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 Trade. Show all posts

Monday, September 8, 2025

Trump's Tariffs on India: Can China or Russia Make Up For Lost Exports to US?

The United States is the biggest export market for India. Among its top 5 trading partners, the US is also the only country with which India runs a trade surplus. This surplus is now at risk with the 50% tariff recently imposed by President Donald Trump on imports from India. Can Prime Minister Narendra make up for it by cozying up to China and Russia? Recent trade data shows he can't.

While India has enjoyed a significant surplus in trade with the US, the South Asian nation has been running large trade deficits with China and Russia. Last year, for example, India had a $100 billion trade deficit with China and a $62 billion deficit with Russia. On the other hand, India ran over a $40 billion trade surplus with the US. Given these figures, it's hard to understand what India hopes to achieve by getting closer to Beijing and Moscow. The fact is that the US is the world's biggest economy that offers the largest and most profitable export market for most countries. Loss of the US export market spells major trouble for any economy in the world. President Donald Trump knows this and he is using it to make new trade deals to America's advantage. Europeans, Japanese and Koreans have essentially accepted higher tariffs in return for continued access to the US market, while China is negotiating a trade deal with Washington.

The loss of the US export market also means heavy job losses in India's major sectors like textiles, shoes, gems and jewelry and shrimps exports. Christopher Wood, the global head of equity strategy at the investment bank Jefferies, puts the economic blow at £41 billion-£45 billion, according to the Guardian newspaper. He singles out textiles, footwear, jewelry and gems, all of which are highly labour-intensive, as “the most negatively impacted”. Tens of millions of jobs are at risk in these industries. "The stakes for India’s government are political as well as economic. The prime minister, Narendra Modi, has pitched manufacturing as a way to provide jobs to the millions of young Indians who join the labour force each year. These industries employ tens of millions, directly and indirectly", the Guardian reports.

Explaining the punitive India tariffs, US Treasury Secretary Scott Bessent has said: "India came to the table early. They’ve been slow rolling things. So I think that the president, the whole trade team has been frustrated with them. And also, you know, India, India has been a large buyer of sanctioned Russian oil that they then resell as refined products. So, you know, they have not been a great global actor".

Indian Prime Minister Narendra Modi clearly misjudged what he needed to do with Trump 2.0. He continued business as usual, counting on his "bromance" with the US president to get a favorable deal. He thought the US policy of "strategic altruism" with India will continue as it had under the Trump 1.0 and Biden administrations. Modi let his billionaire friends Adani and Ambani rake in billions in profits on Russian oil trade. The discounted Russian oil Adani and Ambani bought was refined and exported for a huge profit to buyers around the world. Now the ordinary Indians are paying the price for Modi's folly.

Worried about a slowing economy, the Modi government is now trying to stimulate domestic consumption by cutting GST (general sales taxes). It is a good move but it will not make up for dollars lost from the precipitous fall in exports to the US market. This fear is causing the Indian currency to fall against the US dollar. There are tough times ahead for the Indian economy.

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Saturday, August 9, 2025

India Tariffs: Is Modi-Trump Bromance Over?

President Donald Trump has imposed 50% tariffs on India's exports to the United States. This is far higher than most countries facing US tariffs. Explaining the punitive India tariffs, US Treasury Secretary Scott Bessent said: "India came to the table early. They’ve been slow rolling things. So I think that the president, the whole trade team has been frustrated with them. And also, you know, India, India has been a large buyer of sanctioned Russian oil that they then resell as refined products. So, you know, they have not been a great global actor".

Indian Cartoonist Satish Acharya on Trump-Modi Dialog. Source: Satish Acharya

Since taking office in January 2025, President Trump has been signaling his intent to apply tariffs on India's exports repeatedly. Trump has been singling out India as a country with the highest tariffs it applies on exports from the US.

Indian cartoonist Satish Acharya published a caricature of Modi-Trump conversation portraying Modi's ignorance or pretense of ignorance of what Trump said to him. The cartoon shows Modi thinking Trump was heaping "taarif" (praise) on him when in fact Trump was threatening to impose high tariffs on India. As an aside, tariff originates from the Arabic word "taʿrīf" (تعريف), which means "notification," "definition," or "announcement". This term probably entered the European lexicon through interactions between Arabic-speaking merchants and European traders in the medieval Mediterranean region.

