Thursday, September 16, 2010

Pakistan Needs Exports and Investments to Drive Economy

Gross domestic product (GDP) is calculated by adding up public and private consumption, investments and net exports (exports-imports). Some of the major world economies, most notably Germany and China, are led by exports, while others, such as United States, United Kingdom, India and Pakistan, are primarily domestic consumption driven.

With almost 80% of its GDP from consumption, Pakistan has particularly heavy reliance on domestic public and private spending for its economic health. This is much higher than the US consumption accounting for over 70% of its economy, and India's 60%.

As Pakistan's GDP has more than doubled over the last decade, its FDI has increased dramatically and its exports have grown at 16% CAGR till 2007, the consumption component has continued to be stubbornly high at about 80%, with about 20% of it coming from investments and exports. By contrast, India's consumption component has declined from 80% to 60% with its investment and export components rising to more than 30% during the same period.

While the rest of the developed economies stagnate, the German formula seems to be working well, with exports driving the nation’s strong recovery. The German economy grew 2.2 percent in the second quarter from the first, yielding an annualized growth rate of about 9 percent that puts it on a footing with emerging markets like China and India.

In spite of the fact that about 80% of Pakistan's GDP depends on domestic consumption, the nation has been highly vulnerable to external shocks related to the need for imports, particularly the oil price volatility. Energy accounts for about a third of Pakistan's imports, and as the speculators drove oil prices to over $150 a barrel in 2008, the nation found itself unable to pay for imports, and sought bailout by the International Monetary Fund in 2008.

While the country was moving rapidly towards the IMF, former economic adviser Prof. Ashfaque Hasan Khan recalls that Pakistan's ministry of finance had prepared the plan to bring $4 billion by June 30, 2008 through four transactions. A kick-off meeting was scheduled on April 23, 2008 at the ministry to give a final touch to the various roadshows. These transactions were canceled on April 20, 2008. Who ordered the cancellation of $4 billion transaction? This cancellation prompted the latest balance of payment crisis and the rest became history.

Since the major missteps by the Zardari government in 2008, the economic crisis has worsened as the investors have pulled out and business confidence plummeted amidst serious security concerns raised by the Taliban insurgency in the country. It has also hurt Pakistan's exports. The recent devastating floods have added to the already serious economic woes. The only positive news has been the rising remittances by overseas Pakistanis which increased to nearly $9 billion last year.



Several East Asian and South East Asian nations faced a similar financial crisis in 1997 which required IMF bailout. Since the 1997 crisis, most of these Asian nations have significantly expanded their exports and built up large dollar reserves to deal with external shocks effectively. In addition, the Association of South East Asian Nations (ASEAN) has banded together with China, South Korea, and Japan to form the "ASEAN Plus Three" financial grouping. This arrangement is designed to enable member countries to swap reserves if speculators again target their currencies.

In addition to reviving the national economy from its current slump, the biggest long-term challenge for Pakistan's economic leadership is to improve the nation's ability to deal with external and internal shocks. This will require learning from the experience of India or other Asian economies in building sufficient internal revenue base for public expenditure, attracting greater foreign investment, expanding and diversifying exports and strengthening hard currency reserves. Inability to deal with these challenges will doom Pakistan to perpetual dependence on IMF and consequent loss of sovereignty to it.

Related Links:

Haq's Musings

Incompetence Worse Than Corruption in Pakistan

Pakistan's Circular Debt and Load Shedding

Pakistan Swallows IMF's Bitter Medicine

Shaukat Aziz's Economic Legacy

Structural Reform in Pakistan Economy

Pakistan's Energy Crisis

Soaring Food and Fuel Prices

Karachi Tops Mumbai in Stock Performance

India Pakistan Contrasted 2010

Pakistan's Foreign Visitors Pleasantly Surprised

After Partition: India, Pakistan and Bangladesh

The "Poor" Neighbor by William Dalrymple

Pakistan's Modern Infrastructure

Video: Who Says Pakistan Is a Failed State?

India Worse Than Pakistan, Bangladesh on Nutrition

UNDP Reports Pakistan Poverty Declined to 17 Percent

Pakistan's Choice: Talibanization or Globalization

Pakistan's Financial Services Sector

Pakistan's Decade 1999-2009

South Asia Slipping in Human Development

Asia Gains in Top Asian Universities

BSE-Key Statistics

Pakistan's Multi-Billion Dollar IT Industry

India-Pakistan Military Comparison

Food, Clothing and Shelter in India and Pakistan

Pakistan Energy Crisis

IMF-Pakistan Memorandum of Economic and Financial Policies

81 comments:

Anonymous said...

OT:
Now Obama has joined Thomas Freidman in ass-licking Indians.

http://business.rediff.com/slide-show/2010/sep/17/slide-show-1-india-china-have-very-talented-people-obama.htm

Anonymous said...

Riaz u praising India on your blog????

But on a serious note this post is more of a 'something needs to be done' type of a post.

If Pakistan wants to build a sound economy etc etc a pre requisite is a sound industrial base with corporations that can compete with the best in foreign countries.
The way India's crompton greaves keeps beating ABB for contracts in the EU,or TCS's BANCS CBS could beat Temenos and Misys for Bank of China's CBS requirement...

Free trade is a myth.It works in tiny countries like Singapore and Hong Kong(now part of China) but it has NEVER helped a major country industrialize.

EVERY country that has industrialized after the UK including Germany and the USA has done it behind high tarrif walls without exception.This invariably means consumers sacrificing choice and having to put up with shoddy products for a generation as the domestic industry learns the ropes,this is a price well worth paying.

Now tarriffs/non tarrif barriers are of several types :
1.Import duties
2.Standards
3.Access to distribution networks
4.Other legal regulations

The above are used to restrict foreign competition.

The ways of propping up your domestic industry are:
1.Massive grants for R&D
2.Tax holidays
3.Subsidized EXIM loans
4.Awarding government contracts to domestic manufactures only.


But the thing is you need a domestic industry and technocratic elite to lobby for this.

The basic difference between the congress and the muslim league was that congress was financed by the Industrialists who wanted high tarriffs and government contracts,which is why Congress had no trouble smashing the Indian feudals in the 1950s itself.

Pakistan's political edifice on the other hand still depends on the patronage of feudals who have now diversified into low end industries sugar,textiles etc

The thing is it is very difficult to envisage feudals who ultimately control Pakistan's industry to lobby the Pak government for the above..

I would like your views on this..

Riaz Haq said...

anon: "The basic difference between the congress and the muslim league was that congress was financed by the Industrialists who wanted high tarriffs and government contracts,which is why Congress had no trouble smashing the Indian feudals in the 1950s itself."

I agree!

Some of the large industrialists, particularly Tata, benefited greatly from Nehru's protectionist policies, while Nehru dismantled the feudal system in India. The downside of it has been that very powerful industrialists and extremely weak rural economy with widespread poverty, farmers' suicides and extreme income inequality.

In Pakistan, Bhutto did the opposite...he destroyed the nascent industrial base that was created in the 1960s by Ayub Khan, and chose to side with his feudal friends by not carrying out land reform.

Bhutto's nationalization of 1970s has left deep scars among Pakistani industrialists who have not been making long term investments necessary to industrialize the country, make it self-sufficient and increase higher-value manufactured exports.

Riaz Haq said...

Foreign investment in Pakistan declined 34% in 2 months, says a report in Daily Times:

KARACHI: Net foreign investment in the country fell 34.1 percent to $267 million in the first two months of the fiscal year 2010-11 (FY11) as compared with $405.4 million in the same period last year, the State Bank of Pakistan said on Friday. Out of the total foreign investment, foreign direct investment (FDI) fell 50.2 percent in July and August to $171.4 million from $344.5 million in the same period last year, the central bank said. A worsening security situation, with a Taliban insurgency in the country’s northwest, coupled with chronic power shortages has put off investors, analysts say. There was a net inflow of $95.6 million in the first two months of the FY11, as compared with a net inflow of $60.9 million in the same period last year. On monthly basis, FDI to the country witnessed a decline of 31 percent in the month of August 2010 to stand at $69.5 million as compared to $101.9 million in the previous month. According to the latest data, the foreign private investment recorded a decline of 18.49 percent as it dropped by $26.6 million to stand at $117.2 million as compared to $143.8 million last month. However, portfolio investment reached $47.7 million in the second month of the current fiscal year as compared to $41.8 million in the first month, showing an increase of 14.11 percent. An International Monetary Fund (IMF) emergency loan package agreed in November 2008 helped Pakistan avert a balance of payments crisis and shore up reserves. It received the fifth tranche of $1.13 billion of the IMF loan of $11 billion in May and Pakistan and IMF authorities are going to meet in November to discuss the release of the sixth tranche. The IMF on Wednesday approved as expected $451 million in emergency funding for Pakistan to help the country rebuild from devastating floods. This was separate from the $11 billion IMF program

Anonymous said...

'The downside of it has been that very powerful industrialists and extremely weak rural economy with widespread poverty, farmers' suicides and extreme income inequality.'

I don't see how having a strong industrial base hinders agro development.

There are certain unique sociological issues in India like caste system etc but sacrificing heavy industry for the lure of short term growth and quick profit in agro based industries is a very short sighted thing to do IMHO.

Incidentally Indian yield/hectare is two to three times that in Pakistan.
This is possible because of high quality region specific hybrid seeds developed by CSIR as well as massive quantities of cheap fertilizers and high quality farm equipment produced by Indian industry like Mahindra and Mahindra.

Though it is in turn only half the yield per hectare in China.

In some states like Gujarat Agriculture is growing at 9% pa due to companies like Parle Agro doing massive value addition to the farm produce in situ.


Inequality is inevitable in fast developing countries. China which is uniracial has a much higher gini coefficient than India does but the difference is that 250 mn Chinese who live on less than $1/day and 100mn who survive on less than $0.5 are all but invisible to the outside world.
There are no mandrin equivalents of 'Peepli live'.

This is because workers who shift to industry see their productivity leap ahead of the people who they have left behind in the villages creating very high inequality only over 2-3 generations do the benefits of industrialization trickle down to everyone.

Anonymous said...

I don't know why u are so obsessed with FDI.Japan and South Korea actively discouraged FDI as a matter of state policy.

What matter's is investment/GDP I would any day prefer the investment of crompton greaves or L&T to build transformers and relays rather than Foreign investments of ABB,AREVA,Siemens.Which I am pleased to report is increasingly the case.

FDI as a source of technology is a myth nobody gives technology most FDI units are screw-driver assembly operations with critical components flown in from abroad.

How has FDI of Hino,Japan helped pakistan's truck industry??

Protectionism and tax breaks on the other hand has helped India build a world class truck industry.

Check these out:
TATA:
http://i69.in/news/tata-world-truck-tata-motors-new-trucks.php

Ashok Leyland:
http://www.motorindiaonline.com/2010/02/ashok-leylands-u-truck-platform-to.html


There are also newer stuff from Eicher though not as big as Tata motors and ALL.

Riaz Haq said...

anon: "I don't see how having a strong industrial base hinders agro development."

The fact is that while big industrialists like Tata and Birla had state protection through high tariffs and other govt benefits, the poor rural farmers were given a small piece of land via land reform without much help. The result is the phenomenon of extreme poverty and hundreds of thousands of farmers' suicides in India.

anon: "China which is uniracial has a much higher gini coefficient than India does but the difference is that 250 mn Chinese who live on less than $1/day and 100mn who survive on less than $0.5 are all but invisible to the outside world."

This is incorrect. China has inequality, but it does not have high rates of deep and abject poverty and hunger than pervades India, with its world's largest population of poor, hungry and illiterate citizens.

Riaz Haq said...

anon: "I don't know why u are so obsessed with FDI.Japan and South Korea actively discouraged FDI as a matter of state policy."

Unlike Pakistan with its paltry 17% savings rate, Japan and South Korea have among the highest savings rates. Pakistan needs external capital which ensure greater investments and access to markets of the investing countries..similar to the FDI in China by US companies who take most of the exports to western markets through intra-company trade. .

Anonymous said...

This is incorrect. China has inequality, but it does not have high rates of deep and abject poverty and hunger than pervades India, with its world's largest population of poor, hungry and illiterate citizens


China is 15 years ahead of the curve of India.It still has the second highest levels of poor and illiterate citizens in the world.

