managers, and the availability of quality managers will determine the numbers of the funds, officials have said. During the last fiscal year, the federal government borrowed Rs1.77 trillion to finance the budget deficit. The State Bank of Pakistan has already warned that due to increasing government borrowing, there is little credit available for the private sector to grow.

“Having access to finances is a challenge for SMEs, as there is little equity and debt available for the sector,” said Heisler. “The longer term goal is to help expand the market for private equity investment and provide money that is not available through banks and other international lending agencies,” he added. He said the real job growth potential lies in the SME sector, as the corporate and public sectors cannot create unlimited jobs.

Heisler said each fund will have a 10-12 year lifespan. Individual investment sizes will range from $500,000 to $5 million, but could vary depending upon requirements. The initiative has been modelled on the Polish American Enterprise Fund, which was started with $140 million and has now grown to a multi-billion dollar fund.

Heisler said the US is looking to create a private equity industry in line with global standards, as there is hardly any private equity investment fund in Pakistan. He said the other purpose was fetching foreign investment through co-investment, as investment in Pakistan is dwindling.

The US is currently looking for fund managers who have a successful history, and Heisler said that both local and international fund managers have expressed interest in the project.

To a question whether Pakistani fund managers have expressed reluctance due to doubts over long-term commitment issues with the US, the US embassy replied “we believe there will be substantial interest from local, regional and international investors”.

It further said that “the US government designed the Pakistan Private Investment Initiative after a year of research and consultations with numerous stakeholders, including the Pakistani private sector and regulatory authorities.” It added that USAID will structure the funding to ensure that it is sustainable.

Riaz Haq said...

Here's a Times of India story on declining private equity in India:

MUMBAI: "We stay away from places that have impossible governments and impossible tax regimes, which means Sayonara to India," TPG Capital founder-partner David Bonderman said recently, tearing into the country's investment attractiveness. Bonderman, among the most influential private equity (PE) investors, said publicly what his peers quipped behind the scenes: India is possibly the least attractive of the emerging markets for PE, right now.

India's recent regulatory moves on retrospective taxes spooked PE funds, which are long-term risk investors. But it's only a part of the story going awry. Big investors into PE firms like global pension funds, university endowments and family offices - piqued with lower growth, poor corporate governance and bad returns - are cutting back capital allocations for investments in India. This leaves more than 500 PE firms in the country struggling for survival, with the sector bracing for a sudden contraction in the number of funds within 12 to 18 months.

The present count of PE firms is a staggering jump considering India had less than 20 just over a decade ago. PE firms invested $3.98 billion in the first six months of 2012 compared to $5.2 billion in the year-ago period, said a JM Financial note on the industry. The 23% decline by value probably tracked the rupee's drop against the US dollar. But the number of deals remained flat at 185, suggesting the shrinking size of investments.
Indian PE play peaked with $19 billion investments in 2007 but fell sharply in subsequent years. Private equity investments totalled a little over $10 billion in 2011. The industry, which offers million-dollar jobs to heavy hitters, has over 1,500 people in its fold riding on the lucrative 2:20 (fund managers charge 2% management fees on committed capital and incentive fee of 20% on capital returned) remuneration formula. But, with fresh capital raise getting harder, some are already settling for lower management fees. "There is a growing discussion that the unfolding scenario could see India private equity managers being forced to accept something less favourable than the 2:20 structure," Chattopadhyay added.

"We see fewer funds competing with us for deals in recent days. PEs without a critical mass and no strong engagement with India's long-term story will get out. One can call it shrinking or maturing of the private equity in India," said a managing director at one of the world's largest private equity firms. "And there are people in my firm who think like Bonderman, that we shouldn't be here," he added, while striking a contrarian mood.

Riaz Haq said...

Here's a Bloomberg story titled "Pakistan, Land of Entrepreneurs":

On a warm Sunday morning in November, Arif Habib leaves his posh home near the seafront in southern Karachi and drives across town in a silver Toyota Prado SUV. About half an hour later, he arrives to check up on his latest project: a 2,100-acre residential development at the northern tip of this city of 20 million. He hops out, shakes hands with young company call-center workers who are dressed for a cricket match, and joins them at the edge of the playing field for a traditional Pakistani breakfast of curried chickpeas and semolina pudding. After a quick tour of the construction site, he straps on his leg pads, grabs his bat, and heads onto the field. “The principles of cricket are very effective in business,” says Habib, 59. “The goal is to stay at the wicket, hit the right balls, leave the balls that don’t quite work, and keep an eye on the scoreboard. I feel that my childhood association with cricket has contributed to my success.”

Habib, who started as a stockbroker more than four decades ago, has expanded his Arif Habib Group into a 13-company business that has invested $2 billion in financial services, cement, fertilizer, and steel factories since 2004. His group and a clutch of others have become conglomerates of a kind that went out of fashion in the West but seem suited to the often chaotic conditions in Pakistan. Engro (ENGRO), a maker of fertilizer, has moved into packaged foods and coal mining. Billionaire Mian Muhammad Mansha, one of Pakistan’s richest men, is importing 2,500 milk cows from Australia to start a dairy business after running MCB Bank, Nishat Mills, and D.G. Khan Cement.