Cartoons aside, it's clear that Mr. Modi failed to take the Trump tariff threat seriously, and Indian negotiators dragged their feet hoping that Mr. Trump would flinch. Meanwhile, India's supporters in Washington continued to argue for a US policy of "strategic altruism" toward India that has characterized US-India ties since the beginning of the 21st century.

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 this 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 saw India as a "superpower in waiting" and urged 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.

At the same time, Mr. Modi has suffered from delusions of personal rapport with Mr. Trump, describing him as "my friend Dolund Trump" at mass rallies in India. Modi and his supporters in Washington should have heeded the advice of Ambassador Kishore Mahbubani. "One hard truth that Indians have to contend with is that America has also had difficulty treating India with respect", wrote the Singaporean diplomat Kishore Mahbubani in his latest book "Has China Won?". "If America wants to develop a close long-term relationship with India over the long run, it needs to confront the deep roots of its relative lack of respect for India", adds Ambassador Mahbubani. It's not just Mahbubani who suspects the United States leadership does not respect India. Others, including former President Bill Clinton, current US President Donald Trump, former Secretary of State Hillary Clinton and CNN GPS host Fareed Zakaria have expressed similar sentiments.

President Trump has rejected all pleas from pro-India analysts for special treatment of New Delhi. Prior to his meeting with Prime Minister Narendra Modi at the White House in February this year, the US president 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.

Friday, April 4, 2025

Trump's Tariffs Shock the World

President Donald Trump's announcement of "reciprocal tariffs" has shocked the world. Nations and corporations were all expecting the US to increase tariffs but the scope and scale have caused severe tremors in the global economy. There's a base level of 10% tariffs on all trading partners. Imports from China (54%), Vietnam (46%), Bangladesh (37%), Pakistan (29%), India (26%), Japan (24%) and the European Union (20%) are all subject to higher tariffs. Even the poor African nation of Lesotho (GDP: $2.5 billion) has not been spared. It is now subject to a 50% tariff on the jeans it exports to the United States.

Trump's Reciprocal Tariffs. Source: CNBC

The charts showing President Trump's claimed tariffs on US imports by other countries have no resemblance to reality. For example, the US Commerce Department claims Pakistan imposes a 58% tariff on imports from the US. Pakistan's trade weighted average tariffs on the US goods were 7.3% compared to 9.9% that the US charges on imports from Pakistan, according to the Pakistani Ministry of Commerce. Financial writer James Surowiecki has reverse engineered what the Trump team did to come up with the "tariffs charged to the U.S.A." column. Surowiecki found that these figures were worked out by dividing the US trade deficit with each country by the total US imports from that country. For example, the US buys more goods from China than it sells to them - there is a goods trade deficit of $295 billion. The total amount of goods it buys from China is $440 billion. Dividing 295 by 440 gets you to 67%.

Trump's Tariffs. Source: Express Tribune

Higher tariffs on imports will raise the prices paid by the US consumers for imported goods such as electronics and textiles. And higher prices tend to depress demand. So Pakistan's main exports of textiles to the US will mean higher prices and lower demand. However, what is important is the difference in tariffs charged on imports from various countries. The fact that tariffs applied to Pakistani exports are lower than those applied to Bangladeshi, Chinese and Vietnamese textiles could help Pakistan gain market share in the US. In addition, Pakistan could attract Chinese manufacturers' investment who could then export their products from Pakistan to the US market.

The biggest fear expressed by most mainstream economists is that the Trump tariffs could trigger a global economic slowdown. Global investors have already sharply driven down major stock market indices across the globe. China, the world's second biggest economy, has already retaliated with 34% additional tariffs on imports from the US. Wharton economist Professor Jeremy Siegel has compared Trump's tariffs to the Smoot-Hawley tariffs that caused the Great Depression of the 1930s. Trump's tariffs put the effective tariff rate above the level of around 20% set by 1930’s Smoot-Hawley Tariff Act.

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Wednesday, February 19, 2025

US-India Ties: Strategic or Transactional?

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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Wednesday, May 17, 2023

India-Russia Trade: Is Indian Rupee Worthless For Cross-Border Transactions?

