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Showing posts from July, 2008

India Blamed for Doha's Death

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India led the charge to kill Doha, say the western government officials and commentators about the failure of the latest round of World Trade Organization (WTO) talks in Geneva to conclude a wide ranging agreement on world trade. Backing India's demands, including right to impose food import tariffs and end to agriculture subsidies in US and Europe, were Brazil, China and other developing nations in Asia. Africans were angry that their trade issues, particularly cotton, were not even discussed as the negotiators from developing giants fought pitched battles with their counterparts in developed nations. "The way the Doha Round collapsed is a preview of what we're likely to see in other negotiations," said Kimberly Elliott, a senior fellow for the Center for Global Development, a Washington think tank, told the Wall Street Journal. "Emerging markets [such as China and India] are taking a big role," she said, sometimes elbowing out even poorer nations. Other im

Pakistan's Best Tax Collector Fired by PPP Government

Abdullah Yusuf, the most effective tax collector in Pakistan's history, has been fired, without explanation, by the PPP government while he was traveling overseas in his official capacity. When the surprise news came, he was in the Russian Federation to discuss customs issues and planned to go to Geneva, Switzerland next, according to Business Recorder newspaper. Mr. Yusuf's key accomplishments include doubling of the revenue collection to achieve an aggressive target of over Rs 1.04 trillion in 2007-08; implementation of broad-based reforms within the tax system; universal self-assessment regimes; paperless customs clearances and e-filing systems and customer responsiveness with the business trade and bodies for creating a friendly business environment. Before Mr. Yusuf's reforms, the tax collection bureaucracy in Pakistan was notoriously corrupt and inefficient and he faced a lot of internal resistance. Mr. Yusuf is a chartered accountant and financial management consulta

$100B Business at Stake in US-India Nuclear Deal

As the Indian parliament gets ready for a confidence vote this week, the fate of the government of Prime Minister Manmohan Singh and the US-India nuclear deal hangs in the balance. The Indian government is pulling out all stops to win this vote to salvage the US-India nuclear deal. In addition to the Indian people, the international community and the nuclear suppliers group (NSG) are also watching the vote closely. The NSG's interest lies in the estimated $100 billion worth of nuclear business in India over the next two decades. U.S. companies hope to capture as large of a share of that business as possible. Private studies suggest that if U.S. vendors win just two civil nuclear reactor contracts, they would create 3,000–5,000 new direct jobs and 10,000–15,000 indirect jobs in the United States, according to US International Trade Administration. It has now been three years since the signing of the historic agreement between President Bush and Indian Prime Minister Manmohan Singh.

Retail Investors Protest Falling Stocks in Karachi

The investor confidence reached new lows when hundreds of irate investors took to the streets in Karachi today. A number of windows were broken and at least two people injured, Reuters news agency reported. They were protesting continuing slide in share prices in Karachi for the 14th consecutive day, eroding about 14% of capital since Monday, reaching a new 18-month low of 10,058.37. The KSE-100 is now down 36% from its peak of 15739.25 earlier this year. Fall of 20% or greater in major indices is considered a bear market. Earlier in June, there was a brief respite for investors when the authorities imposed a temporary ban on short selling and tightened the circuit breaker lower limit to 1% and increased upper limit to 10%. But, as soon as the trading range was revised to plus or minus 5% last Friday, many investors took advantage of it and sold off their holdings, putting further downward pressure on share prices. "The measures taken on Friday proved to be an exit strategy for fo

Pakistani Economy Returning to Bad Old Days

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Just like the bad old days BRIGHTLY painted Tata lorries, laden with sacks of onions, wait in the noon heat at the Wagah border post between India and Pakistan. Once past customs, the onions will go on to Lahore and beyond. But the lorries must turn back. Their produce is laboriously loaded onto smaller vans, driven by locals. Pakistan's costly imports of food ($3.5 billion in the first ten months of this fiscal year, which ends on June 30th), fertilizer ($823m) and fuel (over $8.6 billion) may pull the economic rug from under its newly installed government, which presented its first budget, belatedly, on June 11th. The State Bank of Pakistan (SBP), the central bank, reckons the country's current-account deficit might reach 7.8% of GDP this fiscal year, its highest ever. Growth has slowed to 5.8%, inflation has quickened to over 19% and the government's budget deficit, at about 7% of GDP, is the highest in ten years. Such macroeconomic disarray will be familiar to the coali

Relaxed Trading Rules Trigger Karachi Stocks Selloff

In spite of cheaper valuations of Karachi stocks from shrinking price earnings multiples relative to other markets, foreign investors in Pakistan continue to be nervous. As soon as the trading range was revised to plus or minus 5%, many investors took advantage to sell their holdings Friday and pushed the KSE-100 down more than 4%. The decline continued this week as the KSE-100 index lost 265.84 to close at 11,695.82. Earlier in the morning, it opened at 11,961.66. This is a far cry from the peak of 15739.25 earlier this year. "The measures taken on Friday proved to be an exit strategy for foreign investors," Asad Iqbal, managing director at Ismail Iqbal Securities Ltd. told Business Recorder newspaper in Karachi. Securities and Exchange Commission Chairman Razi-ur-Rehman believes the market has a liquidity crisis and he blamed the bearish trend in the equity market on the State Bank of Pakistan's (SBP) tight monetary policy, which has affected market liquidity. The State

