Thursday, March 11, 2021

Bangladesh: Development Over Democracy

Until 2010, Bangladesh was a laggard in South Asia region. Its per capita income was about half of Pakistan's. Now Bangladesh's per capita gdp is higher than both India's and Pakistan's. What changed? The biggest change is Bangladeshi leader Shaikh Hasina's decision to stifle the unruly Opposition and the media to bring political and economic stability to the South Asian nation of 160 million people. It has eliminated a constant sense of crisis and assured investors and businesses of continuity of government policies. With development taking precedence over democracy, Shaikh Hasina followed the example of Asian Tigers  by focusing on export-led economic growth of her country. She incentivized the export-oriented garment industry and invested in human development. Bangladesh now outperforms India and Pakistan in a whole range of socioeconomic indicators: exports, economic growth, infant mortality rate, primary school enrollment, fertility rate and life expectancy.       

South Asian Countries' Export Growth. Source: Wall Street Journal

Bangladesh's Exports:

Bangladesh's garment exports have helped its economy outshine India's and Pakistan's in the last decade. Impressed by Bangladesh's progress, the United Nations’ Committee for Development Policy has recommended that the country be upgraded from least developed category that it has held the last 50 years. 

Per Capita Income Growth in Pakistan 2002-2019. Source: World Bank

The next challenge for Bangladesh is to move toward higher-value add manufacturing and exports, as Vietnam has done. Its export industry is still overwhelmingly focused on garment manufacturing. The country’s economic complexity, ranked by Harvard University’s Growth Lab, is 108 out of the 133 countries measured. That is actually lower than it was in 1995, according to the Wall Street Journal

Pakistan Growth By Decades. Source: National Trade and Transport Facility

Vietnam's Rise:

Vietnam ruled by autocrats is rapidly becoming an Asian Tiger. With rising manufacturing costs in China and the US-China trade war,  many major manufacturers are relocating to other countries in Asia. This situation has helped Vietnam emerge as a hub of foreign direct investment (FDI). FDI flow into the country has averaged more than 6% of GDP, the highest of any emerging economy. The country’s recent economic data shows a rise of 18% in exports, with a 26% jump in computers/components exports and a 63% jump in machinery/accessories exports.  These figures have earned Vietnam the moniker of the newest "Asian Tiger".

Musharraf Years & History of Pakistan's GDP Growth Rates. Source: PBS 

Pakistan's Lost Decade:

It was in 2007 that Pakistan caught the "democracy" fever led by the lawless lawyers of Lahore. This led to the return of corrupt dynastic rule of Asif Zardari and then Nawaz Sharif. The year 2007 also marked the beginning of yet another lost decade that saw Pakistan's per capita gdp's continuing lag behind South Asia region and other emerging economies. 

Pakistan's per capita income started to lag behind other emerging nations in 2007

Pakistan's Potential: 

Pakistan was the original "Asian Tiger" back in the 1960s when  other developing Asian economies sought to emulate its development model. It became an export powerhouse in the 1960s when the country's manufactured exports exceeded those of Thailand, Malaysia and Indonesia combined.  The creation of major industrial estates in Karachi under President Ayub Khan's industrial policy incentivized industrial production and exports of value added manufactured products such as textiles. Now the country's industrial output lags its neighbors'. 

History of Pakistan's Manufactured Exports

With Chinese looking to relocate some of their industrial production to low-cost countries, Pakistan has a golden opportunity to grow its industrial output and exports again. Here's Karen Chen explaining why:

“Vietnam is too crowded already and moved into automobiles and electronics. There is no space for investment in Vietnam. Myanmar doesn’t have infrastructure. India is terrible. In Bangladesh you don’t have right conditions for setting up fabric units. So Pakistan is the ideal location for such garment manufacturing because of abundance of cheaper labour. The investment and tax policies for SEZs and new projects are also good. We’ve confidence to be at here.”

Seizing the opportunity to attract export-oriented investors will help Pakistan become the next Asian Asian Tiger economy. It will help the country avoid recurring balance-of-payments crises that have forced the nation to seek IMF bailouts with all their tough conditions. Focusing on "Plug and Play" Special Economic Zones (SEZs) is going to be essential to achieve this objective.


Nayyar A. said...