What good is a currency in global trade if it can not be used to buy products and services from other nations that a country needs? The answer to this question came when Russia said it has accumulated billions of rupees in Indian banks which it can not use. “This is a problem”, Russian Foreign Minister Sergei Lavrov told reporters in India’s Western state of Goa on the sidelines of the Shanghai Cooperation Organization meeting. “We need to use this money. But for this, these rupees must be transferred in another currency, and this is being discussed now”. Russia has decided it won't take any more Indian rupees. Moscow has rejected New Delhi's proposal for the Kremlin to invest rupees from oil and military equipment payments back into Indian capital markets so the currency doesn't pile up.

Global Export Map 2023. Source: World Population Review

Only the currencies issued by the governments of the world's largest exporters are useful for buying products and services on the world markets. China, United States, Germany, Japan and the United Kingdom are the world's top 5 exporting nations as of 2020. This makes Chinese Yuan, US Dollar, European Euro, Japanese Yen and British Pound the most important international trade currencies. Of these currencies, only the Chinese Yuan is not impacted by the western sanctions on trade with Russia. Russia wants India to convert Indian Rupees to Chinese Yuan to pay for energy and military equipment imports from Russia.

Yuan vs Dollar in Chinese Cross-Border Trade. Source: Bloomberg

The share of the Chinese Yuan in international trade has been increasing since the US imposed sanctions on the use of the US dollar in trade with Russia. Earlier this year, the Chinese Yuan eclipsed the US dollar as the most used currency for Chinese cross-border transactions, according to Market Insider. The Yuan's use in cross-border payments and receipts rose to 48.4% at the end of March while the dollar's share slid to 46.7%, according to a Reuters calculation of data from China's State Administration of Foreign Exchange. The yuan's use in global trade finance remains low, though it has shown steady increases. Data from SWIFT showed that the Chinese yuan's share of global currency transactions for trade finance rose to 4.5% in March, while the US dollar accounted for 83.71%, according to Reuters.

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Monday, February 20, 2023

India Emerges the Biggest Winner of the Ukraine War and Growing US-China Tensions

"It may be dangerous to be America's enemy, but to be America's friend is fatal" Henry Kissinger

India is emerging as the biggest beneficiary of the Ukraine War and the US efforts to check China's rise. Indian businesses are busting US sanctions to take advantage of the vacuum left in Russia by the exit of western businesses since the start of the Ukraine War. At the same time, the US is rewarding India by promoting it as an alternative to China in the global supply chain. Meanwhile, Beijing is warning New Delhi that India "will be the biggest victim" of America's "proxy war" against China.

L to R: Modi, Putin, Xi and Biden

Soaring Russia-India Trade:

Since the start of Russia's invasion of Ukraine, India has ramped up its imports of Russian oil by a whopping 33 times, according to the Christian Science Monitor. Dr. Nivedita Kapoor, an Indian expert at the Higher School of Economics in Moscow, told the Monitor: “Right now the focus is on pharmaceuticals, electronics, machinery, chemical products, medical instruments, and agricultural products,” says Dr. Kapoor. “We have already been exporting these goods to Russia, and there is potential for major increases. ... It may be harder to expand the list due to the threat of secondary sanctions. In this environment, the Indian private sector looks at Russia as a risky market. But the immediate potential is very big.”

“The best solution would be for Russia to make an early end to this war,” Kapoor said. “We can envisage a situation where Western companies have already exited the Russian market, and burned their bridges, while the Indian private sector no longer regards business with Russia as a risky proposition, carrying the threat of secondary sanctions. All that would go away for us, but we need to see an end to this war”, she added.

India in Global Supply Chain:

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 U.S. works to shift critical technology supply chains away from China and other countries that it says use that technology to destabilize global security.

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.

China-India Border Conflict:

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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Saturday, May 21, 2022

International Tea Day: Pakistan is the World's Largest Tea Importer

Pakistan does not produce tea but it is the most popular beverage among Pakistanis. The country is ranked as its largest importer in the world. In 2020, Pakistan imported $646 million (9% of global tea imports) worth of tea and exported $15.2 million in branded blends of tea such as Tapal Tea. Pakistan tea imports grew 19.8% from 2019 to 2020.

