Haq's Musings

Riaz Haq writes this data-driven blog to provide information, express his opinions and make comments on many topics. Subjects include personal activities, education, South Asia, South Asian community, regional and international affairs and US politics to financial markets. For investors interested in South Asia, Riaz has another blog called South Asia Investor at http://www.southasiainvestor.com and a YouTube video channel https://www.youtube.com/channel/UCkrIDyFbC9N9evXYb9cA_gQ

Showing posts with label Geopolitics. Show all posts

Monday, July 28, 2025

Can Pakistan Balance Close China Ties With its US Relationship?

Pakistani civilian and military leaders have recently met with top leaders from China and the US. While Pakistani Deputy Prime Minister Ishaq Dar has met with US Secretary of State Marco Rubio and Chinese President Xi Jinping, Pakistan's military chief Field Marshal Asim Munir has had lunch with President Donald Trump and Chinese Foreign Minister Wang Yi during July, 2025. “Our foreign policy is not a zero-sum game,” Dar said at a presentation to the Atlantic Council think tank in Washington DC. “We hope to see friendly relations between the US and China and do not wish to embroil in bloc politics.” Pakistan's close ties to both the US and China go back to the 1960s at the height of the Cold War. It was Pakistan which helped arrange the first China-US dialogue in July 1971 when the US Secretary of State Henry Kissinger flew from Pakistan to China to hold the first face-to-face meeting with Chinese leaders.

With increasing US-China rivalry on the world stage today, can Pakistan still maintain close ties with both Beijing and Washington at the same time? President Trump's remarks at a recent Philippines-US summit offer clues to answering this puzzle.

Responding to questions at the White House last week, visiting Filipino President Marcos said "there's no need to balance the relationship between the US and China" and that his "strongest partner has always been the US." President Trump immediately rebuked him, saying he "doesn't mind if [Marcos] gets along with China because we're getting along with China very well," and told Marcos that getting along with China is "doing what's right for his country," would "make the Philippines great again" and "wouldn't bother me at all."

It seems that Secretary Rubio has reconciled himself with the inevitability of China's rise. In February 2025, Rubio told Brian Kilmeade of Fox News: “China is going to be a rich and powerful country. No matter what we do, that’s what – we’re going to have to deal with that. But we have to deal with the reality. What we cannot have is a world where China is so powerful, we depend on them. And that’s right now where we’re headed, unfortunately. That’s going to change. That’s going to change under President Trump”.

Talking about the US interest in South Asia, American Professor John Mearsheimer told India's CNN-News18 in May this year: "When it comes to countering China, India is the most important country for the US in South Asia. But the US also wants to maintain good relations with Pakistan to try to peel it away from China".

Speaking to an Indian YouTube channel "The Federal" after what India called its "Operation Sindoor", French political scientist Christophe Jaffrelot talked of Indian expectations "which are completely unrealistic, a fight to the finish with a nuclear power (Pakistan). What does that mean do you think you can really break Pakistan create an an independent Balochistan this is complete fantasy and of course when you foster this sense of fantasy by being almost belligerent and also there is this sense of hysteria that that the that the media are of course also cultivating when you expect so much you can only be disappointed and and this is really um counterproductive for the BJP to play that game because they are bound to create expectations they will never meet".

Here's a good summation of the aftermath of "Operation Sindoor" as seen by a veteran Indian diplomat MK Bhadrakumar: "The bottom line is, Pakistan has demonstrated its nuclear deterrent capability. It is as simple as that. If Operation Sindoor were to be repeated every now and then, it would only have the same results and be halted unceremoniously within 100 hours. Eventually, it will not only lose all novelty to our ecstatic TV audience, but a troubled nation may eventually start blaming an inept leadership. Pakistan is a major military power. Creating potholes in an odd runway or rendering a radar dysfunctional temporarily will not intimidate that country. Succinctly put, it must be far better for India to take help from Trump, who harbors no animus against us, to solve the problem and move on with life".

Pakistan military's remarkable performance against its much larger rival India has significantly raised Pakistan's geopolitical profile in the eyes of the international community. Islamabad's ties with Beijing and Washington have significantly strengthened. The country has been elected President of the UN Security Council and Chair of the UN Security Council Taliban Sanctions Committee (1988 Committee): This committee oversees the implementation of sanctions measures against the Taliban. Pakistan is also Vice-Chair of the Counter-Terrorism Committee (CTC): The CTC monitors the implementation of resolution 1373, which outlines state obligations to counter terrorism.

Friday, June 27, 2025

Trump Administration Seeks Pakistan's Help For Promoting “Durable Peace Between Israel and Iran”

US Secretary of State Marco Rubio called Pakistan Prime Minister Shehbaz Sharif to discuss promoting “a durable peace between Israel and Iran,” the State Department said in a statement, according to Reuters. Both leaders "agreed to continue working together to strengthen Pakistan-US relations, particularly to increase trade", said a statement released by the Pakistan government.