These numbers use market exchange rates, which fluctuate wildly with currency swings that don't reflect change in living standards. By all metrics, Pakistanis and Indians enjoy higher living standards than Bangladeshis by wide margins. But BD textile exports are real success.

Ramiz S. said...

The graph shows the hidden truth. Businesses need stability and consistency. They don't care about democracy or human rights. This is why Pakistan also saw the best growth under dictators and saw economic instability under democratic governments

Riaz Haq said...

Nayyar: "These numbers use market exchange rates, which fluctuate wildly with currency swings that don't reflect change in living standards. By all metrics, Pakistanis and Indians enjoy higher living standards than Bangladeshis by wide margins. But BD textile exports are real success."

Yes, per capita GDP is based on volatile exchange rates. But Bangladesh outperforms India & #Pakistan on wide range of socioeconomic indicators: exports, economic growth, infant mortality rate, primary school enrollment, fertility rate & life expectancy

Rashid A. said...

In Development over Democracy debate

Few points:

1. Countries like Bangladesh, Singapore, etc. also do not have or have given up any plans and dreams of being “Great Military power”, a leader of the world, teaching west a lesson, beating a 7 times bigger rival, interfering in neighbors affairs and actually live peacefully.

2. Their military expenses are next to nothing.

3. Their military is not calling the shots. The leadership and control is still civilian.

4. And at least in case of BD, the corruption is still in the stratosphere. This seems to contradict the idea that corruption stifles development.

5. Not all dictatorships lead to development.

6. Not all democracies result in economic failure.

7. Yes, there is argument to be made that instead of procedural democracy nations need substantive democracy. That is a walk on a tight, razor thin rope. The tendency of the ruler is to slip into ruthless dictatorship, nepotism, cronyism, revenge, and narcissism. It is a miracle to get a truly genuine, honest and competent leader who ACTUALLY lifts the nation.

Riaz Haq said...

Rashid: "Not all dictatorships lead to development...Not all democracies result in economic failure"

There’s not a single example of a developing nation that became developed under democracy since the end of WW II. Asian Tigers became Asian Tigers under dictators. Taiwan under Gen Chiang Kai Shek. South Korea under Gen Park Chung He. Indonesia under Gen Suharto. Malaysia and Singapore became developed under civilian dictators.

Rashid A. said...

From quick memory:

Turkey was a dictatorship under military and sick economically till Erdogan liberated it and is doing much better under democracy.

Chile was military dictatorship under Pinochet, and sick, and now a democracy and much better economically.

Spain was under dictatorship of Francisco Franco, now a democracy. It’s economy has been rescued.

East Germany was under dictatorship and a truly basket case. Now a democracy with Germany, and thriving.

Cuba remains a dictatorship, and very poor.
Cubans are coming out of and not returning to Cuba.

Egypt, Libya, Syria have been dictatorships. They have nothing to show for their economy.

Burma’s military dictatorship did not do any miracles economically.

So this mantra that democracy is all bad, is what the military and civilian dictators or wannabe dictators like us to believe.

Riaz Haq said...

Rashid: "So this mantra that democracy is all bad, is what the military and civilian dictators or wannabe dictators like us to believe."

There’s absolutely no comparison of the countries you mention with formerly “developing” South Korea and Taiwan that are rightly considered “developed” now. Both are technologically very advanced. They are truly “miracles”.

Turkey and Spain were great empires that fell on hard times temporarily.

Chile was a basket case before Pinochet.

Democracy is designed to slow things down, not accelerate. It throws up a bunch of speed bumps that make rapid progress extremely difficult.

Pakistan’s history also shows it has consistently done better in periods of dictatorship. The decades of 1990s and 2010s have been disastrous for Pakistan.

So there are good reasons why countries do not develop rapidly under democracy.

Mayraj F. said...

The Duty-free Advantage

Bangladesh has Least Developed Country (LDC) status that qualifies it for duty-free market access or reduced tariff facilities to many developed and developing nations, globally. Bangladesh enjoys duty-free access to around 52 countries, including countries in the EU, the USA, Australia, Switzerland, Japan, Turkey, Russia, Norway, New Zealand, China, South Korea, Thailand, Malaysia, and India, for the trade of many products.

Bangladesh has also signed many trade deals offering Bangladesh exports a preferential treatment, like SAARC Preferential Trading Arrangement, Asia-Pacific Trade Agreement, Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Co-operation, South Asian Free Trade Area, and the Trade Preferential System among the OIC member states.

samir sardana said...