Pakistan Tea Trade. Source: The Observatory of Economic Complexity

Other major tea importers in 2020 were as follows: United States: $473.8 million (7.1%) Russia: $412.2 million (6.2%) United Kingdom: $348.7 million (5.2%) Saudi Arabia: $243.6 million (3.7%) Iran: $236.3 million (3.5%) Hong Kong: $221.8 million (3.3%) Morocco: $202.3 million (3%) Egypt: $197.2 million (3%) Germany: $195 million (2.9%) China: $180 million (2.7%) France: $168.1 million (2.5%) United Arab Emirates: $164.9 million (2.5%) Japan: $156.6 million (2.4%) Iraq: $134.7 million (2%). Global purchases of imported tea totaled US$6.7 billion in 2020. Of these countries, 4 markets for tea imports grew since 2019 namely: Hong Kong (up 19%), Pakistan (up 18.7%), Saudi Arabia (up 2.9%) and France (up 0.7%).

Tea is popular in Pakistan and many other parts of the world for many reasons. A British study found that tea provides as much day-time stimulation as coffee, despite having half the caffeine. But tea was less likely to disrupt sleep. A Japanese study reported that plant compounds found in regular black tea – called theaflavins – were found to kill off oral bacteria linked with tooth and gum disease in a clinical trial with adults. A team of American scientists in Baltimore reviewed the evidence on tea and heart health, reporting that tea polyphenols have a direct impact on heart muscle contractions by controlling the flow of calcium ions into the muscle cells. The TAP (Tea Advisory Panel) data review reveals that more than half of Brits agree that tea is good for the heart.

World's Top Tea Importing Countries. Source: Statista

Last year, the PTI government headed by former Prime Minister Imran Khan decided to push domestic cultivation of tea in Pakistan with the help of Chinese experts. Already, trials have been conducted for growing tea in Mansehra, Battagram, Swat and Azad Kashmir regions which are considered to have the right climate for it. About 25,000 acres of government land has been allocated for tea cultivation along the China-Pakistan Economic Corridor (CPEC).

“This year we are going to approve a project where we are growing tea on an area of 25,000 acres; we are creating history; we plan to complete the proposed tea plantations over the next five years,” said Special Assistant to Prime Minister on Food Security Jamshed Iqbal Cheema during his 2021 visit to the National Tea and High-Value Crops Research Institute (NTHRI) at Shinkiari, Mansehra in Khyber-Pakhtunkhwa province. Cheema said Pakistan has great potential for growing tea. The country has 178,000 acres of tea cultivable land. “Pakistan can grow its own tea,” he said, adding that the country imported 30 million tonnes of tea each year from 15 different tea-producing countries.

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Sunday, March 28, 2021

Is "Ever Given" Container Ship's Indian Crew At Fault For Blocking the Suez Canal?

Ever Given container ship that ran aground and blocked all shipping traffic through the Suez Canal, the busiest waterway in the world, has just been re-floated. The mega cargo ship's captain and the entire crew are Indian, the owners and shipbuilders are Japanese, the operator is German, the insurance company is British, the charterer is Taiwanese and the cargo is Chinese, according to media reports. The ship was reported blown aground by strong winds.

Ever Given Stuck in Suez Canal. Source: Bloomberg

The 200,000-ton, 1,312 ft-long, 175 ft-wide cargo ship got stuck in the Suez Canal last Tuesday. About 30% of global cargo ship traffic remained blocked with 50 ships added to the jam every day the vessel remained stuck, As of yesterday, there were $10 billion worth of goods with nowhere to go with more than 300 ships carrying products across multiple industries now stuck in the gridlock.

This is a major incident that will undoubtedly be investigated to prevent its recurrence. Early reports, however, indicate that there were significant errors made by the crew which might have contributed to the problem. Moments before the ship ran aground, the Ever Given was apparently traveling faster than the speed limit set by the Suez Canal Authority, Bloomberg reported. The ship's last recorded speed was 13.5 knots, logged 12 minutes before it grounded, according to Bloomberg, which cited its own data. The maximum allowed speed through the canal was between 7.6 knots and 8.6 knots, the report said. The Japan Times also reported the ship was traveling 13.5 knots, adding that two canal pilots were onboard when the ship hit land.

A Wall Street Journal report said that this is not the first time Ever Given has had problems at sea. On Feb. 9, 2019, the container ship ran into the 75-foot Finkenwerder, a pleasure ferry that was moored alongside a pontoon along the Elbe River in a suburb of Hamburg, Germany. It couldn't be learned if the current Indian captain of the ship was its captain when it hit the ferry.