We don't know how 250 mn chinese who live on less than$1 /day live as they are effectively blocked from the outside and indeed most of china due to the internal passport system.You think their want and deprivation levels are lesser than the Indians who live on less than $1 a day that is your opinion but there is no way for you or anyone else to verify their living standards.

Things aren't extremely rosy in China,10% of Chinese are infected by Hepatitis B(please google this)...

Their mercantalist trade model is also coming under severe strain,
there is serious talk of a coordinated 15-20% duty on china to compensate for the artificially rigged yuan.

Investments in China are state directed with very little corelation with rate of returns,there are 60mn vacant housing units in china,they are building 15,000kms of high speed rail in a country with per capita income of around $3500.HSR loses money in France and Germany with $40,000 per capita incomes,most chinese HSR's run near empty because an average Chinese cannot afford a ticket.

I could go on and on....

I think a non mercantalist balanced trade return on investment oriented growth strategy will win out in the long term.

Though time will tell.

Riaz Haq said...

anon: "It still has the second highest levels of poor and illiterate citizens in the world."

Yes, but China is a distant second to India when it comes to hunger and illiteracy.

FAO released its report on hunger recently. According to the report highlights as published in the Guardian, there are 847.5 million undernourished people in the world. India tops the list with 237.7 million, followed by China with 130.4 million, Pakistan 43.4 million, Democratic Republic of Congo 41.9 million, Bangladesh 41.7 million, Ethiopia 31.6 million and Indonesia 29.9 million.

http://www.guardian.co.uk/global-development/datablog/2010/sep/14/hunger-world-fao-undernourished

On illiteracy, UNESCO data shows India has 270 million illiterate adults, followed by China 71 million, Bangladesh 49 million, Pakistan 71 million, Ethiopia 27 million and Nigeria 23 million.

http://unesdoc.unesco.org/images/0018/001865/186525E.pdf

Anonymous said...

Yes, but China is a distant second to India when it comes to hunger and illiteracy.

India's figures are comparable to china's in 1995 so...

I also believe our non mercantalist balanced trade and competetive industrial base with healthy EPS and ROI ratios is a superior model in the long run.

Whereas China's build at any cost to keep the economy has resulted in a ridiculous 70% investment to GDP ratio with ROI 1/3 of what you get in India.

Its growth strategy now is reminiscent of the USSR's in the 1920s and 30s back then even it achieved unheard of growth rates by essentially mobilizing the population while paying it serf like wages and massively expanding basic industries like steel and cement.

We all know how that story ended.

But again time will tell.

satwa gunam said...

Riaz

I think you are missing the fundamental.

Result is exports and investment

Cause : needs to be a peaceful environment for the business to function.

I am not complaining about corruption. Like indira gandhi said, it is an universal problem and it is in every country irrespective of whether it is a democracy or otherwise.

So what is first important is to have peaceful environment. Nobody will sink the good cash in a place where everybody roams around weapons and violence is the daily routine. I heard and understood from many that some of the countries which had withdrawan all plans of their expansion in pakistan on the assisination of bhutto and till now they have not revived their plans to look at pakistan.

Poverty in india has not gone to the extent of violence as it is happening in the name of religion and as per your standard much above the bpl

Anonymous said...

'This will require learning from the experience of India or other Asian economies in building sufficient internal revenue base for public expenditure, attracting greater foreign investment, expanding and diversifying exports and strengthening hard currency reserves.'

Amen! But you have missed out a very important point.'How'

Internal revenue base.How? Feudal s won't pay and have private armies.The tax authorities are too weak and the judicial system too overloaded to prosecute tax evaders.

Attracting greater foreign investment.How? The country is unstable,its policies change every six months, there is a glut of production capacity in the global economy and there is a relatively tiny market and rolling power shortages in the country.

expanding and diversifying exports.How? Where are the investments? You think the managerial talent at top Pakistani companies have it in them/want to risk massive amounts of money trying to make advanced industrial products and compete head on with EU/US/Japanese MNCs? You think with the IMF effectively writing your economic policy you can get away with playing the 'high tarrif,buy local and unique national standards' game than India/China play?How many Pakistanis in responsible positions even understand this game?

strengthening hard currency reserves.How? Related to all the above + the 'land of terrorists' media image that Pakistan has is unlikely to help the situation.


I would like your views of what a comprehensive actionable revival plan for the Pakistani economy would broadly look like with reference to current Pakistani social/economic situation.

Anonymous said...

"Nobody will sink the good cash in a place where everybody roams around weapons and violence is the daily routine. I heard and understood from many that some of the countries which had withdrawan all plans of their expansion in pakistan on the assisination of bhutto and till now they have not revived their plans to look at pakistan."

There are lot of factors why no one wants to invest in Pakistan.

1. reputation of muslims: It is at its nadir in west.

http://www.nytimes.com/2010/09/19/opinion/19kristof.html?ref=todayspaper

In contrast India has excellent reputation in the west.

2. Quality of Human Resource : Unlike India, IIT etc, Pakistan never earned a reputation in west. So who would be encouraged to invest in Pakistan.

3. Return on investment: Pak's economy is too small for any ROI. Case in point, Pak's auto industry. They had a head start over india in having japanese cars assemble in Pak since 1970s, at a time when India's protectionist policy was making 3rd rate domestic cars. Yet it is India which saw it auto industry grow by leaps and bounds in quality and today india exports to Europe where as Pak made cars are probably not even exported to Bdesh.

I have to come to an inescapable conclusion that Indians are inherently more focused and hard working than Pakistanis.

Riaz Haq said...

A number of commentators (mainly from India) have made unsupported observations and argued that Pakistan can neither increase its exports nor attract foreign investments.

What these commentators forget that Pakistan did more than double its exports in the last decade (2000-2007), and attracted a larger cumulative stock of FDI as percent of GDP than India, and its stock market outperformed all of the BRIC nations' stock markets.

Talking about foreign direct investment (FDI) in emerging economies, former US Federal Reserve Chief Alan Greenspan said in his book titled "The Age of Turbulence" : “But clearly the Licence Raj (in India) has discouraged foreign direct investment. India received $7 billion in FDI in 2005, a sum dwarfed by China’s $72 billion. India’s cumulative stock of FDI at 6 per cent of GDP at the end of 2005 compares with 9 per cent for Pakistan, 14 per cent for China, and 61 per cent for Vietnam.

Based on its track record, Pakistan can absolutely increase its exports and attract greater investment with a little bit of focus and improved security and stability. And I am hopeful this will happen within a few years.

Sohail said...

Not trying to be a devil's advocate however, Pakistan has been falling behind.

In per capita GDP Pakistan in 1999 was $2000 (India @ 1800)and in 2009 we are at $2500 ( India @ 3100. Similarly, exports were at $8.4 bil (India's 36.3 bil) and 2009 we have $18.4 bil exports (India's 164.3 bil). Over the last 10 years in terms of value (the dollar inflated 40% approximately 1999-2009) exports have gone up 49%.

Our primary export is cotton and textiles and this industry is controlled by the feudals and it is in their interest to fight any competition. Government incentives to expand this export has been curtailed by these big land owners (some of them are in the government).
Riaz, please investigate this issue.

Riaz Haq said...

Sohail: "In per capita GDP Pakistan in 1999 was $2000 (India @ 1800)and in 2009 we are at $2500 ( India @ 3100."

The actual numbers I have seen are as follows:

In per capita GDP Pakistan in 1999 was $1600(India @ 1300)and in 2009 we are at $2600 ( India @ 2900).

But your larger point is accurate...India has been growing faster during the last decade, but the last decade was a big improvement over the previous decade of 1990s often called "the lost decade".

Sohail: "Similarly, exports were at $8.4 bil (India's 36.3 bil) and 2009 we have $18.4 bil exports (India's 164.3 bil)."

Yes, but the point is that Pakistan has shown the ability to boost exports significantly...the problem is the mix....Pakistan does need to diversify its exports from textiles, leather and cement to have more higher value-added products to get a bigger boost.

Sohail: "Government incentives to expand this export has been curtailed by these big land owners (some of them are in the government)."

I am much more concerned about their lack of vision and incompetence than their well-known corruption. They are hurting the nation and themselves by holding up progress.

Anonymous said...

Alan Greenspan is the one who also repealed the glass Stengel act and introduced much of the deregulation that led to the current financial crisis.

I would take his views on anything with a large helping of salt.

Like I said we would rather protect our industry than have screwdriver assembly FDI units crowd it out.For eg;Much better that CG or L&T invests in transformer factories than ABB invests in a screw driver assembly unit in with most critical components are flown in from Europe.
FDI is not a necessary requirement for high growth in an economy with a high savings rate(33-36%) like India as the examples of South Korea and Japan clearly demonstrates.

What matters for economic growth is
1.Investment/GDP which is currently 40% of GDP in India.
2.Return on Investment which in India's case is typically 2-3 times that of China.

Pakistan throughout its independence has had 2-3 instances of 6-7% growth which last for 7-8 years coinciding with massive inflows of aid but peters out immediately when the aid stops.

The previous such spurts of growth were between 1955-1965 and in the 1980s.

Pakistan has no internationally competitive industrial base an Achilles heal which no one in Pakistan is trying to rectify.

Top exports even during Musharaff's 'miracle years' were low end textiles,sugar,cement,footballs(hand sewn) and mangoes!

The corresponding items for India were Software/IT services,Gems and Jewelry,Capital goods,light industrial goods,refined petroleum products,pharmaceuticals.
Over 90% of which were/are exported under Indian brand names.

Rest you decide.

Source for India's saving rate:

http://www.moneylife.in/article/8/8434.html

Anonymous said...

PAkistan should sign a FTA with India.It makes much more sense to import from India than China since distances are smaller and the climatic conditions are similar.

Rivals trade all the time china trades with Japan and the US.

Pakistan should stop shooting itself in the foot and sign a free trade deal with India.This will benefit it much more than India.
For eg: Currently most of PAkistan's tea is imported via dubai but originates in India.Isn't this foolish?
Why not buy direct from India and pay less and cut out the dubai middle man?

Anonymous said...

"India received $7 billion in FDI in 2005, a sum dwarfed by China’s $72 billion."

You should also mention that roughly 40% of Chinese factories and companies are owned by American corp.

Riaz Haq said...

anon: "PAkistan should sign a FTA with India.It makes much more sense to import from India than China since distances are smaller and the climatic conditions are similar."

The only thing Pakistan can import from India is a commodity like tea, which it currently imports from Kenya. But Pakistanis, like the Brits, have developed a taste for Kenyan tea already.

As for as manufactured goods are concerned, do you know that India itself is heavily dependent on Chinese imports and runs large trade deficits with China and the rest of the world?

India's imports from China expanded 19 per cent and stood at US$ 32.49 billion in 2008-09, while exports were at US$ 9.35 billion. India's trade deficit with China is expected to grow larger this year, a trend India considers alarming given the nature of imports that go into India's essential infrastructure of power generation and telecommunications networks.

Chinese are now supplying equipment for about 25% of the new generating capacity India is adding to its national grid, up from almost nothing a few years ago. There are thousands of skilled Chinese expatriates at Indian plant sites, along with Chinese chefs, Chinese television and ping pong.

India is already the biggest export market for China's two leading telecom equipment manufacturers, Huawei Technologies and ZTE, as both companies have focused on India in recent years. As India has grown to the world's No. 2 mobile phone market in recent years, its imports of Chinese handsets have soared.

Unlike China, India lacks the necessary industrial and manufacturing base for greater self reliance in infrastructure equipment and defense armaments. India also runs large current account deficits while China is enjoying large surpluses strengthening its economic position in the world.

Sohail said...

Riaz,
I am in the textile business and my point is that it is difficult to expand. The larger companies are in partnerships or agreements with these big feudal cotton farmers. They try to affect your business by not supplying cotton or raise their prices. They are using floods as their reason but, the larger businesses are getting their share!!

Many of us will have to close shop even though government says they will help.

Anonymous said...

"Unlike China, India lacks the necessary industrial and manufacturing base for greater self reliance in infrastructure equipment and defense armaments. India also runs large current account deficits while China is enjoying large surpluses strengthening its economic position in the world."

This is true but India is far ahead of Pakistan in infrastructure for producing consumable items like Autos including specialized items like Diesel Locomotives or Electric Locomotives. India exports many of this. Where is Pakistan?

India has the human resource kill, entrepreneurship to make various industries succeed. Pak has none.