Fact is that South Asians and South East Asians are naturally restive and w/o intellectual or physical discipline.Fact is that the people of PRC WANT a CENTRAL STRONG RULER.That is their HISTORY from BEFORE the Tangs and Mings.A nation of the size of PRC cannot function in "DEMOCRACY".

Singapore is a DEMOCRACY on paper.There are NO FUNDAMENTAL FREEDOMS.Fundamental Freedoms precede Fundamental Rights.

Cuba is NOT a economic miracle BECUASE ITS TRADE and BANKING is EMASCULATED by the USA.Same for DPRK.

Myanmar WILL BECOME A ECONOMIC MIRACLE,in less than 5 years,as it will wipe out Laos and Cambodia,and is a BETTER and LOWER COST OPTION,to Vietnam. It will also wipe out Indian Agri exports.This is the time for Myanmar to build its infrastructure.PRC investment will obviate all FDI in Myanmar.

Japan and Korea are Mahayani Buddhists and the purest Mongol DNA.A highly disciplined and evolved race even before Buddha (except for the chaos in Japan towards the end of the Tokugawa Shoguns - which led to the Meiji)

Take The Thai Magic.All Military Rule and the Monarchy.Entire industry run by Chinese,Japs, Koreans, USA and EU.The workers are mostly Thai.Foreigners need stability which comes from a strong central rule.

Same for Malaysia.dindooohindoo

Lastly,take the magic of Ayub Khan - the pinnacle of Pakistani Economic Growth.

Look at the disaster of India - a busted banking system and agri on verge of destruction with an impending insurrection by the Dalits and Muslims. Y ? The nation was left to the machinations of banias/marwaris/gujaratis/rajasthani trash etc.

A scrap dealer became a steel tycoon and busted the Indian Banking system.A person selling fake condoms became a plastics manufacturer ....and the same story.

Now you have a son of a dishwasher and whose father is an unknown algebraic quantity - and remember his magic,as under:


But Indians are only good at SHIT IN INDIA AND MAKE TOILETS IN INDIA - because,that is the ONLY worth of India !

samir sardana said...

The path to Salvation for Bangla,is PRC. They have to let the PRC invest in the Gas and Power infra sector,to produce power at the LOWEST COST IN ASIA.In the time to set up the capacities,the ports can be deep dredged and the road infra be put in order.Once that is in place - the lowest cost manufacturing in THE WORLD,will be in Bangladesh.

The Edge of Bangladesh,is Gas and the Sea (which makes for Offshore wind and tidal,low freight costs) - and combine that,with the power potential in Myanmar - and its cross border wheeling.

The only issue is the rising sea and the soft soil - and so,manufacturing will need to move into the interiors,or power can be wheeled to Myanmarese SEZs.The Bangla success,will wipe out the ENTIRE MANUFACTURING INDUSTRY IN NORTH EAST INDIA,AND THE ENTIRE EAST COAST OF INDIA.

Basically the Bangla state,has to allow Chinese,Korean and Japanese SEZs on an unrestricted basis,with limited NFE and Taxation - and the Taka will overshoot the Thai Baht and Peso,in 5 -10 years.

That will complete the Chinese Triad and the Chinese Parallel in South Asia.

The Chinese Triad is CPEC,Lanka SEZ and the Bangaladesh SEZ.Industry and manufacturing will migrate from Pakistan to Lanka to Chittagong ,on a value addition mode,on an absolute basis.Dhaka will lose its LDC soon,and so,those units can be relocated in Lanka or CPEC. So Chinese SEZ in Bangla,Lanka and CPEC will wipe out the industry in the East,West and South of India - and the impact of that on banking, unemployment and inflation in India,is obvious.

So there is a successful Chinese SEZ Triad

The Chinese Parallel is a line from CPEC to the Deep Draft Port of Myanmar,with its SEZ.The intersection of the Chinese Parallel and the Chinese Triad,is the CRUCIFIXION of the Satanic nation of Hindoosthan

East Bengal,Assam,Tripura and Manipur belong to Bangladesh.The 1st Ahom king was a Chinese,Arunachal are Hans and the rest are South Tibetans,and so,North East belongs to China

Bangladesh ports are the IDEAL PORT TO BYPASS MALACCA,and exit the LOGISTICS TRAP OF THE US NAVY.It is a better option to Gwadar. Then come the ports in Myanmar,and then comes in Gwadar.Gwadar is viable,when Kashmir is an independent nation,Afghan is under Taliban rule (as a US puppet,can block Chinese logistics) and Baloch is under Control.