These companies have prospered in a country that, since joining the U.S. in the war on terror after Sept. 11, has lost more than 40,000 people to retaliatory bombings by the Taliban. Political violence in Karachi has killed 2,000 Pakistanis this year, and an energy crisis—power outages last as long as 18 hours a day—has led to social unrest. Foreign direct investment declined 24 percent to $244 million in the four months ended Oct. 31, according to the central bank.

At the same time, some 70 million Pakistanis—40 percent of the population—have become middle-class, says Sakib Sherani, chief executive of Macro Economic Insights, a research firm in Islamabad. A boom in agriculture and residential property, as well as jobs in hot sectors such as telecom and media, have helped Pakistanis prosper. “Just go to the malls and see the number of customers who are actually buying in upscale stores and that shows you how robust the demand is,” says Azfer Naseem, head of research for Elixir Securities in Karachi. “Despite the energy crisis, we have growth of 3 percent.”

Sherani of Macro Economic Insights estimates the middle class doubled in size between 2002 and 2012. “Those who understand the difference between the perception of Pakistan and the reality have made a killing,” Habib says. “Foreigners don’t come here, so the field is wide open.” The KSE100, the benchmark index of the Karachi Exchange, has risen elevenfold since mid-2001. Shares in the index are up 43 percent this year alone. Over the past decade, stocks have been buoyed by corporate earnings, which were bolstered in turn by rising consumer spending.
Today, Habib has 11,000 employees and annual revenue of 100 billion rupees. He plans to expand into commodities trading and warehousing. “I’ve created all my wealth in Pakistan and reinvested all of it here,” says Habib, who drives himself to his cricket matches and is never accompanied by security guards. In 1998, when Pakistan’s share index fell to a record low after the government tested nuclear weapons, Habib bought shares even though “people thought I was mad.”...

Hopewins said...

^^^RH:"Goldman Sachs has given Pakistan a low GES score which puts the country among the bottom third of Next-11 nations. However, this score is rising.."

Look at the graph you have published once again:

Notice the following amongst the N-11:

(1) Bangladesh CLEARLY had a better score that we did in 1997.
(2) In 1997, our score was 3.3, while the average was 3.9, leaving us 0.6 short. In 2007, while our score did increase to 3.6, the average increased even faster to 4.6, therby increasing our deficit to 1.0 in 2007.
(3)In other words, we went BACKWARD from 1997-2007 in a RELATIVE sense to all others.
(4) Even after our increase from 3.3 to 3.6 over ten years, we are STILL lower than Bangladesh at 4.0
(5) Note the astonishing speed at which NIGERIA has now caught up with us.
(6) In 1997, we were second-last. In 2007, Nigeria went by us and we were reduced to the absolute LAST.

What do you have to say about these points?

Riaz Haq said...

HWJ: "3)In other words, we went BACKWARD from 1997-2007 in a RELATIVE sense to all others.
(4) Even after our increase from 3.3 to 3.6 over ten years, we are STILL lower than Bangladesh at 4.0
(5) Note the astonishing speed at which NIGERIA has now caught up with us....(6) In 1997, we were second-last. In 2007, Nigeria went by us and we were reduced to the absolute LAST. What do you have to say about these points?"

Pakistan's GES score has gone up in spite of the insurgency that has raged in the country...the kind of violence that other N-11 nations have not had to deal with. This level of violence is not going to last and we have already seen a decline in the last two years after peaking in 2009.

Riaz Haq said...

Here's Emirates 24-7 report on a massive property investment deal between Abu Dhabi Group and Malik Riaz:

UAE’s Abu Dhabi Group and Pakistani real estate tycoon Malik Riaz on Friday signed a deal to invest $45 billion (Dh165.15 billion) in Pakistan including building the world’s tallest building in Karachi.

Pakistan’s news channel Geo reported today that $35 billion (Dh165.15 billion) will be pumped in Sindh province while the rest will be invested in Lahore and Islamabad.

Under the deal, Sports City, International City, Media City, Educational and Medical City will be built in Pakistan’s financial capital. The news channel said that world’s Seven Wonders will also be built as part of the project.

The deal is expected to generate over 2.5 million jobs in Pakistan.

The channel, however, didn’t reveal the time for the completion of the project.

Riaz Haq said...

Here's an Atlantic Mag piece arguing that China is much bigger than the rest of BRICs:

In 2001, China's GDP was equal to the GDP of all the RIBS combined. In the five years since the global financial crisis, just the increment of growth in China's economy is larger than the entire economies of Russia and India combined. Indeed, in the half decade since the financial crisis, 40 percent of all growth in the global economy has occurred in China.

Last year, the economy of China expanded by $1 trillion; Russia and India grew by $100 billion; Brazil and South Africa shrank. In 2001, China ranked sixth among the world's economies. Today it stands at number two, on track to overtake the U.S. and become the world's largest economy in the next decade.

In trade, China accounts for 11 percent of global merchandise exports, roughly double that of the RIBS combined. Moreover, the markets to whom China and the RIBS export and from whom they buy are the U.S., the EU, and Japan. Merchandise trade among China and the RIBS barely registers in world trade statistics.

In foreign reserves, China held twice as much as the RIBS combined in 2001 (with $220 billion), and now holds three times as much as the others (with $3.3 trillion). In greenhouse gas emissions, China accounts for 30 percent of the global total, more than twice the amount of the RIBS combined.

