Haq's Musings

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

Showing posts with label Investment. Show all posts

Tuesday, February 15, 2022

Pakistani American Woman Named Chief Investment Officer of $1.2 Trillion Fund

Pakistani-American Saira Malik has been named chief investment officer of Nuveen which manages US$1.2 trillion in equities, fixed income, real estate, private markets, natural resources, other alternatives and responsible investments, according to US media reports. She will maintain her portfolio management and leadership responsibilities for Nuveen’s US$450 billion global equity business, and remain lead portfolio manager for the US$132.95 billion CREF Stock strategy and a listed portfolio manager for the US$37.84 billion CREF Growth and US$27.21 billion CREF Global Equities strategies.

Saira Malik, Nuveen

Saira has held a variety of positions since joining Nuveen in 2003. Prior to being named CIO, she was head of global equities portfolio management, and before that, head of global equities research. Previously, Saira was with JP Morgan Asset Management, where her roles included vice president/small cap growth portfolio manager and equity research analyst.

Saira Malik's parents migrated to the United States from Pakistan. She grew up in Stockton, California where she attended Lincoln High School. “My parents are Pakistani immigrants. As a high-school senior, I was advised by a career counselor to skip university and go to community college", she is quoted as saying on a Nuveen website. "I didn’t listen and went off to university instead, earning my series 7 and 63 registrations (investment broker licenses) by age 19. After graduating, every Wall Street firm to which I applied rejected me. Then I earned a master’s in finance and finally a large firm hired me. It’s important to be persistent and it’s fine to reject bad advice. My grandmother was among the first class of women admitted to medical school in India, graduating with an M.D. in 1934. Her diploma hangs on a wall in my house. It wasn’t written for a woman; it was written for a man. On it, administrators crossed out the preprinted words ‘him’ and ‘his’ and replaced them with handwritten ‘her’ and ‘hers.’ To this day, that diploma inspires the women in my family.”

She has a bachelor's degree in Economics from California Polytechnic State University (CalPoly), San Luis Obispo, and a Master's degree in Finance from University of Wisconsin in Madison. Her interest in finance was sparked by her father's habit of watching financial news channels. Last year, Malik was named among Barron's "100 Most Influential Women in U.S. Finance". Barron's recognized Malik as follows:

"She (Malik) and her team improved performance last year and continued “to drive more deeply” into environmental, social, and governance (ESG) investing, she says. As of February, according to the company, Morningstar ranked at least 77% of Nuveen’s U.S. equity assets above their peer-group median over the trailing three- and five-year periods..... A mother of two young daughters, Malik co-heads two industry affinity organizations—LEAD (Leadership, Education, Advocacy, and Development), which seeks to promote gender diversity in the asset-management industry, and Achieve, a resources group for female professionals".

Saturday, December 11, 2021

Pakistan Forecast to Become World's 7th Largest Consumer Market By 2030

The World Economic Forum forecasts that Pakistan will rise to become the world's 7th largest consumer market by 2030. Nearly 60 million Pakistanis will join the consumer class (consumers spending more than $11 per day) to raise the country's consumer market rank from 15 to 7 in the next 10 years. WEF forecasts the world's top 10 consumer markets of 2030 to be as follows: China, India, the United States, Indonesia, Russia, Brazil, Pakistan, Japan, Egypt and Mexico. Global investors chasing bigger returns will almost certainly shift more of their attention and money to the biggest movers among the top 10 consumer markets, including Pakistan. Already, the year 2021 has been a banner year for investments in Pakistani technology startups.

Consumer Markets in 2030. Source: WEF

Here's Brookings Institution overview of the top 5 movers in the next 10 years:

1. Bangladesh (+17 positions), from place 28 to 11; future consumer class: 85 million (+50 million) Global share of consumer class: 0.8 percent (2020), 1.6 percent (2030). Bangladesh’s consumer class is projected to more than double by 2030: Today, 35 million people in Bangladesh spend more than $11 a day. By 2030, it will be 85 million!

2. Pakistan (+8 positions), from place 15 to 7; future consumer class: 121 million (+56 million) Global share of consumer class: 6 percent (2020), 2.3 percent (2030). Pakistan will add 56 million new consumers by 2030, for a total of 121 million. This means that in 2030, for the first time, every other Pakistani will be able to spend more than $11 per day.

3. Vietnam (+7 positions), from place 26 to 19; future consumer class: 56 million (+21 million) Global share of consumer class: 9 percent (2020), 1.1 percent (2030). Vietnam’s consumer class will grow from 35 million to 56 million within this decade, which is a success story particularly of the middle-aged generation: Consumers between 45 and 65 years of age will contribute nearly 25 percent of Vietnam’s spending, as opposed to 20 percent today.