Pakistani Prime Minister Shehbaz Sharif and US Secretary of State Marco Rubio

The call came after Iran and Israel agreed to a ceasefire to end what President Donald Trump described as a "12-day war". It is yet another indication of Pakistan's close ties with both Tehran and Washington. Pakistan strongly condemned Israel's "unprovoked attack" and the US bombing of Iran's nuclear facilities. It also shows Washington’s growing engagement with Islamabad at a time when the Trump administration is exploring a new diplomatic initiative with Tehran, possibly “as early as next week”. President Trump met Pakistan’s army chief Field Marshal Asim Munir at the White House last week where they discussed Iran, which Trump said Pakistan knew about better than most other countries.

Earlier in May this year, President Trump, Vice President JD Vance and Secretary Rubio arranged India-Pakistan ceasefire after 4 days of fighting between the two South Asian neighbors. Testifying before the US Congress earlier this month, the US Central Command Chief General Michael Kurilla described Pakistan as a “phenomenal partner in the counterterrorism world”. This statement coincided with the Washington visit of the Indian parliamentary delegation led by Shashi Tharoor. Tharoor's delegation's aim was to "isolate Pakistan" after the Pahalgam militant attack in Kashmir which India blamed on Pakistan without presenting any evidence.

Pakistan also enjoys close ties with China and Russia. China-Pakistan friendship has meant significant diplomatic support and massive investment in infrastructure, as well as the state-of-the-art military hardware for the country's armed forces. Russia, too, has drawn closer to Pakistan. It has recently agreed to invest in a modern steel plant in Karachi where an abandoned Soviet-era steel mill stands today.

Shanghai Cooperation Organization (SCO) Defense Ministers

At a recent Shanghai Cooperation Organization (SCO) Defense Ministers meeting in China, nine member countries(China, Kazakhstan, Kyrgyzstan, Russia, Tajikistan, Uzbekistan, Pakistan, Iran and Belarus) rejected India's attempt to insert a reference to Pahalgam in the joint statement. Earlier, India distanced itself from SCO's joint condemnation of Israel’s attacks on Iran. India also abstained from voting on a UN resolution regarding the Israel-Palestine conflict, specifically related to the humanitarian situation in Gaza. This decision continues India's pattern of abstaining on resolutions criticizing Israel.

While India claims the mantle of the "Global South" leadership, its actions do not align with its ambition. On the other hand, Pakistan's policies and actions are much more aligned with those of the BRICS nations. Pakistan is not currently a member of the BRICS yet, but both China and Russia have publicly expressed support for its inclusion as a full member.

Saturday, May 24, 2025

American Prof John Mearsheimer on International Geopolitics in South Asia

Professor John Mearsheimer, a renowned international relations expert known for his theory of "offensive realism", has recently spoken to India's CNN-News18 about the impact of US-China competition on geopolitics in South Asia. Sharing his thoughts in interviews on India-Pakistan conflict after the Pahalgam attack, he said: "There is really no military solution to this (Kashmir) problem. The only way this can be solved once and for all is through a political solution that both sides find acceptable".

Professor John Mearsheimer on India-Pakistan Conflict

Professor John Mearsheimer is a highly respected professor of political science at the University of Chicago. Here's how he introduces himself on his personal website: "I am the R. Wendell Harrison Distinguished Service Professor in the Political Science Department at the University of Chicago, where I have taught since 1982. Above all else, I am an international relations theorist. More specifically, I am a realist, which means that I believe that the great powers dominate the international system, and they constantly engage in security competition with each other, which sometimes leads to war".

He has said that neither China nor the US want a full-scale war between India and Pakistan that could escalate into a nuclear war. However, it is in China's interest to "see significant tensions between India and Pakistan to get India to devote a lot of its strategic thinking and resources against Pakistan" rather than on China. The US, on the other hand, wants India to focus all its energies on countering China.

Talking about the recent "Operation Sindoor" launched by Indian Prime Minister Narendra Modi against Pakistan, Mearsheimer said it will not deter Pakistan. "By Operation Sindoor, India has responded like it has in the past. Don't think India wants a major war with Pakistan, it can't dominate on the lower or even the middle rungs of the escalation ladder", he said.

On Chinese involvement in South Asia, Mearsheimer said: "China-Pakistan relations are quite good. The Chinese are providing excellent weaponry to Pakistan and will provide even better weapons in future". "I don’t think China wants an India-Pakistan war but it wants to see significant tensions between India and Pakistan to get India to devote a lot of its strategic thinking and resources against Pakistan", he added.

Talking about the US interest in South Asia, he said: "When it comes to countering China, India is the most important country for the US in South Asia. But the US also wants to maintain good relations with Pakistan to try to peel it away from China".