Goldman Sachs continues trumpeting the rise of the BRICS (though it refuses to include South Africa, which was pulled into group by China in 2010). Its latest "BRIC Fund" prospectus forecasts that by 2030, the BRIC nations will have a combined economy larger than that of the G7. If this happens, the most important part of the story will be that China added $17 trillion to the global economy, effectively creating another United States in less than 20 years.

Concepts that jumble together elements with more differences than similarities sow confusion. While it may have played a useful purpose at the beginning of the century to highlight faster-growing emerging economies, BRICS has become an analytic liability. Like generalizations about per-capita growth in countries where wealth disparities are widening (as the rich get richer while the income of the poor declines), submerging China in this acronym misses more than it captures. If a banner is required for a meeting of these five nations, or for a forecast about their economic and political weight in the world ahead, RIBS is much closer to the reality. Even if governments, investment banks, and newspapers keep using BRICS, thoughtful readers will think China and the rest.

Riaz Haq said...

Here's a News story on Pak students participating in international robotics competition:

RAWALPINDI: Pakistan Robotics team will leave for United States of America on April 23 to take part in First Lego League (FLL) international robotics competition to be held on April 24 in United States of America (USA).

According to details, the National Robotics Champions Team would be the first-ever Pakistani team to take part in World Festival. Pakistani team, out of 20 teams, won the regional championship title earlier in qualifying round held for the International competition.

It was also the winner team in the national robotics championship as it defeated 13 other teams.

It may be noted that out of 20,000 teams which took part in the competition worldwide, only 85 teams were declared successful as they cleared the national qualifying rounds. Now they would take part in the FLL World Festival to be held from April 24 to April 27 in Saint Louis, Missouri.

Three-member team comprising Vice Captain Muhammad Rafay Arshad, Abdullah Gulraiz and Umar Khalique along with coach Saeed Akhtar will leave on Tuesday.

The team members have expressed the hope that they will win the international title for Pakistan.

Earlier, the team comprised 7 members but now only three team members will participate in world festival along with their coach, said a statement. (PPI)

Riaz Haq said...

Here's a Daily Times report on Karachi stock market rally:

KARACHI: The Karachi stock market crossed 18,900 points level on the last trading day of the week Friday as earnings frenzy continued to encourage investors to go for buying in oil, fertilizer and cement sectors.

The Karachi Stock Exchange (KSE) 100-share index gained 32.10 points or 0.17 percent to close at 18,917.71 points as compared to 18,885.61 points of the previous session. The KSE 30-share index was up by 10.81 points to close at 14,584.18 points as compared with 14,573.37 points.

“Mixed activity was seen at the market with corporate results season almost coming to an end,” said Topline Sec dealer Samar Iqbal. “Mixed March quarter results were announced today.”

Once again TRG came in the limelight as it closed at its upper cap with 27.5 million shares, she said and added that Engro Corporation and Foods saw some profit-taking ahead of the weekend.

The market turnover went down by 3.53 percent and traded 206.02 million shares as against 213.57 million shares of the previous session. The overall market capitalisation rose 0.34 percent and traded Rs 4.649 trillion as against Rs 4.633 trillion. Gainers outnumbered losers 204 to 146, while 17 stocks were unchanged.

“Stocks closed higher led by second-tier stocks on strong valuations,” said Arif Habib Corporation Director Ahsan Mehanti. “Index remained in a narrow range amid concerns over security unrest in the city, economic uncertainty and rupee fall despite recovery in global commodities and record quarter-end earnings announcements in oil, fertilizer, textile and cement stocks.”

The KMI 30-share index gained 36.24 points to close at 32,930.01 points from its opening at 32,893.77 points. The KSE all-share index closed with a gain of 48.06 points to 13,455.50 points as compared to 13,407.44 points of the previous session.

“The market closed in the green zone with intraday gains clipped by selling pressure in Engro Chemicals and Pakistan Petroleum,” said JS Research analyst Ovais Ahsan. “The banking sector gained led by MCB Bank and UBL as the sector continued to limp out of a long spell of underperformance.”

Adamjee Insurance corrected overbought momentum after a weeklong rally.

“Bulls reined the final session of the week as index came close to 19,000 points level during intraday trade,” said Habib Metropolitan Finance Corporation Salman Vidhani. “Selling pressure in Engro dampened overall sentiment as some stocks also registered a negative close.”

TRG Pakistan Ltd was the volume leader in the share market with 27.54 million shares as it closed at Rs 11.30 after opening at Rs 10.30, gaining Re 1. Lotte Chemical traded 16.43 million shares as it closed at Rs 7.54 from its opening at Rs 7.35, rising 19 paisas. Maple Leaf Cement traded 11.81 million shares and closed at Rs 18.95 as compared to its opening at Rs 19.36, shedding 41 paisas. Pervaiz Ahmad traded 11.50 million shares as it closed at Rs 3.29 as against its opening at Rs 2.57, increasing 72 paisas.\04\27\story_27-4-2013_pg5_17

Riaz Haq said...

Here's Wall Street Journal quoting BRIC coiner Jim O'Neill as saying “If I were to change it, I would just leave the ‘C’:

SAO PAULO–Former Goldman Sachs Asset Management Chairman Jim O’Neill, who coined the BRIC acronym describing four burgeoning emerging market countries, stands by the term he invented more than a decade ago, but admits that three of the countries have disappointed him in recent years.