4. Philippines (+6 positions), from place 20 to 14; future consumer class: 79 million (+38 million) Global share of consumer class: 1 percent (2020), 1.5 percent (2030). The Filipino consumer class is projected to grow steadily, from 41 million today to 79 million in 2030. By then, more than two-thirds of the Filipino population will spend more than $11 per day.

5. Indonesia (+2 positions), from place 6 to 4; future consumer class: 199 million (+76 million) Global share of consumer class: 2 percent (2020), 3.8 percent (2030). While Indonesia is only moving up two places, it is experiencing a large gain of consumer class growth. Starting from an already large base of 123 million, Indonesia will have almost 200 million consumers in 2030, making it the fourth-largest consumer market in the world.

Countries in Asia are expected to show the biggest growth of the consumer class among the world's 30 biggest consumer markets. The consumer class is defined as a group of people who spend more than $11 per day. Currently, 55% of the global consumer class live in Asia.

World's Top 30 Consumer Markets. Source: World Data Lab's Market Pro

Global investors chasing bigger returns will almost certainly shift more of their attention and money to the top 10 consumer markets, including Pakistan. Already, the year 2021 has been a banner year for investments in Pakistani technology startups.

Pakistan Population in 2030: 274 Million. Source: Our World in Data

Vehicles and home appliance ownership data analyzed by Dr. Jawaid Abdul Ghani of Karachi School of Business Leadership suggests that the officially reported GDP significantly understates Pakistan's actual GDP. Indeed, many economists believe that Pakistan’s economy is at least double the size that is officially reported in the government's Economic Surveys. The GDP has not been rebased in more than a decade. It was last rebased in 2005-6 while India’s was rebased in 2011 and Bangladesh’s in 2013. Just rebasing the Pakistani economy will result in at least 50% increase in official GDP. A research paper by economists Ali Kemal and Ahmad Waqar Qasim of PIDE (Pakistan Institute of Development Economics) estimated in 2012 that the Pakistani economy’s size then was around $400 billion. All they did was look at the consumption data to reach their conclusion. They used the data reported in regular PSLM (Pakistan Social and Living Standard Measurements) surveys on actual living standards. They found that a huge chunk of the country's economy is undocumented.

Pakistan's service sector which contributes more than 50% of the country's GDP is mostly cash-based and least documented. There is a lot of currency in circulation. According to the State Bank of Pakistan (SBP), the currency in circulation has increased to Rs. 7.4 trillion by the end of the financial year 2020-21, up from Rs 6.7 trillion in the last financial year, a double-digit growth of 10.4% year-on-year. Currency in circulation (CIC), as percent of M2 money supply and currency-to-deposit ratio, has been increasing over the last few years. The CIC/M2 ratio is now close to 30%. The average CIC/M2 ratio in FY18-21 was measured at 28%, up from 22% in FY10-15. This 1.2 trillion rupee increase could have generated undocumented GDP of Rs 3.1 trillion at the historic velocity of 2.6, according to a report in The Business Recorder. In comparison to Bangladesh (CIC/M2 at 13%), Pakistan’s cash economy is double the size. Even a casual observer can see that the living standards in Pakistan are higher than those in Bangladesh and India.

Wednesday, November 17, 2021

Musharraf Era Textile Boom Returning to Pakistan?

Pakistan textile industry is booming with exports soaring 27% to more than $6 billion in the first four months (July-October) of the current fiscal year. “We believe that $5 billion investment (in textile industry) in the Musharraf era would be matched in the next six to eight months” says Zubair Motiwala, a leading textile industrialist and chairman of Businessmen Group (BMG), as quoted in the Pakistani media reports. Pakistan textile exports more than doubled from $5.2 billion to more than $11 billion during Musharraf years. Exports soared 19.43% in 2001, 20% in 2004, 24.5% in 2005 and 11.23% in 2006, all on President Musharraf's watch, according to "The Rise and Fall of Pakistan's Textile Industry: An Analytical View" published by Javed Memon, Abdul Aziz and Muhammad Qayyum.

Pakistan Textile Exports Growth. Source: Javed Memon

Pakistani government officials report that the textile sector has invested $3-3.5 billion on modernization and expansion in the last 2-3 years and the investment is likely to match the $5 billion that was witnessed during Musharraf era when the sector was undergoing major modernization, balancing and replacement (BMR). Textile machinery imports jumped 110% in the last four months, according to the Pakistan Bureau of Statistics (PBS). Capital equipment imports are contributing to Pakistan's widening trade gap.