Tuesday, March 11, 2025

Trump's Policies Ringing Alarm Bells in Delhi

"We are in Zelenskyy’s shoes now", read a recent headline in a major Indian newspaper. There are similar concerns being raised in other world capitals in Asia and Europe after President Donald Trump's decisions to cut military supplies and stop sharing intelligence with Ukraine following a White House summit with President Volodymyr Zelenskyy of Ukraine who is facing the military might of Russia on the battlefield in Europe.

From L to R: Putin, Trump, Xi and Modi

“My absolute priority will be to strengthen Europe as quickly as possible so that, step by step, we can really achieve independence from the USA,” said Friedrich Merz, Germany's chancellor-elect. Singapore Defence Minister Ng Eng Hen said the US has “changed from liberator to great disruptor to a landlord seeking rent”.

The events of last week have revived the memory of a quote attributed to former US Secretary of State Dr. Henry Kissinger who is reported to have said: "The word will go out to the nations of the world that it may be dangerous to be America's enemy, but to be America's friend is fatal."

New Delhi has been counting on Washington's help to fend off hostile China which sits on its doorsteps. There are some Indians who believe Russia would come to India's help in the event of war with China. But former US National Security Advisor Jake Sullivan threw cold water on this idea when he said: "In fact, it (Russia) is becoming the junior partner to China. And in that way, they would side with China over India any day of the week".

Trump has fundamentally changed the geopolitics of Asia and Europe. Old alliances no longer matter. Now it's all about each transaction which Trump wants to ensure favors the United States.

During the last Trump Administration in 2019, India's friends in Washington argued for a US policy of "strategic altruism" with India. The new Trump administration seems to be rejecting such talk. Prior to his recent meeting with Prime Minister Narendra Modi at the White House, President Donald Trump described India as the "worst abuser of tariffs" and announced "reciprocal tariffs" on Indian imports to the United States. At the same time, Mr. Trump cracked down on both legal and illegal immigration from India. His administration is deporting thousands of illegal Indian immigrants in handcuffs and shackles on US military aircraft. Meanwhile, stringent new regulations on temporary work visas could significantly delay visa processing times and reduce the number of Indian workers employed in the United States on H1B visas.

Tariffs Comparison. Source: BBC

In a 2019 piece titled "The India Dividend: New Delhi Remains Washington’s Best Hope in Asia" published in Foreign Affairs journal, authors Robert Blackwill and Ashley Tellis argued that the Trump Administration should continue the US policy of "strategic altruism" with India that began with US-India nuclear agreement. They asked President Trump to ignore the fact that the US companies and economy have only marginally benefited, if at all, from this policy. They see India as a "superpower in waiting" and urge Washington to focus on the goal of having India as an ally to check China's rise. They see Chinese support for India's arch-rival Pakistan and China’s growing weight in South Asia and beyond as a threat to India.

India Tops Source Countries For H1B Visa Holders. Source: USCIS

Trump's trade and immigration policies are going to hurt India at a time when its economic growth is declining and job growth is stagnant. The latest Indian annual budget has offered middle class tax relief to spur growth. But economists warn it may not be enough for the vast majority of Indians, whose income still falls below taxable limits and who may still be reeling from the impact of the COVID pandemic, which devastated their earnings, according to a report in Aljazeera. “There is a vast base [of people] where recovery has not come back after the pandemic,” says Kaushik Basu, professor of economics at Cornell University. “We see this in data that the agricultural labour base has increased. And agriculture may well be just a parking spot.”

Illegal immigration from India to the US has dramatically increased on Prime Minister Modi's watch. A Pew Research Center report said that as of 2022, India ranked third, after Mexico and El Salvador, on the list of countries with the largest number of undocumented immigrants — 725,000 — living in the U.S.

India has a serious unemployment problem, particularly for the young people entering the job market by the millions each year. This problem is concealed by headline economic growth figures highlighted by the Modi government. At the same time, India is losing its best and brightest in a massive brain drain.

President Trump has clearly not taken the advice of India's friends in Washington. He is in no mood for "strategic altruism". Instead, the Trump Administration has signaled that it will treat ties with India as just another transactional relationship.

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Tuesday, May 14, 2024

Global Baby Bust: Pakistan is A Rare Bright Spot Among Most Populous Nations in Asia

There is an alarming rapid decline in fertility rates in both developed and developing nations, according to the United Nations. Here is how the Wall Street Journal describes it: "The world is at a startling demographic milestone. Sometime soon, the global fertility rate will drop below the point needed to keep the population constant. It may have already happened".

Total Fertility Rates in 12 Most Populous Nations. Source: Wall Street Journal

Birth rates are low and fertility is rapidly dropping for women across all levels of income, education and labor-force participation around the world. Fertility is falling among Pakistani women too but more slowly than elsewhere in Asia. In fact, Pakistani women have the third highest fertility rate (3.47) among the 12 most populous nations of the world.