That provides the pretext to the Chinese,to station the PLN,in The Bay of Bengal,Arabian Sea and build Artificial Islands in the Bay of Bengal, and Indian Ocean.

Once North East India is lost - the Indian weasels will give up Kashmir and Uttarakhand

Hence,the Chinese logistics and economic security strategy,will provide salvation to the People of Pakistan, Bangladesh,Lanka and Myanmar. This is providence and salvation.

A Mahayana Buddhist nation (PRC) is providing salvation to 2 Islamic nations and 2 nations of Theravada or Hinayana Buddhism. dindooo hindoo

samir sardana said...

The Grand Plan for Greater Bangla-desh !

The beauty of Bangladesh,is that,unlike Pakistan,it does not have Afghanistan and Persia,as neighbours - so it is NOT a proxy battleground,for superpowers.

Its borders with India are an ADVANTAGE,as the North East,is the weakest link in the Indian Military defense and economic deveiopment,and the North East Indians,DO NOT have Indian DNA.

PLA sponsored freedom struggles,in the North East,can be operated from Myanmar and Bangladesh, with complete deniability,and strategic ambiguity.

With the Chinese Hydel dam on the Brahmaputra,Bangladesh can be flooded with power at less than 1 cent/kwh - and that will doom all manufacturing in North East India and the Export manufacturing of East India.

This destruction will bring out the stark disparities between North East India and the Bangla race,across the border,in education,inflation,infra,health care etc. - and will start an insurgency in the North East - for secession from India.

With the Hydro and Renewable Power from China and Dhaka,and raw materials imported via Chittagong - North East India as a SOVERIGN NATION ,will enjoy LDC status,for exports to the US/EU - besides bringing an inflow,of US/EU Tourists,via the Bangkok-Dhaka Leg and PRC.

In addition,higher cost manufacturing,can migrate from Dhaka to North East India (as a soverign nation) and thus,qualify FOR LDC status (as the Bangla will lose the LDC status)

A simple Statistic - if Made in Bangla items flood North East India - the cost of living in North East India will fall by 50%,and all farmers and residences in North East India,can be supplied free power,for at least 50 years,from the Hydel power in PRC,and Renewable and Gas power in Bangla.The writing is on the wall !

The Impotent Indian Military CANNOT defend North East India and the Indian cannot develop North East India - as there is no Infra in the North East. Everything moves from Kolkata.It is time to liberate North East India - and it is also time for the Bangla race to populate the North East states

The Indian BSF is a race of corrupt and impotent cowards - and the BDR can easily provide cover for Bangla and North East Freedom Fighters !

The People of West Bengal have to see the writing on the wall.They have a port at the tip of the Bay of Bengal.It is time to secede from India.The People of West Bengal are not with Indian DNA

What does the Hindoo shastra think of Easterners ?

The Hindoo scriptures think of "Easterners", as devil worshippers and the lowest of the low, and as "Easterners follow the practices of the Shudras"- as stated below

The Mahabharata,Book 8:Karna Parva,Section 45

The Pancalas observe the duties enjoined in the Vedas ....... the Easterners follow the practices of the Shudras;

With the formation of Greater Bangladesh and the Soverign United States of North East,and a new race in Dhaka who were born a decade after 1971 - you will have a natural integration with the Islamic Republic of Pakistan - Inshallah !

It is as inevitable as the Sunrise !

Riaz Haq said...

Finland world’s happiest country; India 139th, between Sierra Leone & Burundi
World Happiness Report, now in its ninth year, places Denmark in second place, followed by Switzerland, Iceland and the Netherlands

The COVID-19 pandemic, which has claimed more than two million lives so far, has had little effect on the ranking of the world’s happiest countries, with Finland taking the No 1 spot for a fourth straight year, an annual UN-sponsored report said on Friday.

Once again European nations dominated the top spots; the World Happiness Report, now in its ninth year, placed Denmark in second place, followed by Switzerland, Iceland and the Netherlands. New Zealand, which fell one place to ninth, was again the only non-European nation in the Top 10.