Pakistan Textile Exports Boom. Source: Bloomberg

All sectors of the textile industry from yarn to fabric to ready-made garments are experiencing double digit growth. Ready-made garments exports jumped 22.34% during July-Oct 2021, knitwear exports soared 35.45%, bed-wear posted positive growth of 21.30%, towel exports were up by 14.17%, cotton cloth rose 18.54%. Among primary commodities, cotton yarn exports surged by 71.39%, while yarn other than cotton by 114%. The export of made-up articles — excluding towels — rose by 11.55%, and tents, canvas and tarpaulin dipped by a massive 23.98% during the 4-month period.

International Comparison of Textile Machinery Imports. Source: Business Recorder

History of Pakistan Textile Machinery Imports 2004-2021 in Millions of US$. Source: Ali Khizar

The textile industry is very important for Pakistan's economy. It is a very large employer and contributes nearly 10% of GDP. Textile exports account for more than half of Pakistan's exports. Unfortunately, the textile industry has stagnated in the last 12 years. Textile boom is good news for the country's economy.

Saturday, June 20, 2020

Can India Afford Economic Boycott of China After Ladakh?

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

China-India Lopsided Trade. Source: Times of India

Volume of China-India Trade:

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

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

Indian Industries Dependence on China:

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

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

Chinese Venture Capital in India. Source: Economic Times

Indian Startup Venture Capital:

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

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

India-China Comparison. Source: Gaurav Dalmia

Summary:

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

Related Links:

Haq's Musings

South Asia Investor Review

China in Ladakh

Pakistan's Startup Ecosystem

Consumer Durables in India and Pakistan

Digital BRI and 5G in Pakistan

Pakistan Tech Exports Exceed Billion Dollars

Pakistan's Demographic Dividend

Pakistan EdTech and FinTech Startups

State Bank Targets Fully Digital Economy in Pakistan

Campaign of Fear Against CPEC

Fintech Revolution in Pakistan

E-Commerce in Pakistan

The Other 99% of the Pakistan Story

FMCG Boom in Pakistan

Belt Road Forum 2019

Fiber Network Growth in Pakistan

Riaz Haq's Youtube Channel

Viewpoint From Overseas Channel

Saturday, November 24, 2018

Top Asia Investment Strategist Chris Wood Sees Strong Economy in Pakistan

Speaking at a recent Delhi investment conference, Managing Director and Chief Strategist Christopher Wood of CLSA (formerly known as Credit Lyonnais Securities Asia) surprised everyone, by saying that he loves the Pakistan stock market more than any other in Asia, according to Indian media reports. Wood, based in Hong Kong, has been named as the "best strategist" in Asia several times by magazines such as Asiamoney and Institutional Investor.

Christopher Wood of CLSA in New Delhi, India

Strong Recovery:

After recently visiting Pakistan for the first time,Wood wrote that Pakistan faces some short-term issues but its "economy can recover quickly from its latest crisis once the current hole in the balance of payments is plugged, as is likely to be the case by a combination of China and IMF funding, combined with some extra support provided by Saudi Arabia".

Exports as Percentage of GDP. Source: CLSA

Wood explained that "minimal (private sector) debt points to a strong recovery". He said "it was interesting to learn of the resilience of the country’s private sector with debt concentrated very much at the government level". "Pakistan is well positioned to to benefit from the US-China trade war", he added. A similar conclusion has recently been reached by Tokyo-based Nomura Securities. Pakistan exports are currently just 8.2% of GDP, among the lowest in Asia.

Pakistan's Private Debt. Source: CLSA

Low Private Debt:

Wood wrote: "Consumer loans and SME loans accounted for only 12% of total bank loans (PKR498 billion and PKR422 billion respectively) at the end of 2Q18, while the loan-to-deposit ratio of the banking system is only 53%, down from 75% in 2008 (see following chart). Meanwhile, 69% of bank loans are to the corporate sector. But it is not leveraged, with corporate debt totaling only 16% of GDP."

Source: Grizzle.com

Stock Market Valuations:

Wood finds Pakistan stock market particularly attractive because of its significantly low valuation relative to its Asian peers. Wood wrote: "The attractive point is low valuations and high dividend yields. The market is on 6.9x forecast calendar 2019 earnings based on a universe of 47 stocks and a 2019 forecast dividend yield of 8.2%."

CLSA Recommended Weightings

Summary:

Top investment strategist Christopher Wood of CLSA sees strong recovery of Pakistan economy once the short-term balance of payments crisis is overcome. Wood attributes it to "minimal (private sector) debt". He says "it was interesting to learn of the resilience of the country’s private sector with debt concentrated very much at the government level". "Pakistan is well positioned to benefit from the US-China trade war", he added. A similar conclusion has recently been reached by Tokyo-based Nomura Securities. Pakistan exports are currently just 8.2% of GDP, among the lowest in Asia.