Pakistan Fertility Rate. Source: Data Commons

Birth rates have economic, social and geopolitical consequences. "The falling birthrates come with huge implications for the way people live, how economies grow and the standings of the world’s superpowers", says the Wall Street Journal report titled "Suddenly There Aren’t Enough Babies. The Whole World Is Alarmed".

No challenge is greater than the irreversible decline in female fertility rates that China, Japan, South Korea and the West are now experiencing. It's an existential threat. Nations and civilizations with sub-replacement fertility rates will eventually cease to exist. Automation can not replace young curious minds responsible for new ideas, innovation and social and economic vitality. Nor can automation replace consumers needed to buy and pay for products and services produced by robots.

GDP Ranking Changes Till 2075. Source: Goldman Sachs Investment Research

Back in 2022, Goldman Sachs analysts Kevin Daly and Tadas Gedminas projected Pakistan's economy to grow to become the world's sixth largest by 2075. In a research paper titled "The Path to 2075", the authors predicted Pakistan's GDP to rise to $12.7 trillion with per capita income of $27,100. India’s GDP in 2075 is projected at $52.5 trillion and per capita GDP at $31,300. Bangladesh is projected to be a $6.3 trillion economy with per capita income of $31,000. By 2075, China will be the top global economy, followed by India 2nd, US 3rd, Indonesia 4th, Nigeria 5th and Pakistan 6th. The forecast is based primarily on changes in the size of working age populations over the next 50 years.

Economic Growth Rate Till 2075. Source: Goldman Sachs Investment Research

Economic Impact of Slower Population Growth:

Daly and Gedminas argue that slowing population growth in the developed world is causing their economic growth to decelerate. At the same time, the economies of the developing countries are driven by their rising populations. Here are four key points made in the report:

1) Slower global potential growth, led by weaker population growth.

2) EM convergence remains intact, led by Asia’s powerhouses. Although real GDP growth has slowed in both developed and emerging economies, in relative terms EM growth continues to outstrip DM growth.

3) A decade of US exceptionalism that is unlikely to be repeated.

4) Less global inequality, more local inequality.

Goldman Sachs' Revised GDP Projections. Source: The Path to 2075

Demographic Dividend:

With rapidly aging populations and declining number of working age people in North America, Europe and East Asia, the demand for workers will increasingly be met by major labor exporting nations like Bangladesh, China, India, Mexico, Pakistan, Russia and Vietnam. Among these nations, Pakistan is the only major labor exporting country where the working age population is still rising faster than the birth rate.

Pakistan Population Youngest Among Major Asian Nations. Source: Nikkei Asia

World Population 2022. Source: Visual Capitalist

World Population 2050. Source: Visual Capitalist

Over 10 million Pakistanis are currently working/living overseas, according to the Bureau of Emigration. Before the COVID19 pandemic hit in 2020, more than 600,000 Pakistanis left the country to work overseas in 2019. Nearly 700,000 Pakistanis have already migrated in this calendar year as of October, 2022. The average yearly outflow of Pakistani workers to OECD countries (mainly UK and US) and the Middle East was over half a million in the last decade.

Consumer Markets in 2030. Source: WEF

World's 7th Largest Consumer Market:

Pakistan's share of the working age population (15-64 years) is growing as the country's birth rate declines, a phenomenon called demographic dividend. With its rising population of this working age group, Pakistan is projected by the World Economic Forum to become the world's 7th largest consumer market by 2030. Nearly 60 million Pakistanis will join the consumer class (consumers spending more than $11 per day) to raise the country's consumer market rank from 15 to 7 by 2030. WEF forecasts the world's top 10 consumer markets of 2030 to be as follows: China, India, the United States, Indonesia, Russia, Brazil, Pakistan, Japan, Egypt and Mexico. Global investors chasing bigger returns will almost certainly shift more of their attention and money to the biggest movers among the top 10 consumer markets, including Pakistan. Already, the year 2021 has been a banner year for investments in Pakistani technology startups.

Record Remittances From Overseas Pakistanis:

Pakistan is already seeing high levels of labor export and record remittances of over $30 billion pouring into the country. Saudi Arabia and the United Arab Emirates(UAE) are the top two sources of remittances but the biggest increase (58%) in remittances is seen this year from Pakistanis in the next two sources: the United Kingdom and the United States.

Remittances from the European Union (EU) to Pakistan soared 49.7% in FY 21 and 28.3% in FY22, according to the State Bank of Pakistan. With $2.5 billion remittances in the first 9 months (July-March) of the current fiscal year, the EU ($2.5 billion) has now surpassed North America ($2.2 billion) to become the third largest source of inflows to Pakistan after the Middle East and the United Kingdom. Remittances from the US have grown 21%, second fastest after the EU (28.3%) in the first 9 months of the current fiscal year.