The report used Gallup data asking people in 149 countries to rate their happiness. India was at 139th position. Only Burundi, Yemen, Tanzania, Haiti, Malawi, Lesotho, Botswana, Rwanda, Zimbabwe and Afghanistan were classed as unhappier than India.

Among India’s neighbours, China was at 84th position, Nepal at 87th position, Bangladesh at 101st, Pakistan at 105th, Myanmar at 126th and Sri Lanka at 129th.

The report took into account measures such as GDP, social support, personal freedom and levels of corruption to give each nation a happiness score, which is an average of the past three years. But unlike in the past, this year the index included surveys on how countries have dealt with the pandemic.

This year’s report was faced with a unique challenge in trying to understand what effect the pandemic has had on subjective well-being and vice versa, the report said. Of all the factors usually supporting happiness, the most important for explaining COVID-19 death rates were people’s trust in each other, and confidence in their governments, it said.

The report said it was “no surprise” Finland once again took the top spot. It has always ranked very high on the measures of mutual trust that have helped to protect lives and livelihoods during the pandemic, it said.

The report quoted one of its authors, Jeffrey Sachs, as saying: “We need urgently to learn from COVID-19. The pandemic reminds us of our global environmental threats, the urgent need to cooperate, and the difficulties of achieving cooperation in each country and globally. The World Happiness Report 2021 reminds us that we must aim for wellbeing rather than mere wealth, which will be fleeting indeed if we don’t do a much better job of addressing the challenges of sustainable development.”

Riaz Haq said...

Bangladesh up 6 notches on happiness index

Bangladesh has moved up six notches on the Happiness Index, ahead of India, Pakistan, Sri Lanka, and Myanmar.

According to World Happiness Report 2021 Bangladesh was ranked 102nd among 150 countries of the world, while India, Pakistan, Sri Lanka, and Myanmar placed 140th, 106th, 130th, and 127th, respectively.

Nepal and Maldives ranked higher than Bangladesh, with Nepal ranked 88th and Maldives 90th.

Bangladesh ranked the 108th happiest last year.

Finland, for the fourth straight time, was declared as the happiest country while Afghanistan came out at the bottom of the annual list prepared from data compiled by the Gallup World Poll.

The other two Scandinavian nations, Iceland and Denmark, ranked 2nd and 3rd while Switzerland and the Netherlands came in fourth and fifth positions.

The US moved up from 18th to 14th place and the UK dropped from 13th to 18th. Australia held its 12th place position.

The report ranks countries on six key variables that support well-being, including income, freedom, trust, healthy life expectancy, social support, and generosity.

Due to the ongoing Covid-19 pandemic, however, The World Happiness Report 2021 was assembled slightly differently.

This year, the researchers focused on the relationship between wellbeing and Covid-19 to ensure the countries are judged in light of the new normal.

Riaz Haq said...

IMF says #PMLN government overstated #Pakistan #gdp and understated #debt to gdp ratio starting in 2016. This was done as part of sovereign loan guarantees. Current #PTI government has taken remedial action to correct the error to #IMF's satisfaction

The Executive Board of the International Monetary Fund (IMF) approved a 39-month Extended Arrangement under the Extended Fund Facility (EFF) for Pakistan in the amount of SDR 4,268 billion (about US$6 billion), equivalent to 210 percent of quota, on July 3, 2019. The first review under the arrangement was completed by the Executive Board on December 19, 2019, based upon, inter alia, the reported observance of the quantitative performance criteria (PC) at end-September 2019, including the amount of government guarantees. Upon completion of the first review under the EFF, Pakistan made a purchase equivalent to SDR 328 million (about US$452.4 million).

Subsequently, new information that came to the authorities’ attention, and which was shared with Fund staff, has revealed that the data on government guarantees dating back to FY 2016 was reported inaccurately. The revised data indicates a nonobservance of the PC on government guarantees at end-September 2019 by a margin of PRs 357 billion (about 0.9 percent of GDP), which resulted in a noncomplying purchase and a breach of obligations under Article VIII, Section 5 of the IMF Articles of Agreement. The authorities previously reported that the PC had been met with a margin of PRs 55 billion (0.1 percent of GDP) at end-September 2019. The statistical revision only had a small impact on public debt.