The acronym created in 2001 groups Brazil, Russia, India and China, and has become a reference for a perceived shift in economic power toward developing economies.

“If I were to change it, I would just leave the ‘C,’” Mr. O’Neill said in an interview. “But then, I don’t think it would be much of an acronym.”

Economic growth in other BRIC countries has been disappointing, and the economic outlook for developing economies in general has changed in the last few years amid the end of a commodities boom and a slowdown in Chinese growth–which nevertheless remains high compared with that of its counterparts.

Meanwhile, signs of a recovery in the U.S and expectations the Federal Reserve will soon reduce its bond-buying program have helped strengthen the U.S. dollar, sucking money out of emerging markets and putting even more pressure on their less developed economies.

It has become “fashionable” to say the developed world is recovering while emerging markets are all slowing down, Mr. O’Neill said. “But what people don’t understand is the size of China,” he added.

The economist said that if China’s economy grows 7.5% this year, as he expects, that would create an additional $1 trillion in wealth, in U.S. dollar terms. “For the U.S. to contribute at the same level, it would have to grow around 3.75%,” Mr. O’Neill said.

Economists currently expect the U.S. economy to expand 1.5% in 2013, down from 2% projected in May, according to a recent survey by the Federal Reserve Bank of Philadelphia.

From 2011 to 2020, Mr. O’Neill said he has assumed average growth for the BRIC countries of 6.6% a year, less than the 8.5% average in the previous decade. Most of it up to now has come from China.

India has been the biggest disappointment among the BRIC countries, while Brazil has been the most volatile in terms of investor perceptions, the economist said.

“Between 2001 and 2004, many people told me I should never have included Brazil. Then, from 2008 to 2010, people told me I was a genius for including Brazil and now, again, people say Brazil doesn’t deserve to be there,” he said.

Brazil’s economic growth, which reached 7.5% in 2010, has been weak since then in spite of multiple government stimulus measures. The country seems doomed to growth of 2% or so in both 2013 and 2014, according to economists’ forecasts.

Brazil’s rapid growth in 2010 raised expectations, but many people forgot that the country is vulnerable to big moves in commodities prices, Mr. O’Neill said.

Another problem, he said, is that private investment remains a small share of the country’s gross domestic product. Brazil’s investment rate has been stuck at around 18% of GDP, the lowest level of any BRIC country, for a decade.


“They should only worry if there’s a pickup in inflation expectations; otherwise, they should relax,” he said, before the central bank late Thursday unveiled a massive intervention program to provide relief for the currency.

Brazilian inflation is currently 6.15%, close to the 6.5% ceiling of the central bank’s target range for 2013.

Even in the face of weak growth, Mr. O’Neill says he doesn’t plan to add or subtract letters from his famous acronym.

“If, by the end of 2015, there is persistent weak growth in Brazil, India or Russia, then I might,” he said, noting, however, that he expects Brazil to surprise positively in 2015, possibly even in 2014.

Riaz Haq said...

Here's NY Times Nobel Laureate economist-columnist on Ibn Khaldun's lessons for Microsoft and other established powers:

The trouble for Microsoft came with the rise of new devices whose importance it famously failed to grasp. “There’s no chance,” declared Mr. Ballmer in 2007, “that the iPhone is going to get any significant market share.”

How could Microsoft have been so blind? Here’s where Ibn Khaldun comes in. He was a 14th-century Islamic philosopher who basically invented what we would now call the social sciences. And one insight he had, based on the history of his native North Africa, was that there was a rhythm to the rise and fall of dynasties.

Desert tribesmen, he argued, always have more courage and social cohesion than settled, civilized folk, so every once in a while they will sweep in and conquer lands whose rulers have become corrupt and complacent. They create a new dynasty — and, over time, become corrupt and complacent themselves, ready to be overrun by a new set of barbarians.

I don’t think it’s much of a stretch to apply this story to Microsoft, a company that did so well with its operating-system monopoly that it lost focus, while Apple — still wandering in the wilderness after all those years — was alert to new opportunities. And so the barbarians swept in from the desert.

Sometimes, by the way, barbarians are invited in by a domestic faction seeking a shake-up. This may be what’s happening at Yahoo: Marissa Mayer doesn’t look much like a fierce Bedouin chieftain, but she’s arguably filling the same functional role.

Anyway, the funny thing is that Apple’s position in mobile devices now bears a strong resemblance to Microsoft’s former position in operating systems. True, Apple produces high-quality products. But they are, by most accounts, little if any better than those of rivals, while selling at premium prices.

So why do people buy them? Network externalities: lots of other people use iWhatevers, there are more apps for iOS than for other systems, so Apple becomes the safe and easy choice. Meet the new boss, same as the old boss.

Is there a policy moral here? Let me make at least a negative case: Even though Microsoft did not, in fact, end up taking over the world, those antitrust concerns weren’t misplaced. Microsoft was a monopolist, it did extract a lot of monopoly rents, and it did inhibit innovation. Creative destruction means that monopolies aren’t forever, but it doesn’t mean that they’re harmless while they last. This was true for Microsoft yesterday; it may be true for Apple, or Google, or someone not yet on our radar, tomorrow.

Riaz Haq said...