Worker Remittances as Percentage of Pakistan GDP. Source: World Bank

Pakistan ranks 6th among the top worker remittance recipient countries in the world. India and China rank first and second, followed by Mexico 3rd, the Philippines 4th, Egypt 5th and Pakistan 6th.

Pakistan Demographics

About two million Pakistanis are entering the workforce every year. The share of the working age population in Pakistan is increasing while the birth rate is declining. This phenomenon, known as demographic dividend, is coinciding with declines in working age populations in developed countries. It is creating an opportunity for over half a million Pakistani workers to migrate and work overseas, and send home record remittances.

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Sunday, March 19, 2023

Why Does India Lag So Far Behind China?

Indian mainstream media headlines suggest that Pakistan's current troubles are becoming a cause for celebration and smugness across the border. Hindu Nationalists, in particular, are singing the praises of Indian Prime Minister Narendra Modi and some Pakistani analysts have joined this chorus. This display of triumphalism and effusive praise of India beg the following questions: Why are Indians so obsessed with Pakistan? Why do Indians choose to compare themselves with much smaller Pakistan rather than to their peer China? Why does India lag so far behind China when the two countries are equal in terms of population and number of consumers, the main draw for investors worldwide? Obviously, comparison with China does not reflect well on Hindu Nationalists because it deflates their bubble.

Comparing China and India GDPs. Source: Statistics Times

China was poorer than India until 1990 in terms of per capita income. In 2001, both nations were included in Goldman Sachs' BRICs group of 4 nations seen as most favored destinations for foreign direct investment. Since the end of the Cold War in 1990, the western nations, including the United States and western Europe, have supported India as a counterweight to China. But a comparison of the relative size of their economies reveals that China had a nominal GDP of US$17.7 trillion in 2021, while India’s was US$3.2 trillion. India invests only 30% of its GDP, compared with 50% for China; and 14% of India's economy comes from manufacturing, as opposed to 27% of China, according to the World Bank.

Manufacturing Value Added as Percentage of GDP. Source: World Bank

A recent SCMP opinion piece by Sameed Basha titled "Is India ready to take China’s place in the global economy? That’s just wishful thinking" has summed it up well:

"Comparing China to India is like comparing apples with oranges, with the only similarity being their billion-plus populations.......China is transforming itself into a technologically driven economy in order to exceed the potential of the US. In contrast, India is attempting to position itself as a market-driven economy utilizing its large population as a manufacturing base to compete with China........In its 2022 Investment Climate Statement on India, the US State Department called the country “a challenging place to do business” and highlighted its protectionist measures, increased tariffs and an inability to adjust from “Indian standards” to international standards".

Over 1.5 million patent applications were filed in China in 2021, the highest number in the world. By comparison, the patent filings in India were 61,573, according to the World Intellectual Property Organization. China spends 2.4% of its GDP on research and development compared to India's 0.66%, according to the World Bank.

Top Patent Filing Nations in 2021. Source: WIPO.Int

With growing Washington-Beijing tensions, the United States is trying to decouple its economy from China's. The Wall Street Journal has reported that the Biden administration is turning to India for help as the US works to shift critical technology supply chains away from China and other countries that it says use that technology to destabilize global security.

India's Weighting in MSCI EM Index Smaller Than Taiwan's. Source: Nikkei Asia

The US Commerce Department is actively promoting India Inc to become an alternative to China in the West's global supply chain. US Commerce Secretary Gina Raimondo recently told Jim Cramer on CNBC’s “Mad Money” that she will visit India in March with a handful of U.S. CEOs to discuss an alliance between the two nations on manufacturing semiconductor chips. “It’s a large population. (A) lot of workers, skilled workers, English speakers, a democratic country, rule of law,” she said.

India's unsettled land border with China will most likely continue to be a source of growing tension that could easily escalate into a broader, more intense war, as New Delhi is seen by Beijing as aligning itself with Washington.

In a recent Op Ed in Global Times, considered a mouthpiece of the Beijing government, Professor Guo Bingyun has warned New Delhi that India "will be the biggest victim" of the US proxy war against China. Below is a quote from it:

"Inducing some countries to become US' proxies has been Washington's tactic to maintain its world hegemony since the end of WWII. It does not care about the gains and losses of these proxies. The Russia-Ukraine conflict is a proxy war instigated by the US. The US ignores Ukraine's ultimate fate, but by doing so, the US can realize the expansion of NATO, further control the EU, erode the strategic advantages of Western European countries in climate politics and safeguard the interests of US energy groups. It is killing four birds with one stone......If another armed conflict between China and India over the border issue breaks out, the US and its allies will be the biggest beneficiaries, while India will be the biggest victim. Since the Cold War, proxies have always been the biggest victims in the end".

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Thursday, October 20, 2022

Why Has Modi's India Failed to Internationally Isolate Pakistan Despite its Best Efforts?