The authorities have taken strong corrective actions to address institutional and technical short-comings that gave rise to the inaccurate information, including: (i) creating a working group to reconcile and cross-check guarantees and debt data; (ii) announcing additional functions for the Debt Policy Coordination Office (DPCO), including to act as custodian of all guarantees issued by the federal government; and (iii) publishing a semi-annual debt bulletin that consolidates key debt statistics. Beyond these actions, the authorities have committed to include a list of all new guarantees expected to be issued in the FY 2022 budget submitted to Parliament.

At the conclusion of the meeting, Deputy Managing Director Antoinette Sayeh and Acting Chair, stated:

“The Executive Board of the International Monetary Fund (IMF) reviewed Pakistan’s remedial actions and data revisions linked to a noncomplying purchase under the Extended Arrangement under the Extended Fund Facility as well as a breach of obligations under Article VIII, Section 5. The non-complying purchase arose as a result of a lack of inter-agency coordination in the compilation of government guarantees provided by the federal government to state-owned enterprises that contributed to incorrect estimates of government guarantees starting as far back as FY 2016.

Riaz Haq said...

#India is running out of money, Mr. #Modi. Embrace foreign #debt.Indian public sector banks were already struggling with the problem of unrealized loans, and the #COVID19 #pandemic was about to make that situation a lot worse. #economy #infrastructure

Like many central banks around the world, the Reserve Bank of India has pumped liquidity into the country's banking sector to help prevent an economic collapse brought about by COVID-19.

Since India's Prime Minister Narendra Modi announced a nationwide lockdown in March, the RBI has released around $50 billion in a bid to shore up bank liquidity, helping to avert imminent disaster. Indian public sector banks were already struggling with the problem of unrealized loans, and the pandemic was about to make that situation a lot worse. Recapitalizing the banking sector was a step in the right direction.

Now, as India shifts from the emergency phase to the recovery phase, Modi needs to consider his policy options carefully. For the first time in decades, India's economy is expected to contract. The private sector is no longer optimistic about the future and is unlikely to add much when it comes to long term investment. That means the onus to stimulate the economy will fall on the government, and an obvious way to do that is by kick-starting upstream infrastructure projects, which can have a positive spillover effect for the rest of the economy.

According to the McKinsey Global Institute, every dollar invested in infrastructure can earn up to 20 cents more in economic returns. For infrastructure deficient countries like India, the return will almost certainly be higher. Modi has put faith in an old Keynesian experiment. During the Great Depression, U.S. President Franklin Roosevelt's New Deal program included the launch of countless public works projects that helped to modernize America's infrastructure, created millions of jobs, and infused a sense of optimism that pulled the U.S. out of depression. Could such an experiment work for India?

Well, not if there is no money to finance it. Modi has promised to spend a whopping $1.4 trillion on infrastructure. But where will all that money come from? For now, the government of India is relying more on mobilizing resources at home. In May, it sold $4 billion worth of bonds. But they were mostly bought by state-run banks and financial institutions.

Three months later, India received $24.6 billion in dividends from the RBI. And here is the problem. The more money banks lend to the state, the less there is for business. Borrowings by the government and state-run companies are now set to exceed 13% of gross domestic product. Anecdotal evidence suggests that bank managers are increasingly reluctant to approve loans to small and medium sized enterprises. That is a shame. The private sector is the backbone of a healthy economy, making up 75% of total investment demand.

Banks, therefore, need to be adequately capitalized to meet regulatory requirements. Simply monetizing the debt by printing more money is not the answer. What India needs to do now is to look outside. On the bright side, India's external debt is not a cause for concern, with an external debt to GDP ratio of about 20%, among the lowest in the region.

Riaz Haq said...

Chinese company to carry out marketing for Rashakai SEZ

The China Road and Bridge Corporation (CRBC) would carry out the marketing campaign for the Rashakai Special Economic Zone under China Pakistan Economic Corridor (CPEC) expressing interest to work with the Board of Investment in this regard.

In a meeting with Minister for Planning Development and Special Initiatives Asad Umar here on Friday, the CRBC Vice President Sun Yaoguo along with a delegation said that external marketing of the SEZ to local and foreign investors was crucial for its full operationalization.

The meeting reviewed the Rashakai Special Economic Zone (SEZ) and CRBC’s mega-project Karachi Coastal Comprehensive Development Zone. The vice president of CRBC stated that the development work of Rashakai SEZ was being carried out at a fast pace and to that end the necessary resources had already been mobilized.