Cricket and Commerce Come Together

International cricket megastars with large paychecks to match their egos, Bollywood's elite actors, big business magnates, provocatively dressed cheerleaders, the big sports media, huge worldwide audience, deep pocket sponsors all come together to put on spectacular three hour, 2020 games of the two newly formed Indian cricketing leagues. This is a revolution in the world of cricket, a sleepy, colonial era, gentleman's game that the British brought to their colonies including India and Pakistan. Taking a leaf from the sports leagues in US and Europe, it represents a coming of age for the business of sports in India. According to the New York Times, the Indian billionaires are for the first time staking their prestige on sports teams. The Indian Premier League’s most expensive franchise, at nearly $111.9 million, is the Mumbai Indians, fittingly owned by India’s richest man, Mukesh Ambani. The flamboyant liquor baron Vijay Mallya picked up the Bangalore-based Royal Challengers

Common Myths About India's Resurgence

Hardly a day goes by without headlines about India's success. The headlines proclaim the newly-minted millionaires and billionaires in India, major international acquisitions by Indian companies, the phenomenal growth of Indian economy, India's entry into satellite launch business, the special invited presence of Prime Minister Manmohan Singh at the G8 summit, etc. etc. Indian democracy also gets an honorable mention, along with its economy, particularly when comparisons are made with the other Asian giant China. However, there are many myths associated with India's recent economic resurgence on the world stage and its democracy. Here are a few that I have looked into: India's Success in Information Technology: There is a common misperception in Pakistan and other countries that India’s information technology(IT) success is the result of Indian government’s grand vision and smart policies in recent years. Based on my knowledge of the situation, nothing could be further

Karachi's Business and Political Elite Welcome Musharraf

President Musharaf found a friendly crowd in Karachi during the last weekend visit which coincided with the first anniversary of the Red Mosque raid in Islamabad. As the President met with Karachi-ites, a series of bomb blasts in Pakistan's largest city served as a reminder that there is no escaping the worsening security situation that plagues the entire nation. At a gala reception in President Musharraf's honor by Karachi's business community, business leaders including Khalid Tawab, Mian Zahid Hussain, Abdul Haseeb Khan, Majyd Aziz warmly welcomed the President and reiterated their full confidence and support for him. Governor Sindh Dr. Ishartul Ibad Khan and City Nazim Mustafa Kamal also joined in the welcome, according to Karachi's Business Recorder newspaper. The President thanked the community and called upon the industrialists to help promote rapid industrialization, investment and jobs creation in the country. He met with a delegation of leading industrialists

Assessing Shaukat Aziz's Economic Stewardship

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Is Shaukat Aziz to Blame? Former Prime Minister Shaukat Aziz is frequently blamed in Pakistani media and political and economic circles for the rapid decline of Pakistan's economy during the last six months. The critics say the economic boom under Mr. Aziz was short-lived because it was achieved by easy, plentiful consumer credit, massive borrowing and construction spending in public and private sectors. They further charge that Mr. Aziz promoted the service sector while ignoring large infrastructure projects to enhance Pakistan's agricultural and industrial sectors. They also claim that, if Mr. Aziz had done a good job, the economy would have continued to perform well in spite of all the changes that have transpired since he quit. Some go to the extent of claiming that there was no real economic boom and the whole boom story was a fabrication. How Do Modern Economies Work? To examine the validity of the charge sheet against Mr. Aziz, let us try and understand how modern e

Global Warming Impact in South Asia

At 8 feet below sea level, Pakistan's financial capital Karachi shows up on the list of world's mega-cities threatened by global warming. Other South Asian cities likely to come under rising sea water in the next 100 years include Mumbai, Kolkata and Dhaka. The South Asian governments are sufficiently concerned about potential effects of global warming to warrant a meeting to hammer out a regional response. South Asian experts on climate change are beginning two days of talks in Dhaka today, ahead of a meeting of environment ministers from countries of the South Asian Association for Regional Cooperation (SAARC). According to Reuters , Bangladesh has proposed the creation of a fund to fight climate change in densely populated South Asia, which experts say is vulnerable to rising seas, melting glaciers and greater extremes of droughts and floods. For the rich South Asians thinking of fleeing to real estate in Dubai, the forecast for the GCC countries is no better. Experts belie

Can South Asia Survive in a World Without Oil?

The world will eventually run out of oil. When it does, will south Asians be able to cope with life as we know it? To answer this question, let us examine where India and Pakistan stand today in terms of oil consumption relative to the rest of the world. Pakistan consumes about 400,000 barrels per day. India's consumption is 2.6 million barrels per day. China's daily consumption is 7 million barrels. United States uses 22 million barrels a day. The entire world uses 80 million barrels per day. While China, India and Pakistan are currently at very low per capita energy consumption , their energy requirements are growing at about 6-8% per year, much faster than the US or Europe. While some nations use energy more efficiently than others, the amount of oil used per capita is a rough measure of the standard of living of a nation. Most of the oil is used as fuel for transportation and electricity but a substantial amount is also used in essential materials such as fiber, fertilizer,