Indian Prime Minister Narendra Modi's government has pursued a policy of internationally isolating Pakistan for the last 8 years. Indian diplomats and mainstream media have engaged in a concerted campaign to hurt Pakistan diplomatically and economically during this period. Even the sport of cricket has not been spared. All of the available evidence suggests that this Indian campaign has failed.

Pakistan PM with Other World Leaders at SCO Summit in Samarkand, Uzbekistan. Source: Xinhua

A prominent Indian journalist Shekhar Gupta has recently summarized the reasons for the Modi government's failure to achieve its objectives relative to Pakistan. Gupta argues that Pakistan is too important to be ignored or isolated by the international community. He says, "Pakistan is too big in terms of population, too powerful militarily, too Muslim, too nuclear and too well located to be isolated".

Pakistan PM Shahbaz Sharif with President and Mrs. Biden. Source: White House

Here are some of the key points Shekhar Gupta makes in episode 1093 of his show Cut The Clutter :

1.Pakistan is our most important neighbor. We must focus on Pakistan.

2, We can not ignore Pakistan in India because the world can not ignore Pakistan

3. The Western world has an intrinsic relationship with Pakistan which doesn't go away

4. The West does not see Pakistan as so useful to them today and yet Pakistan can not be isolated.

5. You can see all the indications that Pakistan is not isolated.

6. A lot of (Indian) TV channels say Pakistan is isolated but the evidence doesn't support it.

7. Pakistan FM visited Washington and met his counterpart Tony Blinken.

8. Pakistan Army Chief has received a warm welcome at the US Defense Dept and met US Defense Secretary Lloyd Austin. Bajwa matters more than the Pakistan Defense Minister. Nobody knows his name.

9. US Ambassador to Pakistan Donald Blome, a career diplomat, has visited "Pakistan Occupied Kashmir" and called it Azad Kashmir...Azad means free.

10. When the chips are down in the region Pakistan is the ally Americans reach out to.

11. The US does not want Pakistan to drift to China.

12. German foreign minister Annalena Baerbock has spoken about Kashmir...the K word. She has asked for the UN to help solve the Kashmir issue.

13. Pakistan Army Chief General Bajwa is not a warmonger. He wants to normalize ties with India. He wants to trade with India. He doesn't want Faiz Hameed to succeed him. He used to be the ISI chief and took credit for the Taliban victory in Afghanistan. Do the Americans have leverage here?

14. Where does Pakistan's unique power come from? Why can't Pakistan be ignored? Why can't Pakistan be isolated?

15. The Indian public needs to understand it.

16. Pakistan is too big in terms of population, too powerful militarily, too Muslim, too nuclear and too well located to be isolated.

17. Pakistan has the 5th largest population and its population is growing fast. It could soon exceed Indonesia to become the largest Muslim nation in the world.

18. Pakistan has the 5th strongest military in the world.

19. In terms of nuclear weapons, Pakistan has the 4th largest nuclear arsenal in the world.

20. Pakistan is too well located to be isolated. It has geo-strategic location. Pakistan is the western gateway to China. Pakistan opened China's ties with the US. And then helped the US defeat the Soviet Union.

21. The factors that made Pakistan such a strong ally to US still exist. Don't blame the Pakistanis for it.

22. India is not willing to commit to an alliance with the US.

23. Imran Khan tried to change Pakistan's foreign policy to be more like India's but he failed.

Mentions of Afghans and Afghanistan in US National Security Strategy via Sameer Lalwani

Prime Minister Modi is getting similar inputs and advice from retired Indian diplomat Sharat Sabharwal. In his recently published book "India's Pakistan Conundrum", Sabharwal disabuses his fellow Indians of the notion that Pakistan is about to collapse. He also writes that "Pakistan has shown remarkable resilience in the face of adversity". "Pakistan is neither a failed state nor one about to fail", he adds. He sees "limitations on India’s ability to inflict a decisive blow on Pakistan through military means". The best option for New Delhi, he argues, is to engage with Pakistan diplomatically. In an obvious message to India's hawkish Hindu Nationalist Prime Minister Narendra Modi, he warns: "Absence of dialogue and diplomacy between the two countries carries the risk of an unintended flare-up". Ambassador Sabharwal served as Indian High Commissioner to Pakistan from 2009 to 2013. Prior to that, he was Deputy High Commissioner in Islamabad in the 1990s.

Here's Shekhar Gupta's video titled "Gen Bajwa in DC, US envoy, German FM statements on Kashmir, show why Pakistan can’t be isolated."

https://youtu.be/NuXd4d_clf4

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Wednesday, April 13, 2022

The West's Technological Edge in Geopolitical Competition

The US and its allies enjoy a significant technological advantage over China and Russia. The Chinese are working hard to catch up but the West is not standing still. It is making huge investments in research and development to maintain this edge as it becomes increasingly clear that the outcome of the ongoing international geopolitical competition will largely be determined by technology.