That China is far ahead of India is no relevance to Pak's own failure.

Ajit said...

A correction. India is 5th largest power producer in the world and its demand far exceeds supply. India produces around 150 Gigawatt (150,000 MW), out of which it produces on its own 75%. India is requiring China's help in only filling the gap what NTPC and other state owned enterprises can not do.

regards.

Anonymous said...

"Why not buy direct from India and pay less and cut out the dubai middle man?"

India can offer far more than team to Pakistan. India can build Pakistan's railway infrastructure. Anyone remembers Pakistan's fiasco with China imported Diesel Engines some 5 yrs back when it broke like anything. The chinese company walked away from warranty saying that the operating conditions in Pak railway is far worse than the locos were meant for. It took some political pressure to get that fixed. As for quality of Indian locos, Malaysian rail runs totally on indian locos leased and so are many African countries including South Africa.

The biggest beneficiary of Indian imports would be Pakistan citizens who currently are paying considerably more than Indians for the same product, be it over the counter medicine to Suzuki cars.
It will also help domestic industries compete with Indians and improve their quality.

Riaz Haq said...

Sohail: "I am in the textile business and my point is that it is difficult to expand. The larger companies are in partnerships or agreements with these big feudal cotton farmers. They try to affect your business by not supplying cotton or raise their prices. They are using floods as their reason but, the larger businesses are getting their share!!"

I understand your concern. But my larger issue is disproportionate reliance on textiles for exports...Pakistan needs to focus on exporting higher value products whose demand is growing to ensure expansion of exports for sometime in the future.

The consumption patterns in the world now are trending more toward consumer electronics, computers, telecom and software....Pakistan needs to build its capacity to export these high-value added products in the future.

Riaz Haq said...

anon: "Pakistan throughout its independence has had 2-3 instances of 6-7% growth which last for 7-8 years coinciding with massive inflows of aid but peters out immediately when the aid stops."

You are ignorant of Pakistan's economic history. For most of its existence in the last 63 years, Pakistan economy has grown at a rate of about 6% annually, much higher than the 2% "Hindu growth rate" India saw until early 1990s.

Here's an except from a lecture Pakistani economist Dr. Ishrat Husin, delivered at Indian Business School in Hyderabad on Oct 7, 2005.

"Pakistan's growth rate until late 1980s averaged about 6 percent per annum and the incidence of poverty was lowered from 46% to 18 percent. This favorable situation was reversed in the decade of the 1990s. Growth rates tumbled to a average of 3 to 4 percent and poverty surged to 33 percent of the population. Inflation was double digits, large current account and fiscal deficits escalated debt-gdp ratio to over 100 percent. The country's foreign exchange reserves fell to less than $1 billion, exports were stagnant, tax collection efforts were lackluster. The country was almost on the verge of default crisis on its external paymrnts in October 1999 when President Musharraf took over the reigns of government."

During Musharraf years, Pakistan positioned itself as one of the four fastest growing economies in the Asian region during 2000-07 with its growth averaging 7.0 per cent per year for most of this period. As a result of strong economic growth, Pakistan succeeded in reducing poverty by one-half, creating almost 13 million jobs, halving the country's debt burden, raising foreign exchange reserves to a comfortable position and propping the country's exchange rate, restoring investors' confidence and most importantly, taking Pakistan out of the IMF Program.

These facts were acknowledged by the present government in a Memorandum of Economic and Financial Policies (MEFP) for 2008/09-2009/10, while signing agreement with the IMF on November 20, 2008. The document clearly (but grudgingly) acknowledged that "Pakistan's economy witnessed a major economic transformation in the last decade. The country's real GDP increased from $60 billion to $170 billion, with per capita income rising from under $500 to over $1000 during 2000-07". It further acknowledged that "the volume of international trade increased from $20 billion to nearly $60 billion. The improved macroeconomic performance enabled Pakistan to re-enter the international capital markets in the mid-2000s. Large capital inflows financed the current account deficit and contributed to an increase in gross official reserves to $14.3 billion at end-June 2007. Buoyant output growth, low inflation, and the government's social policies contributed to a reduction in poverty and improvement in many social indicators". (see MEFP, November 20, 2008, Para 1)

Anonymous said...

You are ignorant of Pakistan's economic history. For most of its existence in the last 63 years, Pakistan economy has grown at a rate of about 6% annually, much higher than the 2% "Hindu growth rate" India saw until early 1990s


Well where are the results? Its like saying for most of its existence 1917 thru 1970s the USSR had a faster growth than the US.Its only in the early 80s that the deficiencies of the system became glaring....

btw India's growth rate has been above 6% pa from the early 80s itself.It hit 9% pa in 2003 and more or less stayed there.

In the first 30 years of our independence we built:

1.An Industrial base including heavy industry, pharmaceuticals, capital goods and space launch capability among many other things.

2.A capable confident technocratic elite educated at IIT-IIMs and other prestigious colleges who are now more than capable of building and running world class corporations.

3.Institutional strength RBI,SEBI,Independant judiciary etc etc

All of which are necessary foundations for subsequent growth in the 1990s and beyond.

Just like China's mass literacy,family planning and basic industry building till 1979 was the foundation on which its economy now stands.

Pakistan by contrast could not even dismantle feudalism,the proverbial millstone around its economic neck so to speak.

Pakistan after 63 years of independence does not have a SINGLE industrial goods company that can hold its own against global competition.

What's more nobody in Pakistan seems to have any concrete solution to rectify this embarrassing failure.

Riaz Haq said...

anon: "Well where are the results? Its like saying for most of its existence 1917 thru 1970s the USSR had a faster growth than the US.Its only in the early 80s that the deficiencies of the system became glaring...."

Again, you show your ignorance in abundance.

In spite of starting out at a significant disadvantage in 1947, Pakistan now has much less poverty, less hunger, a larger middle class and a more urbanized population than India.

Over the last two decades, Pakistan has continued to offer much greater upward economic and social mobility to its citizens than neighboring India. Since 1990, Pakistan's middle class had expanded by 36.5% and India's by only 12.8%, according to an ADB report on Asia's rising middle class released recently.

Here are the details of income levels in India, Pakistan and China as reported by ADB:

Daily Income......$2-$4.......$4-$10........$10-$20.....Over $20

India...............20.45%......4.15%........0.45%........0.10%

Pakistan............32.94%......6.56%........0.62%........0.15%

China ..............33.97%......25.17%.......3.54%........0.68%

Pakistan has continued to offer much greater upward mobility to its citizens than neighboring India. Since 1990, China's middle class population has expanded by 61.4%, Pakistan's by 36.5% and India's by 12.8%.

In terms of education, average number of years of schooling in Pakistan is 13 years, 3 years more than India's 10, according to an education comparison published by Newsweek recently. An average Pakistani is, therefore, better educated and more capable of earning higher income than an average Indian.

Anonymous said...

'Again, you show your ignorance in abundance.'

Well you have an entire blog to display your infinite knowledge about India,philosophy, economics ,IT and what not.

But not how to carry out a civilized conversation.

'An average Pakistani is, therefore, better educated and more capable of earning higher income than an average Indian'

Yeah right!
PAkistan's literacy rate is less than 46% vs India's 75%.
And a substantial number of PAkistanis go to madrassas for their education.

When will you stop quoting data out of context.The same newsweek report if i recall also places India an order of magnitude ahead of Pakistan in economic dynamism the basic driver of all the other indices.

Quick facts:
India
GDP 1.5 trillion USD
Growth rate 9% pa
FX reserves:300 bn USD
Lieracy rate:75%
World class companies: TATA,RIL,AV Birla,Infosys,Wipro,CG,Larsen and Toubro,Thermax,Ashok Leyland, Godrej& Boyce,Moser Baer,HCL Technologies,Cipla,DRL,IFB etc etc etc

(feel free to visit their websites)

PAkistan
GDP:$165 bn
Growth rate:2-3% pa(lower than population growth rate)
FX reserves:$14bn
literacy rate:46%
World Class Companies:NONE

Any comments?

Prashant Thakkar, CPA said...

The ADB report has presented two main research approaches to define the Asian Middle class. One approach done by Chun et al uses a household survey data method (page3-4). Chun uses sampling size method(in Pakistan's case FATA and KP areas were avoided). This is what you have repeatedly elected to cite in your blog. This survey is subject to social perception (page 10)

However, ADB also did a more thorough national analysis of China, India and Indonesia. Here household survey was more specifically evaluated and compared with consumption data(consumer durables) Please see page 7-9 of the report. Here the data indicates middle class($2-$20) for China(2007) at 89.1%, India(2005) at 38.1% and Indonesia(2009) at 42.7%.

Although Pakistan is fourth largest developing Asian country in terms of population a formal ADB discussion of its' middle class has been avoided. The authors chose Philippines instead. ADB was not able to get complete verifiable data in 2005 on Pakistan due to declining security conditions.

Anonymous said...

here is one area pakistanis themselves admit Indians can help them as they are too far behind India.

http://www.hindu.com/2010/09/20/stories/2010092053181800.htm

What beats me is despite all this, the stubborn belief among some pakistanis that Pakistan is superior to India.

Riaz Haq said...

anon: "When will you stop quoting data out of context."

Let me share with you some real comparative data with sources and links that you consider out-of-context but I consider relevant:

One out of every three illiterate adults in the world is an Indian, according to UNESCO. Pakistan stands fourth in the world in terms of illiterate adult population, after India, China and Bangladesh.

One out of very two hungry persons in the world is an Indian, according to World Food Program. Pakistan fares significantly better than India on the hunger front.

Poverty:

Population living under $1.25 a day - India: 41.6% Pakistan: 22.6% Source: UNDP

The reason for higher levels of poverty in India in spite of its rapid economic growth is the growing rich-poor disparity. Gini index measuring rich-poor gap for India is at 36, higher than Pakistan's 30. Gini index is defined as a ratio with values between 0 and 100: A low Gini index indicates more equal income or wealth distribution, while a high Gini index indicates more unequal distribution. Zero corresponds to perfect equality (everyone having exactly the same income) and 100 corresponds to perfect inequality (where one person has all the income, while everyone else has zero income).

Nutrition:

Underweight Children Under Five (in percent) Pakistan 38% India 46% Source: UNICEF

Health:

Life expectancy at birth (years), 2007 India: 63.4 Pakistan: 66.2 Source: HDR2009

Education:

Youth (15–24 years) literacy rate, 2000 to 2007, male Pakistan: 80% India 87% Source: UNICEF

Youth (15–24 years) literacy rate, 2000 to 2007, female Pakistan 60% India 77% Source: UNICEF

Economics:

GDP per capita (US$), 2008 Pak:$1000-1022 India $1017-1100

Child Protection:

Child marriage under 15-years ; 1998–2007*, total Pakistan - 32% India - 47% Source: UNICEF

Riaz Haq said...

prashant: "The ADB report has presented two main research approaches to define the Asian Middle class."

As far as I know, the ADB report uses the most liberal criteria of anyone at or above $2 a day as part of the middle class which results in only 25% of India population and 40% of Pakistani population being in the middle class.

Another report by Nancy Birdsall of Center for Global Development says India class is a myth. She has proposed a new definition of the middle class for developing countries in a forthcoming World Bank publication, Equity in a Globalizing World. Birdsall defines the middle class in the developing world to include people with an income above $10 day or $3,650 a year, but excluding the top 5% of that country. By this definition, India, even urban India alone, has no middle class; everyone at over $10 a day is in the top 5% of the country.

Using Birdsall's proposed definition, Pakistan now does have a middle class of tens of millions (at least 10% of the population), as its 30 to 35 million people earning an average of $10,000 a year (well above Birdsall's lower limit of $3,650.00 a year) account for about 17% of Pakistan's population. Another 60% of Pakistanis (vs 75% of Indians) live on less than $2 a day, according to UN Human Development Report 2009. The rest of 23% of the people have incomes between $730 a year ($2 a day) and $10,000 a year, and a significant percentage of them could be classified as lower middle class.

Prashant Thakkar, CPA said...

Interesting that you mention Nancy Birdsall because, she is very much against throwing money at a problem (Delhi University, Lecture given to Economics post graduates). ADB rejected her methodology in the middle class report. Furthermore, this is what she said about giving economic assistance to Pakistan..