Related Links:

Haq's Musings

South Asia Investor Review

Pakistan's Technology Exports Surge Past One Billion US Dollars

Pakistan Among Top 3 Beneficiaries of US-China Trade War

China to Invest in Pakistan's Export-Oriented Industries

Can Pakistan Avoid IMF Bailouts?

Can Imran Khan Lead Pakistan to the Next Level?

Upwardly Mobile Pakistan

Pakistani Universities Among Asia's Best

Fear, Uncertainty and Doubt (FUD) About CPEC

Media Advertising Boom in Pakistan

China-Pakistan Economic Corridor to Add Over 2 Million Jobs

Pakistan's Growing Middle Class

Vehicles and Appliance Ownership in Pakistan

Rising Consumer Confidence in Pakistan

Pakistan to Build Massive Dams for Abundant Water and Power

Sunday, September 2, 2018

China to Invest in Pakistan's Export-Oriented Industries, Buy More Pakistani Products

The bulk of Pakistan's exports consist of low value commodities like chadar, chawal and chamra (textiles, rice and leather). These exports have declined from about 15% to about 8% of GDP since 2003. Pakistan's trade deficits are growing at an alarming rate as the imports continue to far outstrip exports. This situation is not sustainable. What must Pakistan do to improve it? What can Pakistan do to avoid recurring balance of payments crises? How can Pakistan diversify and grow its exports to reduce the gaping trade gap? How can Pakistan's closest ally China help? Can China invest in export oriented industries and open up its huge market for exports from Pakistan? Let's explore answers to these question.

Exports as Percentage of GDP. Source: World Bank

East Asia's Experience:

East Asian nations have greatly benefited from major investments made by the United States and Europe in export-oriented industries and increased access to western markets over the last several decades. Asian Tigers started with textiles and then switched to manufacturing higher value added consumer electronics and high tech products. Access to North American and European markets boosted their export earnings and helped them accumulate large foreign exchange reserves that freed them from dependence on the IMF and other international financial institutions. China, too, has been a major beneficiary of these western policies. All have significantly enhanced their living standards.

Pakistan Among World's Top 10 Textile Exporters. Source: Statista

Chinese Investment and Trade:

Pakistan needs similar investments in export-oriented industries and greater access to major markets. Given the end of the Cold War and changing US alliances, it seems unlikely that the United States would help Pakistan deal with the difficulties it faces today.

China sees Pakistan as a close strategic ally. It is investing heavily in the Belt and Road Initiative (BRI) which includes China-Pakistan Economic Corridor (CPEC). A recent opinion piece by Yao Jing, the Chinese Ambassador in Pakistan, published in the state-owned China Daily, appears to suggest that China is prepared to offer such help. Here are two key excerpts from the opinion piece titled "A community of shared future with Pakistan":

1. China will actively promote investment in Pakistan. The Chinese government will firmly promote industrial cooperation, expand China's direct investment in Pakistan, and encourage Chinese enterprises to actively participate in the construction of special economic zones. Its focus of cooperation will be upgrading Pakistan's manufacturing capacity and expanding export-oriented industries.

2. China will also actively expand its imports from Pakistan. In November, China will hold the first China International Import Expo in Shanghai, where, as one of the "Chief Guest" countries, Pakistan has been invited to send a large delegation of exporters and set up exhibitions at both the national and export levels. It is hoped that Pakistan will make full use of this opportunity to promote its superior products to China. The Chinese side will also promote cooperation between the customs and quarantine authorities of both countries to facilitate the further opening-up of China's agricultural product market to Pakistan. China will, under the framework of free trade cooperation between the two countries, provide a larger market share for Pakistani goods, and strengthen cooperation and facilitate local trade between Gilgit-Baltistan and China's Xinjiang Uygur autonomous region. And China will take further visa facilitation measures to encourage more Pakistani businesspeople to visit China.

Pakistan's Role:

Pakistan needs to take the Chinese Ambassador Yao Jing's offer to increase Chinese investments and open up China's market for imports from Pakistan. Pakistan's new government led by Prime Minister Imran Khan should take immediate steps to pursue the Chinese offer. Finance Minister Asad Umar needs to form a high-powered team of top bureaucrats and leading businessmen to develop a comprehensive plan to attract investments in export-oriented industries and diversify and grow exports to China and other countries. Pakistan must make full use of its vast network of overseas diplomatic missions to promote investment and trade.