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Thursday, December 17, 2020

Pakistan Shipbuilding Industry and Blue Economy

Karachi Shipyard, the oldest and the only major shipyard in Pakistan, is experiencing unprecedented growth. It is rapidly expanding manufacturing facilities to respond to growing demand for both civilian and military vessels. Karachi also has several small boat yards near Karachi Fish Harbor where craftsmen build wooden fishing vessels with their hands to meet fishermen's demand. There are now plans in the works for building a new shipyard in Gwadar. Pakistan has the potential to build a large "Blue Economy" in its 290,000 square kilometers of coastal water or about 36% of the country's land area open for tapping vast resources in it. These resources include seafood and energy resources as well as international transport and trade connectivity with the rest of the world. It offers opportunities for water sports, recreation and tourism in the coastal areas of Pakistan. Pakistan needs a large fleet of ships to defend it and to take full economic advantage of it.

Blue Economy. Source: World Bank

Karachi Shipyard:

Several new dry docks are being built at Karachi Shipyard and Engineering Works (KSEW) to cater to growing demand from Pakistan Navy and other government agencies. Two patrol boats have been built jointly with Dutch builder Damen at KSEW and delivered to Pakistan Customs.

Four Type-039B ‘Hangor Class’ Chinese designed AIP submarines are planned to be built at KSEW. Keel-laying ceremony was held recently at KSEW for Turkish-designed MILGEM corvettes for Pakistan Navy. There are discussions underway to build Dutch Damon corvettes at KSEW for Pakistan Navy.

Karachi shipyard is too small for servicing large ships owned by Pakistan National Shipping Corporation (PNSC).

Karachi Fish Harbor:

Pakistani craftsman are continuing to build wooden fishing vessels for domestic and foreign buyers. They deliver 30 to 40 fishing vessels every year, in addition to repair work at the yard. Their foreign customers include fishermen from Iran, Yemen, Saudi Arabia and UAE.

Currently, the builders are taking orders for cargo vessels since the demand for fishing boats has gone down due to a variety of reasons, including the use of over-aged vessels, according to Arab News.

Gwadar Shipyard:

Karachi Shipyard and Engineering Works (KSEW) has recently acquired land in Gwadar to establish another major shipyard where much larger ships can be built and serviced. KSEW chief Rear Admiral Ather Saleem has told The News “The decision has been taken in view of increased movement of ships and maritime activities at Gwadar Port in the backdrop of China-Pakistan Economic Corridor (CPEC).”

KSEW in Karachi currently has 2 dry docks of limited capacities of 18,000 and 26, 000 DWT. It also has 3 shipbuilding berths with capacities of 6000 DWT, 15000 DWT and 26000 DWT. These are too small for Pakistan National Shipping Corporation cargo ships and tankers. Deadweight tonnage of the biggest PNSC tanker Aframax Tanker Quetta is 107,215.

Blue Economy:

Pakistan has a 1,000 kilometers long coastline on the Arabian Sea with maritime sovereignty over 200 nautical miles deep Exclusive Economic Zone (EEZ) and 150 nautical miles of Continental Shelf. This adds 290,000 square kilometers of sea or about 36% of the country's land area open for tapping vast resources in it.

Pakistan's "Blue Economy" in this extended economic zone includes seafood and energy resources as well as international transport and trade connectivity with the rest of the world. It offers opportunities for water sports, recreation and tourism in the coastal areas of Pakistan. Pakistan needs a large fleet of ships to defend it and to take full economic advantage of it.

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Tuesday, August 4, 2020

Global Geopolitics: US-China Technology War; India's Regional Isolation; Pakistan's Ties With China, US

Is US-China technology war heating with Huawei ban? Is it part of the larger geopolitical landscape pitting the US as the established superpower against China as the new rising power? Is the fight over Huawei 5G merely a symptom of it? How will it affect global peace and the economy of the world?

Why has Intel fallen behind TSMC in semiconductor technology which is fundamental to computers, communications and other related technologies? Is it just the fault of recently fired Indian-American technology executive at Intel? Why is US forcing TSMC to not manufacture chips for Huawei? Is this just an attempt to China's rise in technology?

Are India's regional ties with Bangladesh and Iran fraying? Will Iran-Pakistan ties improve?Why is China building a regional quad with Afghanistan, Nepal and Pakistan? Is it aimed at India and its quad with Australia, Japan and US? Will Pakistan be forced to choose sides between US and China?