"The lessons from past donor experience are sobering. Despite huge inflows of assistance from
donors and multilateral creditors, Pakistan has made only halting progress on the fundamentals
of state building and social development. Today its democracy is fragile, corruption and
patronage are rampant in government, most of its children never complete primary school, and
its health indicators lag behind those of Bangladesh, despite having higher average income. As
just one example, poverty in Pakistan was higher in 2004 than it was a decade earlier, despite
millions of dollars spent by the World Bank on a large antipoverty program in Pakistan in the
1990s.20 At least then and in those sectors, the bottom line was clear: it is very hard to effectively spend a surge of aid money in Pakistan." N Birdsall

Riaz Haq said...

Prashant: "Furthermore, this is what she said about giving economic assistance to Pakistan.."

I agree with Birdsall's criticism of the effectiveness of official aid to Pakistan through corrupt and inefficient govts.

But I disagree with her data on poverty, health and other social indicators. What she is quoting is not supported by the WB or the UNDP or the latest multi-dimensional report published by Oxford researchers which will be incorporated in the next UNDP HDI report.

World Bank economist Sanket Mohapatra has said in a recent post that remittances by overseas Pakistanis have played a significant role in Pakistan's economic improvement. Not only have such remittances contributed to significant poverty reduction in Pakistan "by an impressive 17.3 percentage points between 2001 and 2008 (from 34.5 percent in 2001-02 to 17.2 percent in 2007-08)", but "continued strong growth in worker’s remittances in the past few years has also contributed to improvements in the external current account balance” and “have facilitated improvement in the country’s external position”, according to a World Bank report released on July 30, 2010.

In terms of hunger, malnutrition, life expectancy at birth, access to doctors, etc. Pakistan is doing better than Bangladesh and India, according to UNDP data.

Developed at Oxford University, the new Multidimensional Poverty Index (MPI) goes beyond income poverty based on $1.25 or $2 a day income levels. It measures a range of "deprivations" at household levels, such as schooling, nutrition, and access to health, clean water, electricity and sanitation. According to Oxford Poverty and Human Development Initiative (OPHI) country briefings 2010, 55% of Indians and 51% of Pakistanis are poor.

OPHI 2010 country briefings on India and Pakistan contain the following comparisons of multi-dimensional (MPI) and income poverty figures:

India
MPI= 55%,Under$1.25=42%,Under$2=76%,India_BPL=29%

Pakistan
MPI=51%,Under$1.25=23%,Under$2=60%,Pakistan_BPL=33%

Lesotho MPI=48%,Under$1.25=43%,Under$2=62%,Lesotho_BPL=68%

China
MPI=12%,Under$1.25=16%,Under$2=36%,China_BPL=3%

Among other South Asian nations, MPI index measures poverty in Bangladesh at 58 per cent and 65 per cent in Nepal.

Riaz Haq said...

During his recent visit to India, the new British Prime Minster David Cameron took seriously the advice offered to him by the British media to please his hosts in New Delhi: Never mention p overty, Kashmir and immigration caps on Indians. But he went a step further and denounced Pakistan for "exporting terror" to make his hosts really happy.

The tips offered by Alex Barker of the Financial Times in his blog went as follows:

1. Don't even mention Kashmir. "The quickest way to turn a charm offensive into a diplomatic fiasco. The basic rule: British ministers should say nothing. Don't dare criticise, offer to help, or link bringing peace to tackling terrorism. Stray words have consequences."

2. Avoid any references to poverty. "More poor people (in India) than anywhere on earth. But not worth mentioning too loudly. Talk about the New India instead. Mention the aid review. A patronising tone is fatal."

3. The third, "Coming over too fresh". Barker says: "The young, dynamic, no-nonsense version of Cameron should probably be left behind. It's time to learn some manners. Indian politicians are, as a rule, double his age and four times as grand. If the meetings are stuffy, formal, overbearingly polite, that's a good thing."

4. The fourth is the "Immigration cap". The columnist writes: "A big issue for the Indian elite. Anand Sharma, the commerce minister, raised his 'concerns' earlier this month with Cameron himself." Indians want to immigrate to Britain in large numbers and don't want to see any caps.

Talking about hypersensitive Indians, Irfan Husain, a Pakistani columnist for Dawn who is admired and quoted by Indian for his strident criticism of Pakistan, wrote earlier this year as follows:

The reality is that we are all touchy about seeing our dirty linen washed in public, but somehow, Indians seem super-sensitive to any hint of criticism. While there are many dissenting voices that question Indian claims to having reached Nirvana, they do not find much space in the mainstream media. Although Indian journalists do excellent work in digging up scams and scandals, they do not often question the broad consensus underpinning the ‘India shining’ image the media, politicians and big business work so hard at projecting.

I spent the other evening at the Karachi Boat Club in the company of a European who has spent a long time in the region, and knows South Asia well, having lived in Pakistan and India for several years. When I asked him how it felt to be back in Pakistan after being away for a few years in New Delhi, his answer came as a surprise. As we have known each other for fifteen years, he had no need to be polite: “It feels great to be back,” he replied. “You have no idea how difficult day-to-day life is in New Delhi. Apart from the awful traffic, the pollution, and the expense, you have to put up with the prickliness of most Indians you meet. They are touchy to the point of paranoia. There is a lot of very aggressive poverty in the air. And when the New Delhi airport opens, we’ll have to brace ourselves for yet another self-congratulatory blast. What is truly shocking is how little the well-off Indians care about the poor.”

“Here in Pakistan, people are so much more laid back. Karachi’s traffic flows much faster, and I don’t sense the same kind of anger. While I’m sure there must be slums, I do not see the same level of abject poverty that is ever-present in India. And of course, the food is much better here.”

Anonymous said...

"Indians are so super-sensitive that a recent humorous piece titled "My Own Private India" in Time Magazine by Joel Stein brought an angry response from the Indian-American community. Here's an excerpt from Stein's article:"

This is definitely true. However we should also admit that Pakistanis are super sensitive about their own failure. If anyone asks them why India is so far ahead of them in education, exports, they simple refuse to accept that quality of human resource is one big difference. I understand that admitting that is not easy because right from birth, state propaganda machine has been feeding 'truth' that muslims are superior to Hindus.

Anonymous said...

I read the Time piece by Mr.Stein and the pushback by KalPenn. Mr. Stein clearly wanted to paint the Indian American community with the same brush that was used to portray the Irish in the sixties or seventies. Just watch some of the sitcoms from the eighties. Many of the jokes at the expense of minority communities would not be kosher today. Certain assertiveness is necessary, otherwise people like Mr. Stein would start taking much more liberties next time around. I see nothing wrong with some polite, civil pushback.

Zen, Germany said...

@DC, Riaz

In Youtube, there are hundreds of videos making fun of Indian accent like http://www.youtube.com/watch?v=jZebgL5f8oQ and http://www.youtube.com/watch?v=7rmcThFmdEk, both which are popular and funny. As usual, some Indians have come up with racist and sexist slurs against those who made those jokes. Irony is that Indians themselves have an extremely inflated sense of their English skills and think that Germans, Italians, Arabs etc talk very poor English.
From my(rather limited) experience with Pakistanis in Germany, I find them relatively modest when they talk about their English or their technical skills and this normally make them less of a laughing stock when compared to some Indians - but Pakistanis are often very sensitive to religion - it is not that they are like DC said feeling smug superiority, rather more like irrationally pious and devout.

satwa gunam said...

Pakistan had better growth in the early years as they have been close to usa. And at the same note india invested in education and institutions

India started opening itself in nineties. During janata. Period it opened relationship with the Isreal.

I would sAy the jackpot for india was advancement in telecom. Which allowed an opportunity for greedy American CEO on wage rate arbitrage

Unfortunately Pakistan missed the bus on that account and also become victim of it's own creation Taliban

Riaz Haq said...

Here's an excerpt from a commentary by Jawed Naqvi of Dawn on corruption in Indian democracy:

The rot in the legislature was again on display recently when opposition MPs offloaded bundles of currency notes in the Lok Sabha, alleging that the money had come from Dr Singh’s party to enable him to win a vote on his nuclear tie-ups with the United States. His Left Front allies tried to block the vote and so they were eased out in the second UPA government.If the lure of lucre could corrupt ordinary MPs we can only imagine the devastating consequences it would have for the executive. There was a time when Indian ministers were cited as examples of probity. With committed activist-politicians like Feroze Gandhi keeping vigil, scams were unearthed promptly and punishments meted out instantly. Nehru’s cabinet minister Rao Shiv Bahadur Singh was jailed as early as in 1949 for accepting a mere 25,000 rupees for forging a mining document.

In 1958, Finance Minister T. T. Krishnamachari resigned for helping place state-owned insurance funds with a private banker. The businessman, Haridas Mundra, was jailed. Other tycoons were punished with regularity those days. In 1959, Ramakrishna Dalmia, head of Bharat Insurance Company, was jailed for two years for misappropriating 22 million rupees from the company. Businessman Dharam Teja siphoned 220 million rupees for a spurious shipping company. He was arrested in Europe and jailed for six years. The father of the current chief minister of Orissa was forced to resign for favouring his own company in awarding a government contract. That was the system which today is denounced variously as populist, socialist and inefficient.

Today the honest Dr Singh can’t get rid of a telecommunications minister who is widely accused of large-scale corruption, because if he did his government would fall. From Harshad Mehta to Satyam, the journey of Indian financial sandals has dotted the reforms agenda. The defence deals scandal of the Vajpayee government is not entirely unconnected to the lure of lucre. A former socialist, the then defence minister had to resign though all too briefly. He signalled a new brazenness in blunting public outcry by shooting the messenger. Tehelka.com was shut down for exposing the defence deals and its journalists hounded by various agencies.

However, the free-market genie was to get even with the prying eyes of the media. It simply co-opted the main players. Thus we recently saw the income tax department naming two of India’s most popular TV anchors — a man and a woman — for involvement as lobbyists for a tainted minister. That rules governing conflict of interest were bent to allow newly set up as well as older media houses to perform their sleight of hand is by now axiomatic. One day the hub of India’s free-market architecture — the Securities and Exchange Board of India (SEBI) — realised that its business was getting mired by spurious reporting.

Riaz Haq said...

"Everyone has different standards about cleanliness. The Westerners have different standards, we have different standards," said the Delhi Commonwealth Games Chief Lalit Bhanot in response to criticism that "the facilities are filthy and unhygienic", according to the BBC.

"This is a world-class village, probably one of the best ever," Bhanot added.

Delegates who visited the tower blocks where athletes will live during the games have described them as filthy, with rubble lying in doorways, dogs inside the buildings, toilets not working and excrement "in places it shouldn't be".

Speaking at a news conference in Delhi, Lalit Bhanot, secretary general of the Delhi organizing committee, said the authorities understood the concerns shown by some member countries and the Commonwealth Games Federation (CGF).

But he suggested that the complaints could be due to "cultural differences".

New Zealand chef de mission Dave Currie has suggested the Games might even have to be canceled.

He told New Zealand commercial radio on Tuesday: "If the village is not ready and athletes can't come, obviously the implications of that are that it's not going to happen.

"It's pretty grim really and certainly disappointing when you consider the amount of time they had to prepare."

New Zealand, Scotland, Canada and Northern Ireland have demanded their teams be put up in hotels if their accommodation is not ready.

Commonwealth Games England has called for "urgent" work on the facilities, raising concerns about "plumbing, electrical and other operational details".

I think the world is expecting too much of a nation where two-thirds of the people still def ecate in the open.

The BBC's Mark Dummett in Delhi says the Indian government had hoped that hosting the Commonwealth Games would highlight the country's strengths.

But many Indians now worry that the opposite has happened, and that the country's weaknesses have been very publicly exposed by the many problems, delays and allegations of mismanagement in the build up to the Games.

Irfan said...

There is so much bad news printed in the media about Pakistan. I feel the jewish and hindu media is biased to hide their own problems. Living conditions are better in Pakistan than many other countries and 90% of wealth is hidden from the officials. So Pakistan is richer than what the western and Indian media think!

Riaz, you are doing a good job by printing the correct news about Pakistan because nobody likes India anyway because they steal good jobs.

satwa gunam said...

@irfhan

If pakistani feels they are rich, nobody has any issues. I donot think so in todays world anybody is bothered about pakistan to that extent as they have their own set of problems.

Problem was that, when pakistan goes to world asking for aid on it terms.

Riaz Haq said...