Here's an AOL piece on Pakistan's economy in 2050:

Recently, Jim O'Neill, one of the most renowned British economist predicted that Pakistan could become world's 18th largest economy by 2050 and its per capita income will cross the 20,500 dollars mark with its GDP around US$ 3.33 trillion in 2050. This means that Pakistan's economy will grow 15 times more than what it stands today within the next 35 years.

Jim became famous for analyzing and coining the world's most powerful economies in a single term, 'BRIC' meaning Brazil, Russia, India and China in 2001. He recently developed another term, 'MINT', meaning Mexico, Indonesia, Nigeria and Turkey and has projected them to be coming up as strong economies in the coming decades.

Currently, Pakistan is ranked the 44th largest economy of the world with GDP of US$ 225.14 billion. If Jim O'Neill's predictions turn out to be true, Pakistan's economically sound conditions can be fruitful for the country's development. Not just this but it can also lead to amicable living conditions for its people and can lead to smooth social atmosphere there.

Other than the 2050 predictions, we should not forget about the serious economic challenges being faced by Pakistan currently. International Monetary Fund signed a financial assistance of USD 6.7 billion to save the country from falling into the periphery of an economic collapse back in September 2013. The energy sector is a cause of severe poverty and growing labour force. Pakistan has failed to develop a variegated economy. Pakistan will need to boost up its confidence in order to attract FDIs, said IMF.

Terrorism is another reason behind the slower economy of Pakistan. It has damaged the image and the economy of Pakistan on numerous levels. Normal business and tasks require more time and extra security due to the challenge of terrorism. Terrorism leads Pakistan to have an extra expenditure on humanitarian aid, law and order and various other fiscal, economic, cultural and social charges.

Pakistan's economic circumstances have different root causes and solutions to those causes are demanding but a lot has changed over the years. Since 2007, the domestic consumer demand has been rising. Many multinational corporations have brilliantly performed in Pakistan. The Pakistani markets have proven to hold better potential than the African markets. It has also been said that if the job crisis in Pakistan is resolved, its economy will outdo the economies of many other countries.

"It would be a great achievement for Pakistan if Jim's predictions turn out to be true. Pakistan will then be entering into the positive spheres of world economics. This will be beneficial for the country," said Sukriti, a student of English Honors who holds high interests in economical issues of the world.

"If Pakistan is able to achieve the mark of GDP US$ 3.33 trillion, then nothing like it. It will be a great achievement not just for Pakistan but also for the neighboring countries. The economical ties will bolster and not just Pakistan but all the surrounding countries will flourish with it," said Arushi, a student of Jesus and Mary College.

Pakistan's growing economy will be a big challenge for the other economies of the world.

Riaz Haq said...

Here's an interesting Op Ed by a NZ doctoral candidate Christopher Barber in the Diplomat on Pakistan-China economic corridor:

Historian Daniel Headrick made the crucial connection between means and ends in the projection of global influence. For instance, Headrick argued that the Suez Canal, which opened in 1869, acted a tool of empire for the great powers of the nineteenth century. The building of a canal through the Sinai Peninsula not only made trade and empire in Asia faster by avoiding the Cape of Good Hope, but more economical too. This was particularly the case for the world’s superpower, Great Britain. For Britain, the Suez was an important strategic consideration in its imperial outlook, making the transport of goods, officials and soldiers to Bombay and other key colonial hubs easier and affordable....

With the development of the corridor, Central Asia, traditionally an economically closed region owing to its geography and lack of infrastructure, will have greater access to the sea and to the global trade network. For Afghanistan and Tajikistan, both of which have signed transit agreements with Pakistan, it will provide a more economical means of transporting goods, making their export products more competitive globally. For China, meanwhile, the corridor will provide it with direct access to the Indian Ocean, enabling China to project itself strategically into the mineral and oil rich regions of Western Asia and Africa (and beyond). And for Pakistan, the project provides the country not only a third deep-sea port but also a better connected gateway into China’s backyard, giving Pakistan the potential to make good on its free trade agreement with the dragon economy.

Nevertheless, the corridor will play a crucial role in advancing Pakistan’s economic power. Exporting, transiting, and transporting goods into and out of Central Asia and carrying them away on the current of the world’s sea lanes, the Pakistan-China corridor will be a vital factor in Pakistan’s economic future. The corridor is best thought of as a comprehensive infrastructure package encompassing a wide range of spinoffs, including gas and oil pipelines, railways, an expressway from Karachi to Lahore, fiber-optic cabling, metro bus and underground services for key Pakistani cities....


In reality, agriculture, chemicals, textiles, and various other manufactured items are the stuff of Pakistan’s true productivity—items that are tradable on the global market and capable of boosting national income. Pakistan has always been well placed to export given its access to the Indian Ocean and proximity to key markets in the West and East, to say nothing of its international reach through the Pakistani diaspora and the fact that it has the third largest English-speaking population in the world. Despite government absenteeism—that reoccurring failure within the political sphere to respond to the Taliban and to the reactionaries that routinely thwart Pakistan’s potential—as well as rampant inflation and a serious lack of currency reserves, Pakistan’s private sector has proven resilient, capable of going in for global trade with the right encouragement. The cue is now for the Pakistani government and the business community to formulate a more global economic policy.