Summary:

Pakistan's exports have declined from about 15% of GDP to about 8% since 2003. The nation's trade deficits are growing at an alarming rate as the imports continue to far outstrip exports. This situation is not sustainable. Chinese Ambassador Yao Jing has offered a helping hand to increase Chinese investment and trade in Pakistan. Pakistan's new government led by Prime Minister Imran Khan should take the Chinese Ambassador's plan seriously. Finance Minister Asad Umar needs to form a high-powered team of top bureaucrats and leading businessmen on a comprehensive plan to attract investments in export-oriented industries and diversify and grow exports to China and other countries.

Monday, September 25, 2017

How Has Bangladesh Left Pakistan Behind in Per Capita Income?

A headline in the Economist magazine's recent issue screams: "Bangladesh's GDP per person is now higher than Pakistan's". Let's examine this development to understand its causes.

Per Capita GDP:

The Economist article explains its headline as follows: "Last month revealed a remarkable turnaround. Bangladesh’s GDP per person is now higher than Pakistan’s. Converted into dollars at market exchange rates, it was $1,538 in the past fiscal year (which ended on June 30th). Pakistan’s was about $1,470....Strange as it may sound, Bangladesh jumped ahead because of an advance in Pakistan. On August 25th Pakistan released the results of its census, updating earlier population estimates. They showed that the country has 207.8m people, more than 9m more than previously thought. It may now have the fifth biggest population in the world, surpassing Brazil’s. But the new count also lopped 4-5% off Pakistan’s GDP per person, the arithmetic consequence of revealing so many more people."

Savings Rate in Pakistan Source: State Bank of Pakistan

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

Economic Growth Trends:

One can quibble with the Economist on details of its report but the fact remains that Bangladesh's economy has been growing significantly faster than Pakistan's for about a decade. To understand why, it's important to look into savings and investments, population growth trends and security situation in the two countries. Let's examine each in a little more detail.

Investment as Percentage of GDP Source: State Bank of Pakistan

Savings and Investment:

There's a strong relationship between investment levels and gross domestic product. The more a country saves and invests, the higher its economic growth. A State Bank of Pakistan report explains it as below:

"National savings (in Pakistan) as percent of GDP were around 10 percent during 1960s, which increased to above 15percent in 2000s, but declined afterward. Pakistan’s saving rate also compares unfavorably with that in neighboring countries: last five years average saving rate in India was 31.9 percent, Bangladesh 29.7 percent, and Sri Lanka 24.5 percent..... Similarly, domestic savings (measured as national savings less net factor income from abroad) also declined from about 15 percent of GDP in 2000s, to less than 9 percent in recent years. Domestic savings are imperative for sustainable growth, because inflow of income from abroad (remittances and other factor income) is uncertain due to cyclical movements in world economies, exchange rates, and external shocks".

Net Foreign Direct Investment Source: State Bank of Pakistan

Population Trends:

The total fertility rate (TFR) in Bangladesh has declined faster in Bangladesh than in Pakistan in the last few decades. Currently, Bangladesh is at 2.17 children per woman while Pakistan is at 2.62 children per woman.

As a result of reduced birth rates and more female labor participation rates, a larger percentage of Bangladeshi population is in the work force than Pakistan's. There are now more wage earners and fewer dependents in each Bangladeshi household. This demographic trend has helped boost Bangladesh's per capita income faster than Pakistan's.

Rising working age population and growing workforce participation of both men and women in Pakistan will significantly boost domestic savings and investment. Increased foreign direct investment such as Chinese investment in China-Pakistan Economic Corridor over the next several decades will help fill the gap between the national savings rate and investments required to reach 7% annual GDP growth to create over 2 million jobs a year.

Security Issues:

Pakistan has paid a heavy price for its proximity to and involvement in "war on terror" in Afghanistan. It has cost Pakistan dearly in terms of loss of thousands of precious lives and lower investments due to investors' security concerns. Recent operations by Pakistan Army have helped turn the tide against terrorists, bringing more hope and greater confidence in Pakistan's future. Rising FDI in CPEC-related projects in the last couple of years are an indication of this confidence.

Future:

Pakistan is now experiencing the demographic dividend that Bangladesh has seen in the last few decades in terms of more of its population earning and fewer dependents. Pakistan's labor force is growing at 3.6% a year, much faster than its population growth rate of 2.34%. This should help boost Pakistan's per capita and its domestic savings rate.

At the same time, China-Pakistan Economic Corridor (CPEC) related projects are bringing more foreign direct investment, thereby speeding up the economic growth in the country. Pakistan's GDP growth is accelerating from less than 5% two years ago to 6% forecast for fiscal 2017-18. In its latest economic growth projections, Kennedy School's Center for International Development (CID) at Harvard University expects Pakistan's annual GDP growth to average 5.97% over the next 8 years, ranking it as the world's 6th fastest growing economy. It is within the realm of possibility that economic growth in Pakistan could exceed 7% in the next couple of years.

Summary:

Pakistan has fallen behind Bangladesh and India in per capita income as its growth rates have slipped in recent years mainly due to declining savings and investment rates and security issues. Demographic trends and improved security situation now favor Pakistan's future growth as its workforce grows and household sizes shrink.

Saturday, September 16, 2017

Pakistan Population Boom; Rohingya Ethnic Cleansing

Is Pakistan's growing population a "disaster in the making"? Is it a bigger disaster than the population bust in Europe and East Asia with their aging societies and shrinking labor force? Where will the investment in education, health and job creation come from in Pakistan to meet the growing population? Is there a demographic dividend with Pakistan's labor force growing faster than the overall population? Will growth in labor force help increase domestic savings rate in Pakistan? What is the relationship between GDP growth and job creation? What is Pakistan's employment elasticity relative to other nations in South Asia?

Source: World Bank Report "More and Better Jobs in South Asia"

Who are the Rohingya? Why are they being attacked, raped, killed and driven out of their homes in Rakhine state? Why is the Myanmar government and its allied Buddhist militias, including monks, burning Rohingya villages? Is it a "textbook example of ethnic cleansing" as described by the UN Human Rights chief? Why is Nobel Peace laureate Myanmar leader Aung San Suu Kyi defending these actions instead of using her authority, at least her moral authority, to end this nightmare for the Rohingya? What is the world doing about t? What can and should Pakistan and other Muslim nations do to help their fellow Muslim Rohingya?

Source: Aljazeera

Viewpoint From Overseas host Misbah Azam discusses these and other questions with panelists Ali H. Cemendtaur and Riaz Haq (www.riazhaq.com)

https://youtu.be/ucopTLFQdKY

Related Links:

Haq's Musings

Can Pakistan Economy Add 2 Million Jobs a Year?

Where's the Real Population "Disaster in the Making"? Pakistan or West?

Pakistan's Population Growth: Blessing or Curse?

Pakistan's Expected Demographic Dividend

World Bank Report on Job Growth in Pakistan

Underinvestment Hurting Pakistan's GDP Growth

China-Pakistan Economic Corridor

Musharraf Accelerated Growth of Pakistan's Financial and Human Capital

Working Women Seeding a Silent Revolution in Pakistan

Median Income and Wealth in India and Pakistan

Wednesday, October 14, 2015

Foreign Aid to Pakistan: Blessing or Curse?

This year's Nobel Prize winning economist Angus Deaton of Princeton University considers foreign aid to developing nations a curse like the oft-mentioned resource curse of energy and mineral-rich nations of Africa and the Middle East.

Deaton has studied poverty in India and Africa and spent many decades working at the World Bank whose charter it is to fight poverty. He argues that, by trying to help poor people in developing countries, the rich world may actually be corrupting those nations' governments and slowing their growth and hurting the poor in the process. Prof William Easterly of New York University has published a paper titled "Can Foreign Aid Buy Growth?" that supports the view that increase in foreign aid has reduced economic growth in Africa.

Source: William Easterly of NYU

In addition to being recipients of foreign aid, most African countries are also rich in resources ranging from oil and gas to diamonds and metals. Yet, their people are among the poorest in the world. Why is it? The biggest reason appears to be their corrupt leaders who pocket most of the proceeds from mining. They also siphon off a big chuck of foreign aid left after paying the expensive western consultants employed by aid agencies.

So where does Pakistan stand in this mix? Charts published by Washington Post show that Pakistan, in spite of not being a major exporter of minerals, enjoyed an average economic growth rate of about 5% from 1970 to 2008. This is about the same as India's but higher than Brazil's and Turkey's GDP growth rates. The economic growth rates for China and Korea are much higher than Pakistan's in this period.

Foreign aid to Pakistan has also been more effective in promoting economic growth than much of Africa. Even Dambisa Moyo, author of "Dead Aid" and a critic of western aid, acknowledges that the US aid for "the Green Revolution in India (and Pakistan) played vital roles in economic (re)construction" of the South Asian nations in 1960s and 1970s. The South Asian subcontinent could have faced starvation without this aid.

One of the key reasons for the success of Green Revolution was the ability of the human capital in India and Pakistan to absorb the technological knowhow that it brought along with money. Ms. Moyo offers the same reason for the success of Marshall Plan aid in Europe.

Foreign Aid to Pakistan as Percent of GDP Source: World Bank

US aid to Pakistan after the Green Revolution has been much smaller as percentage of the nation's GDP and much less effective. Total foreign aid to Pakistan has dramatically declined from a peak of over10% of GDP to less than 2% of GDP now, too little to impact economic growth even if it is utilized better.

The expected size and speed of the Chinese FDI of $46 billion in energy and infrastructure is much more likely to spur Pakistan's economic growth than the western aid has been in the recent past. It will put Pakistan on a path to rely much more on investment and trade than on aid or debt for its foreign exchange reserves.

Related Links:

Haq's Musings

Aid, Investment, Trade and Remittances for Pakistan

Declining Investment Hurting Pakistan's Economic Growth

Pak-China Industrial Corridor to Boost Investment and Trade

Pak Army Completes Over Half of CPEC Western Corridor

Pakistan Economic History 1947-2010

Top Global Fund Investor Bullish on Pakistan

Culture of Corruption in Pakistan

Tuesday, April 21, 2015

Smart Money to Follow China's Massive Investment in Pakistan

This (China's $46 billion investment in Pakistan) can not be purely politically driven. Beijing is commercial: CEO’s, not think tank intellectuals, travel with politicians. Barron's Asia

Spurred by Chinese investment, the smart money is taking notice of Pakistan as an attractive investment destination. The investors are looking at the fact that Pakistani stocks have been outperforming both emerging and frontier markets for several years. The benchmark index of the Karachi Stock Exchange (KSE100) is up more than 20% in the last 12 months, according to NASDAQ.com.

Pakistani Shares in 2015:

After a dismal March, MSCI Pakistan rebounded strongly this month, returning 9.1% so far. In April, the iShares MSCI Frontier 100 ETF (FM) rose 4.3%, the WisdomTree India Earnings Fund (EPI) dropped 1.2%, the iShares MSCI India ETF (INDA) fell 1.9%, according to Barron's Asia.

Source: Economist Magazine

KSE-100 Performance:

In 2014, the KSE-100 Index gained 6,870 points thereby generating a handsome return of 27% (31% return in US$ terms), making Pakistan's KSE world's third best performing market. Total offerings in the year 2014 reached 9 as compared to 3 in the year 2013. After a gap of seven years, Rs 73 billion were raised through offerings in 2014 as compared to a meager Rs 4 billion raised in 2013. Foreign investors, that hold US$ 6.1 billion worth of Pakistani shares -which is 33% of the free-float (9% of market capitalization)-remained net buyers in 2014.

Pakistani Shares Valuation:

Even after outperforming both emerging and frontier market indices, Pakistani shares can be bought at deep discounts which make them very attractive, according to Renaissance Capital’s chief economist Charles Robertson. MSCI (Morgan Stanley Composite Index) Pakistan trades at only 8.4 times forward earnings, a 17% discount to MSCI Frontier Markets. For comparison purposes, fellow frontier south Asia markets Sri Lanka and Bangladesh trade at 13.4x and 21.4x respectively. India, included in the emerging market index, trades at 16.8 times.

Key Sectors:

Chinese investment in energy and infrastructure will help stimulate all sectors of Pakistani economy. But the sectors benefiting most from the $46 billion investment will likely include banks, energy and building materials, the sectors which are the favorites of Pakistani billionaire investor Mian Mohammad Mansha.

Being close to the ruling Sharif family makes Mansha the ultimate insider. Beyond his investments in banking, cement, energy and textiles, Mansha is also starting to invest in consumer products sector benefiting from rising incomes, growing middle class and increasing jobs created in Pakistan by the massive Chinese investment. Mansha owns a big chunk of Muslim Commercial Bank (MCB) share. He has recently been pumping more money into energy, cement and dairy businesses. Mansha's DG Khan Cements has announced plans to build a $300 million cement plant near Karachi. In additions, his Nishat Dairies has imported thousands of dairy cows for a dairy farm in Lahore.

Summary:

The $46 billion Chinese investment in energy and infrastructure has brought attention to tremendous investment opportunities in Pakistan, a nation of nearly 200 million people with rising middle class and growing consumption. Pakistani military's recent successes against the terrorists and China's massive investment commitments are expected to boost investor confidence in the country. Higher confidence will help draw other significant investors to invest in Pakistan over the next several years.

Friday, September 19, 2014

Does China Seek to Dominate India, Africa and Latin America?

A new study shows that China is now India's top trading partner, edging out the United Arab Emirates—India’s previous top trading partner—and is comfortably ahead of the US and Saudi Arabia. India-China annual trade volume now adds up to about $70 billion, and India is running a massive $40 billion trade deficit with China. China exports high-value, high-tech machines to India while India exports low-value commodities to China.