Pakistan leads the world in the number cng vehicles and cng stations. Now, a report says that Landi Renzo Pakistan will export CNG Kits:

In Pakistan, Italian CNG kits manufacturer Landi Renzo, which commenced its assembling operations there in 2007, is planning expansion of production to enhance deliveries to growing export markets. Currently annual production exceeds 45,000 units. Corrado Storchi, External Relations Manager for Landi Renzo, confirmed the reports to NGV Global News, adding that “South-West Asia and South America are very important export countries for us”, with shipments also being made to China, Far Eastern and European countries.

Storchi confirmed that Landi Renzo has over 90 percent market share of CNG kits in Pakistan. It supplies to Indus Motors for Toyota and Daihatsu cars and Pak Suzuki Motor Company for its range of cars and vans, and other dealers and wholesalers.

Storchi also confirmed a report by The News that Landi Renzo intends to gradually increase the percentage of locally made components, currently at 20% but with the possibility of building to 100% as full quality and safety requirements are satisfied. A testing laboratory has been set up in Karachi, where all components are tested prior to assembly.

In the report, Landi Renzo Pakistan Chief Executive Officer Alberto Barbiery apparently warned that the safety and quality of the CNG kits, manufactured in Pakistan or imported, should be only installed by registered and certified dealers. Landi Renzo will soon launch an awareness campaign about safety and precautions regarding CNG kits.

Barbiery also encouraged the take-up of natural gas in the currently largely unexploited heavy duty vehicle market. “If heavy vehicles convert to CNG, the country would save precious foreign exchange being spent on diesel imports and environmental pollution would be reduced,” he said.

Anonymous said...

@Irfan spoke like a true pakistan. Blaming all to Jews and Hindus.

And I am sure Chinese are loved all over the world for killing al manufacturing jobs in the country,
including pakistan where little remaining domestic industries can not compete with China

Anonymous said...

OT: Riaz Bhai, Indian coolies are doing great. Time to acknowledge that they are far ahead of us in quality of human resource.

Taken from Today's NYT

"At Cisco Systems, the network equipment giant, what started as a research and development center in the Indian city of Bangalore now has the status of a second headquarters. Since 2007, many top-level managers have moved to Bangalore from San Jose, Calif., as the company seeks to position itself better for the immense changes taking place in emerging Asia. Cisco does not publish a breakdown of profit by region. "

Riaz Haq said...

European textile firms are protesting EU trade concession for Pakistani textile imports to help Pakistan after the massive floods. Here's a Wall Street Journal story on it:

European Union trade concessions for flood-ravaged Pakistan have triggered a backlash among European manufacturers, led by an EU textile sector already imperiled by Chinese imports.

The tensions show how the economic downturn is increasing anxieties over trade to the point where even targeted humanitarian efforts to lower tariff barriers are called into question.

The European Commission, the EU's executive, Wednesday approved tariff waivers on 75 categories of imports from Pakistan for up to three years. The gesture followed an order by EU leaders eager to show they're helping some 10 million Pakistanis left without shelter after violent flooding this summer.

Pakistan isn't a big exporter to the EU, shipping only $4.2 billion worth of goods to the bloc last year. It ranked a distant 46th among EU trading partners, between the United Arab Emirates and Serbia.

However, more than 75% of those exports are textiles, clothing, leather or related products, and those goods will make up a majority of the roughly $140 million in total extra trade the EU says the deal will generate from eliminating the EU tariffs.

That's a problem for European textile manufacturers, mostly located in Europe's southern rim, from Portugal to Italy to Romania. Thousands of small shops and their workers have been getting crushed ever since China joined the World Trade Organization in 2001, partially opening up European textile markets. Some of these European economies are suffering slow growth because of the euro zone's debt problems.

Mayraj said...

SPIEGEL: Are interventions in exchange rates even capable of eliminating global imbalances?

Langhammer: When China allowed the yuan to gradually appreciate by some 20 percent between 2005 and 2008, there were no signs that this helped US businesses on the global market. The crucial thing is that a country must be well positioned with the range of goods that it wants to export. The US is still lagging well behind in that respect. SPIEGEL: As opposed to German industry?
Langhammer: Definitely. Germany produces high quality goods that, to a certain extent, are independent of international price competition. To put it bluntly, people outside the European Union who buy a luxury German car or a machine tool don't make that decision based on the exchange rate.



http://www.spiegel.de/international/business/0,1518,723661,00.html
Economist Warns against Blaming China
Yuan Revaluation 'Won't Allow the Americans to Export More Goods'

A nice companion is this article:

By the way, this is what is said about US-China trade tussle:
"

But even smarter tactics might not be enough to regain lost ground. For though Reagan's aggressive policies were enough to stop the bleeding, they weren't enough to make the U.S. economy genuinely competitive again. Most U.S. producers never recovered what they lost in the 1980s. In fact, the question of just who beat whom in the last great trade war has no easy answer. Consider this: Japanese GDP growth from 1990 to 2000 -- Japan's so-called lost decade -- was just 0.2 percent less than America's when you account for increases in the U.S. population. And Japan comes out ahead on a per capita basis. Even with the battering it took, Japan's productivity growth outpaced that of U.S. workers in the 1990s.

As for that $55 billion trade deficit with Japan that so concerned Reagan in 1986? By 2006, it was $90 billion. Overall, the United States today is running a global trade deficit of roughly $600 billion.

The numbers aren't lying: It's time to realize that the United States never really beat Japan -- and it's unlikely to win against China without a new strategy. Chanting tired ideological mantras didn't save us in the 1980s. And it won't save us now."
http://www.foreignpolicy.com/articles/2010/10/11/lie_of_the_tiger?page=0,1

Riaz Haq said...

Mayraj:

About two-thirds of the US trade deficit is because of the so-called intra-company MNC trade. Big US corporations, such as Apple, Boeing, Cisco, Mattel who have ,moved manufacturing overseas to take advantage of lower costs, are big contributors to the deficit. German companies have done it to a much lower extent.

Mayraj said...

And why?
I think root cause is what was identified by Melman.
Is it not ironic indeed that the Germans are machine tool champions; whereas, US private industry lost out to mispricing caused by defense contracting?

Riaz Haq said...

About 60% of India's workforce is engaged in agriculture, contributing about 16% of GDP, according to published data. Textile manufacturing claims the second largest employment and comprises 26% of manufacturing output. It accounts for a fifth of India’s exports, and employs almost 10 percent of India’s workforce, or some 35 million people, and has the potential to add another 12 million new jobs --dwarfing the 1-2 million jobs created by the much-heralded IT and BPO sector, according to a World Bank report. Even the most optimistic estimates by NASSCOM put the total direct and indirect employment in IT and ITES sectors at 10 million jobs.

Agriculture in Pakistan accounts for 19.4% of GDP and 42% of labor force, followed by services providing 53.4% of GDP and 38% employment, with the remainder 27.2% of GDP and 20% workers in manufacturing sector. Over half of Pakistan's manufacturing jobs are in the textile sector, making it the second biggest employer after agriculture.

Here is a quick comparison of different sectors of the economy in India and Pakistan in terms of employment and GDP contribution:

Country....Agri(emp/GDP)..Textiles..Other Mfg..Service(incl IT)

India........60%/16% ...........10%/4%.....7%/25%...........23%/55%

Pakistan......42%/20%...........12%/8%......8%/18%...........38%/54%

Riaz Haq said...

Here are some excerpts from a piece by Dost Mittar on Chowk.com comparing China and India:

India’s foreign exchange reserves at $300 Billion are only a fraction of China’s and those, too, are not based on export earnings but due to inward remittances and fickle inflows of institutional investments in its stock markets.

Some analysts, especially Indians, have recently become much more aggressive in their economic forecasts for India and started comparing their country to Tortoise in a race with the Chinese Hare. They have suggested that China has peaked in its growth whereas India is just starting. They claim that India has strong legal and financial institutions which the Chinese lack. They foresee bottlenecks in the growth of China just as India’s potential is beginning to be realized. How far is this a valid hypothesis?

India is expected to invest a trillion dollars in its infrastructure and many countries are vying with each other to get a slice of this large pie. This is the reason why leaders of almost all major countries have visited or due to visit India this year. These investments are likely to generate large employment opportunities directly and many more indirectly, in addition to improving economic prospects of regions which are currently not well served by infrastructure.

India’s economic growth has been largely based on the domestic market. India’s middle class is booming and is now gradually expanding to smaller towns and even rural areas. The telecom revolution has been real and now covers most villages. Television has reached into the hinterland and raised aspirations of rural masses for the kinds of goods and services that they see being enjoyed by the urban middle class. India largely escaped the recent global recession in part due to the strength displayed by consumers in small towns and villages which were not dependent upon IT and other sectors which are closely tied to the global economy. The rural sector now accounts for half of the two-wheelers sold in India and an increasing number even of small cars. However, a relative lack of growth has led to a serious trade deficit for India, which has so far been filled through capital inflows which cannot be relied upon on a long-term basis. High and rising costs of oil imports of petrol, large infrastructure projects and large-scale defense purchases indicate that these imbalances are likely to worsen rather than improve in the coming years.

Riaz Haq said...

Here are some trade figures from India's commerce ministry:

A. EXPORTS (including re-exports)

Exports during August, 2010 were valued at US $ 16644 million (Rs. 77509 crore) which was 22.5 per cent higher in Dollar terms (18.0 per cent higher in Rupee terms) than the level of US $ 13586 million (Rs.65670 crore) during August, 2009. Cumulative value of exports for the period April-August 2010 was US $ 85273 million (Rs 392811 crore) as against US $ 66326 million (Rs. 322424 crore) registering a growth of 28.6 per cent in Dollar terms and 21.8 per cent in Rupee terms over the same period last year.

B. IMPORTS

Imports during August, 2010 were valued at US $ 29679 million (Rs.138211 crore) representing a growth of 32.2 per cent in Dollar terms (27.4 per cent in Rupee terms) over the level of imports valued at US $ 22449 million ( Rs. 108506 crore) in August, 2009. Cumulative value of imports for the period April-August, 2010 was US $ 141894 million (Rs. 653828 crore) as against US $ 106605 million (Rs. 518024 crore) registering a growth of 33.1 per cent in Dollar terms and 26.2 per cent in Rupee terms over the same period last year.





C. CRUDE OIL AND NON-OIL IMPORTS:





Oil imports during August, 2010 were valued at US $ 7795 million which was 12.4 per cent higher than oil imports valued at US $ 6936 million in the corresponding period last year. Oil imports during April-August, 2010 were valued at US$ 40736 million which was 31.7 per cent higher than the oil imports of US $ 30929 million in the corresponding period last year.





Non-oil imports during August, 2010 were estimated at US $ 21884 million which was 41.1 per cent higher than non-oil imports of US $ 15513 million in August, 2009. Non-oil imports during April - August, 2010 were valued at US$ 101157 million which was 33.7 per cent higher than the level of such imports valued at US$ 75676 million in April - August, 2009.

D. TRADE BALANCE

The trade deficit for April - August, 2010 was estimated at US $ 56620 million which was higher than the deficit of US $ 40279 million during April -August, 2009.

Riaz Haq said...

Pakistan is seeking to lower US import tariffs on its textiles, according to Washington Post:

FAISALABAD, PAKISTAN - The United States has spent billions of aid dollars on Pakistan, but more than nine years after Islamabad joined the global fight against terrorism, the U.S. government remains unable to provide its strategic ally with one thing it really craves: easier access to the U.S. market for its T-shirts, towels and socks.

Pakistani leaders have long sought trade concessions from their U.S. counterparts in recognition of Pakistan's efforts to root out insurgent groups on its soil, but the calls for lower tariffs have intensified since this summer's floods, which displaced millions and destroyed much of the country's cotton crop.

Lifting tariffs on Pakistan's textile products would undoubtedly boost the country's economy. The textile sector employs nearly 40 percent of Pakistan's industrial labor force and accounts for 60 percent of its exports, and the United States is already one of Pakistan's biggest markets.

-----

The House last year passed a narrowly focused bill designed to promote export industries in Afghanistan and specific zones primarily in Pakistan's northwestern border region, but a corresponding bill has been stalled in the Senate. Separately, the U.S. textile industry has made clear it would strongly oppose any legislation that is more ambitious than the bill being considered, saying it would put American jobs at risk.