East-West Comparison of GDP, R&D. Source: IMF (GDP), OECD (R&D) via WSJ

In 2019, the United States and its allies invested $1.5 trillion in research and development, far outpacing the combined Chinese and Russian R&D investment of half a trillion USD. This gap will likely narrow if the East's GDP continues to grow faster than the West's, allowing for higher investment in technology.

After the Russian invasion of Ukraine, the US, EU, Japan, South Korea and Taiwan have made it clear that the Western allies can and will use technology sanctions to control the behavior of China and Russia.

Taiwan Semiconductor Manufacturing Company (TSMC) will no longer fabricate computer chips for Russia, according to media reports. The ban will particularly affect Russia's Elbrus and Baikal processors, unless China agrees to step in to manufacture these chips, and risk additional US sanctions itself. Both Russian processors use mature 28 nm technology. The world's most advanced TSMC fabrication technology today is 5 nanometers. The best US-based Intel can do today is 7nm technology. China's SMIC (Semiconductor Manufacturing International Corporation) has the capability to produce chips using 14 nm technology. Semiconductor chips form the core of all modern systems from automobiles to airplanes to smartphones, computers, home appliances, toys, telecommunications and advanced weapons systems.

While China is the biggest volume producer of semiconductor components in the world, the Chinese design centers and fabs rely on tools and equipment supplied by the West to deliver products. Western companies dominate all the key steps in this critical and highly complex industry, from chip design (led by U.S.-based Nvidia, Intel, Qualcomm and AMD and Britain’s ARM) to the fabrication of advanced chips (led by Intel, Taiwan’s TSMC and South Korea’s Samsung ) and the sophisticated machines that etch chip designs onto wafers (produced by Applied Materials and Lam Research in the U.S., the Netherlands’ ASML Holding and Japan’s Tokyo Electron ), according to the Wall Street Journal.

There is no question that the current western technology sanctions can seriously squeeze Russia. However, overusing such sanctions could backfire in the long run if the US rivals, particularly China and Russia, decide to invest billions of dollars to build their own capacity. This would seriously erode western technology domination and result in major market share losses for the US tech companies, particularly those in Silicon Valley.

Related Links:

Haq's Musings

South Asia Investor Review

Pakistani-American Banker Heads SWIFT, the World's Largest Interbank Payment System

Pakistani-Ukrainian Billionaire Zahoor Sees "Ukraine as Russia's Afghanistan"

Ukraine Resists Russia Alone: A Tale of West's Broken Promises

Ukraine's Lesson For Pakistan: Never Give Up Nuclear Weapons

Has Intel's Indian Techie Risked US Lead in Semiconductor Technology?

US-China Tech Competition

Can Pakistan Benefit From US-China Tech War?

Ukraine's Muslims Oppose Russia

Riaz Haq's Youtube Channel

PakAlumni Social Network

Monday, April 20, 2015

Can Indian Economy Survive Without Western Money?

India runs massive current account deficits. Its imports far outstrip exports year after year. According to the Reserve Bank (RBI) data, in the April-December 2014 period of last fiscal, India's current account deficit stood at $31.1 billion or 2.3% of GDP.

In spite such large recurring deficits, India has built up over $300 billion in foreign exchange reserves. How does it do it? The simple answer is: Foreign money inflows in the form of debt and investments mainly from the West keep the Indian economy afloat.

Sources of FDI in India Source: Financial Express

These inflows have dramatically increased with western support for India in the post Cold War world. Here's how Indian journalist Pankaj Mishra explains the larger western interest driving this phenomenon:

"Seen through the narrow lens of the West’s security and economic interests, the great internal contradictions and tumult within these two large nation-states (India and Pakistan) disappear. In the Western view, the credit-fueled consumerism among the Indian middle class appears a much bigger phenomenon than the extraordinary Maoist uprising in Central India".

Here's how the Asian Development Bank (ADB) describes the rising inflows of foreign, mainly western, capital into India:

"Gross capital flows have increased nearly 22 times from $42.7 billion in 1991-92 to over $932.3 billion in 2010-11. As a share of GDP, this amounted to an increase from 15.5% in 1991-92 to 55.2% in 2010-11. Much of the increase in financial integration occurred between 2003-04 and 2007-08. Given the impressive economic performance indicated by close to 9% growth rate, higher domestic interest rates and a strong currency, India's risk perception was quite low during 2003 to 2007. Furthermore, this period was associated with favorable global conditions in the form of ample liquidity and low interest rates in the global markets—the so-called period of Great Moderation."

Many other economies have been growing faster and producing higher investor returns than India. So the returns do not justify the increased capital flows. Such flows are driven much more by the changing geopolitics of South Asia region and the world since the end of the Cold War in early 1990s. Without these inflows, Indian economy would collapse and India would be at IMF's door seeking last resort loans.

Lesson: Geopolitics drive economy. It's the reason for over a trillion dollars of western capital flow into India since the end of the Cold War. It also explains China's massive $46 billion investment commitment in Pakistan agreed during President Xi Jinping's state visit to Islamabad.