He assured the minister that the timelines for the projects would be strictly observed. The minister said that the industrial cooperation was the need of CPEC and the government was keen to see early completion of the project and the ministry of energy had already expedited the work on supply of electricity and gas to the SEZ.

He said that BOI would fully cooperate with CRBC for effective marketing of the SEZ. Asad Umar said that it was the first time in Pakistan that the foreign developer would be marketing an Industrial zone. He hoped that CRBC would be able to attract substantial investment in the SEZ from Chinese investors.

During the meeting Mr. Sun also briefed about CRBC’s mega project Karachi Costal Comprehensive Development Zone in collaboration with the Ministry of Maritime Affairs and the government of Sindh.

He said that the project would add substantially to the city’s economy landscape and would be generating employment opportunity for a very large number of populations of the city.

The minister said that the Karachi Costal Development Project was an important project and the federal cabinet had approved the signing of a Memorandum of Understanding (MoU).

It will give a boost to the business and technology sectors and provide employment opportunities to the people.

Riaz Haq said...

Pakistan has potential to push annual exports upto $88.1 bn: World Bank

Given Pakistan’s observable characteristics in terms of economic size, level of development, remoteness, and factor endowments, it is estimated that Pakistan’s potential annual exports are at US$ 88.1 billion, about 4 times the actual current level, World Bank said in its recent report “Pakistan Development Update”.

This large gap between actual and potential exports, or “missing exports,” places Pakistan among the top quartile of the distribution of countries with missing exports. Were Pakistan’s exporters to tap into that potential, the resulting export-to-GDP ratio would place the country at around the middle of the distribution of countries according to export orientation. To reach that point, Pakistan’s exports would need to grow at the same rate as Vietnam’s for 10 years, or Bangladesh’s for 13 years.

The report said that the opportunity cost of Pakistan’s “missing exports” is estimated at 893,000 jobs and US$ 1.74 billion in foregone taxes. Of these, 152,000 jobs could be created in the agriculture export sector, and 741,000 jobs could be created in the
manufacturing export sector.

While some of these jobs could be newly created, others may imply the reallocation of labor from relatively lower productivity, domestic-oriented firms, to higher productivity, export-oriented firms.

In terms of foregone tax revenue, a back-of-the-envelope calculation suggests that realizing the export potential would bring an additional US$ 1.74 billion in direct tax revenues annually, taking into account Pakistan’s value added share in gross exports, as well as the implicit direct tax rate across sectors.

The report added that since the turn of the century, Pakistan has become a more inward-oriented economy. A long-term examination of export performance reveals structural stagnation.

In 1990, Pakistani firms served 0.19 percent of the world’s imports. By 2019, they served only 0.12 percent—a nearly 40-percent decline in their market share. As a share of the economy, exports stood at 16 percent of GDP in 1999, but less than 10 percent in 2020.

To tap into the export potential, Pakistan needs to upgrade its trade policy framework. Specifically, it needs to reduce the anti-export bias of tariff policy. This entails gradually reducing import duties across the board, as well as reducing the extent of the cascading by applying larger import duty cuts to final goods relative to intermediates and raw materials.

Analysis shows that protecting the domestic market through high rates of import duties, as the ones observed in Pakistan, comes at the expense of missing out in terms of exports, because it incentivizes firms to sell domestically rather than to export.

The high levels of protection observed in Pakistan carry a high opportunity cost in terms of export-oriented jobs lost, and a higher productivity path the economy could undertake.

Second the government needs to reorient trade enhancement schemes. Currently, schemes such as those put forward in Statutory Regulatory Order (SRO) 711(I) 2018, provide support to exporters that reach destinations with low export potential and low
dynamism, thus not leading to an effective and efficient allocation of scarce public funds.

High-potential Asian destinations should be targeted rather than low potential African, Latin American, or Pacific Islands ones.

Thirdly the Pakistan government needs to negotiate market access with high potential destinations. Central Asian republics are a high potential for Pakistan, because of high missing exports to those countries, and because of their import dynamism.

Riaz Haq said...

Year 2007 marked the beginning of “#democracy” fever led by the lawless lawyers of #Lahore in #Pakistan. Then came the country’s lost decade under corrupt dynastic rule of #ppp and #pmln. Result: Pakistan's per capita income lags #India, #EmergingMarkets