Pakistani officials and business leaders say they understand that U.S. lawmakers have to answer to their constituencies, but they insist that increased bilateral trade would benefit both countries.

"We do not want aid. We want trade," said Salamat Ali, chairman of Tauseef Enterprises, a garment company based in this Punjab province city that is home to hundreds of thousands of textile workers and 300,000 power looms. "It's better for America and for other allies if Pakistan stabilizes."

Seeking a wider agreement

Pakistan typically exports about $10 billion of textile products each year, with about a quarter of that amount going to U.S. retailers. Waqar Masood Khan, secretary of the Textile Industry Ministry, said that if the United States and Europe lifted trade restrictions, it would result in a $3 billion increase in exports in the short term.

Pakistan succeeded recently in securing trade relief from the European Union, which agreed to waive tariffs on certain textile products from Pakistan for up to three years, starting in January. Pakistanis welcomed the concession but said the waivers, which exclude some finished goods, are unlikely to result in any significant increase in trade.

---

David Trumbull, vice president for international trade at the Boston-based National Textile Association, also said that too often it is the textile industry that has borne the brunt of U.S. trade concessions.

But Pakistani textile factory owners say substantial trade relief is essential at a time when their industry is facing all sorts of challenges.

Because of security concerns, prospective foreign buyers are reluctant to visit Pakistan. High cotton and polyester prices and general inflation have increased production costs significantly.

More crippling, though, are electricity and gas shortages. Some factory owners use more costly generators and wood furnaces to compensate, but many just choose to leave power looms idle and let workers go.

"The Christmas and New Year orders are coming now, and this is the time to ship them," said Waheed Khaliq Raamay, owner of a weaving factory in Faisalabad. "Because of the gas shortage, we are losing customers - and we are losing our faith as well."

Riaz Haq said...

Thailand alone (population 66 million) exports (about $188b), more than Afghanistan, Egypt, Jordan, Lebanon, Mauritania, Morocco, Pakistan, Syria and Tunisia (combined population 345 million) altogether. The countries of the Middle East barely trade among each other, let along with the economic powerhouses of Asia, according to the Wall Street Journal.

Riaz Haq said...

Here's Maplecroft risk warning for investing in India, according to Times of India:

LONDON: The United Kingdom-based Global Risks Atlas 2011 on Friday described India as the 16th riskiest country to invest in for the security hazards it poses and rather embarrassingly clubs it with Niger, Bangladesh and Mali. The Atlas is published by Maplecroft, a consultancy founded by Alyson Warhurst, chair of strategy and international development at Warwick Business School.

The evaluation is structured on seven key global risks including macroeconomic risk and threats around security, governance, resource security, climate change, social resilience and illicit economies.

Maplecroft assessed India faces simultaneous threats of terrorist attacks from Islamists and Maoists. It also points at India's lack of social resilience despite a robust economic growth and cites its poor human rights record. It says large sections of the population lack access to basic services such as education, healthcare and sanitation, and highlights its less productive workforce, greater susceptibility to pandemics and susceptible to social unrest.


A press release by Maplecroft lumps Pakistan with Russia on investment risk:

Dynamic political risks constitute immediate threats to business and Maplecroft rates 11 countries as ‘extreme risk.’ Most significantly, the emerging economy of Russia has moved up five places from 15th to enter the top ten for the first time, whilst Pakistan has also moved two places up the ranking to 9th.

The ‘extreme risk’ countries now include: Somalia (1), DR Congo (2), Sudan (3), Myanmar (4), Afghanistan (5), Iraq (6), Zimbabwe (7), North Korea (8), Pakistan (9), Russia (10) and Central African Republic (11).

Russia’s increased risk profile reflects both the heightened activity of militant Islamist separatists in the Northern Caucasus and their ambition to strike targets elsewhere in the country. Russia has suffered a number of devastating terrorist attacks during 2010, including the March 2010 Moscow Metro bombing, which killed 40 people. Such attacks have raised Russia’s risk profile in the Terrorism Risk Index and Conflict and Political Violence Index. The country’s poor performance is compounded by its ‘extreme risk’ ratings for its business environment, corporate governance and the endemic nature of corruption, which is prevalent throughout all tiers of government.
-----
Jim O’Neil, Chairman of Goldman Sachs Asset Management, states: "Growth is happening where political risk is most challenging. So, meticulous monitoring and mitigation now will enable business to flourish and benefit from the opportunities presented by the future growth economies of the BRICs and Next 11".

Looking to the longer term, the BRICs countries are witnessing increasingly worse structural political risk trends for 2011. China (25), India (32) and Russia (51), rated ‘high risk’ and Brazil (97) medium risk, have all seen risks increase compared to scores from last year’s Atlas.

Riaz Haq said...

Here's a NY Times report on Texas farmers planting more profitable cotton in stead of food crops:

“There’s a lot more money to be made in cotton right now,” said Ramon Vela, a farmer here in the Texas Panhandle, as he stood in a field where he grew wheat last year, its stubble now plowed under to make way for cotton. Around the first week of May, Mr. Vela, 37, will plant 1,100 acres of cotton, up from 210 acres a year ago. “The prices are the big thing,” he said. “That’s the driving force.”
----------
“It’s good for the farmer, but from a humanitarian perspective it’s kind of scary,” said Webb Wallace, executive director of the Cotton and Grain Producers of the Lower Rio Grande Valley. “Those people in poor countries that have a hard time affording food, they’re going to be even less able to afford it now.”

Myriad factors determine food prices. Ethanol demand has pushed up corn prices. Wheat prices rose last year when Russia banned exports after drought devastated its crop.

Farmers typically respond by increasing plantings of the most profitable crop. In the middle of the last decade, as food prices began to rise, cotton prices remained low, prompting farmers to switch from cotton to grains and other food crops. When corn prices jumped with ethanol demand in 2007, farmers grew much more corn.

This year, cotton prices are the highest they have been in years, luring farmers despite strong prices for other crops.

The United States Department of Agriculture predicted last month that southern farmers this spring would plant 12.8 million acres of upland cotton, the type that accounts for the vast majority of the crop. That is a 19 percent increase from last year, when farmers grew 10.8 million acres. It also predicted that the acreage for corn and wheat would grow, although the increases would be lower than they might have been without the competition from cotton. On Thursday, the department will release an updated forecast, based on a survey of farmers.

The effect of the cotton shift is expected to be magnified internationally, as farmers in other major cotton-producing countries, like Brazil, also respond to the high prices.

Cotton futures prices reached nearly $2.20 a pound this month on the ICE futures exchange in New York, up from $0.73 a pound last July. The price is expected to fall by harvest time, but farmers said they hoped to get close to $1 a pound.

In the United States, the economics of growing cotton vary according to many factors, including regional differences and whether or not the land is irrigated. Farmers in several southern states said that at a cotton price of about $1 a pound, their profit could be roughly $200 to $500 more per acre than they could earn growing corn or wheat. For 1,000 acres planted in cotton, that means an additional $200,000 to $500,000 profit.

-----
Mr. Patterson expects to plant 1,500 acres of cotton this year, up from 600 last year. He said the frenzy was so intense that even cattle ranchers were talking about growing cotton.

Farmers say they have no choice but to plant the crops that give them the best chance of making money. They face many uncertainties, and their profits can be wiped out by bad weather, rising costs for items like fertilizer, fuel or seed, or unstable crop prices, which can plummet as rapidly as they rise.

The National Cotton Council expects substantial increases in all cotton-growing states, including large jumps in North Carolina, Mississippi and Tennessee. But Texas is the nation’s biggest cotton producer, and will have by far the biggest increase in acreage.

Riaz Haq said...

Pakistan’s exports were projected at an estimate of USD 24 billion, highest figure so far. Moreover, the remittances in Pakistan are expected to touch USD 11 billion this year and growth rate is estimated at 4.1%, according a report in The News:

ON the invitation of Punjab Board of Investment and Trade (PBIT), world renowned expert on investment promotion Carlos Bronzatto spoke at a seminar “Investment Promotion 101”. Carlos Bronzatto is visiting Pakistan in the capacity of the Chief Executive of the World Association of Investment Promotion Agencies (WAIPA).

Chief Executive Officer, PBIT Saadat Muzaffar, welcomed the high level participants from government and the private sector and said that despite the global economic slowdown, Pakistan was poised to make an economic recovery. He said Pakistan’s exports were projected at an estimate of USD 24 billion, highest figure so far. Moreover, the remittances in Pakistan are expected to touch USD 11 billion this year and growth rate is estimated at 4.1%. He also said that Carlos Bronzatto’s visit signalled a very positive sign from the international community to support Pakistan’s aim to increase FDI in the country.

Chief Executive WAIPA Carlos Bronzatto delivered a comprehensive way forward for Pakistan to promote its investment opportunities. During that session, he provided insight about the investment evolution, core functions and key concept.

He particularly talked about the use of information to influence investment decisions, incentives for long-term development, the targeting of investors and the integration of large global corporations with local stakeholders and communities.

Punjab Board of Investment and Trade is a strategic member of the steering committee of WAIPA which represents South Asia in this committee.

PBIT is the first Investment Promotion Agency from Pakistan to be a part of this international organisation. WAIPA was created in 1995. It was established as an Association under Swiss law. WAIPA Members include 244 national and sub-national agencies from 162 different countries. Through its wide range of activities, WAIPA provides the opportunity for investment promotion agencies (IPAs) to network and exchange best practices in investment promotion.

Riaz Haq said...

Here's a report on Pakistan starting to export rickshaws:

Lahore: After exporting the motorcycles now Pakistan is ready to export CNG rickshaws to eight countries.

Chief executive, Sazgar engineering company, Mian Asad Hameed said that in the phase they were exporting around 150 rickshaws to eight countries and will increase the numbers gradually.

“We have delivered 22 rickshaws to Nigeria whereas we have received order for 40 rickshaw from Egypt,” he added.

He further said, “we are reviewing the possibility of export the vehicle to Srilanka and Indonesia.”

It is to be mentioned here that due to the prolonged outbreaks in Pakistan, industry faces severe crisis but this step would have positive impact on exports.


http://www.thenewstribe.com/2011/10/15/pakistan-all-set-export-rickshaws-to-8-countries/#.TqbmdtSXOSo

Riaz Haq said...

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

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

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

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

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

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

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

Riaz Haq said...

Here's a Bloomberg story on Pakistan seeking US investments:

The American Business Council, that includes the Pakistan units of Coca-Cola Co. and Cisco Systems Inc., plans to invite 10 U.S. companies a year to invest in the South Asian nation and take advantage of rising consumer demand.

“Branded product penetration in Pakistan is so low that the potential for growth is immense,” Saad Amanullah Khan, president of the council, said in an interview in Karachi today. Up to 80 percent of American companies operating in Pakistan, especially technology and consumer goods companies, had a “good year” in 2011.

Pakistan needs to increase overseas investment to help meet an economic growth target of 4.3 percent in the year that began July 1. Foreign direct investment declined 50 percent to $813 million in the year ended June 30, according to the central bank.

The council plans to double its membership of U.S. companies from 63 in the next five years and increase the total investment to $1 billion from $663 million, said Khan, 51, who is also chief executive officer of Gillette Pakistan Ltd.

Pakistan agreed this month to end a seven-month ban on North Atlantic Treaty Organization trucks crossing its territory on the way to Afghanistan, easing tensions with the U.S., its biggest trading partner. The routes were reopened after U.S. Secretary of State Hillary Clinton apologized for the killing of 24 Pakistani soldiers in a November border strike by American helicopters.

Pakistan’s credit rating was lowered deeper into junk status by Moody’s Investors Service on July 13, which cited dwindling currency reserves and political instability. The $200 billion economy faces the fastest inflation in Asia, lingering power blackouts, an insurgency on the Afghan border and reduced aid flows.


http://www.businessweek.com/news/2012-07-16/american-business-council-of-pakistan-to-target-fresh-investment

Riaz Haq said...

Here's a BR report on Pakistan's rising private consumption:

The real private consumption in Pakistan is expected to grow during the fiscal year 2012 by a significantly higher rate than in 2011, a report compiled by the Asian Development Bank (ADB) said.

ADB in its recent report titled ' Asian Development Outlook Supplement July 2012' notes: "Based on the government's latest survey, real private consumption in Pakistan is expected to grow in the fiscal year 2012 by a significantly higher rate than in fiscal year 2011, supported by inward remittances."