Viewpoint From Overseas host Faraz Davesh discusses these questions with Misbah Azam and Riaz Haq (www.riazhaq.com).

https://youtu.be/DLMloNMVwCs

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Saturday, June 20, 2020

Can India Afford Economic Boycott of China After Ladakh?

Indian consumers are hooked to a whole range of Chinese products. India's industry sources critical components from China. Indian startups rely on Chinese venture capital. Can Indians really afford to boycott China without seriously hurting themselves after the killing of Indian soldiers by the Chinese Army in Ladakh? Let's look at the data.

China-India Lopsided Trade. Source: Times of India

Volume of China-India Trade:

India accounts for $70 billion of China's export, less than 3% of the country's $2.5 trillion in exports. Chinese products make up about 18% of India's total imports.

India imports almost seven times more from China than it exports to it, according Indian media reports. India runs huge trade deficit with China – its largest with any country. In 2018-19, India’s exports to China were mere $16.7 billion, while imports were $70.3 billion, leaving a trade deficit of $53.6 billion.

Indian Industries Dependence on China:

Indian industry depends on China for a range of raw materials. About a fifth of components used by Indian automobile industry come from China. 70 percent of all electronic components used by Indian companies are imported from China.

Over 45% of consumer durables, 70% of APIs (active pharmaceutical ingredients) come from China. Nearly 75% of the telecom equipment used by Indian carriers is from China, according to the Sunday Guardian.

Chinese Venture Capital in India. Source: Economic Times

Indian Startup Venture Capital:

China is the biggest source of venture capital in India. Chinese VCs have poured about $4 billion in 90 startups in India. Two-thirds of Indian start-ups valued at more than $1 billion have at least one Chinese investor. High-profile startups like Byju, Flipkart, Ola, PayTM and Zomato.

India's startup ecosystem continues to be dependent on large swathes of foreign funding given the ongoing absence of home-grown pools of capital. It will face significant near-to-medium term cash constraints if investors from the world’s second-largest economy walk away, according to Economic Times.

India-China Comparison. Source: Gaurav Dalmia

Summary:

With growing Chinese trade and investment in India, the Indian economy has become significantly dependent on China. Chinese VCs have poured about $4 billion in 90 startups in India. Two-thirds of Indian start-ups valued at more than $1 billion have at least one Chinese investor About a fifth of components used by Indian automobile industry come from China. 70 percent of all electronic components used by Indian companies are imported from China. Similarly, 45 percent of consumer durables, 70% of APIs (active pharmaceutical ingredients) come from China. Nearly 75% of the telecom equipment used by Indian carriers is from China, according to the Sunday Guardian. Indians can not boycott China without seriously hurting themselves.

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Monday, October 28, 2019

Karachi's New Port Terminal Wins "Container Terminal of the Year" Award

Karachi's SAPT (South Asia Port Terminal) Automatic Container Yard and Housing Project is one of 18 winners of "Year in Infrastructure 2019" awards announced by Bentley Systems.

South Asia Port Terminal, Karachi, Pakistan

The annual awards highlight the work of Bentley software users advancing infrastructure design, construction, and operations throughout the world. 12 independent jury panels of distinguished industry experts selected the 54 finalists from 571 nominations submitted by more than 440 organizations in more than 60 countries.

Hutchison Ports Pakistan is the country’s first deep-water container terminal, designed to accommodate super post Panamax ships, the largest container ships operating today. It is situated at the Keamari Groyne basin and provides the most convenient access to large vessels entering Karachi.

The new container port recently notched up a new productivity high — claimed to be the best-ever at a Pakistani port — when it handled the 8,562-TEU Hyundai Courage. The terminal handled 2,683 moves in about 13 hours, with berth productivity reaching 203.4 moves per hour and gross crane rates averaging 32.3 moves per hour. While in berth, the vessel loaded and discharged 3,501 TEU. That productivity beats the previous high of 1,953 moves in 11 hours, which the terminal achieved on the Hyundai Global, the company told JOC.com.

The US$1.4 billion container terminal operates as a partnership between Hutchison Ports Pakistan, a member of the Hutchison Ports network, and Karachi Port Trust. Hutchison Ports has invested US$600 million to develop the terminal and install the latest technology, whereas Karachi Port Trust has invested over US$350 million on reclamation work and dredging.

Hutchison Ports Pakistan also works with Pakistan Customs to improve clearance systems and procedures and enable easier and faster cargo clearance for end users. With this high-tech, deep-water facility at Karachi Port, Pakistan has the basis to compete with global peers as a modern trading economy.