Chinese Infrastructure Loans to India:

China's state-owned banks are financing huge infrastructure projects in Africa and India to boost Chinese exports. Leading the effort are China's ExIm Bank, China Development Bank and China Industrial Commercial Bank. Major multi-billion dollar projects being signed by Chinese President Xi Jineng, currently visiting India, and Prime Minister Modi will be financed by loans from one or more of the state-owned Chinese banks.

Chinese Infrastructure Project Financing in Pakistan:

China is also pursuing strategic Pakistan-China economic corridor which includes several large infrastructure projects worth tens of billions of US dollars connecting China with the Arabian Sea through Pakistan. These projects will be financed by China's ExIm Bank and other state-owned banks.

In a report last year, China's State-owned Xinhua News Agency articulated China's motivation to expand land trade in addition to building its navy to protect its sea trade. Here's what it said:

“As a global economic power, China has a tremendous number of economic sea lanes to protect. China is justified to develop its military capabilities to safeguard its sovereignty and protect its vast interests around the world."

China's Global Superpower Ambitions:

The Xinhua report has for the first time shed light on China's growing concerns with US pivot to Asia which could threaten China's international trade and its economic lifeline of energy and other natural resources it needs to sustain and grow its economy. This concern has been further reinforced by the following:

1. Frequent US statements to "check" China's rise. For example, former US Defense Secretary Leon Panetta said in a 2011 address to the Naval Postgraduate School in California: "We try everything we can to cooperate with these rising powers and to work with them, but to make sure at the same time that they do not threaten stability in the world, to be able to project our power, to be able to say to the world that we continue to be a force to be reckoned with." He added that "we continue to confront rising powers in the world - China, India, Brazil, Russia, countries that we need to cooperate with. We need to hopefully work with. But in the end, we also need to make sure do not threaten the stability of the world."

Source: The Guardian

2. Chinese strategists see a long chain of islands from Japan in the north, all the way down to Australia, all United States allies, all potential controlling chokepoints that could block Chinese sea lanes and cripple its economy, business and industry.

Karakoram Highway-World's Highest Paved International Road at 15000 ft.

Chinese Premier's emphasis on "connectivity and maritime sectors" and "China-Pakistan economic corridor project" is mainly driven by their paranoia about the US intentions to "check China's rise" It is intended to establish greater maritime presence at Gwadar, located close to the strategic Strait of Hormuz, and to build land routes (motorways, rail links, pipelines) from the Persian Gulf through Pakistan to Western China. This is China's insurance to continue trade with West Asia and the Middle East in case of hostilities with the United States and its allies in Asia.

Pakistan's Gawadar Port- located 400 Km from the Strait of Hormuz

As to the benefits for Pakistanis, expanded trade and the Chinese investment in "connectivity and maritime sectors" and "China-Pakistan economic corridor project" will help build infrastructure, stimulate Pakistan's economy and create millions of badly needed jobs.

Clearly, China-Pakistan ties have now become much more strategic than the US-Pakistan ties, particularly since 2011 because, as American Journalist Mark Mazzetti of New York Times put it, the Obama administration's heavy handed policies "turned Pakistan against the United States". A similar view is offered by a former State Department official Vali Nasr in his book "The Dispensable Nation".

Chinese Checkbook Diplomacy:

China is now the biggest lender to the developing world, surpassing the World Bank set up as an institution by the West to extend its dominance after WWII. China's checkbook diplomacy is bearing fruit with its growing trade making it the biggest trading partner of a growing number of countries and regions. As China surpasses the United States as the largest economy and its trade volume explodes, it is very likely that the RMB (Yuan), the Chinese currency, will replace the US dollar as the world's main trade and reserve currency.

Between 2001 and 2010, China’s Export-Import Bank extended $62.7 billion in loans to African nations, or $12.5 billion more than the World Bank, according to Forbes magazine. Over the same period, trade between Africa and China grew by more than 700 per cent with China replacing the U.S. as Africa’s biggest trading partner in 2009.

Summary:

History is filled with examples of great powers using trade and exports to extend their power and influence across the world. China appears to be taking a page from their playbook in pursuit of massive trade growth through check-book diplomacy in Africa, South Asia and South America.

Related Links:

Haq's Musings

China's Checkbook Diplomacy

Japan to Finance, Build Karachi Mass Transit System

Pak-China Economic Corridor

Soaring Chinese Imports and Twin Deficits in India

India-Israel Military Relations

Pakistan's Military Production

BRIC, Chindia, and the "Indian Miracle"

India's "Indigenous" Weapons

Pakistan's Telecom Boom

India's Growing Defense Budget