The report argues that foreign investment is declining in the both India and Pakistan while the inflation in South Asian region is projected to be 7.8 percent of GDP in 2012 while for the FY 2013, it is projected at 6.9 percent of GDP.

According to the ADB report, South Asia is expected to grow by 6.2 percent in 2012 and 6.9 percent in 2013. South Asia economic growth will moderate as the weaker global environment reduces exports and investment inflows. Although somewhat offset by stable inward remittances, widening trade deficits have led to the depreciation of most currencies in the sub-region and have helped drive inflation up since

early 2012. While manufacturing growth is slowing in most countries, domestic conditions vary among major economies.

The report says that weak global demand has also affected trends in international commodity prices. In general, they are projected to decline throughout 2012 and 2013. The trend in the international price for oil and food suggests prices for 2012 and 2013 to fall below 2011 levels.

Economic growth in developing Asia moderated during the first half of 2012 as slower growth in the US and euro area reduced the demand for the region's exports. Worries over the economic strength of important developing economies have also emerged recently. Growth in developing economies will be slow in the second half of 2012. Unwinding policy stimulus in some countries has also contributed to the region's weaker first half performance.


http://www.brecorder.com/business-a-economy/189/1218815/

http://www.adb.org/sites/default/files/pub/2012/ado-2012-supplement.pdf

Hopewins said...

Dr. Haq,

I agree with you that our country desperately needs more investment. So I thought that we should go over the various potential sources of funds for the sorely-needed investments and see how important each has been to our economy in the past.

Sources of Funding for Investment in Pakistan:

(1) Internal Savings (a.k.a. Gross Domestic Savings)
(2) Remittances
(3) Foreign Aid
(4) Foreign Direct Investment (FDI)
(5) Foreign Portfolio Investment (FPI)

How successfully has Pakistan dealt with these 5 categories of funding in the past?

http://3.bp.blogspot.com/-i8_NjSBBM9g/UDv_aGr_ZcI/AAAAAAAAAGA/PwqYlWpXH5c/s1600/ScreenHunter_23+Aug.+27+19.05.jpg

What is the relative importance (i.e. as per cent of total funds available) of each of these 5 sources?

http://3.bp.blogspot.com/-OiI4tS9AKVc/UDwFjEGMY1I/AAAAAAAAAHM/_0NIlhjtGM0/s1600/ScreenHunter_31+Aug.+27+19.39.jpg

The following points do stick out from the "relative importance" graph above:

(1) Our Eighties-boom was largely driven by rapidly-rising Remittances.

(2) The remittances were rapidly rising because Oil prices were rising. The rising oil prices set-off a Gulf boom. This created more jobs for Pakistani worker & led to rising profits for Pakistani businessmen in the Gulf countries.

(4) Conversely, the decline of Oil prices in later Eighties led to a Gulf bust. This caused profits to decline for Pakistani businessmen and Pakistani workers got laid-off. This, naturally, led to decline of remittances.

(5) After adjusting for inflation, remittances & Oil prices track each other almost perfectly.

http://4.bp.blogspot.com/-ypqh3VnQ75I/UDv_cyX2q9I/AAAAAAAAAGQ/fVvZL7OWzpo/s1600/ScreenHunter_25+Aug.+27+19.05.jpg

(6) As shown in the "oil v/s remittances" graph, remittances then stayed low througout the nineties as Oil Prices stayed down.

(6) Then as Oil prices rose from 2002 onwards, remittances again rose very rapidly.

(8) The 2003-2007 boom was driven by BOTH, rising FDI as well as rising remittances.

(9) The relative weight of internal savings declined during the (consumption-led) 2003-2007 boom.

(10) The "lost decade" of the nineties was when the economy was principally driven by internal savings, with very little foreign money coming in.

A key point to note here is that our remittances are strongly-linked to the fortunes of the Arab/Gulf countries, as a full 2/3 of our remittances come from there. Rising oil prices creates a Gulf boom and our remittances increase (in real terms). Falling Oil prices leads to a Gulf bust and remittances decrease (in real terms).

http://1.bp.blogspot.com/-QiILS-qI6mI/UDv_eIH7DRI/AAAAAAAAAGY/jdtSMGz9-5E/s1600/ScreenHunter_26+Aug.+27+19.05.jpg

Something to think about.

Especially when we blog on & on about FDI, FPI, Aid, Remittances, Domestic Savings, Rising Consumption et cetera.

Thank you.

Hopewins said...

Continued POST SCRIPT---

The same graphs for India are shown below. The graphs clearly show that India's economy is fundamentally different from ours in a structural sense. One key difference immediately visible is that their economy has *always* been driven principally by Internal Savings. All the others (FDI, FPI, Remittances & Aid) are actually relatively less important to their economy.

Specifically, as shown in the graphs, during the Cold war (pre-1992 period) Internal Savings accounted for 91% (on average) of their funding sources for investment, with remittances at 5% and Aid contributing 4%, with negligible FDI & FPI (Soviet-Model Closed Economy).

After the post-Cold-War reforms in 1992, their economy is *still* principally driven by internal savings (now on average 84%), with Remittances contributing 9%, FDI & FPI contributing 5.5% and Aid contributing 1.5% (all on average).

India's Sources of Funding for Investment in Current US$:
http://1.bp.blogspot.com/-W4D38FEk3is/UDv_fj-AiaI/AAAAAAAAAGg/Iof5nJ--o_Y/s1600/ScreenHunter_27+Aug.+27+19.07.jpg

Relative Important of Various Sources of Funding for India:
http://3.bp.blogspot.com/-t2tEUNW2Re0/UDv_hOLwqhI/AAAAAAAAAGo/gYstS4Ixk8k/s1600/ScreenHunter_28+Aug.+27+19.07.jpg

Are India's remittances perfectly correlated with Oil Prices (like ours are)?
http://1.bp.blogspot.com/-4YzLJV0AD6Q/UDv_iKIIg3I/AAAAAAAAAGw/Nv_46NqnoNM/s1600/ScreenHunter_29+Aug.+27+19.07.jpg

Is India overly-dependent (like we are) on Oil-price drive Gulf Countries for its remittances?
http://1.bp.blogspot.com/-hwtzQ7gqqqQ/UDv_jXByY_I/AAAAAAAAAG4/F_5Dw8MlKDA/s1600/ScreenHunter_30+Aug.+27+19.07.jpg

I will let you chew on these graphs as comparative references.




Riaz Haq said...

HWJ: "After the post-Cold-War reforms in 1992, their economy is *still* principally driven by internal savings (now on average 84%), with Remittances contributing 9%, FDI & FPI contributing 5.5% and Aid contributing 1.5% (all on average)."

Regardless of internal savings, countries like India and Pakistan that run huge trade deficits still need substantial foreign inflows to minimize current account deficits and/or build build current account surpluses for dollar reserves.

http://www.riazhaq.com/2010/05/soaring-chinese-imports-worry-india.html

Hopewins said...

Dr. Haq,

You say: "Regardless of internal savings, countries like India and Pakistan that run huge trade deficits still need substantial foreign inflows to minimize current account deficits..."

This is true in a way. But I think you missed my point.

1) Assume Pak & Ind are running "huge trade deficits"

2) Also assume that it is difficult/impossible to get "substantial foreign inflows". (Say something like Sanctions)


What happens?


1) The Local currencies of Pak & Ind will depreciate/fall (in an **inflation-adjusted** or REER sense) vis-a-vis the Dollar.

2) At the weaker currency levels, imports will be subdued and exports will be magnified.

3) The "huge trade deficit" will automatically reduce and eventually then vanish by itself.

4) Foreign inflows will no longer be needed. So the fact that they are not coming in becomes irrelevant.

This is standard Forex 101. Nothing special about this at all. This is standard currency-adjustment theory.


But here is the point I was making:

1) If all foreign inflows into Pakistan cease, our total funding available for investment will scaleably COLLAPSE by almost 46-47%

http://3.bp.blogspot.com/-OiI4tS9AKVc/UDwFjEGMY1I/AAAAAAAAAHM/_0NIlhjtGM0/s1600/ScreenHunter_31+Aug.+27+19.39.jpg

2) If all foreign inflows into India cease, their total funding available will scaleably reduce by at most 19-20%.

http://3.bp.blogspot.com/-t2tEUNW2Re0/UDv_hOLwqhI/AAAAAAAAAGo/gYstS4Ixk8k/s1600/ScreenHunter_28+Aug.+27+19.07.jpg

Therefore, higher contribution by internal or domestic savings vis-a-vis foreign money always (this is the East Asian Example) gives an economy greater stability against the fickle nature of foreign capital flows.

I hope this clarifies my point regarding stability.

Thank you.

Riaz Haq said...

HWJ: "Therefore, higher contribution by internal or domestic savings vis-a-vis foreign money always (this is the East Asian Example) gives an economy greater stability against the fickle nature of foreign capital flows."

Domestic rupee-denominated savings are useless for buying imports like energy as long as US $ is the international trade currency.

Every country needs US $ to survive and the IMF is the only lender of last resort if a country runs out of US $ to do business.

HWJ: "At the weaker currency levels, imports will be subdued and exports will be magnified."

In the event you run out of US $ to buy imports like energy or face international sanctions, it'll be very hard to export anything.

Hopewins said...

RHQuote: "With almost 80% of its GDP from consumption, Pakistan has particularly heavy reliance on domestic public and private spending

for its economic health. This is much higher than the US consumption accounting for over 70% of its economy, and India's 60%"

--------------------------------

Which Consumption are you discussing, Private (Household) or Total (Private plus Public-Government)?

Here are the facts from the World Bank:

------

A) Total Consumption (i.e. Private-Household Plus Public-Government)

http://www.tradingeconomics.com/india/final-consumption-expenditure-etc-percent-of-gdp-wb-data.html

http://www.tradingeconomics.com/united-states/final-consumption-expenditure-etc-percent-of-gdp-wb-data.html

http://www.tradingeconomics.com/pakistan/final-consumption-expenditure-etc-percent-of-gdp-wb-data.html

India: 69.7% in 2011

United States: 88.4% in 2011

Pakistan: 90.6% in 2011

------

B) Private-Household Consumption

http://www.tradingeconomics.com/india/household-final-consumption-expenditure-etc-percent-of-gdp-wb-data.html

http://www.tradingeconomics.com/united-states/household-final-consumption-expenditure-etc-percent-of-gdp-wb-data.html

http://www.tradingeconomics.com/pakistan/household-final-consumption-expenditure-etc-percent-of-gdp-wb-data.html

India: 58.0% in 2011

United States: 70.9% in 2011

Pakistan: 82.4% in 2011

------

C) Public-Government Consumption:

http://www.tradingeconomics.com/india/general-government-final-consumption-expenditure-percent-of-gdp-wb-data.html

http://www.tradingeconomics.com/united-states/general-government-final-consumption-expenditure-percent-of-gdp-wb-data.html

http://www.tradingeconomics.com/pakistan/general-government-final-consumption-expenditure-percent-of-gdp-wb-data.html

India: 11.7% in 2011

United States: 17.5% in 2011

Pakistan: 8.2% in 2011

------

NOTES:

(1) By definition, (A)=(B)+(C)

(2) By definition, 100% -(A) = Gross Domestic Savings Rate

Therefore, Gross Domestic Savings Rates (% of GDP) are, by definition, as follows:

India: 100% -69.7% =30.3% in 2011

US: 100% -88.4% =11.6% in 2011

Pakistan: 100% -90.6% =9.4% in 2011


Now do you see why I speak about "ominous signs" all the time?

------

Annual Generation of Domestic Capital, by definition, is as follows:

India: 30.3% X GDP = 560.0 Billion$ in 2011

United States: 11.6% X GDP = 1678 Billion$ in 2011

Pakistan: 9.4% X GDP = 19.8 Billion$ in 2011


Do you understand the significance of domestic savings at all?

Do you realize why "jhola phelana" (i.e. excessive dependence on foreign capital)is not sustainable?

Hopewins said...

Dr. Haq,

You say, probably copy-pasted from somewhere, "Gross domestic product (GDP) is calculated by adding up public and private consumption, investments and net exports (exports-imports). Some of the major world economies, most notably Germany and China, are led by exports, while others, such as United States, United Kingdom, India and Pakistan, are primarily domestic consumption driven"

--------------------------------

The first part of the statement is correct as a matter of definition.

The second part, however, is an often-repeated slogan based on misunderstandings of macroeconomics by superficial media-promoted analysts & so-called “talking-head” financial experts.

Here are the facts that follow from the very fundamentals of Macroeconomics—

GDP = Total Consumption + Total Investments + Net Exports

Increase in (GDP) = Inc (Total Consumption) + Inc (Total Investments) + Inc (Net Exports)

A) LED by Net-Exports: Defined as "LARGEST contribution to GDP Increase or Growth comes from the Net-Exports sector"

Examples: Germany

B) LED by Consumption: Defined as "LARGEST contribution to GDP Increase or Growth comes from the Total Consumption (Public & Private) sector"

Examples: US, UK, Pakistan

C) LED by Investment: Defined as "LARGEST contribution to GDP Increase or Growth comes from the Total Investment (Public & Private) sector"

Examples: China, India

----

Look at the World Bank data for all these countries last 10 years and satisfy yourself that the above is true.

http://www.tradingeconomics.com/pakistan/indicators-wb

And if you don't understand what is being said, perhaps some serious pre-blogging study is in order?

Thank you.

Riaz Haq said...

Here's Businessweek on Lotte investment plans in Pakistan:

Lotte Pakistan PTA Ltd. (LOTPTA), the pure terephthalic acid producer whose shares have declined by a quarter this year, plans to spend as much as $20 million within the next two years on its plant to trim costs amid concerns annual profit will decline.

Lotte, which started commercial operations of a $50 million power plant in July, plans to modernize its machines, Chief Executive Officer Asif Saad said in an interview in Karachi. The power plant may help cut energy costs by 50 percent, he added. Lotte’s PTA is used to make polyester staple fiber, which is in turned used to make clothes.

The company, part of South Korea’s Lotte Group, reported a 95 percent slump in consolidated net income in the third quarter to 47.4 million rupees ($495,000) compared with the same period a year ago. The company posted a consolidated net loss of 247 million rupees for the nine months started January compared with 4.6 billion rupees profit a year earlier.

“This has not been a good year for us,” Saad said. “You have to appreciate this is a cyclical commodity business and we are going through a down cycle.”

The Lotte group is considering expanding investment in Pakistan to $2 billion in the next five years into areas such as retail and real estate, Saad said.

“Cost cutting will have an impact on their exports, but it will be very marginal,” Raza Hamdani, a research analyst with Shajar Capital, said. “I expect the company to make a marginal profit in 2013 provided they cut costs and regionally prices rise.”

Lotte, which got all its sales from Pakistan last fiscal year, has to sell its product at international prices linked with China, Shajar Capital’s Hamdani said. Lotte is asking Pakistan’s government to increase duties on PTA imports to 7.5 percent from 3 percent now.

Lotte Pakistan’s shares that have declined 24 percent this year compared with a 40 percent gain in the KSE 100 Index.


http://www.businessweek.com/news/2012-10-24/lotte-pakistan-to-spend-20-million-to-upgrade-plant-trim-costs

Hopewins said...

Dr. Haq,

If we go back in time to the 1971 war, we see that massive expenses of repatriating Pakistani POWS & civilians stranded in Bangladesh and the heavy cost of repaying US war-loans took a heavy toll on the economy.

The total investment rate dropped to an all time low of 11.44% of GDP in 1973 as the costs of the war were absorbed.

Historically, that has been considered the worst year for investment since record keeping began in the sixties. You can see the 11.44% investment-bottom in 1973 here--

http://www.tradingeconomics.com/pakistan/gross-fixed-capital-formation-percent-of-gdp-wb-data.html

Ironically, the same WB chart shows that FY 2011 investment rate was 11.80% of GDP.

That is abysmally low, but still a tad 0.35% higher than our 1973 nadir of 11.44% GDP.

So I just wondered what the latest (FY12) investment rate was, since the WB chart above ends in FY11.

Luckily, I was able to find this information at the Finance Ministry. Here it is in Table 1.6 on page 13--
http://www.finance.gov.pk/survey/chapter_12/01-GrowthAndStabilization.pdf

Ouch! GOP is reporting that the FY12 Investment rate was at 10.50% of GDP.

We have just broken the 1973 record for the lowest level of Investment! We are now at the lowest investment rate we have EVER recorded. It is astonishing, to say the least, to see that we are doing worse today than we did in 1973 when we had to absorb the devastating costs of the lost-war.

Obviously, this downward trend cannot continue indefinitely. We must increase investment levels.

Any ideas on how we might go about doing this?

Thank you.

Riaz Haq said...

HWJ: "Ouch! GOP is reporting that the FY12 Investment rate was at 10.50% of GDP."

I checked the report and didn't find 10.5% anywhere.

Here are the figures I see:

Total Investment: 12.5% of GDP

Gross Fixed Investment: 10.9% of GDP

National Savings: 10.7% of GDP

Ad these are war-time figures given the long-running Taliban insurgency in Pakistan.

http://www.finance.gov.pk/survey/chapter_12/01-GrowthAndStabilization.pdf

Hopewins said...

^^^RH: I checked the report and didn't find 10.5% anywhere. Here are the figures I see for FY2012:

(1)Total Investment: 12.5% of GDP
(2) Gross Fixed Investment: 10.9% of GDP
(3)National Savings: 10.7% of GDP
(4)Domestic Savings: 8.9% of GDP

http://www.finance.gov.pk/survey/chapter_12/01-GrowthAndStabilization.pdf
--------

Dr. Haq,

I apologize. I made a typographical error. You are correct, it should have been 10.9% instead of 10.5%.

The term "gross fixed capital formation" as used by the WB is the same as "gross fixed investment" as used by most other institutions.

So the comparison should have been like this--
Gross Fixed Investment FY 2012: 10.90% of GDP
Gross Fixed Investment FY 1973: 11.44% of GDP

But don't you find it strange that whenever I do make a numerical error, it always seems to be on the side of making Pakistan "look worse than it is"?

Do you think this is just a co-incidence? Or do you think I could be doing this in a subconciously deliberate manner?

Please share your thoughts.

Thank you.

PS: In order to allow historical comparisons, here are the WB data for all parameters you mention:

(1) Total Investment:
http://www.tradingeconomics.com/pakistan/gross-capital-formation-percent-of-gdp-wb-data.html

(2) Gross Fixed Investment:
http://www.tradingeconomics.com/pakistan/gross-fixed-capital-formation-percent-of-gdp-wb-data.html

(3) National Savings:
http://www.tradingeconomics.com/pakistan/gross-savings-percent-of-gdp-wb-data.html

(4) Domestic Savings: http://www.tradingeconomics.com/pakistan/gross-domestic-savings-percent-of-gdp-wb-data.html

Hopewins said...

^^^RH: "...And these are war-time figures given the long-running Taliban insurgency in Pakistan.."
----

Dr. Haq,

I can understand that you might "feel" this way, but we must set aside our emotions and ask if the facts support this assertion that our collapsing investment rate has anything to do with the Taliban.

So is there any correlation? How would we find out? Here is one method:

A) Terrorism Fatalities in Pakistan
2003: 189
2004: 863
2005: 648
2006: 1,471
2007: 3,598
2008: 6,715
2009: 11,704
2010: 7,435
2011: 6,303
2012: 6,570

B) Investment Rates (as % of GDP)
2003: 15.1%
2004: 15.0%
2005: 17.5%
2006: 20.5%
2007: 21.0%
2008: 20.5%
2009: 16.6%
2010: 13.8%
2011: 11.8%
2012: 10.9%

Do you see any correlation? Here is a graphical comparison:
http://alturl.com/3bwth

I can see a correlation between the reign of Zardari beginning with the GFC of 2008 and the falling rate of investment. However, there does not seem to be any obvious link between terrorism, which peaked in 2009, and the falling investment rate, which is still continuing its downward spiral.

What are your considered (unemotional) thoughts on this?

Thank you.

Hopewins said...

As I have been saying, we need to SAVE in order to invest. Domestic savings are the KEY to long-term sustainable high growth rates. Bangladesh and India seem to understand this, while our Paindoos keep running around with a begging bowl.

QUOTE: "Currently, infrastructure investments in India are funded mostly out of >LOCAL< savings that hover around 35% of gross domestic product."

READMORE: http://alturl.com/xm7rg

Hopewins said...

^^RH: "But Pakistanis.....have developed a taste for Kenyan tea already..."
----

That's not what Dr. Kaiser Bengali is saying......

Quote: "As an example of how increased regional trade will be beneficial to Pakistan, Dr. Bengali says importing tea from Kenya makes little sense when we can get it from India more easily."

Source: http://alturl.com/s3sm6

Riaz Haq said...

HWJ: "That's not what Dr. Kaiser Bengali is saying......"

Bengali is an economist, not a trader. Traders only import what their customers prefer.

Hopewins said...

We need to SAVE more in order to be able to sustainably invest. This is exactly what I have been saying.

QUOTE March 08, 2013:

SAVINGS AND INVESTMENTS Apart from the relative ease in availability of external resources, other factors also help explain Pakistan's dismal savings performance. Political leadership has rarely emphasised the importance of sacrifice and savings for long-term development. Indeed the governing elite have often set high standards of conspicuous consumption. At a more basic level the low measured savings rate reflects low confidence in the future. Indeed the real savings are understated because of considerable flight of capital. The high savings rate during 2002-04 partly reflected returning capital flight as political stability seemed to be assured and investment climate improved considerably. In addition, for long periods the high population growth rate resulted in Pakistan having a dependency ratio (the ratio of dependent children to working age population) of 0.9 compared to 0.7 in India and 0.5 in China. Finally, for most years since mid 1980s, general government savings have been significantly negative (in many years as high as 3 percent of GDP) as stagnant or slowly growing tax revenues have not been able to cover government current expenditures in most years. The low 'available' savings are reflected in persistently low level of gross fixed capital formation. After a recovery during 2005-08 from the low level reached in 2000, fixed investment as a percentage of GDP has fallen in 2012 to the lowest level in more than three decades.

READMORE: http://alturl.com/7twd2

Riaz Haq said...

Here's an ET story on GSP+ status for Pakistan's textile exports to EU:

KARACHI: Textile tycoons, government officials and financial analysts all converge on one point that the grant of European Union’s GSP Plus status to Pakistan is going to spark investment, create jobs and give a big boost to Pakistan’s economy in coming years.
A long wait has come to an end as Pakistan has qualified for the generalised scheme of preferences, better known as GSP Plus, of the 28-nation European bloc.
The EU parliament on Thursday approved the preferential status for all the countries that had applied for special concessions on duties.
One of the biggest beneficiaries of the greater market access and duty concessions would be the textile industry of Pakistan that exported over $13 billion of products in the last fiscal year, constituting more than half of total exports worth $24.6 billion.

“This is the biggest news for Pakistan’s economy in recent years,” Gul Ahmed Textile Mills Executive Director Ziad Bashir said, referring to the inclusion of Pakistan in the list of countries that won the GSP Plus status.
Bashir, like other businessmen associated with the textile industry, has praised the government for effective lobbying and successful diplomacy.
GSP Plus, which will come into effect from January 2014, would attract new investment in the textile sector, leading to hiring of more workers in coming years.
“I think the GSP Plus will at least give a 10-15% boost to textile exports because of new investments in machinery, efficient energy systems, etc,” said Bashir.
This positive news has not come as a big surprise. The government and private sector have been eagerly waiting for voting in the EU parliament, especially after Pakistan got majority vote in the EU’s International Trade Committee in the first week of November.
Under the scheme, textile exporters can sell most of their products to EU states at concessionary rates of duty or without any duty, making the goods cheaper for European importers. Duty concessions will be for four years up to 2017.
According to industry officials and initial details coming from Europe, the tariff lines covered under the GSP Plus are around 6,000, accounting for 91% of total tariff lines. It is expected that Pakistan will benefit from almost 2,500 tariff lines, of which around 900 are related to the textile sector, brokerage house Topline Securities said in a report.
“We believe textile exports can be increased by at least $500 million to $1 billion in the next 15 months,” All Pakistan Textile Mills Association (Aptma) Central Chairman Yasin Siddik told The Express Tribune. Aptma is looking to create 300,000 to 400,000 new jobs in the next one year.


http://tribune.com.pk/story/644809/duty-relief-economy-likely-to-get-a-big-boost-from-gsp-plus-status/