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Monday, April 22, 2019

Asad Umar's Exit: Causes and Effects on Pakistan Economy

Who removed Pakistan Finance Minister Asad Umar and why? What was expected of him? Did he fail to deliver it? What are the qualifications of Dr. Hafeez Shaikh who has been picked to replace Asad Umar? Is he better suited to deliver a deal with IMF and other international financial institutions?

Pakistan's Current Account Deficit. Source: Trading Economics

What are Pakistan's biggest economic issues now? Budget deficits? Trade deficits? Current account imbalances? Lack of exports? Lack of domestic savings and investments? Low FDI? What must the new economic team do to address short term and long term problems with Pakistan's economy that are forcing the nation to seek 13th IMF bailout in last 40 years?

Pakistan's External Debt. Source: Wall Street Journal

ALKS host Faraz Darvesh discusses these questions with Misbah Azam and Riaz Haq (www.riazhaq.com)

https://youtu.be/Axo8V-HNuHA

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Saturday, April 13, 2019

Current Debt Crisis Threatens Pakistan's Future

Pakistan is battling massive twin deficits, deteriorating foreign currency reserves, low exports, diminishing tax revenues, a weak currency, unsustainable external debt payments, and soaring sovereign debt. This crisis has forced the country to seek IMF (International Monetary Fund) bailout, the 13th such request in Pakistan's 72 year history.

Pakistan Debt Service: Source SBP

Pakistan's debt repayment costs rose to $5.4 billion for first half of fiscal 2019 ( July 2018-Dec 2018), up from $7.5 billion for the entire fiscal 2018 (July 2017-June 2018), according to the State Bank of Pakistan. At this rate, the total debt service cost for current fiscal 2019 will exceed $11 billion, adding to the nation's debt crisis.

Pakistan's External Debt. Source: Wall Street Journal

This $11 billion debt service cost will add to the projected trade deficit of nearly $40 billion for the current fiscal year. How can Pakistan fund this balance of payments deficit of about $50 billion? Remittances of $21 billion in current FY2019 from Pakistani diaspora are expected to reduce it to $30 billion. PTI government has taken on billions of dollars in loans from Gulf Arabs and China. Given the low rates of foreign investments in the country, a big chunk of the remaining deficit will have to be met by borrowing even more funds which will further increase future debt service costs.

Pakistan's Current Account Deficit. Source: Trading Economics

As a result, Pakistan is now battling massive twin deficits, deteriorating foreign currency reserves, low exports, diminishing tax revenues, a weak currency, onerous external debt payments, and soaring sovereign debt. This crises has forced the country to seek IMF (International Monetary Fund) bailout, the 13th such request in Pakistan's 72 year history.

Pakistan Debt as Percentage of GDP. Source: Trading Economics

In the short term, PTI government's efforts are beginning to pay off. The current account deficit (CAD) in first 8 months of FY2019 (July-Feb 2018) declined to $8.844 billion, down 22.5%, from $11.421 billion in same period last year, according to SBP as reported by Dawn newspaper.

Pakistan's Debt Burden Highest Among 25 Emerging Nations

However, Pakistan's economic woes are far from over. The country's twin deficits are structural. Its exports and tax collections as percentage of its GDP are among the lowest in the world. British civil society organization Jubilee Debt Campaign conducted research in 2017 that showed that Pakistan has received IMF loans in 30 of the last 42 years, making this one of the most sustained periods of lending to any country.

History of Pakistan's IMF Bailouts

Pakistan needs to find a way to build up and manage significant dollar reserves to avoid recurring IMF bailouts. The best way to do it is to focus on increasing the country's exports that have remained essentially flat in absolute dollars and declined as percentage of GDP over the last 5 years. Pakistan's economic attaches posted at the nation's embassies need to focus on all export opportunities in international markets and help educate Pakistani businesses on the best way to take advantage of them. This needs to be concerted effort involving various government ministries and departments working closely with industry groups. At the same time, the new government needs to crack down on illicit outflow of dollars from the country.

Pakistan Debt Service as Percentage (45%) of Budget Among World's Highest

Azad Labon Ke Sath host Faraz Darvesh discusses Imran Khan's challenges with Misbah Azam and Riaz Haq (www.riazhaq.com)

https://youtu.be/CQ41Qt_2XQM

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