As it stands, the failure to fully capitalize on the free trade agreement between China and Pakistan demonstrates the need for a major policy effort to make the most of the corridor. For one, the Pakistani government needs to place greater emphasis on trade relations in its overall foreign policy as well as foster the exporting aspirations of small and midsize companies. Expansive economic policy, continued liberal reform, and, above all, an improved security situation are the formula needed to make full use of the tools of globalization which Pakistan will soon have at its disposal.

Riaz Haq said...

With over 100 million people below the age of 30 aspiring to change their lives, the rise of Pakistan is just a matter of time, Morgan Stanley Chief Investment Strategist David M Darst said on Tuesday.
“Demographics will play a major role in coming decades. Pakistan is among those nine countries in Asia that will add another China in the next 35 years and the impact of this change will be phenomenal on the world economy,” he said while giving a lecture on “The World Economic Environment: Where’s the Global Capital Going”.

It was part of a special series of lectures that was organised by The Aga Khan University here at its auditorium.
With a young population of an average age of 22 years, “I believe the opportunities that the young entrepreneurs from Pakistan have are going to make an exceptional contribution to the economy of the region,” he added.
Darst, who is the author of 11 books and has a PhD in economics from Yale, said it is wrong to believe that Pakistan is lagging behind due to its proximity with Afghanistan, Iran and India. “In fact, I believe Pakistan is in the centre of Asian countries like Iran, Bangladesh, Vietnam and Indonesia that will significantly contribute in the world economy in coming decades.”
Speaking about the strong fundamentals of Pakistan’s stocks, he said, with 31% returns in dollar terms Pakistan led the world markets in 2014. “What is important is that the stocks in Pakistan are still very cheap compared to the markets in the industrialised world and they are performing better than many markets in terms of returns,” he added.
“I am surprised to see low number of investors in the bourses of Pakistan. This must change considering the strong fundamentals of Pakistani stocks.”

Darst said women in the world are playing an important role in today’s world economy. The rise of the entrepreneurs from the developing world, especially women entrepreneurs, will also bring significant positive changes in this century.
Listing down the challenges to the global economy, he said though Pakistan and India have benefitted from the current sharp decline in oil prices, sudden fall in oil prices has rejuvenated fears of deflation in many countries.
He said Europe is redefining itself and the sharp changes in Europe can surprise the world at large.
Speaking on the challenges facing Europe in relation to Greece, he said the new elected prime minister of Greece could take decisions that may not go well with the euro and the overall economy of the continent.

Riaz Haq said...

Washington Post: #Hindi, #Bengali, #Urdu languages to dominate business world by 2050. #India #Pakistan #Bangladesh

Hindi, Bengali, Urdu and Indonesian will dominate much of the business world by 2050, followed by Spanish, Portuguese, Arabic and Russian. If you want to get the most money out of your language course, studying one of the languages listed above is probably a safe bet.

The Chinese dialects combined already have more native speakers than any other language, followed by Hindi and Urdu, which have the same linguistic origins in northern India. English comes next with 527 million native speakers. Arabic is spoken by nearly 100 million more native speakers than Spanish, which has 389 million speakers.

Of course, demographic developments are hard to predict. Moreover, the British Council only included today's growth markets, which says little about the growth potential of other nations that are still fairly small today. Also, Arabic and Chinese, for instance, have many dialects and local versions, which could make it harder for foreigners to communicate.

Despite all that, the chart above gives a broad look into which linguistic direction the business world is developing: away from Europe and North America, and more toward Asia and the Middle East.

You want to speak to as many people as possible? How about Chinese, Spanish or French?

German linguistic expert Ulrich Ammon, who conducted a 15-year-long study, recently released a summary of his research. In his book, Ammon analyzes the languages with the most native speakers and the most language learners around the world. Especially for the latter aspect, there is little original data available, which is why Ammon does not provide predictions of exact numbers of speakers per language.

Here's his top three of the languages you should learn if you want to use the language as often as possible, everywhere in the world. If you do not have time, however, don't worry too much: English will continue to top all rankings in the near future, according to Ammon.

1. Chinese. "Although Chinese has three times more native speakers than English, it's still not as evenly spread over the world," Ammon said. "Moreover, Chinese is only rarely used in sciences and difficult to read and write."

2. Spanish. Spanish makes up for a lack of native speakers — compared with China — by being particularly popular as a second language, taught in schools around the world, Ammon said.

3. French. "French has lost grounds in some regions and especially in Europe in the last decades," Ammon explained. "French, however, could gain influence again if west Africa where it is frequently spoken were to become more politically stable and economically attractive."

Riaz Haq said...

#PWC’s ‘brave’ report predicts #Egypt and #Pakistan will surpass #Canada’s #economy by 2050. #GDP … via @financialpost

The economies of emerging market minnows Egypt and Pakistan could surpass the Canadian economy by 2050, according to a “brave” new report by management consultancy PricewaterhouseCoopers.

“By 2050, emerging economies such as Mexico and Indonesia are likely to be larger than the UK and France, while Pakistan and Egypt could overtake Italy and Canada,” PWC said in a report published Tuesday.

The findings — based on gross domestic product purchasing power parity (PPP) terms — also forecasts India will replace the United States as the world’s second largest economy after China by 2050.

Riaz Haq said...

Pakistan will be 16th largest economy by 2050: PWC report

Pakistan will become the 20th largest economy among 32 peers by 2030 and will further grow to become the 16th largest by 2050, stated a report by PricewaterhouseCoopers (PwC), one of the world’s largest professional services firms.