Related Links:

Haq's Musings

India's Soaring Twin Deficits

Xi Jinping's Pakistan Visit

How Strategic Are China-Pakistan Ties?

India Pakistan Economic Comparison in 2014

Pakistan's KSE-100 Outperforms India's Sensex

India's IT Exports Highly Exaggerated

Is India Fudging GDP to Show Faster Growth Than China?

Tuesday, November 3, 2009

Is Pakistan Too Big to Fail?

The phrase "too big to fail" has gained currency in the United States to describe large and troubled financial institutions since the beginning of the banking crisis last year. The characteristics of such institutions include their large size and huge impact on the rest of the US banking system and the global economy at large.

Seen in the context of regional and global geopolitics, are there any parallels between the the large US banks and the Pakistani state? Let's examine this proposition in a little more depth.

Large Size:

In terms of its size, Pakistan is one of the largest countries in the world. With population exceeding 170 million, it is one of only eight nations armed with nuclear weapons. The nation ranks as sixth largest in population, seventh largest in its army size, 8th in number of mobile phone users, 10th in educated English speaking population, 10th in labor force size, 17th largest in number of Internet users, 26th in economy and 34th in land area.

Strategic Location:
Pakistan sits at the entrance to the oil rich Persian Gulf, and it shares borders with Afghanistan, Iran and the world's most populous nuclear states of China and India. Pakistan's Gwadar port is only 180 nautical miles from the exit of the Straits of Hormuz, considered extremely important for the flow of the bulk of world's demand for oil transportation from the Gulf nations. It provides convenient access to sea routes for many of the landlocked mineral-rich Central Asian states and Western China.

Pakistan has a 650-mile long coastline on the Arabian Sea, extending from India to Iran. In addition, some of the air and land routes between west and east pass through Pakistan because of its central location. Karachi and Gawadar have natural harbor ports serving as trading and re-fueling stop for ships.

Major Failures:

Not unlike the troubled US banks facing the prospect of certain failure, Pakistan also shows up at number 10 on the failed state index compiled by Fund for Peace and Foreign Policy magazine in 2008. However, in spite of the disastrous political leadership and extremely poor governance, the country’s saving grace is arguably its people. As the consequences sink in among Pakistan’s secular elite of the rising Taliban, there are signs that the country’s educated middle class – in Islamabad, Lahore and Karachi, cities rocked recently by continuing terrorist attacks – is losing its patience with radicalism. The urban middle class has more clout than many analysts think. It constitutes the backbone of the army, the business and professional classes and the opinion makers in the media. And the middle class is getting serious about its responsibility. They have now compelled the government into taking more decisive action.

Anger and Distrust:

Just like the US bankers who are getting bailed out at US taxpayers' expense, Pakistanis do not trust Uncle Sam, either. But, in spite of the widespread and deep distrust of the United States, the latest polls now indicate that 86 percent of Pakistanis agree that Taliban and Al-Qaeda militants pose a problem for Pakistan and more than two-thirds support a recent Pakistani army offensive against the extremists. Just as many US taxpayers are unhappy with the massive bailout of the US financial services, there is popular opposition to bailing out many troubled nations around the world. Just as people say that US bankers should have to pay for their own failures, there is a strong feeling that nations who have misbehaved should be made to pay for their mistakes.

Consequences of Failure:

The fear of contagion triggering national and global economic collapse was the chief reason why the US acted swiftly and decisively to prop up the failing financial institutions on Wall Street last year. The same "contagion" logic applies to Pakistan's potential failure which can lead to catastrophic consequences for Asia, the Middle East and the rest of the world, and seriously hurt American economy and strategic interests. If a nuclear-armed nation of 170 million people with a large military falls, then the millions of Pakistanis armed and trained to fight could spread out into the neighboring nations and beyond. This could be highly destabilizing and extremely dangerous for the global peace and prosperity.

Rewards of Success:
If Pakistanis, Americans, Europeans and the world make a commitment and do succeed in helping to bring peace and stability to Pakistan, then there can be an expectation of a significant upside for all. In 2007, analysts at Standard Chartered bank estimated that Pakistan has a middle class of 30 million which earns an average of about $10,000 per year. And adjusted for purchasing power parity (PPP), Pakistan's per capita GDP is approaching $3,000 per head. A peaceful, stable, and prosperous Pakistan has a lot to offer in terms of a large, well-educated, English speaking work force, a huge market opportunity for all sorts of products and services, and tremendous potential for global economic growth.

There is no guarantee of success if the world does make a serious commitment and starts making a long term investment in helping Pakistan, but failure is definitely not an option.

Here is British Writer William Dalrymple talking about India and Pakistan:

Here's another video clip from Intelligence Squared debate about Pakistan:

Here are two more video clips about Pakistan: