Have Modi's Misguided Policies Turned India Into A Beggar Nation?

India is set to receive nearly $500 million in emergency aid from Japan to cope with rising covid19 cases and worsening economy, according to Hindustan Times. This is the largest amount of financial assistance announced by any country so far to support India’s response to the Covid-19 crisis, which has had widespread impacts on the Indian economy and health sector. India’s economy in the organized sector shrank nearly 24% last quarter. It is likely a 40% decline in GDP after the government takes the unorganized sector into account, according to the New York Times. Meanwhile, India is seeing record new daily coronavirus cases and becoming the new epicenter of the covid19 pandemic. Have Indian Prime Minister's misguided policies turned India into a beggar nation? The fact is that India was already the world's biggest recipient of foreign aid even before the pandemic. Pakistan is not even among the top 15 recipients of foreign aid.

India in Crisis:

Many in the world, including India's biggest cheerleader Fareed Zakaria, are beginning to see the stark reality of Modi's India as a big failure on multiple fronts. Indian state has failed to contain the deadly COVID19 pandemic. India’s economy in the organized sector shrank nearly 24% last quarter.  It is likely a 40% decline in GDP after the government takes the unorganized sector into account, according to the New York Times. Meanwhile, India is seeing record new daily coronavirus cases and becoming the new epicenter of the covid19 pandemic.  The country's democracy is in decline. India seems like a roadkill for China. This turn of events has created serious problems for Pakistani "liberals" who have long seen and often cited India as a successful example of "secular democracy" at work in South Asia.

Top Aid Recipients and Their Donors in 2017. Source: Wristband Resources

India World's Top Aid Recipient: 

The Japanese emergency aid of $500 million to India is only the latest instance of multi-billion dollar aid Tokyo has provided to New Delhi in recent years. In fact, India is currently the world's largest recipient of official development assistance (ODA) and Japan is its biggest donor. India's $4.21 billion in assistance is followed by Turkey $4.10 billion, Afghanistan $2.95 billion, Syria $2.77 billion, Ethiopia: $1.94 billion, Bangladesh $1.81 billion, Morocco $1.74 billion, Vietnam $1.61 billion, Iraq $1.60 billion and Indonesia $1.48 billion. Pakistan is not even among the top 15 recipients of foreign aid.

India: Epicenter of COVID19:

India is rapidly becoming the world’s new coronavirus epicenter, setting a record for the biggest single-day rise in cases as experts predict that it’ll soon pass Brazil -- and ultimately the U.S. -- as the worst outbreak globally, according to Bloomberg. Over 78,000 new cases were added in a single day taking the total tally to over 3.6 million. This represented the highest ever one-day surge among all major countries. At the current growth rate, India’s virus cases will eclipse Brazil’s in about a week, and the U.S. in about two months. And unlike the U.S. and Brazil, India’s case growth is still accelerating seven months after the reporting of its first coronavirus case on Jan. 30. The pathogen has only just penetrated the vast rural areas where the bulk of its 1.3 billion population lives, after racing through its dense mega-cities.

COVID19 Growth Fastest in India. Source: Bloomberg

Private International Charity to India:

India tops the list of charity recipients from private foundations while Pakistan is ranked as the 12th largest recipient of philanthropic giving in the world, according to a report released by OECD (Organization for Economic Co-operation and Development).

Private Foundation Philanthropy in Asia. Source: OECD 

Global Philanthropic Foundations:

Philanthropic contributions of major international private foundations in Pakistan totaled  $267 million out of the $42 billion global contribution in  2013-2015.  This compares with $1.6 billion in top-ranked India and $498 billion in second-ranked China.  US-based Bill and Melinda Gates Foundation (BMGF) contributed nearly half of the $42 billion in global charity by private foundations.

Private foundations are filling the huge gaps in public funding of health and education sectors in developing nations. . They contributed  $11 billion for the health sector alone in the three year period, ranking third behind the United States and a global fund for fighting disease.

Massive Western Aid to India:

In addition to being the biggest recipient of private foreign charity,  India has been the number one recipient of official US aid since 1947, according to the US government data.   The country India's first Prime Minister turned to for help during the 1962 China-India war was also the United States.

India has received $65.1 billion in US aid since its independence, making it the top recipient of American economic assistance. Pakistan, with its $44.4 billion, is at number 5 on the list.  US data also shows that Pakistan is not among top 10 for military or total economic and military aid.

Local Charity in Pakistan:

Pakistanis donate generously to local charities in the country in the form of religiously mandated donations such as "zakat, sadaqa and fitrana".  One of the key measures of empathy is generosity to others, the kind of generosity demonstrated in Pakistan by the likes of  late Abul Sattar Edhi. The Edhi Foundation set up by the great man is funded mainly by small donations from ordinary people in Pakistan.

 Anatol Lieven, author of "Pakistan: A Hard Country" wrote the following tribute to the Mr. Edhi:

"There is no sight in Pakistan more moving than to visit some dusty, impoverished small town in an arid wasteland, apparently abandoned by God and all sensible men and certainly abandoned by the Pakistani state and its elected representatives - and to see the flag of Edhi Foundation flying over a concrete shack with a telephone, and the only ambulance in town standing in front. Here, if anywhere in Pakistan, lies the truth of human religion and human morality."  

What Professor Anatol Lieven describes as "human religion and human morality" is the very essence of the Huqooq-ul-Ibad (Human Rights) in Islam. Abdus Sattar Edhi understood it well when he said, "there's no religion higher than humanity".

Edhi understood the meaning of what the Quran, the Muslim holy book, says in chapter 2 verse 177:

"Righteousness is not that ye turn your faces towards the east or the west, but righteous is, one who believes in God, and the last day, and the angels, and the Book, and the prophets, and who gives wealth for His love to kindred, and orphans, and the poor, and the son of the road, beggars, and those in captivity; and who is steadfast in prayers, and gives alms."

A recent article written by Shazia M. Amjad and Muhammad Ali and published in Stanford Social Innovation Review said that "Pakistan is a generous country. It contributes more than one percent of its GDP to charity, which pushes it into the ranks of far wealthier countries like the United Kingdom (1.3 percent GDP to charity) and Canada (1.2 percent of GDP), and around twice what India gives relative to GDP."

OECD says corporate donations in Pakistan have increased from  $4.5 million to $56.4 million over the last 15 years. Corporate donations are dwarfed by individual donations made as zakat, sadaqa and fitrana as commanded by the Quran.

In addition to zakat, sadaqa and fitrana, Pakistanis spent about $3.5 billion on Eid ul Azha in 2017, according to analysts. This included sacrifice of $2.8 billion worth of livestock and another $700 million on clothes,  shoes, jewelry and various services. This amount represent a huge transfer of wealth from urban to rural population, including many rural poor, in the country. It also brings philanthropic donations of Rs. 2.5 billion to Rs. 3 billion ($25-30 million) worth of animal hides which are sold to the nation's leather industry.

Empathy Study:

A Michigan State University (MSU) study of 63 countries finds that Pakistanis have higher empathy for others than people in their neighboring countries. It also finds that the United States is among the most empathetic nations in the world.

The MSU researchers, led by William J. Chopik,  analyzed the data from an online survey on empathy completed by more than 104,000 people from around the world.

The survey measured people’s compassion for others and their tendency to imagine others’ point of view. Countries with small sample sizes were excluded (including most nations in Africa). All told, 63 countries were ranked in the study, according to MSUToday, a publication of Michigan State University.

Summary:

India's biggest cheerleaders, including Fareed Zakaria, are beginning to see the stark reality of Modi's India as a big failure on multiple fronts. India is set to receive nearly $500 million in emergency aid from Japan to cope with rising covid19 cases and worsening economy, according to Hindustan Times. This Japanese emergency aid of $500 million to India is only the latest instance of multi-billion dollar aid Tokyo has provided to New Delhi in recent years. In fact, India is currently the world's largest recipient of official development assistance (ODA) and Japan is its biggest donor. India was already the world's biggest recipient of foreign aid even before the pandemic. Pakistan is not even among the top 15 recipients of foreign aid.  This $500 million is the largest amount of financial assistance announced by any country so far to support India’s response to the Covid-19 crisis, which has had widespread impacts on the economy and health sector. India’s economy in the organized sector shrank nearly 24% last quarter. It is likely a 40% decline in GDP after the government takes the unorganized sector into account, according to the New York Times. Meanwhile, India is seeing record new daily coronavirus cases and becoming the new epicenter of the covid19 pandemic. Have Indian Prime Minister's misguided policies turned India into a beggar nation?

Related Links:

Haq's Musings

South Asia Investor Review

Is Fareed Zakaria Souring on India? 

Pakistan Success Against COVID19

Study Says Pakistanis Have Higher Empathy Than Neighbors

Comparing Median Wealth and Income in India and Pakistan

Eid ul Azha Economy

Foreign Aid Pouring in India

Huqooq-ul-Ibad in Islam

Philanthropy in Pakistan

Panama Leaks Scandal

Misaq-e-Madina Guided Quaid-e-Azam's Vision of Pakistan

Interfaith Relations in Islam

World Values Survey Finds Indians Most Racist

Riaz Haq's Youtube Channel

PakAlumni Social Network

Trump's Godfather Doctrine: New Year's First Tweet Warning Pakistan

President Donald Trump began year 2018 with his very first tweet insulting and threatening Pakistan. Is this a continuing manifestation of what American foreign policy experts John Hulsman and Wes Mitchell call "The Godfather Doctrine"? Is Trump prepared to reject the US-created post World War II international institutional  framework? Is he ready to abandon diplomatic route and act unilaterally against a whole range of nations, including Pakistan, refusing to kowtow? Does he think threats and intimidation will work with other nations? Is Trump willing to make a transactional arrangement with Pakistan? Let's examine possible answers to these questions.

Post World War II International Order:

After winning the second world war, the United States led the creation of a new rules-based architecture that heavily favored the United States above all other nations. International institutions such as the United Nations (UN) and its various agencies, International Monetary Fund (IMF), World Bank, World Trade Organization (WTO) and others to exercise power.

President Trump and his friends like Steve Bannon appear to be rejecting the value of this international framework created and sustained by his predecessors. Their preference is for transactional rather than strategic relationships with long-time US allies such as the Western Europeans and the Pakistanis.

Trump's Bilateral/Transactional Model:

Trump, a real estate developer, sees other nations like he saw his business partners, financiers and customers. Each deal is a transaction that must stand on its own. There's no such thing as "long term" or "strategic". Trump is willing to use intimidation and threats to try to get his way just as the Godfather movie character "Vito Corleone" tried. But he is rejecting renewing and using US-built international framework to deal with issues diplomatically.

Parallels with Vito Corleone:

As a superpower in relative decline like the Godfather in the movie, the United States faces a situation similar to the one Vito Corleone's sons Michael and Sonny and adopted son Tom Hagen, the consiglieri, faced right after the unexpected attack on the feared but aging Vito Corleone at the peak of his power that he built by an institutional framework that rewarded policemen, politicians, judges and competing crime bosses in New York City.

The elaborate international alliances and institutions that US has built over 60 years ago, such as UN Security Council, NATO, World Bank, OECD, WTO, IMF, IAEA etc, through which America exercises tremendous power and control, are being weakened by Donald Trump, and my guess is that these alliances and institutions will not survive as they are today. There will be a major realignment of nations, as the powerful new players, particularly China and Russia and other emerging powers such as India and Pakistan, demand greater say in world affairs.

US-Pakistan Transactional Relationship:

How can US and Pakistan negotiate an end to the current impasse if the Trump administration decides to cut whatever little aid Pakistan receives from the United States?  Pakistan could demand significant fees for the use of Pakistani territory by the United States to supply its troops. If the US refuses, Pakistan could simply cut off the NATO supply route as it did back in 2011 after the Salala incident.

Summary:

Trump appears to be opting for the "Godfather Doctrine" to make offers that he mistakenly believes no one can refuse. He rejects the the renewal or use of the US-sponsored international institutional framework.  Given the transactional nature of the relationships the Trump administration seeks, what would a transaction look like between President Donald Trump and Prime Minister Shahid Khaqan Abbasi? It could be in the form of Pakistan continuing to allow the use of its airspace and land routes to supply US troops in Afghanistan for substantial fees that could add up to more than the US aid to Pakistan today. If the US balks at it, Pakistan could simply cut off US supply routes as it did back in 2011 after the Salala incident.

Here's a discussion related to this subject:

https://youtu.be/HRG45PAHpWw



Related Links:

Haq's Musings

What is the Haqqani Network?

Why is India Sponsoring Terror in Pakistan?

Mullah Mansoor Akhtar Killing in US Drone Strike

Gen Petraeus Debunks Charges of Pakistani Duplicity

Husain Haqqani vs Riaz Haq on India vs Pakistan

Impact of Trump's Top Picks on Pakistan

Husain Haqqani Advising Trump on Pakistan Policy?

Gall-Haqqani-Paul Narrative on Pakistan

Pakistan-China-Russia vs India-US-Japan

Robert Gates' Straight Talk on Pakistan

HEC's Indispensable Role in Pakistan's Higher Education

Those who cite the 1996 World Bank study to argue that the social rates of return for higher education in developing countries are 13 percent lower than return on basic education must remember the following: Hundreds of millions of lives in Asia were saved as a result of the success of the Green Revolution that was enabled by a combination of US aid, and the capacity of the recipient nations to absorb it by virtue of the availability of local college graduates in agriculture and engineering.

The Green Revolution succeeded in South Asia and failed in Africa mainly because of the differences in domestic technical and institutional capacity to absorb foreign aid and technical know-how in the two regions. Simply put, Africa did not have the basic critical mass of people who had the benefit of higher education and training in agriculture and irrigation that was available in India and Pakistan in the 1960s.

Going forward, the importance of tertiary education will only grow bigger in developing nations. The physical capital that was essential for development in the 20th century will no longer be sufficient in the 21st century. Instead, the human intellectual capital will determine success or failure of nations in this century. In addition to basic health care, the key input for the development of human capital is quality education at primary, secondary and tertiary levels.

The key role of higher education is to enable basic institutional capacity building for economic, political and social development. The college and university graduates with arts, business, science or technology degrees help promote economy, democracy, social mobility, entrepreneurship, and intellectual and industrial competitiveness of their entire nation.

Pakistan's Higher Education Commission has led a successful transformation of higher education in Pakistan since 2002 through reforms initiated by Dr. Ata-ur-Rahman, appointed by President Musharraf.

In a paper titled "Higher Education Transformation in Pakistan: Political & Economic Instability", Fred M. Hayward, an independent higher education consultant, assessed the success of the HEC-led reforms as follows:

"By 2008, as a result of its policy and financial successes, most universities had become strong proponents of the Higher Education Commission. For the first time in decades university budgets were at reasonable levels. Quality had increased significantly, and several institutions were on their way to becoming world-class institutions. Most universities had signed onto the tenure-track system. The first master’s and PhD students were returning from their studies to good facilities and substantial research support. Many expatriate Pakistanis returned from abroad with access to competitive salaries. About 95 percent of people sent abroad for training returned, an unusually high result for a developing country in response to improved salaries and working conditions at universities as well as bonding and strict follow-up by the commission, Fulbright, and others. Student enrollment increases brought the total enrollment of college age students to 3.9 percent—well on the way to the target of 5 percent by 2010.

"Research publications more than doubled between 2004 and 2006. Especially important was the emphasis on quality in all areas including recruitment, PhD training, tenure, publications—all requiring external examiners. While the percentage of PhD faculty has slipped slightly from 29 to 22 percent, largely because rising enrollments have taken place faster than increases in PhD training with higher standards, the extensive faculty development programs of the commission will soon result in the return of sufficient numbers of PhDs to more than reverse that trend. During this time the student/faculty ratio has improved from 1:21 to 1:19, and a number of universities have focused on upgrading the quality of their teaching programs. By 2008, a broad transformation of higher education had taken place."

Over 5,000 scholars have participated in Ph.D. programs in Pakistan. Thousands of students and faculty have been awarded HEC scholarships to study abroad. The HEC has instituted major upgrades for laboratories and information and communications technology, rehabilitation of facilities, expansion of research support, and development of one of the best digital libraries in the region. A quality assurance and accreditation process has also established.

Unfortunately, the leadership in Pakistan in recent years has demonstrated its total lack of the most basic appreciation of the critical importance of education in the South Asian nation.

Earlier this year, a Pakistani government commission on education found that public funding for education has been cut from 2.5% of GDP in 2005 to just 1.5% - less than the annual subsidy given to the PIA, the national airline that continues to sustain huge losses.

The commission reported that 25 million children in Pakistan do not attend school, a right guaranteed in the country's constitution, and three million children will never in their lives attend a lesson, according to the BBC.

Now there is an attempt to dismantle the HEC in the name of provincial autonomy under the recently approved 18th amendment of the Constitution. By all indications, this attack on the HEC appears to be politically motivated to punish the HEC for its role in exposing fraudulent degrees of many leading politicians in the country.

More immediately, about $550 million in approved foreign grants and loans are on hold because of HEC's uncertain future.

What is at stake here is not just the future of the current students on HEC scholarships, but also the entire nation's future prospects as the world rapidly moves toward knowledge-based economy. The Pakistani government must acknowledge the potentially serious harm its actions are going to inflict on the nation and reverse course immediately.

Related Link:

Haq's Musings

Dr. Ata-ur Rehman Defends HEC's Role in Higher Education Reform

Human Capital and Economic Growth in Pakistan

Musharraf Legacy
Intellectual Wealth of Nations

Pakistan Education Emergency

Politicians' Incompetence Worse Than Corruption in Pakistan
Higher Education Transformation in Pakistan

Beyond the ABCs: Higher Education and Developing Countries

UK Aids Pakistani Schools

Why is Democracy Failing in Pakistan?

Brits Offer $1 Billion to Aid Schools in Pakistan

A new British aid package for Pakistan, announced by Prime Minister David Cameron in Islamabad, is worth $1,055 million over four years. The money will fund education for up to 4 million students, train 9,000 teachers, purchase 6 million new text books and build 8,000 schools by 2015, according to various media reports.

Announcing new aid, Cameron said, “I struggle to find a country that’s more in our interest to progress and succeed than Pakistan." “If Pakistan succeeds then we will have a good story ... if it fails we will have all the problems of migration and extremism, all the problems", he added.



With growth in the last decade, a number of countries like China, India and Pakistan have transitioned from low- to middle-income status under World Bank classifications. But China and India together still account for about half of the world's poor, and most of the illiterates, according to The Guardian. The focus of the OECD nations and the World Bank should be on helping all of the poor people regardless of whether they live in low-income or middle-income countries. Such help needs to be specifically targeted toward human development programs like education and healthcare.



Earlier this year, a Pakistani government commission on education found that public funding for education has been cut from 2.5% of GDP in 2005 to just 1.5% - less than the annual subsidy given to the PIA, the national airline that continues to sustain huge losses.

The commission reported that 25 million children in Pakistan do not attend school, a right guaranteed in the country's constitution, and three million children will never in their lives attend a lesson, according to the BBC.

The report added that while rich parents send their children to private schools and later abroad to college or university, a third of all Pakistanis have spent less than two years at school.

Among the key findings of the commission are the following:

* 30,000 school buildings are so neglected that they are dangerous
* 21,000 schools do not have a school building at all
* Only half of all women in Pakistan can read, in rural areas the figure drops to one third
* There are 26 countries poorer than Pakistan which still manage to send more of their children to school
* Only 65% of schools have drinking water, 62% have latrines, 61% a boundary wall and 39% have electricity

The report concluded that Pakistan - in contrast to India, Sri Lanka and Bangladesh - has no chance of reaching the UN's Millennium Development Goals for education by 2015.



Will the additional British aid bring new focus on education in Pakistan? Is it still possible for Pakistan to achieve the UN's Millennium Development Goals for education by 2015? I certainly hope so, but it will take a renewed national focus in both public and private sectors of the country.

Fortunately, there are a number of highly committed individuals and organizations like The Citizens Foundation (TCF) and the Human Development Foundation (HDF) which are very active in raising funds and building and operating schools to improve the situation in Pakistan. It is important that all of us who care for the future of Pakistan should generously help these and similar other organizations.

Related Links:

Haq's Musings

Pakistan Must Fix Primary Education

Teach For Pakistan

Developing Pakistan's Intellectual Capital

Intellectual Wealth of Nations

Resilient Pakistan Defies Doomsayers

Student Performance By Country and Race

India Shining and Bharat Drowning

South Asian IQs

Low Literacy Rates Threaten Pakistan's Future

Pakistan Education Emergency

Light a Candle, Don't Curse Darkness

Mobile Phones For Mass Literacy in Pakistan

Poor Quality of Higher Education in South Asia

Teaching Facts vs Reasoning

Signs of Pakistan's Economic Rebound Brighten

Shares in the Karachi Stock Exchange 100 Index trade at 9.6 times reported earnings, the lowest in Asia excluding Japan, after the gauge rose 21 percent in 2009, according to Bloomberg.

Dollar-denominated debt sold by Pakistan returned 86.4 percent so far this year, more than any of the 45 emerging markets tracked by New York-based JPMorgan and 19 developed countries followed by Merrill Lynch & Co.

Aberdeen Asset Management Plc in London is bullish about Pakistan because the country is a beneficiary of international support. The U.S. House voted on June 11 to triple economic and development aid and to increase military assistance to stabilize a country vital to the war in neighboring Afghanistan.

While the US aid announcement attracts the attention of investors, the fact is that the Pakistani global diaspora's remittances to Pakistan are far larger than any foreign aid packages. Over 7 billion dollars have already been received in the first eleven months (July-May) of the current fiscal year 2008-09, according to APP.

Foreign direct investment in Pakistan declined by 8 percent to $3.04 billion, compared with $3.31 billion in the year-earlier period, according to Reuters.

In local currency, Pakistan's exports during July-April (2008-2009) were Rs.1,147,435 million (about $14 billion) versus Rs.938,428 million during the corresponding period of last year, showing an increase of 22.27 percent, according to Federal Bureau of Statistics. But the rupee decline against dollar has more than offset any increase in exports.

“We are positive,” said Edwin Gutierrez, who helps oversee $4.5 billion of global emerging-market debt at Aberdeen Asset Management Plc in London and added Pakistan dollar bonds to his funds earlier this year. “It was pretty clear that the international community is supporting Pakistan and providing it with a decent amount of money.”

An important source of investments in Pakistan are the Islamic nations of Asia and the Middle East. While the Islamic finance is still early in its early development stage, I see it as a crucial vehicle to ensuring in the future that significant part of the wealth of Muslim investors is invested with Muslim businesses in Muslim nations to help them develop. Already, the biggest foreign direct investors in Pakistan are Muslims from Dubai, Malaysia and the Middle East.

APP reported that Malaysia topped the list of investors making Foreign Direct Investment (FDI) in Pakistan during first six month of year 2008, according to data released by Ministry of Foreign Affairs. The Foreign Direct Investment during the first five months of current financial year reached US$ 1.8 billion registering an increase of 1.5 percent, export reached to US$ 8.2 billion with a growth of 20 percent and foreign remittance at 2.9 billion registered an impressive increase of 15pc.

The May Bank of Malaysia made the biggest investment of US$ 907 million in banking sector followed by Saudi Arabia with an investment of US$ 750 million in steel sector and UAE with an investment of US$ 500 million in power sector in Pakistan.

The global economic meltdown has not deterred the foreign investors, including Malaysians, from investing in Pakistan, as Pakistan’s economy showed extreme resilience and defied the economic recession with registering growth in FDIs, Export and Foreign Remittance.

The signs of an economic rebound in Pakistan are more visible today, bringing new investors and businesses to Pakistan.

Related Links:

A Trillion Dollar Halal Market


Pakistani Economy Poised For Rebound

China Signs Power Plant Deals With Pakistan

China has agreed to build several power plants in Pakistan to help the South Asian nation deal with its worsening electricity crisis. When completed over the next several years, these plants, including Nandipur (425 MW, Thermal), Guddu(800 MW, Thermal) and Neelam-Jhelum(1000 MW, Hydro), Chashma (1200 MW, Nuclear) will add more than 3000 MW of power generating capacity for the energy-hungry country. Pakistan is currently facing a deficit of 4,000 to 5,000 megawatts, resulting in extensive load-shedding (rolling blackouts) of several hours a day.

China has already installed a 325-megawatt nuclear power plant (C1) at Chashma and is currently working on another (C2) of the same capacity that is expected to be online by 2010. The agreements for C3 and C4 have also been signed. The United States has objected to China supplying C3 and C4 on the grounds that any Pak-China nuclear cooperation would require consensus approval by the NSG, of which China is now a member, for any exception to the guidelines. The US is applying double standards since it supported and got approval for such an exception from NSG for its own nuclear deal with India.

Under another agreement, China has agreed to invest about $600 million for setting up an integrated coal mining-cum-power project in Sindh. The project will produce 180 million tons of coal per year, which is sufficient to fuel the proposed 405 MW power plant. Pakistan is currently world's seventh largest coal-producing country, with coal reserves of more than 185 billion tons (second in the world after U.S.A.'s 247 billion tons). Almost all (99 percent) of Pakistan's coal reserves are found in the province of Sindh. Pakistan's largest coal field is Thar coal field which is spread over an area of 9100 square kilometers, and contains 175 billion tons of coal. So far this coal field has not been developed but efforts are underway.

The Export-Import Bank of China will lead the multi-national bank financing and China Export and Credit Insurance Corporation (Sinosure) will provide political risk and credit default insurance for the first 425 MW project at Nanipur, Gujranwala estimated to cost $329m, according to Associated Press of Pakistan. Other participating banks include BNP-Paribas, HSBC Bank plc, and CIC France. The lead contractor is China's Dongfang Electric Corporation Limited, with G.E. France as a sub-contractor.



Political risk has been rising in many developing nations, including the South Asian nations of Bangladesh, India, Pakistan and Sri Lanka (see 2008 political risk map). The cost of insurance against political and economic risk has also been going up, as the global economic crisis unfolds. Hong Kong-based Political & Economic Risk Consultancy Ltd. has recently rated India as the riskiest of 14 Asian countries, not including Pakistan and Afghanistan, it analyzed for 2009.

With their national coffers bulging and their exports driven economy slowing, the Chinese see opportunity in the developing world where others see political and economic risks. It is an opportunity for China to assure the continuing availability of raw materials and oil for its growing industries and to diversify its export markets. In addition to helping bail out the ailing US economy, China is using some of its vast cash reserves of $2 trillion to offer supplier financing as well as insurance for the non-Chinese partners to cover political and credit risk in the emerging markets. With bilateral trade volume of about $7 billion, Pakistan is only one example of Chinese interest. Others include politically-risky Afghanistan, and many nations of Sub-Saharan Africa where the Chinese are financing and building major infrastructure projects. In Afghanistan, China has committed nearly $2.9 billion to develop the Aynak copper field, including the infrastructure that must be built with it such as a power station to run the operation and a railroad to haul the tons of copper it hopes to extract. The Aynak project is the biggest foreign investment in Afghanistan to date, according to Reuters. The trade between Africa and China has grown an average of 30% in the past decade, topping $106 billion last year.

Looking at how the Chinese are working with many developing nations in Asia and Africa, it appears to be an unwritten Chinese policy to offer trade and investment in projects rather than direct cash aid. Given the rampant government corruption in many developing nations, including Pakistan, the Chinese policy is a sound one. It attempts to benefit the people and the nation more than the corrupt politicians and government officials who they must deal with.

In terms of Chinese dominance in power infrastructure development, one only needs to look at the heavy Chinese presence in the Indian power sector development. According to the Wall Street Journal, Chinese companies are now supplying equipment for about 25% of the new power capacity India is adding to its grid, up from almost nothing a few years ago. They have sent thousands of skilled workers to Indian plant sites, some of which boast Chinese chefs, Chinese television and ping pong.

Clearly, the Chinese objectives are not entirely altruistic. Their strategy is driven by enlightened self-interest in the developing world, which they see as source of commodities that their industries need as well as growing export market for their products and services. But the Chinese want to do good and do well at the same time by helping to lift people out of poverty in the developing world. By doing so, they want to be seen as friends and partners by the people in Asia, Africa and Latin America. The strategy enhances China's status as the new superpower that takes its global leadership role seriously.

Related Links:

Chinese Do Good and Do well in Developing World

World's Largest Solar Deals

Pakistan Inks Neelum-Jhelum Deal

Political Risk Insurance

Political and Economic Risk Consultancy

Pakistan's Electricity Crisis

Forget Chinindia! It's Chimerica to the Rescue!

China Asserts its Role as Global Leader

The world's GDP in 2009 will shrink for the first time since WWII, according to the World Bank. Poor developing nations will be particularly hard hit with a shortfall of $270 billion to $700 billion, which will set them back by many years. Many of these nations are looking for help from the traditional donors in the West. But the West itself is preoccupied by its economic woes, with tent cities popping up all over the United States as home foreclosures rise.

According to the latest estimates of the World Bank, almost 40 percent of 107 developing countries are highly exposed to the poverty effects of the current economic crisis, less than 10 percent face little risk and the remainder are moderately exposed. Bangladesh, India, Nepal and Pakistan are ranked among the 43 countries most exposed to poverty risks, raising the horrible specter of further political instability and dangerous social strife in a very important region of the world.

As one of the developing nations facing a serious economic crisis, Pakistan has received International Monetary Fund's commitment of $7.6 billion rescue package. But it needs more help. China refused cash aid to Pakistan during last month's China visit by President Asif Ali Zardari to seek financial assistance. At the time, many press reports inaccurately said that Zardari returned empty handed.

Instead of cash aid, the Chinese offered $450 million to Pakistan as suppliers’ credit for Neelum Jhelum Hydroelectric Project during Zardari's visit. China and Pakistan also signed specific agreements to help Pakistan on a number of other water and power development projects. Prior to these agreements, China has been helping Pakistan in many infrastructure projects such the Gwadar port and a number of nuclear power plants. Looking at how the Chinese are working with many developing nations in Asia and Africa, it appears to be an unwritten Chinese policy to offer trade and investment in projects rather than direct cash aid. Given the rampant government corruption in many developing nations, including Pakistan, the Chinese policy is a sound one. It attempts to benefit the people and the nation more than the corrupt politicians and government officials who they must deal with.

The Chinese government recognizes the crucial role it must play to lead the world out of the current economic crisis. Not only has it announced significant stimulus spending, it is also continuing to lend to the United States to help in America's recovery back to health. Together, the US and China have become the twin locomotives pulling the global economy. The combined behemoth of China and America has been labeled by Harvard business school professor Niall Ferguson as "Chimerica". Ferguson believes "we are living through a challenge to a phenomenon Moritz Schularick and I christened “Chimerica.” In this view, the most important thing to understand about the world economy over the past decade has been the relationship between China and America. If you think of it as one economy called Chimerica, that relationship accounts for around 13 percent of the world’s land surface, a quarter of its population, about a third of its gross domestic product, and somewhere over half of the global economic growth of the past six years."

Along with helping the US economy recover, China has a unique position and policy to help the developing world at the same time. Not only does the West have the white man's colonial baggage to contend with, the western view of Africa is one of wasted aid and growing poverty. This view holds that, if Africa generates any kind of growth, it is in suffering—and in the overseas aid sent to address that, now a $40-billion-a-year industry, according to Time Magazine. Naturally, with a new appeal every year and a new disaster every other, some people are feeling donor fatigue. They have begun to wonder if all that money is doing any good. They argue that aid creates dependence, fuels corruption, undermines democracy and stifles development in Africa and some of the poor underdeveloped nations in Asia and Latin America.

Learning from the western experience, the Chinese have sought to avoid fueling the culture of corruption and dependence by staying away from cash hand-outs. Instead, the trade between Africa and China has grown an average of 30% in the past decade, topping $106 billion last year. Chinese engineers are working across the continent, mining copper in Zambia and cobalt in the Democratic Republic of Congo and tapping oil in Angola, according to Time. Nor is this merely exploitative. China bought its access by agreeing to create a new infrastructure for Africa, building roads, railways, hospitals and schools across the continent. The current economic crisis is not expected to affect China's march in Africa: on the contrary, with the West's plans in Africa on hold at best, Beijing views it as an opportunity to extend China's lead. "We will continue to have a vigorous aid program here, and Chinese companies will continue to invest as much as possible," Chinese Foreign Minister Yang Jiechi said in South Africa in January. "It is a win-win solution." Dambisa Moyo, who wrote Dead Aid, says those who need convincing about Africa should ask themselves if they are convinced about China, "because if you back China, you're backing Africa." Ecobank CEO Ekpe says part of the explanation for China's zeal for Africa is a new way of looking at Africans. "[The Chinese] are not setting out to do good," he says. "They are setting out to do business. It's actually much less demeaning."

Clearly, the Chinese objectives are not entirely altruistic. Their strategy is driven by enlightened self-interest in the developing world, which they see as source of commodities that their industries need as well as growing export market for their products and services. But the Chinese want to do good and do well at the same time by helping to lift people out of poverty in the developing world. By doing so, they want to be seen as friends and partners by the people in Asia, Africa and Latin America. The strategy enhances China's status as the new superpower that takes its global leadership role seriously.

Can Pakistan Avoid IMF Bailout?

Pakistan may have to accept politically unpopular aid from the International Monetary Fund to ward off possible economic meltdown if wealthy nations turn it down, the government said Sunday.

Battered by high inflation and a plunging currency, nuclear-armed Pakistan needs up to US$5 billion to avoid defaulting on sovereign debt due for repayment next year.

Foreign Minister Shah Mehmood Qureshi said Sunday the "IMF was an option" but no decision had been made yet.

Shaukat Tareen, the finance official leading the country's efforts to secure the money it needs, said he was confident Pakistan would not default but that IMF aid may be needed as a "backup."

He predicted the country would soon receive more than US$4.5 billion through the acceleration of planned development loans and direct assistance from rich countries.

The crisis comes as the country's new civilian leaders struggle against Islamist militants in the northwest blamed for soaring violence at home and in neighboring Afghanistan.

Seeking help from the IMF would be politically difficult for the government because the agency's help is often on condition of deep cuts in public spending that can affect programs for the poor.

Pakistan hopes its front-line status in the war on terrorism will mean the international community will not have the stomach to see it default. But its plea for help comes as many countries are distracted by the global economic crisis.

President Asif Ali Zardari returned Friday from wealthy China with no public commitment of help.

Through much of its history, Pakistan has struggled with chronic economic instability and foreign debt, but the current crisis comes at an especially dangerous time.

The country has seen more than 90 suicide blasts since July last year.

Last month, a suicide bomber struck the Marriott Hotel in Islamabad, killing 54 and leading the U.N. and foreign embassies to withdraw the families of foreign staff.

Pakistan's overwhelmingly poor population of 160 million is already suffering from skyrocketing food and fuel prices and enduring daily power cuts caused by energy shortages.

Defaulting on debt risks shattering any remaining local and foreign investor confidence in the battered economy. It could escalate into an economic meltdown with out-of-control price increases, fewer jobs, more power shortages and a general breakdown in law and order.

"Bankruptcy, should it happen, could unleash a massive tidal wave of social unrest," the U.S.-based intelligence risk assessment agency Stratfor said in a report. "Exactly what the jihadists on both sides of the Afghan-Pakistani border would like to see to advance their goals."

The financial crisis was caused in part by the previous administration of President Pervez Musharraf, which subsidized fuel and food even as international commodity prices soared last year.

That created a huge hole in public finances, meaning the new government has had to borrow heavily from the central bank, stoking inflation that this month reached 25 percent.

The Pakistani rupee has lost about a third of its value this year. The benchmark 100-stock index had already fallen more than 40 percent from a record high in April when its board of directors put a floor under it at the end of August.

___

Associated Press writers Stephen Graham in Islamabad and Ashraf Khan in Karachi contributed to this report.

Source: International Herald Tribune