The report titled, ‘The Long View: How will the global economic order change by 2050?’ said that emerging markets will dominate the world’s top 10 economies in 2050 with China continuing to lead the pack. It projected GDP for 32 of the largest economies in the world, which together currently account for around 85% of global GDP.

Pakistan and Egypt are set to overtake Italy and Canada by 2040, it said.

Fitch affirms Pakistan at ‘B’; outlook deemed stable

“By 2050, emerging economies such as Mexico and Indonesia are likely to be larger than the UK and France, while Pakistan and Egypt could overtake Italy and Canada (on a purchasing power parity basis). In terms of growth, Vietnam, India and Bangladesh could be the fastest growing economies over the period to 2050, averaging growth of around 5% a year.”

According to the report, by 2030, Pakistan will improve its rank from 24th to 20th and will see a further improvement of four places in the next 20 years, based on projected GDP (at PPP).

India will overtake the US to become the second-largest by 2050, it added.

“China has already overtaken the US to become the world’s largest economy in PPP terms, while India currently stands in third place and is projected to overtake the US by 2040 in PPP terms.

“When looking at GDP measured at market exchange rates, we do not see quite such a radical shift in global economic power, reflecting the lower average price levels in emerging economies.

“But China still emerges as the largest economy in the world before 2030 and India is clearly the third largest in the world by 2050, so there is still a considerable shift in economic power towards Asia in particular whichever measure we use.”

‘Pakistan’s economy will collapse in the next 10 years’

According to the GDP at PPP measure, Canada is currently ranked as the 17th largest economy, but by 2030 the country will slip to the 18th position and by 2050 to the 22nd spot.

Egypt will move to the 15th place with Pakistan at 16th.

Despite the Canadian economy’s diminished status, the country’s GDP will roughly double to $3.1 trillion by 2050 from its current level.

While PwC’s findings show some of the same countries near the top of the list in 13 years, they also have numerous economies slipping or rising massively by 2030.

Riaz Haq said...

Jim O’Neill, ex Goldman Sachs investment banker who coined "BRICs", praises #China government’s #coronavirus response: ‘Thank God this didn’t start in somewhere like India’. His comments anger #Indian officials. #India #Modi #BJP #CowUrine #COVIDー19|twitter&par=sharebar

Jim O’Neill, the chair of U.K. think tank Chatham House, on Wednesday commended the “fast, aggressive” Chinese response to the coronavirus outbreak, suggesting western countries should follow suit.

“Thank God this didn’t start in somewhere like India, because there’s absolutely no way that the quality of Indian governance could move to react in the way that the Chinese have done,” O’Neill, the former Goldman Sachs chief economist, told CNBC’s “Squawk Box Europe” on Wednesday.

“That’s the good side of the Chinese model, and I think you could probably say the same about Brazil too,” he added.


On one hand, O’Neill acknowledged that the dominance of President Xi Jinping and the diminished responsibility of officials in Wuhan, where the virus originated, may have enabled COVID-19 to initially spread quicker.

“That said — and it’s often like a lot of other things when China got hit with a crisis over the last 30 years — once they realized the scale of it, the system seems to be capable of dealing with it pretty quickly, relative to other places, and pretty decisively,” O’Neill contended.

Chinese authorities suppressed early warnings from doctors and citizens in Wuhan and forced them to apologize for spreading “lies” and in turn failed to contain the outbreak in its infancy. The government has been widely criticized for its delayed response at the outset, with Raymond James analysts likening the situation to the Soviet Union’s handling of the Chernobyl nuclear disaster.

Ophthalmologist Li Wenliang sounded the alarm in December when he told a group of doctors on Chinese social media about seven cases he saw. He and seven other whistleblowers were reprimanded by the Wuhan police in January for spreading “illegal and false” information.

Chinese authorities shut down vast swathes of the country’s travel infrastructure and industrial production last month, causing a profound short-term shock to the Chinese and global economy. However, new cases of the virus in greater China have now slowed to a trickle, while Italy deals with a rapid escalation in new infections and a spiking death toll.

Negi highlighted that the Indian government supplied 15 tons of medical assistance comprising masks, gloves and other emergency medical equipment to China on 26 February 2020.

The outbreak is now a global pandemic while new cases in China have begun to slow, and Beijing is now attempting to cast doubt over whether the virus actually originated in China at all.

A ‘globalized people’
O’Neill, the former commercial secretary to the U.K. Treasury suggested that western governments dealing with outbreaks of their own, such as Italy and the U.K., should look to emulate China, South Korea and Singapore in the swift deployment of aggressive containment measures.

He also argued that finance and economic policymakers must begin treating health policy more seriously and think of it in the same way as other investment spending, and criticized the protectionist agenda of the U.S. and other nations on international trade.

“Unless we get rid of all forms of communication, we are globalized people and we need to think and learn from each other about the right solutions at any moment in time for all of us,” O’Neill concluded.

Riaz Haq said...

Here’s Goldman Sachs' Take on World Economy Through 2075

Goldman Sachs analysts said slower population growth will present “a number of economic challenges,” such as how nations will pay for rising health costs of their aging populations.

Goldman Sachs Group Inc. economists have taken a stab at predicting the path of the world economy through 2075.

Two decades since they famously outlined long-term growth projections for the so-called BRIC economies, the economists, now led by Jan Hatzius, expanded their projections to encompass 104 countries over the next half-century.

The results:

Global growth will average just under 3% a year over the next decade, down from 3.6% in the decade before the financial crisis, and will be on a gradually declining path afterwards, reflecting a slowing of labor force growth.
Emerging markets will continue to converge with industrial nations as China, the U.S., India, Indonesia and Germany top the league table of largest economies when measured in dollars. Nigeria, Pakistan and Egypt could also be among the biggest.
The U.S. is unlikely to repeat its relative strong performance of the last decade, and the dollar’s exceptional robustness will also unwind over the next 10 years.
While income inequality between countries has fallen, it will continue to rise within them.
Economists Kevin Daly and Tadas Gedminas saw protectionism and climate change as risks that are “particularly important” both for growth and the convergence of incomes.


Pakistan projected to be among largest economies in the world by 2075: Goldman Sachs

A research paper published by Goldman Sachs on Tuesday projected Pakistan to be the sixth largest economy in the world by 2075 given “appropriate policies and institutions” are in place.

Authored by economists Kevin Daly and Tadas Gedminas and titled ‘The Path to 2075’, the paper projected that the five largest economies by 2075 will be China, India, the US, Indonesia and Nigeria.

Goldman Sachs has been projecting long-term growth of countries for almost two decades now, initially starting out with BRICs economies, but for the past 10 years they have expanded those projections to cover 70 emerging and developed economies.

Their latest paper covers 104 countries with projections going as far as 2075.

Riaz Haq said...

20 Largest Economies in the World by 2050: The Rising Giants

Complete List
Country Projected GDP at PPP (in trillion)
Vietnam $3.18
Philippines $3.34
South Korea $3.54
Iran $3.90
Pakistan $4.24
Egypt $4.33
Nigeria $4.35
Saudi Arabia $4.69
France $4.71
Turkey $5.18
United Kingdom $5.37
Germany $6.14
Japan $6.78
Mexico $6.86
Russia $7.13
Brazil $7.54
Indonesia $10.5
United States $34.1
India $44.1
China $58.5


In our exploration of the future, we’ve delved into the fascinating realm of global economic dynamics, forecasting the 20 largest economies by the year 2050. But if you’re eager to cut to the chase, feel free to jump straight to our top 5 predictions.

Our journey begins in the heart of London, at the headquarters of our own professional services network.

We’re proud to stand among the world’s leading accountancy firms, and in 2017, we embarked on a bold project: The World in 2050. This report was our attempt to gaze into the crystal ball of the world’s economic future, three decades down the line.

Our projections suggest a seismic shift in the global economic landscape. We anticipate the global economy will surge by 130% by 2050, with China commanding a 20% share of the world’s GDP in purchasing power parity.


Pakistan Forecasted GDP at PPP: $4.24 trillion

Pakistan, the world’s fifth most populous nation, is expected to be among the 20 largest economies in the world by 2050, driven by its youthful population. A Goldman Sachs report from December 2022 even tipped Pakistan to be the sixth largest economy by 2075.

Riaz Haq said...

Dependency ratio is the ratio of children (under 15) and retirees (65 and above)) to working age (15-64 years) people in a population. Countries with high dependency ratios tend to perform poorly relative to countries with low dependency ratios in terms of economic growth.

A recent NY Times article by Lauren Leatherby titled "How a Vast Demographic Shift Will Reshape the World" uses charts and graphics to show how the world economic landscape will change during the rest of the century.

It shows that Pakistan will join the top 10 countries with highest share of working age population and lowest dependency ratios.

Pakistan will join top 10 countries in working age population in 2050

Bangladesh is already in the top 10 working age population countries today.

Countries are categorized as having large working-age populations if people between the ages of 15 and 64, an age group commonly used by demographers, make up at least 65 percent of the total population.

Countries where at least a quarter of the population is under age 15 and where less than 65 percent of the population is working age are categorized as having a large young population. Countries are categorized as having a large old population if those age 65 and older make up more than a quarter of the population.

Unless noted otherwise, graphics include all countries with a population of at least 50,000 people.

The world’s demographics have already been transformed. Europe is shrinking. China is shrinking, with India, a much younger country, overtaking it this year as the world’s most populous nation.

But what we’ve seen so far is just the beginning.

The projections are reliable, and stark: By 2050, people age 65 and older will make up nearly 40 percent of the population in some parts of East Asia and Europe. That’s almost twice the share of older adults in Florida, America’s retirement capital. Extraordinary numbers of retirees will be dependent on a shrinking number of working-age people to support them.

In all of recorded history, no country has ever been as old as these nations are expected to get.

As a result, experts predict, things many wealthier countries take for granted — like pensions, retirement ages and strict immigration policies — will need overhauls to be sustainable. And today’s wealthier countries will almost inevitably make up a smaller share of global G.D.P., economists say.

This is a sea change for Europe, the United States, China and other top economies, which have had some of the most working-age people in the world, adjusted for their populations. Their large work forces have helped to drive their economic growth.

Those countries are already aging off the list. Soon, the best-balanced work forces will mostly be in South and Southeast Asia, Africa and the Middle East, according to U.N. projections. The shift could reshape economic growth and geopolitical power balances, experts say.